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Thread: Ginormous Financial Shift Underway in the World

  1. #1

    Ginormous Financial Shift Underway in the World

    http://www.lewrockwell.com/2014/11/b...-in-the-world/

    Ginormous Financial Shift Underway in the World

    By Bill Sardi

    November 10, 2014


    Only for those persons who want or need to understand what is going on in the world financially.

    Here is what is happening:

    1. The US is involved in a financial war against Syria, Ira and Russia, by reducing the price of oil to below break even. This frees-up billions in the consumer economy.

    2. China is buying cheap oil by the boat loads and is switching its primary source from Iran to Nigeria.

    3. Japan (read below) is switching from investing US dollars it earns by selling cars and cameras from US Treasury Bonds (which are earning less than 2%) to investing in the stock market. Japan now holds $1.2 trillion of US Treasury bonds that are almost worthless now as they will likely never be repaid. This is a monumental change. Japanese companies have been buying each other’s stocks to prop up prices. This will create a crisis for the US which is living on borrowed money to pay for military, Medicare and Social Security. Will the US just create phony electronic money now? If you follow what I am saying here, the stock market might soar while the federal government collapses.

    4. See the second article below. It is written by Chriss W Street and published at BREITBART. It is the best explanation of what is going on in the world today and it says China is ready to dump its $1.3 trillion in US Treasury Bonds. Couple that with the shift from US Treasury Bonds to stocks by Japan and you have a ginormous financial tsunami about ready to hit the US. That is the reason why demand for gold and silver coins is very strong from the US Mint while gold and silver prices are being shorted by the bullion banks to stave off a bank run that would value gold over paper money. China is trying to weaken its currency so its goods are cheaper on the open market to buoy up its faltering economy.

    Make your investment decisions accordingly.

    Bill Sardi

    cont....
    FJB



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  3. #2
    China isn't going to dump their Treasuries. That would hurt them too because it would cause the value of their currency to soar which would cause their exports to us (and Europe) would plummet leading to possible domestic turmoil as people lose jobs which they want to avoid. (converting the US dollars in Treasury notes to yuan would mean they would be buying huge amounts of yuan with dollars- driving up the price in terms of dollars).

    China is trying to weaken its currency so its goods are cheaper on the open market to buoy up its faltering economy.
    They are trying to keep their currency low which means not converting dollar holdings into yuan. Dumping their Treasuries would do the opposite (unless they kept the money from the US Treasuries in some other dollar denominated investment).

    And Japan isn't dumping theirs and buying stocks either. In fact, their holdings have increased. http://www.treasury.gov/ticdata/Publish/mfh.txt Up $10 billion from the previous month and up $80 billion from a year ago.

    The price of oil is not below "break even" for Russia, Syria, and Iran. It is true that it is probably about what Russia set their budget based on (most of their government income is from energy) which could mean a budget shortfall but it is not below what they can produce it at. US does not set the price of oil anyways.
    Last edited by Zippyjuan; 11-10-2014 at 02:45 AM.

  4. #3
    LibForestPaul
    Member

    If there is an energy manipulation afoot, where should the smart money be invested.

  5. #4
    Quote Originally Posted by LibForestPaul View Post
    Where should the smart money be invested?
    In a balanced and diversified "bullet-proof" portfolio.

    25% gold bullion coins
    25% US Treasury bonds (30-year)
    25% total US stock market index fund
    25% US Treasury bills (1, 3, or 6 months)

    That, to me, is where the smart money should be invested -- the money that you can't afford to lose. No matter what storms may come, such a portfolio will indeed be relatively "bullet-proof". And during the last 40 years, such a portfolio has given a return of about 9% per year (nominal).

  6. #5
    Last edited by Natural Citizen; 11-10-2014 at 06:17 PM.

  7. #6
    Quote Originally Posted by LibForestPaul View Post
    If there is an energy manipulation afoot, where should the smart money be invested.



  8. #7
    Quote Originally Posted by helmuth_hubener View Post
    In a balanced and diversified "bullet-proof" portfolio.

