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Cash
by
Adam Taggart
Executive Summary
If you have not yet read Part 1: Fortunes Will Be Made & Lost When Capital Flees To Safety available free to all readers, please click here to read it first.
So, given the conclusions in Part 1 — as well as the larger risks to the economy and financial markets that we analyze daily here at Peak Prosperity — how am I positioning my own personal investments?
I get asked this question often. Often enough that I'm deciding to open the kimono here and let it drop to the ground. Everyone interested to look will get the full frontal.
Before I do though, let me make a few things absolutely clear. This is NOT personal financial advice. The investment choices I've made are based on my own unique situation, financial goals and risk tolerance. And I may change these choices at any moment given new market developments. What's appropriate for me may not be for you, so DO NOT blindly duplicate what I'm doing.
As always, we recommend working with a professional financial adviser to build an investment plan customized to your own needs and objectives. (If you do not have a financial adviser or do not feel comfortable with your current adviser's expertise in the market risks we discuss here at PeakProsperity.com, consider scheduling a free consultation with our endorsed adviser)
Suffice it to say, any investment ideas sparked by this report should be reviewed with your financial adviser before taking any action. Am I being excessively repetitive here in order to drive this point home? Good…
OK, with that out of the way, let's get started. I'll walk through the asset classes I own and my rationale for holding each.
The strategy behind my portfolio allocation is of my own devise, though it has been influenced in no small part by the good folks at New Harbor Financial, Peak Prosperity's aforementioned endorsed financial adviser.
At a high level, it has been constructed to address my strongly-held conclusions that:
- Prices of most asset classes are dangerously overvalued
- The risk of another economic contraction on par with (or greater than) the Great Recession within the next 2-4 years is uncomfortably high
- The most likely path is we will experience a short period of coming deflation, followed soon after by one of high inflation as central banks starting printing currency without restraint (the Ka-POOM theory)
- Capital will increasingly want to flow from paper assets (tertiary wealth) into tangible ones (primary and secondary wealth)
- This is a time to prioritize protecting capital (defense) over speculating on how to grow it (offense)
- Diversification is wise: just be emotionally prepared that some of your bets, by definition, will not pay off
- In today's world of financial repression, no asset class is truly "safe". As such, asset performance is all relative.
This is not a swing-for-the-fences portfolio. It's much more of a prepare-for-the-storm approach…
How My Personal Portfolio Is Positioned Right Now
PREVIEW by Adam TaggartExecutive Summary
If you have not yet read Part 1: Fortunes Will Be Made & Lost When Capital Flees To Safety available free to all readers, please click here to read it first.
So, given the conclusions in Part 1 — as well as the larger risks to the economy and financial markets that we analyze daily here at Peak Prosperity — how am I positioning my own personal investments?
I get asked this question often. Often enough that I'm deciding to open the kimono here and let it drop to the ground. Everyone interested to look will get the full frontal.
Before I do though, let me make a few things absolutely clear. This is NOT personal financial advice. The investment choices I've made are based on my own unique situation, financial goals and risk tolerance. And I may change these choices at any moment given new market developments. What's appropriate for me may not be for you, so DO NOT blindly duplicate what I'm doing.
As always, we recommend working with a professional financial adviser to build an investment plan customized to your own needs and objectives. (If you do not have a financial adviser or do not feel comfortable with your current adviser's expertise in the market risks we discuss here at PeakProsperity.com, consider scheduling a free consultation with our endorsed adviser)
Suffice it to say, any investment ideas sparked by this report should be reviewed with your financial adviser before taking any action. Am I being excessively repetitive here in order to drive this point home? Good…
OK, with that out of the way, let's get started. I'll walk through the asset classes I own and my rationale for holding each.
The strategy behind my portfolio allocation is of my own devise, though it has been influenced in no small part by the good folks at New Harbor Financial, Peak Prosperity's aforementioned endorsed financial adviser.
At a high level, it has been constructed to address my strongly-held conclusions that:
- Prices of most asset classes are dangerously overvalued
- The risk of another economic contraction on par with (or greater than) the Great Recession within the next 2-4 years is uncomfortably high
- The most likely path is we will experience a short period of coming deflation, followed soon after by one of high inflation as central banks starting printing currency without restraint (the Ka-POOM theory)
- Capital will increasingly want to flow from paper assets (tertiary wealth) into tangible ones (primary and secondary wealth)
- This is a time to prioritize protecting capital (defense) over speculating on how to grow it (offense)
- Diversification is wise: just be emotionally prepared that some of your bets, by definition, will not pay off
- In today's world of financial repression, no asset class is truly "safe". As such, asset performance is all relative.
This is not a swing-for-the-fences portfolio. It's much more of a prepare-for-the-storm approach…
by
Chris Martenson
The central planners are setting the stage for the next round of officially sanctioned theft and this time they mean to assure that you have no way(s) of escaping.
