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American Survival Newsletter:
Combining the World of Finance, Health & Politics
4/8/2016

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Edited by Alfred Adask
Friday, April 8, AD 2016
 
MARKETS 
 
Between Friday, April 1AD 2016 and 
Friday, April 8, AD 2016, the bid prices for:
Gold rose1.3 % from $1,221.90 to $1,238.40
Silver rose 1.4 % from $15.05 to $15.36
Platinum rose 0.9 % from $957 to $966
Palladium fell 4.2 % from $564 to $540
Crude Oil rose8.0 % from $36.69 to $39.61

US Dollar Index fell 0.4 % from 94.58 to 94.22

DJIA fell 1.2 % from 17,792.75 to 17,576.96
NASDAQ fell 1.3 % from 4,914.54 to 4,850.69
NYSE fell 1.0 % from 10,220.00  to 10,119.70
S&P 500 fell 1.2 % from 2,072.78 to 2,047.60


 
 
 

"Only buy something that you'd be perfectly happy to hold
if the market shut down for 10 years." --Warren Buffett 

"If the markets shut down for 10 years, what investment would you dare to hold-- 
other than gold"? --Alfred Adask

Unsustainable

by Alfred Adask 
 
One way to understand the difference between "speculators" and "investors" in the markets is to consider a Las Vegas casino.  In the casino, there are two kinds of people:  the gamblers and the casino owners. 
The gamblers are constantly betting on the next throw of the dice, the next turn of the cards, the next spin of the roulette wheel.  Their focus is on right now and the immediate present.
The casino owners aren't concerned with the next throw of the dice.  They're concerned with "fundamental" truth that, statistically, the casino has a 1.4% statistical advantage in the game of craps.  That means that, in the long run, out of every 100,000 throws of the dice, the casino will win 51,400 throws and the gamblers will win 48,600 throws.  
Yes, there'll be the occasional sailor who makes seven consecutive passes and wins a small fortune-but, long-term, the casino's seemingly small 1.4% advantage is enough to guarantee that, long-term, the casino owners will become fabulously wealthy and, if the gamblers play long enough, they'll lose every cent they've got.
The speculators in the stock, bond and commodities markets are analogous to casino gamblers.  They may get lucky from time to time in the short-term but, long-term, the odds are against them.   They can only see and bet on the immediate moment.  They are so blinded by the the thought of the next throw of the dice or next stock transaction, that they can't peer into the future.  They can't see that, if they play long enough they'll lose everything they have.
Market investors are analogous to the casino owners.  They take the long-term view, they seek and discover "fundamentals" that give them a statistical advantage-and they invest accordingly and wait to get rich.  Unlike the speculators/gamblers, investors aren't particularly interested in what happens in the very next throw of the dice or the next market report.  They're interested in what happens over the next million throws of dice or in the next million stock transactions because they know that, as investors focused on fundamentals (statistical odds) they'll win more than they lose and, long-term, they'll become rich.
Speculators = gamblers = short-term losers.
Investors = casino owners = long-term winners.
 
*  Stanley Druckenmiller spent 25 years as a Wall Street hedge fund manager.  During that time, his investments compounded money at an annualized rate of return of 30% and Durckenmiller didn't suffer a single single down year.   Mr. Druckenmiller's investing acumen has turned him into a billionaire. 
Therefore, when Druckenmiller speaks, ordinary speculators/gamblers should listen-but not because Druckenmiller is some sort of Wall Street "god".  No doubt that he's an intelligent man who knows more about markets than I will ever imagine.
But, Druckenmiller didn't become a billionaire simply because he was a smart speculator.  He became a billionaire because he took the long-term view and invested in the future rather than speculate on the immediate present.
Mr. Druckenmiller became a billionaire because he was a hedge fund manager.  He owned one of the Wall Street "casinos".  He was therefore an investor/"casino-owner" in long-term trends while most speculators can't see further into the future than the current DJIA or S&P 500 reports.
 
*  Business Insider recently published on article on Mr. Druckenmiller's incredible investing success entitled "Stanley Durckenmiller:  'This is the most unsustainable situation I have ever seen in my career."   The article observed that Mr. Druckenmiller's success was based on his uncanny ability to make accurate macroeconomic forecasts.  They could've said the same thing about the Las Vegas casino owners:  they get rich by making accurate long-term craps forecasts (the casino will will win 1.4% more than the gamblers/speculators).
Druckenmiller explained his success as follows:
 
"How did we do it? Very simple. While others were focusing on the present, we looked and focused on the future in terms of analyzing unsustainable situations."
 
On the one hand, that's a brilliant investment formula.  On the other hand, it's just common sense.  Druckenmiller looked for long-term fundamentals ("odds") and owned a "casino" (hedge fund management firm).  He became a billionaire because he was a long-term investor and a "casino owner" rather than a short-term speculator/gambler.
Druckenmiller's not Wall Street's only long-term investor.  Warren Buffett explained his investment strategy saying, "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years."   Buffett also takes the long-term view.  He's an investor, not a speculator.  As such, he's reportedly worth about $67 billion. 
Long-term investing can make you rich.  Short-term speculating (gambling) will probably make you poor.
 
