When we analyze US and rest of the world corporate debt and benchmark this against the Wilshire 5000 total market full cap index, we see a near 1 to 1 relationship. Thus implying that stock market performance is strongly linked to debt growth. This is no surprise to us here at The Kapital News, but it’s always interesting to see this data represented graphically. (We will do a video presentation on this as well). When one understands that debt is growth from the future being brought to the present, one must then ask the question, where will the future growth come from? This is the question at the heart of this central bank and debt expansion experiment. The Kapital News expects the fallout to be detrimental for generation(s). This also gives rise to outlandish and unsustainable valuations in the stock market. Market cap to US GDP is currently around 148% – levels not seen since the height of the dot-com bubble. Again, how long can this be sustained on a growing mountain of debt and currency creation?
In other news, President Trump has a major decision to make by 2 December as this is the deadline for him to sign the bipartisan Hong Kong Human Rights Act into law. Will he do it and risk upsetting the Chinese and thus a Phase 1 trade deal? Or will he cave and not sign it because he’s more concerned with the stock market as opposed to standing up for American values and human rights? Also coming due is a decision centered around tariffs. Come 15 December, tariffs are expected to increase and be placed on additional Chinese goods. Decisions. Decisions. American values? Human rights? Or new highs in the stock market? What will the President decide? Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Truth #Debt #Recession #EndTheFed #Stocks #Trade #Politics #USA #China #HongKong #Justice #Peace #Republic
Whether we’re discussing the markets or politics at the highest levels, traders, investors, and the general public seem not to care about the truth, the facts, and the fundamental data. How long can this decoupling from reality last? How long can this charade maintain itself? Whether it’s false headlines centered around US/China trade talks, or the Federal Reserve continuing to print money to “ensure” that stocks continue to rally, how much longer do we have until this big lie catches up to itself and collides with the truth?
The American Republic and its success are predicated on a moral and just people. Our Founders knew this from the very beginning. They knew and fully understood how fragile this American experiment was, would be, and is. And the wisdom they gave us was centered around the people of this country being righteous. In a world of lies and fabrications and misinformation and disinformation, how much longer can this Republic survive if our Founders’ words and concerns should hold true? Profit at any cost? Financial assets rally at any cost? Political lies for any purpose? Is this American? When asked what kind of government the Founders have created, Benjamin Franklin replied, “A Republic, if you can keep it.” Do yourself a favor and ponder the above questions and others like it and ask yourself, whether or not we’re doing a good job of keeping our Republic? Stay diversified, stay vigilant, and stay with The Kapital News #Truth #Justice #Republic #Peace #Politics #Economy #EndTheFed #Impeachment
Wrapping up a drama filled week that focused primarily around the impeachment inquiry. However, there are still also some serious questions surrounding the global markets. As the end of 2019 draws near, will investors attempt to lock-in their gains or will they attempt to chase these markets at all time highs? Prudent investors are supposed to buy low and sell high. With markets at all time highs, what do you think the risk-reward profile looks like at this juncture? On top of this, there are expectations that Q4 US GDP is going to be around 0.3 to 0.5%. Does that sound like the greatest economy ever in the history of the USA? This is also on the back of renewed global central bank intervention, tax cuts, deregulation, and trillion dollar deficits – and all we can generate is 0.5%? We’re in trouble if this happens to be the case.
On the DC drama front, former National Security Advisor, John Bolton, is back in Washington and on Twitter. He claimed that his twitter account was placed on a hold by the White House. The White House denies this allegation. Nevertheless, a potential bombshell witness is back in the news and should he decide to testify, he could prove to be the death knell for the President’s and Republicans’ defense. Bolton was one of the most senior advisors in the White House and would have intimate knowledge of what was taking place behind the scenes. Recall his descriptive language of “hand grenade” and a “drug deal” as it related to Rudy Giuliani and Mick Mulvaney and Ambassador Gordon Sondland respectively. The drama is far from over. Stay diversified, stay vigilant, and stay with The Kapital News. #Truth #Justice #Peace #Impeachment #Politics #Economy
Ep. 276 - Impeachment Hearings Day III + No Trade Deal?
