• Are cryptocurrencies having their “shoeshine boy” moment?

    25.07.2017 • United KingdomComments Off on Are cryptocurrencies having their “shoeshine boy” moment?

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    Andrew Lockley – Exponential Investor (United Kingdom) –

    Joe Kennedy, a famous American investor, is often quoted as receiving a warning of the Wall Street Crash from his shoeshine boy. When he was given stock tips while having his shoes cleaned, he realised the market was in a catastrophic bubble – and he sold.

    Something happened to me a few days ago which made me think that we might be entering a similar situation with cryptocurrencies. To explain this, I’ll need to give you a bit of background.

    One of my greatest bugbears with our online world is the astonishingly incompetent advertising we are subjected to. I’ll give you an example: Google (Alphabet) is the owner of YouTube and it should have a pretty clear idea of what I’m like. One of my most obvious and defining characteristics is that I am male. Unsurprisingly, this isn’t something I’ve ever tried to hide – online or otherwise.

    Accordingly, it’s a source of ongoing frustration for me that I routinely have to view adverts for feminine hygiene products on YouTube. Sanitary-towel firms either seem too stupid to avoid selecting me (which seems unlikely), or they are not presented with sufficiently usable tools to target their ads effectively. Accordingly, I’ve got very little faith in the quality and targeting of the adverts I receive on YouTube (and online, generally).

    These badly-targeted tampon ads lead me to believe that the extremely persistent advertising of Plus500 cryptocurrency trading services is probably not much smarter. If “shoeshine boys” are also getting these cryptocurrency investment adverts, it rather implies that advertisers are seeing a return on their investment. That may suggest that we’re nearing the top of the “hype curve” for cryptocurrencies.

    Now, I could be wrong. Maybe Plus500 is targeting me with expert precision. But it seems odd that the tampon manufacturers don’t know that I’m incorrectly plumbed for their products, if Plus500 has managed to target me personally. That rather suggests that they’re indeed advertising to shoeshine boys – as well as to financial editors.

     

    Of course, I wouldn’t expect you to change your entire trading strategy based on one advert – and I certainly can’t claim any insider knowledge of firms ad targeting. But the cryptocurrency hype goes far beyond this one campaign. The overexposure is currently endemic, and far outstrips the current day-to-day usefulness of bitcoin, and other cryptos.

    You should be very carefully attuned to the risks of a “shoeshine boy moment”, in any asset class. When every other TV show was a property renovation and investment show, it strongly implied the time had come to get out of buy-to-let – or at least form an investment strategy that didn’t rely on ever-rising prices. I was heavily leveraged in UK property at the time of the financial crisis, and almost lost my shirt as a consequence. However, unlike most investors, I saw it coming. I vividly remember calling out the coming train wreck well before it happened in 2007-8 – but I could not get out of the market in time. Property is a notoriously illiquid asset, and I was left holding a large portfolio of vacant properties, when the property party ended. It hurt, badly.

    When cryptocurrencies are all over the mainstream media, but are not routinely used, we may likewise be seeing a great opportunity to sell. However, an early peak is absolutely no guide to the long-term fundamentals of a market. Remember the dotcom crash? That was by no means the end of the investment boom in online firms.

    Ultimately, if we all eventually start using cryptocurrencies as much as the media currently likes to talk about them, they could experience huge long-term increases in value. Tomorrow, we’ll be looking at how the future might unfold for cryptocurrencies.

    One of Southbank Investment Research’s writers, Sam Volkering, has very strong opinions about these developments. He believes that cryptocurrencies will ultimately experience gargantuan growth in value – as they move to become a much more mainstream currency product. The long-term rises he’s predicting would allow you to experience spectacular returns – potentially multiplying your investment in a way that’s unachievable in any other asset class. Please do check out his book, which you can get for free here – or you will risk missing out on the potential long-term growth of these currencies.

    Do tell us where you think bitcoin’s ing – both short and long term: andrew@southbankresearch.com.

    Best,

    Andrew Lockley
    Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • Trump Is No Outsider

    25.07.2017 • United StatesComments Off on Trump Is No Outsider

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    Bill Bonner – Bill Bonner’s Diary (United States) –

    LAUSANNE, SWITZERLAND – One of the most remarkable conversations on finance we’ve ever had happened here in Lausanne yesterday.

    “You mean it costs as much to put money on deposit at a bank as it does to borrow it?”

    We asked the question to a colleague who recently bought a house here.

    He borrowed the money to buy the house at an interest rate of less than 1%.

    Meanwhile, a person with an account at the same bank will pay almost the same amount in negative interest for the privilege of lending money to the bank (putting it on deposit).

    “How could that be?” was the question that leaped to our lips.

    Age of Miracles

    Imagine two people…

    One has a million Swiss francs (roughly equal to $1 million). Another has nothing. One puts his million in a local bank. He pays 10,000 francs a year in negative interest.

    What does he get? A monthly statement!

    The other fellow borrows the same million dollars. He pays 10,000 francs a year in interest.

    What does he get? A house!

    But remember, we live in an age of miracles. Things that wouldn’t make sense in any other era don’t make sense in ours, either. But we learn to live with them… and gradually come to accept them as normal.

    Investors, for example, have come to believe it is entirely meet and right that central banks should not only control the price of credit, but also that they should at all times and all places make sure stock prices don’t fall.

    This leads them to a further whacky conclusion: Stocks may already be sky high. But so what? They’re ed to the moon!

    Judged by a range of valuation metrics – including their CAPE ratio, their price-to-earnings ratio, their price-to-book ratio, and their dividend yield – U.S. stocks are now the most expensive in the world.

    (Tomorrow… why investing in the most expensive stocks is not a good idea.)

    Bezzles and Bamboozles

    At the deepest, darkest depths of the last bear market (yes, they exist!), the average working person could buy the S&P 500 Index after just 20 hours of labor.

    Today, he would have to huff and puff for nearly three weeks – 110 hours – to buy the same share of America’s publicly traded corporations.

    Broadly, the working stiffs have added nothing to their wealth in the last 35 years. But the owners of corporate America have seen their wealth – compared to baseline hourly labor rates – go up five and a half times.

    That, too, must be a minor miracle.

    People who work for a living got nowhere. People who did nothing – other than sit on their stock certificates – got richer still.

    That miracle is what lies behind another miracle – the election of a man with no political experience, no ideological position, no political party base, and none of the skills usually required for the job… to the highest office in the world – president of the USA.

    How was that possible?

    People in the red states – who earned their money in the Main Street economy by the sweat of their brows – felt left behind and left out.

    They didn’t know whom to blame. But when the usual suspects presented themselves in the primaries, they revolted against them and went with the impertinent impresario from Queens. For all his faults, Donald J. Trump appeared to be someone who could shake things up.

    But wait. Are these real miracles? Or are they tricks, bezzles, and bamboozles?

    Bomb-Squad Hustle

    Negative interest rates, flat earnings, soaring stocks, and Mr. Trump’s election all share the same sordid provenance.

    Pull back the curtain, and there are the PhD economists in their rumpled suits. They are pushing levers and turning knobs. Up comes a gush of smoke. Ga-zaaing goes a burst of ersatz lightning. And all around are mirrors that magnify and distort.

    What kind of miracle is this?

    Money represents wealth. But they’ve created trillions in new money… with no wealth at all to back it up.

    It hots up Wall Street wealth but leaves Main Street cold. It makes rich people richer but leaves ordinary people with nothing to show for 35 years of work. It puts a bomb thrower in the White House… and then surrounds him with a wall of concrete insiders.

    Emblematic of this bomb-squad hustle is the nomination of one Randal Quarles to join the Fed as chief Wall Street regulator.

    Mr. Quarles is hardly someone who will shake things up. Instead, he is a veteran of both finance and the federal government – a smooth Deep State operative for his entire career who served in various policy posts in the George W. Bush administration.

    Not only that, he is married to a relative of Marriner Eccles himself, for whom the Fed’s quarters building is named.

    With Mr. Quarles to defuse them, it will be a miracle if Mr. Trump’s bombs do any damage on Wall Street.

    Regards,

    Bill

    -Read more at bonnerandpartners.com-

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  • Cash chaos and how to profit

    25.07.2017 • United KingdomComments Off on Cash chaos and how to profit

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    Nick Hubble – Capital and Conflict (United Kingdom) –

    It’s a banknote. Couldn’t be much simpler or more taken for granted. You’ve probably never really spared the time to think about what it really is. You just use them without a second thought. And always have.

    But all around the world, cash is causing all sorts of surprising confusion. People are rediscovering that money is not as simple as it seems. Understanding what money really is will become what separates the winners from the losers of currency chaos in the future.

    The signs are everywhere.

    Thanks to the rocky Brexit negotiations, the pound’s cash exchange rate has been fluctuating all over the place. In Cardiff, British travellers were offered 88 euro cents per pound at the airport. That’s 24 cents less than the market rate. It’s not quite as bad at other major airports, but the rate is still below a euro.

    The papers were quick to blame profiteering instead of a lack of competition. The busiest day at British airports ever probably left currency exchange kiosks short of euros. Because busy airports on the first day of the holidays is not a predictable phenomenon…

    It’s always interesting how the reality of finance on the ground can differ so wildly to the markets we hear about on the news. Even when it comes to something as immutable as cash, the premium charged at an exchange kiosk dominates the actual moves in the exchange rate that day.

    In Germany, things are even stranger

    The major banks are sick of the European Central Bank’s (ECB) negative penalty rates. If a bank wants to keep its funds in reserve with the ECB, it has to pay around 0.4% of the funds in the account. The idea is to encourage banks to lend instead of hoard.

    But they have better ideas – cash. In the last two years, German banks have stored €10 billion in banknotes in their safes according to the German central bank. And that’s set to continue.

    The banks argue that German borrowers simply aren’t biting. They won’t borrow, leaving the banks with vast amounts of money at the ECB. Transferring the reserves into cash is cheaper because there are no penalty rates.

    The only problem is, €10 billion is a lot of cash. Given the €500 note is being phased out, the €10 billion weighs at least 50 tonnes in the next highest denomination.

    While banks in Germany hoard cash, banks in Scandinavia are hell-bent on banning it.

    Norway’s largest bank is promoting the idea. One of their executives came out and said this:

    Today, there is approximately 50 billion kroner in circulation and [the country’s central bank] Norges Bank can only account for 40 percent of its use. That means that 60 percent of money usage is outside of any control. We believe that is due to under-the-table money and laundering.

    Huh?

    Anything that central bankers don’t know about is now a crime. The institutions have gone from obscurity to ruling the economy in the space of a century.

    Of course it’s obvious why big companies want cash banned. It advantages them enormously over smaller companies because the cost of electronic payment mechanisms and the infrastructure that goes with it is a tiny part of their budget but a big part of a small business’. And people perceive bigger banks as safer.

    What’s fascinating about the government crackdown on cash in Scandinavia is completely missed by the media. The proposed laws do not ban cash, but allow companies to refuse cash payments. In other words, for now at least, the war on cash in Scandinavia is really the reassertion of a basic right – to choose your method of payment and the power to reject the method of payment your customer is offering you.

    But things don’t stay agreeable for long. Complete bans are on the cards too.

    India comes closest. It’s the guinea pig of the war on cash. The government decided to de-cash its economy last year. 86% of the country’s currency became worthless overnight. In their fear of prosecution, many Indians shredded their banknotes.

    The aim was to digitise payments and bring in the new VAT called GST. As well as clamp down on corruption. Which brings up an important point.

    One reason the war on cash came to India is, once again, glossed over by the media. India’s state governments are a disaster. The country has customs inspections at its state borders, which can hold up business for days. The new ban on cash and digitisation of payments came with a complete revamp of the former absurd inefficiencies. Because of the measures it was coupled with, the ban on cash looks like a good idea. Don’t be fooled by the two separate issues.

     

    How to profit from the war on cash

    Who would’ve thought banknotes could’ve caused so much drama? Having them, hoarding them, getting rid of them and using them is now a major economic and political issue. Opinion polls suggest the matter divides Europe.

    So how can you profit? Well if Visa’s stock price is anything to go by, the war on cash is a pretty good deal for payment processors:

    Chart showing the increase of VISA equitiesBut there’s an even better option.

    Imagine you owned dollars in Argentina

    Imagine you owned US dollars in Cuba in 1960. The exchange rate went from par to 125 pesos over the subsequent decades. You’d have been 125 times as rich as those stuck with the local currency.

    You could buy anything with pocket change.

    Or if you’d owned dollars in Argentina, you’d be 37% richer per year on average over the last 100 years. Now that’s keeping up with the Joneses!

    The French who occupied the Ruhr Valley discovered their francs were worth a small fortune in Weimar Germany.

    In Venezuela, the official dollar exchange rate gets you less than half the black market rate, doubling the purchasing power of dollar holders.

    In each case, simply by owning a foreign currency in cash, anyone was able to escape the poverty and chaos of a financial breakdown. Instead, the surge in purchasing power during these desperate times meant owners of foreign currencies became outrageously rich without lifting a finger. They were just smart, and early.

    It’s time for you to do the same thing. But this time, the world is different. You need to…

    Escape government money altogether

    The Bank of England’s balance sheet has quadrupled since the financial crisis. Brexit is looking shaky. A full-blown socialist who idolises Venezuela is in charge of the Labour Party.

    Confiscation is also on the government’s menu. British bank accounts in Cyprus were raided when the country went broke. The government’s deposit insurance is set at just £85,000, so any bank failures here mean your savings aren’t safe in the bank.

    What are you going to do?

    Owning another currency is the truest form of diversification. Governments know this, so they try to stop it.

    But there’s one currency they can’t stop, or print. They don’t even know who owns it.

    The media recently reported on a currency exchange trader known only as 0x00A651D43B6e209F5Ada45A35F92EFC0De3A5184. He or she made $200 million in about a month. But no knows who to tax.

    The obscure currency that turned the profit is your way to escape the pound and all the other government currencies around the world.

    Every day people in the basket-case economy of Venezuela are using this new option to buy groceries off Amazon and then smuggling them into the country.

    In other words, it works. But what is it?

    You better find out before governments realise it gives their citizens the power to escape financial repression of any kind.

    Until next time,

    Nick Hubble
    Capital & Conflict

    -Read more at www.capitalandconflict.com-

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  • Goldman Sachs Analyst: Valuations Are Reaching Highs

    25.07.2017 • SwitzerlandComments Off on Goldman Sachs Analyst: Valuations Are Reaching Highs

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    Henry Bonner – Strategy and Council Letter (Switzerland) –

    You are already more than 3,000 giving your support to our petition against the rise of the CSG …

    As a reminder, in the “action plan” of Macron, you have an increase in contributions that the state applies to pensions …

    After raising from year to year, the State intends to push even further … passing the CSG at 8.1% (against 6.6% today) as of January 1, 2018 …

    In short, we launched a petition to counter this increase … to say STOP to the administration before they further increase the contributions on retirement …

    You will find the petition here if you have not yet put your name (or shared on your Facebook) …

    This Week, the Stock Market moves …

    We’re getting 3 weeks since the end of the quarter … and the companies are preparing to publish results …

    On Wall Street, 180 companies in the S & P 500 index will publish results … including the “giants” of computers like Alphabet (parent company of Google), Facebook, and others.

    In short, the coming week is going to make the eddies …

    Wall Street has been rising since January … even after the “shortness of breath” of the wave of optimism that Trump has brought to markets …

    In 6 months, the S & P 500 index rose by almost 9% …

    Here in France, the equivalent of the S & P 500, the CAC 40, climbed at the beginning of the year but is down since early May …

    That said, its performance since February is in line with Wall Street, rising by just over 8% since …

    As you can see, the Paris Bourse follows Wall Street more or less … and the latter is optimistic about the rise of computer groups – Alphabet, Facebook, and Apple in particular …

    For the companies of the S & P 500 that have already published their results, 77% have broken the expectations of analysts … which encouraged the markets … pushing the Nasdaq to reach a record level …

    On the other hand, Wall Street begins to think that “something is wrong …”

    In short, valuations are climbing too much … and now groups like Goldman Sachs and JP Morgan begin to wonder if the future can justify the rise of values ​​…

    In a post released yesterday, Goldman Sachs announced that “valuations are reaching highs,” which could suggest a downturn in the coming weeks …

    According to their chief analyst, David Kostin, “the ratio of valuations to business revenues on the S & P 500 has increased by 80% since 2011 (to 18 times), which exceeds the values ​​of this Ratio 89% of the time in 40 years. ”

    Here is the FactSet graph on the ratio of income valuations …

    As you can see, we are approaching a level we have not experienced since 2008 …

    What to do…?

    Will the market begin to plunge …?

    Well, we’ve received results for the moment up on the S & P 500 …

    We have doubts on the side of Alphabet … where analysts report that rising profits slows down …

    We have suggested to have a little gold … and maybe Bitcoin (although the value of this currency will fluctuate – and possibly fall) day by day …

    Of course, the market can continue to publish results rising … but the market can not climb to “forever …”

    At today’s prices, we must see profits climbing from month to month to justify them …

    If we see these profits missing the call … then the downhill slope could prove stiff …

    Truly,

    Henri Bonner

    -Read more at www.lettre-strategie-conseil.com (French)-

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  • Time to Pull the Plug on Greece

    25.07.2017 • FranceComments Off on Time to Pull the Plug on Greece

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    Simone Wapler – The Strategy of Simone Wapler (France) –
    Greece borrows again from the financial markets. Memory is not the strong point of the latter who know that, whatever happens, the ECB will save them. The “mule of the pope” does not forget and takes revenge seven years later. The memory of the goldfish would be three seconds. What is the relationship with financial markets? Very simple: Greece that comes to borrow money again. Its first loan since 2014. You do not know, but … … You have all you need to enter the New Millionaires Club Ultra-exciting investments that put you in the backyard of Bill Gates or Warren Buffett … Four-figure profits (or even more – and this is not a light figure) … And all this in France , easily and without Take unnecessary risks. Click here to find out more. It is a return to “normality,” according to commentators. The Parasitocracy rejoices. “Normality” is that a State must borrow. Simply living on its tax revenue after several debt restructurings is abnormal. It is “normal” that Greece borrows. The mule of the pope brazen (yes: the mule emits a sound between neighing and bracing) full lung. But finally, Greece is still indebted in public capacity to the tune of 179% of its GDP and in private capacity to the tune of 137%! Its trade balance is in the red! Despite all its restructuring of debts, loans etc. Its deficit persists and its growth is almost zero (0.4%)! On July 19, IMF itself was negative on this issue of debt, considering that the bond burden is already too high! Privatization drags on … The Greek economy weighs less than 200 billion euros and the various rescues have already cost 365 billion euros! Greek banks own € 115bn of “non-performing loans”, according to the European Parliament document  ! But no one listens to the ugly mule of the pope confided in his resentment. The goldfish will gober this debt. Lutz Roehmeyer of the Landesbank Berlin Investment finds the perfect timing: ”  This is after getting the rescue money, after getting a green light for debt reduction next year, after the IMF said it would ultimately join the last rescue, after the agency S & P revised its rating and before the European Central Bank will end its buyouts and starts to raise rates ”  . And Crédit Agricole will also take it! After all, Crédit Agricole is “common sense near you”. Everything is fine. Do you know how many German banks have non-performing loans? € 68 billion. What about France? € 148 billion. What, then, are some Greek titles-which are state bonds-in the midst of this ocean of private credits that will never be honored? Obviously, if you are rather mule than goldfish, you must suspect that the future of the euro as we know it is no longer guaranteed at all. [Editor’s note: German elections are approaching. There is still time to take these six simple steps to protect your savings in the coming monetary and financial crisis. Click here to find out how .]

