Tag: Cass Freight

Ep. 366 – Banana Republic is Here!
The Kapital News
The Kapital News
Ep. 366 - Banana Republic is Here!
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We’ve been saying it out loud for a while here at The Kapital News, but now it’s official – the United States of America has turned into a banana republic. During today’s press conference, Jay Powell, Chairman of the Federal Reserve, made it known that now is not the time to worry about deficits and the national debt. Wrong sir! Now is exactly the time to be more concerned and vigilant with respect to deficits and debt levels. Nonetheless this was his message. This is in stark contrast of course to what he has been telling Congress over his recent bi-annual briefings – where in fact Powell has been warning Congress to get a grip when it comes to the deficits and growing national debt.

This too in and of itself is laughable because the Fed holds the keys to keeping Congress in check by informing these politicians that the Fed is not going to be there to buy Uncle Sam’s US Treasuries. The Fed could easily do this which would translate into higher borrowing costs which should make the Congress more hesitant to spend, but of course the Fed is not going to do this. No, no. They would much rather facilitate this insanity, this fraud, and this out of control spending. So, yes, this is why the USA is now officially a banana republic. Simply just print the money and purchase whatever assets you want to whatever degree you want with little to no oversight or accountability. I weep for my country and for the vision that our Founding Father’s had for this nation. This is a true travesty and barely a word of protest from any politician of any party nor from the Trump Administration to the President himself. No checks. No balances. Just money printing and fiscal “stimulus” from a government that is broke, but for borrowing trillions and trillion of dollars. There is no free lunch and the costs of this irresponsibility, criminality, and unethical conduct will be truly costly – especially the everyday American.

In other news we discuss the first print of GDP for Q1 2020, which came in worse than expected at -4.8%. This is the largest contraction since the GFC. It should also be noted that the US didn’t begin its major lock-down until March – the final month of the quarter. So this simply tells us what we already knew and have been discussing for months – that the US economy was slowing down prior to the onset of COVID19. Despite this news, poor housing data, and announcements from Boeing, Lyft, and Uber, that they will be cutting their staffs by 10%, 17%, and 20% respectively, stocks still continued their march higher. Perhaps this is on the back of the news announcement from the biotech company, Gilead Sciences, that once again is stating that their treatment for COVID19 is looking positive. Recall, this is the same company that did this a week ago. Isn’t it highly coincidental that this news story broke at the same time a worse than expected GDP number came out? They don’t even care anymore – they flaunt the fact that the game is rigged right in the open. Welcome to the banana republic. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Bailouts #Recession #Debt #EndTheFed #USA #Depression #Oil #Gold #Revolution #Protests #Inflation #Deflation

Ep. 362 – A Total Collapse
The Kapital News
The Kapital News
Ep. 362 - A Total Collapse
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Another week and an additional 4.4 million Americans have filed for unemployment insurance. This take the five week total to nearly 26.5 million. These last five weeks of job losses have entirely outstripped the job gains since the end of the Great Financial Crisis (GFC).

PMI figures have also been published globally and we are witnessing levels in both manufacturing and services that are nearing levels not seen since the GFC. In some cases, they are even worse.

The Federal Reserve has updated its balance sheet, which now stands at nearly $6.6T and counting. This represents an increase of around $200 from the week prior. If this rate of increase remains, then we are talking about an increase of $10T on an annualized basis. If this happens, the Fed’s balance sheet would be around $14T. This would then represent about 70% of US GDP. Most of the gains on the balance sheet were from purchases of US Treasuries and mortgage-backed securities. Of course, there is little outside demand for US Treasuries, which is even why a recent analysis by Goldman Sachs suggested that nearly 70% of new Treasury issuance will be purchased by the Federal Reserve. This is virtually debt monetization and more reminiscent of a banana republic as opposed to a Constitutional Republic. There is no free lunch and per a previous podcast, “Free Was Never So Expensive.”

