BERLIN – We’ve looked at the past: $20 trillion added to the world’s monetary base over the last 20 years… $250 trillion of debt worldwide… U.S. stocks pushed to record highs…
We’ve looked at the present: sales, pre-tax earnings, and incomes all going nowhere… sluggish GDP… trade war… $1 trillion deficits… and, over the last two days on Wall Street, nearly a 1,400-point sell-off in the Dow…
Today, we look at the future.
And we begin with America’s president, Donald J. Trump.
POTUS says the Fed is to blame for falling stock prices. It’s “gone loco,” he claims. It’s “out of control,” he charges.
He’s right. But the Fed went loco a long time ago. When he was a candidate for the White House, Trump saw it clearly.
The Fed had “created a false economy” with lower interest rates, he charged. Trump – always the fighter – said they did this in order to make Obama look good. He said it had created a “big, fat, ugly bubble.”
He’s right about almost everything. Except the Fed didn’t create the bubble to make Obama look good. The Fed lowered rates to make itself look good – as the savior of the economy.
It was just part of its classic Three Mistakes Policy: 1) Keep interest rates too low for too long, 2) Raise rates to try to offset the damage from Mistake #1, and 3) Cut rates in a panic when markets fall.
Once elected, however, Mr. Trump came to like Mistake #1. If the Fed could make Obama look good, he reasoned, it could damn well make him look good, too.
No president likes Mistake #2. It sets up a correction… and risks defeat at the polling stations. But Mr. Trump is especially vulnerable. And today, no one stands to lose more from a stock market crash than he does.
King of Debt
First, his own personal wealth depends on low interest rates.
In the New York area, for example, condo prices have doubled in real terms over the last 20 years. Developers like the “King of Debt” himself, Donald J. Trump, use cheap, borrowed money to leverage that gain. So the Trump family might have seen a 10x increase in the value of the buildings left by Fred Trump.
But take away the cheap money, and Trump’s fortune suddenly teeters. Yes, Dear Reader, The Donald’s fortune – along with the fortunes of millions of others in America’s squalid empire of bling – depends on Mistakes #1 and #3.
As soon as Mistake #2 begins to bite, palms sweat, tempers flare, and common sense flies out the window.
Second, once in office, Mr. Trump used the stock market as a measure of his own success. He said he had “already made America great,” and pointed to rising stock prices to prove it.
If stocks go down, he won’t look like such a genius. A sustained bear market on Wall Street will crack the whole illusion of economic competence on which his reputation and political clout depend.
Third, much of Mr. Trump’s foreign policy is based on the flimflam of U.S. economic strength.
The president thought he was winning the trade war with China, for example, because Chinese stocks were falling and U.S. stocks were going up.
And now, the Trump team is throwing its weight around all over the globe, based on the sham of the U.S. as an unstoppable economic powerhouse.
Economic sanctions, to give you another example, have been levied against several different countries, including Iran and Venezuela. But once the U.S. markets stumble, the sanctions will lose much of their sting.
Blame the Fed
So the Trump team wants to do whatever it can to avoid a market sell-off. Barely had the leaves fluttered on Wall Street before Mr. Trump was putting up the hurricane shutters.
Of course, Mr. Trump wants to protect himself from the howling winds of a financial storm. And, of course, he is right to blame the Fed; more than anything else, the Fed is ultimately at fault.
But it was Mistake #1 that caused the core problem – too much credit – not Mistake #2.
We watched the action yesterday. The Dow sold off in the morning. Then, it rallied at noon. In the afternoon, it didn’t seem to know where it was going… and finally, by the closing bell, it was down more than 500 points.
And this morning, it looked like the market was having a good bounce.
This is not the sort of action you expect in a real panic. There has been no rush to unload overpriced stocks.
Our guess – and this is purely guesswork on our part – is that investors are reading the same writing on the wall that we are. It’s the handwriting of POTUS himself. And he’s telling us all what to expect.
The U.S. won’t go gently into a correction. Instead, in a panic, the Fed will abandon its normalization policy… and go into “Full Japanese Central Bank Retard” mode.
That is, it will begin buying everything in sight – U.S. Treasury debt (which will explode to $2 trillion a year)… stocks… corporate bonds… baseball cards… you name it.
And then, watch out… It will make Mistake #4 – dumber… more dangerous… and more destructive than any other mistake we’ve ever seen.
MARKET INSIGHT: HOW TO STOP THE OPIOID CRISIS
Editor’s Note: In less than a week, legal cannabis will go on sale in Canada, the world’s tenth-largest economy. It’s not our usual beat at the Diary… But with legalization gaining support worldwide, we asked cannabis investing expert Nick Giambruno to share his thoughts on what could trigger federally legal cannabis in the U.S., and reveal how legal pot could help stem a national emergency.
By Nick Giambruno, Chief Analyst, Crisis Investing
Did you know drug overdoses are the No. 1 cause of accidental death in the U.S.?
According to a Centers for Disease Control and Prevention estimate, more than 72,000 Americans died from drug overdoses last year… far exceeding the roughly 40,100 killed in car accidents and the 15,500 killed by gun violence.
The problem is so severe that it caused the second consecutive annual decline in U.S. life expectancy.
The majority of these overdose deaths (over 60%) were from opioids, many of them prescription drugs like hydrocodone and oxycodone.
President Trump has acknowledged the situation and declared the opioid crisis a “national public health emergency.”
The problem is that, when using opioids for medical reasons such as the treatment of chronic pain, many people become addicted. Eventually, opioid users develop a tolerance and need more and more of the drug to get the same effect.
Opioids target the area of the brain responsible for breathing. That makes a deadly overdose a real possibility.