*  Consider Mr. Druckenmiller's success formula again:
 
"How did we do it? Very simple. While others were focusing on the present [speculating], we looked and focused on the future [investing] in terms of analyzing unsustainable situations."
 
First, note that Druckenmiller didn't usually speculate on what the price of a particular stock would do in the short term (the "present").  He invested in the future (long term) price moves of particular stocks, industries or bonds. 
When you stop to think about it, long-term investment is a lot easier than short-term speculation.  Short-term speculation requires you to pay attention to every change in the relevant news, every day, every week, every year.  If something, somewhere, moves by 0.1% you must buy, sell or at least reconsider your speculative "bet".  Short-term peculation is incredibly volatile and therefore nerve-wracking.
Long-term investment, on the other hand, only requires that you identify one or more strong trends that might be volatile in the short term, but must be certain over the long term.  Invest accordingly.  Pay little attention to daily, weekly and even yearly volatility.   Hang on tight until that fundamental trend is recognized by all as true, predominant and profitable.
The problem with long-term investing is that it requires enormous patience and very steady nerves as you wait, perhaps for years-before the fundamentals can reassert themselves and generate huge profits for those who believed in them and invested "early".
Second, Druckenmiller didn't spend his time trying to deduce which, of a multitude of strong corporations, was currently the most powerful competitor and therefore most likely to produce a quick profit.   Instead, Druckenmiller looked for those economic programs, policies and trends that were so irrational as to be unsustainable.  Then, he looked for the programs, policies, or corporations which relied on a fundamental premise that was unsustainable.  When that premise failed, it would rain down havoc for some and fantastic wealth for others. 
For example, the current global oil and gas industry's combined debt is reportedly about $3 trillion.  A Deloitte Study indicates that 175 Oil and Gas Exploration Companies are at high risk for bankruptcy in A.D. 2016.  A wave of oil company bankruptcies and credit defaults is coming.  Those credit defaults should create a domino effect as credit counter-parties fail, and defaults spread to other sectors.  For an investor like Stanley Druckenmiller, that's exactly the kind of opportunity that he's looking for.   An economic "bubble" is "unsustainable" and about to burst.  When it does, there'll be sudden poverty for some and sudden wealth for others.
Mr. Druckenmiller became a billionaire by searching for economic "bubbles" that were popular and powerful-but irrational, unsustainable and certain to eventually burst.   In the real world, the terms "economic bubble" and "unsustainable" are synonyms.   Every time government creates a "bubble," Druckenmiller presumably gets ready to add a few hundred million more to his fortune.
Third, once Druckenmiller identified an unsustainable premise/"bubble," he calculated which corporations' stocks, government bonds, or other investments would be most adversely affected when the premise failed.  Druckenmiller then avoided or shorted the investments that were destined to fail, while he invested heavily in whichever investments would most benefit when the unsustainable, economic-bubble finally popped.
In a sense, Druckenmiller became a billionaire by betting against every "bubble" the government and/or Federal Reserve ever created.  He probably knew that almost everything the government touched would turn to crapola and therefore bet against every government "bubble" as "unsustainable".
 
*  Druckenmiller recently applied his investment strategy to the federal government's financial condition and concluded:
 
"When I look at today's picture of expected tax revenues combined with benefits promised to future generations,this is the most unsustainable situationI have seen ever in my career."
 
In essence, Druckenmiller sees tax revenues shrinking at the same time demand for promised retirement benefits is exploding.  The irresistible force is colliding with the immovable object.  That collision can't be sustained.  The result should be horrific.
According to Business Insider,
 
"The disaster that Druckenmiller sees coming for the United States is all about changing demographics and entitlement spending. They don't add up to a sustainable situation.
"In 1940, entitlement payments  amounted to just over 20% of annual government spending in the United States.  Today, entitlement spending has swelled to nearly 70% of the annual federal budget.
"The 20-year baby boom that took place after World War II is now beginning to result in a [20-year] retiree boom.  This demographic trend is going to create an entitlement spending catastrophe."
 
Our "changing demographics" means there will soon be too many "chiefs" (retirees, welfare and subsidy recipients), and not enough "Indians" (workers able to produce enough income to feed all the "chiefs" in the lavish style to which they've become accustomed). 
Result? 
Government won't have enough currency to pay most of its debts and provide most of its promised entitlements. 
Result?
People who feel entitled to subsidies, pensions and welfare from government will shout, scream and riot.
 Druckenmiller:
 
"The way the system works, the current workforce provides the tax revenue to support the current senior population.  A huge rise in the retiree population relative to the number of people working results in a funding dilemma."
 
