Most currency experts predicted that the dollar would rebound this year amid rising U.S. economic growth and interest rates.

But it hasn’t quite worked out that way. U.S. GDP growth shrank to a paltry 0.1 percent in the first quarter, and the 10-year Treasury yield has slid to 2.59 percent from 3.04 percent Dec. 31.

Meanwhile, the Dollar Index, which measures the greenback against six major currencies, has dipped 2.5 percent since Feb. 1, falling to a six-month low.

The Federal Reserve’s tapering of quantitative easing (QE) was supposed to lift both interest rates and the dollar….”

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“While much of the world was distracted by the supposed clash over Ukraine between Russian strongman Vladimir Putin and Western politicians, the International Monetary Fund announced a bailout of the new Ukrainian regime denominated in the IMF’s increasingly influential proto-global currency known as Special Drawing Rights, or SDRs. Analysts are warning that the developments could have profound implications for the global monetary system and the economy — and especially for the United States, which is stealthily being set up for economic calamity as the U.S. dollar continues on the road to losing its prized status as the world reserve currency.

The controversial planetary entity and its Western apparatchiks, along with various communist and socialist dictatorships and the United Nations, have long been agitating to ultimately dethrone the embattled U.S. dollar. Top-level American officials at the U.S. Treasury and the Federal Reserve have been helping them along. The dollar’s place as the global reserve currency would be filled by the IMF’s SDR, currently composed of a basket of currencies that includes dollars, British pounds, euros, and Japanese yen. The IMF, the UN, and multiple national governments have all openly advocated precisely such a plot in reports and statements made in recent years. The Obama administration, meanwhile, has exploited the Ukraine crisis to further empower the IMF while reducing U.S. influence.

In bailing out the new Ukrainian government, the IMF announcement of its decision — taken with approval from Russian authorities despite the alleged East-West brouhaha — referred to SDRs on multiple occasions. The press release noted that the IMF board had agreed to a two-year “Stand-By Arrangement” that “amounts to SDR 10.976 billion (about US$17.01 billion, 800 percent of quota).” The approval under the Fund’s “exceptional access policy,” the statement said, “enables the immediate disbursement of SDR 2.058 billion (about US$3.19 billion), with SDR 1.29 billion (about US$2 billion) being allocated to budget support.”

It is not the first time the IMF has relied on SDRs, which were originally created in 1969, for bailing out governments that agree to its demands. Iceland, for example, was also bailed out by the IMF amid the financial crisis with loans denominated in SDRs, which the Fund uses as its “unit of account.” However, the move in Ukraine has attracted the attention of prominent analysts including currency expert and best-selling author Jim Rickards, as well as Robert Wenzel, editor of the Economic Policy Journal. “The U.S. has never really stopped promoting SDRs as a global currency,” Wenzel noted. “Now Ukraine is being bailed out with this global government souped up money.”

In an e-mail to The New American, Wenzel noted that during the recent financial crisis, IMF allocations of SDRs occurred in 2009 and 2011 to various countries. “But what is noteworthy about those distributions is that China voiced its displeasure at the measures,” he said, citing comments made by the chairman of the People’s Bank of China, Zhou Xiaochuan. “It highlights the legitimate concern of the Chinese that the U.S., because of its major influence at the IMF, is trying to promote the SDR as an alternative to the dollar.”

“The payment to Ukraine in SDRs should be viewed as another move in this direction,” Wenzel added. “It signals fear on the part of U.S. government officials that the dollar is slowly losing its luster as a reserve currency. U.S. officials are trying to nudge the SDR as the alternative to the dollar because they will still maintain significant influence with regard to the SDR, as opposed to some other currency taking hold in parts of the world as a reserve currency (the [Chinese] renminbi?) or gold returning as an important reserve. China and Russia are both presently accumulating gold.”

Other analysts have also pointed to the latest IMF move as significant. Writing in Personal Liberty Digest, Alternative Market Project founder Brandon Smith suggested that the supposed bickering between East and West is largely theater for public consumption. Noting that like the U.S. government, Russian authorities are also dominated by global banks, Smith said that what is happening with the Ukraine bailout is part of the quiet but open move toward replacing the U.S. dollar with a global fiat currency such as the SDR.

“The SDR will not immediately be issued as a commonly traded currency itself,” he said. “Rather, the IMF will take over management of included currencies and denominate those currencies using SDR valuations. For example, $1 U.S. is worth only .64 SDR today. In the near future, I expect that the dollar will plummet in relation to the SDR’s value. We will still have our greenbacks when the IMF begins administrating our currency system, but the international and domestic worth of those greenbacks will fall to pennies. In turn, other currencies with stronger economic positions will rise in worth relative to the SDR.”

Indeed, since the financial crisis began, the SDR, described by the IMF as an “international reserve asset,” has taken on a far greater role in the global economic system….”

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“William Patalon writes: During the 30 years I’ve spent as a business journalist and financial columnist, I’ve developed a long list of personal axioms that have helped me identify “Best of Breed” investments.

These axioms touch on such topic areas as finance, marketing, intellectual property, and even competitive threats. But some of the most important of my personal investment aphorisms have to do with leadership and a company’s management team.

And leadership starts with the CEO.

As one of my precepts holds, “A good CEO can create a very strong company. But a great CEO can create an empire.”

Just like these…

Build an Empire of Profits

The example I usually use to illustrate this axiom is John F. “Jack” Welch Jr., who ran General Electric Co. (NYSE: GE) from 1981 to 2001.

Welch had already been with GE for two decades prior to becoming the head honcho and had a well-earned reputation as a maverick.

