Loss of Trust in Markets.
This week’s podcast reviews the market distortions on display across the globe.
The general public and Wall Street believe that there is a recovery and the economy is doing well. Recently, however, some obvious signs of cracks in the story have emerged.
Events in Greece make it obvious that there is no viable solution. Any deal that placates Greece bring Portugal Ireland Italy Spain and France, lining up for a similar deal. Greece’s message to the Troika: “We stay YOU pay” will be rejected. Whether Greece stays in the EURO is irrelevant. Greece is broke and it’s obvious.
The Shanghai Stock Exchange has fallen over 30% in recent days. The Chinese government solution: outlaw short selling and market trash talking! Fifty percent of the companies trading on the Shanghai Stock Exchange have been suspended presumably to prevent further share declines. While those in the U.S. smirk at Chinese style market manipulation, many in the U.S. are also aware the Fed manipulates markets albeit less brazenly. Central banks in the west also buy stock futures that have the impact of influencing the markets.
U.S. Stock Market
The New York Stock Exchange experienced a trading suspension blamed on a computer glitch. The NYSE was closed for more than three hours on Wednesday.
Was this glitch not a glitch but planned shut down to stop the decline? @reinman_mt
— Smaulgld(@Smaulgld) July 8, 2015
Technical glitches that last more than three hours don’t inspire confidence in markets.
U.S. Mint Halts Sales of American Silver Eagles Due to Excessive Demand
The U.S. Mint halted sales of American Silver Eagles coins (ASE’s) citing excessive demand in a note to their authorized purchasers: “As you are aware, the significant increase in demand for American Eagle Silver Bullion Coins depleted our current inventories.”
The US mint had only on June 1 lifted volume buying restrictions on the purchase of ASE’s. In June, the U.S. Mint sold a record 4.8 million ASE’s. The day the US Mint made the announcement they were halting sales of ASE’s the price of silver plunged 5%!
Gold is desired, but silver is required.
Industrial demand is strong for electronics and solar applications. A potential silver shortage is discussed.
Pumping of non profitable stocks, like Zillow is discussed.
Markets in Defiance
Markets continue to rise even though poor economic data continues to pour in. The Fed continues to discuss raising interest rates even though the data does not seem to warrant a rate hike. The Fed will probably raise rates in order to retain credibility and combat de-dollarization initiatives. The Fed would love to have an event so overwhelming that they won’t have to raise rates, but absent such an event the Fed will raise rates this year. The Fed loses credibility if they raise rates as the economy heads in to a recession. They also lose credibility if they don’t raise rates after having promised to do so for a year.
Will there be a major economic collapse this fall?
The U.S. vs. Greece
11:10-15:10 The similarities between the US and Greece are discussed. Consumer credit is down even though consumer confidence is up. Consumers are tapped out– no matter what they think!
15:10-19:09 Over all market manipulation starting with the fixing of interest rates by the Federal Reserve is discussed. Banks have admitted to felony charges related to LIBOR manipulation.
Will Greece Exit the Euro?
19:09-20:09 Speculuaton on whether Greece will exit the Euro. Whether Greece exits is irrelevant as it is broke whether it stays or goes. Grexit/Grentry? Credit extention around the world has reached its limits.
Debt to GDP vs Debt to Tax Revenue
20:09 – 32:45 Discussion of debt to GDP ratios vs. debt to tax revenue as a meaningful measure of a country’s finances. Discussion of the reasons the Fed will raise rates (even with Chinese and Greece in crisis) and why gold and silver will continue to be under pressure. A rate hike can be used as evidence that the economy is doing well! The Fed will insist that they are raising rates into strength, even though the data does not show a rosy economy.
The Mighty U.S. Consumer
32:30-35:00 discussion of the encouragement of the U.S. consumer to spend. Americans have access to cheap credit and cheap products. The San Francisco Bay area housing bubble is discussed.
Markets Interfering with Government Intervention
35:00-37:15 Discussion of how the concept of government intervention into free markets has been turned on its head by massive government/central bank intervention that makes it seem as if the free market is intervening with government manipulations.
The current Chinese stock market bubble is similar to the dot com bubble of the early 2000’s in that there is widespread participation of the general public.
The U.S. Bubble Bursting Will Impact the Rich More than Anyone Else
37:15-45:00 the assset bubbles in stocks and real estate are largest where the wealthiest reside- (San Francisco, San Jose, New York). Will the crash happen this fall? It has to happen as their are no/limited fundamentals supporting valuations.
Euro vs. the Dollar
45:00-48:00 the differences between the Federal nature of the dollar vs the confederate nature of the Euro are discussed. The stock market is holding up the economic “recovery”. If the stock market crashes the recovery is over.
If a politician tells you there is nothing to worry about, there is
We are Monitoring the Situation
when they say someone is "monitoringthe situation" it means they are standing by helpless doing nothing
— StockCats(@StockCats) July 8, 2015
Tsipras to Troika- We Stay You Pay
48:30 A house guest dictates the terms of his free vacancy and requests that while he is staying that his son’s tuition be paid by the homeowner. Flaws of the Euro are discussed as compared to the U.S. Federal union.
Markets in Defiance