Posts Categorized: Bill Holter
This is my last article of the year as I need a little R and R. There are a couple interviews already done and will be posted when we receive a link. We will be doing our weekly call for subscribers on weekends as usual. A very golden 2019 is in store!
Is This A Joke?
December 20, 2018
As the year comes to a close, we all look back and reflect on what happened, what didn’t, and what should or should not logically happen in the future. During some recent reflection, I could only laugh and finished my thoughts by thinking “is this a joke”?
We all (even the brain dead) know something has seriously changed in our financial markets. Emotional thought has morphed from buy the dip to sell the rip. In other words, fear is now in the process of replacing greed as the prevailing sentiment. But why? What has changed?
Specifically, the “clock” is finally running out. I am of course referring to debt and the (in)ability to service it. The Great Financial Crisis was brought about by too much debt and was reacted to by administering even more debt as the fix. This little tidbit is outright history but now forgotten in less than a decade. QE was put forth as something “new” when in fact it was only a fancy name for debt monetization which has been tried hundred’s of times in the past with the very same result each time …destroyed and worthless pieces of paper called currency. The only difference in today’s world is currencies now are predominantly digital rather than pieces of paper.
This article was held for 48 hours for our subscribers.
People continually ask “when” will it happen? For the last 6 months we have responded “it is happening right before your very eyes”! In fact, as of this morning 52% of global markets are now down over 20% from their highs and qualifying as bear markets. Please understand the financial backdrop these weakening markets are falling into. Bluntly, the world is facing a giant margin call that cannot be met.
Liquidity had become extremely tight even as markets made their high water marks. It is this lack of liquidity which threatens to become a self reinforcing flash crash to hell via margin calls. “Don’t worry” they say, central banks will come to the rescue. There is one fundamental problem with this line of thought, the value of the issued currencies themselves. There is zero mathematical way to service and pay off current debt with current currency values … currencies must be massively printed and thus devalued if they are to pay off the mountains of debt! Central banks created the problem, they will not be the solution. Rather, their demise will be part of the solution.
Looking at the backdrop that a revolving door of “buy the dip(pers)” on CNBC assure us is the right thing to do, the list is many and for the most part the issues are carved in stone. Obviously number one on the list are the levels of consumer, corporate, state and sovereign debt. By any measure, we have never been at current levels. Then we have the current unfunded pension problem. This is not just a US problem, it is a $400 trillion mathematical sinkhole seen worldwide.
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As I alluded to a couple of days ago, “look around, what do you see?”. People who own precious metals are quaking in their boots at EXACTLY THE PRECISE TIME they should be comfortable. We have gotten many “scared” e-mails recently, some from people I would have never guessed. Even a $10 move down in gold has sparked fearful e-mails…but why?
It should be clear to you now, the “unwind” has begun. Jim and I tried to tell you this a couple of months back, now there is absolute evidence. Look at real estate in many parts of the world. Australia, China, London, Vancouver, New York and now even San Francisco. The most important thing to look at is “volume”, as price always follows. Pricing, as it did back in 2006 has gotten to unaffordable levels…and banks have begun to pull back on lending. Ask yourself this simple question, where would pricing be if everyone had to pay cash for new purchases? I am not sure the answer but it would surely be less than 50% of current pricing. “Credit” is the reason real estate attained the values they did, lack of credit is now reducing sales volume…and thus pricing.
Then we can look at autos all over the world. Asia, Europe and North America, all markets are soft and the build up in “sub prime” auto loans has exploded. Any discussion of credit and sub prime in the same sentence should certainly not leave out “student loans”. This sector is now well over $1 trillion. Yes, for a good cause I suppose you could say, but we now have an entire generation in hock before they even leave the starting gate? Not to mention, college grads today are not exactly what their parents expected when they first wrote their checks, rather they tend to melt under pressure. Is this a “solid credit”?