Not exactly.
First, we're not approaching a genteel "funding dilemma" that will be debated and resolved by economists over tea.   We're approaching a time of starvation, reduced life expectancy, and riots that could precipitate violence unlike anything seen since the Civil War.
Second, Social Security entitlements won't fail because of "demographics" (i.e., too many retirees and too few workers).  Social Security will fail because the currency we've contributed to Social Security during our working years-the currency that should've been saved into our individual accounts-has been "borrowed" and "spent" by the Federal government
As a result, our individual SS accounts are empty and the only way for government to make good on its promises to repay the money we invested into SS, is to increase taxes on the workers who aren't yet retired.  
Now-after government has looted our SS accounts-demographics are coming into play as an excuse and justification for the missing SS funds.   Retirees won't retire into poverty because the government looted their accounts.  No.  They'll retire into poverty because of unforeseen "demographics," see?
In fact, if the government hadn't looted our SS accounts, each of us would still have however much we contributed into SS (plus compounded interest) and, no matter how many retirees or workers we had, each retiree would still have exactly however much he personally contributed to support his retirement. 
But, now-because government has looted the SS accounts and there aren't enough workers left to contribute enough to pay existing SS obligations.  Therefore, we're heading for a moment when government will have to admit that it's insolvent and can't repay all of its entitlement debts.
When that moment arrives, government will base its default on demographics, China, Muslims, an unexpected fall (or rise) in the price of crude oil and/or perhaps even WWIII.  But the real reason for the coming SS entitlement default will be that government looted the SS accounts to benefit itself and special interests.
I distinctly remember my step-father telling me about 60 years ago that, if people invested as much into a private savings account, as they contributed into their SS accounts, by the time they retired, they'd have over $1 million in the bank.  And that was back when SS only cost us about 2%/year.   I don't know that his math was correct, but the principle is still true:  if you'd saved as much in a private saving account as you've contributed into SS, by the time you retired you'd be at least modestly wealthy.
Imagine retiring with a $1 million nest egg instead of a monthly SS annuity of $1,100.  It could've happened.  Government could've collected SS contributions, deposited them into separate accounts, invested wisely, and each of us could've retired with a small fortune.  Instead, we can now expect to retire with a monthly pittance-if we can even collect that.
 
*  In 1980, there were five working-age Americans for each retiree.  There were enough workers paying taxes to support the retirees.  By 2030, that ratio will fall to 2.5-to-1.
Druckenmiller:
 
"There's just no way that the workforce at that time is going to be able to fund the entitlements of these seniors.
This is a problem because those are commitments that have been made and will have to be paid."
 
Sorry, Stanley-that's bunk.  Those commitments will not "have to be paid".  Regardless of the government's "commitments," what can't be paid, won't be paid. 
The "commitments" made to retirees will be repudiated simply because they're mathematically impossible to keep.  Ultimately, retirees are less productive and therefore less important than workers.  Retirees will be sacrificed in order to allow workers to keep enough of their own earnings to support themselves and their families.
Druckenmiller:
 
"Corporations are required to disclose on their balance sheet the future defined pension obligations that their employees have earned.  Those are very real liabilities for companies that are going to have to be paid, so they should be included.
"The balance sheet of the United States, meanwhile, doesn't account for the future payments that it has promised to its senior citizens. Again, like [corporate] defined benefit pension payments, these are very real obligations.
"They should be recorded as liabilities of the United States."
 
But, why should SS pensions be "recorded as liabilities [debts] of the United States," if government knows it can't or won't pay them?  Could it be that government doesn't report unfunded liabilities as part of the National Debt because it knows they'll never be paid?   I certainly don't believe that, but it makes for interesting conjecture. 
I.e., government claims that its total financial liability is the "official" National Debt of $19 trillion.  However, according to the Congressional Budget Office and economist Laurence Kotlikoff, if government included all of its promised, but unfunded, liabilities (like SS retirement obligations) into the "official" National Debt, the government's real liability would be over $200 trillion.
I've argued for at least five years years that government won't be able to pay more than 10% (20% tops) of its existing debts.  And here we see that the "official" National Debt ($19 trillion) is about 10% of what may be the real National Debt ($200 trillion).
What an odd coincidence, hmm?  Could it be that the "official" National Debt ($19 trillion) is all government intends to pay out of the real National Debt of $200 trillion?
Nah-probably not.  Still, that question does make for interesting conjecture.
 
*  OK-back to reality.
Q:  Why aren't future payments to retirees really included in the government's balance sheet? 
A:  Probably, because, if included, any fool could see that there was no way those $200 trillion in promises could be kept; no way that government's $200 trillion in debts could be repaid in full.  If the real National Debt were admitted, the whole fiscal system would probably collapse within the year.
Business Insider:
 
"This is a case of simple math.
"Either tax rates increase in a massive way or the payments to seniors have to be cut significantly.
"Druckenmiller is passionate about entitlements because they aren't only a huge problem, there is no possible solution that will please American voters."
 
Druckenmiller:
 
"Fixing this is going to require some real sacrifice by the American people."
 
