Is This What Has Got the Fed So Spooked? 

Source: Zero Hedge

“Over the last week, multiple Fed officials have surfaced to suggest the Fed needs to start cutting interest rates right now. Indeed, on Thursday, John Williams, who runs the NY Fed (the branch in charge of market operations) suggested the Fed needs to cut rates to ZERO again. Not 2%, or 1%, ZERO. This is happening at a time when economic data is rebounding, unemployment is below 4% and GDP growth is north of 3%. So what exactly is going on? What does the Fed know that has it so terrified, because it’s obviously not the US economy. 1) Deutsche Bank (DB) is imploding. Sitting atop over $49 trillion in derivatives, DB is like Lehman Brothers 2.0….2) China’s banking system is freezing. China experienced its first financial institution failure in 21 years in June. Depositors and creditors lost 30% of their deposits in the process. This is EXTREMELY similar to what happened to the US credit markets n 2008. And finally… 3) The Everything Bubble has burst. Treasuries are the bedrock of the current financial system and their yields represent the risk-free rate of return against which all risk assets are priced. So when the Fed created a bubble in these bonds, it created a bond in EVERYTHING. If the Fed cannot get this situation under control, there’s $555 trillion in derivatives at stake. Yes, TRILLION with a T. Something BIG is coming and the Fed knows it.”

 

Gold’s Shine Spreads to Other Precious Metals 

Source: Wall Street Journal

“Gold has recovered some of its former shine lately. Silver and platinum have been dull by comparison, but if history is any guide they are likely to regain their luster too. The price of silver, as measured by futures contracts traded on the New York Mercantile Exchange, has surged by 8.3% over the past two weeks. This may be a sign that gold’s impressive rally over the past year – its price has gone up 16%, compared with roughly 6% for the S&P 500 – is finally spreading to other precious metals. Part of the yellow metal’s jump is explained by extraordinary demand for haven assets. Investors have been fretting about the risk of a global economic slowdown as well as an escalation in the U.S.-China trade spat. But much of it also has to do with the Federal Reserve’s policy. And that should eventually boost all precious metals. Gold tends to move in the opposite direction to these bonds’ yields, which have plummeted since the beginning of the year. This is because the Fed has led investors to believe that it will soon lower rates – most now expect the first rate cut in a decade to happen later this month. What is more surprising is that the other two top-traded precious metals, silver and platinum, have lagged behind so much behind. Earlier this month, the ratio of gold to silver closed at a 24-year high….In the case of silver in particular, the link to gold appears too strong to be ignored for long.”

 

Are central banks losing their big bet? 

Source: El Erian/FN London

“In recent years, central banks have made a large policy wager. They bet that the protracted use of unconventional and experimental measures would provide an effective bridge to more comprehensive measures that would generate high inclusive growth and minimize the risk of financial instability. But central banks have repeatedly had to double down, in the process becoming increasingly aware of the growing risks to their credibility, effectiveness, and political autonomy. Ironically, central bankers may now get a response from other policymaking entities, which, instead of helping to normalize their operations, would make their task a lot tougher….The Fed tried to support growth in indirect, experimental ways. By injecting liquidity using multiple means, it raised financial asset prices well above what the economy’s fundamentals warranted. The Fed hoped that this would make certain segments of the population (asset holders) feel richer, enticing them to spend more and encouraging companies to invest more. But such ‘wealth effects’ and ‘animal spirits’ proved quite feeble. So the Fed felt compelled to do more of the same, which led to a host of unintended consequences and risks of collateral damage….With central-bank activism intensifying, the gap between asset prices and underlying economic and corporate fundamentals is likely to widen further. Central banks bet that greater activism on the part of other policymakers would be their salvation. But these days, they are facing an increasing probability of a lose-lose proposition….Like seasoned gamblers, central bankers may soon discover that not all bets pay off over the longer term.”

 

