08/02/2016

Financial Markets, Change and Action - by Jeff Fitchett

If you are invested in blue chip dividend paying stocks, bonds, high yield bonds (junk bonds), ETF's, emerging market investments, regular equity and fixed income mutual funds, etc; I challenge you to think about why you are investing in these types of investments.  If you hold bank stocks or other financial industry related stocks; what is your rationale for holding these companies?  Take blind faith out of the equation and seriously think about the outlook for banking.  Do you hold any investments related to transportation (railways, trucking, cargo ships, couriers)?  Do you own commodity extractors involved with iron ore, copper, zinc, coal, timber, aluminum, base metals, oil, etc.?  Do you hold consumer staples and consumer discretionary stocks & bonds?  Do you own REIT's and home building related stocks?  What are the positive catalysts in owning any of these sectors?  You need to think long and hard about the repercussions that will occur when you lose the bulk of your life savings.  Now is the time to be contemplating your investment strategy as government benefits such as pensions, health care and other government funded entitlements will not be around to support you.  I am extremely comfortable making these statements because the basic math does not add up.  

Banks lend money, manage assets and provide basic services such as transfers, bill payments, currency transactions and so on.  We all know that the world is drowning in debt.  Trillions upon trillions of debt will never be paid back other than through a hyperinflation.  This will destroy society.  On the wealth management side, baby boomers are marching into retirement and spending what little savings they have left.  In addition, the equity markets have been manipulated higher via central banks printing money and forcing interest rates to historically low levels.  As equity prices drop so to will wealth management revenue.  Not only that, but because of fractional reserve banking there is a serious risk associated with having any money held in any bank.  We are coming very close, even in Canada, to a time where our banks will fail and client money will go down with the banks.  If you are reading my remarks and you think I'm being hyperbolic I highly recommend you spend some time thinking for yourself and dig into how money is created.  You need to understand how leveraged our banks are and read about bail-in legislation that has been put in place in most Western nations.  In Canada, you can read about the bail-in legislation that was passed in our 2013 national budget.  Go to page 144 to 145 and read for yourself the bail-in legislation.  Over the weeks and months ahead be prepared for most companies to report brutal earnings reports. Bank stocks, fund companies and other financial firms are going to get hit very hard.

Manufacturers, commodity producers, transportation companies, retail sales companies are starting to suffer right now, but things are about to go from bad to much worse.   If consumers aren't buying, manufacturers will not be making things and shipping companies will not be moving cargo.  It's as simple as that! It doesn't take a mental giant to connect the dots.  I'm sure you have noticed major store closings such as Walmart, Target, Macy's, etc.  As well, everyone has noticed the drop in the price of oil.  Too much oil and not enough demand has contributed to the drop in oil prices.  I don't believe that oil prices are going to stay depressed indefinitely as the world is very unstable.  All it will take is for a major oil producing nation to have instability or an outright attack and oil prices will skyrocket.  

We are caught in a negative feedback loop that will progressively get worse over time.  Pay attention to corporate layoffs because this will be the ultimate canary in the coal mine.  It's a vicious deflationary spiral we are facing right now.  There are limits to how much debt the world can handle.  The 2008 financial crisis was caused by too much debt.  Central banks interjected and pumped trillions of dollars into the massive debt bubble in an effort to keep our way of life afloat.  Absolutely nothing has been solved in the aftermath of the great recession.  Extend and pretend should have been the name for Quantitative Easing programs (printing money) launched by central banks and applauded by politicians and mainstream media.   

Equity markets have been a distracting illusion for the masses to follow.  The average person believes that if the equity markets are doing well so to is the overall economy.  That is an incorrect assumption.  We no longer have free markets.  The manipulation within the financial markets today will go down in history as the biggest fraud ever conceived in human history.   Most people do not understand that the US Federal Reserve is a private bank and that their priority is to satisfy the objectives of their shareholders who happen to be the biggest banks in the world.  I have mentioned in previous articles that I invest in hard assets. Take a look at how gold has behaved since the volatility picked up at the beginning of January.  Hardly anyone invests in precious metals because the mainstream point of view from pundits, politicians and other talking parrots preach that blue chip dividend paying stocks and investment grade corporate bonds are the way to go.  Warren Buffet has done amazingly well playing the mainstream mantra of investing, but no one ever questions his political & corporate connections in addition to the fact that he has benefited more than most with the massive amounts of money that has been created since the 1960's through to this day.  In addition, the cost to borrow money has been dropping for 35 years.  He has enjoyed the gravy train for decades.  I'm not suggesting that he isn't a smart businessman, but I am highlighting that he benefited immensely from this rigged game we call the financial markets. 

I invest in hard assets because I do not have faith in our leaders, our society and our global economy. I am aware that there are limits to growth and that we have now hit the proverbial wall.  Many people will be financially ruined over the coming years and even more so will find themselves stuck in a perpetual state of depression.  I believe that we all have the power to control our own actions and we all have the option to prepare in some way for the changes that are upon us.  I understand that many people feel stuck and at a loss as it pertains to improving their own unique position.  Many people do not have savings that would allow for them to make drastic changes in their life.  I understand how complex each of our lives are, but I do know that each of us have the ability to educate ourselves.  Education leads to solutions. Think for yourself.

 I wish you the best!

2 comments:

  1. The rock and roll world gets it! "All the world's a stage" (Rush) and "paper money won't hold" (Montrose). "The system has failed", and the "endgame" is upon us (Megadeth). Wake up people and open your eyes. It wont be scary if your ready for it.

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  2. I concur completely! Thanks for your comments!

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