We lastly discuss some recent surveys that highlight the economic and behavioral changes that we’re likely to see once the economy is “opened” up for business. When asked about receiving government spending money directly and what would you do with it, the largest responses were the following – savings, everyday expenses, and payoff debt(s). A handful of other options, primarily centered around spending, all received a response around 5%. Then there was another survey that asked if stay-at-home orders were lifted, how comfortable would you be going to bars and restaurants, getting on an airplane, and going to a large event – by factors of 3 to 1, people would not feel comfortable with those options. This simply confirms what we have been discussing here for weeks – and that is how people will be changing their spending habits and behavioral “norms” for the foreseeable future, which will translate negatively with respect to the economy on a short and mid-term basis. On a longer-term basis, this kind of deleveraging is healthy for an economy and is part of the broader correction. This is a process and will take time. And the more the government tries to “help” the worse the outcomes will be and the longer it will take to recover. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Recession #Debt #Gold #Depression #USA #EndTheFed #Congress #Bailouts #Oil

Ep. 347 – No Pain, No Gain
The Kapital News
The Kapital News
Ep. 347 - No Pain, No Gain
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In a continuation of our discussion related to moral hazard and the spending/bailout bill, we wanted to talk about the sacrifices people and corporations will likely be making. However, there is still unfortunately, going to be a lot of practices that will continue. Many of the same practices that have led us to so many structural issues that we are currently witnessing.

Corrections in markets are healthy and they are an indicator of a healthy system (even if only quasi-healthy). They correct for imbalances, malinvestments, levels of leverage and indebtedness, poor business decisions and the like. And at the end of these corrections, lessons are hopefully learned so that individuals, corporations, and governments can operate from a healthier foundation. Also, it would be the intent of free-markets to allow for those who made prudent business decisions and maintained healthy balance sheets, the opportunity to acquire the resources that are likely on sale for pennies on the dollar. Thus allowing for better managers to manage more resources. This is turn should lead to a better and healthier economy because you have better decision-makers at the helm. Of course mistakes will be made, but then the next correction, if allowed to, will correct for these inefficiencies as well. And the cycle continues. Get the picture?

Well in our current system, we’re not allowed to feel pain – well at least not those on Wall Street or Corporate America. No, no. They’re allowed to take outsized risks, reap the profits if they’re correct, but if they’re wrong, then their losses become socialized and we the people (taxpayers) have to bail them out. This is ridiculous and entirely immoral, unethical, and un-American. We have the opportunity now to wake up and say enough is enough and to demand the restoration of our Constitution and that of free-market capitalism. However, it appears that given the recent spending bill, passed by both parties, and happily signed into law by the President, that it looks like we’re going to have to wait a little longer for our peaceful revolution. And remember, there is no free lunch – so this government/ central bank “medicine” is likely going to be worse than the disease. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #Bailouts #Debt #Republic #USA #Constitution #Revolution #EndTheFed #Gold

Ep. 340 – Stage Set for Inflation?
The Kapital News
The Kapital News
Ep. 340 - Stage Set for Inflation?
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With all of the money printing and fiscal “stimulus” measures being undertaken around the world, when, oh, when, will inflation rear it’s ugly little head? Now, depending on the sector of the economy or a particular good and/or service, there may already be considerable inflation. However, when the United States has amassed over $23T in debt and rising in trillion dollar increments, while heading into a recession, if not depression, then how can this debt be paid off? Possibly through inflation or dare we even say, hyperinflation. Don’t say that it cannot happen, because if history is any guide, then that is almost certain to happen some time in the not too distant future. This will decimate any remaining purchasing power that people have. Savings will be destroyed. Many people who will be out of work due to the recession and/or depression will now have to also deal with ever-higher costs of living. Of course, much of this was predictable because what natural conclusion would follow generations of ever-increasing credit expansions, deficits, and debts on the household, corporate, governmental, and central bank balance sheet? Well we’re witnessing these negative effects coming together all at once and sad to say, we’re just getting started.

So, in our analysis, yes, the stage for inflation if not hyperinflation has been set. It’s a process and it will take time as there are still the effects of deflation hitting global markets because the demand side of the equation has been all but decimated. On the other side when this comes to pass, with all of the monetary and fiscal measures that have been undertaken and all of the debts and unfunded liabilities that remain on the books – a serious question will arise. How is this all to be paid for? Well economic growth is not going to do it because there’s not going to be enough growth to put a dent into the size of these debts – especially not during the years of a recession/depression. Therefore, a logical conclusion is to say it will be “paid” for through inflation/hyperinflation. Again, say good bye to our Constitutional Republic and say hello to our new banana republic. How far we have fallen. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #Debt #Bailouts #Depression #Deficits #USA #Politics #War #Peace #Truth #Justice #EndTheFed #Gold #Oil

Ep. 338 – The Great Unraveling
The Kapital News
The Kapital News
Ep. 338 - The Great Unraveling
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We don’t know what the historians will call this time in which we currently find ourselves, but if we may, we would suggest they call it “The Great Unraveling.” A recession in the United States as well as most of the globe is all but certain, especially on a technical level. However, given the fact that the global economy was already slowing prior to the onset of COVID19 and the oil price war, it is likely that the world is headed towards a depression. We do not say this lightly. This is a very serious and dire situation as this will hurt millions if not billions of people on a number of fronts. The world needs leadership. And the world needs the truth. And unfortunately, the world is in short supply of both.