When he took over as chairman and CEO in 1981, he inherited a moribund industrial company with a stultifying bureaucracy, an oversized workforce, and many laggard businesses. One of his edicts stated that every GE business had to be either No. 1 or No. 2 in its respective market; those that couldn’t meet this requirement would be sold, broken up, or shut down.

In the years to come, Welch restructured GE’s business holdings, bought some businesses and sold others, and carved out unneeded layers of management. He also slashed business-unit work forces while leaving the underlying business alone – a corporate version of the “Neutron Bomb” invention of the time. The parallels earned Welch his “Neutron Jack” sobriquet, a nickname he was said to despise.

Welch’s results ultimately silenced any critics: During his tenure at GE, the company’s value rose 4,000%. His retirement came with a severance of $417 million – the largest in history. And GE hasn’t been the same company since.

As I’ve mentioned in past Private Briefing columns, I had the opportunity to interview Welch. And I followed his career – and results – with a deep interest. And when I related this story to a colleague a week or so ago, it served as a bit of inspiration… giving me an idea of something we could do here – for you.

It’s something I believe will put some real money in your pocket.

So let’s take a look …

An Intriguing Conversation…

A week or so ago, I related this story about Welch to Radical Technology Profits Editor Michael Robinson. Like me, he had an earlier career as a journalist, so we were quickly in synch in analyzing the importance of leadership.

Wanting to capitalize on Michael’s tech-sector expertise, I ended up issuing a bit of a challenge.

“We see the long-term gains that Welch was able to generate for his shareholders,” I told Michael. “So, what if we turn our attention to the tech sector – your bailiwick – and ‘handicap’ the five CEOs that we’d want to take the same kind of long-term trip with? A lot of these companies have probably enjoyed some pretty dramatic gains already. But those are the ‘trees’… and we can’t lose sight of the reality that the kind of long-term returns that Welch generated for GE shareholders are actually the ‘forest.’ I’m betting that if we use your insights into the global tech sector, we could identify the ‘Neutron Jacks’ of the digital world – folks with vision and the ability to create a venture that can evolve, adapt, and grow with the changes technology brings.”

I could tell that Michael was locked in on what I was saying, because he immediately added: “And the great thing, Bill, is that – with GE, as great as it was at the time – you’re still talking about an industrial company. Here we’ll be talking about tech firms. And, for that reason alone, you’d have to think that, over the same long-haul period, the returns that we’ll be talking about will be much, much more than were realized by Welch.”

Three final thoughts: First, we decided to handicap five CEOs instead of just one in the interest of diversification… not every one of these will play all the way out. And, second, we chose established CEOs – those with a track record already. A startup might generate stratospheric returns, but that wasn’t the point of this exercise. Finally, we wanted to do this now, reasoning that any kind of an extended sell-off might give you the chance to establish positions in these stocks at even lower prices than they’re trading at today.

The breakdown I present now is the result of a lot of legwork by Michael – with a few contributions from me…

Top Tech CEO No. 1
Elon Musk, of Tesla Motors

Best known as a co-founder of electric-vehicle (EV) firm Tesla Motors Inc. (Nasdaq: TSLA), Musk showed a burning desire to turn his technical talents into money very early in life.

Raised in his native South Africa and later in Canada, Musk learned computer programming at age 12. Working by himself, he programmed a video game that he then sold for $500.

Peanuts, to be sure, but the experience was an inspiration to Musk – an epiphany, in fact, that high-tech was the pathway to success – and wealth.

After earning his physics degree from the University of Pennsylvania and business degree from Wharton, Musk turned his passion for business into a string of successes.

He helped launch Zip2, a software company later sold for $305 million, netting Musk $22 million for his shares. He then developed PayPal, which later sold to eBay Inc. (Nasdaq: EBAY) for $1.5 billion. At the time, Musk owned 11.7% of the company, making his stake worth roughly $175 million.

In 2002, he founded SpaceX with $100 million of his own money. Less than six years later, the company received a $1.6 billion NASA contract. In 2012, the firm made history as the first commercial company to launch and dock a vehicle at the International Space Station (ISS).

Besides serving as Tesla’s CEO, Musk is chairman of the board at SolarCity Corp. (Nasdaq: SCTY). Over his career, he’s received countless awards.

In 2007, Inc. magazine named him “Entrepreneur of the Year” for his involvement with Tesla and SpaceX. And in 2011, Forbes named him one of “America’s 20 Most Powerful CEOs 40 and Under.”

Along the way, Tesla’s shareholders have done extremely well. Since Tesla’s initial public offering (IPO) back in 2010, the stock has returned nearly 1,100%.

Tesla’s shares have sold off sharply of late. But the lower they go, the more interested we get. Musk is a proven builder. And he’s still standing at the starting line of what we believe will be a very profitable career for those willing to go along for the ride.

Top Tech CEO No. 2
Reed Hastings, of Netflix

A natural whiz at math, Hastings didn’t start out in business. Instead, he joined the Peace Corps, serving in places like Switzerland and Africa.

With public service under his belt, Hastings went back to school, eventually receiving a Master’s Degree in computer science from Stanford. In 1991, he founded Pure Software, which provided debugging and troubleshooting services.

Then came Netflix…

Hastings founded the company in 1998, as a through-the-mail movie-rental business. The company began with a subscription format focused on physical media like videotapes and DVDs.

It was here that Hastings showed he was a visionary exec, and not a caretaker.

The “experts” up on Wall Street thought the company would have a tough time moving to a web-based platform.

Hastings proved them wrong.

He recast Netflix Inc. (Nasdaq: NFLX) as a dominant player in the burgeoning market for online movies. And the company has won awards for its original TV shows.

