BALTIMORE – Stock markets continued their rebound yesterday.
The Dow rose 284 points… or just over 1.5%.
London’s FTSE 100 Index was up 3.6%.
And Europe’s equivalent of the Dow, the Euro Stoxx 50, was up 2.7%.
Investors have realized Brexit isn’t the end of the world.
First, because they think it won’t really happen.
After all, elites can fix elections, buy politicians, and control public policy…
Surely, they can fix this! (A letter in the Financial Times reminds us that Swedish voters cast their ballots against nuclear power in 1980. The government just ignored them, doubling nuclear power generation over the next 36 years.)
Second, because investors see the panic over Brexit leading to more spirited intervention by central banks!
The EZ money floodgates – already wide open – are to be opened wider.
The U.S. has its QE program on hold, but Europe’s scheme is gushing like Niagara.
Mario Draghi at the European Central Bank buys $90 billion a month in bonds. And he’s not only buying government bonds; he’s buying corporates, too.
In Japan, always a trendsetter, the Bank of Japan has bought so many bonds it has pushed Japanese government bond yields below zero – out to more than 45 years on the yield curve!
In other words, you can now lend to the bankrupt Japanese government until 2051 with no hope of making a single yen, nominally, on your investment.
Now, with bonds stacking up in their vaults, the Japanese feds are diversifying. They’re buying exchange-traded funds (ETFs), too.
Via its ETF purchases, the BoJ buys about $30 billion of Japanese stocks a year. This has made it a top 10 shareholder in about 90% companies listed on the country’s Nikkei 225 Index.
Apparently, the BoJ announced it would buy a particular kind of politically correct ETF, even before such an investment existed. This led to a rush to meet the demand (no matter how looney) to create exactly the ETF the Japanese feds were looking for.
So now, the phony money created by the BoJ… buys phony ETFs created by the sushi equivalent of Wall Street… solely for the purpose of letting the Samurai feds put more phony money into the financial sector.
The ETF then must buy politically fashionable companies, many of which probably wouldn’t exist were the fix not in so deeply.
Result? The Bank of Japan – not private investors – is the proud owner of stocks and bonds that private investors didn’t want, bought at prices they wouldn’t pay.
The whole show is too goofy for words. But words are all we’ve got!
“It is just a matter of time,” says a friend writing from Switzerland, “before the feds own all our assets. They’re determined to keep prices high and they have unlimited resources.”
Yes, stocks, bonds, old copies of Mad Magazine… everything will be owned by the government.
Then our liberty will be complete. We will have nothing… and nothing to lose. We will have become what leading progressive economist Wilhelm Röpke had anticipated: the “stable fed” animals that depend on their masters to keep them going.
At last, we will have the kind of capitalism another economist – Karl Marx – dreamed of: capitalism without private capital.
The Deep State will control all our wealth. We will go to college on federal loans…
…we will drive cars, leased of course, at federally subsidized low rates…
…we will live in houses mortgaged by federal mortgage lender Fannie Mae… with the mortgage rates pushed down by its fellow manipulator, Freddie Mac…
…we will work for companies that depend on the Fed’s EZ money financing…
…and, of course, our medical care will be in the hands of the feds… and our retirement finances too.
Cradle to grave – Chapter 1 to Chapter 11… all on central bank credit.
Each dollar in the private sector is either earned or borrowed. The feds and their crony friends get their money for free. Gradually, they own more and more assets… while the rest of the people owe more and more debt.
But wait… let us look again at the maze of dots.
How did this happen?
Yesterday, we saw that price is not the same as value.
If you want to increase prices, all you have to do is spread around some cash. Drop money from helicopters… especially in bad neighborhoods…. and prices will soar.
Here is where it gets interesting…
Because when you drop money from helicopters, values tend to drop, too.
What shoemaker will still take pride in a making a good pair of walking boots, when his money floats down from Heaven with no effort at all?
What company will still sweat and strain to produce the best possible products, when its revenues no longer come from demanding customers?
What analyst sharpens his pencil to find the best companies to invest in… when there is no longer any connection between money and quality performance?
In rich neighborhoods or in poor ones, giving away money causes trouble.
Quality declines… as fewer and fewer people are willing to put in the time and trouble to produce it.
And why should they?
