Tag: Treasury

Ep. 487 – The Zombie Economy
The Kapital News
The Kapital News
Ep. 487 - The Zombie Economy
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According to estimates from Deutsche Bank, nearly 18 percent of US companies can be classified as “zombie” businesses. This is 50 percent higher than levels seen only two years ago. Zombies are generally defined as firms that can pay their operational expenses and make debt servicing payments, but are unable to pay off their debt(s). Their existence, especially at these levels, are extremely dangerous and destructive to the economy and society. Many, if not all, are “kept alive” by governmental and monetary policies. However, these actions in the long-run prove detrimental to the economy because the capital and/or liquidity injections into the system come at the expense of more debt, less investment, and fewer to no gains to productivity and innovation. Furthermore, it also hurts successful businesses more than otherwise would be the case in the event of an economic downturn. This situation arises, because in a well-functioning market economy, these zombies would go out of business or restructure, thus allowing the healthier firms to grab more market share. Well, if the zombies are kept alive, then it becomes harder for the well-run firms to acquire a bigger piece of the market. This essentially is policy making for the short-term at the expense of the long-term.

What becomes more disconcerting is that there is currently around $1.4 trillion of debt obligations on the books of these zombies. This is more than double the amount seen during the depths of the GFC. In fact, if about $1 trillion of this amount were paid down, we’d still be staring at GFC levels – just to provide some perspective. This is completely unsustainable and unhealthy. The federal government through the Nobody CARES Act, and Federal Reserve through several of their “emergency facilities,” have served to prop up these zombie firms. What should have happened is rates should have increased, poorly managed firms would have went bankrupt or insolvent, malinvestments would be flushed out throughout the economy, and well-managed firms would begin to gain market share. This is not an easy process and because of the size of this massive bubble, the correction would prove devastating to a lot of people. Nonetheless, this would have been a correction on which to build a solid foundation for future prosperity. But because politicians and central bankers do not want to be held to account, they take the “easy” way out and borrow, print, and spend money we do not have, in order to make it appear that the economy is in good shape – it is not. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Zombies #Bailouts #Recession #Liberty #Revolution #BananaRepublic #Debt #USA

Ep. 486 – Vaccine Monday
The Kapital News
The Kapital News
Ep. 486 - Vaccine Monday
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Another Monday and another vaccine headline. This one from Moderna, where according to their press release, their vaccine is 94.5 percent effective. This bests last week’s vaccine headline from Pfizer, where theirs was “only” 90 percent effective. Yes, Pfizer’ press release also came out for the Monday trading session. There are still several other pharmaceutical companies attempting to create a vaccine, so we might see this every Monday from now until perhaps the end of the year. These companies appear to be on a rotation when it comes to their vaccine announcements. We shall see. Nonetheless, the news catapulted US equities to new all-time highs and carried global stocks up as well. So despite having tens of millions of Americans out of work, collecting unemployment, in line at food banks, and facing evictions, we also have a stock market that is making new all-time highs. This is clearly a first world banana republic. And serves as further evidence of our moral, political, social, and economic decay and decline as a nation. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Vaccine #Bailouts #Debt #Recession #Depression #Gold #Silver #Liberty #Revolution

Ep. 395 – More Funny Money, Please
The Kapital News
The Kapital News
Ep. 395 - More Funny Money, Please
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Stocks were selling off this morning, but given all of the recent backstops and the de facto “law(s)” in place that forbid stocks from going down, they “miraculously” closed in the green today. Of course the reason for the major turnaround from deep red to light green, was because the Federal Reserve issued a statement indicating that they will be purchasing corporate bonds on the secondary market. This is no surprise as this facility was announced nearly three months ago during the depths of the massive market sell-off. The total could potentially hit $250 billion for this facility alone. This pertains to the secondary corporate debt market. There is also a facility that pertains to the primary market, meaning the Fed may/will purchase corporate bonds directly from selected corporations – of course at subsidized lower rates. Lower rates than what a true functioning market would demand. So-long free market capitalism and hello banana republic.

