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Central Bank Have Set the Stage For a Disaster That Will Make 2008 Look Like a Joke

Phoenix Capital Research's picture




 

The Central Bank policies of the last five years have damaged the capital markets to the point that the single most important item is no longer developments in the real world, but how Central banks will respond to said developments.

 

Let us take a moment to digest that. Before 2008, for the most part, when something happened in the world, an investor would think about how that issue would affect the markets.

 

Today, that same investor will try to analyze how the Central Banks will react to that issue, not the impact of the issue itself. This is why, for various periods between 2008 and today, the markets would rally on terrible economic data and other economic negatives: traders believed that because the data was bad the Fed would be more inclined to engage in more easing.

 

After all, why do we invest? We invest because we want to make money. And when it comes to investing, we prefer easy money: gains that have a high probability of success. And thanks to Central Banks cutting interest rates over 500 times and printing over $10 trillion in money since 2008, what’s the easiest way to make money by investing today?

 

Front-run Central Banks policies.

 

Consider Europe. In 2012, ECB President Mario Draghi promised to do “whatever it takes” to keep the Euro in one piece. Since that time, nothing has really improved in Europe’s economy.

 

France is approaching a triple dip recession. Germany may re-enter recession before the year’s end. Spain remains an economic basket-case. Portugal just suffered another major bank failure. And on and on.

 

And yet, bond yields on European Sovereign debt have fallen to multi-century lows. Germany’s 10 year is now at 1%... an ALL TIME low. The reason for this? Investors, convinced that the ECB will buy sovereign bonds or, at a minimum, drive bond yields lower, have poured into European bonds.

 

As a result, European bonds are now stretched to levels that far exceed a bubble. Remember, the entire sovereign debt crisis in Europe was based on the fact that most European countries are insolvent. When you include unfunded liabilities, most European countries are running Debt to GDP ratios north of 400%.

 

The basic premise of investing is that you should be compensated for your risk exposure. The riskier an investment, the higher your expected returns should be.

 

However, thanks to Central Bank meddling, today this is no longer the case. In Europe, where lending money to sovereign nations is in fact a high risk proposition, you are given almost nothing in the way of yields.

 

This will not end well. In fact, the ending will likely be catastrophic as the fast money herd panics and tries to move out of the various assets it only bought based on the assumption that it could unload its position on someone willing to pay a higher price (likely a Central Bank) down the road.

 

We don’t know when this will happen, but it WILL happen. And unlike stocks, when bond bubbles implode things tend to get VERY serious VERY quickly.

 

This concludes this article. If you’re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html.

 

This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.

 

Best Regards

 

Phoenix Capital Research

 

 

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Wed, 09/03/2014 - 08:23 | 5174866 Itinerant
Itinerant's picture

Investors are investing in so-called no-risk government bonds that yield almost nothing not so much because they are delusional, but principally because they cannot find real-world investments and loans with a better risk/return profile. The demand for no-risk loans also has a lot to do with regulations about capital requirements for banks and risk profiles for insurance and pension investors, so these investors are not crazy, even though collectively we are fooling ourselves with bogus accounting.

It is also not true that the European sovereigns are far worse than the USA. Federal debt is north of 600% of revenues. Europeans sovereigns typically have less than a third of this ratio. European statistics count consolidated public sector debt, whereas Americans typically leave out municipal and state debt positions and revenues. Much of this outrage over Europe is a statistical mirage which commentators keep falling for.

Wed, 09/03/2014 - 00:43 | 5174425 Creepy A. Cracker
Creepy A. Cracker's picture

I just hope that I'm not dead by the time I'm finally right...

Wed, 09/03/2014 - 00:21 | 5174380 Duck077
Duck077's picture

The Euro is accutually and better store of value than the US $.  Most people are shocked.  Europe has over 10 T of Gold to back their currency, the us claims to have 8. something but they leaased out a large portion that they will never be repaid.  Good luck to you.  It's not going to be easy.

Wed, 09/03/2014 - 08:24 | 5174867 Itinerant
Itinerant's picture

Except for the part about storing it in the Federal Reserve vaults

Tue, 09/02/2014 - 23:55 | 5174310 falconflight
falconflight's picture

But will basic materials stocks weather the onslaught better?  Stocks in energy; oil and gas, coal?  Commodities index funds related to agriculture?

