- It’s earnings season once again and it looks as if, as a group, corporate America still can’t find the end of its earnings decline since profits peaked over a year ago. What’s more analysts, renowned for their Pollyannish expectations, can’t seem to find it, either.
- So I thought it might be interesting to look at what the stock market has done in the past during earnings recessions comparable to the current one. And it’s pretty eye-opening. Over the past half-century, we have never seen a decline in earnings of this magnitude without at least a 20% fall in stock prices, a hurdle many use to define a bear market.
Read more at:In 50 Years This Has Never Failed To Trigger A Bear Market
- Gold Now in a Sustained, Structural Bull Market; On Average, History Suggests ~175% Incremental Upside
- The last time we discussed gold on the site was a few weeks back in this post; therein we suggested a break-down in USDZAR was at hand and that should history hold, it would help propel and/or coincide with additional upside in the metal.
- However, the above was merely a tactical, nearer-term call.
- Strategically, it’s been even longer since we updated our longer-term framework for gold. In fact, it’s been three months since we did that in this post. In that May piece we suggested the metal continued to track favorably vs. our bullish expectations, but in the near-term it faced a major test having rallied nearly +25% off its Dec-15 low, a historical demarcation point whereby cyclical retracement rallies were either snuffed out with a resumption of a secular bear beginning afresh, or, the same moves continued higher, indicative of a new secular bull being underway.
- Where do we now stand vs. that +25% demarcation point?
- As of month-end today, gold is up over 27% from its Dec-15 lows.
- This a major milestone – any time gold has managed a move of at least 25% off a major low, it has continued higher every single time with incremental gains ranging from 21%-412%, with the average totaling 175%.
Read more at:Gold Passes A Major Milestone
- The recent book review “A Stark Nuclear Warning” by Jerry Brown, in which he has shared views on William J. Perry’s memoirs “My Journey at the Nuclear Brink”, raises a lot of questions and concerns.
- Jerry Brown unequivocally describes Perry, who held many important positions in the past, including the U.S. Secretary of Defense in 1994-1997, as a double-hated man.
- On the one hand, as the U.S. Secretary of Defense he helped to build a formidable U.S. nuclear arsenal several decades ago, being responsible for important technological advances with respect to U.S. nuclear forces, like launching the B-2 a heavy strategic bomber; revitalizing the aging B-52, a bomber from the same category as SOA (Strategic Offensive Arms) inventory; putting the Trident submarine program back on track; and making an ill-fated attempt to bring the MX ICBM, a ten-warhead missile, into operation.
- On the other, William J. Perry has been identified as a staunch proponent of avoiding nuclear danger, nowadays, when he has retired and embarked “on an urgent mission to alert us to the dangerous nuclear road we are travelling.” He is clearly calling American leaders to account for what he believes “are very bad decisions”, such as the precipitous expansion of NATO right up to the Russian border (William J. Perry was a very brave man when he became the lone Cabinet member who opposed President Bill Clinton’s decision to give Poland, Hungary, and the Czech Republic immediate membership in the Alliance). William J. Perry has also not been supportive of President George W. Bush’s withdrawal from the Anti-Ballistic Missile Treaty with Russia in 2002.
- It is interesting to note that a person who took an active part in the continuous U.S. SOA and TNW (tactical nuclear weapons) build-up today has concluded that there could be no acceptable defence against a massive-scale nuclear attack. According to him, the great paradox of the nuclear age is that deterrence of nuclear war is sought by building ever more lethal and precise weapons. For the sake of reality it should be underscored that this notion has to be attributed exclusively to the USA, who has a long time ago embarked upon an “offensive unconditional nuclear deterrence strategy” which has not practically been changed so far.
- Jerry Brown observes that William J. Perry is convinced that parity is “old thinking” because nuclear weapons can’t actually be used – the risk of uncontrollable and catastrophic escalation is too high. Seemingly, he shares the earlier maxim once articulated by President Ronald Reagan: “A nuclear war cannot be fought, because it can never be won.”
Read more at:Three Steps To Reverse A “Doomsday” Clock
- It appears causing an economic depression and significantly deteriorating life expectancy in Greece is not enough for the IMF.
- In a paper published this month, the IMF seeks to study the relationship between GDP and sovereign debt restructuring using data from 1970-2010. Its main conclusion may be shocking: “the central finding of this paper is that sovereign debt restructurings with external private creditors can affect per capita GDP growth performance in the years after debt restructuring.“ And these are the people in charge of advising nations on managing their economy…
- The paper continues with the following insight “we find that there are bad and good (or “not so bad”) debt restructurings for growth. Growth generally declines following a debt restructuring operation; however, restructurings that allow countries to exit a default spell (i.e., final restructurings) lead to significant improvements in growth performance in the aftermath of the debt operation, with the effect being persistent over time.
- Final restructurings are good for growth because they reduce countries’ debt (in NPV terms), and the lower the post restructuring debt is, the better the post restructuring growth performance for any given level of debt relief.
Read more at:IMF Studies Sovereign Debt Restructurings, Admits Its Policy Was Responsible For Greek Depression
- In effect, America has undergone a rolling national LBO since the Gipper’s time in office. It is the result of the Washington/Wall Street policy consensus in favor of permanent deficit finance, stock market-centered “trickle-down” stimulus by the Fed and massive borrowing by the household and business sectors of the private economy.
