It Looks like the Bubble May Pop… Again

Here are just two data points hinting at big potential movement in the real estate market. Sounds like the click of seat belts to me… buckle-up buttercups.

Royal Bank of Scotland Plcs RBS.L securities unit will now exit its U.S. mortgage trading business after originally planning to shrink it by two-thirds.Exiting mortgage backed-security, commercial real estate and commercial mortgage-bond sales and trading “is a necessary part of repositioning our US business,” an RBS spokesman said in an emailed statement.” – Reuters

…billionaire Tilman Fertitta [issues] …dire warning about the state of the “crazy” US real estate market, which he believes set for an imminent crash… That, and his take on inflation: “There is huge inflation going on right now.” – Bloomberg TV via Zero Hedge

Meanwhile from the rising East we hear the clink-clank of stacking gold bars. I don’t read this as economic war preparations – that’s been going on for a long time. To me it just sounds like more seat belts clicking.

Just as China is buying ‘cheap’ oil with both hands and feet, so Russia, according to the latest data from The World Gold Council (WGC) has been buying gold in huge size. Dwarfing the rest of the world’s buying in Q3, Russia added a stunning 55 tonnes to its reserves, as The Telegraph reports, Putin is taking advantage of lower gold prices to pack the vaults of Russia’s central bank with bullion as it prepares for the possibility of a long, drawn-out economic war with the West.” – Zero Hedge

If you mix in all the news about the world walking away from the U.S. Dollar for trade it’s clear… the global economy is gearing up for a reset – again.

What to do?

  1. When it pops, don’t panic. Many of us woke-up the last time the bubble popped. I suspect more folks will follow soon.
  2. Have a transition plan that includes shelter, food, work. Think of this plan as a bridge over the ravine the powers-that-be dug with their artificial stimulus and market rigging.
  3. Consider extreme downsizing – like a small or tiny house.

Greenspan: Economic Problems Stem from Discounting the Future

I have been definitely doing that – discounting the future. Early in the talk he points to taxes & entitlements as leading causes of this global consensus, but I think it runs deeper. I suspect a fellow like Alan Greenspan would never say exactly he thinks at an on-the-record talk at a Council on Foreign Relations talk, so I’m sure there’s more.

I doubt he’d go down the rabbit holes I like to visit, but I’ll take a stab at it. I think the leading causes of uncertainty come from:

  1. East/West divide and the threat of world war. While war can be profitable for some, it’s not for most. As the BRICS rise they threaten the West’s hegemony. The US has deployed military assets globally. The BRICS continue to strengthen by leveraging production based economies. The timing and outcome of this tug-of-war is anyone’s guess.
  2. Centralization of power and the closing of free markets. As the rich get richer they naturally gain more power and control over the game… exactly like the Monopoly board game. At the end of that game there are only two players left and one quickly bankrupts the other – while all the loosing players just watch the last two try and destroy each other. That’s where we are today in the real world.
  3. Lack of global governance standards. I don’t think we need a world government, I think we need global governance standards so that all people can play on a level field. Right now we play on rocky mesa with the people on top holding all the cards but still needing the resources below the mesa. Globalization has given the people at the foot of the cliffs a view of the top, and they want that life too. Instead of going to war on a global scale we could choose to adopt a set of standards that restores fairness to the people of the world. I’m not describing communism or socialism; I’m describing rules that helps restore balance between the powerful and the powerless.

So to eliminate uncertainty we somehow need to prevent a global war, decentralize power, and establish global governance standards that allow the nations of the world retain their sovereignty while reducing the chances of future conflicts. To be blunt, uncertainty can be eliminated by positioning the world for peace and prosperity.

Until then we should discount the future. For the rich that might mean hedging bets through diversification – for the rest of us that might mean stockpiling bullets, beans, bandaids, and yes, bunkers.

The Retail Investor Will Come Back When the Markets Are Free and Fair

As the S&P 500 levitates ever higher on the back of what even JPM and Citigroup now both admit is nothing but a global central-bank reflated bubble which, hardly a spoiler alert here, will burst sooner or later leaving those who are holding the bag with unprecedented losses, one thing is clear: the retail investor is not coming back.” – Zero Hedge

I’m just an average guy and this is just my opinion. Apparently the numbers don’t lie and most folks with money to invest aren’t taking chances by gambling on rigged markets. Call it what you will… but when the leading investors in the markets are all using massive computers to squeeze every last cent out of high frequency trading – the little honest investor can’t risk being left in the dust.