Hastings also is pushing the boundaries of the format by moving Netflix into ultra-high-definition TV (UHDTV), a Next-Big-Thing technology that could ignite the next spending boom in broadcasting. (Indeed, one of our favorite recommendations – which allowed Private Briefing subscribers to double their money in just a few months last year – is a play on this “4K” technology.)

Today, Netflix has 44 million subscribers in more than 40 countries around the world. The stunner: The company says its subscribers watch more than a billion hours of its streaming service each month.

Hastings has done incredibly well by his shareholders. With a $22 billion market cap, the stock trades at $378 a share. Over the past five years, it’s gained 920%.

Top Tech CEO No. 3
Jeff Bezos, of Amazon.com…..”

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“Sometimes pictures are far more effective in communicating an important point. They are extremely effective in undermining respect and confidence, when in the cartoon format. A sequence of graphics struck the cognitive circuits recently. Long explanations will not serve well. The US Federal Reserve has been printing money since 2011 to cover USGovt debt securities in a frenetic manner. They have lost control. They call it stimulus, when it is actually the opposite. It does assist the speculators with nearly zero cost money to borrow, but one must be a club member to win loan grants.

The Quantitative Easing programs are deceptive. When the program was initially announced, the Jackass claimed it would be part of an endless sequence. With QE1 and QE2 and Operation Twist and QE3, following the failed trial balloon called Taper Talk, it is quite clear to anyone with an active brain stem and absent rose colored glasses that the USFed is caught in a trap called QE to Infinity. It is not stimulative. Instead, the uncontrollable bond monetization causes capital destruction. It causes economic degradation. It causes lost jobs and vanished income. It is a gigantic wet blanket to smother and destroy the USEconomy slowly, amidst unending propaganda. QE is the device that will result in Systemic Failure, which is already flashing signals of its arrival.

MONEY VELOCITY FALLING RAPIDLY

Money Velocity continues to fall rapidly in both the USEconomy and that of Canada, reaching 50-year lows in the Untied States. The indication is failure in monetary policy, as hyper inflation has killed capital on an extensive basis. The capital destruction is in its fourth year, probably having reached critical mass. Compared and contrasted with fast rising money supply, the systemic failure is obvious to conclude. The exception is to morons, Wall Street junkies, Big Bank criminal elite, and USGovt hacks. The fast decline in Money Velocity means that it is not moving in the body economic. The reason is simple. The blood system is contaminated with the USDollar, a toxic currency with no backing in a hard asset. The new money is toxic currency under phenomenal debasement by its own steward, the USFed itself. They redouble their harmful policy instead of abandoning it.

The Money Velocity picture is not pretty. The declining rate has broken lows set 50 years ago. Technically, the velocity of money is the frequency at which one unit of currency is used to purchase domestically produced goods and services within a given time period, like an inventory cycle time. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy. The result would be that growth (as measured in GDP) should be rising. With falling velocity of money, then fewer transactions are occurring and a recession is indicated. Such is the present case in astonishing rapid deterioration. Consumers and business are holding firm their money rather than investing it, as they see poor prospects. New capital formation is not occurring inside the USEconomy, or pitifully little. Debts are being dissolved, usually in default. It should be noted that the velocity of money has also been falling in the EU and Japan. The entire global economy is in recession, the pathogenesis shared.

DESTRUCTION OF CAPITAL

The claim that the QE bond monetization is stimulus is pure propaganda, and could not be further from the truth. The claim disguises the nature of the hidden Wall Street bailout, which is to cover their worthless mortgage bonds, and to cover all manner of derivatives, in addition to the obvious coverage of USTreasury Bond sales. Nobody wants the USGovt bonds anymore, except for Belgium operating as hidey hole on behalf of the Euro Central Bank, and for Japan operating as the usual lackey servant. The claim of stimulus is 180 degrees wrong. The bond monetization is pure unsterilized monetary inflation, free money shoved into the system without offset. To be sure, Bernanke had a machine to produce money at no cost, except that like with acid it ruins capital. The result is pure inflation, and extreme motivation for the entire world to take on hedge positions with energy, metals, farmland, and more in order to protect themselves from the ruin of money. The effect is felt as a rising cost structure, felt across the world, and thus shrinking profit margins for the entire global business sector.

As businesses realize the lost profitability, they shut down and retire their capital. They turn idle their factor machinery, their design workstations, their office computers, their transportation vehicles, their company buildings and offices. The destruction of capital is the ugliest dirty secret behind the official New Normal of central bank monetary policy. They are killing the system, so as to avoid liquidating the big banks. By refusing to take the proper capitalism path in liquidating failed corporate structures, they have instead chosen to kill capital, force income engines to the sidelines, generate capital formation in other nations (like the East & Asia), and destroy the USEconomy. The US and West has forgotten capitalism and embraced socialism with a fascist twist.

RAMPANT MONETARY GROWTH

Contrast the declining Money Velocity with fast rising Money Supply growth (presented in March). The conclusion is both galloping economic recession and systemic failure, hardly a reward. Yet it continues without interruption, only the promise of interruption. The systemic failure and breakdown is upon us, the evidence stacking up, the message no longer escapable. The two charts back to back make the point convincingly. New money is wrecking the financial structures and economic systems by destroying capital. The USFed balance sheet is well over $3 trillion, and continues to grow. The new money is going largely in a hidden Wall Street bailout of their bonds and derivatives. The USFed is a grand liar, as their QE volume is growing, not tapering. They are using proxies and back doors, in addition to airborne dirigibles like the Interest Rate Swap contract. Like with the Hindenburg, the floating monsters will explode someday. The growth in money supply is frightening and alarming, evidence of the wrecked capital and wrecked system. Many have called the Jackass a lunatic and alarmist, but they seem incapable to explain the fast rise in monetary base, yet fast decline in money velocity. Monetary policy is a failure. The fiat paper money is toxic. The big banks are insolvent. The global franchise system of central banks should be shut down, except they control the governments, control the finance ministries, control the central banks, control the regulators, and control the militaries.