    -Read more at la-chronique-agora.com(French)-

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  • This New Technology Is an Early Warning System for Disease

    24.07.2017 • United KingdomComments Off on This New Technology Is an Early Warning System for Disease

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    Andrew Lockley – Exponential Investor (United Kingdom) –

    Your path through life is largely set by a small number of facts and choices, which control virtually every aspect of our lives. These change with age. Our ultimate looks, intelligence and physiology are largely established before primary school. As young adults, we have a choice of partner, home and career. But as we enter old age, our health is typically the most important issue.

    Because we’re all living longer, mental capacity is becoming an ever-more important consideration. Neurodegenerative diseases are a huge global problem – and they’re likely to grow in importance, as we all tend to live longer. A cure may elude us – but at least early diagnosis would give people the freedom to plan.

    At present, by the time most people are diagnosed with a neurodegenerative illness, they’re already suffering significant cognitive problems. This means that they may not have much healthy time left – and any opportunity for early treatment may have been lost. Furthermore, by the time of diagnosis, cognitive problems may already be so advanced that people can no longer make plans for their final years. This denies them opportunities like taking early retirement, saving for care, or completing their “bucket list”.

    For me, this is a very personal issue. My DNA test shows that I’m at increased risk from Alzheimer’s disease. However, a risk isn’t a diagnosis – and if I want to find if I’m personally affected, then I’ll have to get tested. Common tests rely on either expensive brain scans, or on time-consuming cognitive tests. Accordingly, the early stages of mental decline are often missed.

    Last week, we looked in depth at a range of digital technologies that can help diagnose neurodegenerative diseases. Today, we’ll take a deep dive – and I’ll meet a man who is attempting to revolutionise the process of early diagnosis. I’ll hand you over to Mikhail Yanchikov, founder and CEO of EyeMove.

    AL: Just for a bit of context: how big a problem are neurodegenerative diseases?

    MY: Dementia is one of the main causes of disability and dependency among elderly people in the world. There are 28m people living with diagnosed Alzheimer’s, and 6m with Parkinson’s disease. For dementia, the total is 47.5m people. This problem is global now, and will worsen in future, as life expectancies increase.

    AL: Your fundamental idea will surprise most people. Can you give a quick summary?

    MY: EyeMove reveals the signs of neurological diseases by analysing eye movement. It is a qualitatively new product, based on machine learning and artificial intelligence (AI). We measure variables such as micro-motion and speed of reaction, to identify the first signs of disease. It is important that our project solves the problem of diagnosing diseases of the central nervous system at the early stage, when a person can still be helped.

    AL: What got you interested in doing this?

    MY: My grandmother was ill with Alzheimer’s. At first, everyone began to notice that she forgets little things – such as where she put her glasses. It seemed that this was just normal ageing. But over time the condition worsened. She eventually stopped recognising me, and her emotional state changed a lot. The diagnosis was made at a late stage, when it was already impossible to help her by halting the development of the disease. It’s painful to see when this happens to a person close to you.

    AL: That must have been traumatic; I can certainly see the motivation. Can you please step me through how your tests are carried out?

    MY: We use an ordinary mobile phone app, and the on-board camera. EyeMove uses AI to identify and measure the , eye and pupil. During operation, the person begins to follow the stimuli-points that appear on the screen. At this time, the camera records the trajectory of eye motion. It determines micro-motion (saccades), the response time of each eye – and so on. It takes just a few minutes to collect enough information for diagnosis.

    AL: That’s a very radical idea. How far have you got, at present?

    MY: We have a prototype, and we are looking for investors for product development. We need to make improvements to our algorithms, and then launch our website and app publicly.

    AL: Can you explain how you do this diagnosis, with just a mobile phone?

    MY: We are developing a mobile application for iPhone 6, and newer. The main hardware requirement is a camera capable of 240 frames-per-second video. This means we have access to very precise timing – around 4 thousandths of a second. It’s this which enables people to do the diagnostics at home.

    AL: How do you know the results are reliable?

    MY: More than 30 years of scientific research has gone into the analysis of eye movement. For the standard procedure, the patient wears a helmet with mounted cameras. They then react to specific visual stimuli. All the necessary clinical trials for this approach have already been carried out. Our idea is simply to make this existing technique available far more widely, by using mobile phone hardware.

    AL: Is it dangerous to diagnose these diseases, without giving people the support that’s normally available?

    MY: If negative symptoms are detected, we directly connect the user with a doctor, for a detailed examination and further consultations. In Russia we have an agreement with the scientific research Institute of Psychology of the Russian Academy of Sciences.

    AL: What other companies are working in this area? What are their approaches, and how successful are they?

    MY: At the moment there is no direct analogue to diagnosis by eye movement. Other, similar projects appear not to be proceeding commercially. However, there are contrasting approaches. Nerotraсk analyses short-term memory, not eye movements. This test is specific to Alzheimer’s disease, whereas our solution allows us to diagnose more than ten diseases.

    There are also several methods for early diagnosis of Alzheimer’s and Parkinson’s, which are based on a comprehensive examination in the hospital. Unfortunately, they are inaccessible to most people, and are very expensive. As a result, many people don’t get the help they need. Our product offers diagnosis that’s discrete, convenient and at an affordable price – as it requires only a mobile phone.

    Some conventional hospital diagnostics are not only relatively expensive, but they also confer significant risks. Patients may be exposed to a strong magnetic field (for MRI) – and this makes the tests unsuitable for people with certain surgical implants. Other approaches may be invasive – such as requiring injections (for PET) or tissue samples (CSF analysis for beta amyloid and tau protein).

    AL: What are your future plans?

    MY: The near-term goals of the project are to start a website and a mobile application. In future, we plan to make our technology work in virtual reality (VR) helmets with cameras (such as those made by Fove). In addition, in 2018 we will start working on a smart mirror, this will enable us to conduct daily monitoring – giving the earliest possible diagnosis.


    Would you like to know whether you have a neurodegenerative disease – or would you rather be blissfully ignorant? andrew@southbankresearch.com.

    Best,

    Andrew Lockley
    Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • Gov’t Insider: The Next Reset Will Lead to E-Money

    24.07.2017 • United KingdomComments Off on Gov’t Insider: The Next Reset Will Lead to E-Money

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    Nick Hubble – Capital and Conflict (United Kingdom) –

    It’s rare for a government insider to offer insight into the future. But many can’t keep quiet once they leave government. That’s why big financial firms hire them in an instant. Their connections and ability to predict the government’s future moves are incredibly profitable assets.

    Over the weekend we got an extraordinary insight into an event that will dominate your financial future from a former government insider. I call it the coming reset. A few weeks ago I imagined how such a reset might come about – the Davos Accord. Let’s briefly recap what I discussed so you can appreciate just how remarkable the new information is.

    Every few decades, the world’s financial system goes through a reset. Just before a complete collapse, the powers that be come together in an obscure place and hash out the terms of the new currency system.

    That new system usually gets named after the random place they decided to meet. After World War II it was Bretton Woods. Trade imbalances and the outflow of gold forced the Smithsonian Agreement and the Jamaica Accord in the 70s, which gave us floating currencies. The Treaty of Versailles was one they got wrong, with disastrous consequences.

    These are just some examples from the 20th century. But the history of financial system resets goes back much further. The Rosetta Stone records such an event.

    These resets occurred for the same reason as those last century – to prevent a crisis and the popular uproar that goes with them (ie, rebellion). The aim is to create a new workable system rather than allowing the old one to collapse.

    At some point, a reset of the financial system is preferable to the status quo of a failing system. It might be that the level of debt is just too high to service. Or perhaps a government printed too much money. In the 40s, war had ravaged Europe. In 1971 it was the American trade deficit that led to an outflow of gold. The Rosetta Stone and related records suggest that the amount of debt slaves was so high it risked a rebellion at the time.

    Whatever the threat, a reset comes before anything really hits the fan. That’s why you’ve got to keep your eye out for them. They precipitate the crises we are all worrying about, catching most people unaware. The gold confiscation in 1930s America is an example of what happens when you don’t see such a reset coming.

    Having imagined how such a reset occurs, my advice was simple. Opt out of the financial system in a way that will preserve your assets.

    It’s no coincidence that the coming reset features the very asset I recommend you invest in to protect yourself.

     

    When money is reborn

    Dr Pippa Malmgren used to be part of the US Plunge Protection Team. The officially named Working Group on Financial Markets looked into market crashes and how to prevent them getting out of hand. It also helped draft statements for policy officials, intended to move markets.

    In other words, she’s no conspiracy theorist or alarmist – quite the opposite. She worked at the pointy end of government intervention in financial markets. And these days, that’s all that matters to financial markets.

    Her incredibly well-informed past makes this quote from her Macro Voices podcast interview rather startling:

    you have got to understand if the size of your debt problem is so big that it can’t be paid off and in fact even inflation, which is the usual way you would seek to default on your debt slowly over time, you can’t get enough inflation generated, then there is one further option. And that is you literally abandon the entire system of money, and accounting. I know that sounds unbelievably radical, but we have seen it happen before.

    There you have it, a currency system reset is now mainstream. Malmgren also tells us how the coming reset will play out:

    Today, we are on the brink of similar step change, and the way you will do it is you move to electronic money in conjunction with blockchain. Blockchain is the new ledger, and e-money is the new currency.

    She is saying the coming reset will be to a form of cryptocurrency

    Probably a selection of national ones, or an international one. Your economic life could soon be running on cryptocurrencies.

    It’s no surprise that technology enables financial change. It’s always been the case with every reset. Mining and minting, the printing press, digital currency and now the blockchain. It’s a natural progression.

    What is very surprising is that a government insider is telling you the coming reset will be to cryptocurrencies. That’s a major break.

    It used to be radical to say that governments would try to inflate their way out of the impossible amount of debt they’re in. These days it’s not even radical to suggest a complete reset of the monetary system to a form of money that the government is busy demonising.

    How far we’ve come…

    But it’s not that simple

    This confirmation from inside government circles certainly puts a lot of what’s going on into perspective.

    The global war on cash, for example. India’s experiment with forcing commerce online is shaping up to be a success after a very turbulent few months. Someone even named their baby GST after the new Indian version of VAT.

    Then there’s Russia’s President Vladimir Putin and his meeting with the developer of Ethereum. Not to mention the many small approvals of blockchain technology for use in financial markets around the world.

    But there are plenty of bumps in the road too.

    Malmgren identified the longer-term issue at stake if governments do start to utilise cryptocurrency technology.

    1. Who issues, owns and controls the currency?

    For now, cryptocurrencies are private initiatives. Although Singapore is testing a government version.

    The power to control and mint money is simply too big for governments to give up. It puts their entire revenue base at risk. Not to mention the ability to control the economy.

    1. What sort of privacy goes with a cryptocurrency?

    It’s called “crypto” for a reason. And privacy is one of the features making cryptocurrencies so popular to begin with. They’re hard to crack down on.

    If two people can transact anonymously over the internet using a token they consider to be of value, then a new cryptocurrency can be born no matter what the government does to try and stop it. The power of cryptocurrencies comes with the feature of decentralisation – what governments fear most.

    But, as you can learn about here, there are many other benefits of the blockchain over and above privacy. It’s certainly superior to government money today.

    And many of a cryptocurrency’s features are flexible enough to be tailored to the government’s purpose. Privacy is not an inherent feature of a cryptocurrency.

    The opposition’s positions

    Standing in opposition to the coming reset are voters. They rather like cash.

    And it’s not just in Greece and Italy, where cash and tax avoidance go hand in hand. Germany and Japan, for example, love cash too.

    But as Malmgren explained, at some point a reset is needed. And cryptocurrencies offer one option for the replacement system. You need to understand them to stay one step a of the coming reset.

    Until next time,

    Nick Hubble
    Capital & Conflict

    -Read more at www.capitalandconflict.com-

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  • The Japanese Blame Amazon for the Failure of Abenomics

    24.07.2017 • AustraliaComments Off on The Japanese Blame Amazon for the Failure of Abenomics

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    Vern Gowdie – Markets and Money (Australia) –

    Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output…

    Nobel Prize winning monetary economist Milton Friedman

    Exactly how much is a more rapid increase in the quantity of money?

    Would doubling the monetary base qualify?

    From The Guardian, 4 April 2013 (emphasis mine):

    Japan’s central bank has promised to unleash a massive programme of quantitative easing [QE] — worth $1.4tn (£923bn) that will double the country’s money supply — in a drastic bid to restore the economy to health and banish the deflation that has dogged the country for more than a decade.

    As part of a new set of policies known as Abenomics, formulated by Japan’s new prime minister Shinzo Abe, the Bank of Japan will buy ¥7tn yen (£46bn) of government bonds each month using electronically created money, with the aim of rekindling demand and pushing up prices and wages.

    Haruhiko Kuroda, the Bank of Japan’s new governor, described its stance as “monetary easing in an entirely new dimension”.

    He promised to target a doubling in the size of the “monetary base” — the amount of cash circulating in the economy, plus the reserves held by financial institutions at the central bank — in the hope of stoking inflation of 2% within two years.

    The Bank of Japan [BOJ] governor has more than delivered on his promise. Over the past four years, Japan’s ‘monetary base’ has increased 2.5-times.

    But what about ‘stoking inflation of 2% within two years’?


    Source: BigCharts
    [Click to enlarge]

    Things got off to a promising start. The monetary sugar-hit did the trick. After 2013, inflation spiked above 2%…for a little while.

    Alas, it has again fallen back into the zone it has become all too familiar with over the past 20 years…the range slightly above and below the zero line.

    Central bankers lack many things (real life experience and common sense, to name just two), but confidence is not one of them.

    Imagine the ego stroke that comes with the power of being able to print money at will…

    Somehow, it’s failed to register with them that a trained (or even untrained) chimp could press the money-printing button.

    Their overblown egos obscure objectivity. The continued failure of their ill-fated stimulus strategies is invariably met with the following defense: It’s not my fault. We just need more QE and even lower rates.

    Therefore, it came as no surprise when The Australian published this line on 20 July 2017:

    ‘Amazon stymies BOJ’s deflation busting plans’

    Bloody Amazon. How dare they crash Kuroda-san’s inflation party?

    According to the article:

    Japan thought it was on track to beat deflation. Then came the Amazon effect.

    The country’s retailers have been cutting prices in response to the rise of online rivals like Amazon.com, disrupting what had seemed like perfect conditions for Japan to get the stable dose of inflation it has long been looking for.

    Japan isn’t alone in its surprise at the slow response of prices to improved economic strength. Policymakers, economists and central bankers in the US and Europe are also scratching their s about why prices around the world can move so little while economic growth gathers momentum.

    Aeon, which operates Wal-Mart-like superstores that sell food and general merchandise, cut prices on milk, shampoo and more than 250 other products in April and is planning to do so again next month.

    Aeon president Motoya Okada said in April that consumer trends, including the low prices offered by internet retailers, left Japan unable to return to inflation after nearly 20 years in which prices have often been in decline.

    “The end of deflation was a great illusion,” Mr Okada said.

    The Aussie Recession Survival Guide: How to protect your wealth in a fast-shrinking economy

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    In this urgent investor report, Markets and Money editor Vern Gowdie shows you why Australia is poised to fall into its first ‘official’ recession in 25 years…

    Simply enter your email address in the box below and click ‘Send My Free Report’. Plus…you’ll receive a free subion to Markets and Money.

    We will collect and handle your personal information in accordance with our Privacy Policy.

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    E-commerce accounts for only 6% of retail sales in Japan, yet it’s painted as the villain in this deflationary saga.

    Personally, I’d have thought a national debt load in excess of 600% of GDP and an ageing population who are less inclined to indulge in debt-funded consumption would have been the root causes. No, it’s that pesky Jeff Bezos who’s to blame…

    And, according to the article, those clever people at the BOJ think that, possibly, maybe, there could be something else afoot (emphasis mine):

    Another theory gaining ground at the BoJ is that Japanese companies are investing in automation to improve productivity and offset the higher costs of labour and raw materials.

    This could help them avoid pushing up the prices they charge customers.

    Seriously, investing in automation to remain competitive is a ‘theory’?

    Let’s hope the good folks at the BOJ don’t give up their day job to become private detectives…they’ll starve.

    However, in fairness, the BOJ has only been carrying out the mandate of Prime Minister Shinzo Abe.

    Remember Abe, of ‘Abenomics’ fame?

    In 2012, Abe promised to return Japan’s economy to its glory days. The electorate was convinced Abe’s ‘three arrows’ policy was the answer to the country’s economic malaise. The Economist magazine described Abe’s 2012 electoral victory as ‘Sumo-sized’.