    25% gold bullion coins
    25% US Treasury bonds (30-year)
    25% total US stock market index fund
    25% US Treasury bills (1, 3, or 6 months)

    That, to me, is where the smart money should be invested -- the money that you can't afford to lose. No matter what storms may come, such a portfolio will indeed be relatively "bullet-proof". And during the last 40 years, such a portfolio has given a return of about 9% per year (nominal).
    Half your money in Treasuries? That is very heavy in my opinion. Especially at a time of such low interest rates. I currently have a couple index funds (one small cap, one total market) and a dividend paying utility in a DRIP fund. And a paid off mortgage which lowers my future financial needs.

    Bonds have benefited from falling interest rates over the last 35 years (since 1980 when 30 year notes were paying 15%- today they are about three percent). There isn't a lot of room for that to continue for a long time into the future. They certainly can still go down some- but not by any significantly large amounts over a long term. Unless they go negative. Short term you may still be able to make money on them but long term it will be difficult.

    I would post a chart but everything seems to be flash these days. You can go here http://research.stlouisfed.org/fred2/series/DGS30 and select "MAX" to see.

    Found one from 2009 I can post. Scale is logarithmic. As I mentioned earlier, today 30 yields are 3.09% today.


    http://www.ritholtz.com/blog/2009/05...f-the-30-year/
    Last edited by Zippyjuan; 11-11-2014 at 01:25 PM.

  9. #8
    Let's see: Zippy or Sardi, Zippy or Sardi, Zippy or Sardi?

    I'll choose Sardi.



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  11. #9
    The vitamin salesman? OK.

    Actually if one reads the rest of the article, it talks not about China dumping all of their US Treasuries but possibly deciding to slowly sell some of them if they became concerned about the yuan weakening too much against the dollar.

    http://www.lewrockwell.com/2014/11/b...-in-the-world/

    The People’s Bank of China in November of 2013 announced it was ending its purchase of U.S. Treasury bonds. When China sold $48 billion in Treasuries in January, the yuan weakened by 5% to 6.3 yuan to the dollar. China has recently been intervening in the foreign exchange market to prevent the yuan from strengthening.

    Although the International Monetary Fund estimates that the yuan is still 5-10% undervalued, Lombard believes that China’s currency is 15-25% overvalued to the U.S. dollar. The easiest way for China to solve the overvaluation problem would be to “liberalize capital flows” by removing restrictions that limit Chinese investments to bank savings accounts and real estate. But, according to Lombard, “if Beijing opened the flood gates, asset diversification would cause huge outflows that would swamp inflows.” Such action could trigger a Chinese banking crisis.

    A smooth sale of its U.S. Treasury bond portfolio by China would push up U.S. 10-year Treasury bond yields by up to ½% and U.S. interest rates by about 1%. The People’s Bank of China could intervene in the currency markets to smooth the yuan’s decline. This action “would slow but not derail the US recovery.”
    Last edited by Zippyjuan; 11-11-2014 at 02:39 PM.

  12. #10
    Quote Originally Posted by Zippyjuan View Post
    That is very heavy in my opinion.


    Heaven forbid I do something that Zippyjuan/Peter Schiff does not approve of and does not comprehend!

    Sorry to be too heavy for you, Z/PS.

  13. #11
    What economic factors do you think will continue to push up Treasury bond prices in the long term? Thanks!

    Will the US economy get even stronger relative to the rest of the world- attracting more capital to US government bonds? Will price inflation go even lower (since they tend to follow the inflation rate)- making one or two percent yields over 30 years attractive?
    Last edited by Zippyjuan; 11-11-2014 at 05:28 PM.

  14. #12

  15. #13
    Quote Originally Posted by Zippyjuan View Post
    What economic factors do you think will continue to push up Treasury bond prices in the long term? Thanks!
    I would answer, Peter, but it would be too heavy for you.


