Payne Investment 301-259-5299

The ideal setup for a crash is a consensus that a crash is impossible--in other words, just like the present: sure, there are carefully measured murmurings about a "correction" but nobody with anything to lose in the way of public credibility is calling for an honest-to-goodness crash, a real crash, not a wimpy, limp-wristed dip that will immediately be bought.

What I'm calling for is a rip your face off, weeping bitter tears over the grave of the speculative wealth that you thought was forever crash. All those buying the dip because the Fed will never let the market go down will be crushed like scurrying cockroaches and all those trying to rotate into the next hot sector or asset class will also be crushed like scurrying cockroaches because when the Everything Bubble pops, well, everything pops. There is no shelter in a risk-off cascade.

The crash is coming as a result of multiple mutually reinforcing dynamics, the first being that no "serious person" believes a crash is possible, much less imminent. In no particular order, here are a raft of other causally consequential triggers of a cascading market crash:

1. As I noted in my call for the top, Is Anyone Willing to Call the Top of the Everything Bubble? (September 6, 2021), there is no history to support the widespread confidence that the extremes of over-valuation, leverage, euphoria and speculation last forever, or even much longer than the lifespan of a cockroach. We're well past that benchmark into unprecedented insanity. So what happens next: squish.

Just for the record, the Dow topped out on August 13, the S&P 500 topped out on September 2 and the Nasdaq topped out the day after my call, September 7. (Close enough for gummit work...)

2. The credibility of the Federal Reserve is in the dumpster, which just caught fire.

As I explained in The Fed Is Fatally Corrupt-- And So Is the Rest of America's Status Quo (September 10, 2021), the Fed is corrupt on multiple levels--thoroughly, completely corrupt, and so are all its minions, proxies, apparatchiks, toadies, apologists and lackeys.

This is finally leaking through the Fed corruption containment vessel as even the lackeys in the billionaire-owned corporate media are now fearful of losing whatever tattered shreds of credibility they still possess by refusing to acknowledge Fed corruption, over-reach and hubris. And so at long last, the Fed no longer walks on water. The Fed's fraudulent travesty of a mockery of a sham scam has finally breached the three-foot thick containment walls and the putrid stench of Fed corruption can no longer be bottled up.

Like any good kleptocratic Politburo, the Fed cashiered the two most indefensible scapegoats to divert attention from the equally corrupt incumbents presiding over the collapse of Fed credibility.

Don't be surprised if the scapegoats are airbrushed out of official photos, per officially approved propaganda.

3. As I detailed in The U.S. Economy In a Nutshell: When Critical Parts Are On "Indefinite Back Order," the Machine Grinds to a Halt and Sorry, Fed, Inflation is Already Embedded, the fuel of the inflation rocket has just ignited and the clueless, corrupt Fed is watching the boost phase in abject, humiliating confusion, as the Fed is now completely powerless, having blown the opportunity to get ahead of the curve by reducing their making billionaires richer "stimulus" a year ago.

Inflation is not just embedded, it's global.

Natural gas prices could triple in entire regions without even breathing hard, and the costs of other essentials could just as easily triple without breaking a sweat.

Inflation crushes risk-on speculative markets like, well, scurrying cockroaches.

Squish.

4. The Fed has lost control of yields. We all know that liars reveal their dishonesty via micro-signals, and with this in mind, slow down the video of Fed Politburo speakers, starting with Chairperson Powell. Wealth inequality soaring? It's not our doing! etc.

Oops, the cat is out of the bag: the Fed has lost control of yields. Trust in the Fed's god-like powers is wavering, as punters and players realize the Fed's shuck-and-jive has finally lost its power to wow the greedy and the credulous.

Rising yields crush risk-on speculative markets like, well, scurrying cockroaches.

Squish.

5. China is not "saving the world" this time.

As I explained in What's Really Going On in China (September 23, 2021), China has other fish to fry and it isn't bailing out global markets as it did in previous bubble pops. Squish.

6. The rising US dollar is Kryptonite to speculative markets, emerging market debt and risk-on euphoria.

Sorry about that, but you know what happens next: Squish.

7. The retail bagholders are now all-in. As I noted in Please Don't Pop Our Precious Bubble! (September 8, 2021), the retail punters have finally gone all-in on the "this bubble will never pop" Everything Bubble. As I observed in August, The Smart Money Has Already Sold (August 18, 2021) as the retail bagholders have poured more cash into the Everything Bubble than they did in the past decade or two.

This is of course the most reliable signal that a bubble is about to pop.

Sorry about that: squish.

8. The buy the dip crowd has been so well-trained that they will provide the necessary buying to keep the cascade from gathering too much momentum. A stairstep down that sucks in buy the dip buyers is ideal for those profiting from the decline. First up: a rally to close the quarter positively to make it appear that every money manager beat the index funds. And so on.

But the net result is still: squish.

Consequences can be put off for quite some time, but the rot beneath the machinations only amplifies the eventual collapse.