The US national debt has officially topped $26 trillion – so congratulations America – you’re broke. And to add insult to injury, the White House is now presumably on board for another major spending bill that may cost up to $2-3 trillion. More trillions that we do not have. At this juncture in the current fiscal year, we’ve already spent $7 trillion – this is more than double the amount of total tax receipts! And there’s more spending on the way. Rome is burning and nobody seems to care because stocks keep going up. Markets are lost and unfortunately, so is any semblance of morality. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Depression #Bailouts #Debt #USA #Liberty #Revolution #Protests #Recession #Peace #EndTheFed

Ep. 380 – The Nobody CARES Act
The Kapital News
The Kapital News
Ep. 380 - The Nobody CARES Act
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This is of course a direct criticism of the multi-trillion dollar monstrosity known as the CARES Act. The bill that was passed by Congress with bipartisan and Presidential support in response to COVID-19. Well, just like any title of a bill – it’s usually the exact opposite that transpires – so in this case, it’s the Nobody CARES Act.

Today via a virtual Senate hearing, Treasury Secretary Mnuchin, and Fed Chairman, Jay Powell, gave their testimony as to the progress of the CARES Act. During today’s podcast, we highlight a few of the key points. These pertain to: not all of the money that has been appropriated has been spent, the Fed will utilize leverage if and when they put this money to use, the base case of the US Treasury is that on a net-net basis, there will be losses, questions asking if there will be conditions to receiving any funds, especially by large corporations, such as guaranteeing that employees are kept on payroll and/or brought back from being laid-off, the money supply, limitations to the Fed’s balance sheet, discussion of Treasury issuing 50 and/or 100 year bonds, and asking how the Fed’s purchases of junk bonds, is a help to the people…all this and more as we dissect this new banana republic. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Recession #Bailouts #Jobs #USA #Depression #Gold #Protests #EndTheFed

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. – 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

Debts & Deficits – Part I

Link to video:

Debts & Deficits – Part I

With deficits and debts off the charts and with little to no signs of slowing, coupled with the increasing mentions of Modern Monetary Theory (MMT), we thought it prudent to put together a Kapital Economics presentation that highlights the growing deficits and debts. This is Part I of a to be determined numbered series where we discuss in greater detail the causes and effects of deficits and debts. The numbers are black and white, but their causes and effects will prove to be rather nuanced. Part I showcases the levels of debt and how it relates to GDP and its year-over-year percentage changes. #Economy #Debt #Deficit

Ep. 342 – The Fed: To Infinity & Beyond!
The Kapital News
The Kapital News
Ep. 342 - The Fed: To Infinity & Beyond!
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Well folks, it looks like $700 billion in quantitative easing just isn’t enough. Recall, this was only announced one week ago! So, here we are, one week later after the Fed’s 2nd emergency meeting, and we’re already through that $700 billion and/or it’s been determined during their 3rd emergency meeting that it wasn’t going to be enough. Well you ask, by how much did they increase QE? Great question. Answer: to the “amount needed.” That’s right, the Fed just wrote themselves a blank check to buy as much as they want and whatever they want. We have been warning that this “helicopter money” was coming and here it is – at least the first tranche. We’ve also been warning that the Fed would start to enter other markets than just Treasuries and mortgage-backed-securities (MBS). Well now they’re going to be purchasing corporate bonds – both directly from “credit worthy” companies, whatever that means, and also on the secondary market. They may even do this by purchasing ETFs too. This is beyond ridiculous and of course it has the blessing of our elected officials in Washington, DC. The same officials by the way that are working on a $2 trillion “stimulus” package. How is this to be paid for? That’s right, with trillion dollar deficits that need to be paid back by the very same taxpayers who are bailing themselves out. This would truly be laughable if it wasn’t true. From free-market capitalism to nationalization. From free nation to bailout nation. From Constitutional Republic to banana republic. This madness must end or it will be the end of us. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Bailouts #Recession #USA #Republic #Constitution #EndTheFed #Congress #Gold #Debt

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. 20A – Clinton Foundation Investigation: Will There Be Justice?
The Kapital News
The Kapital News
Ep. 20A - Clinton Foundation Investigation: Will There Be Justice?
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A look into the story that is getting ZERO attention. A Congressional testimony by financial investigators looking into the Clinton Foundation uncovered startling findings. They intimate that there are investigations underway by the FBI/DOJ and the Treasury may get involved as well.