Media

04/28/2017 - David Rosenberg: The Bond Market Is Reacting To The Facts On The Ground

The stock market is at a critical juncture, and it may be time reduce risk, strategist David Rosenberg says .. He predicts economic growth will slow even more as the Federal Reserve resumes its tightening policy.

“The reckoning will be which market has the story right: Is it the stock market that is de facto pricing in double-digit earnings growth or is it the Treasury market with the 10-year yield at 2.3 percent? .. The bond market is really pricing in a completely different nominal GDP growth world .. The bond market is actually reacting to the facts on the ground. The facts on the ground are this: Year-over-year growth on a nominal GDP cycle already peaked at 4.9 percent. We have never before in the post-World War II period ever have seen year over year nominal GDP growth peak below 5 percent. That happened two years ago.”

LINK HERE to the article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


04/28/2017 - Dr. Albert Friedberg: Bullish On Risk Assets, Federal Reserve Will Only Shrink Its Balance Sheet When It Sees Accelerating Inflation

LINK HERE to the Quarterly Conference Call – MP3 Podcast

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From the Quarterly Report

“In sum, we see a global expansion gathering strength and being liberally financed by politicians, politically influenced bankers and academics with little feel for reality. It is these academics who are now floating the idea of raising the inflation target to 4% from 2% on the pretext that it will be easier to achieve negative real rates without having to breach the zero-interestrate bound — the next time they are called on to save the world!

There is good reason to believe, then, that we are still early, that the bull is proceeding as it always has, confounding the great majority of experts, defying the well-armed but uncritical skeptics and taking its sweet time. So what is needed is patience (don’t switch lanes — you will always regret it), blindness and deafness (to experts’ concern about valuations, presumed political gridlock, Brexit, etc.) and discrimination (persist with active managers, for their time has come).”

LINK HERE to the latest Friedberg Quarterly Report

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


04/21/2017 - Alan Greenspan: Stagflation Is Here And Rising, “It’s A Fiscal Issue”

Former Fed Alan Greenspan discusses U.S. entitlements growing 9% a year and that no one wants to attack that. On Stagnation he says we have a slow growth economy where you end up with inflation and slow growth just like the 70s.

 

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


04/21/2017 - Adam Andrzejewski: The Open-Government Movement – How Posting All Public Spending Online Can Transform U.S. Politics

“Sunlight is said to be the best of disinfectants; electric light the most efficient policeman,” wrote Louis Brandeis in 1914. Today, the Freedom of Information Act and internet make it possible to post online all spending at the federal, state, and local levels. This kind of radical transparency can transform U.S. politics.

Since 2011, American Transparency, a nonprofit, has built and operated OpenTheBooks.com, the largest private repository of U.S. public-sector spending. The ultimate goal: post “every dime, online, in real time.” To date, OpenTheBooks.com has captured 3.5 billion government-spending records, including nearly all disclosed federal government spending since 2000; 48 of 50 state checkbooks; and expenditures in 60,000 localities across America.

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


04/05/2017 - McAlvany Weekly: Central Bankers Cannot Create Perpetual Growth

Bullish Sentiment hits highest level on March 1st…So did the stock market. The repeating and painful Errors of Optimism. TESLA market cap exceeds FORD & has yet to turn a profit .. New studies showing one dollar of new debt giving one dollar less of GDP growth.

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


04/04/2017 - Former Federal Reserve Advisor Danielle DiMartino Booth On The Adverse Effects Of Monetary Policy On Savers

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


04/04/2017 - GMO’s Jeremy Grantham: Stocks “Decently Different This Time”

Jeremy Grantham, co-founder of Boston investment firm GMO, doesn’t expect valuations to drop back to normal levels for two decades. But he is keeping cash on hand to take advantage of any dip, which he says would need to be 15-20% to act.

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


03/23/2017 - Financial Literacy Day – Mark Your Calendar – Live Stream on March 30th – Link From Here

 

LINK HERE to get the Live Stream

 

Financial Literacy Day

Mar 30, 2017

Event Navigation

Cumberland Advisors and the University of South Florida Sarasota-Manatee are proud to invite you to our Financial Literacy Day being held on March 30, 2017. This event will feature panel discussions by experts on:

  • Fiduciary/Trustee Roles and Responsibilities
  • Women’s Financial Issues
  • Investment Options/Outlook for Investors and Financial Markets
  • The Global Economic Outlook

The keynote remarks will be given by William C. Dudley, President and CEO of the Federal Reserve Bank of New York.