"Fixing this"?  How? 
There isn't going to be any "fixing" of this problem. 
There's going to be a massive debtdefault that will be achieved by either: 1) open repudiation ("Sorry, folks, we can't pay."); and/or, 2)  hyperinflation which allows government to pay $1,100 month to each SS retiree-but the nominal $1,100 will have only $100 in purchasing power. 
The problem will not require a "real sacrifice by the American people"-it will require a "real sacrifice of American retirees."   Many retirees aren't going to get their SS retirement funds.  They'll therefore be pushed into poverty and left to die.  That'll be the sacrifice.  America will sacrifice its retirees.
The retirees won't be alone. 
What about all the people and communities that rely on their "entitlement" to welfare for support? 
What about the rich who rely on their entitlement to government subsidies? 
When the moment comes when government admits that it can't pay its debts, the retirees, welfare recipients and rich subsidy recipients are all going to lose their entitlements and be "sacrificed" into poverty.
Druckenmiller:
 
"The finances of the entire world are run by short-term thinkers [speculators].  To try to make the short term a little better, central bankers have been perfectly willing to roll the dice on the long term.
"It is crucial that you realize that your long-term financial well-being really needs to be taken care of by one person-you."
 
Again, Druckenmiller indicates that his secret to profitable investing has been to take the long-term view rather than engage in short-term speculation/gambling.  He implies that there's a war going on between the short-term speculators and the long-term investors.   The speculators have had their day.  Now, it's time for the investors to win for a while.
 
"We [investors] have to make sure we protect our wealth diligently [from "short-term speculators] and invest in assets that willretain their value when the consequences of all of this short-term thinking arrive.
"Because-eventually, they will."
 
I suspect that Mr. Druckermiller is deeply concerned about this "most unsustainable" conflict between government revenue and entitlements because he understands that problem will not appear "eventually" at some distant date, but rather "immediately" in the sense of within the next months or years.
He's right.
More, what "assets will retain their value" over the coming years?  Gold.
What did Warren Buffett say?
He said, "Only buy something that you'd be perfectly happy to hold if the market shut down for10 years."
What do I say?
I say, "If the markets shut down for 10 years, what investment would you dare hold-other than gold?"
Stop speculating.  Start investing.
Get gold.



Weekly Commentary: Bubble Economy or Not?
 
 
"The US economy has made tremendous progress in recovering from the damage from the financial crisis. Slowly but surely the labor market is healing. For well over a year, we have averaged about 225,000 jobs (gains) a month. The unemployment rate now stands at 5%. So, we're coming close to our assigned congressional goal of maximum employment. Inflation which my colleagues here, Paul (Volcker) and Alan (Greenspan), spent much of their time as chairmen bringing inflation down from unacceptably high levels. For a number of years now, inflation has been running under our 2% goal, and we are focused on moving it up to 2%. But we think that it's partly transitory influences, namely declining oil prices and the strong dollar that are responsible for pulling inflation below the 2% level we think is most desirable. So, I think we're making progress there as well. This is an economy on a solid course - not a bubble economy. We tried carefully to look at evidence of potential financial instability that might be brewing and some of the hallmarks of that - clearly overvalued asset prices, high leverage, rising leverage, and rapid credit growth. We certainly don't see those imbalances. And so although interest rates are low, and that is something that can encourage reach for yield behavior, I certainly wouldn't describe this as a bubble economy." Janet Yellen, April 7, 2016, International House: "A Conversation with Janet Yellen, Ben Bernanke, Alan Greenspan and Paul Volcker"
 
 
From my analytical perspective, unsustainability is a fundamental feature of "Bubble Economies." They are sustained only so long as sufficient monetary fuel is forthcoming. Over time, such economies are characterized by deep structural maladjustment, the consequence of years of underlying monetary inflation. Excessive issuance of money and Credit are always at the root of distortions in investment and spending patterns. Asset inflation and price Bubbles invariably play central roles in latent fragility. Risk intermediation is instrumental, especially late in the cycle as the quantity of Credit expands and quality deteriorates. Prolonged Credit booms - the type associated with Bubble Economies - invariably have a major government component.
 
Japanese officials in the late-eighties recognized the risks associated with their Bubble economy and moved courageously to pierce the Bubble. Outside of that, few policymakers have been even willing to admit that Bubble Dynamics have taken hold in their systems. Apparently, only in hindsight did U.S. monetary authorities recognize the Bubble component that came to exert pernicious effects on the U.S. economy in the late-eighties, later in the nineties and again in the 2002-2007 mortgage finance Bubble period. I would strongly argue that the U.S. has been in a "Bubble Economy" progression for the better part of thirty years, interrupted by financial crises relatively quickly resolved by aggressive governmental reflationary measures. And each reflation has been more egregious than the previous, with resulting booms exacerbating underlying financial and economic maladjustment.
 
