SPECIAL GUEST: GRAHAM SUMMERS  is the Chief Market Strategist for Phoenix Capital Research, , an independent financial research firm based in Charlottesville, VA. He writes Gain, Pains, and Capital, the firm’s FREE daily e-letter covering the equity, commodity, currency, and real estate markets. Graham  also writes Private Wealth Advisory, a weekly investment advisory devoted to helping paying clients navigate the financial markets and produce outsized returns from their investments. To whit, Graham called the 2008 Crash and was one of the few newsletter writers to produce positive gains that year. Graham Summers worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He has made presentations on investment ideas to high net worth clients in Dubai, Singapore, Zurich, Playa Del Carmen and his research has been quoted by Crain's New York Business, Money Talk Radio, Reuters, and RollingStone Magazine to name a few publications.

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GRAHAM SUMMERS TALKS

FINANCIAL REPRESSION

Published 04-28-15

34 Minutes

FINANCIAL REPRESSION

"When I think of repression I think of the Psychological concept that repression is the suppression (or pushing back) of something that is too painful to deal with in sort of a conscious way. That is exactly what the central banks of the world have been doing essentially since 2008. What we had in 2008 was the beginning of a debt deleveraging cycle o the dreaded debt deflation. The economists often like to argue that deflation is terrible but they are being overly general because deflation is actually a wonderful thing (we all want to have things we want to buy be cheaper) but the issue for the economists or Keynesian's is 'debt deflation'".

When debt begins to deflate you run the risk of becoming insolvent particularly in the bond market.

"Because we have been in this debt leveraging cycle for over 30 years ( a bond bubble would be the simplest way of putting it) the central banks are all terrified of a bond bear market because that means that almost instantly all developed nations are bankrupt because the way they have papered over the decline in living standard is by issuing more debt. It has gotten to the point now where because we don't have the money to pay the debt back we are issuing new debt to roll over the old debt (or pay back the old debt)."

"It sounds like a Ponzi scheme and it actually is! It works relatively well while the bond or underlying asset is rising in value because the debt is getting cheaper and the yield is falling

"When it reverses if you don't have the money to pay back the bond so you start to enter a deflationary cycle which is what we had in 2008.

WATCH WHAT THE FED DOES - NOT WHAT IT SAYS

"Most of what the central banks talk about is nonsense. If you watch their actions it is about how do we stop the bond bubble from blowing up? They have done that by three ways:

1. They cut interest rates down to zero. By doing this they made it much easier to finance debt.
2. They began engaging in Quantitative Easing (QE). They essentially print money and buy large assets from the banks. It started out as Mortgaged Backed Securities (MBS) because they were the assets devaluing fastest. The second and third rounds were just attempts to keep the whole thing afloat. By Buying bonds you are basically broadcasting to the world I am going to be buying this asset in the near future. The most obviously trade is then for you to buy the bond before you and then turn around and sell it to you for a profit. Globally investors have essentially been front running the central banks.
3. They suspended accounting standard. This was so banks weren't forced to sell devaluing products but could maintain using them as collateral at higher required values.

"Essentially Repression was the Central Banks trying to repress the terror of debt deflation!"

"All of this has manifested a sort of financial perversion where you seeing capital doing all sorts of crazy things and flowing into areas it would have never gone to before because risk has been so mis-priced by the market."

TROUBLING ISSUES

• $555T INTEREST SWAPS
  • All Interest Swaps are trading "hinged" on Bond Collateral which is in a massive bubble,
  • Something may be up when the Plunge Protection Team takes up increasing residence in Chicago where Bernanke is now consulting to Citadel (the largest High Frequency Trading player in America) also in Chicago.
• $72T SHADOW BANKING
  • The source of the 2008 Financial Crisis has mutated to new instruments to borrow short to finance Student Loans and Car Loans. The Shadow Banking Systems now "hinges" on Repos, Collateral Transformations and Rehypothecation.
• USD CARRY BLOWING UP
  • The $9T US$ carry Trade is hinging on ~$5T in merging Markets which ar now on the wrong side of the trade as the US dollar spikes,

"When it gets serious you can expect the central bankers to lie!"

