September 18, 2014
- IMF chimes in on a couple assumptions of the Mother of All Asset Bubbles thesis…
- The Dow hit new highs again… a cautionary tale if you think you’re missing out
- The return of the tapir… even in Dave’s absence!
- Scottish, schmottish… what’s the difference? (Hint: It’s black and gooey)
- Your Prophecy 2015 entries begin to arrive… a suggestion for Miley Cyrus… a video twice removed from the Internet reappears… and more!
As if on cue, the International Monetary Fund (IMF) released a report yesterday warning of the rising risk of financial crises around the globe.
Recall from yesterday, through our Prophecy 2015 project, we are revisiting our most audacious forecast: the implosion of the “Mother of All Asset Bubbles.” Thus, we’ve begun counting the ways in which the next financial crisis may begin happening in earnest.
The IMF yesterday appeared to agree with at least three of our assumptions.
“The global economy faces a growing risk,” the IMF perfunctorily admitted, “from big financial market bets.” The stern stepsister of the World Bank suggests that “if investors get spooked by geopolitical tensions” or if they perceive “a shift in U.S. interest rate policy,” they might, what, try to take profit? Preserve capital?
We’re not sure.
They summarize with this nearly impossible sentence: “New downside risks associated with geopolitical tensions and increasing risk taking are arising.” So there’s new downside risk associated with increasing risk taaak… ing… wait.
Let’s see if we can… translate:
Assumption No. 1: Low volatility. Relative calm in the markets leads traders to make bigger bets on trades they feel are more and more certain. Margin debt rises.
Assumption No. 2: Uncertainty also rises with debt levels. The terror group ISIS released a video through social media showing, among other things, a guy snooping around the White House… with the oh-so-cheesy ending “WAR OF FIRE!” as the final screen. Stuff like that makes traders a little less certain.
Assumption No. 3: Rising interest rates on debt is, well… bad. You’ll note below the Federal Reserve decided to begin rolling back bond purchases by another $10 billion a month. That to our friend Richard Duncan’s way of thinking is one small step in the direction of the Next Great Depression.
But before you start looting your own investments: Yesterday, the Dow shot to a new record high of 17,157. The S&P rose to 2,002, and the Nasdaq shimmied into a sleek 4,562.
Let’s begin by asking our new source on the inside [see yesterday’s 5] what he makes of these numbers…
“The stock market is in a bubble,” he notes. Stocks are pushing higher despite anemic earnings growth around the globe. Naturally, there are other factors defining the global financial system… one he says most “experts” are in denial about: The market is being propped up by a zero interest rate.
“There’s nothing Wall Street doesn’t like about free money. Leverage on the New York Stock Exchange is at an all-time high.”
“So,” continues the cautionary tale for you, “this is the worst possible time for the everyday investor to get in.
“Now, it is true that they haven’t really participated. You know, people like to say, oh, well, the stock market has more than doubled since the low in March 2009. Well, it has, but it’s more than doubled with enormous leverage and very little participation.
“Volumes are low so you have a steeply rising stock market on very low volume with massive leverage. That is almost the definition of a bubble, and that bubble will burst.
“So, investors who kinda jump in now saying, oh, gee, I missed the boat, I gotta get in, they’re just setting themselves up for a fall. So that’s really the first problem. This is really the worst possible time to jump in.”
Yesterday, the Federal Reserve’s Open Market Committee rolled back its bond purchases by another $10 billion per month, to just $15 billion.
In Dave’s continuing absence, we feel it’s our duty to trot out his good friend the tapir:
On Dec. 12, 2012, then Fed chair Ben Bernanke announced QE3 would start at $85 billion a month. By January of this year, the purchases had been “tapered” to $65 billion a month. Successively, nearly month by month since then, the tapir has gotten shorter in the tooth.
After next month, we’re told, QE will end altogether. Sadly, one of our favorite gags will come to an end too. Thanks for all the good times, Dave. (Unless of course, Duncan’s hypothesis proves correct.)
When QE finally ends, U.S. banks have several billion dollars a month less to play with. “Gotta make it up somewhere,” Dave presciently observed back in May. What sneaky fees and ambitious dinnertime telephone calls banks have in mind for us will no doubt reveal themselves in the coming months…
The big mainstream news for today: the Scottish independence referendum. The Scots have apparently had enough tea and crumpets, and there’s a 50-50 chance that today’s vote will create a newly independent nation (with lots of North Sea oil and awkward placement of some English nukes within its “new” borders).
“If it’s a ‘yes’ vote,” our new source continues, undeterred, “it’s an earthquake — very bad for the [British pound] sterling. I’ve been saying for some time that sterling is vulnerable to a currency crisis… Even if it’s a ‘no’ vote… the issue’s not going away. They’ll have other referendums in the future, so that will kind of cast a cloud over the sterling.”
He predicted a year ago that Scotland would separate from the United Kingdom and could apply for EU membership, along with Albania, Bosnia, Herzegovina and Kosovo, among others. “Over the next 10 years, the EU is destined to become the world’s economic superpower, stretching from Asia Minor to Greenland and from the Arctic Ocean to the Sahara Desert.”