Tue, 09/02/2014 - 23:49 | 5174296 stpioc
Tue, 09/02/2014 - 22:44 | 5174114 AdvancingTime
AdvancingTime's picture

 We may soon be forced to face our economic Armageddon. The forces that have driven stock markets ever-higher and upward may be beginning to wane. Many markets became distorted years ago when QE and super low interest rates hit the economy in an effort to lessen many of the missteps of recent years.

This has been more helpful in holding up the underlying value of assets and derivatives it now appears than helping to repair a wounded economy. QE has up to now stopped an implosion of derivatives including the resulting contagion and shock that would have spread throughout the financial system. Unfortunately the economy has not fared as well as these asset prices and in many ways these policies have harmed Main Street. More on this subject in the article below,

http://brucewilds.blogspot.com/2014/05/facing-our-economic-armageddon.ht...

Tue, 09/02/2014 - 23:19 | 5174223 Okienomics
Okienomics's picture

You're catching up on the author as the most suck-ass, self-serving whoring poster on ZH.

Tue, 09/02/2014 - 18:50 | 5173363 GFORCE
GFORCE's picture

These posts are getting dull. 5 years he's been writing doom and gloom posts. Yeah, we all know a crash is coming! Stop regurgitating the same old bull!!

Tue, 09/02/2014 - 18:00 | 5173188 Duc888
Duc888's picture

 

 

 

Dammit, well here's the problem!

 

Fed: US consumers have decided to 'hoard money'

"The St. Louis Federal Reserve thinks it has the answer: A paper the central bank branch published this week blames the low level of money movement in large part on consumers and their "willingness to hoard money.

 

 

....can't make this shit up.

 

http://www.cnbc.com/id/101963821

 

Tue, 09/02/2014 - 20:07 | 5173648 Rhal
Rhal's picture

My money hoard:

.... a piggy bank.

Tue, 09/02/2014 - 16:49 | 5172885 Lordflin
Lordflin's picture

PC.... Central Bank has been the only game in town for at least the past four years... no one pays attention to the market anymore.

Tue, 09/02/2014 - 16:02 | 5172635 limacon
limacon's picture

Become a Neo-Viking and raid the treasures stolen by the banksters and oligarchs .
See http://andreswhy.blogspot.com/2014/02/neo-vikings.html

Tue, 09/02/2014 - 14:39 | 5172197 achilles5008
achilles5008's picture

Sorry, left off sarc

Tue, 09/02/2014 - 14:18 | 5172087 achilles5008
achilles5008's picture

Wanted to read this, but ad bloc took out the whole article.

Tue, 09/02/2014 - 16:30 | 5172791 Cognitive Dissonance
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That's funny on so many levels.  ;-)

Tue, 09/02/2014 - 14:38 | 5172189 Ol Man
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I am running AdBlock Plus 2.6.4...  and have read the article with no problems...

Tue, 09/02/2014 - 23:16 | 5174208 Okienomics
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You forgot to turn on the stupid filter.

Tue, 09/02/2014 - 14:16 | 5172074 Ewtman
Ewtman's picture

The coming bubble burst was explained here months ago...

 

http://www.globaldeflationnews.com/anatomy-of-a-bubble-how-the-federal-r...

 

Tue, 09/02/2014 - 19:18 | 5173491 TeethVillage88s
TeethVillage88s's picture

My mind is going back and forth looking at the Financial Bubble like Dow Jones Index and Derivatives... and the Gold Chart which has never been higher than $2000.

It looks like if you were in USA, India or China you could have bought gold for $500 an Ounce back in 2003-2004. Gold is getting more expensive to mine, but poor people are still doing it on the cheap in South America. Supply problem maybe if 500 tons or 1000 tons is not available.

Your link: "The magnitude of this credit (debt) bubble is staggering, over forty-nine (49) times larger than the 1929 stock market crash. Look at the 1929 crash way off to the left there. It’s almost minuscule."

The Financial & Debt Bubbles are completely different animals from the Gold Market.

Money & Credit has high Utility. Everyone needs money, water, food, shelter, transportation, energy... and maybe EBT cards & Welfare Payments.

