BALTIMORE – Funny money is getting funnier and funnier.

Our challenge is to figure out who’s the butt of the joke.

We have a brother who is a realtor in Virginia. This past weekend, he was busy entertaining a group of Chinese visitors.

“What are the Chinese doing in rural Virginia?” we wondered.

The answer was in The New York Times. It was:

…part of an exodus of wealth outside the country, as people in China look to diversify at a time of worries about the slowing economy and the country’s growing political and social challenges. But China heavily restricts the flow of money out of the country…

Monetary Disaster

Everyone seems to want to get clear of his own currency and into someone else’s – especially the dollar.

Much of this refugee money ends up in real estate. Unlike bankers, real estate salesmen don’t ask questions. “Just show me the money,” they say. 

Manhattan, Los Angeles, Miami, and San Francisco – and even central Virginia – are being bought by foreigners eager to protect themselves from their own funny monies.

Meanwhile, a friend in India comments on the recent decision by the government there to ban large-denomination banknotes:

What happens when you suck out 86% of the currency in an economy where cash accounts for over 90% of all transactions?

And where hundreds of millions of people don’t have access to credit cards or debit cards and have never owned a smartphone – or are not literate enough to use these “modern-day essentials”?

And how do you measure the loss of productivity of an estimated 100 million people standing in lines over 55 days changing… a total of 25 billion pieces of paper…?

What happens? You have a monetary disaster. Which is what is happening in India now.

The amazing thing is the typical Indian seems to believe it is for his own good. He thinks the cash ban is intended to inconvenience criminals, hardly noticing that it is he who is most inconvenienced!

Trash Currency

Our friend reminds us of a dictum attributed to Mark Twain: “It’s easier to fool people than to convince them they have been fooled.”

Venezuelan President Nicolás Maduro tells his compatriots that he is separating “fraudsters and Mafiosi” from the “fruit” of their racket.

How?

By depriving them (and everyone else) of the use of the nation’s trash currency, the bolivar, Maduro is taking nearly half of Venezuela’s banknotes out of circulation.

Bolivar banknotes were already on their way to extinction, thanks to the federales’ habit of printing them like Watchtower leaflets.

Now, Venezuelan funny money banknotes lose half their value every 17 days, putting the bolivar in the “hyperinflation” category.

And the Venezuelan feds claim criminals have been stockpiling them!

Again, it’s amazing what people will believe and put up with. Venezuelans already spend as much as six hours in line at ATMs or banks to get enough cash to do their daily shopping.

Naturally, ATMs run hot and break down. Or they simply run out of cash. It takes 32 100-bolivar notes (worth just US$0.03 each) to buy a kilo of tomatoes.

Economic Sabotage?

Over in Anatolia, Turkish President Recep Erdoğan didn’t think it was funny when he faced an attempted military coup in July.

Once warned, he’s now twice shy. “Someone is trying to force this country to its knees by economic sabotage,” he claims.

As in Venezuela, the saboteurs seem most interested in escaping the nation’s funny money. Erdoğan offers this suggestion: “For those who have foreign currencies under the pillow, come change this to gold… come change this to Turkish lira.”

We’re not sure what practical joke he is playing… but we’d be a little wary of showing up with a big pile of Ben Franklins.

And in Italy, voters have rejected constitutional reforms put forward by the country’s former pro-European Union Prime Minister Matteo Renzi.

Following the referendum’s defeat, Renzi stepped down. And Beppe Grillo, a comedian-turned-politician and leader of the populist Five Star Movement, says Italy needs two funny monies, not just one.

He would stick with the euro for foreign transactions and create a new national funny money for scamming the homies.  

But it is back in the USA where the world’s funniest money is found.

Stay tuned…

Regards,

Signature

Bill

Further Reading: Bill is so adamant about the monetary disaster that’s coming, he’s put together a tell-all presentation to help you prepare for the consequences of decades of reckless Fed policies. You can watch it all here.

