Tag: student debt

Ep. 376 – Negative Rates Are Coming!
The Kapital News
The Kapital News
Ep. 376 - Negative Rates Are Coming!
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It is all but certain that negative rates will be here in the United States in short order (within a year). Despite the many voices of protest from several members of the Federal Reserve regarding the adoption of negative rates – it’s sad to say, but we don’t trust them as far as we can throw them. This is the same group that claimed only 1 1/2 years ago that the Fed’s balance sheet was on autopilot with respect to shrinking their balance sheet. Well fast forward to today and we have had several interest rate cuts, two of which transpired during emergency meetings that have taken us back to the zero bound. And what of the balance sheet? Oh yes, over the last two months the Fed has added over $2T in assets to its books. So excuse us if we do not believe the rhetoric from the Fed. After all, it’s no big secret that the Fed follows the market, especially during these types of events. Now of course, the Fed also tries to lead the markets with their rhetoric, which they claim is an effective tool in the kit – but the question remains, how effective and for how long? If the markets are always expecting the Fed to do more and the Fed can’t live up to the hype and the promises, then how will markets behave? Are we setting ourselves up for one of the biggest “buy the rumor and sell the fact” events?

The reason for today’s topic is because Jay Powell, Chairman of the Federal Reserve gave an interview this morning and so we thought it prudent to cover his remarks in greater detail. Some of the key takeaways were the following remarks from the Chairman: there is no bubble to pop, the usual suspects are not to blame, it is all the fault of COVID19, above and beyond what the Fed can do by law as outlined in their charter, will only take place with the direct approval of the Treasury Secretary (thus potentially shifting the blame to the government and not the Fed), once the crisis is over all of their tools will be put away, highlighted the important difference between a liquidity crisis and a solvency crisis, and how the Fed can only do so much and mainly on the liquidity side of that ledger, and lastly, how the fiscal side of the equation will likely have to carry more weight – thus calling out Congress to do more, but stopping short of giving them any recommendations. So there you have it – delusional comments about no bubbles and no issues prior to COVID19 – an unlimited amount of money to be printed, and seemingly an unlimited amount of federal spending is likely required and is perfectly fine with those soaring deficits and debts. We did tell you this is now a banana republic – enjoy the rum! Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #EndTheFed #Bailouts #Debt #USA #Recession #Depression #Jobs #Gold

Ep. 374 – American Dream or Ponzi Scheme?
The Kapital News
The Kapital News
Ep. 374 - American Dream or Ponzi Scheme?
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A very fitting title for today’s podcast as we digest further the national debt, national deficit, State and local debt, and household debt. With over $25T and growing, will this national debt ever be paid back and if so, how? Will it take the form of inflation, stagflation, hyperinflation, default, and/or some combination thereof? These are serious questions that have serious consequences. The American people need to wake up to the fact that the US economy is a Ponzi scheme – especially at the government level. Broken promises, whether that being Social Security, government and/or corporate pensions, Medicare, etc… These are huge price tags and it places an ever-increasing burden on younger and future generations and taxpayers – making this by default a Ponzi scheme. Why? Because the scheme relies upon new entrants/taxpayers/investors to come into the system to support earlier contributors. The Kapital News is of the mindset that the government in conjunction with the Federal Reserve are well aware of this and thus explains their insane response to printing and spending. These institutions know the fragility of the system. They know it is a Ponzi scheme and thus they are implementing such policies to the tune of several trillion dollars because they have to keep this fraudulent system alive. Otherwise the masses will awaken to such fraud and demand real change. So that old American dream of getting an education, a solid job with a pension and/or retirement plan, buying a house, starting a family, and hoping your kids have it better than you did – well, that dream is getting awfully expensive and is looking more and more like a nightmare. And the price tag just keeps going up!