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The third day of public impeachment testimony took place today and both sides of the aisle are claiming victory. This stalemate, however, could possibly be decided during tomorrow’s testimony of Ambassador Gordon Sondland. Amb. Sondland is going to be the first person to testify who can perhaps speak from a first-hand perspective as to what was motivating the President when it came to Ukrainian policy. Recall that Amb Sondland already amended his testimony from his closed-door deposition. This amendment was likely conducted because of the release of transcripts from other witnesses. The Ambassador is basically claiming that others’ testimony refreshed his memory – this or perhaps he doesn’t want to be charged with perjury and was taking advantage of the opportunity to amend? We also know that another State Department official, testified behind closed-doors that he overheard a phone conversation between the Ambassador and the President. Allegedly, the President was only concerned with the Ukrainians investigated the Bidens. Also, allegedly, there were other staffers who could have overheard this phone call. The Ambassador now finds himself in a very delicate situation. The veracity of his initial testimony is already in question due to his amendment. Now, he has to be concerned with making sure he tells the whole truth when it comes to this phone call and other conversations he may have had with the President. Otherwise he may face the real possibility of being charged with perjury; especially if other staffers can corroborate the testimony pertaining to the phone call. All eyes will be on Sondland.
In other news, both chambers of Congress unanimously passed the Hong Kong Human Rights Act. This has been criticized by the Chinese and they claim they will retaliate if this bill becomes law. It will now head to the Presidnet’s desk. Should the Presidnet veto this bill, given the unanimous consent from both chambers, they could potentially override the veto. This throws a big wrench into trade talks – however, we’ve been highly skeptical of any real progress on the trade front. Furthermore, President Trump has been claiming that if there is not a trade deal soon that the tariffs will go up significantly. The markets have not priced in a no-deal. They have been strung along into believing that a trade deal was at-hand. Should there be a no-deal, the markets could correct quickly and significantly. Stay diversified, stay vigilant, and stay with The Kapital News. #Impeachment #HongKong #Truth #Peace #Protests #EndTheFed #Justice #Economy #Politics
No surprise to us here at The Kapital News, the Federal Reserve cut its benchmark interest rate by 25bps. This was highly expected by the markets and the Fed did not want to upset the apple cart. The markets whip-sawed as they are apt to do during the conclusion of a FOMC meeting, however, the major indexes closed higher for the day. The small caps in the Russell 2000 were the exception, losing 4 points for the day. When pressed by the media as to what the Fed is likely to do next, Chairman Jay Powell, said the main factor is going to be the inflation rate. Yes, other data and geopolitical events will still be on the radar, but the main focal point is inflation. If history is any guide, the actions undertaken by Japan and European monetary authorities have yet to see their inflation rates rise to meet their respective targets. So why does the Fed think that they will reach theirs? So for all intents and purposes, the Fed is in a new wait-and-see mode for the time being – barring some major geopolitical event, or heaven forbid that the stock market should correct again. This market has been reflated and inflated, and reflated again, and nobody wants to take responsibility when this thing corrects to fair value and so the Fed will keep pumping liquidity into the system – more hot air for this bubble.
US Q3 GDP came in at 1.9% on a preliminary report, slightly beating market expectations. The growth was sustained by consumer spending and government spending. Recall that the US budget deficit just hit a 7-year high of $984B. All that and still below 2%. Business investment is virtually in contraction and net exports continues to be a drag on GDP. It is worth noting that business investment will lead consumer behavior as businesses are likely to cut back on other costs before they start reducing hours and/or layoffs.
