Tag: Currency

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. 337 – Bailout Nation + Black Monday Jr
The Kapital News
The Kapital News
Ep. 337 - Bailout Nation + Black Monday Jr
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Another day and another historic day in the markets. A sell-off the likes which has not been seen since Black Monday of October 1987. This of course was also on the heels of the Federal Reserve’s emergency meeting and subsequent 100bps rate cut, expansion of QE, lowering the rates for the discount window, and the basic removal of the reserve requirement. So despite all of this, the major indexes were all down 12-14%! Can anyone say that the Fed is out of ammo? This has been the biggest risk that we have been warning about here at The Kapital News since we’ve been online – once the markets no longer believe in the efficacy of monetary policy then what tools remain to boost the markets? And we’ve always cautioned that if and when this day came to pass, that this would be the end of the bull market and the start of something we may have never witnessed before. Well, behold, a massive 20-30% sell-off in only a few weeks’ time. And remember and be warned that we have still yet to see credit/bond downgrades and/or bankruptcies – both of which are virtually inevitable given the COVID19 situation, the oil price war, and the massive amounts of debt in existence.

In addition, we now have the airline industry lining up at the government trough requesting a bailout of at least $50 billion. Are you kidding us here?! Tax cuts, deregulation, billions of people now taking to air travel, etc, etc… and they need bailed out? Where did all of their cashflows go? Oh, that’s right, it went to share buybacks so they could financially and artificially engineer their stock prices higher – which happened – which then led to handsome compensation packages for the executives. Now we, the US taxpayer have to bail them out?! Today during a COVID19 press conference, the President commented on how the virus is not the fault of the airlines and thus the government needs to assist the industry. While the President is correct that the airlines are not responsible for the virus, they are responsible for their cashflow management! So again, why does the taxpayer need to bail them out? Let them file bankruptcy, restructure, etc… Let them sell their assets for pennies on the dollar to someone who knows how to manage an airline. No more bailouts! And we’re just getting started. Boeing is lining up. As is the cruise line industry. What about the hotel, casino, restaurant, entertainment, energy sectors, and others? Bailouts for all?! This is beyond ridiculous and I hope the American people wake up to this fraud.

When and where will this market find its bottom? We have no idea. But if history, math, economics, financial analysis, and human behavior have anything to say, then we likely have another leg or two lower to go. And the subsequent economic recovery is also likely to take years to find its footing. Therefore, we hope during this massive transition that the correct and prudent policies are adopted and implemented. This of course would be the restoration of our Constitutional Republic and a return to free-market capitalism. We already have the blueprints. We just need the will power, work ethic, and leadership to build our economy on a solid foundation. We can do this and we must do this, if our future is to be brighter than our past. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #Invest #Bonds #Gold #Debt #Bailouts #Stocks #Politics #USA #Oil #EndTheFed

Ep. 333 – The War for Oil
The Kapital News
The Kapital News
Ep. 333 - The War for Oil
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Lots and lots of volatility in the markets amid much uncertainty. Take into consideration debt levels, monetary and fiscal measures, COVID19 and that’s enough to cause some serious concerns. Now add on top of that a price war for oil and you really start to have some problems. Whether this is a true spat between Russia and Saudi Arabia or some sort of backroom deal between the two nations to attack US oil and gas producers, we will likely never know. However, regardless as to which is the case, the same outcome holds true – oil prices plunged, they’re likely to remain lower for longer, and this has serious negative consequences for US producers.

The world was already awash in oil and gas and now with Saudi Arabia pledging to produce even more, well prices will just go that much lower. Why? Well for one, global demand has been weak, remains weak, and will continue to be so for the foreseeable future. This was the case even before COVID19. So add all of these things together and you have this perfect storm of weakening global demand and a sizeable surge in supply creating this plunge in prices. With the amount of debt that exists on the balance sheets of many US oil and gas producers, especially the marginal, small, and mid-sized producers, we should expect a decent amount of bankruptcies. In the very least, we will witness a reduction in capex and hours worked, which will likely then lead to sizeable layoffs. And a lot of this stems from poor fiscal and monetary policies, but we digress.