The global protests that we witnessed well before COVID19, are starting back up and we imagine they’ll be even more intense. Be on the lookout for civil war(s), government overthrows, and war(s) amongst nations. We stated for months that these protests were not transitory, but rather history in the making. And we ain’t seen nothing yet! Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Debt #Bailouts #Recession #USA #Depression #Protests #Oil #Gold

Ep. – 373 – An Historic Jobs Report
The Kapital News
The Kapital News
Ep. - 373 - An Historic Jobs Report
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A truly historic jobs report was released today by the Bureau of Labor Statistics (BLS). In today’s podcast, we take the time to read the report in its entirety. A few of the takeaways: the headline unemployment rate (U-3) was 14.7% and the broader measure of (U-6) was 22.8% for the month of April. For the full month of April 2020, some 20.5 million jobs were lost and spanned the spectrum of industries. The hardest hit was leisure and hospitality that lost some 7.7 million jobs. With respect to several data points, one would have to go back to the 1970’s, 1940’s, or 1930’s to find a comparable number while still others were the worst on record. Further broader measures of unemployment such as the labor force participation rate declined by 2.5 percentage points over the month to now sit at 60.2% – this is the lowest reading since January 1973. The employment-population ratio now rests at 51.3%, dropping some 8.7 percentage points over the month. This would constitute the lowest rate and largest month-to-month decline in the series’ history, dating back to January 1948.

The BLS also notes that had they accounted for those still on payroll but absent from work, then the headline unemployment rate would have been 5 percentage points higher. Nonetheless, BLS kept the number at 14.7%. Revisions were also made to the prior months of February and March and the BLS noted that those months were over-counted, thus an additional 214,000 jobs were lost and/or gains did not occur during those two months. Nonetheless, the major stock indexes could not care less as they rallied over 1% and the futures market is now pricing in a Fed Funds Rate in negative territory by January of 2021. The banana republic is here! Also, if we simply take into consideration just the $3T that the US Treasury will be issuing in Q2 of 2020 and dividing by 33.5 million (representing the jobs losses since COVID19 lock-down), we come to approx. $89,500/job! The vast majority of people who lost their job(s) did not make near this amount, yet this is what the government is spending to keep it all afloat. And this does not count all money spent, printed, and/or yet to be spent or printed in response. Now do you understand why we say that “Free Was Never So Expensive.” Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Bailouts #Debt #Deficits #USA #Depression #Recession #BananaRepublic

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. 341 – Representation & Recourse
The Kapital News
The Kapital News
Ep. 341 - Representation & Recourse
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In light of COVID19, the oil price war, and the structural weakness in our economic and financial systems, there is panic in Washington, DC, among other national capitals, and their “solution” is to offer fiscal and monetary stimulus measures. Well, I for one, am sick and tired of all these bailouts. Therefore, I feel compelled as an American to write my elected officials. During this podcast, I take the time to read, what is in essence, my preamble to my own personal Declaration of Independence from the US government. This letter is also posted to our website at thekapitalnews.com, so be sure to read it as well.

What is unfolding before our very eyes is a financial coup d’etat whereby central banks and even central governments are likely to take equity stakes in companies and/or purchase their debts – likely for pennies on the dollar. This is beyond being un-American. Yet, here we are. History is watching us, and what we do as individuals and as a nation will be remembered. We can be remembered for pulling ourselves back from the brink of failure or we can be remembered for allowing ourselves to be taken over the abyss. Where do you stand? Stay diversified, stay vigilant, and stay with The Kapital News. #Revolution #USA #Economy #Politics #1776 #Liberty #Constitution #Congress

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. 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. 336 – Central Banks Panic!
The Kapital News
The Kapital News
Ep. 336 - Central Banks Panic!
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In a second emergency meeting in as little as two weeks, the Federal Reserve has met, and decided to cut interest rates by 100bps. This now takes the Federal Funds Rate down to a range of 0.0 – 0.25%. The last time rates were this low was during the depths of the Great Financial Crisis in 2008. Recall, it was just a couple of weeks ago that the Fed cut rates by 50bps during that emergency meeting. So in very short order, the Fed has cut rates by 150bps! The next leg down, by definition would take us into negative territory on a nominal basis. On a real basis, the US has been in negative territory for quite awhile.

On the back of this information, we believed their were only two outcomes for how markets would respond. First, this decision could be seen as a panic move because the FOMC was scheduled to meet this week and announce their decision on Wednesday. However, they instead held this meeting this weekend and announced their decision this afternoon. So, the question becomes, why couldn’t the Fed wait another 48-72 hours to announce their decision – panic perhaps? Or option two would be, the crack addicts got their fix from their dealer a few days earlier, thus setting the stage for stocks to rally. Well, it appears the former. At least for now as the US futures market has hit limit down once again – the 5th time in the last six sessions, which means the circuit breakers have kicked in because stock futures have fallen by 5% and thus trading has been halted. Despite the massive rally on Friday – should the futures market hold, then half of Friday’s gains will be eliminated if not more. But not much surprises us anymore.