    Proving yet again the wisdom of: ‘You can fool all of the people some of the time…’

    This is from the Financial Times on 10 July 2017:

    Shinzo Abe’s popularity has slipped to a record low, casting doubt over the durability of the Japanese prime minister’s administration and its economic reforms.

    According to a poll for the Yomiuri newspaper, only 36 per cent of the Japanese public supported the prime minister’s administration while 52 per cent opposed it — the worst figures since Mr Abe returned to office in 2012.

    The figures suggest that a stream of scandals and unpopular laws, combined with slow progress on the economy, have tarnished the leader who has dominated Japanese politics for the past five years.

    Bad polling raises the odds that Mr Abe will pull back from economic stimulus in an attempt to regain popularity — or that he will be pushed out by a new leader of his Liberal Democratic party who abandons it altogether.

    Abe just couldn’t fool all the people all the time.

    So what’s Abe’s next ploy to retain power?

    Putting a fourth arrow through the heart of the very policy he once touted was the path to economic nirvana.

    And the ruling class wonder why the word ‘opportunist’ is used as an adjective alongside ‘politician’.

    Kuroda-san actually had an all-too-brief moment of clarity a couple of years ago.

    On 20 March 2015, he delivered a speech titled ‘Quantitative and Qualitative Monetary Easing: Theory and Practice’ at the Foreign Correspondents’ Club of Japan (emphasis is mine):

    …a key problem that arose is that, as prices continued to fall due to these factors for a prolonged period, a deflationary mindset took hold among the public — that is, the belief became entrenched that prices would not increase but continue to steadily decline.

    Once this deflationary mindset had taken hold, people engaged in economic activity assuming that deflation would continue. As a result, the economy fell into a vicious cycle of a decline in prices, a decline in sales and profits, stagnant wages and consumption, and a further decline in prices. Moreover, under deflation, the real value of cash and deposits increases with the decline in prices. Therefore, hoarding cash and deposits becomes a relatively better investment strategy than actual investment, discouraging firms from taking risks and investing in business facilities and in research and development to launch new businesses. In this way, deflation in Japan perpetuated itself in a self-fulfilling manner and the growth potential continued to decline.

    When you’re weighed down by debt-servicing costs, or are receiving next to nothing on your retirement capital, you become a bargain hunter. Looking for discounts to make your yen, dollar or euro go that little bit further.

    Retailers responded to this challenge, driving costs lower with technology, wage suppression, a more flexible workforce, and negotiating tougher deals with suppliers. It all feeds into a vicious cycle.

    A cycle Kuroda was determined to break with Quantitative and Qualitative Monetary Easing (QQE). Create inflation, push up prices, and people would buy today and not wait until tomorrow.

    Kuroda delivered this speech when inflation peaked in 2015. Which is why he ‘puffed out his chest’ and proudly declared to the assembled audience (emphasis mine)…

    As I have explained, QQE has been exerting its intended effects and it seems safe to say that QQE works both in theory and practice. The Bank believes that it can achieve the price stability target of 2 percent by continuing to steadily pursue QQE going forward.

    Clearly, poor old Kuroda suffered from a case of premature speculation.

    QQE produced a moment of fleeting economic ecstasy, but that was it.

    In true central banker inflated-ego , it’s not his fault.

    No.

    It’s Amazon, or the theory of automation, or even the Easter Bunny for making chocolate eggs too cheap.

    Central bankers built an economic growth model — one based on bringing forward future consumption with cheap debt — that was unsustainable.

    That flawed model created an unrealistic expectation of inflation being ‘always and everywhere’. But every yin has a yang. The equal and opposite effect to decades of inflation is a prolonged period of deflation.

    And Kuroda-san (for once) was on the money when he said ‘…under deflation, the real value of cash and deposits increases with the decline in prices.’

    Cash is the most unloved asset class at present. Which is precisely why it should be the most valuable one in your portfolio.

    Regards,

    Vern Gowdie,
    Editor, Markets & Money

    -Read more at www.marketsandmoney.com.au-

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  • Here’s How Yellen and Draghi Intend to Enslave Your Children

    21.07.2017 • FranceComments Off on Here’s How Yellen and Draghi Intend to Enslave Your Children

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    Simone Wapler – La Chronique Agora (France) –

    The current monetary system, based on unrestricted credit, is a new form of crime against humanity,I wrote yesterday

    Yesterday, Mario Draghi, President of the European Central Bank, announced that he persisted in this direction. The ECB will continue to raise tens of billions of euros of credit every month, 60 billion euros to be precise.

    Since 2000, the ECB has created € 4,846.3 billion in credit.

    Bilan des banques centralesWhere is the evil, you say?

    This mass of credit is disproportionate to what we can repay, which we produce as wealth.

    If we accept to honor an infinite debt, we will be enslaved, we and our descendants. A slave is someone who does not own the fruits of his labor. It is now generally accepted that slavery is contrary to human rights.
    But whoever says “credit” says “debt,” and who says debt says “debtor”. However, the debt can not be infinite because the human reimbursement capacities are limited. Indeed, we are mortal and our ability to work is over.

    Therefore, a system that tends to reduce people to slavery is a system that is contrary to human rights. Those who claim to impose it are committing a new kind of crime against humanity.

    However, this crime can be perpetrated by the myth and trust we place in criminals.

    The myth is that governments, authorities, central bankers would only want our good. Therefore, we have total and absolute trust in their actions.

    Trust is misplaced when it supports a dangerous myth

    The myth of free and infinite credit and the authority of central banks is supported by trust. But do governments and non-elected authorities (IMF, ECB, European Commission) want your property?

    This question shocks you? You have faith in democracy, and after all why not? Well controlled, it’s a good system.

    Let us then proceed by analogy. You may be co-owner. Your accommodation is yours but you share common areas with other co-owners. The assembly of the co-owners elected a union council and entrusted the management of these common parts to a syndic to whom you pay your expenses.

    You trust the union council and the trustee … to a certain extent. If you have doubts about the cost of certain works, its tenders, the accounting, its fees … you check. You do not let him enter the private rooms and you do not give him the keys to your apartment. You do not think that this trustee necessarily wants your good. Trustees are often very eager to offer you works not always useful or rewarding for the condominium. You may well find yourself faced with an incompetent union council and a wicked syndic.

    It is exactly the same for a government. A government, like a trustee, is watching over! It monitors itself more than a trustee because the latter does not constantly change the rules of co-ownership, does not impose its own vigils, its arbitration tribunal and a currency valid only in your joint ownership.

    Among the robust myths fed by trust, that a reliable currency is necessarily issued by a state or a union of states. Nothing is more false.

    As we saw yesterday, there are two kinds of currencies.

    Unlimited credit-currency and commodity-money, always limited

    Credit money has always depended on an authority (scribe, priest, sovereign, lord). Commodity money does not necessarily need an authority. It exists as such and happens very well of scribe, priest, sovereign, lord, central banker!

    Strange, curious, and bizarre, governments adore money-credit and hate commodity money. If they are forced to go through there, they do not hesitate to cheat …

    Those who know the history of money know that the first gold coin of state, struck in Lydia by the father of Croesus in the sixth century BC, was also the first known monetary scam.

    However, commodity money remains a better currency – for us individuals than a credit currency, because it can exist without the State, without a higher authority. Gold does not need an official seal to be gold. It can be labeled “Veritas” or “Veravalor” …

    In the absence of anchorage in reality, the credit money – it – may be excessively multiplied by the authorities to which management has been delegated.

    These criminals – issuing bonds at age 50 or 100 years and indebted to future generations, cheating on interest rates to kill private savings – do not cure us of bondage. They have only one and only concern: to make endure the myth of the infinite and gratuitous credit, this myth which assumes their authority.

    They serve their interests, as international civil servants, they do not pay taxes. They are rentiers of this system they have set up.

    You will have to choose your camp, time is short

    As for you, warned of this new crime against humanity, you will have to choose your camp: collabo, victim or resistant. You will not be able to say “I did not know, I did not understand anything, it was too complicated …”.

    It’s notnotcomplicated. There isnotFree money.

    When the confidence is dissipated, the myth will be shaken. The “authorities” will then attempt a jubilee. It will not be the jubilee of the Old Testament, it will be a last attempt to re-establish the monetary system in the direction that suits them.

    Your savings, your “real money” backed by your work, what you have legitimately acquired, will be swallowed up in this jubilee to pay a portion of the liabilities and “restore confidence.” Exactly like a bad payer who makes a small partial settlement to save time …[Editor’s note: It’s not too late to prepare for the jubilee.Discover hereSix simple but effective steps to take now to save your savings.]

    Confidence will dissipate when central bankers face the next financial crisis. The rates are already almost zero, the balance sheets of the central banks are already scary (look again at the graph): what will they do? More than anything that did not work but in addition, they will confiscate your money in a jubilee. Mr. Piketty will then draw a curve showing the enrichment of 0.1% of the population and the servitude of the remaining 99.9%.

    -Read more at la-chronique-agora.com (French)-

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  • Tim Price: “Your Liberty is Under Threat”

    21.07.2017 • United KingdomComments Off on Tim Price: “Your Liberty is Under Threat”

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    Boaz Shoshan – Capital and Conflict (United Kingdom) –

    Today I’d like to share an interview with Tim Price, the editor of London Investment Alert and The Price Report. Tim has decades of experience working in finance, and is an award-winning asset manager. He’s a constant source of knowledge for us here at Southbank Investment Research, so I thought I’d share a few pearls of his wisdom with you today.

     

    Hello Tim. To start us off, what is the current biggest economic risk out there today?

    Good morning Boaz. That’s an excellent question. I think the biggest market risk is that the bond market vigilantes finally ride back into town and force interest rates higher, or that the central banks lose control of the bond market, which is largely the same thing.

    We have been living with emergency rates for nearly ten years now, and it is beginning to feel a bit desperate. My thesis is that the primary problem facing all investors today is the massive burden of debt in the system. Just the “on balance sheet” debt of the US stands at nearly $20 trillion, and the UK has a pretty impressive and fast-approaching £2 trillion of national debt. These are unthinkably large sums that can never possibly be paid back. And so they won’t be.

    The real question is: which of the limited options do we get in dealing with it?

    Option one is generating enough economic growth to service the debt. This is unlikely, especially in the eurozone. Option two is default, which would immediately bankrupt the global pension fund and banking industries.

    Option three is the one I think we will end up with, which also happens to be the option to which every heavily indebted government has resorted throughout all human history: an explicit policy of state-sanctioned inflationism. Quantitative easing (QE) and zero interest rate policy (Zirp) haven’t yet delivered the goods (higher inflation), but give it time. The central banks have so much committed now that they are unlikely to abandon their disastrous experiment. So I think there is a particular merit to inflation hedges and crisis insurance.

    Do you think markets are now hypersensitive to politics? If so, is there any hope of them becoming less so, or will this only get worse?

    I think markets are as confused as the rest of us. Markets try and solve for probabilities and they crave certainty. None of the latter is on the table. That said, trying to parse the macro-economics in a world of QE and Zirp is just as difficult. So I think the primary emphasis for every investor has to be: avoid conspicuous overvaluation, and favour compelling bottom-up value.

    Do you see the state getting any smaller in the future?

    This is a huge issue. Take Brexit, for example. I hoped, as an ardent Leaver, that Brexit would offer the UK a once-in-a-lifetime opportunity to shrink the state. There are now some doubts as to whether we’ll even attain Brexit to begin with. In any case, I believe in small government and the smaller the better. Do I think we’ll achieve that? I don’t know, but we can at least hope.

    Where do you see the pound going in the future?

    Sterling feels fairly priced to me now after the Brexit devaluation, so I wouldn’t be betting against it. I think the US dollar remains the “last man standing” in currency terms as the US markets are so deep and liquid – the currency that feels vulnerable to me is the euro. The news flow is currently all one way – but I think the benefits of Brexit will ultimately swing back against the EU.

    Is there any hope for a return to sound money?

    The market, through cryptocurrencies, is clearly working through all the various options. I happen to believe that this “predicament” of too much debt, too low interest rates and too much state intervention in markets will end badly. Once the dust clears, assuming it does, then the time will be ripe for politicians and investors of all stripes to rediscover the merits of sound money. But the experience of getting there may prove extraordinarily painful. The mess of 2008 has not even been resolved yet. The central banks now have no dry powder with which to fight the next battles.

    Do you see individual liberty under threat?

    Yes, absolutely. The “war on cash” theme is a perfect example of the way in which the rights of the individual are being slowly eroded by venal governments and their overly biddable central banking agents. Government should have nothing to do with money, but today it sits on the scales of finance, distorting the most important price there is, the price of money itself: interest rates.

    What’s the outlook for oil and commodities?

    No strong feelings about oil but I would, if forced, expect prices to be lower rather than higher in the light of a secular rebalancing in favour of alternative energies. This includes natural gas and solar.

    I sense that the world economy is recovering and I think commodities, having suffered a terrible few years, will stabilise from here. Given the threats still out there in relation to the vast oversupply of global debt, I continue to believe that everyone should have some exposure to precious metals as a hedge against financial crisis and potentially messy inflation.

    What do you make of cryptocurrencies?

    As a libertarian, I like the idea of having a choice in currencies. I don’t claim to understand the in-depth technicalities of bitcoin and Ethereum and the like, but I endorse the idea of giving people a choice beyond bankrupt fiat currencies.

    What are your thoughts on the growth of passively managed, low cost exchange-traded funds (ETFs)? And dare I say it, thoughts on leveraged ETFs?

    I understand the attraction of low cost funds. I do not understand why investors are willing to support undiscerning and indiscriminate investment vehicles at the top of the stock and bond market – when these markets are at their most expensive levels in history. I think ETFs are a fly in search of a windshield, and leveraged ETFs are more of the same. The time for passive is when markets are cheap. When they are hilariously expensive, it’s time for discernment and principled active management.

    What is your opinion on gearing, or leverage generally?

    Avoid, unless you have an iron constitution.

    What was your finest investment decision?

    To abandon “the City” and work for myself, and so become completely independent of vested interests in the banking and financial system.

    What was your worst investment decision?

    Not to go fully independent of “the system” far sooner in my career.

    Thanks Tim.


    Tim’s latest issue of London Investment Alert goes into the origins of the Bank of England, and how the world has been in the grip of central bankers ever since. To read it, click here.

    I wish you all a great weekend!

    Until next time,

    Boaz Shoshan
    Editor, Southbank Investment Research

    -Read more at www.capitalandconflict.com-

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  • Don’t Let Today’s Digital Gold Rush Pass You By

    21.07.2017 • United KingdomComments Off on Don’t Let Today’s Digital Gold Rush Pass You By

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    Andrew Lockley – Exponential Investor (United Kingdom) –

    Yesterday, two of the internet’s largest black markets were shut down. Hidden on the “deep web”, and accessible only through an anonymising protocol known as Tor, Alphabay and Hansa were global drug, gun and other miscellaneous contraband brokers. Their currency of choice? Bitcoin.

    I’d like to share with you today a section from Sam Volkering’s new book, Crypto Revolution, on how bitcoin found its initial support from illegal “darknet” markets. One such market outshone all others and became hugely successful before its collapse – the Silk Road.

    A secretive online marketplace for drugs, guns, hitmen and fake IDs… This was an online marketplace where you could buy and sell illegal items. But easily the most popular goods for sale were drugs. Weed, hashish, ecstasy, MDMA, cocaine, heroin… whatever your poison, it was available.

    Unlike dialling up a dealer and having to deal face to face with a criminal, people could simply jump onto their computer, order some Class A narcotics and have it sent to them via a dead drop location (if they were smart).

    They could do it all online, and importantly with no paper trail and at the time 100% anonymously. Imagine that. Unfettered access to any drug you could think of, and the authorities had no idea this was going on right under their noses — at least in the early days.

    An illegal community existed online where people could freely buy and sell illegal goods and services. It was all done with complete anonymity and safety, and there was no monetary trail to follow.

    It’s was the perfect, no, the ultimate system for nefarious characters to operate. And it was real. We saw it. We didn’t buy from it, but it would have been easy. This market existed on the ‘deep web’. Its name, ‘The Silk Road’.

    It was in effect the ultimate black market in the deep, dark parts of the internet that most people don’t even know (and don’t want to know) exists. And the thing people most wanted to know was how could they get away with it?

    But what is this ‘deep web’? The deep web is the parts of the internet you’ve never seen. It’s the bigger part of the internet, the uncatalogued part, the part you don’t want to know about and don’t want to visit. It’s place online where websites can exist under the radar, unknown to the masses. Often it’s run through a TOR network.

    That’s an ‘Onion Router’ network.

     

    Picture an onion. Cut it open. Peel back the first layer, what do you get beneath? More layers. This layering is the framework on which the deep web is built. You can go through one layer, only to find another layer and another and another. Meanwhile the IP address is bounced from server to server around the world. It’s virtually impossible to find and track down. And sites change location all the time so as to not be found and shut down by the authorities. And even when these kinds of sites are found, two more spring up in their place. It’s this kind of growth and evolution of the deep web that’s made it far bigger than people realise.

    Estimates are that the ‘visible web’, the web you see through Google or Bing, is around 4% of the information available on the internet.

    The remaining 96% exists in the deep web.

    It’s hard to track, nearly impossible to index. But it exists. It’s deep, it’s dark. It’s incredible really. At around 500 times the size of the surface web, the deep web is the perfect location to hide an illegal drugs and firearms website.

    Mind blown yet?

    But what makes the deep web and in particular the Silk Road so fascinating was the ability for it to be anonymous and virtually untraceable. That realisation that someone can go online, buy drugs and have no money trail was astounding in the modern world — but not unexpected.

    Most people couldn’t get their around the fact this site could operate as a market yet with no financial institution, no kind of account or ‘traditional’ payment methods (like cash) attached in order to pay for the drugs and guns.

    To buy and sell on the Silk Road, users paid and received ‘currency’ in Bitcoin.

    While many people assume one of the earliest exchanges of Bitcoin for goods was for a couple of pizzas, the reality is it was more likely for drugs and guns in the deep web. But we’ll never know for sure. And that was the appeal of Bitcoin on the Silk Road in the deep web. No one was sure of anyone or anything. The only thing known for sure was that a mysterious operator by the handle ‘Dread Pirate Roberts’ was the main administrator of the site.

