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Image | Paul Tustain: Be Wary of Balance Sheet Risk
Paul Tustain: Be Wary of Balance Sheet Risk
by Chris Martenson

"I always tell people when they look at their bank account, they think they have got maybe $50,000 in the bank. It says $50,000 CR. Credit.

You are a creditor. It is the bank’s property, that $50,000. And they recognize in that document that they owe it to you.

So, you have to watch out for that word 'creditor'. When you see CR, you are on the balance sheet. You are at risk."

So says Paul Tustain, founder of BullionVault and advocate for minimizing counterparty risk in a world of rehypothecation and 100-to-1 leveraged paper markets.

 

Paul Tustain: Be Wary of Balance Sheet Risk
 by Chris Martenson

"I always tell people when they look at their bank account, they think they have got maybe $50,000 in the bank. It says $50,000 CR. Credit.

You are a creditor. It is the bank’s property, that $50,000. And they recognize in that document that they owe it to you.

So, you have to watch out for that word 'creditor'. When you see CR, you are on the balance sheet. You are at risk."

So says Paul Tustain, founder of BullionVault and advocate for minimizing counterparty risk in a world of rehypothecation and 100-to-1 leveraged paper markets.

 

Image | Central Follies
Central Follies
 PREVIEW
by Chris Martenson

Note: Mish was unavailable for our podcast today, so I am writing up the topics I had hoped to cover for my portion. Perhaps not enough has been said about the folly of central planning, with ‘folly’ being a relatively neutral word along the spectrum of possible nouns that might describe what the central banks…
Central Follies
 PREVIEW by Chris Martenson

Note: Mish was unavailable for our podcast today, so I am writing up the topics I had hoped to cover for my portion. Perhaps not enough has been said about the folly of central planning, with ‘folly’ being a relatively neutral word along the spectrum of possible nouns that might describe what the central banks…
Image | Are We Heading for Another 2008?
Are We Heading for Another 2008?
by charleshughsmith

We all know that central banks and governments have been actively intervening in markets since the 2007 subprime mortgage meltdown destabilized the leveraged-debt-dependent global economy. We also know that unprecedented intervention is now the de facto institutionalized policy of central banks and governments. In some cases, the financial authorities have explicitly stated their intention to “stabilize markets” (translation: reinflate credit-driven speculative bubbles) by whatever means are necessary, while in others the interventions are performed by proxies so the policy remains implicit. 

All through the waning months of 2007 and the first two quarters of 2008, the market gyrated as the Federal Reserve and other central banks issued reassurances that the subprime mortgage meltdown was “contained” and posed no threat to the global economy. The equity market turned to its standard-issue reassurance: “Don’t fight the Fed,” a maxim that elevated the Federal Reserve’s power to goose markets to godlike status.

But alas, the global financial meltdown of late 2008 showed that hubris should not be confused with godlike power. Despite the “impossibility” of the market disobeying the Fed’s commands (“Away with thee, oh tides, for we are the Federal Reserve!”) and the “sure-fire” cycle of stocks always rising in an election year, global markets imploded as the usual bag of central bank and Sovereign State tricks failed in spectacular fashion.
Are We Heading for Another 2008?
 by charleshughsmith

We all know that central banks and governments have been actively intervening in markets since the 2007 subprime mortgage meltdown destabilized the leveraged-debt-dependent global economy. We also know that unprecedented intervention is now the de facto institutionalized policy of central banks and governments. In some cases, the financial authorities have explicitly stated their intention to “stabilize markets” (translation: reinflate credit-driven speculative bubbles) by whatever means are necessary, while in others the interventions are performed by proxies so the policy remains implicit. 

All through the waning months of 2007 and the first two quarters of 2008, the market gyrated as the Federal Reserve and other central banks issued reassurances that the subprime mortgage meltdown was “contained” and posed no threat to the global economy. The equity market turned to its standard-issue reassurance: “Don’t fight the Fed,” a maxim that elevated the Federal Reserve’s power to goose markets to godlike status.

But alas, the global financial meltdown of late 2008 showed that hubris should not be confused with godlike power. Despite the “impossibility” of the market disobeying the Fed’s commands (“Away with thee, oh tides, for we are the Federal Reserve!”) and the “sure-fire” cycle of stocks always rising in an election year, global markets imploded as the usual bag of central bank and Sovereign State tricks failed in spectacular fashion.
Image | Why A Near-Term Market Rollover is Probable
Why A Near-Term Market Rollover is Probable
 PREVIEW
by charleshughsmith

Why a Near-Term Market Rollover is Probable

by Charles Hugh Smith, contributing editor
Wednesday, April 11, 2012

Executive Summary

  • A plethora of technical indicators show a breakdown is in progress
  • The key charts you need to be aware of
  • Time to place your bets: higher equity prices or higher interest rates?
  • Why a defense strategy in the near term is critical for those holding stocks and bonds

Part I: Are We Heading for Another 2008?