LOST CRITICAL MASS IN INDUSTRY

It is very confusing that money velocity is falling fast, yet central banks are creating new money very rapidly. Imagine a Ferrari or Lamborghini race car spinning its gears, burning its engine out, running out of oil, making no movement. It aint working, started by Alan Greenspan, amplified by Benjamin Bernanke, and to be continued by Janet Yellen. They are stuck with failed monetary policy, and cannot alter the destructive course. The Jackass has maintained that a critical error was committed by granting China the Most Favored Nation status for trade. It was actually a fatal error. The industrial investment is taking place in Asia, led by China. Wall Street and the USGovt leadership at the time, under President Clinton and Robert Rubin, betrayed the nation. They leased gold from the Chinese, in order to perpetuate the fiat paper USDollar regime. They deployed the lunatic Rubin Doctrine, to wreck next year for a few more tomorrows. In doing so, the Chinese benefited from $23 billion in foreign direct investment in the space of a mere two to three years. But the blowback was fatal. The USEconomy lost its industrial critical mass, and has inadequate traction from monetary policy in accommodation. It still has some industry, but not enough. The ultra-low interest rate makes borrowing costs low, but grotesquely inadequate new capital formation has taken place in the USEconomy. It is being done in Asia. Worse, the new industrial parks are springing up across the US landscape, operated by Chinese industrial masters. The QE is not stimulating the USEconomy because 1) the US lacks critical mass industrially, 2) the regulator burden and corporate tax burden and ObamaCare burden are too great, and 3) the nation is too busy with court cases against the big banks and waging war against fabricated enemies. This is Game Over !!!

As David Chapman points out, “It all seems counter-intuitive that the velocity of money should be falling even as the ECB, the Fed, the BOJ, and the Bank of Canada have been maintaining low interest rates for years in order to encourage borrowing and keep the cost of money low. The central banks have also pumped billions of dollars into the economy through QE and other stimulative measures. The result has been an explosion in the monetary base, a sharp rise in M1 but lower growth for M2 and sluggish M3. The economies are weighed down with debt, banks are reluctant to lend, consumers and corporations are unwilling to borrow. The money instead has been used for speculation, primarily going into risk assets such as the stock market. Corporations instead of investing in new plants and investment are sitting on cash hoards or buying back their own shares. Both are non-productive.”

CANADA DITTO ON FAILURE….”

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“Private equity investors have long looked to four large emerging markets for big returns: Brazil, Russia, India, and China. But the BRICs today don’t quite fit the fast-growth that Goldman Sachs strategist Jim O’Neill described in the2001 paper that coined the widely used acronym.

With each BRIC economy in some sort of trouble, private equity firms are increasingly putting their investment dollars to work in other less-developed markets—especially Southeast Asia and Sub-Saharan Africa—in hopes of better returns.

Money invested in non-BRIC emerging markets increased 18 percent in 2013, reaching a five-year high of $11 billion and representing 44 percent of total capital invested in emerging markets, according to a recent study by theEmerging Markets Private Equity Association. At the same time, total capital invested in the BRICs declined 20 percent between 2012 and 2013 and was 38 percent lower than in 2011.

“Investors are certainly looking beyond the BRICs, acknowledging that consumer driven growth is accelerating most in these new markets,” said Aly Jeddy, partner at The Abraaj Group, a global private equity firm that runs $7.5 billion across more than 20 sector and country-specific funds. “Investors are increasingly as wary of BRICs hype as they are weary of the unattractive returns many of the funds in these markets have delivered.”

To be sure, the BRICs are still a force….”

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“We’re being Fed to the sharks, every day, one morsel at a time. What a way to go….

What can we say about the Federal Reserve’s policies that hasn’t been said a million times? How about simplifying the two primary purposes of Fed policies? I will cover one today and the second one tomorrow. Both involve feeding the 99.5% to the financier/ Wall Street/bank sharks.

Longtime readers are familiar with Harun I.’s incisive analysis. Two of his recent commentaries can be found in Resolution #1: Let’s Call Things What They Really Are in 2014 (January 15, 2014) and Doomed If We Do, Doomed If We Don’t (February 12, 2014)

In the above entries, Harun explained how the Fed’s money creation has leveraged a global bubble in assets. At 72-to-1 leverage, the Fed’s $3.3 trillion money expansion has generated inflation as well as asset bubbles, though the Fed and its cronies deny both asset bubbles and inflation.

Inflation is the Fed’s explicit, stated goal. The Fed wants prices to go up because that raises GDP (gross domestic product) and makes debt cheaper to service every year.

But alas, real income isn’t keeping pace–it’s declining. Median household income is down 7% since 2000, but if we strip out the top 1% households, the decline for the bottom 99% would be more than 7%. And if we strip out the top 10% households, the decline of the bottom 90% of households is much more than 7%.

Household income for the bottom 90% has been stagnant for four decades:

So the Fed is robbing the purchasing power of our money as a matter of policy. In simple terms, the Fed is stealing purchasing power and delivering the stolen wealth to the financiers and banks, who borrow money from the Fed for near-zero rates of interest….”