    It was the ultimate trustless system, it was the ultimate trustless currency. There was no bank, no bank account. It was a cryptographic token exchanged from an anonymous wallet address, sent to another anonymous wallet address. Then goods were sent to an anonymous user at an anonymous location working off a computer that could exist in Lithuania one minute, the US the next minute, Germany, Bolivia, the Czech Republic, Bermuda and Kazakhstan, all within the space of minutes.

    In the early days around 2010 and 2011, the Silk Road was the poster child for everything the establishment hated about Bitcoin. It still kind of is today as well.

    Once authorities got wind of the Silk Road they decided very quickly it was bad news.

    Due to its unique property of anonymity (at the time) Bitcoin was clearly the obvious choice for criminal exchange on the Silk Road. But don’t forget, before Bitcoin, cash was the king of the criminal world. So for every negative aspect of Bitcoin being the currency of choice for bad actors, just remember cash did the same thing before it — and no one seems to have an issue with cash.

    The Silk Road was an incredible, revolutionary operation. Sure it was illegal, but its very existence helped to fuel the rise of Bitcoin from the deep web into the public consciousness.

    It was a salacious story. A mysterious part of the internet, 500 times bigger than what most people realise. A dark, secretive website where anyone could buy drugs and guns from the comfort of their computer. And the unit of exchange underpinning it all, fuelling the fire and making the criminals wealthy, was a new, mysterious digital currency called Bitcoin.

    You couldn’t write a better if you were trying to make a blockbuster Hollywood movie. But for those operating in the deep web and on Silk Road you had access to drugs, guns, fake IDs, human trafficking, hitmen… and worse. It was all there for sale on the ‘deep web’. And the ‘money’ flowing between the buyers and sellers was Bitcoin — all because it helped the buyer and seller operate commerce with complete anonymity.

    By the time Bitcoin began to hit its incredible price highs in 2013 it was well known amongst the deep web community. By 2013, the Silk Road had been in operation for two years. It had already made a lot of criminals wealthy. And it had done so accidentally. If it cost $100 for a gram of cocaine in 2011 that would have been anywhere from 100 Bitcoin to 5 Bitcoin.

    For a drug dealer who received 100 Bitcoin in 2011 and held on, by 2013 that would have been worth $100,000 — or 1 kilogram of cocaine. You can start to figure out now just how this drew the ire of authorities — for once, they weren’t making all the money.

    The development of the Silk Road actually started around August 2010. At that point in time one Bitcoin was worth just 7 US cents, and a gram of cocaine would have set you back (based on a $100 price) 1,428 Bitcoin! Fortunately for buyers of drugs, the Silk Road officially launched in February of 2011.

    By then the price of one Bitcoin had already increased more than 1,328% to reach the lofty heights of US$1. So those Bitcoin could buy a lot more drugs than they could have done just six months earlier — a great moment for buyers!

    All this was going on under the noses of everyone. Until 1 June, 2011.

    It was on this date the most significant news articles in the history of Bitcoin was published on the website Gawker, by the author, Adrien Chen. The title of the piece was, ‘The Underground Website Where You Can Buy Any Drug Imaginable.’

    The article was an op-ed piece about Silk Road. That was the main focus. But it was the other detail, the new, crazy ‘currency’ in the article, which really caught everyone’s attention. Chen uses a real world example of how easy it was to buy drugs on Silk Road, ‘Mark, a software developer, had ordered the 100 micrograms of acid through a listing on the online marketplace Silk Road. He found a seller with lots of good feedback who seemed to know what they were talking about, added the acid to his digital shopping cart and hit “check out.” He entered his address and paid the seller 50 Bitcoins—untraceable digital currency — worth around $150. Four days later the drugs, sent from Canada, arrived at his house.’

    The article on Gawker went viral. It became one of the most talked about articles of 2011. It received coverage on a few major news sites, but the mainstream was still oblivious to what was going on.

    The tech community was abuzz with the uncovering of the Silk Road, but even more so with this ‘untraceable digital currency’, Bitcoin. It instantly grabbed the attention of technologists and futurists as many quickly came to realise that this was the early stages of something serious, something transformative, something disruptive — something with the potential to long term completely revolutionise the entire global financial system.

    What was even more insane about Bitcoin was the fact that it was ‘money’ in the digital world that you could actually use to buy things and receive payment for things. And it was untraceable.

    If you wanted you could convert it back into fiat currency. And you could ‘mine’ it — in other words you could create it yourself out of thin air.

    While not the idea or central premise of Bitcoin, the attractiveness to make some quick cash was all too tempting.

    And then just to top things off, it was the impossible made possible.

    As a child your parents often tell you that ‘money doesn’t grow on trees’. This usually comes after you plead for a few bucks to buy something you really want. And as a life lesson they tell you no, money doesn’t grow on trees. Well technically they were correct. That is until Bitcoin came along.

    Bitcoin allowed users with the right technical proficiency and the right computer equipment to rip that money off the money tree. It was the ability to be your own royal mint, to print your own money.

    From the very beginning you could mine Bitcoin. Your reward for solving its algorithm was blocks of Bitcoin. And as each Bitcoin was worth real fiat money, each block was worth something.

    People began to realise this in fact was the mythical ‘money tree’. You could ‘mine’ Bitcoin from nothing and instantly by doing this you would have something that was worth real money.

    These early days held incredible parallels to the great gold rush era. Those in the know flooded to this ‘digital gold’ and things got a little crazy.

    When Chen published the article about the Silk Road on Gawker, Bitcoin was trading at US$9.21. After hitting US$1 in February, and with the growth of The Silk Road and the deep web awareness of Bitcoin, it had increased a further 821%.

    But just 10 days after the release of Chen’s article the price of Bitcoin hit US$17.61. That’s a 1,661% rise from February and an incredible 25,057% from August 2010.

    In just 10 months the price of one Bitcoin had gone up 25,057%. This was the first massive run for Bitcoin. With such a short history it had become a cult hero in the digital world. It had all the hallmarks of the perfect financial instrument for anarchists, libertarians, anti-establishment movements — it was the ultimate disruption to global finance, arriving at a time when people wanted nothing more than to ‘stick it to the man’.

    But its rise didn’t last…If you’d like to continue reading Sam’s book, click here.

    Have a great weekend!

    Until next time,

    Boaz Shoshan
    Editor, Southbank Investment Research

    -Read more at www.exponentialinvestor.com-

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  • Trump Should Have Come With a Warning Label

    21.07.2017 • United StatesComments Off on Trump Should Have Come With a Warning Label

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    Bill Bonner – Bill Bonner’s Diary (United States) –

    POITOU, FRANCE – A young man drove up yesterday. Shaved . Earring. Nice car. Sad look.

    “Monsieur Bonner?”

    After the introductions, he got down to business.

    “Damien [our gardener] told me you were looking for chickens. I’ve got about 10 of them I’d like to get rid of.”

    “Why do you want to get rid of them?”

    “My girlfriend was cheating on me. You know what that’s like. So I kicked her out. Now I’m getting rid of her chickens.

    “You know what it’s like. I don’t want to take care of her animals anymore.”

    We agreed to buy his chickens, bringing our flock up to 16… from which we get a few eggs every day.

    Later, we said to Elizabeth, “He kept saying, ‘You know what it’s like.’ He was talking about his girlfriend stepping out on him. But I don’t know what it’s like. And I don’t want to know…”

    “Of course not, honey…”

    Warning Labels

    Girlfriends, world improvers, and candidates for public office should all come with warning labels. Like preion drugs, people should know what they’re getting themselves into.

    Imagine how much grief could have been avoided if Hitler had announced:

    “I’m going to go to war with the rest of Europe. This may mean diverting at least half of total GDP to weapons production and support of the army; consumers may struggle to find basic necessities.

    “And it may put Germany in a two-front war that it may not win. Millions could die, our cities could be destroyed, and our country could be occupied by foreign armies for the next 40 years.”

    “Okay, then,” the voters might say… “Sure, why not?”

    A shrewd and honest Joseph Stalin could have given a s-up, too:

    “We’re going to organize the whole economy like the military. The insiders, like generals, will control everything and get the best food, lodgings, work assignments, and so forth.

    “The plain people will be assigned cells… oops… I mean houses. There will be no unemployment. Every will have work to do… a lot of it.

    “Malcontents and people I don’t like will be sent to special camps in Siberia for retraining or extermination, whichever comes first.

    “Then, we all may get poorer every year for the next half-century… until our children and grandchildren finally come to their senses.”

    Again, citizens would have a chance to look at the program carefully and decide if they still want to take the medicine:

    “Sure… Sounds good to us…”

    Invitation to Surprises

    Of course, no one can see into the future. And who knows what will happen?

    Still, there are some basic propositions that can provide guidance. If you do what others have done, for example, you will probably get similar results.

    Imagine this warning label from former Venezuelan President Hugo Chávez:

    “I’m going to put into place the programs that worked so well for Russia and Cuba. You know, nationalizing major industries. Price controls. Trade restrictions. Spending money we don’t have.

    “Then, when the price of oil goes down and the bills come due, there may not be any food on the shelves. Inflation could hit more than 1,000%. Crime might soar. The government could crack down. That sort of thing.”

    Just being alive is an invitation to surprises. But live-in girlfriends and public policies have predictable risks… and almost predictable results.

    Mass murder is never a good idea. Neither is starting a war. Or restricting trade.

    Bird Watchers

    The future is our subject. Unpredictable. Full of slipups. Nevertheless, there are two things we know about it.

    First, tomorrow deeply affects today. Second, it probably won’t be that different after all.

    As we explained yesterday, the future casts its shadow backward on the present. We anticipate what will happen. And we adjust for it. Today changes depending on what we expect for tomorrow.

    That’s why the old economists eschewed activism. They were like bird watchers, not zookeepers.

    It is one thing to keep your eyes open and watch what people do. It is quite another to tell them what to do.

    Once you begin trying to control the future, you become a part of the thing you’re trying to understand.

    And now, standing in his own shadow, dark and benighted like the bottom of a well, is economic activist Peter Navarro.

    Previously, he had been a bit of a local celebrity in the San Diego area where, after failing in four campaigns for public office, he was regarded as a hopeless loser. He was known in the economics community, too, but mostly as a crackpot.

    Then, all of a sudden, national fame came to the Harvard PhD. He was named director of something that hadn’t existed until “The Donald” created it: the White House National Trade Council.

    The National Association for Business Economics sat politely through one of his speeches. And in March, The Wall Street Journal published an op-ed from him.

    The Journal did us a favor. Navarro laid out his basic ideas for all the world to see…

    And there he is, egging on the president to do more of what never works – to block win-win deals with trade restrictions… to raise prices for consumers (leaving them less money to spend)… to contradict the principle of comparative advantage… and to make Americans poorer.

    He writes:

    Reducing a trade deficit through tough, smart negotiations is a way to increase net exports — and boost the rate of economic growth.

    Where’s the warning label, we wonder?

    More to come…

    Next week, we will be writing from Switzerland and concluding our meditation on the future: why Peter Navarro is wrong, how trade increased productivity by 3,000% in the last half-century, and why the principle of comparative advantage still works.

    Stay tuned.

    Regards,

    Bill

    -Read more at bonnerandpartners.com-

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  • Welcome to the Last “Year of Plenty”

    21.07.2017 • SwitzerlandComments Off on Welcome to the Last “Year of Plenty”

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    Henry Bonner – Strategy and Council Letter (Switzerland) –

    If you reach retirement age these days, or if you are already there, then you have benefited from an advantage that you should not underestimate …

    In the four decades before today, approximately since 1980, we have seen an increase in the value of assets, up and down markets …

    On the bond market, stocks have risen since 1981. Look at the graph of interest rates we pay:

    When rates fall, the value of bonds climbs … In short, you could have bought bonds at any time since 1981, and you would have made profits of size …

    Look at the valuation of these bonds since 1980, according to the Federal Reserve …

    You can see that the valuation of assets has increased by about 1,400% …

    In other words, you would have multiplied your stake by 14 by leaving it in the bonds … not counting the interest you would have benefited … and that you could have reinvested …

    Similarly, in the equity market, stocks rose in France …

    Here is the valuation of the assets, in multiples of the GDP of France, calculated by the Bank of the World:

    As you can see, the valuation of our stock has climbed about 10 times faster than GDP since 1980 …

    In short, if you had done nothing but leave your money in a range of bonds and shares on the stock exchange … without selling during the panic of 1987 … or 1998 … or 2000 … or the crisis of 2008 … then you could easily multiply your money by 10 … or more, especially if you had reinvested your dividends and interest …

    In short, our era of prosperity in assets – bond and stock – would have allowed you to build a capital of size …

    During the four decades that we have just known, you could also multiply your capital through real estate … you will see in the graph below (in black) the index of real estate in France, published by the Ministry Of the Ecological and Solidarity Transition:

    You will see that after price stability between 1980 and 1998, prices went up … the price index doubling between 2000 and today, despite the crisis of 2008 and its impact on real estate in France.

    In short, we have experienced almost 4 decades of rising values ​​… in the stock market … in bonds … and in real estate … offering the opportunity for some to build up a significant portfolio during their lifetime …

    Of course, nobody buys just when it takes … and nobody knows how to sell stack when the shares have reached their peak …

    If you are like most French people … who have their assets divided between real estate, their bank account, their life insurance, shares on the stock exchange, and perhaps gold or metals, then you could Benefit from highs and lows … and your returns have followed more or less the average …

    Even if you had hired a stock advisor, studies indicate that you would not have had far-reaching returns in the end.

    In the end, when you subtract the costs of an adviser for your finances, the client who entrusts his money to an expert installed at the Defense actually underperforms the futures market …

    In short, whatever decisions you have made with your money, you may have benefited from an upward wave in assets, allowing you to benefit in one way or another …

    Little do we realize for the moment … but we are perhaps arriving at the end of this period … and in the decades that come, we could no longer benefit from this trend … which allows us to see the value of our heritages Climb from year to year …

    In short, we have just known 4 decades of “years of pomp” in the markets …

    As the Parable of the Bible explains, after the pomp comes famine …

    What will the years of “famine” look like in the area of ​​economics and finance …?

    Well, know that most of the French, it seems, is already preparing for this kind of scenario …

    According to a study by the Legg Mason Group, most French people give up their savings in investment products, for fear of needing cash in the future …

    You did not expect to learn that most French people remain in “defense” mode since the crisis of 2008 …?

    … despite the fact that our state bank, the ECB, claims to have fixed the situation … and to have put the train back on the rails …

    On the other hand, Janet Yellen, who heads the Fed – the equivalent of the ECB in the United States – said she did not expect to experience any other crisis during her lifetime.

    If Mrs. Yellen believes in it … should not we also trust …?

    After all, with all the tools at her disposal, Mrs. Yellen herself could make sure that a crisis does not happen … right?

    Well, for now, most of the French, it seems, continues to doubt … although on the surface, everything seems “in order …”

    Since the 2008 crisis, our stock market shares have only risen steadily … and on Wall Street, we are constantly learning that the Americans are breaking all records … with profits and valuations in Stock market still rising …

    Yet … you may also feel that something is wrong … at least not quite … and that you should not totally rely on what the Fed says, or Wall Street, or even experts from the City of London or the Defense.

    After all, every time Wall Street jubilates, a crisis seems to occur shortly after …

    Do you remember for example the excitement for Japan’s actions in the 1980s …? Do you remember how Japan was to become the # 1 power of the world …?

    Do you remember how Internet actions should go up forever … just before starting an unprecedented fall …?

    And then, remember the craze for real estate that packed the markets just before the collapse of 2008 …

    Could it be that we are at the dawn of something of this sort … seeing it past … if the experts are wrong again …?

    Of course, if you were one of the experts, you would be well advised to ignore the danger that might be found nearby …

    Would not you like to have their work …?

    … allowing you to collect premiums just by investing the money of your customers in a panoply of assets … which climb from year to year … without you have to lift a finger …?

    Ask yourself what would become of all these experts in the case of a “famine” like that which could occur in the markets …

    Do you think that most people will continue to entrust their money to them while they see their yields collapse …?

    Do you think these experts will continue to be able to afford their sports cars … and their luxury apartments in the heart of Paris …?

    Of course not…

    As a result, you can imagine that most of these experts prefer to forget that a major threat is hanging over their business … that they only manage to collect their premiums year after year because the markets – and the assets of All kinds – have only been climbing for 40 years …

    In truth, almost no one can tell when exactly our era of “pomp” will come to an end … but we know in any case that the situation today depends on stock market upwards … bonds Higher … and lower interest rates …

    My intention is not to make you think that you should withdraw your money from the bank … or stock markets … at all costs, or sell all your bonds and go somewhere in the country, away from it all.

    On the other hand, to tell you the truth, we are on the verge of major changes … we will have a world more like the depression situations we have experienced in this country – just after the Second World War Government rationed basic goods), or after the 1929 Crash …

    We have experienced situations in this country where real estate is no longer growing … and, as a result, builders stopped working … you had fewer and fewer homes built … and you had fewer and fewer purchases And consumption … you had households looking to save at all costs rather than spend … in order to have food to eat …

    Meanwhile, you had factories closing their doors … and leaving their employees to the tile … while on the shareholders side, the magnitude of the losses they were suffering compelled them to block their funds … and to try to repatriate their loans …

    You may not believe it … but the United States War of Independence against England – in which France played a major role – began after the massive repatriation of debts by the British Had just suffered the bankruptcy of one of their banks … and tried to raise taxes on trade with the colonies at the same time.