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II: Why a Near-Term Market Rollover is Probable

In Part I, we summarized the global financial meltdown of 2008 as recognition that the collateral beneath an enormous inverted pyramid of leveraged debt had vanished, while all the monetary and fiscal tricks of central banks and governments failed to sustain the illusion of sufficient collateral.

Once again we find that massive, sustained intervention in global financial markets is being touted as successful – everything has been “fixed,” markets have been “stabilized,” and a global “recovery” is well underway,

If we believe this, we might be exposed to a dramatic downside should 2012 turn out to be another 2008, when markets realized that intervention did not create collateral, but instead a temporary illusion of sufficient collateral. 

Why A Near-Term Market Rollover is Probable
 PREVIEW by charleshughsmith

Why a Near-Term Market Rollover is Probable

by Charles Hugh Smith, contributing editor
Wednesday, April 11, 2012

Executive Summary

  • A plethora of technical indicators show a breakdown is in progress
  • The key charts you need to be aware of
  • Time to place your bets: higher equity prices or higher interest rates?
  • Why a defense strategy in the near term is critical for those holding stocks and bonds

Part I: Are We Heading for Another 2008?

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II: Why a Near-Term Market Rollover is Probable

In Part I, we summarized the global financial meltdown of 2008 as recognition that the collateral beneath an enormous inverted pyramid of leveraged debt had vanished, while all the monetary and fiscal tricks of central banks and governments failed to sustain the illusion of sufficient collateral.

Once again we find that massive, sustained intervention in global financial markets is being touted as successful – everything has been “fixed,” markets have been “stabilized,” and a global “recovery” is well underway,

If we believe this, we might be exposed to a dramatic downside should 2012 turn out to be another 2008, when markets realized that intervention did not create collateral, but instead a temporary illusion of sufficient collateral. 

Image | Khosla Ventures: The US is Massively Underfunding the Innovations Critical to Its Energy Future
Khosla Ventures: The US is Massively Underfunding the Innovations Critical to Its Energy Future
by Chris Martenson

"The age of cheap oil is over," agrees Andrew Chung, partner at Khosla Ventures, arguably the most knowledgeable venture capital firm spearheading next-generation energy projects.

While perhaps more optimistic than Chris on the odds that the world can transition off fossil energy sources without experiencing some duration of lower overall energy output, Andrew is clear to point out that large and near-term capital investments are essential for such a smooth transition.

The size and scale of the investments necessary to evolve and replace our existing (and increasingly outdated) power infrastructure are enormous, and too big for private companies alone to address the issue on an acceptable timeline.

And as of now, the U.S. is decidedly NOT treating the matter with the urgency it deserves.
Khosla Ventures: The US is Massively Underfunding the Innovations Critical to Its Energy Future
 by Chris Martenson

"The age of cheap oil is over," agrees Andrew Chung, partner at Khosla Ventures, arguably the most knowledgeable venture capital firm spearheading next-generation energy projects.

While perhaps more optimistic than Chris on the odds that the world can transition off fossil energy sources without experiencing some duration of lower overall energy output, Andrew is clear to point out that large and near-term capital investments are essential for such a smooth transition.

The size and scale of the investments necessary to evolve and replace our existing (and increasingly outdated) power infrastructure are enormous, and too big for private companies alone to address the issue on an acceptable timeline.

And as of now, the U.S. is decidedly NOT treating the matter with the urgency it deserves.
Image | Off the Cuff with Mike “Mish” Shedlock
Off the Cuff with Mike “Mish” Shedlock
by Chris Martenson

Nearly every week, PeakProsperity.com enrolled members enjoy a fresh podcast of "Off The Cuff," an informal discussion on the markets between Chris and Mike "Mish" Shedlock, publisher of the extremely popular economic blog Mish's Global Economic Trend Analysis.

We're making this week's Off the Cuff podcast available to the public-at-large to build awareness for an important cause that Mish is championing. Earlier this week, he shared with readers that his wife Joanne suffers from ALS, better known as Lou Gehrig's Disease.

After several years of juggling an intense publishing schedule (describing Mish as 'prolific' is a gross understatement) while caring for his wife on his own, he's created an online raffle as a means to raise funds for important ALS research, patient care, and education. We support his efforts and wish Mish and Joanne all the best.

Click here to learn more about the raffle.

In this week's Off the Cuff, Chris and Mish look at the impact of the recently-released Fed minutes and the worsening situation in Europe (no, the problems there haven't gone away).

