| By Bill Bonner Friday, October 30, 2020 – Week 33 of the Quarantine Hard times create strong men. Strong men create good times. Good times create weak men. And weak men create hard times. – G. Michael Hopf SAN MARTIN, ARGENTINA – America’s weak men – in Congress, on Wall Street, in the Federal Reserve, in universities and newsrooms – getting old, desperate to hold on to their status and their money – are setting up some very tough times. At least, that’s our guiding hypothesis here at the Diary. But the blockheads think that, with math and mechanics – or brute force – they can escape the patterns of the past… and the poetic judgment of the future. Simpleton Logic During the Vietnam War, for example, the number-crunchers, led by former secretary of defense Robert McNamara, tried to win by doing simple cost/benefit analysis. They watched the “body count”… as if it were the Dow Jones Industrial Average. Then, in an effort to increase the cost to the enemy, they “sent a message to Hanoi,” threatening to bomb it “back to the Stone Age,” if it didn’t do what the U.S. wanted. Years later, North Vietnamese general Vo Nguyen Giap said to McNamara, “We didn’t know you were trying to send a message. We thought you were trying to kill us.” We see the same sort of simpleton logic at work in America’s “sanctions” – against Russia, Iran, and others. They are supposed to increase the pain to the foreigners and result in a gain for the U.S. Instead, the “enemy” digs in its heels and rallies behind its leaders. | Recommended Link | | Replay Available Until Midnight Tonight Silicon Valley millionaire Jeff Brown shares the name of the one tech stock he believes could rival NVIDIA – and make you over 1,683%… In this exclusive encore presentation, tech investing wizard Jeff Brown reveals the No. 1 technology investment you can make in America today. He shows why it is set to grow 30,000%. Plus he reveals how you could start with $1,000… and build a million-dollar portfolio… from scratch… in today's market… Jeff guarantees this all-new Million-Dollar Portfolio could show you the chance to double your money at least five times over the next 12 months – at a minimum. Jeff predicts some of these stocks could soar 8X, 10X, or higher. | | | -- | Illusion of Recovery The mechanistic/math-based illusion is also at the center of the feds’ ham-fisted “stimulus” measures. Dropping money bombs from helicopters (or supplemental unemployment compensation… or business bailouts), they believe they can increase real “demand” and change the behavior of the economy. Which is what led to the latest “blowout” GDP growth numbers. According to the number-torturers, U.S. GDP grew 33% in the third quarter – a record. But wait. How could GDP go up so much while 22 million people – 13% of the workforce – are receiving unemployment? And when actual on-the-job earnings are down by hundreds of billions of dollars? And when long-term unemployment is rising as more and more small businesses simply give up? Oh, Dear Reader… you already know the answer, don’t you? In the midst of the sharpest downturn in history, the feds increased Americans’ incomes by giving them more money than they earned when they were working – with more than $5 trillion in fiscal and monetary stimulus. Since they were trapped at home, folks took the free cash and started daytrading… or bought new appliances. Now, they have new refrigerators… and a new TV to watch while they’re waiting to be called back to work. If you just looked at the numbers, the result could be mistaken for a “recovery.” And if you were particularly thick, like a Federal Reserve governor… or a White House economic advisor… you might conclude that the economy needs more of this stimulus. Do You Know About "Tech Royalty" Investing? Old Wives’ Tales But if you have any poetry in your soul… or any real brains in your head… you know you can’t borrow or “print” your way to wealth. The “recovery” has stalled. Because the mechanical/mathematical metaphor – even dressed up as the Fed’s “dynamic stochastic equilibrium” model – is a fraud. There are deeper patterns at work… oft brushed off as old wives’ tales and moral lessons: “A penny saved is a penny earned.” “Don’t go looking for trouble – or you’ll find it.” “Marry for money – and you’ll earn it every day.” And our favorite: “One generation learns; the next forgets.” The generation of the 1930s and 1940s faced hard times. They learned to work, save their money, and let the economy do its stuff. | Recommended Link | | Stock Options are DEAD! "Penny Trades" have WON… Forget options! Because there’s a NEW way to trade. It can pay far more than stocks… Trades can cost as little as 1¢… These special trades can multiply as much as 529 times… Warren Buffett made $12 billion with the idea behind this technique… These trades can shoot up lightning fast – sometimes in weeks or even days… One of these odd trades even shot up 183% in one day! Our readers saw the chance at gains as high as an extraordinary 5,100% with one 19¢ trade. I repeat – this is NOT options trading. | | | -- | Weak Men That is what produced the good times of the 1950s and 1960s… making the U.S. the world leader non-pareil, in every sense. First in economy. First in art and culture. First in military power. First in science, learning… You name it. We were number one. But the good times produced weak men. Richard Nixon was faced with rising inflation – it hit 4.3% in 1971. The U.S. dollar was falling. The French were coming to the Treasury, demanding to exchange – as guaranteed by six generations of U.S. Treasury Secretaries – their U.S. dollars for gold. What did Nixon do? Stiffen his backbone… cut