Even Ukraine, he noted, could apply for membership.
So while mainstream economists are telling Scotland they’re foolish for the plan to keep the pound sterling while dislodging from the Bank of England, our source is saying Scotland seems more likely to join the EU and piggyback on the euro as it competes with the dollar for supremacy.
“We have no intention of joining the euro, and don’t even qualify for membership even if we did,” a Yes Scotland spokesman told the U.K.’s Telegraph on Tuesday.
We’ll see.
Another democratic referendum is quietly shaping up to have global consequences too: Our friend Dr. Ron Paul wrote over at his namesake institute recently that the Swiss want to repatriate gold held in foreign banks and ensure that Swiss bank assets are 20% in gold.
Officially, they’re not happy with the traditional banking system getting bullied by the U.S. Treasury… because their own tax revenues are dropping!
“The Swiss referendum,” goes the official word, “is driven by an undercurrent of dissatisfaction with the conduct not only of Swiss monetary policy but also of Swiss banking policy.”
Au contraire, says our source. The Swiss know something is up with central banks around the world. They know the world’s major currencies are overextended. They know China has been stockpiling gold. Some Swiss banks have even put up a fight when depositors attempt to take their gold out.
The Swiss, one assumes, are preparing for a big shift in the global monetary system…
Halfway around the world, and a lot closer to ISIS, we sniffed out a piece of irony that you might also find interesting.
While ISIS has successfully goaded the U.S. military into action by posting three violent videos of journalists and aid workers getting beheaded on the Internet, Saudi Arabia has been quietly beheading Christians in their own country… 23 of them at last count, reports Zero Hedge this morning. That’s more than seven times the number of beheadings that have enraged 61% of Americans enough to support bombing, at least, in Syria.
Yet while the president is playing political footsie with Congress over whether to send troops… or just airstrikes and training… to Iraq and Syria, Human Rights Watch also noted, “The U.S. concluded a $60 billion arms sale to Saudi Arabia, its largest anywhere to date.”
Hmmm…
On this front, our source conjectures the U.S. is quietly behind the scenes trying to work with Iran. So much so to help with their nuclear program. That’s enraged the Saudis and pushed them closer to the Egyptians and, by extension, the Russians. The newly minted arms deal with the Saudis is a U.S. attempt to keep everyone calm.
“I foresee that 2015 will be a year of tension,” our first reader kicks off a smattering of forecasts for the Prophecy 2015 file. “It will be your typical tension due to discrimination, prejudice and intolerance crossing ethnic, socioeconomic, geographical and geopolitical backgrounds. The xenophobia will also spread to more atypical habitations like the military and police forces.
“We are immediately headed for confiscation of assets, much higher food costs and far fewer opportunities for gaining wealth,” writes another. “Probably late 2015 and into 2016. The election ahead is so vital. And from there, I believe our entire citizen fortitude will be tested in a way we have never seen.”
“My prophecy,” agrees a third, “big trouble is coming and most folks are not prepared.
“Keep at least $100 in $20s for every person in your home,” the reader continues, offering some advice, “hidden away (not in your underwear drawer). Don’t let your gas tank get below 1/2. Keep enough food and bottled water to last you at least a week. And start socking away as much money as you can in your checking account(s), because that’s the first account the gov’t will unfreeze in case of a bank ‘holiday.'”
“Stealing money from current accounts in financial institutions,” a fourth reader catches on the theme, “is a no-brainer for governments. Where can people put their money that it cannot be confiscated?”
The solution he suggests: “Bitcoin resolves that problem.”
“One day,” a fifth conjectures without a definite time frame, “the world’s markets will not rebound as they have in the past, and the nations will enter a worldwide race to grab all the resources they can for themselves. The welfare states will end as we now know them, there will be a lot of greed and a lot of suffering, millions will die from so many causes…”
Grim.
Only one reader bothered to wonder what will become of Miley Cyrus if these events should come to pass.
“I’ll go out on a limb and predict she will have a massive born-again experience and will use a large Bible as a prop during her concerts.”
As likely as anything.
Sincerely,
Addison Wiggin
The 5 Min. Forecast
P.S. In light of all the geopolitical intrigue we’ve been running across of late, we wanted to make sure you didn’t miss the following presentation. It disappeared from the Web twice before.
Our publisher, Joe Schriefer, recently urged you to take a look at a secret the Pentagon’s been hiding at 9800 Savage Rd., Fort Meade, Maryland, for nearly a decade.
But recently, they’ve been CAUGHT. And a former naval flight officer with over 1,200 hours of fighter jet time has gone on video to spill the beans on this little-known program.
You’re never going to believe what he’s revealing. It’s so scandalous, in fact, the CIA is spending billions of dollars a year to keep it under wraps.
What’s the Pentagon up to?
Who’s this “secret army” designed to fight. (Hint: It’s not ISIS.)
And why is it so important you see this story immediately?
Click here for the shocking truth. The Pentagon probably doesn’t want you to see this. So watch it while you still can.