The Folly of Central Bankers

The virtually unlimited level of credit creation by the major central banks over the past seven years has created conditions never seen before in the history of mankind. Yields on government bonds in many countries are now below zero, which we have never seen to this extent in history. In Europe, over $11 TRILLION of government bonds now have a yield below zero. That means the bond owner, in effect the lender, pays interest to the borrower.

This is the ultimate absurdity. How can anyone believe that this won’t eventually result in an unstoppable crisis?

How to Fix the Fed!

The forecasts of the Federal Reserve have always been amazingly inaccurate, for at least the past four decades that I have been watching the Fed.

In fact, for 38 years at my firm, Dohmen Capital, we have used the Fed as an excellent contrarian indicator at important turning points, especially as the economy goes into recession. When the Fed Chair tells Congress “there is no recession in sight,” it confirmed our work that either the recession was immediately ahead, or had already started.

Just Say No To Stocks

TINA is not a girl, it stands for “There Is No Alternative” to stock investments.

This is the latest obfuscation by Wall Street. It’s the typical illusion deliberately created at market tops to keep naïve money managers from selling, because that would interfere with the selling and shorting by the large Wall Street firms.

Wall Street never mentions that stocks are vastly overvalued. The smartest money managers say they can’t find anything to buy. They never tell you that corporate earnings have now had an earnings decline for five consecutive quarters.

Why China’s Crisis Threatens Your Wealth

Many US investors say, “why should I be interested in what is happening in China? I would never intend to invest there.”

Over three years ago, I wrote an e-book, The Coming China Crisis. Surprisingly, a number of our clients asked, “why would I be interested in China?” When you look at how the global markets are intertwined as I do, with China accounting for more than 50% of global economic growth, I was surprised to hear that. Perhaps now people are more enlightened.

Here Comes The Recession And Bear Market

Let me discuss one major error of most analysts you see in the media. It is about the Fed rate hike. There is a great misconception.

The majority of analysts tell you that the 0.25% rate hike by the Fed is not important. They obviously know little about how the Fed works.

But this is much more important than just a small rate hike. One has to know what it compels the Fed to do to achieve its goal.

Can China Reflate Its Economy?

Now the global institutions think it is better to issue warnings rather than continue hiding the big problems. Only Wall Street analysts still play the “let’s pretend all is well” game.

We hear all the time that China cannot have a crisis because it has $3.7 TRILLION in reserves. We disagree with that for several reasons. First, who has counted that? Is this Chinese accounting? It may have accumulated over the years, but hasn’t it been spent on extravagant and unproductive governmental projects, such as building cities where no one except the street sweepers live?

Alibaba: One Year After—Celebrating The Losses

Today is the anniversary of Alibaba’s founders sucking $22 billion out of pockets of US investors. About 40% of that, or $8.8 billion, has already gone to money heaven. The media is full of stories about this firm.

Even after the plunge, 39 Wall Street analysts have a “buy” on the stock, while there is only one with a “sell.” That’s wonderful for experienced contrarians. Shorting such lopsided advice can be very profitable. We predict that eventually there will be “class-action” law suits for lack of disclosure of the IPO.

The Great ‘Fall’ Of China

About three years ago, I wrote the book, THE COMING CHINA CRISIS. The book predicted the sequence, such as record debt, mal-investments, excessive debt-financed speculation in real estate, 64 million empty condominiums, a credit crunch followed by a credit crisis, and then a crash. Furthermore, the book said this crisis would probably envelope the global markets. So far, that seems to be right on track.

Total private, corporate, and governmental debt is now an immense $28 TRILLION. That is 50% more than US annual GDP. Moreover, it is 282% of China’s GDP.

Stock Market: “To Buy Or Not To Buy, That Is The Question.”

Our long-standing upside target for the Nasdaq Composite as a proxy for the stock market has been reached. In our Wellington Letter we have written for the past 18 months that this index would reach the all-time high of March 2000, which was 5,133 intraday, before the bull market would end.

That high was finally reached and surpassed on June 22 and June 23, 2015. But it was for only two days on a closing basis.