Friday, April 13, 2018

Are we in an 11 year cycle?

Ok, here is a theory, that we are at a point in the business cycle that matches the previous one, with a 11 year delay.  Let's see if we can prove or disprove it.

Oct 9, 2007:  DJIA peaks at 14,164.
Jan 26, 2018: DJIA peaks at 26,616.   This is about 10.3 years later.

Fed Reserve Rate
June 2006: Fed raises rates for the last time in the cycle to 5.25%.  The first cut is in Sept 2007, to 4.75%
June 2018:  The Fed projected to raise rates to 2.0%, which I speculate will be the last one, because there won't be enough room to raise it more, with the 10 year at 2.75%.  This indicates a 12-year cycle.  (On the other hand, it could keep going for several years).

Housing Market
Summer 2005. "The booming housing market halted abruptly in many parts of the United States in late summer of 2005, and as of summer 2006, several markets faced the issues of ballooning inventories, falling prices, and sharply reduced sales volumes."

Summer 2018.  It is hard to get numbers, but the refinance index seems to have peaked about Jan. 2018 and applications have declined since then. We haven't seen a peak in the housing market yet, but it seems inevitable with rising rates and decreases in financing.  This would indicate a 13-year cycle.

This is obviously still a work in progress.  But it seems like housing will cause the next bust, just like in 2007-2008, and this may occur sooner.  So keep a tight eye on housing news, specifically when the housing market peaks.

Keto Military Diet

Here is a 3-day diet I have invented, based on the military diet, that I will try sometime.  I have omitted the bread, crackers and fruit.  It is almost a fast it is so low in calories.  Here it is:

Day 1 Breakfast: quiche, peanut butter (2 tbl), coffee.
Day 1 Lunch:  tuna (5 oz can)
Day 1 Dinner: meat, any kind (8 oz), can of green beans (15 oz).  Non-fat greek yogurt (5 oz).

Day 2 Breakfast: 2 hard-boiled eggs, butter, coffee
Day 2 Lunch: 4% fat cottage cheese (8 oz), 5 slices of small salami rounds (not lunch meat)
Day 2 Dinner: 2 hot dogs (without bun), broccoli and carrots (12 oz), greek yogurt.

Day 3 Breakfast: cheese (2 oz), 5 salami rounds, coffee
Day 3 Lunch: 2 hard boiled eggs, small side salad w/no dressing or croutons
Day 3 Dinner: 1 can tuna, greek yogurt.

You can add celery and cheese as a snack.

Monday, April 9, 2018

Why a recession is inevitable and it will be caused by the housing market tanking again


We have made our economies fully dependent on banks creating loans out of thin air. Which is a ridiculous model, and as Steve says: “That is no way to run an economy”, but we still have. And if and when home prices start to fall, and fewer people buy homes, the money supply will first stop rising, and then start falling, and we will have the mother of all deflations.

Update:  I keep trying to find patterns and I keep being wrong.  But maybe we are in a 11-year cycle?  I.e. 2018 is like 2007.  So a major crisis in Sept. 2019?

New CBO Projections

The CBO just released their new 10-year budget projections.  I don't find it that interesting.  Yea it shows trillion-dollar deficits that increase each year, and a deficit of $1.5 trillion for the first time in the year 2028.  They are projecting that FY 2018 will only have a $804 billion deficit, and that FY2019 won't reach a trillion, only $981 billion.  Yea, right.  And that net interest will be at 3.1% of GDP in 2028 (which is well below the level at which I freak out).

I am however really interested in two upcoming reports they will issue.  The first is the next Long-Term Budget Projection.  The last one of those they issued was in March 2017, which is like an eternity ago, because so much has happened since then to increase the deficits.  I would like the deficit projections extended out to 20 years and see if the US will still be credit-worthy

The next is the 2018 Report on Long Term Projections for Social Security.  The last was issued in Oct. 2017, so it will be a while until the next one. 

Tuesday, April 3, 2018

Debtwatch March 2018

On Feb. 28, 2018, the debt held by the public was $1.515 x 10^13.

On Mar 31, 2018, the debt held by the public was $1.543 x 10^13, an increase of $278 billion or 1.8%.  

Update:  The interest paid in March was $33 billion per the Treasury, up from $23 billion in February.  This will number will continue to increase exponentially as interest rates rise and the base increases.

Thursday, March 29, 2018

FY 2020 deficit could exceed $2.5 trillion

If there is a recession within the next 2 years, something that is almost guaranteed to happen, the deficit will skyrocket even more.

If one assumes that a recession is likely to arrive within the next two years, and that such a recession will reduce government revenues and increase spending by at least 20%, the federal deficit would easily exceed $2.5 trillion in fiscal year 2019 or 2020, not the $1 trillion currently being forecast.