    In short, when you suffer a loss of scale in the field of banks, you can quickly destabilize a situation …

    Here in France, you will agree that our country already has “tensions” beneath the surface … which, it seems, are just waiting to explode at any moment … be the “difficult” areas in The suburbs … or the quarter of young people who are unemployed … or the hundreds of thousands who get allowances without ever working …

    In times of difficulty, when the government suddenly has to lower its support for the population because it can not afford it, then you can trigger a mess … something like the turmoil between 1789 1800 …

    As for what the government must do to resolve the situation, think again … Our state does not have the capacity to help things …

    You may have heard that the state has put an end to the crisis of the 1930s by massive intervention … with increases in taxes on wealth … and programs of work and hiring by the State …

    Well, imagine that this interpretation of history does not describe reality at all …

    In fact, the government started its programs to support the economy after the crisis hit bottom … and that it has already begun to resume–

    Indeed, state intervention – far from helping the situation – has only slowed down the return to growth … and this intervention has produced far-reaching consequences – particularly in Germany – where State, to put people to work, control prices, and devalue the currency, have driven the country more and more into a slump that led to the rise of the Nazies …

    Now, at this very moment, the government is making the same mistake … with a major intervention in the economy … and in our finances …

    You may already know that the government represents 60% of the economy in France … a figure that has been rising since the 1970s … period when the state accounted for about 40% of the economy …

    You have in it the companies that the state owns – such as EDF, Areva, SNCF, or Airbus, for example … as well as all the expenditures on civil servants, teachers, or French medicines …

    Realize that our leaders are also issuing more and more debt … and that this debt is circulating in our economy, infiltrating the assets of banks, insurers, and companies …

    Our state bank, the ECB, promises to support the value of these debts … to such an extent that the government believes it can still issue … without fear of breaking its obligation to repay …

    Because of the ECB’s hand in the game, we hesitate to say that bonds – and stocks – will collapse every time …

    After all, when you are the ECB, you can create as much money as you want … and nothing prevents you from buying bonds, paying the debts of states, or even buying shares Stock Exchange…

    You may be aware that Japan already buys shares on the stock exchange through the Bank of Japan … and that the ECB buys bonds issued by companies, allowing them to access forever the funds they need…

    What will happen to put an end to this scenario …?

    Well, as long as the euro is our currency, the ECB can – legally – administer its care on the economy … even if the “sick”, our economy, suffers …

    For the ECB to lay down their weapons, we would need the euro zone to abandon the euro, or to start using an “alternative” to the euro – like the dollar, or the Yen …

    We have seen this kind of scenario in countries like Zimbabwe in the 1990s, or Venezuela these days – where people are looking for dollars to protect their savings …

    Here in France, given that the inflation rate hardly reaches 1%, we are not going to see the ECB stop working right away … not before the situation is much more to the rout …

    So, given the state of affairs, should you invest thoroughly in the stock market anticipating an upward explosion …?

    Will we see the ECB announcing the mass buying of shares of companies to support them …?

    Well, that kind of scenario could happen – we saw it in Japan.

    Yet, even with the ECB behind, will bonds continue to grow forever …?

    Can they …?

    Well, already, we are beginning to feel the eddies that should worry you …

    See, our economy is not growing … at least not in the proportions we would need to reduce the size of the debt … or so that the ECB can begin to reduce the size of its assets …

    Meanwhile, the equity market is starting to pitch … with markets now focusing on rising corporate profits in the last quarter of 2017 to justify the rise in prices …

    What do you want…?

    When we can no longer rely on support from the ECB … nor from the State … nor from the IMF …

    What will we do in this case …? What will happen to the country where we live …?

    You may imagine that the stock market could plunge … even see that the value of your home would drop …

    Are you thinking about the possibility that your bank will no longer open …? Wherever your local supermarket will stop serving you …? That you go to the pharmacy but will find that they have no stocks, because they can not pay their suppliers …?

    What will you do to move when the petrol station has no more fuel at the pump …?

    Remember that your supermarket … like your delivery person … or your pharmacist … can only pay because his bank account works … which depends on the assets of their banks …

    In the end, it all depends on the ECB and the value of the assets in our system …

    We are so used to paying for our shopping by card that we do not know how this system allows us to pay … We believe we have euros in our bank account … but we only have promises … that figures on screens … Which depend on asset markets … which receive the support of the ECB …

    Should you do something to protect yourself …?

    Some of the experts we observe recommend to have Bitcoin … or put your money in real estate – the “physical …”

    We do not know what will happen to Bitcoin in a situation where our bank accounts are no longer working …

    We can assume that they would continue to walk … but we would also recommend that you have a little gold … because gold has always kept its value in times of crisis …

    As for real estate, you can be certain that real estate would collapse if the market were to fall …

    On the other hand, having at least possession of your home could save you some of the problems associated with falling assets …

    Realize that many French people hold a mortgage on their home …

    Imagine that the value of their housing falls below what they owe to the bank …

    You can imagine that, especially when many French people suddenly lose their jobs, many of these credits could be delinquent … pushing the banks to repatriate their loans – or take possession of the housing …

    In such a scenario – resembling what happened in Ireland, or cities in the US in 2009 – the value of housing in some places could drop by 90% …

    With this kind of deflation in the value of real estate, the bank would stop borrowing …

    In fact, this kind of thing could quite possibly represent the final blow to the whole system – for banks, insurance companies, and defense institutions where experts work …

    To deal with it, the ECB will have to further increase the size of its assets – panicking … to buy back billions of euros from these mortgages …

    Imagine the scenario: Macron goes on TV to say that the ECB “takes the situation in hand …” and that the State intends to implement “emergency” measures that will enable them to revive the economy …

    You see that more and more people are striking – and paralyzing the cities. You have the feeling that no one in the government – Macron, or Mario Draghi, or anyone else – has any control over the problem …

    Once the disaster begins, you feel like you are going down a slope … you go faster and faster …

    Sooner or later, you realize that your entire country is no longer as before …

    Perhaps the state will decide to buy debts in delinquency, banks in bankruptcy, and even businesses in difficulty …

    From what you probably read, we were able to “contain” the crisis of 2008 thanks to this kind of intervention …

    Could we not do that kind of rescue again …?

    Well, know that the intervention – about 360 billion euros – of the State in 2008, here in France, was only a “drop of water” compared to the problem that is currently looming …

    In fact, according to many sources, the system has recovered by then not because the state has intervened to buy banks in difficulty, but because the ECB – like the Fed and the Bank Of Japan – have reduced interest rates to the bottom … which has resulted in inflating the value of the banks’ assets … saving many of them from bankruptcy.

    For others, the system was not even in danger of collapsing in 2008 … and the intervention of the State was nothing but a “gift” to banks …

    According to an expert in the matter, David Stockman, the banks – or at least the system itself – was never involved in 2008.

    According to Stockman’s research, bank clients themselves were never in danger of their savings disappearing.

    Why did the state banks intervene so as to “save it”, if the system was not in danger …?

    Well, because of the relationship between bank executives and state-owned banks – especially the Fed – that allowed banks to take advantage of panic, and the media, to get money from the government, And to use them to extend their margins.

    Of course, if the banks would have gone bankrupt without the assistance of the state – we can not know …

    On the other hand, we know that everything that has taken place since 2008 has put France’s economy on a path that leads to disaster …

    We have almost doubled our debt … We have more unemployed than before the crisis … and today we have stock market valuations – and bond values ​​- that are reaching record highs … while the economy itself does not Still does not …

    What can we expect …?

    First, we could see the value of the euro falling … inflation climb … and some credits start to pose problem – because rates are rising …

    After three or four months of this kind of scenario, we could see a “cash freeze,” as we began to see in 2007, when BNP Paribas froze some of its investment funds … citing the “lack of Cash in real estate. ”

    In my book, “The End of France: Your Survival Plan,” you will find the original explanation of our system – and the “flaw” in it – that goes back to 1971 and the end of ‘Gold standard under Richard Nixon …

    You may not know, but France played an important role in the end of the gold standard … because France held dollar-size reserves …

    We had accumulated them since the Marshall Plan and the expansion of trade in the 1950s and 1960s …

    In 1970, with the US wars in Korea and Vietnam, the dollar was beginning to show signs of weakness … and the bankers here in France saw that the United States could at any moment revoke their promise of ” To exchange gold for gold

    In short, the United States did not have enough gold to meet the gold standard … and we tried to get rid of our dollars before it was too late …

    In August 1971, the government of Pompidou sent a warship to the port of New York, in the United States, filled with dollars, to exchange them for their gold equivalent …

    The same month, President Nixon announced the end of the redemption of the dollar in gold … ending the system of the gold standard once and for all …

    After the end of the gold standard, the US government accelerated the pace of its debt issuance … taking Europe and Japan in the same current …

    Truly,

    Henri Bonner

    -Read more at www.lettre-strategie-conseil.com (French)-

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  • Digital Exhaust: The Innovation That Could Make Your Doctor Irrelevant

    21.07.2017 • United KingdomComments Off on Digital Exhaust: The Innovation That Could Make Your Doctor Irrelevant

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    Andrew Lockley – Exponential Investor (United Kingdom) –

    We’re used to the idea of “going to the doctor”. But, in future, our digital devices may watch out for conditions we’ve previously relied on healthcare professionals to diagnose. We’re never really satisfied by five-minute consultations with overstretched medical staff – so this may be a Great Leap Forward. However, the reality may end up being rather more complicated…

    Let’s look at the future of online healthcare

    You might think of digital medicine as being all about enabling easier access to conventional services. Indeed, there are firms that do exactly this. One, PlusGuidance, we’ve interviewed before – and its model is a Skype-like connection to a qualified counsellor. An alternative approach is to create a system that does not rely on real-time human intervention. There are many firms using such an “expert system” approach – with Ada and Babylon being two of the better-known examples. This strategy is based on getting patients to manually report their symptoms and history. This data enables the apps to diagnose problems – in much the same way a human doctor might. Ada’s chatbot- interface has a number of advantages. Cost is an obvious benefit, but it’s not the only one. Such apps are better able to diagnose rare diseases, which family doctors are unused to seeing.

    However, there’s an alternative vision. It’s far more powerful, but much more ethically troubling. We all now produce a stream of data, as we carry on our lives. This is sometimes known as “digital exhaust”. Tracking this data can give important insights into our health. Everything from flu epidemics to mental health problems can be tracked in various ways. Some, such as social media mentions of “flu”, are obvious. The US Centers for Disease Control relies on these kinds of overt monitoring techniques, for checking up on flu outbreaks. Other approaches, such as tracking who-met-whom, are more oblique indicators of an illness’ spread. Such inferred methods are particularly informative when data is aggregated across multiple individuals – as this irons out the reliability issues affecting individual people. For example, watching when students switch off social media at night has been found to be a good proxy for the spread of seasonal flu. It seems they’re just not so chatty, when they’re going down with a bug.

    However, it’s not just public bodies that have access to this information. Employers can also monitor behaviour, for signs of illness. For example, Soma Analytics aims to detect which employees are suffering from stress. That approach could work well, if an employer is supportive. But with a zero-hours contract, employees might never get asked back. This raises real questions regarding the reach of employers into our private time. Do we really want our boss to know if we stay up drinking whisky until 3am, or if we’re suffering from post-traumatic stress disorder after an assault? Expect legislation controlling potential overreach to be just around the corner, if you’re an investor in this sector.

    Of course, there’s more to this field than just the tech in our pockets. Beyond our smartphones, there’s a wealth of data that is open to environmental monitoring.

    Facial recognition technology is coming along in leaps and bounds, and one benefit of this is that it is becoming easier to diagnose conditions that manifest themselves in facial gestures, expressions and emotions.

    One appropriate use case is monitoring children suspected of having attention deficit hyperactivity disorder or autism. In a clinical setting, facial recognition and monitoring improves the accuracy of diagnosis. However, what’s much more interesting – and worrying – is that this technology could potentially recognise and diagnose mental illnesses, via pervasive real-world surveillance. Ubiquitous cameras, and low-cost computing power, enable a world where our every move is watched for signs of ill health. Just as our browsers track our journey around the internet, we can expect a future where our behaviour and health could be monitored pervasively by technology. We might leave home with a snuffle, and be presented with a personalised advert for a flu remedy as we sit down on the bus. Is that creepy, or useful? I’ll let you decide. Whatever your answer was, it might change if the condition was skin cancer or schizophrenia, rather than a snuffle. If you’d like to invest, there are a myriad of firms working on personalised out-of-home (OOH) advertising – and a medical upgrade to their technology is a real possibility, in coming years.

    Degenerative conditions are particularly amenable to pervasive monitoring. One particular example is Parkinson’s disease – which results in a steady softening of speech. Canary Speech is a firm that’s aiming to commercialise monitoring of this change. In future, firms such as banks and insurance companies may deploy this technology routinely on phone systems – as may many employers.

    It’s conceivable that schools, workplaces and doctors’ surgeries may soon be equipped with technology to flag potential sufferers of mental and neurological illness as they go about their daily lives. Devolving this down to our personal devices is logical. Disorders such as seasonal affective disorder are potentially easy to spot. If someone is wide awake at 5am in June, but never touches their phone before 10am in January, it’s likely there’s a problem. Presently, we’re not even taking such simple monitoring steps as a matter of routine. That will change – as will the degree of sophistication of the monitoring. Apple’s new sleep tracker is an example of how such technology approaches have reached the highest echelons of Big Tech. It’s already likely that these tech majors are impacting on your investment portfolio – as well as on your life.

    Is pervasive monitoring sinister, or helpful?

    It’s certainly helpful to know if you might be getting sick – but I’m not sure we’d all like to share that information with the government, advertisers, or employers.

    While such technology may help with healthcare diagnosis and monitoring, it may break down the barrier between healthcare and the wider world. If the doctor is always watching, this may make over-diagnosis a bigger problem. It may also be seen as intrusive, by people who view their inner life as a private matter – not a medical one, or one they’d care to share with their employer.

    For example: a friend of mine had hypomania, and he never forgave me for trying to get him help. He viewed it as “taking away [his] sunshine” – but those affected by his reckless, dangerous behaviour saw it very differently. However, in subtler cases, it’s harder to determine where the limits on medicine should be placed. Who’s truly depressed, and who’s simply cautious, withdrawn and prone to being slightly glum? It’s not always clear.

    Having labels for people at the edge of normal functioning may sometimes be helpful. But the flipside is that it may diminish the agency of individuals. Ubiquitous diagnosis will plainly tend to worsen this problem. Unusual actions may then be viewed as a product of illness – rather than a product of choice or personality. Furthermore, by labelling people with conditions that are widely seen as being disordered, the natural diversity of human cognition and emotion becomes medicalised. We may soon frame difference as deviance, and become tempted to treat people accordingly. Encouragement can quickly drift into coercion and compulsion. We may insist on people being medicated to keep their jobs or freedom. Ultimately, we may insist on editing their genes to “protect” their children – from natural variance, inappropriately medicalised. Technology doesn’t always facilitate a libertarian trend – and in future we may have to get used to far more invasive health monitoring: from medics, educators and employers.

    This is a fascinating field, with much investment promise. Nevertheless, it is mired in ethical and legal problems. Don’t overlook these, if you’re keen to buy the sector.

    Please do write in. We’ll carefully analyse your text, for any signs of undiagnosed illness. We won’t tell you, but we’ll let your life insurance firm know right away. You can reach us at andrew@southbankresearch.com.

    Best,

    Andrew Lockley
    Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • Japan Is a Crystal Ball into Our Economic Future

    21.07.2017 • United KingdomComments Off on Japan Is a Crystal Ball into Our Economic Future

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    Nick Hubble – Capital and Conflict (United Kingdom) –

    Predicting the future has been easy in hindsight. We’re very closely following the left by Japan, although in fast forward. So we had hindsight right in front of our noses, in a way.

    The Western world’s tech bubble, housing bubble, bank crisis, meandering stockmarket, low GDP growth with low unemployment, negative real interest rates, lack of inflation, government policies, central bank policies – just about everything is turning Japanese.

    Their economy’s struggle began in the 90s. But we’re catching up fast. These days we’re close behind.

    If the similarities continue to hold, then looking at Japan today should tell you a lot about your future. And that will tell you how to invest successfully.

    Following in Japanese footsteps

    Perhaps the most powerful lesson you can learn from Japan is why the famous Widowmaker trade is called the Widowmaker.

    Japan’s government is in an impossible financial situation. Its debts are at 250% of GDP. Which is a meaningless statistic. Japan’s government doesn’t have a claim on the country’s GDP. Tax revenue is only a small portion of that GDP. So let’s do the maths properly.

    Japanese government revenue was 55 trillion yen while debt is over a quadrillion yen, costing almost 13 trillion yen in interest per year according to the Japan Debt Clock. That means tax revenue is 5.5% of total debt and interest uses up 24% of total government revenue. This at nigh 0% rates too.

    Despite the dire situation, Japanese government bonds are holding up incredibly well. So many whizz kids have bet against the bonds and retired either themselves or their bet since no takes much notice anymore. The Widowmaker trade’s victims are some of the most successful investors in the world.

    It’s not just the government that’s loaded up on debt though

    Japanese companies are borrowing like mad too. They borrowed a record amount so far this year, with huge amounts of bonds issued internationally.

    The debt boom is a surprise because Japanese companies historically got their funding in the same way as German companies like to – banks. But this time the companies are using bonds issued overseas. It’s a whole new market that lets the spent Japanese banking system have a rest.

    The Japanese version of banking had a key similarity to what made European and American banks blow up in 2008. Academics call it risk and information asymmetry. In the Western world, dodgy loans were repackaged well enough for the eventual investor to lose sight of their dodgy nature. The person taking on the risk of the loans wasn’t in a position to know how risky they are.

    In Japan, banks were set up by large corporations to finance those corporations’ investments. That’s why you have the Mitsubishi Bank, for example. This of banking, known as keiretsu, ended up with the bank as a sort of holding company of the conglomerate. But the point is the same – the bank wasn’t lending for the simple motivation of the profit motive, but for other aims – to finance the conglomerate. This led to the mispricing of risk – too much debt at too low interest rates.

    Just as in the West, an entire generation of the smartest Japanese wanted to become bankers. There was even a popular TV show about a career banker and his trials and tribulations. Yes, a popular TV drama about a corporate banker. The show made the phrase “double payback” a part of the Japanese vocabulary. It also redefines the term “melodramatic”.

    When your best and brightest want to become bankers, you have a problem. Bankers are facilitators of other people’s endeavours. They don’t generate economic growth or innovate productively.

    All this amounts to one thing – a debt bubble. Which leads to stage two – the one the Western world is entering.

    The Bank of Japan owns everything

    The Bank of Japan (BoJ) has a bit of a keiretsu relationship with the national government. In 2013 the governor was replaced for not easing monetary policy enough to achieve the prime minister’s economic goals. Today we have the government’s advisers criticising the new governor for the same failings.