 

Off the Cuff with Mike “Mish” Shedlock
 by Chris Martenson

Nearly every week, PeakProsperity.com enrolled members enjoy a fresh podcast of "Off The Cuff," an informal discussion on the markets between Chris and Mike "Mish" Shedlock, publisher of the extremely popular economic blog Mish's Global Economic Trend Analysis.

We're making this week's Off the Cuff podcast available to the public-at-large to build awareness for an important cause that Mish is championing. Earlier this week, he shared with readers that his wife Joanne suffers from ALS, better known as Lou Gehrig's Disease.

After several years of juggling an intense publishing schedule (describing Mish as 'prolific' is a gross understatement) while caring for his wife on his own, he's created an online raffle as a means to raise funds for important ALS research, patient care, and education. We support his efforts and wish Mish and Joanne all the best.

Click here to learn more about the raffle.

In this week's Off the Cuff, Chris and Mish look at the impact of the recently-released Fed minutes and the worsening situation in Europe (no, the problems there haven't gone away).

 

Image | Promising Investments as the Race for BTUs Heats Up
Promising Investments as the Race for BTUs Heats Up
 PREVIEW
by Gregor Macdonald

Promising Investments as the Race for BTUs Heats Up

by Gregor Macdonald, contributing editor
Tuesday, April 3, 2012

Executive Summary

  • Three attractive sectors to invest in early as we enter the post-oil economy
  • The transition away from oil has already begun — which energy sectors are leading?
  • The key trends over the next five years
  • How scarcity — and inflation — will manifest in this next phase

Part I: The Race for BTUs

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II: Promising Investments as the Race for BTUs Heats Up

Hopefully readers will not be too shocked by my openhandedness towards a cyclical global expansion — restrained by oil for sure, but made possible by several years of continued reflationary monetary policy and the ability of humans to tactically access new sources of energy.

Let’s remember that a tremendous amount of pain, in industrial terms, has already been taken by the OECD over the past 7 years as it shed nearly 15% of its oil demand. Readers will also recall my previous essays, in which I warned that an export boom was continuing to unfold in the United States. And readers of my work over the past several years know I’ve been adamant that the 5 billion people in the developing world have plowed right through the 2008 financial crisis increasing their reliance on coal.

Thus, I identify three areas of investment as the world stumbles forward with poor growth in the OECD, restrained by oil but becoming increasingly desperate to find some — any — additional energy resources. These are not stock recommendations, nor am I making a timing call as to when to invest in these areas. Rather, these are indicative of three means by which an investor could participate in emerging, secular trends over the next 2 to 4 years.

Promising Investments as the Race for BTUs Heats Up
 PREVIEW by Gregor Macdonald

Promising Investments as the Race for BTUs Heats Up

by Gregor Macdonald, contributing editor
Tuesday, April 3, 2012

Executive Summary

  • Three attractive sectors to invest in early as we enter the post-oil economy
  • The transition away from oil has already begun — which energy sectors are leading?
  • The key trends over the next five years
  • How scarcity — and inflation — will manifest in this next phase

Part I: The Race for BTUs

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II: Promising Investments as the Race for BTUs Heats Up

Hopefully readers will not be too shocked by my openhandedness towards a cyclical global expansion — restrained by oil for sure, but made possible by several years of continued reflationary monetary policy and the ability of humans to tactically access new sources of energy.

Let’s remember that a tremendous amount of pain, in industrial terms, has already been taken by the OECD over the past 7 years as it shed nearly 15% of its oil demand. Readers will also recall my previous essays, in which I warned that an export boom was continuing to unfold in the United States. And readers of my work over the past several years know I’ve been adamant that the 5 billion people in the developing world have plowed right through the 2008 financial crisis increasing their reliance on coal.

Thus, I identify three areas of investment as the world stumbles forward with poor growth in the OECD, restrained by oil but becoming increasingly desperate to find some — any — additional energy resources. These are not stock recommendations, nor am I making a timing call as to when to invest in these areas. Rather, these are indicative of three means by which an investor could participate in emerging, secular trends over the next 2 to 4 years.

Image | Charles Biderman: The Problem with Rigged Markets
Charles Biderman: The Problem with Rigged Markets
by Chris Martenson

"Even Wile E. Coyote had to come back down to earth sooner or later", says Charles Biderman, founder of TrimTabs Investment Research. In his opinion, the prices of stocks and bonds – enabled by excessive financialization of our economy and central bank money printing – have been defying gravity for a dangerously long time. 

If we continue to do all we can to preserve the status quo — to maintain "phony" asset price levels as Charles calls them — at best we will restrict overall growth and handicap the economy.