Congress and the Whitehouse have chosen to greatly increase the federal deficit. As a result, if a recession arrives in the next couple of years, the government will be in a weak fiscal position to respond with stimulus. Even if a recession doesn’t arrive, the government is ensuring that an ever increasing percentage of tax revenues will go towards debt interest expenses and not actual government services and programs.

Wednesday, March 28, 2018

Dystopia in Songdo

'Songdo is a new kind of city: Completely artificial, painstakingly designed, without a hint of decay or poverty, and nearly empty. It's a human desert'. 'There is an oppressive, Chernobyl-like emptiness here. The shallowness is awesome, in both the modern and traditional sense of the word; you can almost feel that these huge buildings are only years away from being completely abandoned.'

But it appears that like the UAE’s Masdar City, another perpetually unfinished ‘international’ ‘green’ ‘futuristic’ gated community, Songdo may be just one more city on its ways to becoming one more exhibit in the Museum of Futures That Never Were.

This also reminds me of other dytopian cities:  BrasiliaYujiapu, and Ordos, Mongolia.

Thursday, March 22, 2018

New Interstates

I don't have time to write a complete article so this will be short.

The Interstate Highway System was mostly completed by 1980.  The original act proposed 41,000 miles of highway, and 40,000 were built by 1980.  And the system was deemed complete in 1992 with the completion of I-70 through Glenwood Canyon in Colorado.  But there are 3 new major interstate highway being built now.

Interstate 11 is being built between Phoenix and Las Vegas, and it may eventually reach Reno in the north and Nogales, AZ in the south.  It is hard to believe it was left out of the original system.

Interstate 69 is partially built and will connect Mexico with Canada.  I think the most useful part of it will connect Houston with Shreveport.

Interstate 14 is mostly across the middle part of Texas, starting in El Paso following I-10, then branch off.  It will eventually go all the way to Augusta, Georgia.

Since we have unlimited money to spend, why not fully fund these? 

Friday, March 16, 2018

Global 12 Stocks

There are 12 stocks which seem to rise head-and-shoulders above the rest.  These are listed here:

G12 as of 3/16/2018

In Shares (M) Price
Total (M)
Rank Symbol Company DJIA 03/16/18 03/16/18 Subtotal 03/16/18
1 AAPL Apple Inc X 5070 178.02

GOOGL-A Alphabet
298.49 1134.42 338,613

GOOG-B Alphabet
47 1134.42 53,318
2 GOOG-C Alphabet
349.84 1135.73 397,324 789,255
3 AMZN Amazon
484.11 1571.68
4 MSFT Microsoft
7700 94.60
5 TCEHY Tencent
9500 59.27
6 FB-A Facebook
2400 185.09 444,216

FB-B Facebook
505 185.09 93,470 537,686
7 BABA Alibaba
2560 200.28

BRK-A Berkshire Hathaway
0.74875 310630 232,584
8 BRK-B Berkshire Hathaway
1340 206.96 277,326 509,911
9 JPM JP Morgan Chase X 3430 115.44
10 JNJ Johnson Johnson X 2680 133.68
11 BAC Bank of America
10240 32.17
12 XOM Exxon Mobil X 4240 75.12

The market cap of these companies is about $6.7 trillion.

Honorable mention:
Samsung (SSNLF)
Wells Fargo (WFC)
Walmart (WMT)
Royal Dutch Shell (RDS-A & RDS-B)

These companies are just dominating their fields to such an extent that they are clearly in a different league then the rest.  Note: I may have made some mistakes in calculation.

$21 Trillion of close of Friday, the US Treasury reported that total US debt has risen above $21 trillion for the first time; or $21,031,067,004,766.25 to be precise.

It hit $20 trillion on 9/8/2017, so this is only a little over 6 months later.  I had earlier seen 9/30/2018 as the date when the $20 trillion line would be breached, so this is 5.5 months early.

If we are spending $100 billion per month, we should get to $22 trillion on about 1/20.2019, by the 2nd anniversary of Trump taking office.

When did we first cross the $10.5 trillion mark?  On 10/30/2008.  So this took about 9.5 years.  So if past trends continue, we should get to $42 trillion on about 10/30/2027.

Monday, March 5, 2018

$1 trillion in interest per year by 2021

Here is a thought:  If the national debt rises to $25 trillion, and interest rates on that jump to 4%, then the annual bill for interest will be $1 trillion.  And this could occur as soon as 2021.