Chair Yellen stated that the U.S. "is an economy on a solid course - not a bubble economy" - "we tried carefully to look at evidence of potential financial instability that might be brewing." That the Fed has for seven post-crisis years clung to near zero rates and a $4.5 TN balance sheet (with reassurances that it can grow larger) argues against such claims. That the Fed rather abruptly backed away from its 2011 "exit strategy" and repeatedly postponed "lift off" due to market instability rather clearly demonstrates the Fed's underlying lack of confidence in the soundness of the markets and real economy.
 
I have argued that the more systemic a Bubble the less obvious it becomes to casual observers. By the late-nineties, the "tech" Bubble had turned rather conspicuous (although the Fed and the bulls still rationalized with claims of New Eras and New Paradigms). While having quite an impact on the technology, telecom and media sectors, these relatively narrow Bubble distortions had yet to cultivate more general structural impairment throughout the economy.
 
The mortgage finance Bubble was a much more powerful Bubble Dynamic, clearly in terms of Credit expansion, economic imbalances and systemic impairment. Alan Greenspan nonetheless argued that since real estate was driven by local factors, a national housing Bubble was implausible. Only in hindsight was the degree of systemic "Bubble Economy" maladjustment recognized.
 
It's now been seven years since my initial warning of an inflating "global government finance Bubble" - the "Granddaddy of All of Bubbles." This Bubble did become systemic on a globalized basis, ensuring the strange dynamic of a somewhat less than conspicuous global Bubble of historic proportions. Over the past eight years, global Credit growth has been unprecedented - driven by an extraordinary expansion of government borrowings. The inflation of central bank Credit has been simply unimaginable. Global asset inflation has been extraordinary - especially in securities markets and real estate.
 
The expansion of Chinese Credit has been greater than I previously imagined possible. Hundreds of billions - perhaps Trillions - have flowed out of China, with untold amounts flowing into the U.S. (real estate, securities and M&A). For that matter, I believe huge inbound flows have been inflating U.S. securities and some real estate markets, especially "money" fleeing bursting EM Bubbles.
 
Indeed, extraordinary international financial flows are fundamental to the global government finance Bubble thesis, flows that I believe are increasingly at risk. Along with Bubble flows from China and out of faltering EM, I believe speculative flows grew to immense proportions. And, importantly, the massive global pool of destabilizing speculative finance has been inflated by the proliferation of leveraged strategies. Chair Yellen may not see "high leverage," yet on a globalized basis I strongly believe speculative leverage reached new heights over recent years. "Carry trade" speculation - borrowing in low-yielding currencies (yen, swissy, euro, etc.) - has proliferated over recent years, especially after the 2012 "whatever it takes" devaluations orchestrated by the European Central Bank and Bank of Japan.
 
How much of the resulting speculation-related liquidity ended up flowing into U.S. markets and the American economy? What are the consequences - to the markets and overall economy - if these flows stop - or even reverse? Moreover, I suspect unprecedented amounts of leverage have accumulated throughout the U.S. Credit market - Treasuries, corporates and munis. And Wall Street has definitely been hard at work in recent years creating all varieties of instruments, products and strategies that benefit from the combination of ultra-low rates and leverage (certainly including higher-yielding equities).
 
Over time, Bubble Economies become increasingly vulnerable to economic stagnation, Credit degradation and asset price busts. Bubbles are fueled by Credit excesses that distort risk perceptions and resource allocation. Credit and asset price inflation will incentivize speculation, another key dynamic ensuring misallocation and malinvestment. In the end, Bubbles redistribute and destroy wealth. Major Bubbles will tear at the threads of society.
 
It remains my view that the global Bubble has burst. The recent rally in global risk markets restored hope that things remain central bank-induced business as usual. This week provided support for the view that the respite from heightened volatility and vulnerability has likely run its course.
 
Global equities were under pressure this week, while safe haven bonds and gold rallied. Japan's Nikkei dropped 2.1%, increasing 2016 losses to 16.9%. The German DAX fell 1.8%, boosting y-t-d declines to 10.4%. Spanish stocks were down 2.0% (down 11.7%), and Italian shares fell 1.5% (down 18.3%). Ten-year German bund yields dropped to nine basis points
 
Ominously, global financial stocks continue to trade poorly. After the recent notably unimpressive rally, selling of global bank and financial shares has resumed. The STOXX Europe 600 Bank index sank 3.5% this week, pushing 2016 losses to 24.7%. This week's 3.1% decline boosted Italian bank stock y-t-d losses to 35.4%. Deutsche Bank has returned to February lows (down 34%). European bank stocks generally are quickly approaching February lows. Italian bank stocks traded this week slightly below lows from the February tumult period. Hong Kong's Hang Seng Financial index was down 2.0% this week (down 12.6%). Here at home, U.S. bank stocks (BKX) dropped 3.6%, increasing y-t-d declines to 14.7%. The security broker/dealers (XBD) sank 6.2%, increasing 2016 losses to 13.7%. Goldman Sachs closed Friday at about $150, after trading as high as $200 this past November.
 
