- Banker propaganda as only bankers can deliver it
- What our “Deep State rogue operative” learned from a high-up Fed official
- Two more ways the Social Security COLA is a raw deal… and a saner retirement alternative
- Merger mania… a billionaire’s raid on taxpayers… the elites’ strategy in the War on Cash… and more!
“Bank Costs Cited as Drag on Growth,” says the sedate above-the-fold headline of this morning’s Wall Street Journal.
The paper dispatched a reporter yesterday to a conference of bankers and regulators in New York. There, a deputy governor from the Bank of England named Minouche Shafik declared that all those post-2008 bank regulations are a significant reason the economy’s in the doldrums.
“The roughly $275 billion in legal costs for global banks since 2008,” Shafik declared, “translates into more than $5 trillion of reduced lending capacity to the real economy.” Just how she came up with that figure, she didn’t say.
We have an alternate take on the Journal’s headline…
Really… We’re supposed to believe seven-plus years of a craptastic “recovery” is the fault of regulators making life hard for the poor widdle banks that can’t lend?
No, it wouldn’t have anything to do with, as David Stockman said here yesterday, “the massive debts that encumber [the economy] and the Fed’s ruinous regime of Bubble Finance that crushes savers, wage earners and Main Street businesses — even as it showers speculators and the 1% with stupendous windfalls of unearned riches.”
Even the Journal called BS on the Bank of England’s thesis, howsoever gently: “In the U.S. at least, banks in recent years have attributed tepid lending growth to lack of demand, not their inability to supply credit.”
In other words, people and businesses are still frightened to take on new debt because they fear more economic shocks lurking around the corner, ready to attack at any moment.
And with good reason. Again, as David said here yesterday, the third Clinton administration will bring us “financial calamity at home and more wars abroad.”
Recognizing that Donald Trump latched onto an upwelling of discontent in “Flyover Country,” — however clumsily — David calls his latest book, Trumped!: A Nation on the Brink of Ruin… and How to Bring It Back. Consider it a prophecy for the next four years. Order from us and you get a signed copy featuring a bonus chapter laying out an investment plan, complete with David’s favorite asset to own for the next six months.
Spot us $4.95 for shipping and handling and we’ll send the book to your door. Claim your copy at this link.
As the week winds down, the Dow is again threatening to break below the 18,000 level.
At last check, the Big Board is down 100 points at 18,059. And crude is in danger of breaching the $50 level. But Treasuries are catching a bid, the 10-year yield now 1.74%. Gold is steady at $1,265.
Economic numbers are taking a back seat to earnings and merger news. PayPal met expectations, Microsoft beat expectations. British American Tobacco is offering to buy the portion of Reynolds it doesn’t already own. Meanwhile, Qualcomm and NXP Semiconductors have agreed to a merger.
But the big story in acquisition news is AT&T gunning for Time Warner. The Wall Street Journal says a deal may get done this weekend, bringing HBO and CNN under Ma Bell’s wing. (Time Warner is not to be confused with Time Warner Cable, which has been acquired by Charter. No, this won’t be on the test.)
If the stock market tanks after the Federal Reserve raises interest rates in December, the Fed will be OK with that.
That’s the takeaway from a conversation our own Jim Rickards had during a private dinner Wednesday evening with New York Fed President William Dudley — one of the most influential members of the Fed power structure. “The atmosphere was relaxed,” Jim tells us, “and Dudley was generous with his time in discussing Fed monetary policy with me and our fellow dinner companions.”
[Heh — it’s not for nothing the writer James Howard Kunstler refers to Jim as a “Deep State rogue operative.”]
“The most important view Dudley expressed was his belief that the Fed will raise interest rates ‘before the end of the year.’”
As a practical matter, that means Dec. 14. The only other Fed meeting before year-end is Nov. 2 — six days before Election Day. “The Fed does not want to be blamed by either side for the outcome of the presidential election,” says Jim, “so they will take a pass.”
Dudley effectively confirmed Jim’s outlook, made in here our digital pages on Oct. 4.
But what of the stock market impact?
Jim goes on: “I reminded Dudley that after the last rate hike (Dec. 16, 2015, the famous ‘liftoff’), the stock market fell over 11% in the following eight weeks. That would equate to a 2,000-point drop in the Dow Jones industrial average from today’s level. I asked if the Fed was mindful of that history and if the Fed considered it important to put a floor under the stock market.”
Dudley said he saw no connection between the rate increase and the market correction that followed. And he went a step further: “Dudley then suggested that the Fed is not worried at all about any damage that might be done to stock markets from the next rate hike. Dudley said it is ‘not our job’ to put a floor under stock prices.
“Taken together, these remarks told me that the status of the stock market is not an impediment to a December rate hike by the Fed, and that the Fed is unprepared for the market damage that will arise when it does hike rates.
“The conversation was long, cordial and substantive. Despite the pleasantries, I was disturbed by what I heard,” Jim concludes.
“Bottom line: The Fed will raise rates in December. That will be bad news for the economy and for stocks. The Fed does not see the market carnage coming.
