When we shared the last research outline of what is being assembled by a quiet coalition of President Trump (U.S.A), Prime Minister Netanyahu (Israel), President Fattah Abdel el-Sisi (Egypt), King …
Tag Archives: Illuminati
The Total Lack of Common Sense
Armstrong Economics Blog/Pension Crisis
Re-Posted Feb 20, 2017 by Martin Armstrong
QUESTION: Martin – Given your compelling elucidation of the business cycle (which remains ineluctable even with central bank and regulatory distortion of money and markets), the avg annual return targets set by pension and retirement plans seems absurd. CalPERS had an annual bogey of 8% to meet via its active management. Even in a rapidly-growing economy whose markets were free from distortions, it seems that any fixed number could only rationally be set as a target if the investment horizon spanned several business cycles. This would allow at least some averaging over bull and bear phases to enable a fixed average return target like this to have any meaning.
This is not exotic – it seems commons sense. Do professional asset managers (or central bankers for that matter) make up nice-sounding goals that they know they cannot meet, or do they just not know what they are doing?
ANSWER: The fund managers are not really very professional. The majority of pension funds based their returns upon the standard 8% yield of long-term 30 year bonds. They have never actually adjusted their return expectations and thus the majority remain under-funded.
Do not apply this to all pension funds. We have helped many make the transition to the real world. When you have CALPERS where the decisions come often from the board, which is not professional, but political, therein lies the problem. The Social Security system is likewise a disaster. I tried to convert it into a wealth fund almost 20 years ago. The Democrats blocked it for anything to do with the free markets to them was risky. Thus, they stuff it with their own debt and then lowered interest rates. The fund is broke and you will see demands to raise taxes to cover the losses the politicians have created, yet they will of course blame someone other than themselves.
Someone who has simply managed a pension fund for the government is typically not qualified to be a private fund manager. If they were hired from the private sector to then clean up a public pension fund, then we have a different type of person. It will depend at that point on the board of directors and if they will allow the fund manager to make market decisions or will they still be overridden by politics.
Keep in mind that I often appear to be the lone analyst on many issues. This is ONLY because those with experience must sign confidentiality agreements to work for a fund or bank. They are not allowed to make comments for whatever they say would be attributed to their employer. I get tons of emails cheering often what I say because they are silenced. You really have to peek behind the curtain to comprehend what goes on because it really does defeat COMMON SENSE! It is like everything else. Nobody would have sat down and designed a financial or political system as we have today. This whole mess is just total insanity. It does not take a conspiracy, it takes stupidity. These people attribute such knowledge to people that is not justified. Some of these decisions do not make even the basic common sense tes
Sovereign Debt Crisis – Cycle Due 2017
Armstrong Economics Blog/Sovereign Debt Crisis
Re-Posted Feb 20, 2017 by Martin Armstrong
QUESTION: Hi Martin It’s been 30 years since I first saw you speak and this year I’m taking my son to Orlando to see you for the first time. How time flies. That said why have you not talked about the 86 year Sovereign Debt cycle that is forecasting a Great Depression for 2017. Have the monetary powers delayed this?
Thanks for all you do.
See you in November.
JPG
ANSWER: No. 2017 is the start of this whole mess. We have bank runs in Greece because the prevailing view is that Merkel will not relent and Greece cannot pay. This is why we are holding two conferences this year because it is very important and it is why I highlighted Greece in the report we issued for 2017.
BTW, thank you for this old hand drawn chart I did so long ago. I didn’t have a copy of it. People do not realize that these forecasts were made decades ago.
We also marked that 2009 would be the turning point 30 years ago. This was equivalent to the 1923 turning point in a basket of currencies back then. So the 2009 target was correct and this implies that the 2017 target should also be correct. Th
Civil Unrest Tears France Apart
Armstrong Economics Blog/Civil Unrest
Re-Posted Feb 20, 2017 by Martin Armstrong
The civil unrest in France which began in Paris has led to riots in some parts of the capital that spilled over spreading across France as vigilantes stage running battles with police in protest of the rape of a young black man. Chaos erupted after it emerged police anally raped a young black man named Theo with a baton. This was similar to an incident by police in New York City. Abner Louima was at a club in Brooklyn when a fight broke out. Policeman, Justin Volpe, mistakenly took Louima for a man who sucker punched him and began beating him up on the street. The police took Louima back to the precinct where Volpe continued to beat him. Volpe Kicked him in the testicles and sodomized him with a broomstick, causing critical internal damage. After he was done, Volpe, proudly displayed the excrement and blood stained broomstick to his co-workers and boasted that he had broken a man. Volpe then threatened to kill Louima and his family if he told anyone.