  16. #14
    I think I can handle it. If you are willing to share your insights. I offered my reasons I think Treasuries are not a good long term investment at this time. "This is what you should do" but why should you do it? Thanks anyways.
    Last edited by Zippyjuan; 11-11-2014 at 08:06 PM.

  17. #15
    Quote Originally Posted by Ronin Truth View Post

    I see he writes on other conspiracies like JFK and 9/11 too.

    He also warned:
    Brace yourselves. Williams says “The timing of this remains sooner, rather than later, still likely within calendar 2013″ and that the dollar sell-off probably “will be the proximal trigger for the onset of hyperinflation before the end of 2014.” It may be time to buy a ticket on a spaceship to another planet.
    http://www.lewrockwell.com/2013/05/b...e-day-of-cash/

    Yep -nailed that one! (Did he buy his spaceship ticket?)

    H1N1 was a government bioweapon. Buying gold can help overthrow the government. Don't teach your kids to read (it is bad for their eyes!) Using sunscreen triples your chances of being hospitalized for heart failure.
    Last edited by Zippyjuan; 11-11-2014 at 07:42 PM.

  18. #16
    Quote Originally Posted by Zippyjuan View Post
    Thanks anyways.
    You're welcome anyways!



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  20. #17
    LibForestPaul
    Member

    Quote Originally Posted by helmuth_hubener View Post
    In a balanced and diversified "bullet-proof" portfolio.

    25% gold bullion coins
    25% US Treasury bonds (30-year)
    25% total US stock market index fund
    25% US Treasury bills (1, 3, or 6 months)

    That, to me, is where the smart money should be invested -- the money that you can't afford to lose. No matter what storms may come, such a portfolio will indeed be relatively "bullet-proof". And during the last 40 years, such a portfolio has given a return of about 9% per year (nominal).
    25% short term treasury, just trying to stay out of cash ?

  21. #18
    Quote Originally Posted by LibForestPaul View Post
    25% short term treasury, just trying to stay out of cash ?
    That is cash -- in the safest form available. Safer than keeping it in a bank.

  22. #19
    Quote Originally Posted by helmuth_hubener View Post
    In a balanced and diversified "bullet-proof" portfolio.

    25% gold bullion coins
    25% US Treasury bonds (30-year)
    25% total US stock market index fund
    25% US Treasury bills (1, 3, or 6 months)

    That, to me, is where the smart money should be invested -- the money that you can't afford to lose. No matter what storms may come, such a portfolio will indeed be relatively "bullet-proof". And during the last 40 years, such a portfolio has given a return of about 9% per year (nominal).
    You don't think that 25% of all retirement funds is too much in JUST gold bullion?

    You don't at least diversify with silver bullion also?

    I was looking at the different investment packages here & can't believe people rollover $100,000+ of their retirement into gold...

    https://www.regalassets.com/our-reco...tions/?id=2365

    I think 15-20% of all funds in metals is a good balanced number...

  23. #20
    Quote Originally Posted by Peter4Paul2016 View Post
    You don't think that 25% of all retirement funds is too much in JUST gold bullion?
    It is a lot, but there's a reason for it...

    You don't at least diversify with silver bullion also?
    No. I have a (relatively) small amount of silver, but I consider it an emergency-preparedness supply, like food storage or a generator, and not as an investment. Silver in today's world is primarily an industrial metal, and so it will not necessarily behave the same way and serve the same purpose as gold in an inflationary period. Which brings us to:

    The reason for 25%? The way, I see it, there are four possible economic environment:

    Prosperity
    Recession
    Inflation
    Deflation

    Those four environments are comprehensive. That's all there are. There aren't any more. There can't be, logically. And that is very fortunate. Since there aren't any more, we can take advantage of that. Even though the future is unknowable, we do know (at least as best I can tell) that those are the only four possible economic environments. And so, we can prepare for all four by buying something that will be good to have in each one.

    For Prosperity: Stocks
    For Recession: Cash
    For Inflation: Gold
    For Deflation: Bonds

    I do a four-way split because I am taking the radically humble view. I don't know the future. And so I don't presume to try to weight one component or another, pretending that one economic environment is more likely than another to be coming up. I just don't know. So I just cut the pie into four equal pieces.



