Gold. The Big Reset.

35 years of exponential debt growth and lower interest rates

Markets wipe away the Fed’s December interest rate rise

Gold reversing trend relative to the S&P 500?

Fed can’t cut interest rates by 5% this time!

“Major advanced economies are now all slowing in concert”

The credit cycle downtrend is now well established. Much further to go.

2 consecutive negative year-over-year profit quarters means …

“The End Of Plan A: The Big Reset & $8000 Gold”

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35 years of exponential debt growth and lower interest rates

At some point enough investors see that central bank policy is “out of tricks” as was discussed 2 weeks ago.

http://chrisbelchamber.com/fed-rate-rise-blunder-signals-central-banks-are-out-of-tricks/

Eventually 35 years of exponential debt growth and lower interest rates are reaching an endpoint.

0216FFhistory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Markets wipe away the Fed’s December interest rate rise

It took just one month for the markets to wipe away the Fed’s December interest rate rise. The Blue line below shows the end of 2016’s market price for Fed Fund interest rates. Just this week it fell below the low prior to the interest rate rise! The dollar failed to make a new high after the rate rise and has been weakening significantly in the last week. The markets have already wiped away the Fed’s fumbling and frequently failing forecasts.

0216dollarFF

 

 

 

 

 

 

 

 

 

 

 

 

Gold reversing trend relative to the S&P 500?

No surprise that lower interest rates and a lower dollar are good for gold, which has performed very well this year and could be breaking higher relative to the S&P 500 Index after a 4 year downtrend.

0216goldspyweldon

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fed can’t cut interest rates by 5% this time!

For the last 2 recessions the Fed cut interest rates by over 5%, but the cyclical down trend continues relentlessly and interest rates may be starting from just 1/2%!

“Major advanced economies are now all slowing in concert”

Where will the stimulus come from? “Major advanced economies are now all slowing in concert” says ECRI.

https://www.businesscycle.com/ecri-reports-indexes/report-summary-details/economic-cycle-research-ecri-major-advanced-economies-slowing-in-concert

It’s hard not to see how fragile the situation has become.

http://www.oftwominds.com/blogfeb16/seneca2-16.html

The credit cycle downtrend is now well established. Much further to go.

The credit cycle has been turning for over 18 months and the charts below show that this is very far from being played out. Hedgeye explains the read from the recent loan officer survey this week:

The Fed Senior Loan officer survey for 1Q16 showed a further tightening in corporate & commercial credit. Specifically, a net percentage of banks tightened C&I (commercial and Industrial) lending standards for the second quarter in a row. Moreover, demand for C&I loans inflected into negative territory this quarter. Eleven percent of banks saw C&I loan demand decrease from large and medium firms (13% saw it decrease from small firms), signaling that borrowers expect a decreased need for capital. This matters because, historically, when two of the three C&I questions have turned negative, it has portended a recession in the near future.”

0216Loanofficersurvey

 

 

 

 

 

 

 

 

 

 

 

 

 

This same story is mirrored by Hedgeye’s bank credit cycle indicator.

0216creditcycle

 

 

 

 

 

 

 

 

 

 

 

Finally, markets have recognized the rising probability of recession. The downcycle is now fully a year old and it is becoming impossible to deny the risk as it continues to intensify.

2 consecutive negative year-over-year profit quarters means …

“308 of 500 S&P 500 Companies have reported and it’s not pretty. On a year-over-year  basis, SALES -4.7%, EPS -6.4% and only 3 of 10 SECTORS have year-over-year profit growth. Reminder: 2 consecutive negative year-over-year profit quarters has always = 20% draw-down in the S&P 500.” – Hedgeye.

That hasn’t happened yet!

0216earnings

 

 

 

 

 

 

 

 

 

 

 

At the same time it doesn’t look like the Fed is aware of the problem, or has much of a solution with interest rates already so low, and most of its policies to date at best spent forces, if not outright failures.

No wonder investors are now considering the need for a system reset. It is clearly time to focus on gold allocations, and consider the global geopolitics that surrounding how a new financial system could evolve.

“The End Of Plan A: The Big Reset & $8000 Gold”

It is therefore very timely that this week there was an excellent and fully comprehensive discussion on this whole issue. It is probably a very good time for most investors to put aside an hour to listen to this very valuable discussion.

http://www.zerohedge.com/news/2016-02-01/end-plan-big-reset-8000-gold

 

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