What Teenagers Learn When They Start a Business 

Source: Wall Street Journal

“For teenage entrepreneurs, running a summer business can teach a lot of lessons. Students, of course, are taking a chance when they launch ventures of their own instead of hunting for jobs, whether for the summer or the whole year. And in doing so, they’re in for a crash course in entrepreneurship. They must learn about dealing with customer complaints, adjusting a flawed business model and more. Here’s what some student entrepreneurs learned about business – and, sometimes, life….Anthony Mollo, Senior, Skyline High School, Ann Arbor, Mich., Business: Rescue Lawn Care, Revenue: Over $17,000 in 2018 season, Profit: $8,700. How he did it: Mr. Mollo had mowed lawns over the summer since middle school and over the years had earned about $4,000 in total. At the end of the 2017 season, he decided to see how far marketing could take the business. He spent about $200 on postcards – and ended up with so many clients that he hired 10 students over the season, with two or three assisting on a typical job. LESSONS LEARNED; Make a good estimate: At the start, Mr. Mollo says, he was a ‘terrible estimator’ and failed to anticipate things that could go wrong. In one early estimate, for instance, he didn’t account for the time to buy and unbag mulch, among other things…Now, he says, he asks more questions when developing an estimate and builds in contingencies for the unexpected….Bridgette Kim, Senior, Our Lady of Good Counsel High School, Olney, Md., Business: tutoring, Revenue: $8,900 since 2016, Profit: $7,500. How she did it: Ms. Kim began tutoring in math and science as a summer business after her freshman year. She initially helped middle-school students, and then shifted her focus to high-schoolers, charging $20 an hour. She stopped tutoring at the start of her senior year to focus on college applications. LESSONS LEARNED; Be prepared to sacrifice: When two students complained that they hadn’t been helped, Ms. Kim developed a money-back policy and refunded them each $40. But in the end, the students kept working with her. One told Ms. Kim that initially he didn’t believe she could help him and wasn’t paying full attention. When he buckled down, he picked up the material, she says. The other student appreciated Ms. Kim’s hourly rate and that she went over the allotted time without charging more. Adapt to your customers: When Ms. Kim saw students losing concentration, she modified her approach. After explaining lessons, she asked students to summarize to make sure they had understood the material. She also found a session of more than an hour was counterproductive.”

 

Jim Rogers Warns: “Worst Bear Market” Is Coming 

Source: Zero Hedge

“On a recent call with ETMarkets.com, no-nonsense economic guru Jim Rogers restated his concern that a bear market was on the way, and investors should be on the lookout for small signs to avoid another crisis like 2008. Although Rogers could not give a timeline for the bear market to arrive, he did say that it will be the ‘worst in my lifetime,’ a prediction he’s stuck by for a while now, and the key to spotting a market correction lies within smaller markets. Rogers told Economic Times, ‘I am not investing in US stock market because I expect problems to come in the next year or two. I am not buying shares. In the US market, some of the stocks like Apple and Google go up every day. They never go down, which is a dangerous sign in any stock markets…It has been over 10 years since we had a serious bear market in the United States. I would suspect by the end of this year or next year, it will start. These things always start small, where people are not looking and then they work to the major markets, and then you see them on the major news.’….Rogers also told ETMarkets.com that he believes a trade deal will arrive soon between the United States and China amid escalating tariffs, but it may not mean much as even more trade wars will begin, contributing to the catastrophic bear market scenario Rogers mentioned above.”

 

The Three ‘D’s Of Doom: Debt, Default, Depression 

Source: Smith/Of Two Minds

“‘Borrowing our way out of debt’ generates the three Ds of Doom: debt leads to default which ushers in Depression. Let’s start by defining Economic Depression: a Depression is a Recession that isn’t fixed by conventional fiscal and monetary stimulus. Here’s why we’re heading into a Depression: debt exhaustion…Costs for big-ticket essentials such as housing, healthcare and government services are soaring while wages stagnate or decline in purchasing power. When wages are stagnant and big-ticket items are soaring in cost, that leaves less available to service more debt…Marginal borrowers default, and the resulting losses collapse marginal lenders….Meanwhile, labor’s share of the economy (wages and salaries) has been in structural decline the entire 21st century. There’s less – a lot less – available to fund more borrowing after those stagnating wages pay for rent or a mortgage/property taxes, healthcare, childcare, student loans, etc.”

 