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[youtube://http://www.youtube.com/watch?v=hEZzoEsBzVk 450 300]

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“In the history of capitalism, this is the hardest time ever to invest. People are going broke, losing their jobs, and fear more than greed rules the news and tries to rule thoughts.

In short: people are scared. And I do think the uncertainty is going to rise quickly so I wanted to put this note together.

In 2001 and 2002 I lost all my money through bad investing. The same thing happened to me on a couple of occasions after that.

So why should anyone listen to me about investing? You shouldn’t. You shouldn’t listen to anyone at all about investing. This is your hard-earned money. Don’t blow it by listening to an idiot like me.

Here’s my experience (and perhaps I’ve learned the hard way about what NOT to do and a little bit about what TO do.):

I’ve run a hedge fund that was successful. I ran a fund of hedge funds, which means I’ve probably analyzed the track records and strategies of about 1000 different hedge funds.

I’ve been a venture capitalist and a successful angel investor (I was a HORRIBLE venture capitalist though – but I put that under the category of “does not work well with others”).

I can’t raise money anymore. Nor do I want to play that game. I don’t BS about my losses and everyone else does.

So I’m not in that business anymore. It’s too much work to run a fund anyway.

In the past 15 years I’ve tried every investing strategy out there. I honestly can’t think of a strategy I haven’t experimented with.

I’ve also wrote software to trade the markets automatically and I did very well with that.

And I’ve written several books on my experiences investing, with topics ranging from automatic investing to Warren Buffett, to hedge funds, to long-term investing (my worse-selling book, “The Forever Portfolio”, which has sold 399 copies since it came out in December 2008, including one copy for the entire last quarter).

Incidentally, why publish a book called “The Forever Portfolio” during the worst financial crisis in history. I begged my publisher (Penguin) to postpone but they couldn’t. “It’s in the schedule” was their magic incantation. Publishers largely suck. The good news is: they will never make back the advance.

That said, all of the picks in that book have done excellently since then but the one thing I am proud of is that I made a crossword puzzle for the book. I don’t know of any other investing book with a crossword puzzle in it.

So, Ok! Let’s get started. Don’t follow any of my advice. This is advice that I do and follow and it works for me.

A) SHOULD I DAYTRADE?

Only if you are also willing to take all of your money, rip it into tiny pieces, make cupcakes with one piece of money inside each cupcake and then eat all of the cupcakes.

Then you will get sick, and eat all of your money, but it will taste thrilling along the way. Which is what daytrading is.

B) I DON’T BELIEVE YOU. MANY PEOPLE DAYTRADE FOR A LIVING.

No. I personally know of two. Maybe three. And they work 24 hours a day at it and have been doing it for a decade or more. So unless you want to put in that amount of time and be willing to lose a lot first then you shouldn’t do it.

One more thing: when you daytrade and lose money it’s not like a job.

When you go into a job you NEVER lose money. If you show up for two weeks, you get paid. Even if you have been warned repeatedly about sexual harassment you still get paid. You might get fired but they won’t take your money.

The stock market TAKES your money on bad days. Sometimes it takes a lot of your money. We’re not used to the brutality of that and it can destroy a person psychologically, which makes one (me) trade even worse.

C) WELL, WHO MAKES MONEY IN THE MARKET THEN?

Three types of people:

1) People who hold stocks FOREVER. Think: Warren Buffett (has never sold a share of Berkshire Hathaway since 1967) or Bill Gates (he sells shares but for 20 years basically held onto his MSFT stock).

2) People who hold stocks for a millionth of a second (see Michael Lewis’s book “Flash Boys” which I highly recommend.) This is borderline illegal and I don’t recommend it.

3) People who cheat.

I’ve seen it for 20 years. I’ve seen every scam. I can write a history of scams in the past 20 years.

Without describing them, here’s the history: Reg S, Calendar trading, Mutual fund timing, Death spirals, Front running, Pump and Dump, manipulating illiquid stocks, Ponzi schemes, and inside information. Inside information has always existed and always will exist.

One time I wanted to raise money for one of my funds. I went to visit my neighbor’s boss. The boss had been returning a solid 12% per year for 20 years.

Everyone wanted to know how he did it. “Get some info while you are there,” a friend of mine in the business said when he heard I was visiting my neighbor’s boss.

The boss said to me, “I’m sorry, James. We like you and if you want to work here, then that would be great. But we have no idea what you would be doing with the money. And here at Bernard Madoff Securities, reputation is everything”.

So I didn’t raise money from Bernie Madoff although he wanted me to work there.

Later, the same friend who wanted me to get “info” and “figure out how he does it” said to me: “we knew all along he was a crook.”

Which is another thing common in Wall Street. Everybody knows everything in retrospect and nobody ever admits they were wrong.

Show me a Wall Street pundit who says “I was wrong” and I’ll show you…I don’t know…something graphic and horrible and impossible [fill in blank].

D) So how can one make money in the market?

I told you about: #1. Pick some stocks and hold them forever.

E) What stocks should I hold?…..”

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“From time to time I’m asked why I don’t include Market Cap to GDP among the long-term valuation indicators I routinely follow. The metric gained popularity in recent years thanks to Warren Buffett’s remark in a 2001 Fortune Magazine interview that “it is probably the best single measure of where valuations stand at any given moment.”

My friend and guest contributor Chris Turner offered some analysis along those lines last year using the S&P 500 as the surrogate for the market (When Warren Buffett Talks … People Listen). For a broader measure of Market Cap, VectorGrader.comuses line 36 in the Federal Reserve’s B.102 balance sheet (Market Value of Equities Outstanding) as the numerator. Since both GDP and the Fed’s data are quarterly, the folks at VectorGrader.com do some interpolation and extrapolation to produce monthly estimates. Their latest chart is available to the general public here.