They’re coming for your cash. This is a risk that Charles Hughes Smith explored for us back in June in a very well-received analysis.
Once a fringe idea, this concept is now being openly discussed and debated at the highest levels publicly. Which means it is being hotly discussed behind closed doors, and likely has been for a long time.
The War On Cash Intensifies
PREVIEW by Chris MartensonThe central planners are setting the stage for the next round of officially sanctioned theft and this time they mean to assure that you have no way(s) of escaping.
They’re coming for your cash. This is a risk that Charles Hughes Smith explored for us back in June in a very well-received analysis.
Once a fringe idea, this concept is now being openly discussed and debated at the highest levels publicly. Which means it is being hotly discussed behind closed doors, and likely has been for a long time.
by
charleshughsmith
Executive Summary
- Why global capital flows will determine everything
- What impact euphoria and fear wil have on liquidation and valuation
- The importance of debt denominated in other currencies
- What's likely as capital shifts from Risk-On to Risk-Off assets
If you have not yet read Part 1: Here's Why The Markets Have Suddenly Become So Turbulent available free to all readers, please click here to read it first.
In Part 1, we listed five interlocking trends that will severely limit the scale and effectiveness of official responses to the next recession. In effect, the world will not be able to “borrow and spend” its way out of recession.
In Part 2, we’ll examine the single most important dynamic in any asset value: capital flows.
The Tidal Forces of Capital
Let’s start with the most basic building blocks of supply and demand.
Capital flowing into an assets class (buying) in excess of capital flowing out (selling) increases demand and pushes prices up.
If supply increases even faster than demand, prices may decline despite rising demand.
If capital flows out (selling) in excess of inflows (buying), prices will decline.
Prices are set on the margin. If 5 homes out of a neighborhood of 100 homes sell for 25% below the previous price level, the valuation of the other 95 homes also drops 25%.
Risk on = seeking asset appreciation and taking on more risk in exchange for higher yields.
Risk off = seeking capital preservation and accepting lower yields in exchange for reduced risk.
Assets have two ways to appreciate/depreciate: the nominal price, and the underlying currency the asset is priced in.
If a Mongolian bond yields 7%, the owner earned a nominal 7% on the capital. But if the currency the bond is denominated in dropped 20%, the owner suffered a 13% loss when the investment is priced in other currencies.
The consequences of capital flows can be counter-intuitive.
For example, if the Federal Reserve creates $1 trillion out of thin air, our initial expectation would be…
What Happens Next Will Be Determined By One Thing: Capital Flows
PREVIEW by charleshughsmithExecutive Summary
- Why global capital flows will determine everything
- What impact euphoria and fear wil have on liquidation and valuation
- The importance of debt denominated in other currencies
- What's likely as capital shifts from Risk-On to Risk-Off assets
If you have not yet read Part 1: Here's Why The Markets Have Suddenly Become So Turbulent available free to all readers, please click here to read it first.
In Part 1, we listed five interlocking trends that will severely limit the scale and effectiveness of official responses to the next recession. In effect, the world will not be able to “borrow and spend” its way out of recession.
In Part 2, we’ll examine the single most important dynamic in any asset value: capital flows.
The Tidal Forces of Capital
Let’s start with the most basic building blocks of supply and demand.
Capital flowing into an assets class (buying) in excess of capital flowing out (selling) increases demand and pushes prices up.
If supply increases even faster than demand, prices may decline despite rising demand.
If capital flows out (selling) in excess of inflows (buying), prices will decline.
Prices are set on the margin. If 5 homes out of a neighborhood of 100 homes sell for 25% below the previous price level, the valuation of the other 95 homes also drops 25%.
Risk on = seeking asset appreciation and taking on more risk in exchange for higher yields.
Risk off = seeking capital preservation and accepting lower yields in exchange for reduced risk.
Assets have two ways to appreciate/depreciate: the nominal price, and the underlying currency the asset is priced in.
If a Mongolian bond yields 7%, the owner earned a nominal 7% on the capital. But if the currency the bond is denominated in dropped 20%, the owner suffered a 13% loss when the investment is priced in other currencies.
The consequences of capital flows can be counter-intuitive.
For example, if the Federal Reserve creates $1 trillion out of thin air, our initial expectation would be…
by
Adam Taggart
by
Nomi Prins
by
Nomi Prins
Executive Summary
- The banking system runs on liquidity
- Banks will do anything to keep it flowing — including raiding their depositors
- The risks of a global liquidity crunch are dangerously high today
- Why extracting physical cash from the system is highly advised
If you have not yet read Part 1: In A World Of Artificial Liquidity – Cash Is King available free to all readers, please click here to read it first.
It's All About Liquidity For The Banks
Liquidity is the buzz-word that central banks used to justify their policies of keeping short term rates at zero (give or take) percent and buying bonds from banks in return for giving them more of it. Central banks say their primary responsibility is to balance full employment with low inflation, but that’s just code for being able to keep the largest banks solvent in times of emergency by all means possible. This current emergency has lasted nearly seven years and counting.