Location:
USF Sarasota-Manatee at the Selby Auditorium
8350 N. Tamiami Trail
Sarasota, FL 34243

Parking Information:
Please use the parking lots on the south side of Seagate Drive. You will not need a parking permit if you’re attending this event.


Schedule of Events



 Tickets


Speakers:

  • David Kotok, Chairman & CIO, Cumberland Advisors
  • David BersonSenior Vice President and Chief Economist, Nationwide Mutual
  • Michael ChrisztVice President & Public Affairs Officer, Federal Reserve Bank of Atlanta
  • Tracy CollinsAssistant Professor of Economics, New College of Florida
  • Neal D. ColtonFormer Shareholder (retired), Cozen O’Connor (Philadelphia, PA) 
  • Ray Dillon, President & CEO, Deltic Timber Corporation (Retired)
  • Michael DruryChief Economist, McVean Trading & Investments, LLC.
  • Megan Greene, Managing Director and Chief Economist, Manulife Asset Management
  • Edward F. Keon, Jr.Managing Director and Portfolio Manager, QMA 
  • Kozo KoideChief Economist, Asset Management One Co. Ltd. (Japan)
  • Ramiro Lopez Larroy, Partner & Director, Integras Capital
  • Cheryl LoefflerRealtor & Former Chairman Board of Trustees of Ringling College of Art & Design
  • Laura Mattia PhD., CFP ®Financial Planning Program Director, University of South Florida
  • Michael McNiven, PhD., Managing Director & Portfolio Manager, Cumberland Advisors
  • John Mousseau, CFA, Executive Vice President and Director of Fixed Income, Cumberland Advisors
  • Dr. Donal O’SheaPresident & Professor of Mathematics – Natural Sciences, New College of Florida
  • Kimberly Walker, Attorney specializing in Labor & Employment, Williams Parker

Moderators:

  • Judy Hangartner, CPAAssistant Professor, State College of Florida
  • Alison GardnerFirst Vice President — Wealth Management, Morgan Stanley
  • Michael McKee, Radio Host and Economic Editor for Bloomberg Television
  • Janet SperlingSenior Vice President, Investments, WMS, Raymond James (Sarasota, FL)

Dedication of the
David Kotok/Cumberland Advisors Financial Information Laboratory

The day will also feature the dedication of the new David Kotok/Cumberland Advisors Financial Information Laboratory equipped with Bloomberg Professional Services. This new Lab will provide access to the same data and analysis used by financial experts and managers around the world to students across the Sarasota-Manatee region. David Kotok and Cumberland Advisors were recently featured in the October 2016 edition of SCENE Magazine (pg. 50 – 51), explaining the importance of having these services accessible to financial professionals and students in the Sarasota-Manatee area.

 

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


03/22/2017 - McAlvany: Printing Money To Save The System Will Not Work Anymore

Who’s absorbing the liquidity from international money printing? The FED’s grand stimulus experiment has lost its effectiveness, Negative consequences soon to be felt. Inflation risks create key changes in the market that could lead to 2017 being an inflection year.

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


03/12/2017 - Rob Arnott On Why Valuations Matter, Contrarian Investing And The Unintended Consequences Of The New U.S. Administration’s Policies

Rob Arnott Of Research Affiliates:

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


02/25/2017 - Yra Harris Warns Of Massive Global Slowdown If U.S.$ Appreciates 20% On Top Of A 20% Border Adjustment Tax

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


02/22/2017 - Will A Trump Administration Cause Rising Inflation And Rising Interest Rates?

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


02/12/2017 - Danielle DiMartino Booth: An Insider Exposes The Fed

Danielle DiMartino Booth, former analyst at the Federal Reserve Bank of Dallas, has just released the book Fed Up: An Insider’s Take On Why The Federal Reserve Is Bad For America.

The Federal Reserve is controlled by 1,000 PhD economists .. The Fed continues to enable Congress to grow  the U.S.’s ballooning debt and avoid making hard choices, despite the high psychological and monetary costs. And the addiction to the “heroin” of low interest rates is pushing America’s economy towards yet another collapse ..