On the COVID19 front as well as economic front, country after country is making the decision to close their borders and/or make stricter guidelines surrounding travel in and out of their respective countries. This is in effect a global quarantine. The economic shock from both the supply side and demand side cannot be remedied by monetary or fiscal stimulus. These efforts to be undertaken by monetary and governmental authorities will serve only as mere attempts at looking like they are in charge – as if there is some kind of leadership. After a decade of deranged and fraudulent monetary policies, coupled with asinine fiscal measures, out of control corporate debt, and over levered consumers, the debt and credit chickens are coming home to roost. What COVID19 did was that is served as the pin that pricked the out of control global debt bubble. On top of this, don’t forget about the oil price war and all of the other economic data that has been pointing to a global slowdown prior to both COVID19 and the oil price wars.

We are only witnessing the tip of the iceberg, which is why central authorities are panicking. We have yet to see any cascading effect with respect to bankruptcies, let alone any bankruptcy of a major corporation. This outcome is unfortunately likely because of the size and duration of this supply and demand shock, coupled with the massive amounts of debt. This is a double, triple, maybe even a quadruple whammy across various sectors the world over. This massive unraveling will not end well nor will it end quickly. People must understand the root cause of this if we are ever to put into place a solid foundation on which to build a lasting economy and society. Otherwise, we’ll continue with the same old antics, on the same old foundation of sand. We can and must do better. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #COVID19 #EndTheFed #Truth #Justice #Peace #Politics #USA #Coronavirus

Ep. 329 – Bubble Bursting?
The Kapital News
The Kapital News
Ep. 329 - Bubble Bursting?
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So we continue to see a sell-off in global equities, which begs the question, is the bubble bursting or is this simply a standard pull-back? A couple things are certain, 1) the recent melt-up in equity prices over the last several months was getting long-in-the-tooth, and 2) the global supply and demand shock of COVID19 is real. It’s one thing for the typical run-of-the-mill correction, especially after such a run up, but it’s another if this is becoming something more structural where COVID19 becomes the pin that finally pricks the everything bubble.

Regardless of which turns out to be the case, understand that this is a process that takes time. It will not be resolved in a day, a week, or even a month, these processes and potential full-reversal(s) into a bear market can take months if not years to complete. All we know is that the world has been awash in easy money and credit for over a decade; that central banks come running to the “rescue” every time there’s some kind of hiccup with global equities; that federal governments have thrown a lot of fiscal stimulus into the pot as well; and now with the shock of COVID19, how will this all play out? These debts need to be paid and if you have your supply-chain shuttered and your customers shuttered, then we expect hours worked to be cut and then layoffs to tick up. And if this occurs, then we’re likely to find ourselves in a downward spiral loop as a lack of demand fuels a further lack of demand until it bottoms out. And oh, lastly, the CDC has come out and stated that it’s not a question of IF, but WHEN, COVID19 turns into an outbreak here in the USA. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Coronavirus #Recession #Gold #Silver #Oil #Politics #DemsDebate #EndTheFed

Ep. 325 – Billionaires + Negative Guidance
The Kapital News
The Kapital News
Ep. 325 - Billionaires + Negative Guidance
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Today we discuss the Democratic debate in Las Vegas that was held this evening prior to the Nevada caucuses and we also chat about the global markets. It has been a consistent theme for the last so many days and weeks that the global markets continue their ascent despite further deterioration of fundamental economic data. Further still, on a technical basis, stocks and other financial assets are greatly disconnected from their underlying technical levels as well. Something is greatly amiss. If it was a true panacea – that central bank liquidity injections cured all ailments, then why has it taken mankind so long to figure this out? Perhaps it’s because monetary injections and intervention is NOT a cure-all. In fact, this is setting the stage for what may become the largest financial and economic crises the world has ever seen. Can the irrationality continue? Of course it can. But the longer the boom – the bigger the bust. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Stocks #DemsDebate #Recession #EndTheFed #Politics #USA #Coronavirus