Gold News

Better Off With Bernie

But too late now. We got Trump. Badly...
OUR GUESS is that the smart money is pulling out first, writes Bill Bonner in his Diary of a Rogue Economist.
Paul Tudor Jones, Ray Dalio, Bill Gross – many Wall Street giants have already announced that they are turning bearish. The rest of the smart money keeps its mouth shut...and wonders when to sell.
All markets go up and down. That's how they discover prices – always guessing...always adjusting...over-optimistic one day, full of gloom and doom the next.
But there's something different about this market. The Dow has gone up from 1,000 in more than 24,000 today.
Three times the market has tried to correct – in 1987, in 2000, and in 2008. And three times the Fed has "come to the rescue" with more cash and credit, slashing interest rates and goosing up stock and bond prices through so-called "quantitative easing" programs.
And the next time the market tries to correct...which could happen any day...the Fed will want to cut rates again to stimulate the flow of more cash and credit.
As we've explained, understanding Fed policy moves is as easy as 1, 2, 3.
Mistake #1: Leave rates too low for too long.
Mistake #2: Raise rates to try to "normalize" things.
Mistake #3: Drop rates in a panic.
Now, the Fed is making Mistake #2 again. After 30-plus years of adding to its balance sheet (by buying bonds), it has now begun a program of quantitative tightening, effectively selling bonds (or simply letting them expire).
By the end of this year, it is scheduled to be offloading bonds at a rate of $600 billion annually, which is sure to set the stage for Mistake #3 again.
Over the last couple of days, we've been laying our own cards on the table. We want dear readers to see what we're holding – including the jokers.
Yes, in addition to the fairly standard jacks of stock prices, queens of GDP growth rates, and kings of inflation, we have two cards that most people have never seen.
First, we think the government is not what people think. Second, neither is the money.
Often, when we explain what we see happening, people say, "Oh...they'd never let that happen." Or, "If they did that, we'd vote them out of office."
Lies (especially those we tell ourselves) are always more pleasing than the truth. And myth always trumps reality. The myth is that the government of the US operates by, for, and of "the people."
It is supposed to make choices that suit the peace and prosperity of the nation; it would never go along with a multitrillion-Dollar rip-off of the average voter...or permit a catastrophic meltdown in the economy.
After all, that is what an elite is for: to manage complex systems that require real expertise.
Well, we have bad news.
Over the last 30 years, maybe longer, Washington has been taken over by an incompetent and increasingly parasitic elite. Now, we have a government by, for, and of the insiders who control it. Naturally, they use their influence to shift more and more real wealth and power to themselves.
The most recent examples?
  • The Pentagon and its cronies just got an extra $700 billion over the next 10 years. (When the real shooting starts, we predict all this money will just get in the way.)
  • The steel industry – famous for putting one over on gullible politicians – paid for trade advisor Peter Navarro's silly Death by China documentary, funneling the money through a "non-profit." It turned out to be one of the best investments steel company Nucor ever made. Donald Trump saw the video and asked Navarro to advise him. What was his advice? To put tariffs on imported steel, handing Nucor a windfall profit.
  • The tax cut is supposed to return money to the people who earn it. What it really does is shift the burden of wasteful government spending from the present generation of taxpayers (some of whom make campaign contributions) to the general public and the future. Now, spending will be financed by be paid by someone, sometime, somehow...
  • The Democrats, Republicans, and every other malingerer, chiseler, flimflam fast talker, and goofball win-lose guy scored a major victory when they got Team Trump to join with Democrats Pelosi and Schumer to lift the debt ceiling and propose a budget that avoids any need for tough negotiations, compromises, or cuts.
  • Federal debt has been going up at a rate of $200 billion a month for the last six months. It hit a staggering $21 trillion just last month.
Bernie Sanders is, of course, a lefty scalawag.
But if he were in the White House, it would be a different story.
Republicans would have to dig around in the bottom of their desk drawers to find their old principles. They'd rediscover the virtue of debt ceilings. And spending cuts. Maybe even balanced budgets.
The Republicans could then stop the liberal giveaways. And Sanders and his allies (using the veto!) would stop the Republicans' boondoggles.
As it is, everybody is for everything...all are happy to spend someone else's (borrowed) money. They're all on board – in the plush first-class section, of course – drinking martinis, slapping each other on the back...
...and enjoying the ride to financial Hell!

New York Times best-selling finance author Bill Bonner founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group exposed and predicted some of the world's biggest shifts since, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and the election of President Trump (2016). Sharing his personal thoughts and opinions each day from 1999 in the globally successful Daily Reckoning and then his Diary of a Rogue Economist, Bonner now makes his views and ideas available alongside analysis from a small hand-picked team of specialists through Bonner Private Research.

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals