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Global Intervention; The Death of ‘All Men are Created Equal’

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“Greater love has no one than this, than to lay down one’s life for his friends” – Jesus Christ, 1st century AD, John 15:13 [NKJV]

It has been a month now since Hurricane Harvey hit the southern part of Texas, dropping more rain than any storm on record in the U.S. The size and scope are unfathomable when we consider so much change in such a brief time.

15 Trillion Gallons: Putting the Rainfall Total From Hurricane Harvey Into Perspective. Fox 26 Houston, Aug 30 ‘17

 

Harvey and Irma Economic Hit Could Total $200 Billion: Moody’s, CNBC, Sept 11 ‘17

Yet in the midst of such devastation, we saw acts of kindness, courage, and sacrifice from average Americans.

Yet another storm has been building for years. The numbers it has produced are staggering. Many have benefited; many have not. However, this storm differs from Harvey and Irma. As this storm has grown, we have been told that we were in recovery, yet like a Hurricane, if we track the storm, we see it has been building in strength, not diminishing.

Let me take one factor in this storm.

Since the $700 billion bailout announced 9 years ago in September 2008 to solve the worst crisis since the Great Depression, we have watched an ongoing deluge of “financial rain” (or debt to buy up financial assets). As I write this in September 2017, the global total of this ongoing “temporary assistance” for financial markets is already over 15 times the original US bailout the world heard in September 2008.

One side effect from the storm that has been building over the last decade, is that it has produced the widest financial inequalities between the top 1% and bottom 90% of any decade in American history.

According to an NY Times article, Our Broken Economy in One Simple Chart (Aug 7 ’17), when I was leaving college in the early 1980s, the middle class and poor were seeing their take home paychecks rise faster than those in the top 1%. By 2014, the torrent of debt to inflate financial assets had flipped income growth on its head; the bottom 90% were declining while only the tiniest of percentages at the top saw their incomes leaping.

In the last decade, the huge gap has not between the upper middle class and the middle class, but between the middle class and the group that make up less than 1/100th of the population.

Has history always shown that the number at the top is small and the number at the bottom is large? Yes. However, never has the wealth of the world depended on so much debt created in this short of a period!

The chart below from the Wall Street Journal is another view of the enormous income disparity that has developed since the “recovery”….and as the chart states, these numbers are now 5 years old, so the widening is even greater in 2017.

So I ask you, have the financial policies followed by the major central banks since 2008 encouraged the idea that all men are created equal?

This short post should not lead one to label the writer as a Democrat or Republican or a Liberal or Conservative, but merely a human being looking at his nation and world and asking questions from the data.

The most powerful force that has elevated the super rich far beyond the rest of the population, whether national or global, has been the Quantitative Easing model followed by central banks. Repeatedly since 2008 we were told this explosion of debt out of thin air, was an attempt to push inflation (prices) higher.

Central banks contributed $7 trillion to BUY ASSETS (chief recipient of the inflation) across the world between 2011 and 2016. YTD an additional $2 trillion has poured into the global financial system to continue this scheme. Keynesian central planning economists call this “the wealth effect”.

BofA: $2 Trillion YTD in Central Bank Liquidity is Why Stocks Are at Record Highs, Zero Hedge, Sept 15 ‘17

But has all this debt, funneled into financial markets producing the second longest bull market in US history, produced rising wages, leading to more spending, or have debt levels increased as wages have declined since 2009?

Wall Street Hits Record Highs, S&P 500 Pierces 2500, Reuters, Sept 15 ’17

 

Consumer Debt is At a Record High, Haven’t We Learned?, Washington Post, Aug 12 ’17

How can a nation believe “all men are created equal” when month after month their stock markets produce all time highs, yet their economy produces all time highs in the number of Americans out of the workforce?

Yes millions are retired, but with 97 million Americans living paycheck to paycheck, and adults between the working ages of 15 and 64 at 205 million, one can not conclude that overall, the American society is fiscally better off today than when we were lead to believe a $700 billion bailout was enough.

Bush signs $700,000 Financial Bailout Bill, NPR, Oct 10 ’08

Five years after the S&P 500 bottom in October 2002, the public saw that $8 trillion in stock market wealth had been created. 13 months later, the entire $8 trillion was gone.

Since March 2009, we have seen US stock wealth climb $19.2 trillion as of September 20, 2017. We can see from the chart below, 5 of the central banks in the world have grown their balance sheets over $11 trillion since the summer of 2008. This had never happened until the 2008 crisis. The debt used to buy these assets and “assist” market prices for 9 years has not gone away.

Are tens of millions of Americans, whether rich, poor, or middle class preparing for the next major financial storm? Will we talk, listen, and work together as this storm sets in, or place our hope in more debt and more “assistance” from our government, who itself sees debt as “unlimited” and the Federal Reserve as the force to calm the financial wind and waves.

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” – The Declaration of Independence, 1776

 

A Curious and Confident Mind

 

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A New Holiday: Central Bankers’ Day

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Today is September 21, 2016.  Two of the largest central banks in the world gave press releases after their regularly scheduled two day meetings. It is not normal for two major central banks to do this on the same day, but this is what took place today.

The reason I am calling it a “holiday” is because the most common theme across investment markets at the management or trading level has become “central banks run the show”. Free markets? What’s that? We now are centrally planned with constant intervention by the state (i.e. major central banks) to make certain the public is happy with their 401k statements and rising real estate prices.

Will this grand illusion end very badly and powerfully? Could it be very soon?