I would argue that currency market instability has negative portents as well. The Japanese yen surged 3.2% this week to a 17-month high. The yen gained about 5% versus the Australian dollar, New Zealand dollar and Mexican peso. It's worth noting that the Chilean peso, Colombian peso, Turkish lira and Brazilian real were all under pressure, as the recent EM rally appears increasingly vulnerable.
 
A few headlines were telling: "Japanese Yen Trade Mystifies and Could Penalize" (CNBC); "Stunning Rally in Japanese Yen Risks Too Little Faith in BoJ Policy Genius" (Australian Financial Review); and "Japan Faces Trouble Controlling Yen Rise" (Reuters).
 
It is no coincidence that the yen is rising as global financial stocks are sinking. Both are indicative of market fears that global policymakers are losing control. The yen has rallied significantly in the face of the BOJ imposing punitive negative interest rates. The euro has also risen to a six-month high in spite of the ECB's surprise one-third increase in its QE program.
 
Keep in mind that both the BOJ and ECB boosted stimulus, as the Fed assumed a more dovish posture, in a concerted response to heightened global market instability. These measure did incite a robust short squeeze, an unwind of bearish hedges and a general rally in global risk markets. Yet markets are already again indicating waning confidence that policymakers actually have things under control.
 
The Japanese have lost control of the yen, which has hurt prospects for Japan's equities and overall economy. It has also turned various leveraged strategies on their heads, portending pressure on the global leveraged speculating community more generally. Meanwhile, the half life of Draghi's latest "shock and awe" has proved alarmingly short. Boosting the ECB's QE program reversed what had been a significant widening of Credit spreads throughout Europe. It's worth noting that European periphery spreads (to German bunds) widened meaningfully this week. Portuguese spreads surged 48 bps and Greek spreads widened 41 bps. Italian spreads widened 13 bps and Spanish spreads increased 12 bps.
 
I've excerpted below from my recent analysis of the Fed's Q4 2015 Z.1 "flow of funds" report:
 
Treasury Securities ended 2007 at $6.051 TN. By 2015's conclusion, Treasuries had inflated to $15.141 TN, an increase of $9.090 TN, or 150%, in eight years. It's worth noting that Agency Securities ended 2015 at $8.153 TN, having now almost recovered back to 2008's record high.
 
Total Debt Securities (Treasuries, Agencies, Corporates & muni's) ended 2015 at a record $38.741 TN. Total Debt Securities have increased $11.3 TN, or 41%, from what had been 2007's record level. Total Debt Securities as a percent of GDP ended 2015 at a near record 217% of GDP. For perspective, this ratio began the eighties at 66%, the nineties at 110%, and the 2000's at 140%.
 
Equities ended 2015 at $35.687 TN, or 199% of GDP. This compares to Equities/GDP of 44% to begin the eighties, 67% to start the nineties and 200% to end Bubble Year 1999. Combining Debt and Equity Securities, Total Securities ended 2015 at a record $74.428 TN. This was up 40% from 2007 (a then record 366% of GDP) to 415% of GDP. This compares to 109% to begin the eighties, 178% to start the nineties and 341% to end the nineties.
 
Household... Assets ended 2015 at a record $101.306 TN, up $2.953 TN during the year. Household Assets have increased almost 50% since the end of 2008. ...Household Net Worth jumped another $2.607 TN last year. For the year, Household holdings of Real Estate increased $1.562 TN (to a record $25.267 TN), with Financial Assets up $1.171 TN (to a near-record $70.327 TN). Household Net Worth as a percentage of GDP ended 2015 at 484%. For comparison, Household Net Worth to GDP began the nineties at 379%, ended 1999 at 446% and closed Bubble Year 2007 at 461% of GDP.
 
Total Non-Financial Debt increased $1.912 TN in 2015 to a record $45.149 TN. NFD has increased $10.218 TN, or 29%, over the past seven years. NFD to GDP ended 2015 at a record 252%. For perspective, this ratio began the eighties at 138%, the nineties at 179% and the 2000's at 179%.
 
 
The U.S. economy has all the characteristics of a Bubble economy - one increasingly vulnerable on myriad fronts. 
 
Doug Noland is not a financial advisor nor is he providing investment services. This blog does not provide investment advice and Doug Noland's comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. 



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The 2016 Mark Twain Silver Dollar Proof Coin; who doesn't have fond memories of reading The Adventures of Tom Sawyer or Adventures of Huckleberry Finn?

Samuel Langhorne Clemens, whose pen name was Mark Twain, has influenced American culture like few other authors; Twain published 28 books, as well as many short stories, letters and sketches. He is remembered for addressing complex social situations that were facing Americans during his time. His books have been translated into more than 75 languages, and many are still in print today.

This commemorative coin program is in recognition of Mark Twain's literary and educational contributions.