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SPECIAL GUEST: JOHN BROWNE is the Senior Market Strategist for Euro Pacific Capital, Inc. Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with." A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

In addition to careers in British politics and the military, John has a significant background, spanning some 37 years, in finance and business. After graduating from the Harvard Business School, John joined the New York firm of Morgan Stanley & Co as an investment banker. He has also worked with such firms as Barclays Bank and Citigroup. During his career he has served on the boards of numerous banks and international corporations, with a special interest in venture capital. He is a frequent guest on CNBC's Kudlow & Co. and a former contributing editor and columnist of NewsMax Media's Financial Intelligence Report and Moneynews.com. He holds FINRA series 7 & 63 licenses.

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JOHN BROWNE TALKS

FINANCIAL REPRESSION

Published 04-27-15

40 Minutes

FINANCIAL REPRESSION

"It is the financial repression of the ordinary individual in America. It is happening through three main avenues or arteries.

1. POLITICALLY - The government is increasing its power almost everyday and repressing the public individual and particularly the rights of the individual. Always under the guise that it to help you! Published statistics are highly questionable; growth rates, inflation rates, unemployment rates. They are confusing people and today I read how they are forcing people out of using cash!
2. ECONOMICALLY - We have had an enormous, unprecedented injection of cash into the economy with a $3.8T QE program. Its an experiment! It was initiated in Japan where two decades ago the BOJ said it wouldn't work but the politicians insisted they do it. After two decades it still hasn't worked. We are now doing it on a grand scheme without a pilot program. It is creating a (liquidity) trap. It is a major distortion and is crushing savers.
3. FINANCIALLY - ZIRP is (also) crushing savers! It is savings which forms investment for the future. 62% of employment comes from small businesses where formation must be incented. That needs capital from savings. This along with increasing regulation is not only killing the consumer but the incentive to start a small business which is the key to the creation of jobs, which is key to the creation of income which is then key to savings and growth in the economy. It has all been killed by these policies.

"I don't believe the central bank is necessarily evil, just unbelievably Irresponsible!

LIQUIDITY TRAP

"I think we are now seeing a situation which you could call a liquidity trap. There is so much money around that if they start to raise interest rates they are going to discourage people even more from spending. Ordinary individuals have low wages (wages have been flat for six years at least) yet taxes are going up (the number of taxes) as well as charges (licenses and fees)"

"They are pushing on a string. It isn't liquidity that matters but wages and income!"

"How does the Fed create income without just giving us cash in the post (mail) by just sending us checks?

BY DESIGN

"I'm afraid I believe at the very top it is devious! If I connect all the dots together I cannot feel it is by accident - it by design. I think the president wants to distribute American wealth around America, but even worse is to distribute American wealth around the world. Its killing the economy and its kiliing America."

"It means (eventually) everyone is going to look towards the government for solutions - that is when totalitarian governments come in (to existence)"

"The only solution is single term politicians - Turkey's don't vote for an early Thanksgiving!"

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SPECIAL GUEST HOST: JOHN RUBINO, Author & Publisher of DollarCollapse.com

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DE-DOLLARIZATION

with John Rubino & Gordon T Long

Published 04-20-15

35 Minute Video

IT BEGINS!

John Rubino and Gordon T Long discuss the status of global De-Dollarization within the context of three developing macro events:

• THE ASIAN INFRASTRUCTURE INVESTMENT BANK (AIIB) “MUTINY”
• PUTIN’S EURASIA CURRENCY PROPOSAL
• MOUNTING PETRODOLLAR MERCANTILISM PRESSURES

It is clear from insiders that:

"China plans to push for yuan to take prominence in loans under the Asian Infrastructure Investment Bank and the Silk Road Fund. China may encourage $100b AIIB and $40b Silk Road Fund to issue loans directly in yuan or set up yuan-denominated funds under the two institutions. This is according to the people, who ask not to be identified because deliberations are private.” 

The South China Morning Post specifically reports:

Beijing will push for the yuan to be included in a basket of currencies used to denominate and settle loans from the Chinese-led Asian Infrastructure Investment Bank (AIIB), according to think tank sources.