On the US/China trade front, the economic summit that was scheduled for November in Chile has been cancelled. Given the recent and ongoing protests that are taking place, the Chilean government has cancelled the event. It remains to be seen at this point as to whether this event will be hosted in a different country. Recall, this is where Presidents Trump and Xi were supposed to sign a portion of phase 1 or the entirety of phase 1. Will this cause hiccups? We were also informed by Treasury Secretary Mnuchin that even if a deal is signed, it will take a while for China to ramp up its purchases of US agricultural products. Are you surprised? China has had o source these ag products from other countries. Signing a deal doesn’t just change things immediately, so it’ll be interested to see how things transpire. Stay diversified, stay vigilant, and stay with The Kapital News. #Recession #EndTheFed #Economy #TradeWar #USA #China #Chile #Protests #Freedom #Politics #Truth #Justice #Peace #Invest #Debt
This week is surely setting up to be one for the front pages. There will undoubtedly be further remarks and tweets from President Trump regarding an interim “Phase 1” trade deal with China. Short on specifics and reminiscent of this summer’s trade truce, we here at The Kapital News are highly skeptical of any deal of worth. Even if there is substance, this would simply take us back to where we were prior to the trade war in regards to the amount of agricultural products being purchased by the Chinese. Nevertheless, The White House will continue its jawboning and market manipulation tactics. Other market rallying headlines were the rumors of a Brexit deal in the works only to have conflicting stories come out this weekend claiming that there is still much work to do. The Queen’s Speech is also set to take place on Monday and if Parliament shoots down the vote on the Queen’s Speech then there is going to be much pressure on PM Boris Johnson to resign. This would only serve to throw another curveball in the Brexit saga. The Federal Reserve has started another round of QE. Welcome to QE4, but don’t you dare call it that – at least the Fed doesn’t want you calling it QE. Why? Because the Fed also claims that the US economy is strong and is in a good place, so then why would they need to engage in an emergency monetary policy? A rose by any other name is still as beautiful. #EndTheFed The Fed is also expanding their involvement in the overnight repo market. Recall it was initially just a one-off, then extended to 10 October, then extended to 4 November, now it’s going to last until at least January of 2020 (and it’s not likely going to be enough). There is also continuing escalation between Syria and the Turks. It is likely that if the Turkish military continues deeper into Syria that Syria will declare war against Turkey. Also, since President Trump has ordered the removal of US forces from Syria, the Kurds have now formed an alliance with the Syrian government in order to fight-off the Turkish military. This story has drawn the ire of Republicans and Democrats alike and are pressuring the President to hit Turkey with harsh sanctions to crumble their economy. It is unknown at this time as to what sanctions if any the White House will impose. President Trump is calling an end to these endless wars by withdrawing US forces from Syria, only to deploy thousands more to Saudi Arabia and surrounding countries to fend off Iranian aggression. Does this make any sense? Stay diversified, stay vigilant, and stay with The Kapital News. #Brexit #War #Peace #Economy #TradeWar #Politics #Impeachment #Whistleblower #Justice #Truth #Recession #Stocks
Lots to focus on this week and throughout this month as a number of data points and geopolitical events are set to unfold. The Federal Reserve is once again extending their repo agreements to 4 November. This started out as a “one-off,” and then quickly expanded to have a deadline of 10 October and now another moving of the goalpost to 4 November. This is due to a lack of liquidity in the system. The same system that saw the Fed pump trillions of dollars into the financial bloodstream over the last decade is now drying up. We fully anticipate that the Fed will soon begin future round(s) of QE – however, note that it is highly unlikely that they will brand it QE. This lack of liquidity is signaling something just isn’t right beneath the surface – and given not one but two deadline extensions, perhaps it’s not beneath, but right on the surface. This week will see a continuance of US-China trade talks. As we’ve been told for nearly two years – we’re sure everything is going just “great” and a deal is soon at hand (sarcasm). Not really much of a reason for the two sides to strike a deal, especially given the geopolitical climate and the domestic issues surrounding President Trump. Other items discussed include: Hong Kong protests, Brexit, the US jobs report, corporate lay-offs, and a potential 2nd whistleblower coming forward against President Trump. Stay diversified, stay vigilant, and stay with The Kapital News. #Whistleblower #EndTheFed #Impeachment #Justice #Truth #Economy #Politics #TradeWar #Peace