The four valuation indicators I track in my monthly valuation overview offer a long-term perspective of well over a century. The raw data for the “Buffett indicator” only goes back as far as the middle of the 20th century. Quarterly GDP dates from 1947, and the Fed’s B.102 Balance sheet has quarterly updates beginning in Q4 1951. With an acknowledgement of this abbreviated timeframe, let’s take a look at the plain vanilla quarterly ratio with no effort to interpolate monthly data or extrapolate since the end of the most recent quarterly numbers.

 

 

That strange numerator in the chart title, MVEONWMVBSNNCB, is the FRED designation for Line 36 in the B.102 balance sheet (Market Value of Equities Outstanding), available on the Federal Reserve website. Here is a link to a FRED version of the chart…..”

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“The only solace for Isabel Santos as she spends her evenings huddled over stacks of yellowed foreclosure notices is that her parents are not alive to watch their ranch-style house in Pleasant Hill, Calif., slipping away.

Ms. Santos, 61, along with a growing number of baby boomers, is confronting a bitter inheritance: The same loans that were supposed to help their elderly parents stay in their houses are now pushing their children out. “My dad had nothing when he came here from Cuba and worked so hard to buy this house,” Ms. Santos said, her voice quivering.

Similar scenes are being played out throughout an aging America, where the children of elderly borrowers are learning that their parents’ reverse mortgages are now threatening their own inheritances. Reverse mortgages, which allow homeowners 62 and older to borrow money against the value of their homes that need not be paid back until they move out or die, have long posed pitfalls for older borrowers.

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“A drop in U.S. government securities held in custody at the Federal Reserve by the most on record is fueling speculation that Russia may have shifted its holdings out of the U.S. as Western nations threaten sanctions.

Treasurys held in custody at the Fed by foreign central banks dropped by $104 billion to $2.86 trillion in the week ending March 12, according to Fed data, as the turmoil in Ukraine intensified. As of December, Russia held $138.6 billion of Treasurys, making it the ninth largest country holder. Russia’s holdings are about 1 percent of the $12.3 trillion in marketable Treasurys outstanding, according to data compiled by Bloomberg.

“The timing of the drop in custody holdings makes Russia a more likely suspect,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in a telephone interview. “If Russia did it, then they may have transferred the holdings to another bank outside of the U.S.”…..”

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UPDATE: It’s happened – China has suffered its first domestic corporate bond default as Chaori fails to meet interest payments on schedule and rather more surprisingly failed to receive a last-minute mysterious or otherwise bailout…

• *CITIC BANK WON’T HELP CHAORI MAKE INTEREST PAYMENT: 21ST HERALD
• *SHANGHAI CHAORI DEFAULTS ON BOND INTEREST PAYMENTS, WSJ SAYS

But hey don’t sweat it, Moody’s think it’s great news…

• *MOODY’S: DEFAULT BY CHAORI SOLAR WOULD ADVANCE CHINA’S BOND MKT

Maybe tell the issuers that couldn’t get their deals off today!!!

Of course what they mean is – maybe the market will finally start pricing in some real risk…

“Over the past few years, municipal governments and banks in China have stepped in to help distressed companies meet their bond payment obligations. These bailouts have led some investors to overlook the fundamental credit risks in bonds,” says Ivan Chung, a Moody’s Vice President and Senior Credit Officer.

 

…

 

“A default would likely make investors recalibrate their risk-return consideration for onshore bonds. Credit risk would play a more important role in pricing, thereby making the bond market more efficient in the allocation of capital,” adds Chung.

 

Chinese stocks are not happy

 

Wondering who’s next? We explained here…

 

and there are a lot to come…

 

As Bank of America reports in an analysis by David Cui, the Trust defaults are about to get hot and heavy….”

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“Even though 14 out of the surveyed 54 economists expected a rate cut of some sort, and some were even calling for an outright QE any minute now, this time the majority of academics, or 40 of them, were right and the ECB proceeded with no changes to its various interest rates.

From the ECB:

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.25%, 0.75% and 0.00% respectively.

 

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today….”

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“SHANGHAI—China’s sudden move to engineer a weaker yuan to curb heavy inflows from abroad has led to an unexpected and undesirable upshot: a sharp increase in cash flowing into its financial system.

Investors have been buying up U.S. dollars and selling yuan over the past two weeks, leading to local currency flooding China’s money markets and sending short-term interest rates plummeting. That has concerned economists, however, as it contradicts Beijing’s campaign since June to keep borrowing costs high to rebalance a credit-driven economy and rein in risky financing such as the loosely regulated “shadow-banking” sector.

The policy makers’ dilemma also shows how complex it is to manage the vast state-controlled economy and how interlinked the entire financial system is.

“If you want to deleverage the economy, you have to keep interest rates high and liquidity tight. If you weaken the currency, liquidity will increase. The two objectives are conflicting. So what is it that the central bank wants to achieve?” said Teck Kin Suan, an economist atUnited Overseas Bank U11.SG -0.87% in Singapore.

The problem has arisen as the People’s Bank of China has been guiding the yuan weaker, seeking to discourage speculative foreign funds that profit from high interest rates and gains in the currency. Those flows are a problem as they add excess cash to the economy and contribute to soaring property prices.

The central bank’s moves to guide the yuan appear to have worked. The currency Friday suffered its biggest one-day fall since its revaluation in 2005. The yuan is down 1.7% since reaching a record high in January.