The ancient and sacred tether, connecting quality to wealth, effort to reward, has been severed.
Want to know why the average American man earns less today than he did 40 years ago? Want to know how the rich got so filthy rich? Want to know why, as the Financial Times put it yesterday, Hillary is afraid of a “populist contagion"?
The feds got out the knife in 1971. They changed the money system itself. They severed the link between gold and the dollar… and between value and price.
It was so subtle almost no one objected… and so clever almost no one saw what it really meant.
It took us more than 40 years to figure it out. And even now, the dots reveal a pattern, but it is indistinct… hard to see… and easy to misinterpret. Most people see only the symptoms… the boils… the fever… the night sweats… and the daytime delusions:
The masses voting for Brexit or Donald. Interest rates falling to 5,000-year lows. The gap between rich and poor opening wider and wider.
What is the cause?
By Doug Casey, Founder, Casey Research
Diary: So Doug, why don’t you give a little background on your recent trip to Poland and the Ukraine?
Doug Casey: Well, my first trip to Eastern Europe was in the late ‘60s, during the Soviet era. But I’ve spent relatively little time in Eastern Europe, and this was my first time to Poland and Ukraine.
I’m favorably impressed with both countries — the societies, the opportunities, and with the way things look. That’s contrary to what most people think, especially regarding Ukraine; they think of it as a warzone. But the secession in the Donetsk and Luhansk provinces doesn’t affect the rest of the country.
In fact, we’re looking at real estate and stock prices, and they appear to present tremendous opportunities…
Of course, most people would say, "Well, there’s no way I’m going to live in the Ukraine. That must be a horrible place."
But the fact is that Kiev as a city dates from the 500s. It’s an ancient city. It’s a beautiful city. It’s a delightful place to be, totally undiscovered, and very, very cheap.
Eastern Europe, for all the bad PR it gets, is generally crime-free. So popular perceptions and what you read about in the mass media are totally inaccurate, in my opinion.
Doug Casey and his globetrotting analyst Nick Giambruno in Kiev’s Maidan, the scene of a recent and bloody revolution.
I could live very happily, and very inexpensively, in a luxury apartment, in either Warsaw or Kiev.
Both cities are very civilized, lots of people speak good English. And there’s reason to think both these countries will improve significantly.
Editor’s Note: Doug and his globetrotting analyst Nick Giambruno are expert “crisis investors.” This strategy allows them to buy world-class companies at depressed prices… and reap the benefits when they soar. In the wake of Cyprus’s banking crisis for example, they made 210% on the country’s Lordos Hotels.
It’s all part of a strategy we believe anyone can use to "flip" financial chaos into a fortune. No matter their investing experience or level of wealth. That’s why Doug and Nick put together a video to show you exactly how to use this profitable technique. Click here to watch it now.
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Puerto Rico is facing default over a mountain of debt it can’t pay back. But yesterday, the Senate passed a bill that protects the U.S. territory from its creditors.
More great feedback today on Bill’s tongue-in-cheek take on the Brexit in Diary – “Maryland Secedes!”
“Flexit” is next… FLORIDAHAAAAAA!— Dennis M.
Right on and write on!— Barbara N.
You forgot north of the U.S. border! QUEBEC! (Je me souvien.) The 1980s Quebec referendum came in at 40% back in the 1980s.
Many feared Quebec would separate from Canada before referendum… and U.S. companies by the droves packed up their suitcases and left to set up their HQ elsewhere.— Carl T.
So now we’re wishing for the good old days of isolationism. Remember where that got us.— Bob J.
And finally, some general praise for the Diary…
I too have enjoyed Bill Bonner’s Dairy. He expertly milks every ounce of graceful, direct, and contentious thoughts from awful global situations. He clearly chews his cud before writing a single word.
You butter not put him out to pasture any time soon – Bill Bonner’s Dairy provides an organic healthy meal every reader can enjoy – if they’re willing to digest it.— Scott A.
You have great, great insight, knowledge, and great real stories. It’s a privilege to see and read your work. Keep it up, and best wishes.— Erik C.
Currencies expert Jim Rickards says that gold is on its way to $10,000 per ounce.
But before you buy a single ounce, there’s something Jim says every gold investor needs to know. Listen to his important advice here.