Back in the day, like just before the dot-com bust, people had money to invest. But when that little bubble burst a lot of people lost their retirement money on bad bets. Then during 2008 anyone left with money to invest, or an equity mortgage on their home, got woken up abruptly and many have still to feel any real recovery. Since then we’ve seen not much but government stimulus and the big boys trading.

At some point it has to stop – either by natural consequence or by policy (even a policy of war). In the mean time regular folks with money seem to be staying clear of the casinos – although I’m not sure if its due to the fact that people have wised-up or they don’t have money to invest. I suppose it a mix of the two.

The bottom line is that we need a reset. We need a change. Change is inevitable. Change can be good. Expect it. Make the best of it.

 

G20 & FED Warning of Gravity Ahead

In other words, the G-20 is warning that the credit bubble that has kept the world afloat is about to explode, even as its impact on the global economy, by kicking the can on the day of inevitable reckoning, is the weakest since the Lehman failure.” – Zero Hedge

Not many are paying attention. Most regular folks think things are peachy keen. You owe it to yourself to read this story on Zero Hedge.

Also take note that Gold & Silver are at a 4 year low. Just saying.

So Which Is It? Is the Dollar Strong or Toast?

Conflicting reports in the news today about the current state of the U.S. Dollar. Some say the Dollar is stronger than ever, others say the Dollar is slowly weakening, and still others say the Dollar is about to hit the skids as the BRICS rise.

No matter which narrative you believe, a few things remain true:

  1. The Dollar is backed by the demand for it globally. So as demand shifts, the value of the Dollar us put in a delicate balance.
  2. The BRICS are rising. Sanctions against Russia are dividing the world on East/West lines.
  3. The markets are not necessarily indicative of future trends – only current reactions. So relying on them to predict the future is unreliable. Instead look to larger global trends for making guesses at the future value of things like the Dollar.

What to do?

  • Physical assets, while often heavy and difficult to move, have intrinsic value because they are useful. Food, tools, land, and shelter are things people can use.
  • Monetary metals like silver and gold have historically held value during tough economic times.
  • Skills are also assets, but guessing which skills might have value in the future can be tricky – in easy and tough times. Although skills that people need under any situation are more likely to hold more value like medical, farming, mechanical, building will always find demand.

At the end of the day it’s up to the individual to know how to hedge one’s bets – but waking up to the reality that the new normal is change, a normalcy bias can be blinding, and things like self-reliance is essential for riding through any change.

 

End of U.S. Dollar Reserve Status Publicly Socialized

There are few truisms about the world economy, but for decades, one has been the role of the United States dollar as the world’s reserve currency… But new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles. To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.” – Zero Hedge

Well now that’s an incredible spin. At least it’s an attempt at socializing the unavoidable.

The way I understand this is that the U.S. Government has been adamantly protecting the Dollar’s reserve & petrodollar status with all their might, just like they’ve been extending stability in America using every trick in the book. Most of this time this is called protecting national security or the American way of life, but in any case it’s overshoot.

But things seem to be changing course. Now instead of all good news, we’re hearing about a new threats to stability everyday in the news: increasing climate change, Iran nuclear deal, Israel/Hamas war, Ukraine war, new cold war with Russia, ISIS/ISIL growing threat, open borders, an Ebola epidemic, and now the Enterovirus-D68.

This latest story on the possible dumping of the reserve status won’t make big headlines because it’s boring and most people have no idea what it means.

Some say the reserve & petrodollar status are tied directly to the massive strength and growth America has experienced over the last 40 years. So suggesting that we bow-out of that global role and pull back is an about-face in policy and direction.

I think things on a smaller scale with more diversity are more sustainable. So I can’t say I don’t think it’s a bad idea, but two things remain true:

  1. This signals publicly that the Feds are considering the idea and that the loss of the reserve status is officially on the table. Investors in the U.S. Dollar have undoubtedly taken note.
  2. Things are clearly on a course to destabilize. The pressure from the tides that have held back the tides may now break through our defenses. So the powers-that-be have two choices, allow the dike to break naturally at the weakest points or choose which points for it to break in the hope of averting a larger disaster.

If I’m right, this also gives more reason for the drums of war, and hints at what may be sacrificed.

What to Do?

