Buy Here… Sell Here… It’s That Simple

By Jody Chudley

history says now

This post Buy Here… Sell Here… It’s That Simple appeared first on Daily Reckoning.

Today, I’m going to let a chart do the heavy lifting for me.

The chart below compares the valuation of the S&P Goldman Sachs Commodity Index (GSCI) with the S&P 500.

Take a quick look. It isn’t hard to see where we are at today.

This chart tells us is that the Commodity Index has never been this inexpensive relative to the S&P 500. In other words, commodities are a screaming buy.

It also tells us that historically, any time the ratio has gotten this low, the Commodity Index has bounced back very sharply… which leads us to today’s buying opportunity.

So What’s In The Commodity Index (GSCI)?

The last time the GSCI to S&P 500 ratio was at this level was in the late 1990s when the dot-com bubble was about to burst. At that time, the big technology stocks were leading the market, exactly as they are today.

Over the decade that followed, the GSCI wildly outperformed the S&P 500.

I’ll admit that the chart is very intriguing. But before we get too excited, let’s make sure we understand exactly what the GSCI is comprised of.

The S&P GSCI isn’t an index of stocks. It’s an index of commodity futures that includes a diversified basket of commodities. Currently, 24 different commodities are included from all possible commodity sectors:

  • Six energy products
  • Five industrial metals
  • Eight agricultural products
  • Three livestock products
  • Two precious metals

The weighting of each commodity in the index is based on the quantity of that specific commodity that has been produced over the past five years. In other words, the more important the commodity (measured by consumption/production) to the global economy, the larger the weighting in the GSCI.

The weightings are selected once per year. And right now there is one industry that is dominating the weightings. Maybe you can spot it:

  • Agriculture — 18.3 percent
  • Industrial Metals — 10.9 percent
  • Energy — 58.6 percent
  • Livestock — 7.5 percent
  • Precious Metals — 4.7 percent

While I have no doubt that almost all of these commodities are worthy of closer inspection, I can’t help but point out the fact that this screaming buy signal is more narrowly screaming… BUY ENERGY!

Energy Exposure And An 8.45% Dividend Yield

I have a couple of takeaways from all of this.

The first is that there is significant risk at the top of the stock market today. I am absolutely convinced of that.

While the S&P 500 is still trading near its all-time highs, the gains in recent months have been concentrated in shockingly few large, popular and expensive stocks.

Amazon, Apple, Microsoft and Netflix alone combined for 84 percent of the S&P 500’s gain in the first half of the year.

Today, we need to be avoiding those types of stocks that momentum investors love.

Second, there are opportunities outside of these big expensive companies. Energy and commodities in general definitely fit that bill.

A good place to start would be with the very much off-the-radar Canadian oil producer Cardinal Energy (CRLFF).

Cardinal doesn’t just provide us with energy exposure. At current share prices, the company yields a whopping 8.45 percent!

More importantly, that dividend is fully sustainable thanks to the company’s incredibly low base production decline rates. This is a business that does not need to do much drilling to maintain its existing level of production. That is not something that is common in this new age of high-decline shale oil.

For 2019, Cardinal is even expecting to have enough free cash flow that the dividend could be increased. You generally don’t see that from companies that already yield over 8 percent.

With a sensible balance sheet and juicy yield, Cardinal Energy would be a good start towards positioning your portfolio to take advantage of the current opportunity that the GSCI chart is screaming about.

Here’s to looking through the windshield,

Jody Chudley

Jody Chudley
Financial Analyst, The Daily Edge

The post Buy Here… Sell Here… It’s That Simple appeared first on Daily Reckoning.

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From:: Daily Reckoning

The Fed Will Not Give up “Dark Money”

By Nomi Prins


This post The Fed Will Not Give up “Dark Money” appeared first on Daily Reckoning.

When it comes to second quarter U.S. economic growth figures, interpretation is everything.

On one hand, the projection of 4.1% second quarter growth is a sign of a surging economy set to grow for years to come.

But on the other hand, it is seen as temporary sugar rush created by tax cuts and debt. It’s unsustainable in the light of higher tariffs, an escalating trade war that could impact large portions of the economy, and rising federal deficits that put America even deeper in debt.

Another data point to determine which of these two camps is most accurate for predicting the future of the U.S. economy is job’s figures. July’s jobs report came in with fewer than expected jobs, a gain of 157,000 jobs vs. a forecast of 190,000.

While that miss in itself may not mean much, since the overall jobless rate dropped to 3.9%, the fact that wages are growing slowly remains a concern.

Also concerning is the record amount of household debt. Consumers are using it to spend and that is partially responsible for that 4.1% GDP growth, as I noted on Fox Business recently. But it’s not sustainable.

Add it all up and there’s considerable reason to believe that the 4.1% growth rate is only temporary.

It will not represent the full GDP growth figure over all of 2018, nor will it be the growth figure in 2019 or 2020. Even the Fed admits growth will slacken over the next couple of years.

I don’t often agree with the Fed. But on this point, I agree with the Fed’s forecast for slower growth to come. That outlook presents options for the Fed to create more credit, or what I call dark money to support the markets, to confront inevitable periods of volatility ahead.

Dark money is the #1 secret life force of today’s rigged financial markets. It drives whole markets up and down. It’s the reason for today’s financial bubbles.