“That’s the trillion-dollar question. We didn’t used to call it that did we? We used to call it the million-dollar question. But it’s now the trillion-dollar question. The punditry up there will tell you that The Fed has been in tightening mode since the taper began several years ago, but I say hooey to that. What we have today is absolute fungibility with central bank purchases on a global basis. You’re talking about something upwards of $200 billion every single month. What the global bond market now revolves around, and relies upon, is the assumption that somebody somewhere will be conducting quantitative easing. As long as they do that, we’re operating in a bond market that is assuming that every single bond purchased by a central bank globally has been expired permanently .. You’re taking supply out of the system, which is the only thing that could get you to justify where bond yields are and, therefore the mirror image of that, where bond prices are, which is at record highs or close to record highs. That I think is at the crux of central bankers’ global dilemma. The first central bank that even hints that they are going to reduce the size of the balance sheet or even worse, sell off a single bond, it is game over at that point for the world bond market.”

On The Ticking Pension Time-Bomb: “The problem with pensions is that the sins are compounding over time. They are piling up. Every single fiscal year that goes into the history books with a 6%+ gap between what was assumed versus what was returned piles on to the next year of equal, if not worse, relative underperformance .. You’re talking about having to make up for all of that lost time, but in spades — at multiples of what the current rate of return assumptions are. Going forward, on an ongoing basis for years to come. Which is highly unrealistic when you are staring down the barrel of an almost 40-year bull market in bonds and the second longest bull market in US history. The assumptions are simply Herculean in magnitude and impossible to achieve. That’s why you’re seeing rate of return assumptions begin to come down. This is all good, fine and well until you completely square the circle and understand that every time a municipality or a state pension plan reduces their rate of return assumptions, some entity, whether it be the state, the school district, some entity has to write a bigger check in order to make up for the cash flow that is no longer being assumed in by the actuaries via rate of return investments. It doesn’t work. You can’t do it for very long when you’re not bringing money in as a state municipality.”

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


02/06/2017 - Grant Williams: A Punch To The Face For Central Banks

Peak Prosperity special .. Grant Williams, publisher of the economic blog Things That Make You Go Hmmm and principal of Real Vision TV, returns to the podcast this week to discuss his expectation of a return of volatility to the markets .. Grant warns that over the past seven years, the various financial markets around the globe have melded into a single world market dominated by trading algorithms and the central banks. This new system only knows how to operate effectively in one direction: Up .. Grant is very concerned that a return of volatility will act as a wrench tossed into the gears, quickly throwing the world financial system into panic.

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


01/28/2017 - James Grant: It’s A Different Investment World Now

A different investment world. Financial Thought Leader, James Grant, Editor of Grant’s Interest Rate Observer declares the 35 year bull market over and sees few opportunities to replace it. WEALTHTRACK broadcast on January 27, 2017.

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


01/18/2017 - McAlvany Commentary: Russell Napier On Financial Repression

Russell Napier: Gold Will Rise With the Dollar 

Financial Repression will increase, just ask Carmen Reinhart, Euro & Yen will devalue as Dollar and Gold will rise, Societies that feel a threat to their private property buy gold. You can find Russell’s Book “Anatomy of the Bear: Lessons from Wall Street’s four great bottoms.”

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


01/12/2017 - McAlvany Report: Capital Controls And Financial Repression The New Tools Of Captivity

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


01/09/2017 - Russell Napier On Financial Repression: “You Are Not Supposed To Know It Is Happening”

Financial Repression – “Put inflation above interest rates and to maintain them there” .. it’s being done by the central banks, and it could be forced by financial institutions upon investors by governments .. it’s all about governments trying to maintain & reduce the burden of government debt .. but now the need to repress is higher than after World War II, since there is also a lot of private debt as well .. “we are at the very early stages of this [financial repression]” .. 

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


01/09/2017 - Dr. Marc Faber: Federal Reserve Likely To Launch QE4 In 2017

“Let’s say the Fed realizes that the deficits for the U.S. go up and that interest rates increase and that the economy slows down, do you really think that they will increase the Fed funds rate three times in 2017? Never. What they will aim at, then, is to essentially bring interest rates down, especially if by then the dollar is still strong. And so they will probably launch QE4 in 2017. I think that will be a surprise for many people — not for me, but for many people that will be a surprise.”

LINK HERE to the podcast

Also recommend watching the below video interview: Dr. Marc Faber sees emerging markets as outperforming the U.S., the U.S. Treasury Bond Market likely to correct (go higher) in the short term, & the U.S.$ likely peaking in 2017 .. sees the world’s big central banks – Federal Reserve, Bank of England, ECB and Bank of Japan – as coordinating monetary policies together on a global basis.