Here in the United States it’s not a question of bailouts, fiscal and monetary stimulus, it’s simply a question of how much is all of this going to cost? One industry after the next is lining up in Washington, DC seeking “assistance.” On the fiscal side, every time it’s discussed, the price tag goes higher and higher. From $850 billion to $1.2 trillion to $1.3 trillion, and we don’t know if we’re finished. If you think this is a lot of money – it is. But it doesn’t hold a candle to what the central banks are doing. The Federal Reserve has been pumping hundred of billions into the repo market. They’ve cut rates by 150bps over the last two weeks. They’ve made tapping the discount window more accommodative. And they’ve reduced the reserve requirements for banks with respect to cash on hand against deposits. Oh, and they’re still not done. Why does this continue? Are these people completely unaware that the reason we’re in The Great Unraveling is because of these very programs and actions that have been at the helm for over a decade? Again, there is no leadership to say that enough is enough. Or that these policies are not the cure, but rather the disease.

The funding of all of this, especially the bailouts and fiscal measures will be financed through debt. This means that the US Treasury is going to have to issue US Treasuries across the curve. This additional supply coming to the market is likely to depress bond prices, thus increasing yields (or borrowing costs). In addition, given the wave of global debt coming due, many countries around the world, especially emerging markets are selling their US Treasury holdings because they need US Dollars to satisfy their dollar denominated debts. This is also occurring at a time in the Foreign Exchange markets, where many (virtually all) of these currencies have been greatly weakened against the US Dollar. This then puts additional pressure on these same countries because it now takes more of their domestic currencies to be swapped for dollars. This is also coupled during a time of a global slowdown where prices for commodities are at decade(s) if not all-time lows. Many of these emerging economies are highly dependent on commodities for the economic survival. So it’s easily evident that much of the world is facing single, double, triple, and even quadruple whammies. This is a vicious downward spiral that will not find a bottom for some time and it will likely not end until this bottom is found. Central authorities are rendered impotent in such an environment despite their intentions and actions. Markets must be allowed to clear.

The people in the United States of America should be ashamed of what we have allowed to happen in and to our country. This is not the Constitutional Republic of Washington, Jefferson, Adams, and Franklin. Nor is this a country of free-market capitalism – because clearly what exists in this country is NOT free-market capitalism. This is the time for leadership, this is the time for the truth, this is the time to restore our country to our founding principles, and this is the time to place our faith and confidence in each other. Otherwise, this country will truly cease to be a country of, by, and for the people. Stay safe. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #TheGreatUnraveling #Debt #USA #Gold #Bonds #Oil #Truth #Peace #Bailouts #EndTheFed #1776

Ep. 335 – Birth of a Bear Market
The Kapital News
The Kapital News
Ep. 335 - Birth of a Bear Market
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Well the major indexes finally entered that closely watched 20% decline from an all-time-high constituting a bear market. It was quite the run in terms of the bull market, which started in early 2009. But like every party, they all must come to an end. However, the rapidity of this decline is nothing short of historic. It’s always possible that there can be a bounce back and perhaps even a sizeable one – but we believe the markets have finally caught up with the economic reality of the world. Many major global indexes have given back years of stock market gains. The UK for instance has given back 8 years of gains – and did so in the course of one month! What this confirms for us is the fact that the bull market from 2009 was built on a foundation of sand. So, what we’re witnessing is simply economic gravity taking root of stock markets that were highly overvalued. It’s ok to be “steady as she goes.” We don’t need these massive melt-ups, only to be followed by their massive melt-downs. This does serious damage to millions of people as most are not informed of the topics we discuss here at The Kapital News. This is a lack of leadership from our elected officials and the members of the media for not providing the full-picture.