government spending… cut taxes… and roll up his sleeves to dig his way out of the hole Lyndon Johnson had put him in? Nope. His knees buckled. He slithered down and ordered the “gold window” at the Federal Reserve closed. Thenceforth, America operated with a new kind of fake money – not backed by anything except the jelly-like ligaments of future Treasury and Fed chiefs. Inflation rose to 13% in 1980 and threatened to go higher… until Paul Volcker, America’s last honest Fed chairman, brought it under control. This “save” bought the U.S. 20 more years of relative prosperity… and peace. The One Big Threat You Face on November 3rd. No Backbone But since then, it is as if America’s Achilles tendon had been cut. Wibbly wobbly… flippety floppety… First, in 2001, George W. Bush gave in to the warmongers and the military/industrial/surveillance wing of the Deep State… He began the longest, most expensive, most pointless war in U.S. history. There wasn’t even an identifiable enemy. Meanwhile, Fed chief Alan Greenspan collapsed, too. Rather than let the economy heal itself after the recession of 2001, he jazzed it up and perverted it by lowering the key federal funds rate by more than 500 basis points (5 percentage points). These artificially low interest rates caused the mortgage crisis of 2008-2009. Then, both the Fed – under Greenspan’s successor, Ben Bernanke – and the federal government, under Barack Obama… gave way. Bernanke famously applauded his own spinelessness in his hagiographic book, The Courage to Act. Like his predecessor, he cut the federal funds rate by more than 5 percentage points… down to near zero. For his part, Obama backed the “shovel-ready” boondoggles already in motion. And though he had pledged to get America out of Bush’s futile wars, when push came to shove… rather than go up against the warmongers… including Hillary Clinton and Joe Biden – he went limp. No Strength or Courage The next crisis, in February of this year, brought forth a new bowl of noodles. Donald Trump couldn’t stand up straight and confront his own health bureaucrats. And the Jerome Powell Fed went along with an outrageous money-printing spree, in which in the second quarter of this year brought government spending to more than half of GDP… and made the deficit for 2020 greater than tax receipts. So far, in the face of the COVID-Lockdown-Recession, there have been few people who have shown any strength at all. Instead, they watch the numbers – new “cases”… “with-COVID deaths”… hospital beds in use… They must think that if they only had enough data, they could defeat death itself. Somehow, the Swedes mostly resisted the hysteria. Practically everywhere else, people panicked and fled in terror. Perhaps the greatest exception is a federal judge in Pennsylvania. On September 14, the New York Daily News reported… A federal judge on Monday struck down Pennsylvania’s coronavirus restrictions that banned large gatherings and forced nonessential businesses to close, calling the order “unconstitutional.” Judge William Stickman ruled in favor of four counties that had sued Gov. Tom Wolf and Health Secretary Rachel Levine over the rules. “There is no question that this country has faced, and will face, emergencies of every sort,” Stickman wrote. “But the solution to a national crisis can never be permitted to supersede the commitment to individual liberty that stands as the foundation of the American experiment.” As for the rest – the whole elite of judges, politicians, rich people, media figures… the soft generation that grew up in the cushy 1960s and 1970s – there is little sign of strength or courage. Surely, the curse of history is on us all. Regards, Bill
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Q3 2020 Doom Index Update By Sean Stanton, Analyst, Rogue Economics We created the Doom Index to sound the alarm ahead of the next crisis. It tracks 12 key indicators to detect when there’s stress in the economy and markets are overheating. [For more information on how we calculate the Doom Index reading each quarter, have a look at our Introducing the Doom Index report.] The chart below shows our Doom Index levels by quarter. The red bars indicate a reading of 8 or higher. That’s when we raise our tattered crash alert flag and tell investors it’s time to prepare for a market crash. As you can see from the chart above, we raised the “crash alert” flag in Q2 2019, when the index reading moved up to 8. In Q3 2019, it shot up to 9, where it stayed for the next four quarters. In the first quarter of 2020, the S&P 500 – the bellwether for the American stock market – fell 34%, its fastest drop in history. Over the summer, the S&P 500 rebounded… hitting new all-time highs, based largely on investor confidence in the feds’ stimulus measures. Our recent Doom Index reading – based on the Q3 2020 figures and reports – is 7. Good News First, the good news… The Institute for Supply Management (ISM) Manufacturing Index is a terrific gauge of economic activity. A reading above 50 signals expansion. At the end of the third quarter, the reading was at 55.2. So no Doom Points were awarded. We use U.S. Railcar Utilization as a proxy for the amount of goods moving throughout the economy. When the economy slows, the movement of goods shipped also slows. In Q3, Railcar Utilization was up 45% from the previous quarter. No Doom Points were awarded. Likewise, Nonfarm Payroll and U.S. Building Permits were also on the rise – up 4.83% and 27.5%, respectively, from the previous quarter. No Doom Points were awarded. And finally, Investor Sentiment. We use this as a contrarian indicator. Stocks tend to fall when investors get too bullish. We