 

 

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.


10/17/2016 - FINANCIAL REPRESSION IS NOW “IN-PLAY”!

FINANCIAL REPRESSION IS NOW “IN-PLAY”!

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A FALLING MARKET CANNOT BE ALLOWED – at any cost!

The Central Bankers have clearly painted themselves into a corner as a result of their self-inflicted, extended period of “cheap money”.  Their policies have fostered malinvestment , excessive leverage and a speculative casino approach to investments. Investors forced to take on excess risk for yield  and scalp speculative investment returns, must operate in an unstable financial environment ripe for a  major correction.  A correction because of the  high degree of market correlation that likely would be instantaneously contagious across all global financial markets.

Any correction more than 10% must be stopped. As a result of the level of instability, even a 10% corrective consolidation could get quickly out of control, so any correction becomes a major risk. What the central bankers are acutely aware of is:

  • If Collateral Values were to fall with the excess financial leverage currently in place, it would create a domino effect of margin calls, counter-party risk and immediate withdrawals and flight to areas of perceived safety.
  • The already massively underfunded pension sector (which is now beginning to experience the onslaught of baby boomers retiring) would see their remaining assets impaired. This could lead to social and political pressures that would be simply unmanageable for our policy leaders.
  • A falling stock market is the surest way of alarming consumers and signalling that things are not as “OK” as the media mantra  has continuously brain washed them into believing. In a 70% consumption economy, a worried consumer almost guarantees a further  economic slowdown and a potential recession.

As our western society continues to consume more than it produces, productivity is not increasing at the rate that justifies the developed nations standard of living as well as the current levels of equity markets. A possible corrective draw-down to the degree shown in this chart is simply “out of the question”!  The central bankers acutely aware of this.

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MARKETS TEMPORARILY HELD UP

The markets are presently, temporarily held up due primarily to three factors:

  • Historic levels of Corporate Stock Buybacks,
  • The chasing of dividend paying stocks for investment yield in a NIRP environment,
  • Unusual Foreign Central Bank buying (example: SNB)

Professionals, institutions, hedge funds etc have been steadily lightening up on equity markets (or simply leaving completely) leaving the public holding the bag.

It is estimated that the $325B that will leave the US equity markets in 2016 will be replaced by an artificial $450B of corporations buying their stocks. With corporate cash flows now falling and debt burdens triggering potential credit rating downgrades, this game is quickly slowing. The central bankers are aware of this.

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TECHNICALS INDICATING AN END TO THE DEBT SUPPER CYCLE

The Market Technicians of all persuasions are almost unanimously calling for a major correction. What is most troubling here is that their indicators are not just short and intermediate term measures but critical long term indicators.

  • KONDRATIEFF CYCLE: The 55 Year generational Kondratieff Cycle  shows an overdue major downturn with a cleansing of debt as part of the end to what has been termed the “Debt Supper Cycle”,
  • DEMOGRAPHIC CYCLES: Harry Dent has done some major  work on Demographic Cycles and cycles overall. I interviewed him for the Financial Repression Authority where you can find the video and he lays out the seriousness of the shifting demographics and how it overlays of many different types of cycles he has studied.

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  • ELLIOTT WAVE

The technicians who study Elliott Wave see clear evidence that we are now completing a multi-decade topping pattern in the form of a classic megaphone top.

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Chart courtesy of Robert McHugh

The central bankers are aware of this.

  • TECHNO-FUNDAMENTALS

I could keep on illustrating the types of warnings we are seeing, but let me share what the central bankers are likely most concerned about regarding Correlation, Liquidity and Volatility ETPs.

The markets have become so correlated (think of this as everyone on the same side of the boat) with asset correlations not only being higher, but the correlations themselves are becoming more correlated. While traditionally rising cross-asset volatility has resulted in volatility spikes, that is no longer the case due to outright vol suppression by central banks. While central banks may have given the superficial impression of stability by pressuring volatility, they have also collapsed liquidity in the process, leading to less liquid markets, a surge in “gaps”, and “jerky moves” that are typical of penny stocks.

The greater the cross asset correlation, the lower the vol, the greater the repression, the more trading illiquidity and wider bid ask-spreads, and ultimately increased “gap risk”, which becomes a feedback loop of its own. Global central banks are now injecting a record $2.5 trillion in fungible liquidity every year – in the process further fragmenting and fracturing an illiquid market which  is only fit for notoriously dangerous “penny stocks.”

