QUESTION:  Martin,
Love your blog, especially your historical perspective.
You recently responded to a viewer that we should take precious metals out of safety deposit boxes. Is there a reason for this? To my understanding the bail-in rules for banks in N.america put deposits and bonds at risk only?
Thanks.

ANSWER:  The contents of a safe deposit boxes are not covered by FDIC insurance. Never store a passport or any document you might need to get a hold of in emergency in a safe deposit box. The government can simply close all banks as they did in 1933 in a “Banking Holiday”. At 1:00 a.m. on Monday, March 6, President Roosevelt issued Proclamation 2039 ordering the suspension of all banking transactions, effective immediately. He had taken the oath of office only thirty-six hours earlier.

From March 6 to March 10, banking transactions were suspended across the nation except for making change. Roosevelt presented the new Congress with the EMERGENCY BANKING ACT at this time. The law empowered the President through the TREASURY DEPARTMENT to reopen banks that were solvent and assist those that were not. The House allowed only forty minutes of debate before passing the law unanimously, and the Senate soon followed with overwhelming support.

Banks were divided into four categories. Surprisingly, slightly over half the nation’s banks were deemed first category and fit to reopen. On the Sunday evening before the banks reopened, Roosevelt addressed the nation through one of his signature “FIRESIDE CHATS.” Roosevelt assured sixty million radio listeners that the crisis was over and the nation’s banks were secure. The bank run was over. On June 16, 1933, Roosevelt signed the GLASS-STEAGALL BANKING REFORM ACT, and also created the FEDERAL DEPOSIT INSURANCE CORPORATION.  Keep in mind the the government can close all banks for there is precedent. Whatever you have in a safe deposit box can also be seized and inspected.

There is no precise law against storing metal or cash in a safe deposit box. But law is malleable in the hands of any judge. He can seize the money or gold under the pretense of money laundering hiding it from the government. Under Civil Asset Forfeiture, they can assume the money is guilty of a crime being even tax evasion. It then is your burden to fight in court to get it back if you can hire a lawyer.

On April 1st, 2015, Chase bank in the US advised clients who rent safe deposit boxes from them that there would be some changes in their policies. Of particular interest is the following condition:

“Contents of box: You agree not to store any cash or coins other than those found to have a collectible value.”

This is why I recommend buying $20 common date gold coins and not modern bullion. You need to be in a position to say these are collector coins – not bullion. Gold is a HEDGE AGAINST government in the midst of a crisis. Gold does NOT rise with inflation. The 1980 high adjusted for inflation is about $2300. So if gold is a HEDGE, it is during a crisis. The risk of being able to get to a safe deposit box in a crisis diminishes greatly.

This year, 2017, is the beginning of the Sovereign Debt Crisis. While Greece is popping up on the financial radar, the Euro rescue in Portugal has also completely failed to reverse the trend of the country. There has been no effective relief from the debt crisis in Southern Europe. The debt in Portugal is also once again as high as before the crisis of 2010. The 78 billion euros of the European taxpayers money did nothing to reverse the economic trend, but in fact the funds simply went to save the banks.

Politicians really should be criminally prosecuted for trying to manage an economy. They have no experience and their own political careers always come first. As I have stated before, when the Euro was being planned, the commission in charge attended our World Economic Conference in London. I warned them that the Euro would fail unless the plan consolidated all the debts of member states. They said they understood the problem, but that the European people would never vote for that plan and so they wanted to get the currency through first and deal with the debt later.

That Phase II never came and as a result, as the euro then rallied from 80 cents to the dollar to about $1.60, all PREVIOUS debt of  member states DOUBLED in real cost. Joining the euro effectively destroyed Southern Europe and the politicians still cannot figure this out. It is as simple as you borrowed a foreign currency to buy your house and then that currency double in price. You now owed twice the amount in your home currency.

Meanwhile, the new US government wants to put US first returning to the age of mercantilism. Donald Trump also fails to grasp that forcing Americans to buy manufactured products in the USA, is forcing the consumer to subsidize inefficient American labor. You cannot tinker with the free markets. Trump’s concept of world trade and jobs falls short of reality of what free markets are all about exactly why the Eurozone is collapsing.

Welcome to the world financial crisis. We can make it better – but we have to PREVENT politicians from playing with the economy.

QUESTION: Hello Martin, I was wondering if you could write a piece on the Norwegian real estate market? The market has gone complete mad the last couple of years with salaries declining, and housing prices booming. Over 40% of Oslo is now owned by people not leaving there. A lot of apartments are empty because people don’t care to rent them out, it is just for speculation. Will this continue or will the Sovereign debt crises drag the market down with it? Love your blog, and hope you can spare some time for little Norway!

HG

ANSWER: Actually, I will be speaking there in Norway in a few weeks. Most of this “speculation” is really parking money. They are not trying to actually make a profit, which is why they are not renting these properties out. This is about parking money outside of the Eurozone. This has been a bet against Brussels and the collapse of the Euro. When we look at the share market, we see an outside reversal to the upside in 2016 as our model warmed with a Panic Cycle. This too is money trying to get off the grid.

The is a picture of the Krone expressed in US dollars since 1927. Here also, the dollar is positioned to rally against the Krone and we should see a new high above that of 1985, but at the very least a rally to retest that level for the third time.

In the case against the Euro, the Yearly Bullish Reversal stood at 87125 and we closed 2016 at 86450 after reaching intraday for the year 89940. To have exceeded the Yearly Bullish for the Euro intraday yet failed to close above it warns that the rally in the Euro against the Krone is most likely coming to an end.

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

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.