In Paris, law enforcement admit that two weeks of civil unrest has now led to full blown clashes in 20 districts. The police say that about 60% of those involved in the street fights are youths. In addition, this has led to an excuse for also an outright serious crime wave in at least 16 northern parts of Paris. In Rouen, located in Normandy, a catholic priest Father Jacques Hamel was murdered while he was saying mass at the altar last summer.
The civil unrest is more than just the abuse of a black man by police. The police have been targeted with molotov cocktails, hit with steel poles, shot at, and filmed being chased with cars. Armed police have taken to the streets have responded firing live rounds of bullets and used tear gas to disperse the rioters.
Countless number of cars have been torched, shops and banks smashed and/or broken into. A bus full of tourists from South Korea was targeted in northern Paris. They have even attacked the Eurostar train network.
This is widely now seen as the collapse of multiculturalism in Europe.
Globalist-Minded Media Fraught Over “Deliberate” and “Well Prepared” Acumen of Secretary T-Rex…
We are so fortunate Rex Tillerson was willing to take on the role of Secretary of State. T-Rex’s approach is giving the pearl-clutching leftists fits, as outlined in this article by ABC whic…
Source: Globalist-Minded Media Fraught Over “Deliberate” and “Well Prepared” Acumen of Secretary T-Rex…
Retired Green Beret Warns: Deep State’s Utopia Of Oligarchs Is “Enslavement And Complete Control Of All Of Mankind”
I am also a retired Green Beret and all I can say is that we had unique training in the subject of bring down governments and so we are very qualified to understand the process and recognize it when it is in play.
Greece – Cyprus – EU & Rise of the Neo-Ottoman Empire
Armstrong Economics Blog/Turkey
Re-Posted Feb 19, 2017 by Martin Armstrong
COMMENT: Your article on “All Eyes on Greece” is very interesting. A very similar story applies to Cyprus (the Greek side). My parents were from there and my cousins who live there frequently tell me stories of how bad things are becoming, not just from the EU stranglehold they are under but also the fear of the uprising tensions with the neo-Ottoman Empire that appears to be on the rise. I feel I am so fortunate to be away from all the fuss yet I yearn to go and live there knowing we have our own problems bubbling away and the ensuing crises that are about to hit us here in Australia and the rest of the Western world. It’s sort of being between a rock and a hard place. For the time being of course it’s better to stay where I am but for how long? I suspect we have several more years to go before the real SHTF.
Regards,
J
REPLY: Yes. People do not read about the neo-Ottoman Empire that Erdoğan has been attempting to create. He has shut down freedom of speech and is moving in every possible direction toward a dictatorship. The crisis in Greece is just unimaginable and it is impacting Cyprus as well. I was called in by members of the government during the EU crisis. But the Prime Minister sold his country down the river in an effort to retain the euro. The coup in Turkey I believe was a staged event to create the excuse to purge the military before they could overthrow Erdoğan. Then we take the EU collapse and we have a meltdown on political stability throughout that region.
We just seem to have the most incompetent politicians running everything around the globe. The fuse has been lit and the question becomes – why can we hide?
Categories: Turkey
“Seriously Delinquent” Auto Loans Surge
We never learn do we … so sad!
Trade v Banking – The Real Issue
Armstrong Economics Blog/Banking Crisis
Re-Posted Feb 18, 2017 by Martin Armstrong
While CNN and ABC news have turned really vicious against Trump, they are failing to report the real impact of world events that can undo everything. As we head into April/May, we are looking at a real crisis emerging that is beyond contemplation. The prospect of the breakup of the European Union because Brussels refuses to consider that their dream of ruling all of Europe is coming to an end. Yes, Juncker has said he will stand down while Draghi tries to threaten member states, saying they have to pay up in order to leave.
Last September, the International Monetary Fund (IMF) has warned at the G20 summit in Hangzhou, China, that in the face of crises, the refusal to reform how things are functioning will lead to economic weakness in the global economy. “The latest data shows subdued activity, less growth in trade, and a very low inflation, suggesting an even weaker global economic growth this year,” the IMF told G20 leaders.
The real crisis behind the curtain remains not TRADE, but BANKING. The EU hired over 20,000 people to regulate the European banking system. They have been installing bail-ins after that worked in Cyprus. They have been moving toward instant banking transfers by September 2017 with the design of eliminating cash. All of this becomes a major risk and the European Central Bank holds 40% of all government debt in the Eurozone. The cracks in the foundation of the EU are tremendous and the ramifications will ripple through the entire global economy. The seriousness of this crisis is being ignored by mainstream media because they are too busy trying to undermine Trump because their own ratings have collapsed. Newspapers are for the 50+ generation. The youth go to the internet and really do not watch the news of mainstream media. They are rapidly becoming sidelined and they hate Trump’s tweets because he is going directly to the people much as FDR did with his fireside chats.