    On the other side of the camp we have the of the Japanese stockmarket who is complaining the BoJ is doing too much. They’re buying so many exchange-traded funds – US$54 billion a year – it’s distorting the entire stockmarket. Trading volume has fallen because of a lack of volatility. The of the Japanese Bankers Association said he is also concerned about the problem.

    In Japanese culture, this sort of criticism at the top is very much out of order. It interferes with Wa – a concept of harmony and cooperation which is very important to the Japanese. Which begs the question why on earth we’re sending Boris Johnson of all people to Japan to try and encourage Nissan and Toyota to invest in the UK. The last time he went, he flattened a Japanese ten-year-old in a game of street rugby.

    Johnson may not be the only thing unleashed on Japan imminently. The trigger for a change in BoJ policy may have gone off. The two BoJ board members who opposed the current governor’s wild policies are set to leave this week. Their replacements, both from the Mitsubishi conglomerate, are less likely to stop Governor Haruhiko Kuroda from increasing his easing programmes.

    With the government breathing down his neck and his board no longer opposing him, the Japanese central bank might end up owning everything.

    Why you should care about Japan

    What does Japan tell us about our future?

    First of all, John Maynard Keynes’ maxim that markets can remain irrational longer than you can remain solvent certainly holds true for now. Betting on a debt implosion of any government with access to a central bank is a bad idea unless you’ve discovered the secret to eternal life. (European countries don’t have sufficient control of the European Central Bank to make their demise a bad bet, but even there you’ll be waiting a long time thanks to the International Monetary Fund’s support.)

    Instead, there’s a different trade you can make with Japan as your guide. There will be an enormous and unexpected reversal in monetary policy over coming years.

    The BoJ is the only major central bank not on a tightening path. All other central banks are expecting to raise rates or at least reduce their easing measures.

    If history holds true and we continue to mimic Japan, that means central bankers in the West will never genuinely get to tightening policy. Inflation will be too weak, the economy and government financing too reliant on low rates, the stockmarket too addicted to central bank buying, and central bankers too timid to actually tighten.

    That’s a profound difference to what markets are pricing in at the moment. If expectations reverse and people think central banks in the West will abandon their tightening, it would move markets dramatically.

    One Twitter commentator illustrated the issue cleverly

    In a chart she compared the Federal Reserve’s balance sheet today to the Japanese one ten years ago. Back then the BoJ tried to tighten policy… for a while. Since then it’s been quantitative easing all the way.

     Chart comparing the balance sheets of the Bank of Japan and the federal reserve

    If central bankers follow the Japan once more, they will return to stimulus indefinitely. Gold, stocks and bonds should soar, the yen will strengthen (as other countries move to match Japanese devaluation policies unexpectedly) and financial markets will be safe from a significant crash.

    But it’s not all good news. Japan has hardly been an investor’s heaven. You’d be significantly better off spending your funds on Japanese food than the Japanese stockmarket.

    One big caveat to all this is whether the world can afford so much of itself turning Japanese at the same time.

    With record levels of private debt, Britain is among the worst-off nations if the world turns Japanese. In fact, things are so bad my friends at London Investment Alert are issuing a dire warning you need to see to believe.

    If the highly experienced investor Tim Price is right, Britain’s Widowmaker trade will look very different to Japan’s. Watch your inbox for more on this soon.

    Until next time,

    Nick Hubble
    Capital & Conflict

    -Read more at www.capitalandconflict.com-

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  • Student Debt Will Prevent Your Children From Ever Owning a Home

    21.07.2017 • United StatesComments Off on Student Debt Will Prevent Your Children From Ever Owning a Home

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    Bill Bonner – Bill Bonner’s Diary (United States) –

    POITOU, FRANCE – “My father told me to plant trees,” said a neighbor last night.

    “It was right after I bought this place. Of course, I was young… I was busy… I didn’t have time to plant trees.

    “Now, I tell my sons to plant trees while they’re still young. So they can enjoy them later.

    “Funny, as you get older, and the less future you have available, the better you know it.”

    Closed Book

    What follows is a meditation on something we cannot know – tomorrow.

    The future is a closed book, insofar as it is possible to know what will happen. But that doesn’t mean the future won’t happen.

    And although it is terra incognita – a place you’ve never been before – that doesn’t mean you shouldn’t pack your old familiar toothbrush and a warm sweater; it might be a lot like home.

    Aesop wrote his fables. The French have added to them with a few of their own. Here’s one about the future:

    Long ago, an old man decided to turn his farm over to his son and his wife.

    “I have just one condition,” he told them. “You have to let me stay with you as long as I live.”

    This was readily agreed. But the son’s wife and the old man didn’t get along. Finally, the wife persuaded her husband to throw him out. And so he did.

    But taking pity on the old man, the younger man turned to his own son: “Go and get a horse blanket for your grandfather so he’ll at least have something warm to wrap around him.”

    A few minutes later, the young boy came with a blanket, but his father could see that it was only half a blanket.

    “Why did you cut the other half off?” he asked.

    “Oh…” replied the boy. “That’s for you when you get old.”

    All of a sudden, a pattern came into view. And the future didn’t seem so unknowable.

    Like a tall tree, the future casts its shadow backward over the present.

    If you think it will rain later in the day, you take an umbrella in the morning. If you think stocks will go up, you buy now. If you think you have only two years to live, there is no point buying a refrigerator with a 20-year guarantee.

    Gift to the Future

    The invention of money greatly increased man’s interest in tomorrow.

    You could grow tomatoes, sell them for gold coins, and enjoy your harvest years into the future. Or you could borrow the coins now… and pay for them with next year’s tomato crop.

    But what if there was a drought next summer? What if you didn’t live through the winter? What if a fungus or a swarm of locusts attacked the crop?

    Savings are always a gift to the future. Debt is always a burden on it.

    Suppose you were to plant black walnut trees. It could take 50 years before they mature. It will be a gift to your children. But what if a pest kills them?

    What if people no longer want natural wood a half-century a? What if you borrowed the money to plant them?

    The further a you look, the more risks you can’t see. Logically, the farther out you go, the more you are likely to run into something that will upset your plans.

    So the longer term the debt… the less likely you are to be paid back.

    Logically, too, the more debt there is outstanding, the more likely that some will never be paid back.

    Treacherous Path

    Which brings us back from the future…

    And there, in front of us, is the heaviest ton of bricks the future has ever had to shoulder – nearly $20 trillion of U.S. government promises, not counting the roughly $200 trillion of off-the-books obligations.

    No one seems to be worried about it. The stock market is going through one of the periods of lowest “volatility” – price swings – ever recorded. Stocks are hitting record highs… and interest rates are still at epic lows.

    But a, the path – poorly lit and strewn with rocks and banana peels – is treacherous. Somewhere in mid-September, for example, lies a major trap – a debt “ceiling” Congress imposed on itself.

    But it’s not just the feds who face obstacles. Consumer debt to disposable personal income is at an all-time high. Mortgage payment to disposable personal income is also at an all-time high.

    Over in the auto sector, used car prices – the chassis on which auto credit rests – are losing their bolts. Subprime auto defaults are already soaring. Bloomberg:

    It’s classic subprime: hasty loans, rapid defaults, and, at times, outright fraud.

    Only this isn’t the U.S. housing market circa 2007. It’s the U.S. auto industry circa 2017.

    A decade after the mortgage debacle, the financial industry has embraced another type of subprime debt: auto loans. And, like last time, the risks are spreading as they’re bundled into securities for investors worldwide.

    Student debt, meanwhile, has doubled since 2009; it now totes to $1.4 trillion.

    What kind of way is this to treat them? Alas, the future has cast a dark shadow over America’s young people.

    And according to a study by the New York Fed, student debt is having consequences far beyond just transferring wealth from young people to the old cronies in the education sector.

    It’s undermining America’s most important industry: housing.

    How so?

    Burdened with student debt, young people cannot afford to buy houses. This leaves the bottom rung of the housing ladder unoccupied.

    There are starter homes available but few solvent starters to take them… which makes the whole housing market weak and vulnerable.

    August, September, October… shadows lengthen. Someone stumbles.

    More to come…

    Regards,

    Bill

    -Read more at bonnerandpartners.com-

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  • Creditism Is the New Capitalism

    21.07.2017 • FranceComments Off on Creditism Is the New Capitalism

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    Simone Wapler – La Chronique Agora (France) –

    The current monetary system, based on credit, is a new form of crime against humanity that leads to making us slaves to debt. A jubilee will be necessary.

    I recently attended a conference on the cybermuseums (Bitcoin and others) given by Gérard Dréan. I found that, apart from the speaker, the audience had little historical and economic knowledge about money.

    This misunderstanding is also visible in the media when reporting on “monetary policies”.

    Curiously, in this field, the public of the early twentieth century was more aware of these issues. This 1912 drawing, criticizing the Aldrich project, which was to become the Federal Reserve in 1913, illustrates this:

     

    Fed

    source:https://mishtalk.com/2017/07/19/crazy-fed-cartoons-from-1912-vs-today/#more-46892

    As soon as it was created, some had seen what the Fed was going to become: a creature that levied to redistribute to the financial sector. Note however the dollars that flood Wall Street: these are coins and the 1913 dollar was silver.

    10 years we expected it …

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    Half a century after the creation of the US Fed, the world has shifted from a monetary system backed by precious metals to a monetary system dependent solely on credit. This is what Bill Bonner calls in his chronicles the dollar “adulterated” or “fraudulent” resulting from the end of the Bretton Woods agreements. For my part, I call this system of “creditism”, as opposed to capitalism.

    Contrary to what some think, this is a technical regression and not a progress.

    Indeed, the very first currencies were only credit: inions carried on registers (wood, stones, papyrus) held by authorities (scribes, priests, monarchs).

    This system presents a genetic disease: credit tends to inflate without limit. But credit is debt, debt is owed by human beings whose life and work capacity are limited. Allowing unbounded credit to swell can lead to a slave society controlled by some affluent or lead to extreme violence when slaves revolt.

    The Hebrews understood the problem and instituted the “jubilee”, every 50 years (7 x 7 years in the seventh month). All the debts were remitted: the slaves and prisoners released, the mortgaged or seized lands returned to their owners. For we did not joke at the time: the bad payers but also their descendants were reduced to slavery.

    In modern economics, it seems that the jubilee regulated the credit cycle. The lenders were to be scarce in the sixth month of the year of the jubilee. Conversely, borrowers did not have to jostle at the beginning of the cycle, the prospect of 49 years of slavery chilling the ardor.

    If money is not credit, then it is commodity. Among the merchandise currencies, metallic coins have established themselves thanks to their incomparable advantages:

    • Conservation: better than the grain of barley used in Sumer;
    • Storage of value: not easy to multiply gold or silver at will;
    • Recognition: gold and silver do not resemble other metals;
    • Relative uselessness: no one dies of hunger, cold or thirst if gold or silver are the subject of speculation.

    This fundamental break between money-credit and money-commodity led to a model that was not based on trust, unlike barter or credit.

    The sight of gold and silver is sufficient for the seller. He laughs at the credit score of his buyer and does not gauge his muscles in case he should reduce him to slavery for default.

    The buyer has a reliable means of storing the fruits of his work or the products of what he has legitimately acquired. He is assured of the preservation of the value of money which no scribe or high priest can multiply.

    To ignore this monetary history, to swoon before the fiduciary currencies, to swallow the gibberish of the monetarists, to admit as normal that money is only credit controlled by superior authorities condemns us to become slaves again.

    We should revolt in the face of the nonsense of the central bankers, these so-called mandates (given by whom do you remember signing something?).

    As we have no jubilee, the role of central bankers is to steer the infinite growth of the debt, we accept that our descendants become themselves slaves.

    It’s as simple as that.

    Recently,Of the parliamentarians Bataves summoned Mr. Mario DraghiTo explain his monetary policy and offered him a luminous tulip in memory of the financial bulb of the bulb (1637).

    It’s a nice treat.

    I would personally tend to say that Mr. Mario Draghi – by reducing us to a debt he is contracting on our behalf but without our authorization – is complicit in an unprecedented form of crime against humanity.

    All this will end badly. When people finally understand the situation, it will be necessary to organize a jubilee. At this time, your private savings left in the financial system will be forfeited and will be used to repay public debts.[Editor’s note: It’s not too late to prepare for the jubilee.Discover hereSix simple but effective steps to take now to save your savings.]

    -Read more at la-chronique-agora.com (French)-

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  • The 2008 Crisis Was Just a Preview of This Year’s Collapse

    19.07.2017 • FranceComments Off on The 2008 Crisis Was Just a Preview of This Year’s Collapse

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    Simone Wapler – La Chronique Agora (France) –

    Default rates are rising in the automobile and shale oil in the United States. Exactly as at the end of 2006 with real estate.

    As you know, we are in a “bubble of everything”. Markets are rigged by unlimited and almost free credit provided by central banks. This has inflated the prices of stocks, bonds, real estate almost everywhere in the world.

    Usually the bubbles are localized. Everyone has in memory the “bubble internet” of 2000 or that of the mortgage subprime (1637), the bubbles of the railways (1847), the real estate bubble in Florida (1926) and finally the bull of Wall Street and 1929. Nothing new under the sun

    That bubble says crash. In an open economy, the bursting of a bubble causes considerable collateral damage, as we saw in 2008. The next crash will have an unprecedented magnitude and will spray our monetary system.
    The law is made by and for the ParasitocracyWe live in an open economy but not in a free market. We live in a period when a minority forges the law and has access to unlimited and free credit. I call this minority “Parasitocracy” because it lives and prospers to our detriment.

    Most laws and regulations are not made to protect private property, the individual, the freedom to trade, or to create competition. Instead, they are designed and designed to protect the interests of multinationals who lobby regulators to safeguard their interests.

    To illustrate my remarks, which for example has an interest in the CE marking?

    CE

    ‘The CE marking was created in the framework of European legislation. It demonstrates the conformity of a product with the Community requirements of the manufacturer of the product.

    It must be affixed before a product is placed on the European market. “

    An artisan wishing to sell a product “shall carry out or cause to be carried out checks and tests which ensure the conformity of the product with the essential requirements defined in the directive (s) concerned”.

    Our artisan will then have to unravel a web of norms, directives, regulations, decisions of the European Parliament. Then he will have to pay test and control laboratories.

    What has brought us this CE marking to us consumers? Before this marking, we bought our gloves and shoes made in Italy, domestic robots made in France or Germany, olive oil produced in Spain or Italy. In use, we detected the best quality / price ratio. As far as I know, nobody was more electrocuted or intoxicated than now.

    CE marking protects large groups and constitutes a barrier to entry for many small artisan-producers.

    This digression on standards was simply to make you feel that the “regulatory bodies” are not at our service. The same is true of monetary regulation.

    The currency is made by and for the Parasitocracy

    The monetary creation of the last 10 years has been done with the aim of protecting the Parasitocracy from bankruptcy. It penalizes savers who set aside to finance a project (real estate, retirement, investment in the work tool). But it avoids the downfall of the weak links of the economy, especially in the financial sector, it finances on credit public spending to buy votes of voters.

    This “bubble of all” will, of course, crack like all bubbles. This time will not be different from the others, except obviously by the extent of the crash that will ensue.

    Low borrowers depend on unlimited and free credit. As in 2003-2004, faced with the shy attempt by the Fed to raise interest rates, borrowers subprime Are beginning to crack.

    This time it is not real estate that cracks like in 2008. These are borrowers of oil and shale gas and automobile.

    xThis article Bloomberg We learn that bondholders in this sector are afraid of never seeing their money again. We are talking about $ 110 billion of debt maturing in 2021 that is classified as “speculative” or junk

    ThisBloombergTells us that the default rate is rising inexorably on those auto loans that inflated sales from US manufacturers.

    x
    Macintosh HD:Users:waplers:Desktop:-1x-1.pngLogically, cracking occurs where rates have been raised first in the United States and in the most competitive sectors (shale energy subject to the world oil price) or those already saved from bankruptcy Remember that this is the case of General Motors?).

    But that is not why we are at the dawn of the great crash that will crunch us all.

    By taking the parallel of real estate subprime, The Fed raised its rates from 2004 to 2006, from 1% to 4.25%. Then, it had frozen them to lower them again in 2007 without however succeeding in checking the rise of defects.

    The next crash will be infinitely more devastating as it should definitely discredit the central bankers and this crazy pretension to want to control the prices of credit. The world monetary system will emerge profoundly altered. [Editor’s note: In Europe too, we have a huge debt problem and a corrupt banking system with non-performing loans. Discover here The six emergency measures to take now to protect your money.]

    -Read more at la-chronique-agora.com (French)-

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  • Uncle Sam Is Your Crypto-Folio’s Worst Nightmare

    19.07.2017 • United KingdomComments Off on Uncle Sam Is Your Crypto-Folio’s Worst Nightmare

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    Nick Hubble – Capital and Conflict (United Kingdom) –

    Is the cryptocurrency rout over? Things looked dire for a while there.

    The bitcoin price tumbled over a third from over $3,000 to below $2,000. Then a three-day $400 rally followed. With that sort of volatility you can’t really call the bounce a stabilisation of the price yet.

    There are plenty of narratives which fit the situation. For example, Forbes profiled the famous investor Bill Miller, who put 1% of his net worth into bitcoin in 2014. Having generated around 1,000% returns, that means two things.

    First of all, he can sell a small stake of his holding and turn the remainder into a “free option”. After selling the value of his initial stake, the remainder of the investment is “free” in the sense that, if it goes to $0 it won’t cost him anything because he’s already sold out the value of his initial stake. This is a popular trading strategy and it explains why investors take profit, even when they’re optimistic.

    The other factor to consider for big bitcoin investors is diversification. After a 1,000% increase, the bitcoin portion of Miller’s net worth would be getting uncomfortably large. Huge swings in the bitcoin value can become the make or break of his net worth. No former funds manager is comfortable with that. (Bitcoin is also the top holding of Miller’s hedge fund according to Forbes.) The obvious way to return his net worth to a more stable and diversified portfolio is to sell a chunk of bitcoin.