But while it is seeking to block cash from abroad entering China, the increased supply of the Chinese currency in the financial system because of its foreign-exchange intervention is still adding liquidity to the banking system.

As a result, money-market interest rates are falling with the benchmark cost of short-term loans among banks–the weighted average of the seven-day repurchase agreement rate–down to 2.83%, from 3.84% two weeks ago and a high of 8.94% on Dec. 23.

The rate is now at levels seen before an unprecedented cash crunch that Beijing engineered in June to help curb explosive growth of shadow banking activities. Since the summer credit crisis, the Chinese central bank has allowed three more cash squeezes to occur in October, December and January, pushing the benchmark borrowing cost to average around 4%-5%.

Now with easy-money rates back though, worries are resurfacing that banks will feel emboldened again to take on the riskiest forms of lending, economists said.

“To me, deleveraging is still a more critical task for the central bank right now because the risks associated with shadow banking and local government debt are much higher. They will have to make a choice,” said Mr. Suan.

Some economists say managing the world’s second-largest economy, ranging from ensuring growth doesn’t slow too much to tackling rising financial risks and deterring speculative so-called hot money inflows, means the authorities can sometimes adopt short-term measures at the expense of achieving long-term goals….”

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“The Chinese yuan fell 0.9% to a 10-month low of 6.1808 per dollar in Shanghai, the most on record going back to 2007, report Fion Li and Kyoungwha Kim at Bloomberg News.

This is the largest drop since the revaluation in 2005, reports Fiona Law at The Wall Street Journal.

The People’s Bank of China (PBoC) fixed the yuan at 6.1214 per dollar, according to the China Foreign Exchange Trading System.

This reference rate was stronger than the fix on Thursday. But the yuan continued to weaken.

After rising 3% against the U.S. dollar in 2013, the onshore yuan (CNY) weakened against the greenback last week. The offshore yuan (CNH) has also  weakened….”

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“Equity funds while at the same time putting a historic amount into bond funds, and over 95% of the flows were in and out of ETFs.

Citi analysts Markus Rosgen and Yue Hin Pong relay the details in a note to clients:

U.S. funds had record-high inflow into bonds and outflow from equities — In the week ended 2/5/2014, there was a $14.8 billion inflow into bond funds and a $28.3 billion outflow from equity funds, representing record highs in both cases. The inflow into bonds was driven by U.S. bond funds which saw $13 billion of inflow. On the flip side, U.S. equity funds were hit by a $24 billion outflow. More than 95% of these flows were attributed to ETFs.

$6.4 billion of outflow from EM funds — This was the 15th week of outflows from EM equity funds and was the largest outflow since August-2010. The major outflow was from GEM funds, at $4.8 billion, while Asia funds had $966 million of outflow. EMEA funds and LatAm funds had respective outflows of $361 million and $199 million. China funds ended a 6-week run of inflows with $132 million of outflow this week.

$3.6 billion net selling of Asia equities by foreigners — In the week ended 2/5/2014, foreign net selling in Asia widened as Taiwan and Korea saw over $1 billion of net selling. Thailand was also sold down by $516 million. In Japan, during the week of 1/31/2014, there was a massive $7.0 billion net selling by foreigners.

The chart below….”

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“China boosted its holdings of US Treasury debt by $12.2 billion in November, enough to pass record levels set back in 2011.

As noted by the Associated Press, China now holds nearly $1.32 trillion in US Treasury debt, marking a 0.9 percent increase over the previous month for the United States’ largest foreign lender.

“Large interest-rate differential and steady appreciation of the renminbi contributed to large arbitrage inflows into China, a situation made all the more easy with China’s increasing financial integration and renminbi internationalization,” wrote UBS AG Hong Kong-based economist Wang Tao in a report on China’s data, according to Bloomberg News.

Meanwhile, Japan also purchased roughly $12 billion in Treasury holdings, a one percent increase, boosting its second-place share to almost $1.19 trillion.

Overall foreign holdings increased 1.1 percent to $5.72 trillion, marking the fourth straight month in which foreign purchases of US Treasury debt has risen.

Despite China’s record level of US holdings, Wang expects the country’s purchases to slow down over the course of 2014, largely due to the Federal Reserve’s decision to unwind its $75 billion bond-buying program….”

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I found this document to be rather interesting.

Anyone involved with banking, real estate, law, and the purchase of a home should consider the following information.

Since i’m not an authority to give an opinion as to the validity or value of said information, it would be greatly appreciated that the readership offer any knowledge of the topic and or refer this to anyone they might know who could shine a light on these here matters.

 

Selected excerpts:

“WHERE DOES THE FRAUD BEGIN?

This document is meant to take the reader down a road they have
likely never traveled.   This is a layman’s explanation of what has
been happening in this country that most have no idea or inkling
of.   It is intended to  give the  reader  an  overview  of  a  systemic
Fraud  in  this  country  that  has  reached  epic  proportions  and
provoke action to eradicate this scourge that has descended upon
the people of America.   Depending on what your situation is, you
may react with disbelief, fear, anger or outright disgust at what you
are about to learn.   The following information is supported with
facts, exhibits, law and is not mere opinion.

Let’s start our journey of discovery with the purchase of a home
and subsequent steps in the financial process……

….THE DOCUMENTS INVOLVED
The two most important and valuable documents that are signed
at a closing are the “Note” and the “Deed” in various forms.  When
looking at the definition of a “Mortgage Note” it is obvious that it is
a “Security Instrument”.  It is a promise to pay made by the maker
of that “Note”.