The problem isn't so much the unfairness and malinvestment evident in a rigged market. As Charles shrewdly asks: what happens when the market becomes un-rigged?

We've never experienced the unwinding of an entirely manipulated financial system, so we can't predict for sure. But at this point, a painful collapse of our markets and loss of the US dollar as the world's reserve currency seem entirely plausible.
Charles Biderman: The Problem with Rigged Markets
 by Chris Martenson

"Even Wile E. Coyote had to come back down to earth sooner or later", says Charles Biderman, founder of TrimTabs Investment Research. In his opinion, the prices of stocks and bonds – enabled by excessive financialization of our economy and central bank money printing – have been defying gravity for a dangerously long time. 

If we continue to do all we can to preserve the status quo — to maintain "phony" asset price levels as Charles calls them — at best we will restrict overall growth and handicap the economy.

The problem isn't so much the unfairness and malinvestment evident in a rigged market. As Charles shrewdly asks: what happens when the market becomes un-rigged?

We've never experienced the unwinding of an entirely manipulated financial system, so we can't predict for sure. But at this point, a painful collapse of our markets and loss of the US dollar as the world's reserve currency seem entirely plausible.
Image | How High and When to Sell?
How High and When to Sell?
 PREVIEW
by Chris Martenson

How High and When to Sell?

by Chris Martenson
Wednesday, March 28, 2012

Executive Summary

  • Confiscation and/or excessive taxation of gold seem low risks at the moment
  • Our price projections for gold
  • How to know when to sell your gold
  • What to exchange your gold for

Part I: Gold is Manipulated (But That’s Okay)

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II: How High and When to Sell?

Confiscation and/or Taxation

Here is a quick aside on the prospect of confiscation and/or additional and punitive taxation of gold (and silver) because it comes up often. I think neither is especially likely at this point.

Confiscation will become a concern for me if:

  • Gold is ever remonetized. Should gold become the international choice of cross-border balancing, as I expect it might some day, the chance of it being ‘nationalized’ will skyrocket. However, as was true in the 1930s in the US, I fully expect that holders of gold will be compensated for their holdings. 
  • Gold is demanded for oil. Should a current oil-exporting nation demand that it be paid in gold instead of cash, I would expect gold to be nationalized.
  • Gold crosses $5,000/ounce. Once gold becomes a significant store of value compared to other sources such as money market funds or 401k plans, it might become a target of choice for revenue-strapped governments. As it is right now — on a relative basis vs. the equity or bond markets — the size of the entire gold market is a tiny, puny store of value, and therefore not really worth the government’s effort.

Should any of these things change, I believe we will have weeks, if not many months, of forewarning of confiscation or additional taxation — and my alert service will have you prepared well in advance.

There will be rumblings and discussions and other warning signs to forewarn that a change is coming, if one ever does. For now it seems rather unlikely that either confiscation or burdensome taxation is a near and present concern to hold.

How High and When to Sell?
 PREVIEW by Chris Martenson

How High and When to Sell?

by Chris Martenson
Wednesday, March 28, 2012

Executive Summary

  • Confiscation and/or excessive taxation of gold seem low risks at the moment
  • Our price projections for gold
  • How to know when to sell your gold
  • What to exchange your gold for

Part I: Gold is Manipulated (But That’s Okay)

If you have not yet read Part I, available free to all readers, please click here to read it first.

Part II: How High and When to Sell?

Confiscation and/or Taxation

Here is a quick aside on the prospect of confiscation and/or additional and punitive taxation of gold (and silver) because it comes up often. I think neither is especially likely at this point.

Confiscation will become a concern for me if:

  • Gold is ever remonetized. Should gold become the international choice of cross-border balancing, as I expect it might some day, the chance of it being ‘nationalized’ will skyrocket. However, as was true in the 1930s in the US, I fully expect that holders of gold will be compensated for their holdings. 
  • Gold is demanded for oil. Should a current oil-exporting nation demand that it be paid in gold instead of cash, I would expect gold to be nationalized.
  • Gold crosses $5,000/ounce. Once gold becomes a significant store of value compared to other sources such as money market funds or 401k plans, it might become a target of choice for revenue-strapped governments. As it is right now — on a relative basis vs. the equity or bond markets — the size of the entire gold market is a tiny, puny store of value, and therefore not really worth the government’s effort.

Should any of these things change, I believe we will have weeks, if not many months, of forewarning of confiscation or additional taxation — and my alert service will have you prepared well in advance.

There will be rumblings and discussions and other warning signs to forewarn that a change is coming, if one ever does. For now it seems rather unlikely that either confiscation or burdensome taxation is a near and present concern to hold.

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