On Wall Street, knowledge of and access to dark money means trillions of dollars per year flowing in and around global stock, bond and derivatives markets.

I learned this firsthand from my career on Wall Street. My first full year working on Wall Street was in 1987.

I wasn’t talking about “dark money” or central bank collusion back then. I was just starting out.

Eventually, I would uncover how the dark money system works… how it has corrupted our financial system… and encouraged greed to the point of crisis like in 2008.

When I moved abroad to create and run the analytics department at Bear Stearns London as senior managing director, I got my first look at how dark money flows and its effects cross borders.

The “dark money” comes from central banks. In essence, central banks “print” money or electronically fabricate money by buying bonds or stocks. They use other tools like adjusting interest rate policy and currency agreements with other central banks to pump liquidity into the financial system.

That dark money goes to the biggest private banks and financial institutions first. From there, it spreads out in seemingly infinite directions affecting different financial assets in different ways.

Yet these dark money flows stretch around the world according to a pattern of power, influence and, of course, wealth for select groups. To be a part of the dark money elite means to have control over many. How elite is a matter of degree.

These is not built upon conspiracy theories. To the contrary, alliances make perfect sense and operate publicly. Even better, their exclusive dealings and the consequences that follow are foreseeable — but only if you understand how the system works and follow the dark money flows.

It’s easy to see how this dark money affects the stock market at a high level, because we can monitor its constant movement.

Here’s the smoking gun:

The black line shows you how much “dark money” the Federal Reserve has printed since 2008.

The gray line shows you the S&P 500.

They move together — more dark money drives the market higher. Much higher.

There are dark money charts from around the world, just like the one I showed you for the Federal Reserve and U.S. stock market.

Look at this “dark money” chart from Japan, for example:


The blue line shows the dark money created by their central bank, The Bank of Japan. The red line shows Japan’s major stock index, the Nikkei 225, going up as well. The dark money drove the market much higher over the past eight years.

Or, look at this “dark money” chart from the U.K.:


Again, the blue line shows the “dark money” created since 2009 by the U.K.’s central bank, The Bank of England. The black line shows how the FTSE 100, their stock index, has followed higher in lock-step.

To invest profitably in financial markets, you need to understand the hidden power relationships that drive financial and political events. Ideologies and personal associations among elites are oblivious to political party lines and international boundaries. So is dark money.

Needless to say, that’s not free market economics.

Where do things stand today?

The Fed has been raising interest rates since December 2015. And as of last October, it’s been reducing its balance sheet, although not as much as they’d have you believe (more on that in a moment).

But if markets plummet, the Fed will probably stop tightening or even return to quantitative easing.

This week, elite central bankers are having their annual confab at luxurious Jackson Hole, Wyoming.

The Federal Reserve chair invites elite central bankers to wine, dine and fish. In between the schmoozing, they will talk monetary policy.

This year, new chair Jerome Powell will be the master of ceremonies. He will be addressing the elite group on “monetary policy in a changing economy” this Friday.

The speech title alone casts a broad net. He will certainly discuss the tools available to the Fed when the next downturn occurs.

Given that rates are still pretty low, despite 175 basis points of tightening since December 2015, there’s not …read more

From:: Daily Reckoning

Happy Days Are Here Again

By Brian Maher


This post Happy Days Are Here Again appeared first on Daily Reckoning.

The lion has rediscovered its roar…

The S&P notched a new intraday high yesterday — 2,873.23 — eclipsing its January peak of 2,872.87.

Strong corporate earnings and a bouncing economy are the explanations widely on tap.

The professional men sang hosannas… and clapped happy hands.

Yesterday’s record is “fundamentally justified by the strong economy and better earnings,” says Kevin Caron of Washington Crossing Advisors.

“From an economic standpoint… it looks like we’re still in pretty solid shape,” adds Andrew Hopkins, head of equity research at Wilmington Trust.

The bears “may be waiting in vain” according to Steve Auth, chief investment officer at Federated Investors.

Stocks are “running out of excuses for not going up,” says this bull.

Just so.

Apparently escalating trade war and a possible emerging-market crisis (Turkey) are not menaces that rate a mention.

Where do stocks go next?

Perhaps we should consult the historical record for guidance…

Recall the S&P registered its last record high in distant January.

According to Bloomberg, the S&P has sustained 17 similar record-less spans since 1927.

What follows after a new record is established, as yesterday?

More records is the answer.

Bloomberg’s research reveals stocks rose the next 12 months on 16 of 17 occasions — a nearly blemish-free record.

On average, the S&P rose 13% over such periods.

In light of the foregoing… you can expect clear conditions to the far horizon.

And no one buys the umbrella when the sun is bright.

But as we have noted before, climate is what a fellow can expect — weather is what he actually gets.

The Sahara sees its days of rain… snow occasionally falls on Florida… Baltimore weather is not always paradisiacal.


A reliable market barometer — with over 100 years of history in back of it — has just given only its sixth “sell” reading since 1895.

That is, unlike many market “indicators”… this one doesn’t cry wolf.

Here we speak of the Sound Advice Risk Indicator.

Hatched by analyst Gray Cardiff, this indicator compares the ratio of the S&P to the median price of a new home.