When looking at a copy of a “Deed of Trust” such as
the attached Exhibit “A”, which is a template of a Tennessee “Deed
of Trust” form that is directly from the freddiemac.com website, it
is very obvious that this document is also a “Security Instrument”.
This is a template that is used for MOST government purchased
loans.    You  will  note  that  the  words “Security  Instrument”  are
mentioned no less than 90 times in that document.   Is there ANY
doubt it is a “Security”?  When at the closing, the “borrower” is led to believe that

the “Mortgage Note”that he signs is a document that
binds  him to make repayment of “money” that the “lender” is
loaning  him to  purchase the  property  he is  acquiring.   Is there
disclosure to the “borrower” to the effect that the “lender” is not
really loaning any of their money to the “borrower” and therefore
is taking no risk whatsoever in the transaction?  Is it disclosed to
the “borrower” that  according to  FEDERAL  LAW,  banks  are  not
allowed to loan credit and are also not allowed to loan their own or
their depositor’s money?   If that is the case, then how could this
transaction  possibly  take  place?    Where  does  the  money  come
from?  Is there really any money to be loaned?  The answer to this
last question is a resounding NO!  Most people are not aware that
there has been no lawful money since the bankruptcy of the United
States in 1933……..

……When  you  sit  down  at  the  closing  table  to  complete  the

transaction to purchase your home aren’t you tendering a “Note”
with your signature which would be considered money?   That is
exactly what you are doing.   A “Note” is money in our monetary
system  today!    You  can  deposit  the  “Federal  Reserve  Note”  (a
promise to pay) with a denomination of $10 at the bank and they
will credit your account in that same amount.  Why is it that when
you tender your “Note” at the closing that they don’t tell you that
your home is paid for right on the spot?  The fact is that it IS PAID
FOR ON THE SPOT.  Your signature on a “Note” makes that “Note”
money  in  the  amount  that  is  stated  on  the  “Note”!    Was  this
disclosed to you at the “closing” in either verbal or written form?
Could this  be the  place  where the  other  players  come  into the
transaction at or near the time of closing?

What happens to the
“Note” (promise to pay) that you sign at the closing table?  Do they
put it in their vault for safe keeping as evidence of a debt that you
owe them as you are led to believe?  Do they return that note to you
if you pay off your mortgage in 5, 10 or 20 years?  Do they disclose
to you that they do anything other than put it away for safe keeping
once it is in their possession?

WHAT ACTUALLY HAPPENS TO THE “NOTE”?
Unknown to almost everyone,there is something VERY different
that happens with your “Mortgage Note” immediately after closing.
Your “Mortgage Note” is endorsed and deposited in the bank as a
check and becomes “MONEY”!……

……How can it be that you could just write a “Note” and pay for your

home?   This leads us back to the bankruptcy of the United States in
1933.  When FDR and Congress took all the property and gold from
the people in 1933 they had to give something in return for that
confiscation of property.   See attached (Exhibit “B” para 6)   What
the people got in  return was the promise that all of their needs
would be met by the government because the assets and the labor
of the people were collateral for the debt of the United States in the bankruptcy.

All of their debts would be “discharged”.   This was
done without the consent of the people of America and was an act
of Treason by President Franklin Delano Roosevelt.  The problem
comes in where they never told us how we could accomplish that
discharge and have what we were entitled to after the bankruptcy.
Why  has this  never  been taught  in the  schools in this  country?
Could it be that it would expose the biggest fraud in the history of
this entire country and in the world?

If the public is purposely not
educated about certain things then certain individuals and entities
can take full financial advantage of virtually the entire population.
Isn’t this “selective education” more like “indoctrination”?    Could
this  be what  has  happened?   In  Fina  Supply, Inc.  v. Abilene Nat.
Bank,  726  S.W.2d  537,  1987  it  says  “Party  having  superior
knowledge who takes advantage of another’s ignorance of the law
to deceive him by studied concealment or misrepresentation can
be held responsible for that conduct.”

Does this mean that if there
are  people  with  superior  knowledge  as  a  party  in  this  “Loan
Transaction” that take  advantage  of the “ignorance  of the  law”,
(through  indoctrination)  of  the  public  to  unjustly  enrich
themselves, that they can be held responsible?   Can they be held
responsible  in  only  a  civil  manner  or  is  there  a  more  serious
accountability that falls into the category of criminal conduct? ….”

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“A cash crunch in China pushed short-term interest rates to another recent high Monday and highlighted the difficulties faced by the central bank in managing an increasingly complex and stressed financial system.

The latest jump in rates came even after the People’s Bank of China last week made cash injections into the banking system that were aimed at cooling the upward pressure on rates.

The government has the capacity to prevent the cash squeeze from developing into a systemwide financial crisis, analysts say. Still, they are watching closely because rising borrowing costs could erode Chinese companies’ already weakening profitability and exacerbate a current economic slowdown. Reduced demand from the world’s second-largest economy would hurt global resources exporters and others that are dependent on Chinese buyers.

An announcement by the central bank Friday that it had added cash to the financial system initially triggered optimism among analysts and investors that the country would avoid a a severe cash squeeze like one in June. But they said they have become less certain after the central bank’s move failed to keep money-market rates from climbing further Monday.

The central bank has tried to rein in lending this year as part of a broader effort to reduce the economy’s dependence on credit-driven growth.

But the credit squeeze highlights that in seeking to do so, the PBOC is facing crosscurrents ranging from government budget tightening and quirks in bank accounting rules to distrust among banks and rising bad-loan losses that haven’t yet been disclosed.

A broad squeeze in lending will likely continue into next year, analysts said, as the central bank tries to get control of short-term interbank lending while the government limits spending. China will also feel the effects of the reduction of monetary stimulus in the U.S…..”

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