Millions of Americans are set to retire in waves over the coming years. Their portfolios just lost 20-30%. What do they do now? These are the real questions facing real people. And, oh, despite this recent sell-off, we’ve still yet to see any major corporation file for bankruptcy or even be downgraded to junk status – just wait until this happens and watch how the markets respond. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #Invest #Gold #Silver #Bonds #USD #Politics #COVID19 #USA

Ep. 334 – Bailouts + Public Health
The Kapital News
The Kapital News
Ep. 334 - Bailouts + Public Health
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Another bumpy day for global markets and given the time of this podcast, it appears a choppy day in Asia and in the futures markets. A lot of this continued downside may be on the back of President Donald Trump’s Oval Office address this evening, where he is placing a restriction on all human travel from Europe into the US for 30 days. This will, however, exclude the UK and is limited to people and not goods. So trade between the USA and Europe will continue. The President also laid out some of his plans for attacking COVID19 as well as some measures to be taken to provide economic “stimulus.” The true stimulus is to allow markets to correct to fair value, the liquidation of malinvestments, and the subsequent restructurings that need to follow suit to occur. Will this be painful? Yes. But it is necessary and would set the path forward from a solid foundation. However, this would require great leadership, which is unfortunately, in very short supply.

On the corporate side, big names such as Boeing, Wynn Resorts, and Hilton Hotels, have all tapped out their respective credit lines. Over the past few weeks, the share prices of these companies have also taken a considerable beating. In essence, these companies are on life support. How much longer can they last? Also, how many other companies, small, mid, and large have tapped out their credit limits? With additional travel bans the world over, airlines continue to be negatively effected. With low margins and high debts loads to begin with, this places the entire industry in dire straits. Will all of these companies be able to weather the storm? Unfortunately, most likely not.

Add this to the cracks in the corporate debt markets and we’re likely to see many companies with BBB rated debt downgraded to junk. If and when this happens, we will truly begin to see what companies have foundations of concrete and those of sand. The dominoes are set, this bubble has likely been pricked, and once the air is let out, you cannot put it back in, the only question that remains is which dominoes fall first? Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #COVID19 #Recession #Politics #Oil #Gold #Bonds #Silver #Debt

Ep. 328 – Manic Monday
The Kapital News
The Kapital News
Ep. 328 - Manic Monday
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We asked the question last week is, “Reality Sinking In?” And we noted that time will tell, but we have to look out for Monday and how the markets perform. Well Monday came and boy, was it manic. Global equities shed 3% and some even more than that on the major indexes. So is reality sinking in and which reality? The reality of a melt-up coming to an end? The realization of record-breaking valuations? The coming to terms with COVID-19? Or some combination thereof? It’s probably a combination, but the point of the matter is that the global economy and its markets are balancing on a blade of grass and it’s not going to make much to knock it off its perch. Too much debt and too much interventions from federal governments and central banks is coming home to roost. Will this all take place in a day’s time? No. It’s a process, but we may well be in the midst of this long overdue correction to fair value. But make no mistake, if history is any guide, this could simply be a pullback and then off to new highs. So long as the inmates are running the asylum, anything can happen. Yeah we have the COVID-19 spreading to some 36 countries, but don’t forget about the locusts too. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Coronavirus #Recession #COVID19 #EndTheFed #Gold #Silver #Oil #Bonds #Politics

Ep. 327 – Reality Sinking In?
The Kapital News
The Kapital News
Ep. 327 - Reality Sinking In?
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Another down day on Wall Street, which begs the question, is reality sinking in? Time will tell, but it’s too early to say. Disappointing US PMI numbers on both the services and manufacturing fronts help keep pressure to the downside. In addition, COVID19 does not appear to be slowing down any and the WHO stated today that the window to prevent a global pandemic is narrowing. We have been warning about all of this for weeks, if not months, especially regarding the economic figures. We also discuss the Cass Freight Index for the month of January and some of the politics of the 2020 Presidential campaign. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Coronavirus #Recession #EndTheFed #Gold #Silver #Oil #Politics #USA

Ep. 308 – Impartial Justice
The Kapital News
The Kapital News
Ep. 308 - Impartial Justice
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Another historic day for the United States of America. Today the Chief Justice of the US Supreme Court, John Roberts, was sworn in today in the US Senate. Following his swearing in, the Chief Justice swore in the members of the US Senate. This is a serious process and it needs to be treated with the gravity and thoughtfulness that it deserves for the sake of the American people and for the respect of the US Constitution. The trial is scheduled to begin on Tuesday, 21 January 2020. The trial may last as short as a couple of weeks or perhaps stretch to over a month, should witnesses come forward and further documents be entered into the record. Time will tell and let us hope the members of the US Senate take their oaths seriously and administer impartial justice. May the truth be known and justice served. Stay diversified, stay vigilant, and stay with The Kapital News. #Impeachment #Truth #Justice #USSenate #Senate #Congress #Politics #Economy #EndTheFed #Peace #USA #Constitution