When the S&P jumps too far ahead of home prices… look out.

Financial analyst and journalist Mark Hulbert:

The investment rationale underlying this indicator, according to Cardiff, is that it “measures the struggle for capital” between the two major asset classes that compete for capital at the riskier end of the spectrum — stocks and real estate. When the indicator rises above 2.0, he argues, it means that the stock market has absorbed “a larger proportion of available investment capital than economic conditions can justify” and, therefore, it is in “imminent danger of falling.”

As the following chart reveals, the Sound Advice Risk Indicator now exceeds 2.0:

Does this mean stocks are in “imminent danger of falling”?


As Cardiff admits readily, his indicator is not necessarily an immediate fire alarm.

After cresting 2.0, he acknowledges stocks can rise “for many months, sometimes even a couple of years.”

Its last sell signal came in 1998, for example — two years before the 2000 crash.

But — but — “in all cases, a major decline or crash followed, pulling down stock prices by 50% or more.”

“In all cases” is not a record to be sniffed at.

Did it botch the 2008 market collapse?

It did — the indicator never breached 2.0.

But it also gave a strong buy signal in early 2009, when the risk indicator struck a low of 0.77.

If you had entered the market with gusto at that point… you would likely be in easy waters today.

Now above 2.0, it advises to sell.

But if the market could still peg along “for a couple of years,” are you better informed today than yesterday?

We have argued previously the bull could steam another year or two before the great reckoning.


We still await the “melt-up” that takes stocks to incandescent extremes… before the flaming out.

Investors in the mass have yet to strike the match.

For the past month, investors have only sunk $15 billion into ETFs centered on U.S. stocks.

During the bullish month of January… that figure totaled $40 billion.

“I would be more concerned if there weren’t worries in the market,” confirms Malcolm Polley, president of Stewart Capital Advisors.

“That would mean you get a euphoric blow-off.”

“Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria,” said Sir John Templeton.

If true, the terminal phase, the denouement, is yet to come…


Brian Maher
Managing editor, The Daily Reckoning

The post Happy Days Are Here Again appeared first on Daily Reckoning.

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From:: Daily Reckoning

The Art of Winning

By Robert Kiyosaki

Robert Kiyosaki

This post The Art of Winning appeared first on Daily Reckoning.

I have never met anyone who likes losing money. And in all my years, I have never met a rich person who has never lost money.

But I have met a lot of poor people who have never lost a dime—investing, that is.

The fear of losing money is real.

Everyone has it. Even the rich.

But it’s not the fear that is the problem. It’s how you handle fear. It’s how you handle losing. The primary difference between a rich person and a poor person is how they manage that fear.

It’s okay to be fearful. It’s okay to be a coward when it comes to money. You can still be rich. We’re all heroes at something and cowards at something else.

My rich dad understood phobias about money.

“Some people are terrified of snakes. Some people are terrified about losing money. Both are phobias,” he would say.

So, his solution to the phobia of losing money was this: “If you hate risk and worry, start early.”

If you start young, it’s easier to be rich.

But what if you don’t have much time left or would like to retire early? How do you handle the fear of losing money?

My poor dad did nothing. He simply avoided the issue, refusing to discuss the subject.

My rich dad, on the other hand, recommended that I think like a Texan. “I like Texas and Texans,” he used to say. “In Texas, everything is bigger. When Texans win, they win big. And when they lose, it’s spectacular.”

“They like losing?” I asked.

“That’s not what I’m saying. Nobody likes losing. Show me a happy loser, and I’ll show you a loser,” said rich dad. “It’s a Texan’s attitude toward risk, reward, and failure I’m talking about. It’s how they handle life. They live it big.”

Rich dad went on, “What I like best is the Texas attitude. They’re proud when they win, and they brag when they lose. Texans have a saying, ‘If you’re going to go broke, go big.’ You don’t want to admit you went broke over a duplex.”

He constantly told Mike and me that the greatest reason for lack of financial success was because most people played it too safe.

“People are so afraid of losing that they lose.”

Fran Tarkenton, a once-great NFL quarterback, says it still another way: “Winning means being unafraid to lose.”

In my own life, I’ve noticed that winning usually follows losing.

I’ve never met a golfer who has never lost a golf ball. I’ve never met people who have fallen in love who have never had their heart broken.

For most people, the reason they don’t win financially is because the pain of losing money is far greater than the joy of being rich.

Rich dad used to tell Mike and me stories about his trips to Texas. “If you really want to learn the attitude of how to handle risk, losing, and failure, go to San Antonio and visit the Alamo.

“The Alamo is a great story of brave people who chose to fight, knowing there was no hope of success. They chose to die instead of surrendering. They got their butts kicked. So how do Texans handle failure? They still shout, ‘Remember the Alamo!’”

Mike and I heard this story a lot.

He always told us this story when he was about to go into a big deal, and he was nervous.

It gave him strength; it reminded him that he could always turn a financial loss into a financial win.

Rich dad knew that failure would only make him stronger and smarter.

It gave him the courage to cross the line when others backed out. “That’s why I like Texans so much,” he would say. “They took a great failure and turned it into inspiration….”

But probably his words that mean the most to me today are these:

“Texans don’t bury their failures. They get inspired by them. They take their failures and turn them into rallying cries. Failure inspires Texans to become winners. But that formula is not just the formula for Texans. It is the formula for all winners.”