- So the U.S. economy is now stuck in the ditch because it has leveraged itself to the hilt over the past three decades. The vast majority of Americans are no longer living the dream because Wall Street speculators and Washington politicians alike have led them into a debt-fueled fantasy world that is coming to a dead end.
- Indeed, this deformation has been long in the making and reaches back nearly a half-century. To wit, once the Federal Reserve was liberated from the yoke of Bretton Woods and the redeemability of dollars for gold by Nixon’s folly at Camp David in August 1971, financial history broke into an altogether new channel.
- As shown in the chart below, since 1971 total public and private debt outstanding soared from $1.6 trillion to $64 trillion or by 40X. By contrast, nominal GDP expanded by only 16X. The very visage of the chart tells you that the former is crushing the latter.
- These debt numbers are elephantine in their own right, but the real surge began when Greenspan took office in August 1987. Shortly thereafter in response to the infamous 25% stock market crash of October 1987, the purported financial Maestro launched the nation’s central bank down the road of chronic easy money and massive monetary intrusion in the financial markets.
Read more at:David Stockman Warns “2008 Was Just Spring-Training For What Comes Next”
- Americans appear to be increasingly pessimistic about the future of America. According to a Real Clear Politics average of recent polls, 68.9 percent of Americans believe that the country is on the wrong track, and only 23.1 percent of Americans believe that we are headed in the right direction. But if you have been listening to the endless parade of political speeches at the Democratic and Republican National conventions, you would be tempted to think that the greatest days for the United States are right around the corner. The politicians keep promising us that better times are coming if we will just make the “correct” choices on election day, but no matter who we send to Washington D.C. things just seem to keep getting worse and worse. Let’s take a look at just a few of the signs that indicate that our country is going in the wrong direction…
- -The rise in violent crime: We haven’t seen crime rise this rapidly in our major cities in a very long time, and according to a report that was just released this week many forms of violent crime are way ahead of where they were at this time last year…
A new report published by the Major Cities Chiefs Association said that violent crime – homicides, rapes, robberies, assaults and shootings – is on the rise nationwide.
The troubling results, though just one survey, could provide vindication to Republican presidential candidate Donald Trump. President Barack Obama has contested Trump’s assertion– made prominently in his nomination acceptance speech last week – that crime is a national epidemic and major problem.
The mid-year violent crime survey, released Monday, shows307 more homicides so far in 2016, according to data compiled from 51 law enforcement agencies from some of America’s largest cities, including Chicago, Los Angeles and New York. There have also been 1,000 more robberies, approximately 2,000 more aggravated assaults, and 600 more nonfatal shootings in 2016 compared to this time in 2015.
- -Police officers are being shot at a staggering rate: The number of police officers shot in the United States during the first half of 2016 was up 78 percentcompared to the exact same time period last year.
- -Mass shootings: In just the past few weeks we have seen the worst mass shooting in U.S. history in Orlando, and there were mass shootings of police in Dallas and in Baton Rouge.
- -The U.S. economy continues to crumble: We just learned that orders for durable goods fell again in June, Gallup’s U.S. economic confidence index just hitthe lowest level so far this year, and at this moment 43 million Americans are on food stamps.
Read more at:If Everything Is So Great, Then Why Do Two-Thirds Of Americans Say The Country Is On The Wrong Track?
- Once Upon a Time…
- Prior to 1933, the name “dollar” was used to refer to a unit of gold that had a weight of 23.22 grains. Since there are 480 grains in one ounce, this means that the name dollar also stood for 0.048 ounce of gold. This in turn, means that one ounce of gold referred to $20.67.A 1922 20 dollar gold certificate – this note was actually redeemable for gold on demand, i.e., it was a money substitute. Today irredeemable banknotes are “standard money”.
- Now, $20.67 is not the price of one ounce of gold in terms of dollars as popular thinking has it, for there is no such entity as a dollar. Dollar is just a name for 0.048 ounce of gold. On this Rothbard wrote:
No one prints dollars on the purely free market because there are, in fact, no dollars; there are only commodities, such as wheat, cars, and gold.
- Likewise, the names of other currencies stood for a fixed amount of gold. The habit of regarding these names as a separate entity from gold emerged with the enforcement of the paper standard.
- Over time, as paper money assumed a life of its own, it became acceptable to set the price of gold in terms of dollars, francs, pounds, etc. (the absurdity of all this reached new heights with the introduction of the floating currency system). In a free market, currencies do not float against each other. They are exchanged in accordance with a fixed definition.
- If the British pound stands for 0.25 of an ounce of gold and the dollar stands for 0.05 ounce of gold, then one British pound will be exchanged for five dollars. This exchange stems from the fact that 0.25 of an ounce is five times larger than 0.05 of an ounce, and this is what the exchange of 5-to-1 means.
- In other words, the exchange rate between the two is fixed at their proportionate gold weight, i.e., one British pound = five US dollars.
Read more at:Why A “Dollar” Should Only Be A Name For A Unit Of Gold