    By now you probably know it’s not just about bitcoin these days. There are so many cryptocurrencies popping up it boggles the mind. Ethereum co-founder Charles Hoskinson told Bloomberg “it’s a ticking time bomb”. Hoskinson argues that there are multiple cryptocurrencies with dangerously similar features. You don’t need so many. Some will disappear.

    This chart from Bloomberg shows how fragmented the crypto market is becoming.

    chart from Bloomberg shows how fragmented the crypto market

    The surge in the number of coins is also causing the total value of cryptocurrencies to skyrocket. It went from $60 billion to $80 billion last weekend alone.

    With so many coins to choose from, you need a guiding hand to make your move. Only some of these coins are likely to soar, even if most manage to survive.

    Our own Eoin Treacy and Sam Volkering have such a guide here. It tells you which three cryptocurrencies to buy, as well as explaining the pitfalls and tricks to investing.

     

    What cryptocurrencies fear most

    The world is waiting for the government crackdown on cryptocurrencies. After all, governments are cracking down on their own cash too. More on that in a moment.

    Although cryptocurrencies are difficult for governments to get a grip on, there are still plenty of ways to meddle. Governments already control the exchanges between currencies and cryptocurrencies. This allows them to track who buys and sells them. It also allows them to shut down or influence the primary way people go into or get out of cryptocurrencies. Many people hold their crypto coins inside the accounts offered by these exchanges, despite the Mt Gox disaster showing how dangerous this is. Sam shows you how to protect your holdings properly here.

    The point is that monitoring these accounts and implementing tax is easy for governments to do. Given one of cryptocurrencies’ biggest strengths is their anti-government nature, all this could devalue them enormously when the government makes a move.

    For some reason, the Australian government has decided to allow people to spend their cryptocurrencies without it being a taxable event. In other places, when you spend a bitcoin, you are actually selling it for money (which incurs a taxable capital gain) and then buying something with that money. It’s inconvenient enough to weaken the concept of a cryptocurrency itself.

    Soon cryptocurrencies will have to decide whether they want to operate inside the government sphere or outside it. Given the end to cash’s reign of the black market, the power of secretive cryptocurrencies could boom.

    Money isn’t what it used to be

    The global crackdown on cash continues. If a newsletter writer had emailed you back in 1845 with the prediction that the government takeover of Scottish banknotes would end in the abolition of cash, it would’ve sounded rather amusing. But now we face the real possibility that anonymous, private and untraceable transactions will come to an end in a decade.

    The government will soon know everything about your spending habits. There isn’t much you can do about it. What does need to be done is laid out here.

    Even in the most unlikely places, the war on cash is a frontline issue. India’s ban on large denomination cash notes sent rural microfinance loan repayment rates from 98% to 50%. Microfinance company shares plunged. The growth rate in lending fell from 80% to 13%. The recovery has begun, but the damage is done.

    All this was supposedly designed to fight corruption in India. Because large denomination cash notes are the only way to pay off officials…

    The irony is that many countries rely on corruption to function. During my work as a flying trapeze artist in 2016, the company forgot to bribe the right customs official and all foreign employees were deported. Try starting a business in most South American countries and you’ll find it’s nigh impossible without greasing the wheels of government.

    In Europe, the plans to crack down on cash hit an amusing snag called public opinion. The European Commission asked the public “How would the introduction of restrictions on payments in cash at EU level benefit you, or your business or your organisation?”

    This is without doubt the stupidest question ever asked. How can a restriction to pay help anyone!?

    The fact that anyone bothered to reply was a surprise in itself. 99.18% of the 30,000 respondents chose the “no answer” response. There was no option to vote against the measure. Although it’s common knowledge most Europeans don’t want government fiddling with cash.

    But it’s too late anyway. There are already restrictions. And it’s not just government pushing. As always, the private sector is seeking to profit from the government policy.

    The Wall Street Journal is reporting that Visa is bribing companies to stop accepting cash:

    Visa says it is planning to give $10,000 apiece to up to 50 restaurants and food vendors to pay for their technology and marketing costs, as long as the businesses pledge to start what Visa executive Jack Forestell calls a “journey to cashless.”

    With cash on the way out and cryptocurrencies cringing in anticipation of regulation, the future doesn’t look bright for freedom. Then again the legalisation of drugs is proceeding steadily and profitably. It looks like Brave New World is in the lead over 1984.

    Until next time,

    Nick Hubble
    Capital & Conflict

    -Read more at www.capitalandconflict.com-

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  • Can Diamond Mining Companies Save Us from Global Warning?

    19.07.2017 • United KingdomComments Off on Can Diamond Mining Companies Save Us from Global Warning?

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    Andrew Lockley – Exponential Investor (United Kingdom) –

    Sometimes, it seems investors forget we live on a finite planet. We can’t have 11 billion people driving diesel cars and eating burgers, without invoking rapid catastrophe. Smart investors always bear this in mind – and invest accordingly.

    Fossil energy is certainly limited. Not only is there a restricted amount of fuel to dig up, but there’s also the issue of dealing with the CO2 that’s produced. That’s one reason why, at Exponential Investor, we’re keen to stress the huge investment opportunities from future-proof clean energy.

    Today, we’re looking at the earth – in a very literal sense. Before I get started on explaining how rocks and soil can magically “fix” carbon dioxide pollution, I’d like to tell you a little about a form of energy that comes directly from the earth itself. You can think of it as “volcano power”. I’ve previously been rather tepid on geothermal energy – but things are changing. Instead of low-grade heat, it’s now potentially possible to exploit the super-high temperatures from much deeper, hotter rocks. Of course, the amount of heat energy stored deep in the earth is almost unimaginably vast – the planet consists almost entirely of red-hot rock, with a very thin skin of continents and oceans on top. An economically-viable way to exploit this high-temperature geothermal energy could be revolutionary. If you’d like to find out which stocks are poised to benefit from a leap forward in geothermal energy, you can get the latest information here.

    Now, we’ll take a look at how geology can help us deal with yesterday’s energy missteps…

    Mining companies get a bad rap – despite our hunger for the commodities they produce. Miners make poor neighbours – with their mountaintop removal, toxic waste, and constant vehicle movements. It’s not surprising that they’re seen as a necessary evil in the global economy.

    So, it may surprise you to learn that a major diamond miner (De Beers) has started deploying a technique which could be a “fix” for climate change. In fact, the firm might literally fix CO2 into rocks – locking it up on a permanent basis.

    Let’s step back a bit and look at the context for this. Obviously, CO2 is a natural component of the atmosphere. Since the dawn of complex life on Earth, it’s played a vital role in keeping the planet warm. It may surprise you to know that a “magical” process governs CO2 concentrations in the atmosphere. This clever trick of chemistry keeps the Earth at exactly the right temperature.

    Here’s how the world stays at the right temperature

    Carbon dioxide is steadily produced by volcanoes. If the Earth warms up, this CO2 reacts more quickly with the rocks in the Earth’s crust (by chemical weathering) – meaning it disappears more quickly from the atmosphere. The carbon remains bound up in rocks, until it’s released again by the volcanoes, as CO2. The process acts like a huge global thermostat. Even though the sun’s output has changed enormously over deep geological time, this process has kept the Earth’s very long-term temperature relatively stable.

     

    But hang on… won’t that sort out climate change?

    Unfortunately, no! These reactions happen much too slowly – on a timescale of thousands of years. By that time, the ice caps would have melted long ago, flooding the world’s coastlines. (Property investors, particularly, should take note of the risks to low-lying communities.)

    Could we speed this reaction up?

    Other than temperature, the main control on the rate of this reaction is the amount of suitable rock available to react with the carbon dioxide. If rocks are in big pieces, or buried in soil, they don’t get in contact with CO2.

    Here’s where the diamond miner’s “magic trick” comes in

    By good fortune, diamonds are often found under rocks which are rich in minerals that react aggressively with carbon dioxide – such as kimberlite. To retrieve diamonds, these rocks have to be smashed up and moved. So the diamond miners end up with a lot of CO2-reactive rock, which they ordinarily have no use for. Normally, this waste is piled up in massive heaps, where it will likely sit for thousands of years. But if it was treated differently, it could react with CO2 in the air. For this to happen, the rock needs to be fairly thinly spread – ideally in a hot, wet environment.

    Then, all this troublesome mine waste could become a global saviour. Instead of thinking about miners as bad neighbours, suddenly everyone would want a piece of their rubbish – to mop up pesky CO2 emissions. What a great position for the miners to be in!

    Fortunately, plenty of extraction processes give rise to mineral wastes with the right chemistry. However, it’s not possible to use it effectively in every part of the world. In some places, it’s too dry or cold. In others, there is insufficient land to spread the waste out. Finally, in many mines, the transport network is too rudimentary to move huge volumes of rock. (After all, diamond mines don’t need high-capacity freight networks – unlike, for example, coal mines.)

    Globally, there’s an awful lot of suitable rock dug up each year – and, right now, it’s a big problem. Using this waste effectively is a big PR coup – and a big economic opportunity. De Beers is the first company to take this process seriously. However, in academia there is already a big push to start working on this technique – to see if it works as well as theory predicts. Fortunately, the UK is a global leader in this “enhanced weathering” research – and our northern slag heaps could already be sucking up far more CO2 than most people realise.

    There have been previous attempts to test this process. Nearly a decade ago there were plans to spread basic rocks on to a beach in Holland (“basic” as in reacts with acids, like indigestion remedies). On the shoreline, waves would continuously smash rock particles into ever-finer grains. Furthermore, animals such as worms and flatfish tend to ingest the sand, and their guts help the process along. So, as we covered in our interview with D’Maris Coffman, chucking rocks into the sea could offer a very simple solution to climate change.

    It’s difficult to predict exactly how rocks will weather in real-world environments. Therefore, only open-air experiments will really tell us what we need to know. These experiments aren’t particularly expensive, and there are a lot of suitable locations. Within perhaps five or ten years, we could have a very clear idea about how to get rid of the unwanted carbon dioxide in the atmosphere. The answers could provide a big, unexpected boon to those formerly-troublesome miners.

    What’s the alternative?

    If you are following the international agreement process on climate change, you’ll see that the current “big idea” for getting rid of CO2 is to grow plants, and burn them in power stations – then to capture the CO2, and bury it. This idea is abject nonsense: it’s hugely expensive, and competes for land with food crops. International political agreements currently depend on this barking-mad process to protect us from climate change. It can’t happen, and it won’t happen.

    That’s why this “diamond” idea to fix climate change is so promising.

    The global environmental pariah of the mining industry could turn out to be our knight in shining armour. If this CO2 rock reaction works well in practice, it could save our bacon. This doesn’t excuse continued use of fossil fuels – as the process would still take decades or centuries to clean up the CO2 (meanwhile, solar radiation management geoengineering can be used as a stop-gap).

    If you have investments in commodities markets or the extractive industries, this is a technology you need to be aware of. It could make a huge difference to which mines get permitted – and to the costs they face in operation. Likewise, if you’re playing on the carbon markets, you’ll need to watch out for this quick and cheap way to lock up huge volumes of CO2.

    Finally: don’t forget to check out our

    Feedback, as always, to: andrew@southbankresearch.com. Today, we’d particularly like to hear what investment decisions you’ve made as a result of Exponential Investor. We’d like to check that we’re not just shouting into the abyss.

    Best,

    Andrew Lockley
    Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • September 2017: Where Will You Be When the Debt Bomb Detonates?

    19.07.2017 • United StatesComments Off on September 2017: Where Will You Be When the Debt Bomb Detonates?

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    Bill Bonner – Bill Bonner’s Diary (United States) –

    POITOU, FRANCE – Sound the alarm. Take your money off the table. Pack your socks and your passport. There’s going to be trouble.

    The Washington Post reports: “Steven Mnuchin, Trump’s treasury secretary, is hurtling toward his first fiasco.”

    Republicans have majorities in both houses of Congress. Yet they cannot do the one thing they all agreed they should do and they all promised to do. And if they don’t do it, the country will go broke.

    “Crumbling health bill dents McConnell image as top tactician,” says the Associated Press.

    “How Trump and Republicans failed on their health-care bill,” explains the Post.

    “Republicans’ health-care split goes all the way to the party’s soul,” declares another Post line.

    Rejoicing or whining, the media is all over the story. But the more important dots are buried deeper.

    Guns and Butter

    Democrats, from the time of FDR, wanted a welfare state. They got it. Cost? About $2.5 trillion per year.

    And since Reagan and the rise of the neo-cons, the Republicans wanted a warfare state. They got that, too. At a cost – all in – of nearly $1 trillion per year.

    Between the two, that’s nearly 90% of the entire federal budget…

    The “guns versus butter” debate goes way back. Lyndon Johnson was warned that the country could afford a war on poverty or a war in Vietnam, but not both at the same time. The big Texan paid no attention.

    Debts and dollars piled up – many of them in the Bank of France via its branch offices in Southeast Asia.

    Jacques Rueff was former French President Charles de Gaulle’s finance chief back then. And Rueff was no fool. It was he who had put the French economy back on its feet after World War II.

    In the 1940s, France had been defeated, divided in two, and then run by military administrators. The Third Republic fell. Food was rationed. Other consumer goods – from nylon stockings to Renault cabriolets – disappeared.

    Then important sectors of the economy – banking, insurance, airlines, autos, steel, cement – were nationalized under the heavy influence of socialists and communists in the après-guerre government. Inflation was out of control, as the French feds put in a welfare-state system under the guidance of economist Jean Monnet.

    Rueff sorted this out in two key moves. He devalued the franc, making it convertible to gold. And he balanced the government’s budget. Honest money and honest finances did the trick. The French economy boomed for the next 30 years.

    Printing Dollars

    In the late 1960s, however, Rueff was confronted with a challenge – America’s “guns and butter” fiscal program.

    The U.S. was kiting its expenses by printing dollars… many of which were stacking up in the Bank of France.

    What to do?

    Rueff advised de Gaulle to take dollars forthwith to the U.S. Treasury and exchange them for gold. He knew that even rich Americans couldn’t afford a warfare state and a welfare state at the same time.

    He was right.

    Gold could be bought for $37 an ounce on the open market on the last day of 1970. A decade later, it was $589 an ounce. Today, it stands at $1,243.

    Had you done nothing other than put your money in gold when the U.S. went off the gold standard, you would have multiplied your capital 33 times.

    By contrast, the Dow has gone up 26 times in the same period… not including dividends.

    Broken Promise

    But back in 1971, few people noticed the change in America’s money.

    It was then – under the administration of Richard Nixon and ill-advised by economist Milton Friedman – the U.S “closed the gold window” at the Treasury, reneging on the solemn promise to convert foreigners’ dollars to gold at a rate of $35 per ounce.

    Thereafter, the dollar could not be redeemed for gold at a fixed, statutory rate. And thereafter, there was no obvious limit to how much butter or how many guns the feds could afford.

    This fake money is what has fueled the growth of the two big projects of the Deep State: imperial wars overseas and runaway welfare expenses at home.

    But even fake money runs into limits. One of those is coming up fast. From the Post:

    Mnuchin is hurtling toward his first fiasco, unable to get Congress, let alone his colleagues in the Trump administration, on board with a strategy to raise the federal limit on governmental borrowing. […]

    Unlike other issues facing the Trump administration – such as passing a health-care bill and overhauling the tax code – raising the debt limit comes with a hard deadline of late September, according to Mnuchin. Failure to do so could lead the U.S. government to miss paying its obligations, causing what analysts would consider a historic, market-rattling default on U.S. government debt.

    “We’re going to get the debt ceiling right,” Mnuchin said in an interview Monday. “I don’t think there is any question that the debt ceiling will be raised. I don’t think there is any who intends to put the government’s ability to pay its bills at risk.”

    He’s right. Republicans and Democrats will come together to raise the debt ceiling. Both know they are beholden to the Deep State. And both know that the Deep State runs on fake money and debt. In the end, they will raise the debt ceiling.

    But there is many a slip ’twixt cup and lip, as Shakespeare put it.

    The Senators who found it so hard to repeal Obamacare will find it even more disagreeable to raise the debt ceiling. They will want concessions.

    Some will insist on protecting their Northern Virginia cronies’ warfare scam. Others will want to throw a bone to the zombies in the welfare state.

    It will be a spectacle worthy of WWE wraslin’. Posturing. Buffoonery. Threats. It’s coming in September, and we can’t wait to see it.

    And we offer a prediction: There will be a lot of ale spilled on the floor before the debt ceiling is raised. “Go long vol” is our advice.

    Regards,

    Bill

    -Read more at bonnerandpartners.com-

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  • How Stein’s Law Could Mean a British Debt Reset

    18.07.2017 • United KingdomComments Off on How Stein’s Law Could Mean a British Debt Reset

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    Nick Hubble – Capital and Conflict (United Kingdom) –

    Today we ask ourselves who you’d rather have as your fund manager. There are two options to choose from.

    The first is Herbert Stein, an American economist who chaired the Council of Economic Advisers under Nixon and was on the board of The Wall Street Journal. His law, known as Stein’s Law, forms the basis of the Stein Fund: “If something cannot go on forever, it will stop.”

    Stein applied this to America’s balance of payments deficit during his time in the halls of power. That’s still going strong, ironically. Although the Americans had to abandon the gold standard to achieve their continued run.

    The other fund management option is Murphy, of the famed Murphy’s Law: “Anything that can go wrong, will go wrong.”

    Both the Murphy Fund and Stein Fund have had a rough time recently. Apart from the plunge of Tesla, their only successful trade since the European sovereign debt crisis was the Shenzhen small-cap stock index, which fell more than 5% yesterday. That could be a canary in the coalmine for the rest of China’s market, but few Chinese shareholders seem to think so thus far.

    The good news for the Murphy and Stein funds is that the odds are stacking up in favour of both. There are plenty of things which could go wrong, and many trends that are unsustainable.

    One of the biggest holdings in both funds is a bet on Greece’s and Argentina’s new bonds. These are quite comical.

    Betting on bailouts

    Greece is hoping to issue its first bonds in three years in the coming week. They’re expected to yield less than 5% according to the Financial Times’ sources.

    That’s a bit misleading though. The country is actually issuing short-term bonds known as “bills” anyway. Because they expire within weeks, they’re seen as a lot less risky than a five-year bond. Hence the yield is just 2.33%. When it’s paying that level of interest, you’d think Greece is doing just fine.

