Plain Speaking and Peak Debt

  • The language of Davos: Whatever it is, it’s not plain English
  • Straight talk from David Stockman: “We are at peak debt”
  • Market shock one day away?
  • A strategy with teeth: In and out at the right time on a “FANG” stock
  • Relentless Silver Eagle demand… a meaningless housing statistic… another earful about our “social income experiment”… and more!

Buzzwords, blather and BS: Judging from the following, we didn’t miss anything at the World Economic Forum’s annual shindig last week in Davos, Switzerland.
Click the image… then read it and weep.

That’s your global power elite nowadays — lawyers, MBAs and economists speaking in a hollow jargon few of us in the “real world” can relate to.
Oh, for a breath of fresh air…
“Forget about jobs, it’s a lagging indicator,” says David Stockman.
David has amassed a sterling pedigree in Washington and on Wall Street across decades, but he’s never lost touch with his plain-speaking western Michigan roots. And as we said last Friday, he wore out his welcome with the Davos crowd long ago.
But CNBC still has him on from time to time, even though he routinely spurns it as “Bubblevision”… and his words during an interview last week are relevant today.
By the time you read this, the Federal Reserve will have wrapped up one of its every-six-weeks policy meetings. Absolutely no one expects another increase in the fed funds rate after the one that came last month.
But Wall Street’s amateur Kremlinologists will surely parse the Fed’s statement for any hints about the March meeting: Will continued “strong” job numbers prompt another increase then?
It doesn’t matter, David told CNBC. “Business sales are the heart of the matter. They’re down 4%; CapEx orders are down 6% from the peak a year ago. Trade volume is down 7% from a year ago. Exports are down 12%.”
In other words, we’re on the cusp of a recession. Not just here, but globally.
But why now?
The answer comes down to this chart CNBC put up on the screen during David’s interview:

Description: GlobalCentralBankBalanceSheet.png

“Central banks had about $2 trillion on their balance sheets two decades ago,” he said. “It’s $21 trillion now. This is high-powered money that caused an enormous expansion of credit and a financial valuation bubble.”
The result was a global debt load that ballooned from $40 trillion in the mid-1990s to $225 trillion today. “We are at peak debt,” he said. “There is no more credit that can be shoved into the system. There has been massive overinvestment in everything — mining, energy, heavy industry, transportation, shipbuilding.”
Overinvestment in airplanes too, we’ll add: Boeing issued a turkey of an earnings forecast this morning, saying it would deliver fewer jets in 2016. As we write, BA shares are down more than 8%.
This is David’s theme that we’ve taken to calling “too much wealth” in recent weeks. And this economic reality is reflected in the stock market action: “Since the S&P 500 crossed the 1,870 mark in early March 2014,” he says, “there have been 35 attempts to rally higher. All of them have failed.”


And as David explained in this space last month, the index would be far lower than it is now were it not for the performance of four companies that have come to be known as the “FANG” stocks — Facebook, Amazon, Netflix, Google.
This is how most bull markets end — “breadth” goes to hell and only a handful of stocks hold up the major indexes. David calls it LSS — “Last Stocks Standing” — syndrome.
It happened in 2000 with the “Four Horsemen” of Microsoft, Intel, Cisco and Dell. And it’s happening now with the FANG names.
“Valuations get utterly detached from the fundamentals — and even rationality itself — when the central bank-induced financial bubble reaches its apogee,” David says. “At that point, speculators pile into the LSS like lemmings headed for the sea.
“When the stock market breaks, it is the LSS bubble extreme that crashes the hardest, because that’s where the mania gets finally concentrated.”
Exactly when does that “oh, crap” moment arrive? Hard telling. But David has reason to believe it might well come tomorrow. Sixty companies will report earnings after the bell… and David has his eyes on one in particular.
“It’s one of the most well-respected and important businesses in modern American history,” he tells us… and he believes it’s set to tumble as much as 70% this year.
Many everyday investors will be caught off guard. But if you act quickly and play it right… you can seize upon this market shock and transform it into a gain of 300% or better.
It won’t cost you a thing to learn this company’s name… or how to bag this potential gain. All you need to do is sign up for a FREE trial of David Stockman’s Bubble Finance Trader. Sign up today, get instant access to David’s recommendation… and you won’t pay a thing for 30 days. If you decide this service isn’t your thing, you won’t be charged a cancellation fee.
That said, we suspect you’ll stick around. David’s been on a roll since we launched this service last fall. So far, he’s recommended closing two positions. The results — a gain of 88% in five weeks… and a gain of 58% in only two weeks.
There are six open positions — up an average 19% across an average hold time of seven weeks.
Once more, David expects this rude surprise to hit the tape tomorrow. So you’ll want to act now. Check out David’s research for yourself at this link.
As traders await the Fed announcement, the major U.S. indexes are inching into the green, the S&P 500 at 1,910.
Indeed, most of the major asset classes are showing little movement: A 10-year Treasury yields 2.04%. The bid on gold is $1,116. A barrel of West Texas Intermediate fetches $31.57.
As long as we brought up Netflix earlier — it’s down 19% over the last month, by the way — it’s another illustration of how it can be fatal to observe one of Wall Street’s alleged “rules.”
“My system triggered a buy signal in early 2009,” says the gentleman we’ve introduced this week as Trading Guru X… “before shares went from $5.16 all the way to $40 in 2011.
“In fact, that year, it seemed nothing could go wrong for Netflix. An analyst from JPMorgan even wrote a note to investors predicting shares would rise to $224 by the end of the year.”
You can guess what happened next: The stock started moving lower. Trading Guru X’s proprietary system told him it was time to bail. “After the signal, the stock lost more than half of its value.” Following his system, you could have gained 330%… and avoided the subsequent crash.
By 2012, at least seven Wall Street analysts lowered their price target for NFLX. “But my system ignored all that noise,” says Trading Guru X, “and triggered a buy signal in late 2012, right before the next run-up.”
By last Thanksgiving — when his system said it was time to bail again — it was another gain of 294%.