Failure inspires winners. And failure defeats losers.

It is the biggest secret of winners. It’s the secret that losers do not know.

There is a big difference between hating losing and being afraid to lose.

Most people are so afraid of losing money that they cannot help but lose. They go broke over a duplex.

Financially, they play life too safe and too small.

The main reason that over 90% of the American public struggles financially is because they play not to lose. They don’t play to win.

They go to their financial planners or accountants or stockbrokers and buy a balanced portfolio.

Most have lots of cash in CDs, low-yield bonds, mutual funds that can be traded within a mutual-fund family, and a few individual stocks. It is a safe and sensible portfolio.

But it is not a winning portfolio. It is a portfolio of someone playing not to lose.

Don’t get me wrong. It’s probably a better portfolio than more than 70 percent of the population has, and that’s frightening.

It’s a great portfolio for someone who loves safety.

But playing it safe and balanced on your investment portfolio is not the way successful investors play the game.

The concept of winning and our desire to win in all areas of our lives were themes of the 2016 U.S. Presidential election.

It’s a mindset, a goal to which we can all aspire, and that motivates us to embrace our mistakes, learn from them, and keep our sights focused on winning.

It’s something President Trump understands, something rich investors understand…

And now it needs to be something you not only understand, but act on.


Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

The post The Art of Winning appeared first on Daily Reckoning.

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From:: Daily Reckoning

7.5% of Paychecks Go To This… And It’s Making Our Economy Tick

By Zach Scheidt

Americans Saving More

This post 7.5% of Paychecks Go To This… And It’s Making Our Economy Tick appeared first on Daily Reckoning.

As a kid, Sunday mornings were the best…

My dad would come into the bedroom I shared with my little brother and wake us up for church. As we rolled out of bed, he would place three shiny quarters on the dresser for each of us… Our allowance for the week.

Each quarter had a specific purpose.

One quarter was for spending… I could use this quarter for whatever I wanted that week.

One quarter was for giving… I would take that quarter and put it in the offering plate at church.

And one quarter was for saving… This quarter went into my piggy bank for a big purchase I would save up for each year. One year, I added up all of my savings to buy a remote-control airplane!

I’m thankful my parents taught me to save at a very young age. Because too many of my friends never learned that lesson.

But today, it looks like Americans are finally starting to figure it out. And that’s GREAT news for the market, for our economy, and for your investments.

The U.S. Savings Rate Gives Us a Safety Net

You’ve heard the term “save for a rainy day.”

If you’ve been around the block a few times, you know that unexpected expenses can hit you out of the blue. A car repair, a busted water pipe, or a trip to the emergency room.

People who are living “paycheck to paycheck” can be totally derailed by one or two of these events.

But if you have some money set aside in savings — hopefully invested in some good dividend stocks or other income opportunities — these expenses won’t hurt you. You’ll have quick access to the cash you need to pay for those little surprises.

Did you know that savings can also help our overall economy?

It’s true!

When an entire country is purposeful about saving some of their money for a rainy day, it naturally makes things more stable for the overall economy. And that’s exactly what is happening right now.

A few weeks ago, the U.S. Commerce Department released a report that showed Americans are saving much more of their income. In fact, nearly 7.5% of the average paycheck is being socked away in savings.

That 7.5% is a big number… Especially when you note that it’s nearly three times the previous estimate.

When Americans save, it helps to protect our economy from a recession.

In the past two weak economic periods (the dot-com bubble and the financial crisis), savings rates were extremely low. And that meant when the economy stumbled and consumers were afraid, they stopped spending money. After all, they couldn’t afford even a short time of unemployment if they were laid off.

But this time around — thanks to extra savings in American’s accounts — a pullback won’t cause the same sort of panic. If a few workers get laid off, they can use savings to continue to cover life expenses while looking for work.

And since spending won’t drop suddenly, the entire economy should be supported by the safety net of savings.

It’s definitely a healthy spot for our economy to be in.

Savings Is a Big Part of The Market’s Acceleration

Another thing to keep in mind is that these “saved” dollars are finding their way into the stock market.

A large portion of the capital saved by Americans is being placed into retirement accounts or traditional brokerage accounts. And this money is being used to buy shares of stock.

Of course, the buying pressure from savings, along with more than a trillion in cash that private equity firms have access to, is helping to prop up the stock market. And the strength in corporate earnings only adds to that dynamic.

As the market breaks to new highs, I expect more of this cash to come flooding into stocks, helping to accelerate this bull market and send stock prices higher. We’ve been talking about this dynamic for some time now and I hope you’ve already put your cash to work ahead of the market’s breakout.

If not, you’re running out of time!

Make sure you are setting your own capital aside to keep your savings rate growing… And invest that cash in the stocks that we’ve been covering here at The Daily Edge.

It’s a great time to be an American, a great time to be a saver, and a great time to be building profits in the best investment opportunities.

Here’s to growing and protecting your wealth!

Zach Scheidt

Zach Scheidt
Editor, The Daily Edge

The post 7.5% of Paychecks Go To This… And It’s Making Our Economy Tick appeared first on Daily Reckoning.