 

Investing Insight


BY Alexander Green, Chief Investment Strategist, The Oxford Club


Over the last five weeks, the S&P 500 is up 4%, the Dow is up 6%, and the small-cap Russell 2000 is up 13%.

Much of this is due to the election. The mainstream media, the polls, the political pundits, and the futures market all indicated that Hillary Clinton would win (and perhaps the Senate would even flip to Democratic leadership).

Those things didn’t happen, of course.

And the election surprise set off a chain reaction. Instead of four more years of Obama-like policy proposals and political gridlock, investors now envisioned pro-business policies being fast-tracked by a Republican-dominated House and Senate.

That could lead to stronger economic growth, more jobs, higher wages, and fatter corporate profits. And this meant equities – already the asset class of choice in an era of ultra-low bond and cash yields – became even more attractive.

Yet it was the “hippos” that made the difference. That’s what I call the institutional investors – mutual funds, endowments, pension plans, and hedge funds – that make up the vast majority of stock market volume each day.

If you want to make serious money on your short-term trades, you need to watch them.

Unlike you and me, institutional investors can’t buy or exit a stock by simply clicking a button or placing a market order.

It takes them days and often weeks to accumulate or unwind a position (because buying or dumping stock en masse would adversely affect their execution prices). That means they are out there buying or selling shares day after day, week after week.

In addition, much institutional trading takes place in what are known as “dark pools,” highly liquid mini exchanges where investment banks and fund managers cross blocks of stock or make private transactions.

Trust me, you want to know what the hippos are doing. Here’s why…

Imagine a stock you own as an Olympic swimming pool with hippos in it. If more hippos come into the pool, the water level (share price) will rise. If hippos start leaving, the water level (share price) will fall.

Clearly, if you’re concerned about the near-term direction of a stock you own, you want the institutional investors – the hippopotami – coming in, not going out.

To know what institutions are doing takes research and due diligence. But it’s crucial that you pay attention here.

At the very least, take a look at Investor’s Business Daily, where every stock has an Accumulation/Distribution rating of A, B, C, or D, with A representing maximum institutional buying and D representing maximum institutional selling.

Think about this. Is it reasonable to expect a stock to rise in the near term if funds, pensions, and endowments are all dumping the stock?

Since the election last month, the hippos have definitely been entering the pool. The water level is rising.

But that’s just the beginning. What is happening with the individual stocks that you own?

Are institutional investors accumulating or divesting shares? You should know.

That’s why Hippo Spotting should be a regular part of your trading analysis.

Editor’s Note: Alexander Green just released a startling presentation about these mysterious “dark pools” and the “Dark Trades” that occur in them. In it, he reveals how some smart investors are making thousands of dollars by using these secret trades as investing signals. To see Alex’s full exposé, go here now


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Mailbag

Yesterday, Bill explained how you become a crony… and it’s sparked some interesting ideas from readers…

If the swamp critters are the only ones that understand the process, why not use swamp critters to fight the process?

In the 1800s, the U.S. Army learned to find and fight Indians by using Indian scouts. I realize that some of the swamp critters are almost as tough as Apache Indians, but why not give Mr. Trump the benefit of the doubt?

Unless you have a crystal ball that allows you to see the future, maybe we should allow the president-elect a few months in office before you start the impeachment process.

– Ken D.

I empathize with Bill’s incessant Diary deadlines and appreciate the need to focus on the systemic hypocrisy that oppresses most of us.

Since few read history, it clearly seems appropriate to root the narrative in Nixon’s monetary default. Yet, as I’ve continued over the years to deepen my reading of European and U.S. economic history, I take some comfort from the belief that there isn’t much of anything new over the long now. 

The names of the strategies and players change. But understanding of principles and careful gauging of consequences and human nature may allow us to survive a little longer.

– Dean M.


In Case You Missed It…

There is no secret to great wealth, but there is a formula… and it’s surprisingly simple.

Bill’s longtime friend and co-founder of Palm Beach Research Group Mark Ford has been sharing this formula for years. Click here to learn all about Mark’s methods for creating lasting wealth.