    But it isn’t. Greece is only doing OK because it has an entire pipeline of bailouts slowly making their way through the International Monetary Fund (IMF), European Central Bank and EU bureaucracies. A bet on Greek bonds is a bet on the political will of those institutions (none of whom are terribly accountable to anyone, so it’s a good bet).

    After three bailouts in seven years, another bailout is probably a fair assumption. But what’s important to keep in mind is that the Greek debt is on an unsustainable, even “explosive” path according to the IMF. And that at incredibly low yields.

    Stein’s Law is clear. Greece cannot go on like this forever. It must stop.

    The Greek effort is probably inspired by the lunacy of the Argentines. They’ve issued 100-year bonds at 8%.

    100-year bonds? Argentina is the world champion of bond defaults and a top-ranked competitor in hyperinflation. What could possibly go wrong within 100 years? Ask analysts at the Murphy Fund.

    Greece’s reliance on continual bailouts has inspired the European banking sector. With three banks bailed out in the last few months, the eurozone’s banks have surged on the stockmarket. But an industry that relies on bailouts can hardly be deemed successful.

    The debt drug is everywhere

    Next up on Stein’s and Murphy’s punts we have the entire higher education sector. NatWest estimates that more than two thirds of UK students will never pay off their loans. Instead, they’ll make repayments for 30 years before writing off the balance. That’s something to look forward to…

    Over in the US, the problems exposed in subprime lending also feature in student loans. With a default rate around 40%, former students are finding their incomes and welfare cheques cut by court-enforced loan repayments. Usually the students don’t show up to court. But those who do all too often discover the owner of their loan can’t actually prove they own the loan.

    It sounds odd, but the same phenomenon dominated the subprime securitisation story. Loans were sold off and repackaged so many times that the paperwork trail broke down somewhere.

    When you’re an investment banker, a loan is nothing more than a cashflow. The legalities of mortgage and property law get lost. And so many American students are defaulting on their loans without consequence because the owner of the loan can’t conclusively prove they do own it with the correct paperwork. Once they fail, the loan is erased.

    Is it common? The New York Times adds evidence:

    Nancy Thompson, a lawyer in Des Moines, represented students in at least 30 cases brought by National Collegiate in the past few years. All were dismissed before trial except three. Of those, Ms. Thompson won two and lost one, according to her records. In every case, the paperwork Transworld submitted to the court had critical omissions or flaws, she said.

    The beauty here is if this story gets out and goes viral

    If US students realise they might not have to repay their student loans… well you’ve got subprime all over again. And the figures are big enough for even the likes of Ben Bernanke to get worried about. Studentloanhero.com summarises the numbers:

    You’ve probably heard the statistics: Americans owe over $1.4 trillion in student loan debt, spread out among about 44 million borrowers. That’s about $620 billion more than the total U.S. credit card debt. In fact, the average Class of 2016 graduate has $37,172 in student loan debt, up six percent from last year.

    Of course, there’s a reason people are defaulting on their student loans in the first place. Their education didn’t lead to an income.

    In Australia, there’s a similar problem with documentation in the mortgage sector. In 2006, the Supreme Court of New South Wales ruled that borrowers who had their loan application manipulated by their mortgage broker could get their loan cancelled. According to my PhD research, rather a lot of mortgages feature such manipulation. Denise Brailey is the Nancy Thompson of Australian mortgages, getting huge loans cancelled consistently.

    Believe it or not, when Argentina defaulted on its bonds in 2014, there was a selection of bonds which no could find the paperwork for.

    The bonds seem to have vanished

    The lack of ownership proof tells you a lot about the culture of debt and lending. If these people can’t even prove ownership, do you think they give much thought to whether the loan is affordable?

    Over in the stockmarket we also have a debt-financed boom. Usually this is hidden in plain sight – margin lending. This is when brokerages lend to their customers to buy shares. Usually the shares return more than the loan costs.

    But margin lending isn’t booming. Instead, it’s company buybacks that are surging. Companies are borrowing near 0% rates and buying their own shares. Here’s Credit Suisse’s chart illustrating how companies are the ones buying stocks:

    Chart of cumulative buying/selling of US securities in % on the market cap

    How much of the stockmarket’s boom comes down to debt-financed buybacks? What happens when companies stop buying?

    There’s a more important question to ask.

    What do all these things have in common?

    Debt.

    All these stories are really just parts of a bigger picture. It’s quite simple. Every part of our life is now debt dependent. Our education is debt financed. Our day-to-day spending is on a credit card. The companies we work for are debt financed. The home we live in needs a mortgage to be affordable. The cars, furniture and TVs we buy come with consumer debt. Our investments go up or down based on borrowings too.

    Everything is debt based.

    That needn’t be a bad thing. It’s allowed us to reach the outrageous living standards we have today.

    The problem arises when new borrowing is needed to repay debt. I don’t mean rolling over your debts. Companies, in a bid to maintain a steady amount of leverage, will borrow new funds to repay the old. That needn’t be an issue – it enhances returns to the shareholders in a sustainable way. It makes otherwise uneconomical activities worthwhile in this way.

    But these days our entire economic growth is dependent on the level of debt growth. One man’s borrowings is all that allows another man to repay. That’s why interest rates are the be all and end all of the economy – they’re the price of debt. It’ the only price that matters anymore.

    Murphy and Stein will return with a vengeance

    A debt boom comes under Stein’s Law. It can’t continue indefinitely, especially not at this pace. Murphy chimes in – something will go wrong.

    Plenty of societies have faced the end of debt booms. Britain has too. It had to go to the IMF, hat in hand, in the 60s and 70s. Although the solution back then was, ironically, a loan.

    At the end of a debt boom, there’s usually some sort of “reset” rather than a collapse. But that’s another story.

    The one I want to highlight today began many years ago with the book Empire of Debt. It was my first introduction to the ideas you read about here at Capital & Conflict. The book was written by the founders of the company which publishes this newsletter. That company grew into an enormous network of analysts and subscribers.

    And now the company’s legacy has come to a here in Britain. It’s a bigger culmination than our predictions of the financial crisis and sovereign debt crisis years ago.

    In coming days, an email about the very future of Britain will hit your inbox. I’ve tried to give you the backdrop today so the ideas in that email aren’t too shocking. I hope you won’t be put off by the brash honesty. It’s what helped so many of our subscribers avoid disaster in the past.

    Until next time,

    Nick Hubble
    Capital & Conflict

    -Read more at www.capitalandconflict.com-

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  • What Do Your Facebook Posts Have to Do with Your Insurance Rates?

    18.07.2017 • United KingdomComments Off on What Do Your Facebook Posts Have to Do with Your Insurance Rates?

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    Andrew Lockley – Exponential Investor (United Kingdom) –

    Yesterday, we heard about how artificial intelligence (AI) is becoming increasingly important in criminal justice. Today, we’ll look at how similar techniques are applied in a closely-related field: insurance. You may find it creepy, but insurers are keen to digitally-scrutinise your personality. They then use this data to work out how risky you are.

    Did you hear about the recent spat between Facebook and Admiral? The insurer wanted to use the vast mountain of data on Facebook to identify people with traits suggesting they’re a lower insurance risk. For example, if you arrange to meet a friend “tomorrow afternoon”, that indicates your mind works in a different way to someone who sends an invite for “1615h tomorrow”. The more precise person is apparently a better insurance risk.

    Facebook was having none of it. It was perhaps concerned by the risk that people would “game” their Facebook profile, or perhaps even stay off the site altogether. In this individual case, the risks were probably low – but it’s an example of a “slippery slope” argument. Once one insurer is surreptitiously analysing your Facebook activity, it’s likely that others will follow suit. If all insurers are doing it, it may become difficult for drivers to obtain competitive quotes without giving social media access. That’s not a way of doing business that Facebook was keen to facilitate – and so it clamped down.

    This is an important story for your investments. Facebook is a large, publicly-traded company. Even if you don’t hold the stock directly, you may be exposed to it in other ways – such as via your pension. Regardless of how you’re exposed, you should be keeping a careful eye on the opportunities and risks posed by these large tech stocks. Fortunately, we’re able to help you with that – and Eoin Treacy’s Frontier Tech Investor is the publication you need to be reading. You can find out more about it here.

    Personality analysis is a fascinating space, and one I’ve worked actively in. The market extends across a huge range of online activity: insurance, loans, and recruitment. Even ecommerce can benefit – as the brands you choose are heavily influenced by your psychological traits.

    We don’t like to treat issues superficially at Exponential Investor – so today we’re doing a deep dive, with Benoit Allibe from ZenWeShare.

    AL: Hi Benoit. Can you start off by telling me a bit about ZenWeShare?

    BA: ZenWeShare is a French company that focuses on adding value with personal data. Two years ago, we developed a portable reputation profile for individuals. We noticed that many sharing-economy sites had reputation scores – brands like Airbnb, BlaBlaCar, Ebay, etc. The problem was that a great score on one site didn’t carry across to others. Our product was designed to help people show their existing sharing-economy reputation on every website. This helps users to sell more quickly, and for a better price. Developing this product made us realise that personality traits can be used far beyond the obvious sharing economy sites. For instance, someone who’s regarded as a safe driver by BlaBlaCar users is also likely to be a good insurance risk. This led us into building a technology solution that can assess personality traits, based on existing online personal data. These are of course accessed with user permission.

     

    AL: What kind of personal data are accessed by ZenWeShare?

    BA: We only use data that users share with us. It can be the content of their Facebook profiles, as well as sharing economy reputations, or even browsing data. Every bit of data is interesting, when you’re trying to build a better picture of someone. This process can be really rewarding for users, if you can find and build the right use case for them. For instance, it could save hundreds of pounds on car insurance premiums for young drivers, or help people get the job of their dreams. For businesses, it helps go beyond the “one-size-fits-all” approach in marketing and communications – emphasising different benefits to different users.

    AL: So you are creating a new way of describing a user online?

    BA: Exactly. We provide a way to summarise information about someone, based on their online behaviour. This information can then be used to offer special discounts, adapt insurance premiums, tailor communication with people, and ultimately personalise and improve the interaction between people and businesses.

    AL: You mentioned car insurance. You tell me the price can depend on your personality traits. Can it lead to a sort of discrimination?

    BA: If you call price differences discrimination, the answer is yes. In fact, every field of a car insurance subion form leads to price differences. That is because statisticians have seen some differences in crash probability, depending on some information about people. They try to reflect these differences in price to propose lower prices to less “statistically risky” people. Think about age, work or postcode. The question is – what is acceptable as a basis for a price change? We have seen that EU has forbidden insurers to base their price on gender, even if insurers know that women have less serious crashes, and therefore deserve lower premiums. The question about using personality traits for adapting premiums is still open, because it is new. Only society has the ultimate answer.

    The correlation between personality traits and car accidents has been proven by numerous studies. However, its social and legal acceptability as an insurance price variable is a new question – and one that has no clear answer yet.

    A few weeks ago, Admiral tried to roll out an insurance product, based on personality scoring. Unfortunately, its acceptance by society has not been measured – because Facebook forbade the insurer from launching as planned.

    In cases outside insurance, the use of personality measurements is widely accepted. For instance – it’s widely used in recruitment, where asking people to fill a questionnaire about their personality is considered acceptable, even routine.

    AL: How does your service help the companies that use it?

    BA: Based on the information we provide, corporations can adapt their service to their customers. That includes things such as communication tailoring, or price changes. Banks and insurance companies have been changing prices for a very long time. They adapt the interest rate or premium depending on information they have on their customers, such as income, occupation, and age. This is because they have historically seen that some types of people are less risky than others, and they therefore deserve lower prices. This kind of price adaptation is generally accepted, but it can be considered as discrimination in some cases. For instance, in the EU, gender-based price discrimination is unlawful. We’re basically adding a more scientific approach to an old process.

    AL: Personality traits seem to be very interesting for many industries. Do you think that it will become publicly available information in the future, such as credit scores are today?

    BA: We don’t think that personal data should be made public without user consent, and the same applies to processed data like personality scores. Scoring has to be controllable, transparent and specific to be acceptable.

    An extreme view of a bad system of scoring can be seen in China, where they have plans to score every citizen. In these cases, the scoring is centralised by a political authority. It’s not under user consent, and seems to be public to everyone. In fact, the plot of Black Mirror reflects the real situation in China. In a one-party state, that’s quite a worrying situation for freedoms and human rights.

    From our side, and from the view of many startups in our field, users have to have control on the information they share. Also, unlike China’s citizen scoring, our results are specific to particular activities. We’re not trying to quantify differences between people, not determine who’s the best citizen.


    Please do send your thoughts to andrew@southbankresearch.com – we’ll be carefully scoring your responses, to work out if you’re the kind of person we want as a reader.

    Best,

    Andrew Lockley
    Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • How A Four-Man Motley Crew Predicted Every Major Event Since the 70s

    18.07.2017 • SwitzerlandComments Off on How A Four-Man Motley Crew Predicted Every Major Event Since the 70s

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    Henry Bonner – Strategy and Council Letter (Switzerland) –

    In 1979, a small group of four, including a lobbyist, an Oxford-educated analyst, and the former director of a national TV channel joined forces to launch a particular project:

    A news service that would not be for the general public, but for private individuals.

    They hired analysts, former politicians, state councilors, and journalists – to investigate events around the world, and monitor the finances and economies of various countries.

    In addition, they were going to try to predict the great economic and political changes in the world.

    This may seem unbelievable, but they have been so successful in this area that their box now has millions of private subscribers to whom they send their research.

    You will be surprised by some of the events they predicted, long before they happened.

    Above all, you will not believe what they have just predicted.

    Prediction # 1: The Soviet Union will collapse.

    Soviet_620x420

    This Group has just issued a Special Alert )

    It was in 1987. A whole generation of Frenchmen had grown up fearing that a nuclear war would break out. Everyone thought that the USSR would remain one of the greatest world powers.

    However, that same year, this independent box (and established in Paris for 20 years) took a contrarian position. She predicted that “the same geopolitical forces that broke out in the great colonial empires will now cause the end of the USSR … the Soviet Empire is coming to an end.”

    Three years later, the USSR began to disintegrate. In 1991, it was the end of the Soviet Empire. The hammer and the sickle fell.

    sub_620x420

    Presentation: Why It’s the End of Many Aspects of the Lives of the French )

    Prediction # 2: Japan, The Next Superpower?

    During the 1980s, movies and TV shows were obsessed with the rise of Japan, showing large neon signs written in Japanese.

    Everyone thought that Japan would be the next global superpower.

    Meanwhile, Japanese companies were buying buildings and businesses in France at high speed, including a Michelin guide restaurant in Paris.

    Japan produced more innovations and won more Nobel prizes than any other country.

    Yet, this analysis box published a message that it sent to its readers, saying: “Prepare to see the collapse of the Japanese stock market.”

    A few months later, the world watched with horror, while Japanese stocks lost almost all their value. Japan never came back.

    Chart nikkei

    Prediction # 3: The Rise of Islamist Terrorism

    In 1993, a terrorist landed in New York, in the United States, claiming to be an Iraqi refugee. Immigration services allowed him to move to New Jersey to wait for asylum.

    While his file was being processed, he prepared a 700-kilogram bomb that he left in a truck parked on the North Tower’s World Trade Center.

    Its objective was to trigger an explosion that would cause the North Tower to collapse. It would fall on the South Tower, which would also collapse.

    wTC

    Although the bomb exploded and crossed five floors of reinforced concrete, making six dead, the Tower held firm.

    The general public thought the disaster had been warned …

    But for the analysts of this independent research box, the conclusion was different.

    In 1993, they warned that “the rise of Islam … could represent the greatest danger the world has experienced in two decades,” adding that “the bomb at the foot of the World Trade Center in New York, Was a foretaste of what is yet to come. ”

    That’s What Perhaps Explains Why the Richest Woman of France Withdrawn 100 000 Euros in Liquid )

    Prediction # 4: They Announced On The Day Near The Collapse Of Internet Shares

    Prior to March 10, 2000, all stock exchanges that were linked to the Internet boom were on the rise.

    But, this same box sounded an alert on March 10, 2000, saying that the “end day” for internet actions had arrived.

    On this exact day, Internet actions began to fall. The Nasdaq lost 77% of its value.

    Prediction # 5: The Collapse of the Real Estate Market and the 2008 Crisis

    In 2003, an article published by this organization announced that a speculative bubble was forming in the real estate market, writing: “Until today, property prices have generally increased. But nothing obliges them … ”

    That same year, one of the biggest newspapers made fun of this kind of prediction, writing: “A speculative bubble? Where is she? Everything indicates that real estate will continue to climb. Sleep in peace. ”

    House_620

    This Problem in the French Economy Threat Always )

    But this group of analysts has announced without hesitation that the bull market would end: “something is wrong in the real estate market, and you will find the source on the accounts of the main real estate investors.”

    The media was still in denial. An editorial that appeared in one of the biggest newspapers said that: “These great anxious expect the real estate market face falling economy. However, this pessimism is not justified: we have no reason to fear that the real estate market falls. ”

    Subsequently, property prices collapsed, pushing France into one of the worst economic recessions since the 1930s.

    Prediction # 6: A New Prediction That They Have Just Issued

    If this group has been right as many times and has more readers than most major newspapers, how come you have not heard of it before?

    The reason is that they prefer to remain discreet, reserving their work for their 2.4 million private readers.

    Most recently, one of the members of this group issued a new prediction intended for France. This prediction is so important that they decided to put it in front of the general public instead of only booking it for their private readers.

    Their research indicates that we could see a big change in the French economy, in a very short time.

    Many of the businesses and businesses you know could even close their doors and stop serving you.

    In addition, this disaster could create a break in the production and distribution networks that allow store shelves to be stored.

    As a result, you may find that the supermarket shelves are emptied, or even that the gas station is no longer working.

    This could lead to food shortages across the country.

    Not to mention that your bank could be forced to close without being able to provide you with your money, nor to insure your payments.

    This message could make you think about how to operate the French economy and what you will see if this system does not work anymore. ”

    You can access this message for free by clicking here.

    PS: This presentation includes content that may be shocking to some people. Consult with care.

    -Read more at www.lettre-strategie-conseil.com (French)-

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