Read this:

We are now ramping up government debt by orders of magnitude at the same time when interest on our mountains of debt will easily rise to 4% in about two years. I come by that number partly from the present rate of interest rise but mostly from the fact that the Fed is moving out of controlling the cost of debt, and will be doing so at a faster rate in the months ahead. (That is, if it stays with the program it has promised; and if it doesn’t, we simply have QE forever.) Mostly I come to it because 4% is the low side of what interest on the debt has historically been when the Fed wasn’t sopping up all government bonds, bills, and notes.
A rise to the low side of normal for government bond interest will likely put interest payments alone on the national debt at a $1 trillion a year by the end of this decade (because the debt will also rise by another $3-4 trillion by then with all new debt being financed at the higher rates and all rolled-over debt being financed at those rates, and most of the US debt is short term, so will roll over soon).
The time (end of 2020), then, is not far off when the entire newly normal trillion-dollar deficit will be consumed just to pay interest on the debt. Whether inflation drives interest up or the Federal Reserve’s unwind or the Republican’s new normal of trillion-dollar annual deficits or the president’s proposed fiscal stimulus plan, the concern that is shaking markets is ALL about lethal levels of interest coming to our already monumental mountains of debt.

My comment:  When this happens we will just up the deficit to $2 trillion per year.  Why not?  We just established that the government is the source of all wealth and its ability to create wealth is unlimited, so everybody will get richer.  And why stop at $2 trillion, why not $3 trillion.  That would be enough to give everyone a Universal Basic Income.  And then there would have to be cost-of-living-adjustments on the monthly non-welfare checks everyone would receive.

New crytocurrencies from Marshall Islands and Cambodia

The Venezuelan Petro appears to be a total fraud even if it isn't banned by the US Treasury.  But two new challengers appear for the title of the first successful official national cryptocurrency.

The Republic of the Marshall Islands is preparing to issue the Sovereign (SOV).  It is unknown what technology this will be based on, whether on Ethereum or something else.  This will be legal tender.  The Marshall Islands currently uses the US dollar as its official currency and this would circulate alongside it.

Cambodia will soon release its new digital currency, to be called the Entapay.  It is aiming at replacing Visa as a payment mechanism.

I don't intend to comment on every single one of these, since there are dozens every day, but I may comment on some of these going forward.  I don't expect these two to be wildly successful, but I think that some country like India or Singapore will have successful cryptocurrencies, which other countries will then copy.

Saturday, March 3, 2018

The government is the source of unlimited wealth

Read:   The Radical Left-Wing Theory That the Government Has Unlimited Money

Now read: Martin Armstrong - Hyperinflation Unfolds Only When Public Confidence Collapses

Now, while we at it, read: Monetarily Sovereign

What is MMT?  MMT (modern monetary theory), or Monetary Sovereignty (from Rodger Mitchell) is the idea that the government can create wealth by spending money, specifically by deficit spending. 

What about inflation? Inflation can be reigned in if it gets out of control through increasing interest rates.  The Fed wants inflation to be about 2%, and it hasn't been 3% or higher since 2007.

How long can this state of affairs last?  Forever, apparently, unless public confidence in the system breaks down.

But what about interest on the debt?  It gets paid to rich people, and we can just jack up taxes on rich people to pay for the interest.

But what about rich foreigners who buy the debt, collect interest, and don't pay taxes?  Well, they are stupid because they will never get paid back in the same dollars, instead they will get paid back in depreciated dollars. The interest is just to compensate for the loss of purchasing power, and it may not even do that.

What is the purpose of taxes?  The purpose of taxes in this system is not to raise revenue, because the government doesn't not need any revenue at all, it can just digitally create money at the push of a button.  The purpose of taxes is: A) to keep inflation under control, and B) wealth redistribution.

Isn't this madness?  Absolutely.  But we have already past the point of no return, which was Rand Paul attempting to filibuster the spending bill on Feb. 8.

We are on a roller coaster ride and there is no way off.  You might as well enjoy the ride.  Unlike Martin Armstrong, I don't believe this will work in the long run.  It certainly will work in the short run (the next 10-15 years).

So let's try it.  But at some point, which I think will be in the mid-2030's, the whole inflation thing will turn into hyperinflation and the whole system will break down, like what is happening in Venezuela right now, but probably not as extreme.

Friday, March 2, 2018

Debtwatch February 2018

On Jan. 31, 2018, the debt held by the public was $14.80 x 10^12.  Interest paid on the national debt for January was $27.8 billion per the monthly treasury statement.

On Feb. 28, 2018, the debt held by the public was $15.15 x 10^12, an increase of $350 billion during the month and an increase of 2.4%.

Update:  For interest, I will use the number on the 1st page of the monthly treasury statement.  So for January 2018, it was $25 billion.  For February 2018, it was $23 billion.  This is actually probably the most important number to watch.  I expect this number to skyrocket to as much as $100 billion per month within the next 3 years.

