Economics & Investing For Preppers

Here are the latest news items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. We also cover hedges, derivatives, and obscura. And it bears mention that most of these items are from the “tangibles heavy” contrarian perspective of SurvivalBlog’s Founder and Senior Editor, JWR. Today, we focus on the Federal Reserve’s recent massive intervention via the Repo Market.  (See the Economy & Finance section.)

Economy & Finance:

A “must read” piece at Zero Hedge: The Repo Market Incident May Be The Tip Of The Iceberg.  A quote:

“In essence, what the repo issue is telling us is that the Fed cannot make magic. The central planners believed the Fed could create just the right inflation, manage the curve while remaining behind it, provide enough liquidity but not too much while nudging investors to longer-term securities. Basically, the repo crisis -because it is a crisis- is telling us that liquidity providers are aware that the price of money, the assets used as collateral and the borrowers’ ability to repay are all artificially manipulated. That the safe asset is not as safe into a recession or global slowdown, that the price of money set by the Fed is incoherent with the reality of the risk and inflation in the economy, and that the liquidity providers cannot accept any more expensive “safe” assets even at higher rates because the rates are not close to enough, the asset is not even close to be safe and the debt and risk accumulated in other positions in their portfolio is too high and rising.

The repo market turmoil could have been justified if it had lasted one day. However, it has taken a disguised quantitative easing purchase program to mildly contain it.

This is a symptom of a larger problem that is starting to manifest in apparently unconnected events, like the failed auctions of negative-yielding eurozone bonds or the bankruptcy of companies that barely needed the equivalent of one day of repo market injection to finance the working capital of another year.

This is a symptom of debt saturation and massive risk accumulation. The evidence of the possibility of a major global slowdown, even a synchronized recession, is showing that what financial institutions and investors have hoarded in recent years, high-risk, low-return assets, is more dangerous than many of us believed.

It is very likely that the Fed injections become a norm, not an anomaly, and the Fed’s balance sheet is already rising…”

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Bank Crisis Hits India: “Bank Stops Functioning, People Crying Outside Bank Branches”

Cryptos:

Forbes reports: As Congress Asks The Fed To Look Into A Digital Dollar, Former FDIC Chair Sheila Bair Is Ahead Of The Curve … Again. (Thanks to G.P. fort the link.)

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Bitcoin Becomes More Important In Hong Kong & India

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UK Consumers Lost $33.29M to Bitcoin Scams: FCA

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Crypto Duel: Will Bitcoin Ever Hit $100K? | Peter Brandt & Erik Crown

Tech Startup Insanity:

Simon Black of Sovereign Man posted this commentary on WeWork: We Not So Crazy after all…

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The 25 Most Absurd Job Titles In Tech

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Money-losing companies that went public in 2018 did better than profitable ones.

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Unprofitable Companies Are Raising the Most IPO Cash Since the Dot-Com Era

Tangibles Investing:

Inside a Rare-Gun Auction

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And here are some realized prices, at RIA:  Past Auction Sales of Rare Firearms Last 5 Years.

Provisos:

SurvivalBlog and its Editors are not paid investment counselors or advisers. Please see our Provisos page for our detailed disclaimers.

News Tips:

Please send your economics and investing news tips to JWR. (Either via e-mail of via our Contact form.) These are often especially relevant, because they come from folks who closely watch specific markets. If you spot any news that would be of interest to SurvivalBlog readers, then please send it in. News from local news outlets that is missed by the news wire services is especially appreciated. And it need not be just about commodities and precious metals. Thanks!




6 Comments

  1. INHO, the longer this continues, the more likely the Fed cannot ‘fix’ it, and make like everything is okay again. They should have been able to ‘fix’ it already, but haven’t, so confidence erodes. Typically, once uncertainty and doubt set in, without good news, fear is not far behind, and the contagion spreads to other markets. And apparently it is, as Zero Hedges seems to imply. I believe, and have observed that this process has been on going, and is now maturing. D Bank’s problems and story, hurt. And there are other significant stories that eroded confidence. At the end of day, it is about confidence, and not strict adherence to risk/reward ratios. Of course it could also be the ‘con game’, the confidence game, is just about over as fewer are simply not seeing enough easy money to justify outrageous risk…

    Bix Weir believes it is headed for 40 trillion bail out in about a month or so, or words to that effect. He also believes that Congress might not approve it. I could understand that as they blindly hate Trump, and if they cannot impeach, they might foolishly believe that this an opportunity to stop the Trump Train, derailing it, by blowing up his economy. They are not rational.

    I cannot possibly have an ‘opinion’, but I can speculate, and believe it is not looking good. It does not take a genius to see that. Regardless, the consensus has been building for sometime now, among the most vocal and knowledgeable. Serious trouble is likely not far ahead. How much trouble at first, is impossible to say. Trump will likely oversee a massive bankruptcy at some point, then worse. If we all did not see trouble ahead, we would not be here in the first place. Yet it could get ‘exciting’ sooner, rather than latter.

  2. The fallacy of promoting unprofitability is a foolish game that can’t last. The rubes that fall for it will pay dearly and the death spiral of those companies will help to pull down the markets and the economy. Keep a safe distance.

  3. As is the case with many sites and blogs, the comments section often gives you a truer sense of what is happening. From Zerohedge story,
    “After Unveiling ‘NotQE’, Fed Eases Liquidity Rules For Foreign Banks (Rescues Deutsche)”.

    This comment follows the story from user ” Fed Leppard”:
    “Funny thing. We seem to be in the beginning phase of another banking crisis but this one is top secret. It looks as though they are doing a splendid job both containing it and camouflaging it, they are only doing a fair job at marketing it as something else. But then, some people just enjoy being fooled if it plays into their life narrative.”

    Truth-The Fed is using US taxpayer dollars to bail out foreign banks and the vast majority of Americans could not care less. Your neighbor with the 72-month loan on his new diesel truck, a 30-year mortgage on his new McMansion, a 12-year note on a new wakeboard boat, and a propensity for sharing it all on Facebook, has absolutely ZERO interest in seeing any of these shenanigans stop much less burn to the ground. This is why we are where we are and why it could continue for decades. Hedge accordingly, trade smart, and enjoy the ride…

  4. I first became aware of the impending economic collapse of the banks, the fed and the country back in 1970 or so. I eagerly followed these prognostications for decades, reading books about it, watching the news and in general expecting that other shoe to drop. Kind of like global warning in that the adherents used every bit of negative news to again predict the impending disaster… and yet here it is 2019 and very little has changed. Now let me be clear; I oppose deficit spending, high taxes, corruption in government, etc. I also think that our debt cannot be paid, ever AND that when high interest rates and inflation return the cost of this debt will crush us. But when will it collapse? No one knows and no one even knows if it will. The president could simply create $22 trillion over a long weekend and buy/pay off all federal debt and we would be back to zero. It would take some guts and be politically problematic but it could be done especially if circumstances make it more desirable than the alternative.

    Having said all that I am a fan of PMs, a years supply of food, self sufficiency, and other preps because the world is a dangerous place and becomes more dangerous every day. Hope for the best but prepare for the worst.

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