award one Doom Point whenever investor sentiment tops 45%. In Q3, investor sentiment remained low – at 26.24%. No Doom Points were awarded. Bad News Now for a look at the indicators that are giving us cause for concern… Bank Loan Growth tracks the growth and decline of commercial and industrial loans. We award one Doom Point whenever total credit growth falls below 2%. We award two Doom Points whenever credit growth goes negative. During the third quarter, credit growth declined 20%. Doom Points awarded: 2 *** Corporate Bond Downgrades tracks the number of corporate bond downgrades relative to the number of upgrades each quarter. We award one Doom Point whenever downgrades exceed upgrades. During the third quarter, there were almost three times as many downgrades as upgrades. Doom Points awarded: 1 *** Margin Debt Outstanding tells us how much borrowed money investors are using. We take the average margin debt for the quarter and divide it by the market cap of the S&P 500. It’s a pretty good contrarian indicator. We award one Doom Point whenever margin debt exceeds 2%. We award two Doom Points whenever margin debt exceeds 3%. In the third quarter, margin debt equaled 2.13% of the S&P 500 market cap. Doom Points awarded: 1 *** Stock Valuations We look at three different stock market valuation ratios, all of which showed that the stock market is overvalued right now: The Shiller P/E ratio – also known as the cyclically adjusted price-to-earnings (or CAPE) ratio – looks at the price of stocks relative to their average earnings, adjusted for inflation, over the past 10 years. We award one Doom Point whenever the Shiller P/E ratio tops 24. In Q3 2020, the Shiller P/E ratio was 30.9. Doom Points awarded: 1 *** The Buffett Indicator compares the market value of all U.S. stocks relative to annual GDP. That tells us how much stocks are worth relative to the size of the economy. A reading above 1 tells us stocks are overvalued. We award one Doom Point whenever the Buffett ratio tops 1. In Q3 2020, the Buffett Indicator was at 2.01. Doom Points awarded: 1 *** The Tobin’s q ratio compares the market value of 5,000 publicly traded companies in the U.S. to the replacement costs of their assets in the private market. Then, it looks at where the stock price is relative to those replacement costs. We award one Doom Point whenever the Tobin’s q ratio tops 1. In Q3 2020, the Tobin’s q ratio was at 2.1. Doom Points awarded: 1 Total Doom Points awarded in Q3 2020: 7 FEATURED READS Donald Trump, Joe Biden Fight Over State of U.S. Economy
The U.S. is only four days away from the 2020 presidential election. In their final campaign days, candidates Donald Trump and Joe Biden argue about the state of the coronavirus-hit economy… and what they plan to do about it. Diversify Your Gold Portfolio to Protect Your Wealth From Volatility
Bill believes buying gold is one of the best ways to protect your money from economic volatility and inflation. But the market is much bigger than just physical gold. Learn how to diversify your gold holdings to raise your profit potential and lower your risk... MAILBAG Praise for Bill’s Diary today… Greetings! I’m from the Philippines and have been following Bill’s Diary since the lockdown started in March 2020. We are a family of doctors and we read the Diary as an entertaining, educational, and thought-provoking reading material. Bill is doing a Kissinger! The uncertain human nature and development will always be a pressure to everyone. We hope Bill will succeed in pacifying the impact of change. Cheers! – Danilo N. A dear reader reflects on Wednesday’s missive, “A Challenge to Which We Are Ill-Suited…” It goes to say that every person finds themself in a situation they are ill-suited to. This is a necessary affliction for the betterment of all. Consider this a dark time before dawn, a bright, new dawn! It is important to do all we can to retain rights rather than uncompromisingly give them away. It is important to not let all distractions take away from us the breakthrough moments all life is here to witness, no matter what condition. All life is much more than the avatar suit. The time is ripe now to – at long last – put to rest all the failures of the past, by never repeating them and acquiescing to the passage of one enormous dark cycle into a bright, new cycle. – Christina M. And others give their take on President Trump’s White House track record... Everything he has done has proven to be a stream of perfection. He has invited people from all over the world to come to this country, because he realized that those people made the United States of America the greatest country in the world, the land of the free and the home of the brave. – Mario M. You hit the nail on the head with Mr. Trump! Preach on about the win-win deals. Both candidates have nothing but their own selves and their families that they want to accommodate. Donald Trump missed his big chance for lasting fame. He became part of the Swamp! Thanks for your advice and clear thinking, Bill Bonner. Preach on! – Tom E. Could America let go of past failures, like Christina says? Has Donald Trump become part of the Swamp, as Tom believes? Write us at feedback@rogueeconomics.com. IN CASE YOU MISSED IT… This has never returned less than 400% over 4 years Something big is happening in America… and almost no one is paying attention. A completely misunderstood asset is transforming our world--and making people rich (Barron's estimates at least 20,000 people). A multimillionaire has written a fascinating analysis, and posted it free on his website here… Click here for more info. 
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