Money is said to be key to progress in all societies (credit & Debt are the same thing except you Enslave yourself)

AVG UK Household Debt is like $200K British Pounds. USA is not that different. So we are partly enslaved within a Fascist Banking & Government System it appears. The British Empire is the model for Global Trade that we all have taken on today: China, Russia, EU, UK, USA.

- Debt Bubble
- Financial Cycle Bubble(Credit)
- Stock Market Bubble
- Central Bank Bubble
- Federal Budget Bubble
- US Executive Compensation Bubble
- US Subsidies, Corporate Welfare Bubble
- USD Bubble(Credit)

We are juggling all of this and saying: Gas & Oil is the new Gold, it is the energy the leads to progress in our society. BUT I notice US War seems to be centered on "LAND" which contains either Oil/Gas or Opium & Cocaine

The goal of wars always has either riches or markets or both.

- 2002 seems to be the start of a WAR Bubble
- Considering the long list of Bubbles above, the US Must Exercise Power globally to continue to prove it is a Superpower
- So perhaps War ends at the same time as the US Bubble provided no one else has money or energy to try to invade the USA or Strike the USA with other weapons

IF TPTB want USA to continue as a country it is now positioning assets

- Increasing Migration of all kinds
- Using Mergers, take overs, LBO, Credit to buy up companies, intellectual property, real estate, debt within the USA
- Creating New Derivatives based on Auto Loans & Credit Card Debt
- Influencing International Treaties to favor property rights of Bankers, Debt Holders, Holding Companies OVER the rights of Bankrupt Individuals

http://research.stlouisfed.org/fred2/series/ROWFDN... ($3.16 Foreign Investment USA)
http://research.stlouisfed.org/fred2/series/GPDI ($2.69 Private Domestic Investment)
http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm
http://www.bea.gov/newsreleases/international/intinv/iip_glance.htm ($26 Trillion foreign compared to $22 for US) (This is very interesting as Big Banks are growing strongly, but the number of total us banks is dramatically decreasing, like someone is gaming the system, Commercial Banks in the U.S. - FRED - St. Louis Fed)

Considering the Actions of the FBI & DOJ since 2001, it seems clear there has been a coup in the USA pulled off by influencing the US Congress & Legislation... The Root being Money

What is the worst thing we have to fear? Being Enslaved as a Nation after a Dollar Collapse or Financial Collapse.

Tue, 09/02/2014 - 23:57 | 5174321 Lord Koos
Lord Koos's picture

No matter what bullshit propaganda the warmongers come up with (religious beliefs, "freedom" etc etc), wars are always over resources and/or turf.

Tue, 09/02/2014 - 21:20 | 5173897 allgoodmen
allgoodmen's picture

1929 has little in common with today as least as the general public (us) are concerned. In 1929, people had bank balances which were lost when banks went under without FDIC "insurance." Today people owe, on average hundreds of thousands of dollars, so any banking collapse will only result in reassigned payees.

For instance, following 2008, the average foreclosure resulted, if the foreclosee played it right, in several years of rent and payment free living. The correct strategy for the "average" American in a general collapse is to hold dollars at all costs and with no regard to credit rating suspend all debt payments, since credit will be unavailable in any event. In 1929 the correct strategy was to be as close to the front of the line during the bank run.

Tue, 09/02/2014 - 23:40 | 5174272 TeethVillage88s
TeethVillage88s's picture

Seems no US Bank will Insure the FDIC.

Wow. This is note worthy.

Thanks for the response. I am always surprised by my thoughts and the progression of possible plans for the USA.

- FDIC is Under Funded,
- so are Pension Funds
- we see a run of failures of pension funds and even forced reduced benefits of pension funds due to Vampiric Banking, or Vampiric US Congressmen Policies, or Vampiric Department of Justice Policies to support Wealthy TBTF Banks at any cost ... well...
- Hm, looks like Russia or Eastern Europe, maybe looks like a Banana Republic Run by Bernie Madoff (the Big City Lover that enlisted the big Celebrities of Hollywood and New York)
- they might be exposed to the International Community as being bumbling or incompetent...
- not that International Banks don't already know that US Banks are Corrupt

Tue, 09/02/2014 - 13:16 | 5171734 lester1
lester1's picture

The trigger for the collapse will occur in 2015-16 sometime when the FED tries to raise interest rates and there are massive defaults on all that cheap QE money the FED printed.