    Why gold bullion? Because you need the assets to be very volatile, so that they'll move up strongly when needed, to carry the rest of the portfolio. That's one thing gold's got, in spades. Gold's got volatility. So, when inflation hits, you can count on it going up very strongly to offset the duldrum performance and losses that the other assets will be experiencing in that condition.

    Why so much? Because you also need enough of the asset to carry the whole portfolio. If you only have 5% of your portfolio in gold, what happens if we go into an inflationary environment? Gold might double or even triple, but the other 95% of the portfolio will likely be doing very poorly, and the performance of that 5% isn't going to be enough to even really make a difference. You have to have enough to make a difference -- enough, in fact, to carry the entire portfolio when the time comes for it to do its job. Gold can't do its job if it's only 5% of your portfolio. It can't protect you powerfully from inflation if it's given such a weak percentage.

    Now is 20% going to be all that different from 25%? Mathematically, no. Is 15% going to be all that different from 20%? Again, mathematically, no. But behaviorally, I think it is best to keep it a straight four-way split. Why? Because it's simple. It's elegant. There's a reason for it that you can understand and explain to your amygdala and other primitive, emotional brain centers when the stock market is crashing, or the gold market is crashing, or the bond market seems like it's just got nowhere to go but down! You want to fight or flight, but instead you review the rationality of your four-way split and stay calm and cool. It's easier to stick with plans that are simple and that come with logical reasons for them. Not sticking with plans is the biggest #1 cause of investment losses. How many investors really ride out the 20% crashes, the 30% crashes, and the 40% crashes, just steadily buying and holding stocks, over long periods of time like 50 years? None. None. None!, that's how many. Seriously, just none. The behavioral studies show this. Essentially no one turns out to be able to do this, it turns out. They just can't stomach it. So they wander from one strategy to another, as one after another fails them. A few years with tech stocks. Argh, 2000! Then a few years with a Boglehead. Argh, still losing money! Then a few years with boring, conservative(-seeming!) high-dividend DRIPs like utility companies. Eventually that stops working as well as you thought it would. Then maybe: oh, blast it all, I'll just keep it all in cash! Then the banking system fails. Whoops!

    Anyway, that's some of my thoughts. Thank you for yours! "15-20% of all funds in metals" is certainly reasonable, and not very far from my own thinking on the matter.

  24. #21
    Quote Originally Posted by helmuth_hubener View Post
    That is cash -- in the safest form available. Safer than keeping it in a bank.
    Treasuries are not as liquid as cash. Bank deposits are insured up to $250,000 so no risk on them either. (If the government fails and the currency collapses both may become worthless).

  25. #22
    Quote Originally Posted by Zippyjuan View Post
    Treasuries are not as liquid as cash.
    I can only assume you have never used a money market account and essentially know nothing about T-bills.

    Or, that you're just being Z/PS.

    Bank deposits are insured up to $250,000 so no risk on them either. (If the government fails and the currency collapses both may become worthless).
    There is probably little immediate risk of widespread banking panic, but if that were to occur, the FDIC does not have anywhere near enough assets to cover anything substantial. So, Congress would have to decide whether to bail everyone out. Would they do so? If so, would they pay one hundred cents on the dollar? Would they bail out your rich privileged self if you have more than $20,000 in savings, or would they instead focus on the "poor" and state that the "privileged" need to help "share the pain" and "make some sacrifices" in this, our time of national crisis? These are questions I cannot answer. They are risks.

    Would the government, on the other hand, ever fail to pay back their Treasury Bills? No. Even partial default would seriously disrupt their business model. Even one day late is inconceivable. They would never do it. They have no rational reason to fail to pay. They can always just create the money from thin air.