Norway Central Banker Warns Of Massive 50% Drop In Wealth Fund Assets To Cover Budget Deficits
by Tyler Durden
Back in August, we noted that, for the first time since it’s creation in 1996, the Norwegian government had started raiding its sovereign wealth fund in 2016 to cover government deficits. Then in October the Nordic country revealed plans to massively increase withdrawals by over 25% in 2017, to $15 billion, to cover a budget hole that was expected to be roughly 8% of GDP.
That said, Norway’s ultimate GDP potential, and therefore budget deficits, are heavily dependent on oil prices so any further weakening of crude could result in even more withdrawals. Moreover, given the substantial YoY increase, it’s important to recall that there are fiscal limits imposed on fund withdrawals equal to 4% of assets, or roughly $36 billion, which could come into play at some point in the future if oil prices remain “lower for longer.”
Of course the withdrawals accelerated just as the heavily oil-dependent economy of Norway started to absorb the impact of lower oil prices.
And what do you do when you depend on portfolio returns to fund everyday living expenses but are faced with extremely low returns courtesy of artificially depressed international bond yields? Well, you just buy more equities, of course. Which, as we noted back in December, was exactly the motivation behind a decision to increase the fund’s equity allocation from 60%, to a staggering 75%, all while funneling another $130 billion to the global equity bubble.
The central bank’s board, which oversees the fund, on Thursday recommended an increase in the equity share to 75 percent from 60 percent. That will raise the expected average annual real return to 2.5 percent over 10 years and to 3.5 percent over 30 years, compared with 2.1 percent and 2.6 percent, respectively, under the current setup
The world’s largest sovereign wealth fund said that it expects an annual return of only 0.25 percent on bonds over the next decade and that the expected “equity risk premium,” or return on stocks over government bonds, will be just 3 percentage points in a cautious estimate.
“In our analyses, this is clearly evident in global data: internationally, growth in firms’ cash flows and equity returns are correlated with growth in the global economy,” Deputy Governor Egil Matsen said in a speech Thursday in Oslo. “Global economic growth in the coming years is expected to be below its historical level. This ‘pessimism’ is partly related to the driving forces behind the low level of the real interest rate.”
But despite their best efforts to protect the principle balance of Norway’s sovereign wealth fund through statutory spending caps and buying more and more equities, Norway’s central bank governor Oystein Olsen warned earlier today that increasing reliance on the fund to cover budget deficits could result in a “sharp reduction” in the fund’s capital over the next 10 years. Per Bloomberg:
Governor Oystein Olsen said that the continued rise in oil cash spending, which now accounts for about 20 percent of the budget and 8 percent of gross domestic product, must now be halted to protect the $900 billion fund, the world’s largest sovereign pool of cash.
“With a high level of oil revenue spending, there’s a risk of a sharp reduction in the fund’s capital,” Olsen said in the traditional Annual Address in Oslo Thursday. “This could, for example, happen if a global recession triggers both a decline in oil revenue and low or negative returns on the fund’s capital.”
In fact, in some of the more dire scenarios, Olsen warned that 50% of the fund’s $900 billion in assets could be wiped out over the next 10 years in the event of a global recession that kept oil prices low while also driving equity valuations down.
While the fund, which is overseen by the central bank, so far has said it’s more than able to handle outflows without selling assets, Olsen’s speech did lift the lid to reveal some of the worst case scenarios being calculated by the investor.
For example, it sees a 1 percent chance of a 50 percent decline over 10 years if spending is kept at the current level of about 3 percent of the fund. If spending is raised to 4 percent that probability rises to about 5 percent. If the fund’s allocation to stocks is boosted to 75 percent from 60 percent, which is currently being discussed, the probabilities rise even further to about 2 percent and 6 percent, respectively.
“This shows what you may risk if you increase oil spending from today’s level,” Olsen said in a separate interview. “This helps us to strengthen the message.”
“It must be recognized, however, that the longer-term challenges facing the the Norwegian economy can’t be resolved by spending more oil revenue and keeping interest rates low,” he said in the speech, arguing the Norwegian economy needs more legs to stand on.
That said, we wouldn’t be too worried because equity prices never go down, right? Silly Central Banker…
Centinel2012 