“More than $50 billion has poured into low-volatility indexed exchange-traded funds over the past five years or so, in the wake of the 2008-09 market meltdown. There are now 14 “lo-vol” ETFs with assets exceeding $100 million each, and many more with less. Whenever the market hits a pothole, these ETFs enjoy a bump-up in assets.”

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Even more concerning are Volatility ETPs (Exchange Traded Products) which are derivative of some underlying asset. Volatility ETFs are particularly strange animals since you’re buying a derivative (ETF) on a derivative (the futures contract) which itself is based on a derivative (the implied volatility of options) and those options themselves of course are derivatives which themselves are based on the S&P 500. Getting the picture? The folks at Capital Exploits warn:

….everyone is on the low volatility side of the boat, because the central banks have managed to create a sense of calm in the markets exhibited by record lows in volatility and  investor have used linear thinking extrapolated well into the future assuming ever greater risk ignoring market cycles and extremes at their peril.

Every time you sell volatility you get paid by the counter-party who is typically hedging the volatility (going long) of a particular position and paying you for the privilege. This is not unlike paying a home insurance premium where the insurer takes the ultimate risk of your house burning down and you pay them for the privilege. The difference however between selling volatility in order to protect against an underlying position and selling volatility in order to receive the yield created is enormous. And yet this is the game being played.

The central banks have managed to create a sense of calm in the markets exhibited by record lows in volatility and for their part Joe Sixpack investor has used linear thinking extrapolated well into the future assuming ever greater risk ignoring market cycles and extremes at their peril.

Again, none of this is going unnoticed by the increasingly worried central bankers.

THE NEXT FED POLICY SHIFT

So what can the central bankers be expected to do? We laid out this road-map at the Financial Repression Authority well over a year ago. We anticipated in our macro-prudential research much of what has now become mainstream discussion:

  • Helicopter Money (now openly discussed)
  • Fiscal Infrastructure Stimulus (has become part of all candidates election platforms)
  • Collateral Guarantees
    • Buying Corporate Bonds – DONE (ECB, BOE)
    • PLUS more on Collateral Guarantees

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We now believe the Central Bankers and Federal Reserve specifically is preparing for more in the way of Collateral Guarantees.

We believe it will actually take the form of direct buying the US stock market similar to what the Bank of Japan is  already doing with ETFs.

THE “MINSKY MELT-UP”

My long time Macro Analytics Co-Host, John Rubino concludes in his most recent writing “Flood Gates Begin to Open“:

Individual countries have in the past tried “temporarily higher rates of inflation,” and the result has always and everywhere been a kind of runaway train that either jumps the tracks or slams into some stationary object with ugly results. In other words, the higher consumption and investment that might initially be generated by rising inflation are more than offset by the greater instability that such a policy guarantees.

But never before has the whole world entered monetary panic mode at the same time, which implies that little about what’s coming can be said with certainty. It’s at least probable that a combination of massive deficit spending and effectively unlimited money creation will indeed generate “growth” of some kind. But it’s also probable that once started this process will spin quickly out of control, as everyone realizes that in a world where governments are actively generating inflation (that is, actively devaluing their currencies) it makes sense to borrow as much as possible and spend the proceeds on whatever real things are available, at whatever price. Whether the result is called a crack-up boom or runaway demand-pull inflation or some new term economists coin to shift the blame, it will be an epic mess.

And apparently it’s coming soon.

It is our considered opinion that the monetary policy setters are presently even more worried about the current global economic situation than we are – if that is possible?

This is evident because over the last 14 days Fed Chair Janet Yellen, former Treasury Secretary Lawrence Summers and JP Morgan have all been out talking openly and publicly about the possible consideration of policy changes that would allow the Federal Reserve to buy US equitiesThese releases must be seen as trial balloons to condition expectations.

Japan and Switzerland amongst others are already doing it (as we previously reported) , while the ECB is also floating its own trial balloon on the same subject.

If you want to know what could create a Minsky Melt-up, this is it!

Here is our latest Financial Repression Authority Macro Map  illustrating what we see unfolding. We believe the dye has been cast!

The US Federal Reserve can soon be expected  to get congressional approval for equity purchases.  

Of course this will take a post election scare and a new congress to receive.

 

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Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.