The obverse (heads) features a portrait of Mark Twain holding a pipe with smoke forming a silhouette of Huck Finn and Jim on a raft in the background with the inscriptions "IN GOD WE TRUST," "LIBERTY" and"2016." The reverse (tails) features an assortment of characters leaping to life from Mark Twain's works: The knight and horse from A Connecticut Yankee in King Arthur's Court, the frog from "The Celebrated Jumping Frog of Calaveras County" and Jim and Huck from Adventures of Huckleberry Finn.

The inscriptions are "UNITED STATES OF AMERICA," "$1"
and "E PLURIBUS UNUM."



HEALTH
THE BENEFIT OF CLEANSES
I've spent most of my professional career as an herbalist educating people on the tremendous benefits of using herbs to cleanse organs - a process modern medicine proclaims as useless. The mere idea of removing toxins to improve health is an individual effort of empowerment; whereby removing the stressors on the body which cause weakness, organ failure and disease. Let's take a look at how empowering the cleansing process can be.
 
SYMPTOMS OF TOXICITY
Impurities in the body can cause a myriad of conditions. In many instances the organ in which the toxicity becomes acute is in the bowel. When there is a build-up of toxins in the tissues the weakness is exacerbated when we are under stress. Some initial symptoms of toxicity requiring organ cleansing are:
 
  • Headaches, brain fog, concentration problems
  • Sluggish bowel & digestion problems
  • Age spots & itchy skin
  • Dark urine
  • Nausea
  • Pale-colored stool
  • Back pain & sciatica
  • Joint pain & muscle aches
  • Reproductive problems
  • Low energy & fatigue
  • Nasal drip, allergies & bad breath
  • Skin problems
  • Mood swings, depression, anxiety
  • Thyroid malfunction
  • Hormonal imbalance
  • Low immunity
  • Inability to lose weight
 
TOXINS ACCUMULATE
Toxic build-up is a real threat to everyone; young and old. Toxins plus stress can cause existing health conditions to become acute. Modern medicine will mask the symptoms with drugs creating another layer of toxicity and burdening an already burdened system. Failure to function is a collapse of a system under the strain due to the body is no longer able to sustain balance (homeostasis). Science approximates that the human body has more than 250,000 billion cells with 35,000 chemical exchanges per second. Taking just one prescription drug will cause 100 chemical changes in the metabolism. If taking a second drug (probably to cover the side effects for the first drug) this creates 100 x 100 chemical changes in the metabolism and modern medicine has no idea what those changes will be. These changes will not help the body repair and heal but will disrupt function and cause further weakness and disease. Modern medicine has no idea overall how their drugs affect the body. What they attempt to do is use chemicals to force the body to function when it is in duress.
 
PHASES OF TOXICITY
According to German physician Hans Heinrich Reckeweg MD, he named phases the body goes through when it is under toxicity.  In the 1970's, Dr. Reckeweg embraced the tenets of homeopathy and broke tradition with scientific medicine. He is said to have created a new field in medicine called Homotoxicology. Some may have considered him an early complementary-type physician. The phases Dr. Reckeweg listed are:
 
Phase 1 - Excretion
Phase 2 - Reaction
Phase 3 - Deposition
Phase 4 - Impregnation
Phase 5 - Degeneration
Phase 6 - Neoplasm (cell death & cancer)
 
According to Dr. Reckeweg, in the first three phases the cells are still intact and functioning against the toxicity. If the body becomes overwhelmed with toxins, and or the immune system response weakens, the elimination channels cannot dispose of toxins fast enough. The toxins sink deep into the cells; create more weakness and progresses to the next set of phases. In these later phases more toxins enter the cells and damage the cells. Cell damage equals lack of chemical exchange and function and the body can quickly lose its ability to regenerate and heal. Organ cell damage means organ function is impaired. In many cases cancer is given a foothold to develop. If illness develops during phases 1 thru 3, the ability for a fast and full recovery is expected. If illness is allowed to progress to phases 4 thru 6, the ability for the body to repair and recover is more challenging and in some extreme cases uncertain. 
 
CELL RESISTANCE
Understanding the cells ability and the immune system's ability to quarantine toxicity is important. For example, if the immunity is weak or if the toxin is strong the body has the ability to limit the spread and protect the cells by putting the toxins into a type of holding pen to keep it from spreading. A cyst, polyp, fibroids, fatty or benign tumors or fat cells are likely places for the body to utilize toxin storage when the toxins are not free-flowing out the elimination channels. This is the body's defense to keep organs and as many cells as possible safe. This is why naturopaths have often said that cutting tumors out often release more toxic cells into the body and the disease returns within two years. Therefore, if the body has difficulty disposing of toxins, it is most often the results in a serious health condition. Cutting out the diseased tumor isn't resolving why the tumor was created in the first place. The disease will replicate if toxins are continued to be allowed to penetrate healthy cells, damage them, cause them to malfunction, mutate changing the DNA and causing internal medicine diseases. This most often overwhelms the immune system and modern medicine has no treatment to support immunity. The drugs prescribed to reduce symptoms will drive the disease deeper into tissues and often the disease will come back with a vengeance.
 