The Strange Political Silence On Elder Care 

Source: Washington Monthly

“Millions of middle-aged women struggle to care for ailing older relatives, and the crisis is only getting worse. So why is no one talking about it? Alexis Baden-Mayer, a freckled forty-five-year-old, put her house on Airbnb three years ago and moved with her husband and two kids into her parents’ home in Alexandria, Virginia. Her mom, who has Alzheimer’s disease, was no longer able to take care of her dad, who had suffered from heart failure. ‘I didn’t really have a good idea of what I was getting into, quite honestly,’ she said, reflecting on what a truly frank conversation with her husband would have sounded like: ‘What do you think of living with my parents for about ten years while their health declines and they die?’….Baden-Mayer is one of about thirty-four million Americans providing unpaid care to an older adult, often a family member. Most of these caregivers are middle-aged, and most are women. They are individually bearing most of the burden of one of America’s most pressing societal challenges: how to care for a population of frail elders that is ballooning in size….Most people assume that Medicare will cover the type of long-term personal care older people often need; it does not. Neither does standard private health insurance…So the safety net you thought would catch you in old age is less like a net and more like a staircase you get pushed down, bumping along until you’ve impoverished yourself enough to hit Medicaid at the bottom….Meanwhile, the cost of hiring a home health aide to take care of a frail parent can add up to $50,000 or more per year….Yet even though American women today are politically organized and running for office in record numbers, elder care remains widely viewed as a purely personal matter. You could be a news junkie, following the 2020 race closely, and have heard nothing about it. Why is that? And could long-term care go from being a sleeper issue to one that boosts a candidate out of the 2020 pack?….One lawmaker who feels strongly about an issue could be worth twenty who merely support it…..’You can divide the world of politicians into two groups,’ said Howard Gleckman, a senior fellow at the Tax Policy Center. ‘It’s not Democrats and Republicans, it’s people who have been caregivers and people who haven’t.'”

 

Forget”FAANG’ stocks, technical analyst touts ‘BAANG’ stocks for a new, scarier era Source: CNBC

“‘BAANG’ is the new ‘FAANG.’ So says technical analyst John Roque at Wolfe Research, who believes a group of gold miners he coined as BAANG – Barrick Gold, AngloGold, Agnico Eagle Mines, Franco-Nevada, Gold Fields – are better plays than mega-cap FAANG names as they might have reached their peaks and started losing steam. ‘We made this index BAANG in homage to the fading FAANG,’ Roque said on CNBC’s ‘Squawk Box’ on Monday. These gold miners are ‘much like gold.’….Gold is trading above $1,400 for the first time since 2013 and it is up more than 12% year-to-date. The metal’s strength is backed by safe-haven buying amid geopolitical uncertainties as well as the Federal Reserve’s openness to rate cuts this year. The BAANG stocks are up a whopping 42% since May 10, the analyst said. Meanwhile, Facebook, Netflix and Google’s parent Alphabet are still in the red for the trailing 12 months…Many market participants said Big Tech which led much of the current bull market are starting to lose their characteristic mojo amid the trade tensions and a global economic slowdown.”

 

From baby boomers to Gen X: America’s retirement crisis by the numbers 

Source: USA Today

“Thousands of people retire every day, and many don’t have the savings they need to last the rest of their lives. When that well runs dry, they’ll need to lean on their family members to support them or seek government assistance to cover their basic living expenses. It’s a fate thousands of Americans are already experiencing, and based on data from the latest Northwestern Mutual Planning & Progress survey, tens of thousands more are set to join them in the coming decades. Northwestern Mutual’s 2019 study focused on baby boomers and Generation X – the two generations next in line for retirement – and the results showed both groups have work to do. Of the 10,000 baby boomers turning 65 every day, 17% have less than $5,000 in retirement savings, and 20% have less than $5,000 in personal savings outside of a retirement account. These numbers are even higher for Generation X, with 21% having less than $5,000 in retirement savings and 22% having less than $5,000 in personal savings….Freeing up cash isn’t always easy, but you must prioritize retirement savings, even if it means foregoing other more enjoyable things. Limit your discretionary purchases, cancel subscriptions you don’t use, and consider downsizing your home to reduce your current expenses or consider moving to an area or state with a lower cost of living. The future looks bleak for many of America’s retirees and older working adults. It may be too late for some of them to save enough for their dream retirement, but with some planning and a frugal mindset, you may still be able to achieve a secure retirement.”

 

2020 Candidates Keep Ignoring The Same Big Issue 

Source: Daily Caller

“The rapidly expanding national debt has seemingly been a virtual non-issue so far in the 2020 presidential campaign. None of the 20 Democratic candidates taking part in the debates later in July touch the national debt issue on their campaign websites, a Daily Caller News Foundation review of their sites found. The ‘Promises Kept’ section on President Donald Trump’s reelection website makes no mention of the national debt. The candidates aren’t the only ones ignoring the issue, either. None of the moderators for the first two Democratic presidential debates asked any questions about the national debt….Neither political party is in a particularly strong position to campaign on addressing the national debt. The national debt grew by almost $9 trillion during the eight years that Democratic frontrunner Joe Biden served as vice president under former President Barack Obama….Trump repeatedly warned during his 2016 campaign that America’s expanding national debt posed a threat to the country, but the debt has only continued to grow during Trump’s presidency.”

 

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