Avoiding the Rollercoaster

“On these two trades on Netflix alone,” says Trading Guru X, “you could have turned each $10,000 into more than $169,000… without riding the roller coaster.”
His system sounds complex… but at the heart of it is this: You have to ignore one of Wall Street’s cherished “rules.” Your wealth depends on it.
More tomorrow…
With silver bargain-priced this month, the U.S. Mint is racing to keep up with demand for U.S. Silver Eagles.
For much of January, silver has traded at or below $14; this morning, it’s up to $14.43.
Sales of 2016 Silver Eagles began on Jan. 11. In that time, 5,727,000 coins have exited the Mint’s doors — already the highest total since October 2014.
The Mint is still rationing the coins — or, to use the Mint’s terminology, keeping its dealer network “on allocation.” On Monday, 1 million were issued and 727,000 were snapped up immediately. That leaves only 273,000 available before the next allotment next Tuesday.
Bogus stat of the day: Your home value is higher if you’re located near a Whole Foods or Trader Joe’s.
So says “research” from the real estate website Zillow, which would have you believe proximity to a “Whole Paycheck” or TJ’s is just as important when home shopping as proximity to a school or park.
“Between 1997–2014, homes near the two grocery chains were consistently worth more than the median U.S. home,” says Zillow. “By the end of 2014, homes within a mile of either store were worth more than twice as much as the median home in the rest of the country.”
Seriously, people? Where do Whole Foods and Trader Joe’s build? They don’t build in inner cities, where real estate prices are lower. They don’t build in small towns, where real estate prices are lower. Of course, homes near WF or TJ’s will be higher priced than the national median. OOOH, WHAT A REVELATION! I FEEL SO MUCH SMARTER NOW.
“Letters of complaint are a result of your bombastic advertising methods,” says an item in our mailbag — circling around once again to our “social income experiment.”
“I trade/sell options successfully. Less sophisticated readers take the claims literally and then are disappointed when reality hits them.
“Take the example of going into the street and showing random people how to make hundreds of dollars instantly.
“You forget to mention that when you sell a put or call, the money you get upfront isn’t yet yours to keep, as it is offset by the underlying obligation. Until that option expires worthless, you can lose more than you initially got for it.
“There is no mention of ‘free money’ in the ad copy, but it sure leaves that impression by omission.”
“I understand that you can make some instant money using options, but it’s not quite as easy as what the video makes it look like,” writes another. “You can also lose money this way. One thing is you need to be glued to your computer a lot, and I personally find that difficult to do.
“P.S. I’m 85, so don’t have a whole lot of time left to do this sort of thing. If I subscribed to every newsletter service that I got offers on, I would go broke and not have any funds left for buying and selling options!”
The 5: Yes, it can be a harrowing experience if it’s not done right. But done right, you can slash the risk, and you don’t have to be glued to a computer.
Says our publisher Joe Schriefer, who does this regularly in his personal account, “The only real ‘risk’ — if you want to call it that — is that occasionally you might be required to purchase shares of a great company at a big discount.”
That’s why we urge readers to have a minimum $20,000 to invest to make the most of this strategy.
And it’s our income specialist Zach Scheidt who stays glued to a screen on your behalf — racking up a 98.44% success rate on 128 plays over a two-year stretch.
We’ve worked to make it as easy as possible. That’s how Joe was able to pull people off the street and show them how to do it in a matter of minutes. Anyone can do it. See for yourself.
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. Final reminder: David Stockman believes one major company will deliver a shocker of an earnings announcement tomorrow.
“Tens of thousands of everyday Americans — maybe even you — own shares of this company,” he says. “Perhaps even without knowing it. And if the stock crashes, they’re going to lose a lot of money.
“But investors who understand the situation and buy one simple type of investment could use the same event to generate 300% returns.”
David’s research will be out of date by this time tomorrow, and it will be too late to act on it. So his exposé will be pulled offline at midnight tonight. There’s no long video to watch. Read it here while there’s still time.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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