Disclaimer: I am not a licensed securities dealer or adviser. The views here are solely my own and should not be considered or used for investment advice. As always, individuals should determine the suitability for their own situation and perform their own due diligence before making any investment.
On March 15, 2017, the federal reserve will announce whether they will raise interest rates. The Fed keeps indicating that they will raise it, leaving little reason to doubt that they will. The Fed has artificially kept the rates down much longer than any period before.
Anyone with a basic economic understanding knows that a central bank’s artificially low interest rate gives a false signal to the business owners and operators that they should invest in projects when there aren’t enough resources in the economy to even complete these projects. Thus, there is massive capital misallocation. Given the fact that the Fed has only raised the interest rates twice in the past decade shows that there is massive capital misallocation.
Add to the fact that the ruling class in Washington D.C., who probably couldn’t tell you what praxeology is or how it even relates to economics, are more worried about preserving and creating political capital instead of real capital through consumer savings.
The republicans are now split between the paleoconservatives/libertarians, the neoconservatives, and the Trumpites. With neocons wanting big spending and a war in every country including our own, the Trumpites will have a hard time not going to war or expanding the government. The Trumpites want to spend money on infrastructure when the Federal infrastructure does not need repair. In fact, it’s only a few states that have this problem: mainly California and Wisconsin (and Wisconsin is famous for its old bridges that are considered “attractions” and the government won’t let them be repaired! The Bridges of Madison County anyone?). As well documented in the book Trumped! A Nation on the Brink of Ruin… And How to Bring It Back, the propaganda about the falling bridges is more about gaining political capital than it is about falling bridges. It resembles more of a “Roman jobs” program of building the Colosseum to kick the fiscal and economic problems down the road (Rome was experiencing unemployment and used major building projects to solve the problem, except this eventually made matters worse).
The Democrats are fractured too. The Democrats are like neocons, they love war and destruction. And it appears they want a war with Syria and Russia, even though Obama mocked the idea of viewing Russia as a threat.
Hey Democrats, the 1980’s called and they want their foreign policy back. And the Russian military threat? Well their entire annual budget is what the US spends in two and a half weeks, and their economy is only 11% of our GDP. If they bully us with that little amount of funding, then we need to be more angry at our own country’s inability to have a respectable military.
The Democrats are fractured between the far left and the Democratic establishment. The establishment hates the far left so much that they actively participated in stopping the candidacy of Bernie Sanders. Which makes their claim of Trump not being legitimate because of alleged Russian hacking seem comical, especially when Obama himself said there was little to no evidence of it. But something that unites the Democrats is the hatred of President Trump, but it is certainly not based on principles, after all, Donald Trump is more closely aligned with the Democrats than the Republicans on economic philosophy.
The Democrats may hate Trump so much that they are willing to throw away their principles (if they had any) and give Trump a hard time no matter what.
That brings us to the debt ceiling, which expires on, you guessed it, March 15, 2017. The Trump administration will need to raise the debt ceiling, which will be immediately surpassed because Trump, who either for political reasons or sheer stupidity, managed to spend virtually the entire treasury rainy day budget in 60 days. Some have pointed to this as the reason why the stock market has continued to rise despite depressing market fundamentals.
So there will be another trillion needed after raising the debt ceiling. And thanks to the genius of Obama and his administration, there is already a set amount of $10 trillion that will take place in this next decade that President Trump is really powerless to stop. So even if the Trump Administration manages to not go into debt, there will still be trillions added to the debt.
Jim Rogers was ridiculed in 1999 when he stated that commodities were the thing to buy in his book Hot Commodities: How Anyone Can Invest Profitably in the World’s Best Market, which shortly after, had a bull market that was about two decades long. Jim Rogers was ridiculed in 2004 when he stated that the housing market was going to cause a meltdown. Jim Rogers enjoyed massive gains from the economic collapse. My advice is to listen to Jim Rogers and not ridicule him.
March also seems to be the month that the Republicans are releasing their version, and disaster, of Obamacare.
The Chinese have created an economy based on the biggest bubble in the world.
The Chinese have apparently recognized this and are trying to figure out how to stop it. Unfortunately, according to history and simple logic, there is no way to stop it other than to let it collapse.
So the entire financial system is now down to Trump getting along with the Republicans, Democrats, and the Chinese. No amount of alcohol will allow anyone to swallow that much pride in order to work together.
David Stockman and many other investors believe that the crash will be worse than the Great Recession. I’m inclined to agree because most likely your neighbor doesn’t have $500 to his name. That is why I sold my water, since it is an ETF. Valuations of stocks are insane. We have reached peak debt. Also there are these statistics:
I bought gold for this reason. The market usually falls during the third quarter, but this time the first quarter seems scarier than the third. Whether the recession starts in the first, second, third, or fourth quarter, it certainly seems that the political climate around the world (like in France) and market fundamentals are all pushing for turmoil in 2017.
Because of the misallocation in the economy, we are long overdue for a market correction. We need a market correction sooner rather than later. Otherwise, the crash will only be bigger and hurt worse.
In parting, I’ll mention SnapChat’s remarkable IPO, which kept rising. This is despite the fact that SnapChat has never made a profit. Many times in my life I have heard it said, when the widow next door who knows nothing about finance except how to write a check to the local grocer makes a lot of money in an investment, it’s a Tulip Bubble and you should get out immediately. Or in the modern case of the new Tech Bubble, it’s not your neighborhood widow, it’s your Uber driver. Now sanity has won over and it is back to somewhat of a reality. But I would stay away from it like the plague, along with Twitter, whose CEO seems to be more interested in being a moralist than actually providing value to retirees whose retirements own Twitter stock.