Tuesday, February 27, 2018

$15 trillion in Debt Held By the Public

The US finally hit $15 trillion in Debt Held By the Public on Feb 15, 2018.  The exact number was 15,018,135,646,693.34.  This is actually a bigger milestone than the $20 trillion National Debt because that includes the number held by the Social Security trustees, not that that isn't real debt, but it represents wealth to the holders, which are the general public. 

Many many moons ago in 2013, in this really old post, I predicted that a "Junior Day of Reckoning" would occur when we hit $15 trillion, and that it would occur about December 31, 2015.  So it took 2 years longer than I had predicted at that time.  And it doesn't seem like there is any sort of wall, other than the fact that spending is suddenly skyrocketing.

When did we cross the $7.5 trillion debt held by the public number?  On 9/15/2009.  So it took exactly 8 years and 5 months.  If it takes 8.5 years to double, we should be at $30 trillion held by the public on 8/15/2026.

We may need to start using floating point notation to represent it.  So the debt held by the public in floating point notation is $15 x 10^12.

I wonder when the deficit will first cross $2 trillion per year.  Maybe in FY 2020.  But that is just a wild guess.  We know that in a recession that government revenues drop and spending increases.  $5 trillion in spending and $3 trillion in revenue doesn't seem out of the question in a couple of years.

Tuesday, February 20, 2018

Venezuela launches the Petro


Venezuela is beginning to sell 82.4 million Petros, which is a crypto-currency, each one tied to the price of a barrel of oil.  It will have the currency code PTR.  This is the first national crypto-currency, but it won't be the last.  I predict that eventually every country will have its own, except for the US.  In the US, each major bank and corporation will have its own.

2017 Financial Report of the US Government


The National Debt is currently (as of 2/20/18) at $20.76 trillion.  This is done on a cash basis.  Another way of looking at things is the financial report at the above link which includes expenses that have been incurred but not paid for yet, like pensions.  It shows a Net Operating Cost in FY 2017 of $1.157 trillion.  It also shows the net worth of the Federal government at a negative $20.4 trillion, which is actually similar to the national debt.

The most interesting thing about it is how it projects the national debt in the year 2090 and later.  Here are some quotes:

The debt-to-GDP ratio was 76 percent at the end of FY 2017, and under current policy is projected to be 74 percent in 2027, 136 percent in 2047, and 297 percent in 2092.

These debt-to-GDP projections are generally higher than the corresponding projections in both the FY 2016 and FY 2015 Financial Reports. For example, the debt-to-GDP projection for 2090 (the final projection year for the 2015 report) is 289 percent in this year’s Financial Report, 249 percent in the FY 2016 Financial Report, and 223 percent in the FY 2015 Financial Report.

While some post-cleanup monitoring and other long-term stewardship activities post-2092 are included in the liability, there are others the Department expects to continue beyond 2092 for which the costs cannot reasonably be estimated.

As a percent of GDP, interest spending was 1.4 percent in 2017, and under current policy is projected to reach 5.1 percent in 2037 and 15.1 percent in 2092.

Beginning in 2022, cost exceeds total income, and combined OASI and DI Trust Fund reserves diminish until they become depleted in 2034. After trust fund reserve depletion, continuing income is sufficient to support expenditures at a level of 77 percent of program cost for the rest of 2034, declining to 73 percent for 2091.

Interjection - my comments.  I don't think Social Security can be cut in 2034.  If they try, it will be a national insurrection, so good luck with that.  All the numbers after 2034 are thus suspect.

I have previously speculated that 5% is about the maximum interest spending that can be achieved before the whole things starts to fall apart, with defaults or hyperinflation.  This report indicates that 2037 is when this will occur.

It is fun to speculate about what life will be like in 2092.  But I think that sometime in the period of 2034 to 2037, that the system will fall apart.

Friday, February 9, 2018

The dam is breaking

The national debt has been frozen at just under $20.5 trillion for months.  Now that the budget deal has passed, the debt is going to increase like mad.

Here is the current level:

It is going to go up at least $100 billion per month from now until the whole system turns into a supernova.  It will be noteworthy only when the debt increases less than this.

Wednesday, February 7, 2018

Military Diet, Day 3: Completion

Weight: 233.2 lbs

Day 3 Breakfast
large apple: 130
2 slices cheese: 220
boiled egg: 70
5 crackers: 60
coffee w/creamer: 10
Total: 390

I forgot to post an update.  I went way over on Day 3.

Ending weight (2/8 AM): 234.4

So, the net result was that I lost 1.4 lbs over 3 days, and I sure didn't follow it strictly.  But if I lost 1.4 lbs every week I would be happy.  The rule of the military diet is that you have to wait at least 3 days before doing it again.  So I will do this again next week.