Cheap Oil Has Killed Nearly 200,000 Jobs, CNN Money, August 4, 2016

Vancouver Average Detached Home Prices See Worst Slide in 39 Years, Huffpost British Columbia, Sept 2, 2016

Have we reached a place in history where more central planning, greater the debt levels, and more “assisted” markets become week by week, the MORE confident we can become that this is a much better path than when we had a more free market structure, far less debt, and “assistance” was occasional rather than constant?

Read on. Keep thinking.

The Sept 21st View Looking Back

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Once again, the computer algos with some “assistance” kicked off another hard run back up. Will it last long? Go to a new all time high again? What is important is that we all remember that the image of central bankers bring happiness was issued on this new “holiday”.

Of course, all is not rosy for central bankers. The Bank of Japan continues having troubles getting the yen to go down according to their plans, and their stock market to climb much before stalling. Now yields on its debt have been climbing from their lowest levels in history.

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Holiday Happiness?

As you look at the chart of the NASDAQ 100 above, ask yourself, “Are stocks reflecting the comments and data that brought us into this “holiday”? Do financial markets at all time high levels reflect the REAL economy? If not, should every investor have an exit plan?

Most of the comments and charts below were pulled today, Sept 21st.

The first two tweets are by Lawrence Summers, former US Treasury Secretary and Chief Economist at the World Bank.

sept21_summers-lacktools

sept21_summers-fed-fragile

I thought these bankers “always” had another scheme to fix the problem? With the NASDAQ producing its highest levels ever today, it would appear that “the crowd” is certainly not thinking about a “shock at a fragile moment”. This NASDAQ image is of extreme confidence.

On this “holiday”, are there any “gloom and doom” naysayers who just can’t understand all the optimism central bankers have brought stock investors?

sept21_worldtrade

But what does world trade have to do with a stock market?

sept21_investmentdecline

If business investment has been slowing, why should that possibly impact our 401k statements and retirement plans?

sept21_germanycds-db

Yes, I know there are things called Credit Default Swaps which rise in price sharply if these big investors believe a company or country is on the verge of default, but why worry that one of the largest banks in Europe could be on the verge of default or nationalization by the German government? Besides, that only happens in times like September 2008 when Lehman’s filed bankruptcy and AIG was nationalized and stocks were getting clobbered.

Stocks certainly don’t seemed phased by such news today.

Could Germany Allow Deutsche Bank To Go Under, Zero Hedge, Sept 21

Meet the Riskiest Bank in the World, Business Insider, Sept 21

As we can see, central bankers have made sure at that millions of stocks investors sitting in stock funds at all time high levels will not impacted by something that happens in Europe…right?

sept21_corporatedebtdoubledsince2008

The doubling of corporate debt since 2008? That doesn’t look good? What if corporate stock prices start falling, wouldn’t the company still have all this debt on its books?

If debt were climbing faster than earnings and had reached the highest levels since 2000 this seems like something that would impact all time high stock prices, doesn’t it?

sept21_debttoearnings-highsincentury

Well, I am not going to worry or be concerned about this silly old data. My experience from trusting central bankers for the last few years has come out okay. The brokerage statement is fine. Besides, what could some manager who oversees a couple hundred billion in investments know that I don’t know? Why do I need to even think about making changes now, especially since today is a central banker’s “holiday”?

$195 Billion Asset Manager: “The Time Has Come To Leave The Dance Floor”, Zero Hedge, 9/21

One things is for certain. Central bankers have been at this a very long time. They know what they are doing. This is certainly no “experiment”, and they would never artificially push up prices to trick us into thinking we were wealthy from trillions in new debt.

World Seeing Greatest Monetary Experiment in History, Jacob Rothschild, RT, August 17, 2016

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The six months under review have seen central bankers continuing what is surely the greatest experiment in monetary policy in the history of the world. We are therefore in uncharted waters and it is impossible to predict the unintended consequences of very low interest rates, with some 30 percent of global government debt at negative yields, combined with quantitative easing on a massive scale,” Rothschild writes in the company’s semi-annual financial report.

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Fed Seeking To Create Wealth, Not Just Cut Rates, Yahoo News, Sept 14, 2012

The Federal Reserve wasn’t just trying to drive down interest rates when it announced a third round of bond purchases Thursday.

 

It also wants to make people feel wealthier – and more willing to spend.

 

The idea is for the Fed’s $40 billion-a-month in bond purchases to lower interest rates and cause stock and home prices to rise, creating a ‘wealth effect’ that would boost the economy.

 

And “if people feel that their financial situation is better because their 401(k) looks better or for whatever reason – their house is worth more – they’re more willing to go out and spend,” Chairman Ben Bernanke told reporters. “That’s going to provide the demand that firms need in order to be willing to hire and to invest.”

sept20_dow2-living2024

Thank goodness we can have these holidays in celebration of our central bankers. Why would anyone be foolish enough to think these central planners of our financial markets and global economy would ever face limits in markets?

Bank of Japan Risk: Running Out of Bonds To Buy, WSJ, Sept 9, 2016

ECB Fast Exhausting German Bonds for QE Buying As Yields Tumble, Bloomberg, July 19, 2016

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Now I am having doubts? Maybe having an “unlimited punch bowl” is not such a good idea? Maybe I should stop betting with an “all in” approach, never selling or reducing my junk bond and stock positions at these all time high levels?

Just not today. It’s a holiday.

A tired but curious mind

 

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