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From:: Daily Reckoning

New Reality of China’s Failing Economy Is Coming Soon

By James Rickards

This post New Reality of China’s Failing Economy Is Coming Soon appeared first on Daily Reckoning.

I’ve written for years that Chinese economic development is partly real and partly smoke and mirrors, and that it’s critical for investors to separate one from the other to make any sense out of China and its impact on the world.

My longest piece on this topic was Chapter Four of my second book, The Death of Money (2014), but I’ve written much else besides, including many articles for my newsletters.

There’s no denying China’s remarkable economic progress over the past thirty years. Hundreds of millions have escaped poverty and found useful employment in manufacturing or services in the major cities.

Infrastructure gains have been historic, including some of the best trains in the world, state-of-the-art transportation hubs, cutting edge telecommunications systems, and a rapidly improving military.

Yet, that’s only half the story.

The other half is pure waste, fraud and theft. About 45% of Chinese GDP is in the category of “investment.” A developed economy GDP such as the U.S. is about 70% consumption and 20% investment.

There’s nothing wrong with 45% investment in a fast-growing developing economy assuming the investment is highly productive and intelligently allocated.

That’s not the case in China. At least half of the investment there is pure waste. It takes the form of “ghost cities” that are fully-built with skyscrapers, apartments, hotels, clubs, and transportation networks – and are completely empty.

This is not just western propaganda; I’ve seen the ghost cities first hand and walked around the empty offices and hotels.

Chinese officials try to defend the ghost cities by claiming they are built for the future. That’s nonsense. Modern construction is impressive, but it’s also high maintenance. Those shiny new buildings require occupants, rents and continual maintenance to remain shiny and functional. The ghost cities will be obsolete long before they are ever occupied.

Other examples of investment waste include over-the-top white elephant public structures such as train stations with marble facades, 128 escalators (mostly empty), 100-foot ceilings, digital advertising and few passengers. The list can be extended to include airports, canals, highways, and ports, some of which are needed and many of which are pure waste.

Communist party leaders endorse these wasteful projects because they have positive effects in terms of job creation, steel fabrication, glass installation, and construction. However, those effects are purely temporary until the project is completed. The costs are paid with borrowed money that can never be repaid.

China might report 6.8% growth in GDP, but when the waste is stripped out the actual growth is closer to 4.5%. Meanwhile, China’s debts grow faster than the economy and its debt-to-GDP ratio is even worse than the U.S.

All of this would be sustainable if China had an unlimited ability to rollover and expand its debt and ample reserves to deal with a banking or liquidity crisis. It doesn’t. China’s financial fragility was revealed during the 2014-2016 partial collapse of its capital account.

China had about $4 trillion in its capital account in early 2014. That amount had fallen to about $3 trillion by late 2016. Much of that collapse was due to capital flight for fear of Chinese devaluation, (which did occur in August 2015 and again in December 2015).

China’s $3 trillion of remaining reserves is not as impressive as it sounds. $1 trillion of that amount is invested in illiquid assets (hedge funds, private equity funds, direct investments, etc.) This is real wealth, but it’s not available on short notice to defend the currency or prop up banks.

Another $1 trillion of Chinese reserves are needed as a precautionary fund to bail-out the Chinese banking system. Many observers are relaxed about the insolvency of Chinese banks because they are confident about China’s ability to rescue them. They may be right about that, but it’s not free. China needs to keep $1 trillion of dry powder to save the banks, so that money’s off the table.

That leaves about $1 trillion of liquid reserves to defend the Chinese currency, if so desired. At the height of the Chinese capital outflows in 2016, China was losing $80 billion per month of hard currency to defend the yuan.

At that tempo, China would have burned through $1 trillion in one year and become insolvent. China did the only feasible thing, which was to close the capital account; (interest rate hikes and further devaluation would have caused other more serious problems).

This distress might have been temporary if China had managed to maintain good trading relations with the U.S. But that proved another chimera. The trade war, which has broken out between the U.S. and China has damaged Chinese exports and raised costs on Chinese imports at exactly the time China was counting on a larger trade surplus to help it finance its mountain of debt.

Now trade is drying up and China is stuck with debt it can’t repay or rollover easily. This marks the end of China’s Cinderella growth story, and the beginning of a period of economic slowdown and potential social unrest.

The coming Chinese crack-up is not just theoretical. The hard data supports the thesis. Here’s a real-time data summary from the Director of Floor Operations at the New York Stock Exchange, Steven “Sarge” Guilfoyle:

The greater threat to financial markets will come, in my opinion from the slowing of global growth, at least partially due to the current state of international trade. This thought process is lent some credence by last night’s rather disastrous across-the-board macroeconomic numbers released by China’s National Bureau of Statistics. … For the Month of July, in China – Fixed Asset Investment.Growth slowed to the slowest pace since this data was first recorded back in 1992, printing in decline for a fifth consecutive month. Industrial Production. Missed expectations for a third consecutive month, while printing at a growth rate equaling the nation’s slowest since February of 2016. Retail Sales. Finally showing a dent in the armor, missed expectation while slowing from the prior month. Unemployment. This item has only been recorded since January. …read more

From:: Daily Reckoning

Shooting War With China More Likely Than You Think

By James Rickards

This post Shooting War With China More Likely Than You Think appeared first on Daily Reckoning.