    Are there extreme scenarios where both bank deposits and T-Bills (and all other dollar assets) could have major problems? Yes. In that case, your gold would carry you through. But T-Bills are safer than bank deposits. Bank holidays can happen (and have!); T-Bill holidays cannot. The federal government, like it or not (and I don't), absolutely, positively will be able to nominally pay all its debts, and it has overwhelmingly strong incentive to do so.
    Last edited by helmuth_hubener; 11-13-2014 at 04:50 PM.

  26. #23
    Interesting. The government (FDIC) might not have the money to pay you your money but the government (Treasuries) will be able to pay your money. As you say, these would be both extreme and rare situations. Baring those extremes, bank accounts are more liquid and equally safe. If your notes are not mature, you may have to sell at a loss in an emergency. Cash does not have that risk. Compared to other investments, true, t-notes are pretty liquid. Just not quite cash. (Money Market accounts are not FDIC insured if you want to talk safety- bank accounts are).
    Last edited by Zippyjuan; 11-13-2014 at 05:23 PM.

  27. #24
    Quote Originally Posted by Zippyjuan View Post
    Interesting. The government (FDIC) might not have the money to pay you your money but the government (Treasuries) will be able to pay your money.
    This response is not for you, because obviously you are just being disingenuous, as is your wont.

    But no, the government always has all the money it wants (nominally). It can just print it. The government may or may not choose to dig deep and pay depositors all their deposit money in the even of banking problems. If they do, they will definitely not do so instantaneously. Congress doesn't have next-day service. You will be without your money for a while, and then hopefully it will come back to you, eventually, and hopefully it will be one hundred cents on the dollar, and hopefully they will not decide that you're above their fat-cat cut-off and thus not in dire need. That's a lot of hope -- especially to put in a legislative body that has not necessarily earned it over the years. Do I think they'll bail out all the common folks with $1,000 in the bank? There would be great political pressure to do so. But people with over $50,000 in the bank, on the other hand, are not a huge voting constituency -- there's not very many of them.

    But we can say that it will pay all of the T-Bills that the Treasury issues, and pay them on time, and do that no matter what it takes. Because there is a fundamental, overwhelmingly strong incentive for them to do so; an incentive which does not exist for the hypothetical mega bank bail-out.



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  29. #25
    Ahh, he added more to his post. Joy!

    Quote Originally Posted by Zippyjuan View Post
    bank accounts are more liquid
    Again, Zippy Schiff is exhibiting a total ignorance of reality here. No great crime, that. After all, how many people would Jay Leno have to stop on the street before he could get accurate information about money market accounts? A lot. The shame here is that Zippy Schiff will continue to assert his ignorant opinion and never, never, never change it. Sad. I blame the Yugo driver.

    But, for anyone else interested in actual knowledge, in actually learning something new: Savings funds kept in T-bills are actually just as liquid and in some ways more liquid than funds kept in an American bank savings account. Both are easily and readily convertible into green Federal Reserve notes. But there are some differences. The market for T-Bills is an over-the-counter market open around-the-clock, whereas depending on your bank's hours and services you may have to visit a branch between 9 and 5 Monday-Friday and excluding holidays, for example. Depending on where you are in the world, there may not even be a branch of your bank nearby. But even in the remote mountain villages of Nepal, you will probably be able to find a bank that you can talk into giving you Nepalese Rupees for a Treasury bill (should you happen to be carrying one). That's pretty liquid. Now if your money is in your American bank savings account, you could get on the internet -- if you can find any -- and transfer the funds into a checking account instead -- assuming you have one -- and then use your debit card to get rupees, in theory, so that you can get something to eat. Will you be able to find a working ATM? Likely not. If you can find one, you could instead just use your debit card linked to your US Treasury money market account, and you wouldn't have to do all that transferring.

    The market for U.S. Treasury securities is one of the largest and most liquid financial markets in the world. The market for your Bybanks, Kentucky Downhome Credit Union savings account... isn't.
    (Money Market accounts are not FDIC insured if you want to talk safety- bank accounts are).
    Again, evincing total ignorance (or just pretending to be). http://www.sipc.org/about-sipc/introduction
    Last edited by helmuth_hubener; 11-14-2014 at 11:39 AM.



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