We can only speculate and see what’s within the realm of possibility. It’s just simple math and accepting the real direction of trends. I’ve been tracking them for some time and only recently been making noise about what I see.

In a nutshell, destabilization and change seem to be rapidly increasing in potential. Everything from the weather, to the markets, to geopolitical instability… things are beginning to move more in flux. A new world order of some kind will be needed, wether we like it or not.

This all reminds me of living in the desert southwest when I was a teenager (AZ) and young adult (NM). When it rains in the desert and you’re out for a hike, you need to pay careful attention to the arroyos & washes and see where water can flow. Sometimes there is no danger. But if the rain is heavy enough those arroyos & washes can flash flood or rise uncontrollably. The ground also becomes a sticky mess. The lichen on the rocks become slick too making them functionally steeper than they look. So be prepared to get home when it starts to rain in the calm & quiet desert. Your surroundings may change quickly, and ironically… especially in the Fall.

Photo of storm clouds over Sedona, AZ, not far from where I went to high school.

The Acquisition Paradigm Ends When We Run Out of Things to Acquire

Of course, The Fed can just print some more oil or gold or uranium, right?” – Zero Hedge

This chart shows the reality of real resources, as opposed to things like paper money. It may also indirectly explain the war drums and why the BRICS are such a huge risk to western powers. You see the Eastern powers get it, and they get that we’re in our eyeballs up to debt – teetering on system failure. The West knows the East knows it – hence the chess game or currency & proxy wars we’ve seen so far.

What to Do?

  1. Build hedges to the risk of collapse. It may happen soon, or never, but it’s on the table. Some say this is silver & gold, others say it’s real estate, survivalists say it’s guns & ammo and a bunker in the woods… you decide what’s right for you.
  2. Consider placing balance over acquisition on your list of priorities. You may think this sounds like the hippie-dippie route, but then I’m so liberal some people sometimes think I’m conservative. Actually I think there’s a full circle there that the man behind the curtain doesn’t want you to see – so shhhhhh. (hint: left-right paradigm is a head trip)
  3. Prepare you mind for change… it’s the new normal.
  4. Consider building alternative income sources based on the value of your contribution to society. I’ll write more about this soon… but the short version is… think different about making money, avoid selling your time, and make it easy for other people to learn what you know to generate passive income. How’s that for a teaser?

 

 

Gazprom Begins Accepting Payment For Oil In Ruble, Yuan

The Nail In The Petrodollar Coffin: Gazprom Begins Accepting Payment For Oil In Ruble, Yuan” – Zero Hedge

What worries me most about this Zero Hedge headline is that most Americans have no idea what this means, not to mention the impact on the value of the U.S. Dollar. If they knew… they’d be buying tangibles with cash and not new cars and luxury items on credit. Historic times we live in.

Very Worried About This UN Vote

In the news we read:

“In the first barometer of global condemnation of Russia’s annexation of Crimea, Ukraine and its Western backers persuaded a large majority of countries in the United Nations General Assembly on Thursday to dismiss the annexation as illegal, even as Russia sought to rally world support for the idea of self-determination.” – United Nations General Assembly Vote Isolates Russia – NYTimes.com.

Instead of rambling on like so many about right & wrong and who we think is more at fault over this Ukraine thing – lets cut to the chase.

Nations around the world are lining up and taking sides on what could turn into a huge global economic split. Pictured below is a quick  yet incomplete look at how the world is splitting apart.

ukraine resolution vote results

I think we can assume that the BRICS are siding with Russia. The BRICS are the rising economic world power, a reality that must really threaten western leaders.

I may be jumping ahead, but if the BRICS chose to stand together and pick some other currency, like the Chinese Yuan, as the preferred currency for international trade, the US Dollar would loose its status as the sole world reserve currency.

What would the loss of the US Dollar’s dominance mean to main street America? 

Technically speaking it would mean that a big chunk of the world would stop demanding dollars. Lower demand of anything results in lower value. When a currency looses value quickly we experience it as rising prices on consumables like food, fuel, and services. If it happens incredibly fast we call it hyperinflation.

Will we see more inflation if the world splits economically in two?

There’s no way to tell because so much reality is papered over by the central banks and government stimulus.

What worries me is that the world leaders seem hell-bent on taking us there. They will blame each other for the mess – when they are all to blame – and the people will end up footing the bill or worse.

So in the mean time I pray they stand down and find some other way to resolve these differences – and buckle up for a rough ride just in case cool heads don’t prevail.