The banquet of consequences is being served, and risk-off crashes are, like revenge, best served cold.

https://bit.ly/3B3egyw

Thursday, September 30, 2021

The Federal Reserve Hedge Fund

Dallas Fed President Kaplan Was Making Bold, Market-Moving Statements to Media
During 2020 Crisis; the Same Year He Traded Tens of Millions of Dollars in
Stocks and S&P 500 Futures
https://wallstreetonparade.com/2021/09/dallas-fed-president-kaplan-was-making-bold-market-moving-statements-to-media-during-2020-crisis-the-same-year-he-traded-tens-of-millions-of-dollars-in-stocks-and-sp-500-futures/

The Federal Reserve Hedge Fund

Was Boston Fed President Rosengren Trading with Citigroup’s Money?
https://wallstreetonparade.com/2021/09/was-boston-fed-president-rosengren-trading-with-citigroups-money/

Wednesday, September 22, 2021

Jamie Dimon’s Bank Has Been Moving Fast and Breaking Things – Like Money Laundering Laws. Now It’s Got Its Own Digital Coin and Bespoke Blockchain

Jamie Dimon’s Bank Has Been Moving Fast and Breaking Things – Like Money
Laundering Laws. Now It’s Got Its Own Digital Coin and Bespoke Blockchain
https://wallstreetonparade.com/2021/09/jamie-dimons-bank-has-been-moving-fast-and-breaking-things-like-money-laundering-laws-now-its-got-its-own-digital-coin-and-bespoke-blockchain/

By Pam Martens and Russ Martens: September 7, 2021 ~

Thursday, September 22, 2016

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered."

-Thomas Jefferson

Wednesday, September 21, 2016

September 21, 2016
En route to New York City

Yesterday I told you how the US federal debt level is expanding at its fastest rate since the financial crisis.

This isn’t supposed to be happening.

The financial crisis is years behind us. The economy is supposedly on solid footing. The government keeps gushing about how much tax revenue they’re collecting.

Usually when government debt expands so rapidly it’s because they’re waging war, fighting a major recession, or financing some serious infrastructure projects.

But none of these things are happening.

Think about it-- yesterday I told you that the debt is now $19.5 trillion. The debt hit $18.5 trillion in November of last year… meaning that they added $1 trillion to the national debt in just 10 months.

What did you get for that $1 trillion? Did they defeat ISIS? Give everyone a massive tax rebate? Recapitalize all of their insolvent trust funds?

Nope. Nada. They made a trillion dollars vanish into thin air and have absolutely nothing to show for it.

That’s because an absolutely astonishing level of spending (and waste) is built into the system now.

Just keeping the lights on, i.e. simply paying interest on the national debt, plus all the mandatory entitlement programs, burns through almost 100% of their tax revenue.

This means that they have to go into debt to finance nearly everything we think of as government, from fake airport security to the national parks to the Internal Revenue Service.

To be fair, this approach has worked well for years. The US government has had an ample supply of lenders willing to fund its largess.

But that pipeline of suckers will soon be running dry.

In fact, according to the Treasury Department’s most recent data, two of America’s biggest foreign lenders (China and Japan) are already cutting back on their $2.37 trillion of US debt.

Then there’s the Federal Reserve, another one of the government’s major lenders, which now owns $2.46 trillion of US debt.

This is up from just $479 billion right before the financial crisis blew up in 2008. So the Fed has expanded its Treasury holdings by 5-fold (not to mention its ownership of mortgage backed securities has exploded from $0 to $1.7 trillion over the same period…)

But one of the Fed’s major challenges is that they’re nearly insolvent, with a razor-thin capital ratio of just 0.8%.

Simply put, if the Fed continues to conjure trillions of dollars out of thin air to feed the government’s insatiable appetite for debt, they’re risking a major currency crisis at a minimum.

That leaves Social Security, far and away the single largest owner of US Treasuries.

It’s been a neat little scam for decades. Workers in the United States pay a portion of their paychecks to Medicare and Social Security, some of which ends up in the pockets of retirees each month.

The rest of that tax revenue (the “Social Security surplus”) is loaned to the federal government.

Over the years, Social Security has loaned the government trillions of dollars, stockpiling entire warehouses full of IOUs from the Treasury Department.

But here’s the thing-- Social Security and Medicare are rapidly running out of money.

Each year in their annual reports, in fact, their respective boards of trustees describe the programs’ financial woes in excruciating detail. They don’t pull any punches.

The Trustees themselves explain that Social Security’s two biggest trust funds will start running terminal deficits in 2020 until they are fully depleted 14 years later.

This means that in just four more years, Social Security will no longer be able to loan any more money to the federal government. Uncle Sam is about to lose his biggest lender.

What’s more, the US government is going to have to come up with trillions of dollars more to pay back Social Security in the subsequent years.

But that’s just the tip of the iceberg: the US government is also staring down the barrel of several trillion dollars worth of other enormous expenses that they’ll need to pay.