The mainstream media narrative about the U.S.-China trade war implies that Trump is on a highly damaging ego trip and China holds all the cards.

The exact opposite is true.

Trump has ample financial warfare weapons including tariffs, penalties, bans on direct investment, improved cybersecurity, forced divestiture and freezing of assets.

Meanwhile, China has almost run out of room to impose tariffs. Further, they will invite retribution if they try to devalue their currency further.

China’s vulnerabilities run deeper than that.

The U.S.-China trade war comes in the aftermath of a Chinese Communist Party conference that made Xi Jinping dictator for life and enshrined his doctrines on the same level as Mao Zedong.

Once Xi got these powers, he proceeded on a disastrous policy course that has resulted in a slowdown of the Chinese economy, higher debt defaults, lost investment opportunities in the U.S. and declining hard currency reserves.

The knives are now out in Beijing.

Reports are circulating that Xi’s opponents are questioning his judgment and the wisdom of expanding his powers at such a critical time. Many are starting to blame Xi for the trade war almost as much as they blame Trump.

Xi still has torture, firing squads and concentration camps at his disposal, but the notion of a unified, coherent leadership structure in Beijing is now seen to be a myth.

Trump will keep up the pressure; he never backs off and always doubles down. It will be up to Xi to blink and acquiesce in many U.S. demands.

The U.S. will win this trade war because Xi does not want to lose his throne. Yet there will still be material damage to the global economy and lasting animosity between Xi and Trump.

But there’s more to the U.S.-China dispute than trade.

Yes, headlines and TV interviews are dominated by talk of the trade war. That escalating confrontation is a big deal, but it’s not the only flash point in U.S.-China relations, and not even the most important.

China is as much concerned about a military confrontation in the South China Sea as it is about the economic confrontation in the trade wars.

China dredged sand surrounding useless rocks and atolls in the South China Sea and converted them into artificial islands and then built out the islands to include naval ports, air force landing strips, anti-aircraft weapons and other defensive and offensive weapons systems.

Not only are the Chinese militarizing rocks, but they are trampling on competing claims by the Philippines, Vietnam, Brunei, Malaysia and other countries surrounding the sea.

China is claiming control based on ancient imperial arrangements and argues that the West and its South Asian allies “stole” the territory from them. The answer is that both the ancient claims and the theft narrative are open to dispute.

More to the point, the world has developed rules-based platforms for resolving these issues without military force. The U.S. is guaranteeing freedom of passage, freedom of the seas and the territorial rights of allies such as the Philippines.

Incidentally, I was at Norfolk naval base last week delivering a lecture on financial warfare with China. There was a “hurry up” feel to it, a definite sense of urgency. I got the impression that something must be up.

So far, the U.S.-Chinese confrontation has been about naval vessels passing in close quarters and surveillance aircraft being harassed by fighter jets. The risk of such tactics is an accidental collision, a rogue shot fired or a command misunderstood.

Any such incident could lead to retaliation, and there’s no telling where it might stop. Trump is not someone to back down, and Chinese leadership does not want to appear weak before the U.S.

That’s especially true at a time of great economic uncertainty. Communist Party leadership is desperate to maintain the support of the people, or else it risks losing the “mandate of heaven.”

China does not want war at this time. But diverting the people’s attention away from domestic problems toward a foreign foe is an old trick leaders use to unite the people in times of uncertainty. Rallying the people around the flag is a tried and true method to garner support.

If China’s leadership decides that the risk of losing legitimacy at home outweighs the risk of conflict with the United States, the likelihood of war rises dramatically.

I’m not predicting it, but wars have started over less.

As Mick Jagger sang, a U.S.-China war is “just a shot away.”


Jim Rickards
for The Daily Reckoning

The post Shooting War With China More Likely Than You Think appeared first on Daily Reckoning.

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From:: Daily Reckoning

Most People Struggle Financially Because They Don’t Know This…

By Robert Kiyosaki

Robert Kiyosaki

This post Most People Struggle Financially Because They Don’t Know This… appeared first on Daily Reckoning.

Money. It’s what makes the world go ‘round.

Yet we hear countless stories about the multi-million dollar athlete who is homeless 10 years later. Or the guy who won the lottery only to soon find himself penniless.

It’s not how much money you make. But how much money you keep.

I cringe whenever I hear people ask me how to get rich quicker, or where they should start. I often hear, “I need to make more money.”

I hate hearing any of that, because more money will often not solve the problem.

In fact, it may compound the problem.

Money often puts a spotlight on what we don’t know. That is why, all too often, a person who comes into a sudden windfall of cash—an inheritance, a pay raise, or lottery winnings—soon returns to the same financial mess, if not worse, than the mess they were in before.

Money accentuates the cash flow pattern running in your head: If your pattern is to spend everything you get, most likely an increase in cash will just result in an increase in spending.

Hence, the saying, “A fool and his money is one big party.”

We go to school to gain scholastic and professional skills, both of which are important. We learn to make money with our professional skills.

When I was in high school, if someone did well academically, people assumed this bright student would go on to be a medical doctor because it was the profession with the promise of the greatest financial reward.

Today, doctors face financial challenges I wouldn’t wish on my worst enemy: insurance companies taking control of the business, managed health care, government intervention, and malpractice suits.

