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Money Matters financial newsletter update for February 3, 2014.
Marc's notes:
Markets are softening and could be developing a negative bias. This week will tell us a lot about longer term direction. Currencies worldwide are softening and we could be seeing the beginning of a flight OUT of paper currencies (at least the weak ones for now) and into stronger currencies and metals. Stocks too should benefit in the long run. Eventually the **** will hit the fan as people realize paper is just that, paper, and then gold and silver will begin their historic assault into new highs but we are not there yet.
Stay tuned to Money Matters as we dissect this coming week and there is a special 2 hour show this Thursday at noon PST on KVMR FM and you can also tune in live at moneymanagementradio.com.
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Things to watch for in the coming months:
Gold and silver may make a new low in the $900 or $1,000.00 (gold) and $15.00 (Silver) range before blasting off once again.
War may break out in the Middle East driving oil into the stratosphere.
Drought may make certain stocks take off so keep tuned as to which ones to buy.
Social media and 3 D stocks may have their final blow off before crashing.
Government deficits will go ballistic and exceed Washington’s predictions only to meet Money Matter predictions reaching 20 trillion in a few short years or less.
More intrusive government and higher taxes.
More wranglings around Obamacare.
Stock markets get volatile as Feds try and taper only to back off as markets start hard down.
Eventual new market highs as money printing continues into overdrive.
The rich will get even richer (only the 1 %) while the middle class and upper middle class will be bled like pigs. The ranks of the poor will swell ever larger as higher food and energy prices drive more and more people to government assistance.
Small businesses buckle under higher and higher costs.
New jobs will only center around service, medical and part time work. Full time workers will continue to decrease.
Propaganda stating how things are getting better will not translate to your street or town.
More of the same from governments, local and otherwise on creating jobs, the biggest myth since Santa Claus.
Interest rates will stay low for a while longer only to eventually rise crushing housing and bonds.
More economic news that will wow and amaze you, but mostly make you shake your head in disbelief and disgust.
Get ready America, you heard it here first.
QE Taper:
The Federal Reserve announced it will cut another 10 billion dollars off its Quantitative Easing Programs (QE) which you should know by now is just printing money from air and giving half of that amount to the banking sector in exchange for their toxic mortgages they still hold. The other half goes to Congress by way of the US Treasury Department for more spending.
The Fed had been printing up about 85 billion dollars a month for a few years now but last month they tapered back to 75 billion a month and now they will go to 65 billion a month.
Some news analysts have referred to this tapering as a tightening of monetary policy but it is not tightening in the slightest. It’s just slowing down the stimulus sort of like telling a child he can only have 3 pieces of cake instead of 4 and calling that a diet.
It’s still a huge amount and would have been incomprehensible just a few years back. But we’re in a new universe here when it comes to monetary policy with central banks now thinking the printing presses can solve everything and anything.
It is assumed that the Fed will continue to cut back 10 billion dollars more at each Federal Reserve meeting going forward which eventually will bring this round of QE to an end.
I have my doubts as to whether they will complete the wind down without causing severe market dislocations in the bond markets where this debt is bought and sold.
If the Feds stop buying bonds (which is what they are doing with all this QE) the question then becomes who will take up the slack and buy.
85 billion dollars a month is no small potatoes, in fact it’s a whole truck load of potatoes, and thinking private investors can buy what the Feds will not is probably wishful thinking.
For now, all the bond buying has been soaked up because new problems are reoccurring in the emerging market arena. Turkey is having its own problems and contagion from that is spreading quickly to other emerging markets and currencies.
This is causing investors to flee back once again to the perceived safety of the US dollar and US debt.
It remains to be seen if this mop up of the excess debt can continue as more and more replacement buyers are needed as the Fed scales back over time.
Once the fear from the foreign market contagion subsides the excess may once again flood the bond markets. Additionally with the continuing scale-back of Fed bond purchases, the sheer amount not being bought by the Fed may overload potential buyers no matter what is happening on the world wide stage
Stay tuned!
All for now,
Marc