Beijing will also encourage the AIIB and the Silk Road Fund to set up special currency funds and issue yuan-denominated loans through both institutions, the sources said.

If the US dollar is used, it weakens China’s bid for the yuan to be a global currency.

The efforts are part of a drive to internationalize the Chinese currency and come as the International Monetary Fund prepares to discuss the possible inclusion of the yuan as its fifth reserve currency and as part of the basket that forms the IMF's Special Drawing Rights.

The sources' claims appeared to be confirmed by a state media report, which said that a basket of currencies called the "AIIB CURRENCY" would most likely be adopted as the bank's currency of settlement… 

Hao Hong, chief economist and managing director of research at Bocom International, said -  China should do its best to establish the yuan as a currency for settlement and denomination.

PUTIN’S EURASIA CURRENCY PROPOSAL

"The time has come to start thinking about forming a currency union," Mr Putin

The EEU is an economic union which comprises Russia, Belarus, Kazakhstan and Armenia. Kyrgyzstan is also set to join the bloc. 

MOUNTING PETRODOLLAR MERCANTILISM PRESSURES

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SPECIAL GUEST: MIKE ("Mish") SHEDLOCK , Publisher of the Global Economic Analysis Blog.

An espoused self educated Austrian Economist,  Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Read more at http://globaleconomicanalysis.blogspot.com

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MISH SHEDLOCK TALKS

AMERICA'S PENSION PROBLEM

Published 04-18-15

Mish Shedlock talks about the magnitude of the mounting Pension Problem in America and uses his home state of Illinois as a prime example. According to a State Budget Solutions, last year’s state unfunded pensions reached an all-time high of $4.7 trillion. This funding gap state public pension plans are underfunded by $4.7 trillion, up from $4.1 trillion in 2013. Overall, the combined plans' funded status has dipped three percentage points to 36%. Split among all Americans, the unfunded liability is over $15,000 per person.

PENDING PENSION CRISIS

"Illinois Pension's in general are 39% funded! This is after this massive rally we have had since 2009 in financial assets. Some of the worst ones are only about 20% funded."

"Various cities in Illinois have problems, Chicago being one of them. The City of Chicago has a huge pension crisis right now. We have things in Illinois like "Home Rule Taxes" where cities can levy their own taxes in addition to the state. That is why we have varying sales tax that range anywhere from 6.25% to 10%, depending on locality."

"I have been working with the Illinois Policy Institute on pension and bankruptcy issues. There are a number of cities in Illinois that are ready to file bankruptcy. The problem is they can't file bankruptcy because the state doesn't allow it."

"The fundamental problem is they have made more promises than they can possibly keep!"

GAMING THE SYSTEM

The problem is "you have police and fire workers who can retire after 20 years ... and collect up to 70% of their earnings based on the 5 highest years salaries. We see a lot of pension spiking in the last few years where for example police work overtime (which counts towards their best five years) so these workers stand to collect far more in retirement (total years in retirement) than they actually ever made while working (total years worked).

"Tax payers are actually funding the employees portion of the pensions by excessive wages and direct contributions ".

"Chicago floated General Obligation Bonds to fund current expenses. That is illegal! We have bonds here in Illinois that are called tax exempt on the basis they are supposed to be funding long term infrastructure expenses that are funding short term needs."

OSCENE PROPERTY TAXES

"Taxes in Illinois are are already obscene. A homeowner on a $600,000 home can expect to pay $14-15,000 per year - every year on property taxes. Do you really own your own home in Illinois?"

"Pensions are so underfunded in Illinois that they are going to go bust in the next slowdown. I believe one (a slowdown) is on the way."

LOOMING CRISIS GLOBALLY

Negative interest rates are sweeping the globe. How will states, cities and towns fund themselves and their pension obligations in an era of potential negative nominal bond rates?

• Returns on the heavily weighted funds' bond holdings are being potentially destroyed , while
• State bond offerings are likely to face mounting issues around maintaining investor attraction with such monstrous overhang levels of unfunded pension liabilities.

"How will states, cities and towns fund (attract) long term assets with 15 year negative bonds?"

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