Big banks will fail and be legally able to seize your savings deposits via "bail-ins"

Tue, 09/02/2014 - 13:54 | 5171959 Stuck on Zero
Stuck on Zero's picture

If the bank fails and you lose your deposits will it also loase your mortgage debt or will you still owe that?

 

Tue, 09/02/2014 - 14:58 | 5172293 lester1
lester1's picture

It would probably be sold to another bank via bankruptcy liquidation.

Tue, 09/02/2014 - 12:20 | 5171479 JRobby
JRobby's picture

It's the big one Elizabeth!

Tue, 09/02/2014 - 13:03 | 5171662 NYPoke
NYPoke's picture

Good 'ole Redd.

Tue, 09/02/2014 - 11:51 | 5171340 RaceToTheBottom
RaceToTheBottom's picture

The central Banks have become the market

Tue, 09/02/2014 - 21:15 | 5173881 Buck Johnson
Buck Johnson's picture

Exactly,  they are the market and very soon it will end.

Tue, 09/02/2014 - 14:15 | 5172073 KnuckleDragger-X
KnuckleDragger-X's picture

Forward into the past.....

Tue, 09/02/2014 - 12:06 | 5171407 Felix da Kat
Felix da Kat's picture

As a former subscriber to PCR, I can tell you that their shtick is to "Doomsday 'em into buying our report". PCR has been crying wolf for five plus years not unlike other doomsday profiteers (Harry Dent, Bob Prechter, et al...) who make their fortunes scaring you. Of course the little boy who cried wolf was correct eventually and these fellows will be too... but with the Fed's unlimited funds, this isn't the big one just yet. It's still BTFD mode here.

Tue, 09/02/2014 - 23:43 | 5174277 TheReplacement
TheReplacement's picture

The thing is that the Fed isn't really fully in control of the situation.  It is using a fiat currency.  A currency is a means of exchange.  That is great that they can print it out of thin air.  Who exactly is guaranteeing that there are buyers for it and that there will remain buyers?  What happens if the largest foreign holders dump treasuries?  What happens if the US does not go into Syria and flex it's muscles once again and Yemen falls to Al Qaida?  My bet is that OPEC notices this huge sign of weakness and starts listening to another strong horse like China/Russia. 

It could happen fast and unexpectedly or it could be slow and drawn out.  The point is nobody knows when it will happen but everyone knows it will happen.  The best bet is to get out of the game as much as you can afford to and start preparing for life after America.

Tue, 09/02/2014 - 14:25 | 5172126 Smiddywesson
Smiddywesson's picture

Timing the total collapse of the financial world isn't like dusting crops, boy.

I wouldn't call someone a wolf crier because they thought they saw a moderate tsunami bearing down on them and sounded the alarm, when in fact they saw the mother of all monster tsunamis on the horizon.  Sooner or later, this will end poorly for hundreds of millions of people.

Tue, 09/02/2014 - 23:44 | 5174282 TheReplacement
TheReplacement's picture

Billions.  Remember this is the mother of all monster tsunamis.

Tue, 09/02/2014 - 14:26 | 5172125 Smiddywesson
Smiddywesson's picture

duplicate

Tue, 09/02/2014 - 12:42 | 5171574 viahj
viahj's picture

profit seeking schtick aside, this is a good entry-level article to forward to my non-global economic theory circle.  timing is a bitch and not without risk but to not prepare is to not give yourself a chance. 

Tue, 09/02/2014 - 23:46 | 5174284 TheReplacement
TheReplacement's picture

That's a prudent approach and attitude.  Use the tools available to the best effect.

Tue, 09/02/2014 - 12:23 | 5171486 JRobby
JRobby's picture

"this isn't the big one just yet"

We know how well "maket timers" do.


Tue, 09/02/2014 - 13:03 | 5171665 hibou-Owl
hibou-Owl's picture

"just Yet" so do you run towards the cliff with your eyes shut hoping the brakes will work before you go over. You may have brakes but you got to get out, and the shear mass of people behind you makes getting a fill extremely unlikely.

What's the upside vs potential loss! Sounds like your the "Market timer" trying to squeeze the last drop of blood.

I rather leave the party early and have clear head in the morning.

Tue, 09/02/2014 - 23:46 | 5174287 TheReplacement
TheReplacement's picture

I rather leave the party early and have a head in the morning.

FIFY

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