No easy solution for your money in this Brave New World
“Two thousand pharmacologists and biochemists were subsidized in A.F. 178…Six years later it was being produced commercially. The perfect drug. Euphoric, narcotic, pleasantly hallucinant. All the advantages of Christianity and alcohol; none of their defects. Take a holiday from reality whenever you like, and come back without so much as a headache or a mythology. Stability was practically assured.” – Aldous Huxley, Brave New World
It’s almost eery how little fear there seems to be out there in the stock markets these days. The major indices are flat on the year, but the highflying bubble stocks and hyped penny stock sectors like marijuana and fuel cells have gone parabolic this year. From 2009 through early last year, we used to get major panicky sell-offs when any hint of any geopolitical crisis heated up. In those last few years, stocks were generally lower and at more compelling valuations, which gave us buying opportunities repeatedly, as stocks then would rally big time on relief of the crisis and on past to new highs as the crises faded from focus.
But that’s certainly changed of late, as stock valuations have climbed and therefore investor payback periods are longer. Yet for the last year or so, the markets don’t even panic over escalating geopolitical tensions between the US and Russia or anything else, and then we get the relief rallies anyway. This all fits perfectly into my long-held thesis here that we’re headed into the biggest stock market bubble in history, but that doesn’t make it easy. Far from it. Let’s discuss this concept further.
We know that the Fed’s keeping interest rates way below any kind of “natural rate” by allowing banks to borrow from the government at 0%. We also know that the Fed is blindly buying hundreds of billions of dollars of mortgage and mortgage derivatives and other securities from the giant banks like Goldman, BAC, JPM, etc. in the name of “Quantitative Easing” or QE. We also know that the Republican/Democrat Regime, both sides equally, have been and continue to borrow trillions of dollars annually, as they subsidize corporate profits. The Republican/Democrat Regime is able to borrow those trillions of dollars at 2-3% interest rates, which, because it’s also a function of the Fed’s rate policies is below a “natural rate of interest,” means that they are able to borrow much more at a lower interest rate than they otherwise would be. Sickeningly, if you finish connecting those dots, as I did once with Professor William Black on my old show on Fox, means that the banks are literally lending back the money they borrow from the government at 0% to the same government at 2-3%, completely risk-free.
So that means that right here, right now, historically speaking, that the Federal Reserve is lending trillions of dollars out to the giant banks at a 0% interest rate and literally pumping hundreds of billions of dollars of new dollars out of thin air to buy the securities from the same giant banks as outlined in their QE policies. Meanwhile, that also means that the Republican/Democrat Regime is also pumping trillions of dollars of extra money into the pockets of their favorite corporations and oligarchs in outright “stimulus” as well as welfare checks for companies like Tesla or Intel or film studios that promise to “create jobs.” GE pays a negative tax rate, meaning they get welfare bonus checks from the government at the end of the year, despite yet another year of record profits. Google, Apple, Facebook and most other giant corporations pay teams of lobbyists, accountants, and lawyers to minimize their tax bill every year, which obviously directly contributes to our nation’s deficit every year.
The money and the tax breaks that these corporations get add up to trillions of extra dollars of corporate profits over the last decade and this year will again be a much bigger cause of our nation’s deficit than food stamps and welfare for the poor combined.
And drilling this down to real-life, you know that you’re out there at home or in your office reading this, as your money market and savings account pay 1% or less, CDs aren’t much better, and you’re desperate just to find some reasonable way of getting 5% or so on the portfolio you’ve spent your life building. Most every middle to high income grandparent, baby-boomer, and anybody with any savings at all has spent the last five years trying to find some safe havens that pay interest. But they can’t because that Fed and Republican/Democrat Regime have forced interest rates so far below any natural rate that people are forced to move into ever riskier assets. Which, over time, of course further inflates the value of those riskier assets like stocks that are already benefitting from those artificially low rates and tax/welfare incentives that are helping to propel corporate profit margins and profits to historic highs.
All of this is here, exactly as I’ve repeatedly outlined for the last five years, and I hope you’ve benefitted from this analysis. I expect that this cycle and all the forces contributing to this bubble-blowing bull market remain in place.
There are no easy answers now or ever when it comes to your money, especially when outside forces are manipulating entire economies to your detriment. That said, I still think that if you’re looking to increase your exposure to the stock market, you should do so selectively and slowly, starting with a 1/3 tranche of a handful of stocks from various sectors, including the highest rated stocks in my own personal portfolio. I think that building up a sizeable holding of physical gold bullion and coins will pay off hugely when this cycle and these manipulations of the Brave New World and the economies we’re in truly end over the next decade or two.
I’d love to hear from any of you if you’ve found what you think is a safe haven for some of your money that’s actually paying you 5% interest or more right now.