Major components of US infrastructure are in dire need of a facelift that is estimated to cost $1.4 trillion.

Then there are entire federal trust funds that are either insolvent or living on borrowed time--like the Highway Trust Fund that was nearly depleted last year…

… or the FDIC’s deposit insurance fund, which guarantees trillions of dollars worth of deposits in the US banking system, yet is undercapitalized and fails to meet its own insurance threshold.

Even more critical is the pension fund crisis across the United States, where private, state, and local pensions face a funding shortfall exceeding $7 trillion according to credit agency Moody’s.

Yet the federal government’s Pension Benefit Guaranty Corporation, which is supposed to guarantee the pensions of 30 million American workers, is itself insolvent and in need of a government bailout.

There is no end to these liabilities that the US government has been pushing off for years.

So in addition to losing its biggest lenders, they’ll need to come up with trillions of dollars more to pay for these looming obligations.

Like it or not, this party starts in just four more years.

Until tomorrow,

Simon Black

Founder, SovereignMan.com

Monday, March 7, 2016

Demand For Gold Bullion Is High And Rising

In a recent interview on February 27, 2016, Dr. Paul Craig Roberts, former US Treasury Assistant Secretary, co-founder of Reaganomics, economist and author, said that the Federal Reserve’s ability to manipulate markets has continued for far longer than he ever thought possible. Even so, he doesn’t think we will make it through the year without a major collapse.

With the American economy hollowed out, Roberts said, “Monetary stimulation today puts the Chinese to work, and the Indians to work.” Today, he said, the Federal Reserve’s policy is “focused on saving a handful of very large” American, British and European banks. Financial deregulation allowed huge banking conglomerates to form with an “extraordinary concentration” of wealth and power. Given their size, he said, “It is believed that if one of them were to fail, the consequences would be the entire financial system would fail.”

“I don’t think the house of cards will make it through the year,” Roberts said, “but I have been surprised so far.” The Federal Reserve, he said, doesn’t seem to be limited by what had been seen as proper, ethical or prudent fiscal policy. Furthermore, he said, “The Fed can create whatever money they need to create” to prop up any market.

Roberts said the economy now runs on impressions. “As long as they have the impression of a good stock market and a good bond market,” he said, the Fed “can keep the impression going that we have a good economy, even when we have 23% unemployment.” There is a “sort of psychological impression that the economy must be going good.” People who are unemployed have the impression that it’s somehow their own fault, not the economy, since government unemployment figures are so low. Inflation, which the public sees as rising every time they go to the supermarket, also must be low, since the government says inflation is zero.

Roberts explained that “The only real limit in my opinion on the Fed to support financial markets through money creation is the value of the dollar.” The key question is when will people lose all confidence in the dollar?

The US Fed has the European Central Bank and the Bank of Japan also doing quantitative easing. If the three major currencies are all printing currency, the dollar won’t lose value against the other currencies. That policy then forces all the little countries to do the same thing, Roberts argued. If they don’t, their currency becomes worth so much, they can’t sell anything. Roberts gave the example of the Swiss Franc, which was rising so much, the Swiss had to state that all efforts of currencies to seek refuge in the Swiss Franc would result in printing more Francs, so it would not rise anymore.

Speaking about the gold and silver markets, Roberts said that the US allows the bullion authorities “to use uncovered shorts in the bullion futures market to drive down the price of gold and silver, and to prevent its rise. If they can prevent gold from rising in price against the dollar, they are protecting the dollar against their policy.”

Roberts wondered what could cause the Fed to lose control of the ability to manage the value of the dollar. “If nothing can cause that,” he said, “then the house of cards can keep going forever.” You could have “50% unemployment and the stock market at 20,000.” The Fed, Roberts said, “manipulates policy for the benefit of the markets, not of the general population.” The current hollowed-out economy “can be presented as a success because stock and bond prices are high, and inflation is low.”

Roberts sees the TransPacific Partnership and other trade agreements as Washington’s attempt to organize the world against the dissident BRIC countries, which are withdrawing from the Western payment system. Washington is trying to make sure that BRIC policies don’t have any adverse effect on the US dollar. The great fear is that if there is a run on the dollar and no one wants dollar-denominated assets, US power would collapse. Roberts predicted that “If there is a dollar collapse, the Fed will let the banks go and raise interest rates to try to convince people to hold the dollar.”

“People are buying gold continuously,” Roberts said, “but the price of gold isn’t determined in the market where they’re buying it; it’s being determined in the paper market,” where the price is manipulated by the selling of options. Demand for bullion is very high and has been growing, he said. The Canadian and US mints have had to either suspend or ration the sale of one-ounce coins because they can’t get enough bullion to produce enough coins. Roberts asked, with such demand, “How can the price be falling? Because they manipulate the price.” And, if the market is rigged, “no one knows what the outcome of this is going to be.”

The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any stock, futures or options contracts.

Payne Investment 301-259-5299

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