Today, kids want to be famous athletes, movie stars, rock stars, beauty queens, or CEOs because that is where the fame, money, and prestige are. That is the reason it is so hard to motivate kids in school today.

They know that professional success is no longer solely linked to academic success, as it once was.

Because students leave school without financial skills, millions of educated people pursue their profession successfully, but later find themselves struggling financially. They work harder but don’t get ahead.

What is missing from their education is not how to make money, but how to manage money.

It’s called financial aptitude—what you do with the money once you make it, how to keep people from taking it from you, how to keep it longer, and how to make that money work hard for you.

Most don’t understand why they struggle financially because they don’t understand cash flow.

A person can be highly educated, professionally successful, and financially illiterate.

These people often work harder than they need to because they learned how to work hard, but not how to have their money work hard for them.

All the education in the world can get you the money. But it won’t necessarily make it stay.

I learned this when I was in the height of my teenage years:

By the time Mike and I were 16 years old, we began to have problems in school.

We weren’t bad kids, we just began to separate from the crowd.

We worked for Mike’s dad (rich dad) after school and on weekends. Mike and I often spent hours after work just sitting at a table with his dad while he held meetings with his bankers, attorneys, accountants, brokers, investors, managers, and employees.

Here was a man who had left school at 13.

He was now directing, instructing, ordering, and asking questions of educated people. They came at his beck and call, and cringed when he didn’t approve.

Here was a man who had not gone along with the crowd.

He was a man who did his own thinking and detested the words, “We have to do it this way because that’s the way everyone else does it.” He also hated the word “can’t.” If you wanted him to do something, just say, “I don’t think you can do it.”

Mike and I learned more sitting in on his meetings than we did in all our years of school, college included.

Mike’s dad was not book-smart, but he was financially educated and successful as a result.

He told us over and over again, “An intelligent person hires people who are more intelligent than he is.”

So Mike and I had the benefit of spending hours listening to and learning from intelligent people.

But because of this, Mike and I couldn’t go along with the standard our teachers preached, and that caused problems.

When we were told to follow set procedures and not deviate from the rules, we could see how creativity was discouraged.

We started to understand why our rich dad told us that schools were designed to produce good employees, instead of employers.

Occasionally, Mike or I would ask our teachers why we never studied money and how it worked.

We often got the answer that money was not important, that if we excelled in our education, the money would follow.

My highly educated dad never pressured me about my grades, but we did argue about money.

By the time I was 16, I probably had a far better foundation with money than both my parents.

I could keep books, I listened to tax accountants, corporate attorneys, bankers, real estate brokers, investors, and so forth. By contrast, my dad talked to other teachers.

Let me reiterate: education is important. Intelligence makes money. But it won’t necessarily help you keep it.

Financial literacy, knowing the assets you have — like the people you surround yourself with — is vital.

You may have heard about the importance of networking. Because sometimes it can come down to who you know.

Think about the people in your life — how they’ve supported you and what you’ve learned from them.

Some of the best education can come from who you surround yourself with.


Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

The post Most People Struggle Financially Because They Don’t Know This… appeared first on Daily Reckoning.

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Avoiding One of Life’s Biggest Traps

By Robert Kiyosaki

Robert Kiyosaki

This post Avoiding One of Life’s Biggest Traps appeared first on Daily Reckoning.

It was 1956, and I was 9 years old.

There was one day when my rich dad came to talk to me and Mike after our shift at the grocery store.

At this point, we were working for free — not even our original pay of 10 cents per hour. It was part of a lessons rich dad was trying to teach us, but we were still having trouble grasping what he wanted us to learn.

This next conversation came three weeks after he’d given us that first big lesson… the difference between working for money, and having money work for you.

“Learn anything yet?” rich dad started with.

Mike and I looked at each other, shrugged our shoulders, and shook our heads in unison.

“You boys had better start thinking. You’re staring at one of life’s biggest lessons. If you learn it, you’ll enjoy a life of great freedom and security. If you don’t, you’ll wind up like Mrs. Martin and most of the people playing softball in this park. They work very hard for little money, clinging to the illusion of job security and looking forward to a three-week vacation each year and maybe a skimpy pension after forty-five years of service. If that excites you, I’ll give you a raise to 25 cents an hour.”

“But these are good hardworking people. Are you making fun of them?” I demanded.

A smile came over rich dad’s face.

“I may sound unkind because I’m doing my best to point something out to the two of you. I want to expand your point of view so you can see something most people never have the benefit of seeing because their vision is too narrow. Most people never see the trap they are in.”

Mike and I sat there, uncertain of his message. He sounded cruel, yet we could sense he was trying to drive home a point.

With a smile, rich dad said, “Doesn’t that 25 cents an hour sound good? Doesn’t it make your heart beat a little faster?”

I shook my head no, but it really did. Twenty-five cents an hour would be big bucks to me.

“Okay, I’ll pay you a dollar an hour,” rich dad said, with a sly grin. Now my heart started to race. My brain was screaming, “Take it. Take it.” I could not believe what I was hearing. Still, I said nothing.

“Okay, two dollars an hour.”

