Strange and Crazy in the Financial World!

It’s been crazy so long it feels like normal …

  1. Several $ Trillion in global debt “pays” negative interest. Loan your capital to an essentially bankrupt government and lose a portion of that capital every year! Strange and crazy!
  2. The US government runs deficits – every year – in the $500 Billion to $1 Trillion range. These are the official deficits, not what GAAP accounting would calculate. So what? Just print and borrow more. Strange and crazy!
  3. The Fort Knox Bullion Depository is so important that almost no one is allowed inside, even the President. It is so important that the gold has not been (truly) audited during the past 60+ years. They use armed guards, fences, motion detectors and much more to protect the gold that supposedly is vaulted behind those 22 ton doors. But at current prices the 147 million ounces of gold is valued at only about $160 Billion. The official national debt is over 100 times larger and the official debt increases by the entire value of the Fort Knox gold in roughly two months. Strange and crazy!
  4. The Fed is all important. We hang (pun intended) on every word. Media people analyze tiny nuances from Fed statements. But the Fed is the “Wizard” behind the green curtain. From Bob Moriarty:

100 years of history proves that the Fed is clueless. The mismatch between interest rates and risk today is absolutely insane. My opinion is that the whole financial system is going to blow sky high.” [Strange and crazy!]

Dow Jones Ind Avg: May 2015 high: 18,350

Jan. 13, 2016 16,151, down 12%

S&P 500 Index: May 2015: 2,126

Jan. 13, 2016 1,890, down 11%

NASDAQ Composite: July 2015 high: 5,230

Jan. 13, 2016 4,526, down 13.5%

Shanghai Comp Average: June 2015 high: 5,176

Jan. 13, 2016 2,950, down 43%

The Societe Generale expert says if the U.S. economy tumbles into a recession led by low manufacturing output, the U.S. market will sink a whopping 75%.” Diane Alter

Gerold’s Blog reported that as of January 8 there were no cargo ships operating in the Atlantic Ocean, something that has never happened before.

The CRB index of commodity prices just hit a 40 year low.

The Baltic Dry Index is down to an all-time low.

Strange and crazy!

From The Burning Platform:

The third speculative boom in the last fifteen years fueled by Federal Reserve idiocy is about to become the third bust in the last fifteen years. The unwashed masses who believe what they are told by CNBC are going to be pretty pissed off when they lose half their retirement savings again. None of their highly paid financial advisors are telling them to expect 0% returns over the next twelve years, but that is their fate. The numbers don’t lie over the long term.”

At current market valuations, a run of the mill bust will result in a 50% decline. A bust that puts valuations back to 1982 bear market lows would result in a decline exceeding 75%.”

Strange and crazy!

2016 is an election year and will probably be a recession year. An outright market crash, such as what is ongoing in China, is certainly possible. The US stock market crashed in 2008 and the US elected a Democrat for President, as if it mattered. A crash in 2016 might cause Wall Street funding to support, and the voting machines to elect, a Republican for President, as if it mattered.

The Fed will have choices: (These are merely my “outsider” opinions.)

  1. Talk, act importantly, raise interest rates slightly, and increase debt, borrowing, and QE (monetizing debt).
  2. Act importantly, talk, and increase debt, borrowing, and QE (monetizing debt). It is what they do ….

There is an outside chance that the Fed “throws in the towel,” the PhD’s resign, admit failure managing the economy, money supply, and monetary policy, and allow nearly everything to crash and burn, metaphorically speaking. My personal bet is that the odds of this are about the same as winning the Powerball, 1 in 292,000,000.

Sane, Not Crazy:

  1. Trust history. Expect larger deficits, more borrowing, declining prices in stocks and bonds, higher prices in gold and silver, and trauma.
  2. Trust politicians, the Fed, and CNBC – to mislead you. Act accordingly.
  3. A different President and/or a different Presidential party will make little difference. The word diversion comes to mind.
  4. Hemingway: “The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin.” Hmmmm. Is war in the Middle-East part of the plan?
  5. The stock market crashed or corrected in 1987, 1994, 2000, 2008, and 2015-2016 – every 7 to 8 years. Watch out below.
  6. Silver prices bottomed in 1986, 1993, 2001, 2008, and 2015-2016 – every 7 to 8 years. 2016 should be a good year for silver.
  7. Gold prices bottomed in 1984, 1992, 2001, 2008, and 2015 – 2016 – every 7 to 8 years. 2016 should be a good year for gold.

2016 looks like a year for strange and crazy events, market trauma, more QE and diversions. Rig for stormy weather and read:

Silver, Silliness, Gold, and Risk

Between the “State of the Union” and the next election much can happen. I think it is safe to say that, “Gold Thrives, Paper Dies.”

Gary Christenson
The Deviant Investor

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