THE LIVER
I've often said the liver is an organ that wears many hats. It is responsible for many important functions that the body cannot live without it. If the liver becomes scarred or fatty, a whole host of health problems result. The blood will send impurities to the liver which is responsible for manufacturing enzymes to neutralize these toxins and dispose of them out through the urinary tract and bowel. Eating the wrong foods, over doing the alcohol and some prescription drugs are a sure way to sabotage liver function and invite disease. There often are subtle signs of liver damage which can linger for years before a full-blown disease lands you in the hospital. Here are a few signs:
 
  • Fatigue & weakness
  • Nausea & loss of appetite
  • Impaired judgment  & confusion
We need to pay attention to even the most subtle of signs, which are the beginning indicators of toxic buildup and disease. I know many people, including myself, are not big fans about seeing doctors unless it involves trauma. This is why it is important to do routine organ cleansing, a minimum of twice annually, to reduce the risk of disease and the need for doctors.
 
OBVIOUS BENEFITS
What are some of the immediate and obvious benefits people notice when they do organ cleansing? Over the years I often here that people feel lighter; as if a weight had been lifted off of them. Some report that they lose ten pounds in the process. Since the first organ cleanse is the bowel cleanse and natural healers know that a sick bowel can affect the skin and brain. Many people report after doing the bowel cleanse that they can concentrate better and others have improved skin (resolves acne).  This is a confirming indicator that the bowel is the last stop for toxin disposal. If the bowel is not eliminating properly, and toxins are lodged in the colon tissue, it can create health problems. To be clear, you can have bowel toxins even if your bowel is moving every day. A bowel cleanse isn't about just improving the transit time; it's about removing the serious toxins that affect health such as; heavy metals, radioactive particles and pharmaceutical residues. Other noticeable benefits people often experience are: improved immunity (don't get as many colds or flu bugs), reduced allergy symptoms and have more energy. I had one gentleman who was tutoring my children in math when in middle school and he was intrigued with the concept of doing the bowel cleanse. This guy was not overweight but he had a protruding stomach, which hung over his waistline and belt. Most often it is referred to as a beer belly; however the tutor did not drink. He completed the cleanse and when my children resumed tutoring after spring break they were all astonished at how great he looked. His stomach was completely flat. During the bowel cleanse he had lost 15 pounds of belly fat and some parasites. Parasites can cause inflammation and swell the gut. Other benefits people notice after cleansing is they sleep better, they are less anxious or moody. It is also important that after cleansing that the do not re-congest the system with unhealthy living.
 
EXTRAORDINARY LIFE
Modern healthcare reduces symptoms but does not eradicate disease. Therefore, we must be vigilant at keeping toxins away from healthy cells, secure a steady exit of toxins out of the body in order to reduce our risk of disease. I've always instructed that the safest and most successful way to remove toxins is to cleanse the body in reverse. For example, the body will remove toxins and debris through the blood and the blood transports the toxins to the liver. The liver neutralizes the toxins and sends the residues to the bowel and urinary tract to exit the body. Therefore, it is imperative that these areas which are a last stop for toxin removal be clean and free-flowing. This will also relieve cellular stress on the other organs. After the bowel and urinary has been cleanses we can move onto cleansing the other organs; liver, gall bladder and the blood system is always the last to be cleansed. We also have the option to cleanse the kidney/bladder and prostate areas along with the urinary tract. For organic herbal cleanses with instructions to properly cleanse the body call the experts, Apothecary Herbs. Call now 866-229-3663, International 704-885-0277 http://www.thepowerherbs.com, where your healthcare options just became endless. Request a free catalog. Money saving coupons on their website.
 
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at Apothecary Herbs www.thepowerherbs.com 
MORE HERB SECRETS IN THE POWER HERBS e-BOOK. By popular demand The Power Herbs e-book is available with symptom/herb reference guide, information on organ cleansing and how to make your own herbal tinctures plus a whole lot more. You must have email to order and receive the e-book a PDF version of The Power Herb book for just $14.99. At this time, we do not offer this title in hard copy. The book is now available in KINDLE and IPAD formats. Select the book you need on the drop down.
 
 
NEW DANDELION ROOT LIQUID
Try Dandelion Root Tincture for inflammation, blood purification, respiratory infections, digestion and cancer protection at Apothecary Herbs 866-229-3663 www.thepowerherbs.com 
 
MALE & FEMALE ORGAN CLEANSES KITS - Don't give disease a foothold. You will have the power to cleanse the bowel, urinary, liver, gall bladder and blood system with this cleanse package. For added cleansing, ask about how you can upgrade your order to include the prostate cleanse for men or the Kidney/Bladder cleanse for females.  Go to http://www.thepowerherbs.com or call their 24-hour live customer service line 866-229-3663, International 704-885-0277.
The information contained herein is not designed to diagnosis, treat, prevent or cure disease. Seek medical advice from a lincensed medical physician (if you dare) before using any product or therapy. 
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