Another key point to note is in relation to global protests and the countries where many of them have taken root. It just so happens to coincide with a lot of oil and gas producing states! So add to the list less revenue for nations’ coffers, which means less money for social programs, which means more outrage from people who are already outraged – get the picture? This war for oil is going to get much worse before it gets better. And this will be true on several fronts – economic, financial markets, commodity markets, government budgets, and social unrest. Don’t say we didn’t warn you. Stay diversified, stay vigilant, and stay with The Kapital News. #Oil #Economy #Recession #Russia #SaudiArabia #USA #Gold #Silver #Politics #COVID19

Ep. – 326 – A Dollar Doom Loop?
The Kapital News
The Kapital News
Ep. - 326 - A Dollar Doom Loop?
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Are we in the midst of or heading towards a US dollar doom loop? What this would imply is that the USD is likely to appreciate against a basket of currencies for a considerable amount of time. Reasons for this possibility include the global economic slowdown, which puts downward pressure on many commodity prices, and with current geopolitical risks and the COVID19 – there is a flight to safety underway in the USD. Also, and quite importantly, is the amount of global USD denominated debt that exists and is coming due over the next few years – especially in emerging market economies. Couple this with lower commodity prices, which is what primarily sustains emerging markets, and the amount of debt they have coming due, and it’s easy to see the writing on the wall.

These very emerging market economies are hit with a double, if not triple whammy. Slowing growth generally speaking. Lower commodity prices. And a stronger USD. All of this combined means that these very countries are going to need to expend even more of their domestic currencies in order to buy USD so that they can pay back their debt holders. Get the picture? When will this end is anybody’s guess, but it’s likely to continue to for the foreseeable future considering the massive amount of global debt on every balance sheet imaginable – household, corporate, government, and central bank. This is quite figuratively – the everything bubble.

This is why we are seeing many markets that typically move opposite each other, moving in tandem. Such as USD and gold price strength. Their is also a large divergence between the US stock market and US government debt. The stock market is painting a picture of strong and vibrant growth ahead and the bond market is forecasting slower growth for years ahead. They cannot both be right. Time will tell – as it usually does, but a US Dollar doom loop is in progress and it’s effects will be felt globally. Stay diversified, stay vigilant, and stay with The Kapital News. #USDollar #Oil #Recession #Economy #EndTheFed #Coronavirus

The Federal Reserve: Pricking Bubbles?

Link to video:

The Federal Reserve: Pricking Bubbles? – Kapital Economics

Continuing with our analysis of the business-cycle and when we’re likely to hit peak expansion and then enter recession, we analyze the Federal Reserve and their actions regarding the Fed Funds Rate. What can we learn by studying the Fed’s actions in determining when we’re likely to find ourselves in recession? Well it appears – quite a lot. This is simply another video in a range of presentation that analyzes various financial and economic variables. #Recession #Economics #Investing #Federal Reserve

Ep. 112B – Brexit Drama, Again!
The Kapital News
The Kapital News
Ep. 112B - Brexit Drama, Again!
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So there’s more drama surrounding British politics and the saga that is Brexit. The PM, Boris Johnson has decided to suspend Parliament, thereby calling for the Queen’s speech. This is a common practice for a new PM and is a highly ceremonial process, which of course is comprised of a speech by the Queen. However, what makes this time slightly different is the fact that this suspension will be longer and comes during a time when the 31 October Brexit deadline is drawing near. This means that there will be fewer days available for members of Parliament, MPs, to debate Brexit. They have had three years and there is still no deal that has been agreed by the British government and the Parliament. What do these politicians think they can actually achieve with another few weeks of discussions? Of course the actions taken by the PM have further divided an already polarized Parliament and country and it can be expected that protesters will take to the streets and there may even be a vote of no confidence of the PM. The people voiced their opinion back in June of 2016, it is now time for the British government to make good on that referendum – deal or no deal.