“With this as prelude, investors should hang onto short positions, build cash positions, reduce long equity bets and be prepared for continued strength in the dollar, at least through the end of the year. Beyond that, a recession and stock market sell-off in early 2017 could cause the Fed to reverse course and either cut rates or use QE next year, which would be bullish for gold.”
[Confidential to existing subscribers of a Jim Rickards publication: Please watch your inbox tomorrow for a special message from Jim. It will be your last chance to claim in “enhanced VIP upgrade” to his most popular premium service.]
“Don’t spend it all in one place!” says our income specialist Zach Scheidt about the not-so-whopping 0.3% increase in Social Security benefits next year.
“It goes without saying that the cost-of-living adjustment doesn’t come close to reflecting the higher expenses that most retirees are facing.”
As we never tire of reminding you, the government inflation figures are bogus. And they’re especially bogus for retirees.
“For starters,” says Zach, “the CPI measure is heavily affected by gasoline prices (which are down significantly over the past few years). But while gasoline prices matter to current workers who commute every day, these prices aren’t nearly as important to most retirees.
“A much bigger concern for retirees is the rise in health care costs. Fidelity estimates that the average 65-year-old retiring today will need $260,000 in savings just to cover future medical costs.
“Rising medical costs aren’t even close to being reflected in the 0.3% cost-of-living adjustment that Social Security will provide next year. In my opinion, this is a criminal offense to our seniors who paid into the Social Security program during their working years.”
“Our Canadian neighbors have a much better ‘Social Security’ program,” Zach reminds us.
“The Canada Pension Plan (or CPP) has a completely different approach to providing for their retirees. Instead of investing in low-return government IOUs like the U.S. Social Security program, Canada takes a different tack.
“The CPP hired a board of experts to actively manage the country’s pension plan. Funds are invested in free-market opportunities, and so far those opportunities have panned out quite well!
“Over the past 10 years, the CPP has generated an average annual return of 7.3%. This positive return is why the CPP currently holds more than $218 billion in assets. More importantly, the plan is actually ahead of schedule and operating at a surplus.”
Zach has figured out a way for you to bolster your own retirement by “piggybacking” the CPP… and it’s angered certain people in high places. No, they can’t make the technique illegal… but all the same, we can’t guarantee Zach’s explanation of how it works will remain online indefinitely.
It’s been a lousy week for taxpayers who don’t want to get fleeced for the sake of sports stadiums.
First, Nevada state lawmakers have approved $750 million in government financing for a stadium to accommodate the NFL’s Raiders, which are set to bolt Oakland once again. The stadium will be operated by Las Vegas Sands, the casino outfit owned by Sheldon Adelson — currently ranked No. 14 on the Forbes 400.
The money will come from an increase in the hotel tax; if the expected revenue doesn’t materialize, Nevadans will be on the hook.
Meanwhile, the public share of the cost for a new stadium hosting baseball’s Texas Rangers might be more than advertised. In theory, it’s a 50-50 public-private split. In practice, it might be something different.
“Tucked in the agreement,” says a report from WFAA-TV, “is a clause called the ‘admissions and parking tax’ that allows for a 10% surcharge on event tickets and up to $3 additional surcharge on parking. State law allows cities to collect and use the taxes to build their stadiums. Arlington’s agreement, however, allows the Rangers to use the admissions and parking tax revenues to help pay their half of the construction costs.”
That’s “verbal gymnastics,” says Villanova professor Rick Eckstein. “It’s relatively unprecedented in terms of stadiums I’ve studied over the last 20 years.”
Arlington residents vote on the deal Nov. 8.
“Living in south Florida just confirms how ludicrous the idea of banning cash is,” a reader writes.
“Just recently, we were under hurricane watch from Hurricane Matthew. Had it hit directly, it would have meant massive blackouts, some for days. Just how would people survive, without ATMs or chip reading machines?
“We have to fight this idea in lieu of just reporting or listening to it. Just my thoughts.”
The 5: In the event of natural disaster in a cashless society, people would undoubtedly be more dependent on government to get what they need. Not that that worked out especially well after Sandy or Katrina, even with cash available.
But for the eggheads extolling the virtues of a cashless society, greater reliance on central planners isn’t a bug — it’s a feature.
“It looks as though, barring some relapse into obvious insanity, Clinton will win,” writes a reader in accord with David Stockman.
“Then the question is what will happen in Congress? If The Donald has driven a resurgence in Democratic fortunes, and that party regains control of both houses of Congress, Clinton will have ample room to enforce her less obvious insanity on all of us.
“If Republicans keep control of the one house at least, she will rule by edict even more than Obama has. Like we really need an empress dictator.”
The 5: In the end, “divided government” is surely the lesser of the evils. Besides, it makes the goo-goos (good-government types) livid because Congress passes fewer laws — an undeniably good thing…
Have a good weekend,
Dave Gonigam
The 5 Min. Forecast
P.S. Next week, we’re taking the wraps off a moneymaking technique you’ve (almost certainly) never seen before. It has to do with a market anomaly that affects less than 3% of stocks traded on major exchanges. But in 100% of the cases, it sends stocks nearly vertical. You won’t want to miss it.
