3-9-16-paco-ahlgren-bottom-violation-podcast

www.BottomViolation.com

See the blue part? That’s consumer credit.

Call me mathematical, but what’s wrong with this picture? More importantly, what propaganda machine continues to succeed in preventing the breathing portion of humanity from recognizing that the government sponsored and encouraged lending in the home mortgage industry for decades, and this is what happened.

Stated another way: The government not only caused this, it encouraged it. This has nothing to do with market action. This is pure, politically-motivated manipulation. For those of you still so mind-numb that you remain skeptical, ask yourself this: why is the commercial mortgage market still solvent? Answer? Because it doesn’t have government sponsorship.

Paco Ahlgren

www.BottomViolation.com

“The best way to destroy the capitalist system is to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” — John Maynard Keynes

“I work for a government I dispise for ends I think criminal.” — John Maynard Keynes

If these don’t justify the immediate cessation of Keynesian policies — like quantitative easing, and targeted inflation — I don’t know what does. But of course, such an about-face would not be politically expedient.

Regardless: to all my detractors who claim Keynes ate his own cooking, I submit the above two quotations. And I assure you, I’m waiting with bated breath for your rambling defenses of these clear and obvious statements. Seriously. Just can’t wait.

Paco Ahlgren

www.BottomViolation.com

As always, I am not so ambivalent; I do believe the Dow could trade lower in the short-term — it has certainly gotten ahead of itself. I’m especially worried about the long-term primary driver of value — earnings (or, more accurately, free cash flow). But here’s the rub: I actually believe stocks will go higher — and probably much higher.

How is that possible? If I’m worried about earnings, and I believe earnings are the primary driver of long-term value, then why would the stock market go higher? The answer is simple: inflation.

The global policy of zero interest rate policy (ZIRP) is conspiring to ensure that prices of all assets are going to explode — once the overwhelming glut of currency, and the effects of ultra-low rates hit economies. Stocks won’t be any exception to the rule. The worst part? It will seem like the biggest bull market in history, and investors will be patting themselves on the back all the way to the top. At some point, however, people will realize that the run was phony, and that’s when the next phase of the crisis will begin.

In the meantime, remember that the American consumer — who has led us out of every major economic crisis of the last century — won’t be back soon. And without the consumer, earnings dry up, and without earnings, value can’t be created. Any appreciation in equities will therefore be a phantom phenomenon, and no matter what the technicians are saying, the wise investor would be leery of any powerful moves to the upside.

www.BottomViolation.com

In 1929, the United States was on the gold standard. The country was a manufacturing giant. Debt levels were insignificant. Credit cards didn’t even exist.

Today, the United States has lost most of its manufacturing base. Consumer debt is at all time highs. There is no gold backing the dollar. The government’s debt levels are unprecedented. Add to all of this the reprehensible and reckless policy of quantitative easing — whereby authorities all over the globe are printing massive sums of money, and easing credit to levels never before seen — and you have a recipe for disaster.

All of this leads me to maintain that we are on the cusp of an inflationary economic holocaust most people simply can’t fathom. This video helps bear bear out my concerns from a technical perspective.

www.BottomViolation.com

the dollar.

the euro.

residential housing.

the yen.

the yuan.

the Dow Jones Industrial Average.

the S&P 500.

U.S. debt.

automobiles.

Assets against which gold is not making historical highs:

energy.

other metals.

commodities.

my articles.