As we continue our way through Q4 of 2019 and we’re only in the second day, the markets continued their sell-off. Could this just be a pullback from a strong run in September or is there something larger lurking just beneath the surface? Well, if we look at the economic data that has been released over the last couple of days, it appears that there is something beneath the surface. Earlier this week it was disappointing PMI data, especially for the manufacturing sector. Today, it was a miss on the expectations from the ADP jobs report, $7.5 billion worth of tariffs expected to be placed on EU goods – following a WTO ruling that was favorable to the US. And it was weak sales data for the auto industry. Sales of autos are starting to slow to the point where manufacturers had to provide customers with $4,100 worth of incentives in Q3 – their largest ever. This continues to squeeze profit margins and if you’re General Motors, this is a double-whammy as they’re currently in negotiations with the UAW and those workers want higher pay and more benefits – not less, thus putting more pressure on GM’s margins. In addition, auto prices continue to climb and consumers now have $1 trillion worth of auto debt, which is much higher than where it was prior to the Great Recession. Furthermore, these price increases have given rise to the 6,7, 8, and wait for it…possibly a 9 year auto loan! This isn’t because consumers can afford the vehicle – they clearly can’t if they’re taking loans of this duration. However, they can “afford” the payment and that’s all that matters to the debt hungry Americans who just has to keep up with the “Jones’.” Not realizing that the Jones’ can’t keep up with the Jones’. Every facet of this economy is saturated with debt and central banks the world over are pushing on a string when it comes to monetary policy. Diminishing marginal returns have kicked in and what was once used as “stimulus” will likely turn into one of the largest economic miscalculations in history. Stay diversified, stay vigilant, and stay with The Kapital News. #Recession #Autos #Economy #EndTheFed #Debt #Politics
Awash with Purchasing Manager Index (PMI), figures coming out over the last couple of days continues to highlight what we have been describing for months – a global economic slowdown. Much of the focus is on Germany, the US, and Japan, but also to the broader Eurozone area, Australia, and other periphery nations. All-in-all the net position is in the negative, either in contraction, a reading below 50, or a continuation of slower expansion, readings above 50. Perhaps the biggest declines were experienced in Germany, which is getting hit from all sides. Whether it’s the ongoing trade dispute between the US and China, the uncertainties around Brexit, the slowdown in China, the weakness of Europe’s financial system, or other ripple effects the world over, one thing is certain – it’s not good for Germany and it’s likely they are in or are nearing a recession. This will not bode well for the rest of Europe or the world, especially given the size of the German economy. Furthermore, there have been more aggressive calls by central bankers “suggesting” that governments also step up to the plate to “stimulate” their economies via fiscal policies, since monetary policy can only do so much. Well it’s going to be quite the move for the Germans to decide to take on more debt at the exact same time that their economy is slowing down. The Germans are quite fiscally prudent and not likely to turn on the debt spigot anytime soon. Further developments out of Europe over the weekend witnessed the failure of Thomas Cook, a UK hospitality and travel agency service, as they filed for bankruptcy. This company has been around since the 1850s and had to file for bankruptcy protection due to their outstanding debt load. Are they a canary in the coal mine? Their bankruptcy leaves thousands of people on holiday/vacation stranded, however, efforts are underway to ensure that proper arrangements are made. This also places up to 9,000 UK jobs in the crosshairs and will only add to the economic and political uncertainties that exist regarding Brexit. Stay diversified, stay vigilant, and stay with The Kapital News. #Recession #Economy #Debt #Politics #EndTheFed #TradeWar #Peace #WakeUpAmerica
Yesterday was the US Constitution day and today is Fed day. And the Fed did not disappoint. The markets were expecting a rate cut of 25 basis points and that’s exactly what the Fed did. There has been some chatter about the overnight lending market and how the Fed has had to intervene and inject tens of billions of dollars to ensure that markets were properly funded. This is basically QE, but by a different mechanism. QE was injecting around $50 billion a month into the system – this recent action was at least $54 billion on an overnight basis! When asked during his press conference about this, Jay Powell, the Chairman of the Fed, stated that it was due to corporate taxes being due as well as US Treasuries maturing. He also noted, perhaps ironically, or ominously, that this is “contained.” Former Fed Chairman, Ben Bernanke, said that sub-prime was “contained,” and we all know what happened next. The Kapital News continues to believe that the Fed will continue with its easing cycle. This does not mean that every meeting will result in a rate cut, but this will be the direction in both subsequent action and communication. The Fed was not the only central bank to cut rates today. The lineup includes: Hong Kong, Jordan, Brazil, Saudi Arabia, and UAE to name a few. In addition, the BOJ held steady, but signaled that more easing is likely in October. Further, we have higher unemployment in Australia, which is likely to lead to lower rates down-under as well. The Reserve Bank of Australia has made it explicitly clear that a lot of their rate decision making process will be predicated on unemployment – and we also know from recent meeting minutes that rates will be lower for longer. So, what we have here is a race to the bottom. And a thinly-veiled acknowledgement that lower interest rates, zero interest rates, negative interest rates, and QE are not working. Especially not to the extent that they “worked” a decade ago when these were “new” and “experimental” and “temporary” policies. Now they appear to be etched in stone and signed in blood with no end in sight. This is diminishing marginal returns at its best and this is a flawed and fraudulent monetary policy at its worse. There is much more to come and this simply pushes people, corporations, governments, and even central bankers, further out onto the risk curve. Stay diversified, stay vigilant, and stay with The Kapital News. #EndTheFed #Recession #Economy #Invest #InterestRates #Politics #Stocks #Peace #WakeUpAmerica