Here are my laws of liquidity behavior:
The first law of liquidity – when it is most needed, it will be least available.
The second law of liquidity – the easier it is to get, the less value it holds for the recipient.
The third law of liquidity – the harder it is to find, the greater its systemic cost.
Banks gain on multiple fronts from “accommodative” monetary policy with respect to their liquidity needs. First, they can borrow money at next to nothing. Second, they can hoard that extra cash under the guise of complying with capital reserve requirements and get brownie points for passing stress tests because they are holding the cash or high quality assets bought with the cash, that central banks provided them to begin with. Third, they can sell bonds they don’t want or need at full value to central banks, and afterwards mark similar bonds at higher levels than the market would otherwise value them.
This is all shell-game finance. It is why people should be diligent about…
They’re Coming For Your Cash
PREVIEW by Nomi PrinsExecutive Summary
- The banking system runs on liquidity
- Banks will do anything to keep it flowing — including raiding their depositors
- The risks of a global liquidity crunch are dangerously high today
- Why extracting physical cash from the system is highly advised
If you have not yet read Part 1: In A World Of Artificial Liquidity – Cash Is King available free to all readers, please click here to read it first.
It's All About Liquidity For The Banks
Liquidity is the buzz-word that central banks used to justify their policies of keeping short term rates at zero (give or take) percent and buying bonds from banks in return for giving them more of it. Central banks say their primary responsibility is to balance full employment with low inflation, but that’s just code for being able to keep the largest banks solvent in times of emergency by all means possible. This current emergency has lasted nearly seven years and counting.
Here are my laws of liquidity behavior:
The first law of liquidity – when it is most needed, it will be least available.
The second law of liquidity – the easier it is to get, the less value it holds for the recipient.
The third law of liquidity – the harder it is to find, the greater its systemic cost.
Banks gain on multiple fronts from “accommodative” monetary policy with respect to their liquidity needs. First, they can borrow money at next to nothing. Second, they can hoard that extra cash under the guise of complying with capital reserve requirements and get brownie points for passing stress tests because they are holding the cash or high quality assets bought with the cash, that central banks provided them to begin with. Third, they can sell bonds they don’t want or need at full value to central banks, and afterwards mark similar bonds at higher levels than the market would otherwise value them.
This is all shell-game finance. It is why people should be diligent about…
by
charleshughsmith
Executive Summary
- Which power groups will determine how the war on cash is waged?
- Is it better to hold cash in savings/checking accounts, or securities accounts?
- What will likely happen with retirement accounts?
- Ways to diversify your cash risk
If you have not yet read Part 1: The War on Cash: Officially Sanctioned Theft available free to all readers, please click here to read it first.
In Part 1, we reviewed the basic elements of the war on cash, and how it benefits banks and governments but not households that don’t already own productive assets.
In Part 2, we’ll review the downside of imposing capital controls and eliminating physical cash, and discuss strategies to protect our financial assets from bail-ins and negative interest rates/fees on cash.
What Will The Wealthy And Politically Powerful Tolerate?
One of the key dynamics in this discussion is: what will the wealthy and powerful tolerate? Any policy that inhibits or harms the wealthy and politically powerful is a non-starter, and so if we align our strategies accordingly, we are less likely to suffer any negative consequences.
The wealthy and politically powerful have little need for physical cash (President John F. Kennedy famously carried no cash), so eliminating cash will probably not generate any resistance in the financial elite.
But other forms of capital control, such as requiring retirement accounts to hold Treasury bonds and limiting transfers to other nations’ banks might…
What To Do With Your Cash Savings
PREVIEW by charleshughsmithExecutive Summary
- Which power groups will determine how the war on cash is waged?
- Is it better to hold cash in savings/checking accounts, or securities accounts?
- What will likely happen with retirement accounts?
- Ways to diversify your cash risk
If you have not yet read Part 1: The War on Cash: Officially Sanctioned Theft available free to all readers, please click here to read it first.
In Part 1, we reviewed the basic elements of the war on cash, and how it benefits banks and governments but not households that don’t already own productive assets.
In Part 2, we’ll review the downside of imposing capital controls and eliminating physical cash, and discuss strategies to protect our financial assets from bail-ins and negative interest rates/fees on cash.
What Will The Wealthy And Politically Powerful Tolerate?
One of the key dynamics in this discussion is: what will the wealthy and powerful tolerate? Any policy that inhibits or harms the wealthy and politically powerful is a non-starter, and so if we align our strategies accordingly, we are less likely to suffer any negative consequences.
The wealthy and politically powerful have little need for physical cash (President John F. Kennedy famously carried no cash), so eliminating cash will probably not generate any resistance in the financial elite.
But other forms of capital control, such as requiring retirement accounts to hold Treasury bonds and limiting transfers to other nations’ banks might…
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