In many cases, there’s a much safer alternative to using opioids to treat pain…
I’m talking about cannabis.
It’s no secret cannabis has incredible medical benefits, including effectively treating chronic pain.
The potential for addiction with cannabis is far less than it is with opioids. And it’s practically impossible to overdose on cannabis. There hasn’t been a single cannabis overdose death… ever.
According to a comprehensive study from the RAND Corporation think tank, there was a 20% decline in opioid overdose deaths in states with legal medical marijuana. A recent study published in JAMA Internal Medicine – which is published by the American Medical Association – had similar findings.
And Dr. Sanjay Gupta, a nationally respected neurosurgeon, said:
Though it is too early to draw a cause-effect relationship, these data suggest that medicinal marijuana could save up to 10,000 lives every year.
Besides its medicinal benefits, there’s huge profit potential in the cannabis market. And part of that could come from CBD’s popularity in health and wellness circles. CBD is a naturally occurring cannabinoid that’s extracted from the cannabis plant. It’s at the root of cannabis’ medicinal benefits.
You’ve probably seen certain websites and stores selling an assortment of CBD gels, capsules, oils, sprays, and edibles.
There’s a good reason for all this excitement… CBD works. It has already been used to help treat the following conditions:
And people aren’t waiting for the feds’ permission. They’re buying CBD products already available online and at many health and wellness stores in the U.S.
Because of its many applications, the potential market for CBD consumer products and pharmaceuticals is enormous.
Market research suggests the U.S. CBD supplements market is worth at least $174 million, a small slice of the overall supplements market. But it could easily skyrocket to over $1.6 billion by 2021.
As impressive as that sounds, I think it’s conservative.
CBD’s medicinal properties are so obvious that not even the brain-dead busybodies in the U.S. federal government can deny it anymore.
In June, for the first time ever, the Food and Drug Administration finally approved a cannabis-based prescription drug, Epidiolex, which is used to treat childhood-onset epilepsy. CBD is the active ingredient in Epidiolex.
And Pew Research recently reported that 62% of Americans now favor cannabis legalization. Already, 30 states, as well as Washington, D.C., have some form of legal pot.
And with the promise cannabis presents to stem the opioid epidemic, it’s now just a question of “when” not “if” the U.S. will legalize cannabis at the federal level.
– Nick Giambruno
P.S. Clearly, the CBD industry is on the verge of an explosion.
As you saw in the chart above, the U.S. CBD supplements market could easily grow 10 times larger in the coming years. Shares of select publicly traded companies in the CBD industry could surge even higher.
And there’s one more catalyst that could light the fuse in just a few weeks…
As I write this, a piece of legislation is working its way through Congress that would legalize a particular strain of cannabis outright. I’m certain President Trump will sign it before the year is out.
But investors hoping to stake a claim in the still-young cannabis market will want to be positioned before that happens. Here’s how.
Why the Next Recession Will Be Different
In 2008, the world witnessed one of the worst financial crises in history. As stock markets tanked and the credit market began to freeze, the government and the Fed stepped into action. The big banks were bailed out. Interest rates were slashed. And trillions of dollars in liquidity was pumped into the global financial markets. That was then. During the next crisis, options will be limited.
America: Losing Its Edge in Start-Ups
For decades, America was the hub of innovation and bold, new businesses. If a revolutionary start-up was being founded, it was being founded in America. But in 2018, America is losing its edge. And the rest of the world is catching up.
How Trump Takes on Big Tech
Recently, President Trump accused Silicon Valley giant Google of “rigging” search results to stifle conservative-leaning viewpoints. Google denies the claim. But now, Big Tech is squarely in the crosshairs of the Trump administration. Here’s how the showdown might shake out…
Brett Kavanaugh may have been confirmed as the newest justice of the Supreme Court, but dear readers aren’t quite done talking about the Kavanaugh hearings…
What your Sam Ervin failed to address is how the drunkenness of the 17-year-old boy has entitled him to lie, shift, and attack during his questioning as a man. I do hope to live to see the end of him in the Supreme Court, sooner rather than later.
The hypothetical questioning of Dr. Ford is a good start. Why not also do one on how Senator Sam would have questioned Mr. Kavanaugh (undoubtedly focusing on the single reason Kavanaugh was there)? There were many other equally qualified people, but only Kavanaugh believes Trump is above the law.
– Bill S.
We are not disgusted by the manner in which Judge Kavanaugh was confirmed, but rather, by the way the process was allowed to be hijacked – by Democrats and Republicans alike.
However, I support your notion that our elected officials are beyond disgusting. For the record, I am white, female, educated, and was a registered Democrat (before the Democratic Party’s reasoning ability was hijacked).
I also help care for an old friend – a teacher with dementia – who could pass a lie detector test in a heartbeat and will swear to most anything that attracts attention. This includes things as onerous as a claim to be the child of incest. While not true, she’s found something guaranteed to evoke a reaction when voiced, and it has become her reality. It’s so very sad… But her freedom to speak is not a license to demand a Senate hearing or an FBI investigation. Those are symptoms of a sick nation. What’s really sad is that it happened on the watch of my generation… and yours.
– Hazel G.
Meanwhile, one Dear Reader is pretty tired of “this Bonner guy”…
I am so tired of this Bonner guy, the never-Trumper. Who is paying him to say these things? Which anti-Trump billionaire is funding him?
– Barb B.
IN CASE YOU MISSED IT…
Have you heard of “The Great Crypto Conspiracy”?
According to cryptocurrency expert Teeka Tiwari, something strange is happening at the highest levels of Wall Street… Insiders are talking down cryptos while buying them hand over fist behind the scenes.
To get all the details, and to see when the next bull market in cryptos is likely to take off, go right here.