My little brain and heart nearly exploded. After all, it was 1956 and being paid $2 an hour would have made me the richest kid in the world. I couldn’t imagine earning that kind of money. I wanted to say yes. I wanted the deal. I could picture a new bicycle, new baseball glove, and the adoration of my friends when I flashed some cash. On top of that, Jimmy and his rich friends could never call me poor again.

But somehow my mouth stayed shut.

Rich dad was looking at two boys staring back at him, eyes wide open and brains empty. He was testing us, and he knew there was a part of our emotions that wanted to take the deal. He understood that every person has a weak and needy part of their soul that can be bought, and he knew that every individual also had a part of their soul that was resilient and could never be bought. It was only a question of which one was stronger.

“Okay, five dollars an hour.”

Suddenly I was silent. Something had changed. The offer was too big and ridiculous. Not many grown-ups in 1956 made more than that, but quickly my temptation disappeared, and calm set in. Slowly, I turned to my left to look at Mike. He looked back at me. The part of my soul that was weak and needy was silenced. The part of me that had no price took over. I knew Mike had gotten to that point too.

People’s Lives Are Forever Controlled by Two Emotions: Fear and Greed

“Good,” rich dad said softly. “Most people have a price. And they have a price because of human emotions named fear and greed. First, the fear of being without money motivates us to work hard, and then once we get that paycheck, greed or desire starts us thinking about all the wonderful things money can buy. The pattern is then set.”

“What pattern?” I asked.

“The pattern of get up, go to work, pay bills; get up, go to work, pay bills. People’s lives are forever controlled by two emotions: fear and greed. Offer them more money and they continue the cycle by increasing their spending. This is what I call the Rat Race.”

“There is another way?” Mike asked.

“Yes,” said rich dad slowly. “But only a few people find it.” “And what is that way?” Mike asked.

“That’s what I hope you boys will learn as you work and study with me. That is why I took away all forms of pay.”

“Any hints?” Mike asked. “We’re kind of tired of working hard, especially for nothing.”

“Well, the first step is telling the truth,” said rich dad.

“We haven’t been lying,” I said.

“I did not say you were lying. I said to tell the truth,” rich dad retorted.

“The truth about what?” I asked.

“How you’re feeling,” rich dad said. “You don’t have to say it to anyone else. Just admit it to yourself.”

“You mean the people in this park, the people who work for you, Mrs. Martin, they don’t do that?” I asked.

“I doubt it,” said rich dad. “Instead, they feel the fear of not having money. They don’t confront it logically. They react emotionally instead of using their heads,” rich dad said. “Then, they get a few bucks in their hands and again, the emotions of joy, desire, and greed take over. And again they react, instead of think.”

“So their emotions control their brain,” Mike said.

“That’s correct,” said rich dad. “Instead of admitting the truth about how they feel, they react to their feelings and fail to think. They feel …read more

From:: Daily Reckoning

99% of People are the Donkey… Be the Driver Instead

By Robert Kiyosaki

Robert Kiyosaki

This post 99% of People are the Donkey… Be the Driver Instead appeared first on Daily Reckoning.

When we left off, rich dad had just told Mike and I something that didn’t quite make sense to us.

He’d said we can’t work for money. And we can’t let the fear of no money, or the desire for money, drive our work ethic.

“So what do we do?” I asked. “Not work for money until all traces of fear and greed are gone?”

“No, that would be a waste of time,” said rich dad. “Emotions are what make us human. The word ‘emotion’ stands for ‘energy in motion.’ Be truthful about your emotions and use your mind and emotions in your favor, not against yourself.”

“Whoa!” said Mike.

“Don’t worry about what I just said. It will make more sense in years to come. Just be an observer, not a reactor, to your emotions. Most people do not know that it’s their emotions that are doing the thinking. Your emotions are your emotions, but you have got to learn to do your own thinking.”

“Can you give me an example?” I asked.

“Sure,” replied rich dad. “When a person says, ‘I need to find a job,’ it’s most likely an emotion doing the thinking. Fear of not having money generates that thought.”

“But people do need money if they have bills to pay,” I said.

“Sure they do,” smiled rich dad. “All I’m saying is that it’s fear that is all too often doing the thinking.”

“I don’t understand,” said Mike.

“For example,” said rich dad. “If the fear of not having enough money arises, instead of immediately running out to get a job, they instead might ask themselves this question: ‘Will a job be the best solution to this fear over the long run?’ In my opinion, the answer is no. A job is really a short-term solution to a long-term problem.”

“But my dad is always saying, ‘Stay in school and get good grades, so you can find a safe, secure job,’” I interjected, somewhat confused.

“Yes, I understand he says that,” said rich dad, smiling. “Most people recommend that, and it’s a good path for most people. But people make that recommendation primarily out of fear.”

“You mean my dad says that because he’s afraid?”

“Yes,” said rich dad. “He’s terrified that you won’t earn enough money and won’t fit into society. Don’t get me wrong. He loves you and wants the best for you. I too believe an education and a job are important, but it won’t handle the fear. You see, that same fear that makes him get up in the morning to earn a few bucks is the fear that is causing him to be so fanatical about your going to school.”

“So what do you recommend?” I asked.

“I want to teach you to master the power of money, instead of being afraid of it. They don’t teach that in school and, if you don’t learn it, you become a slave to money.”

It was finally making sense. He wanted us to widen our views and to see what the employees of this world couldn’t see. He used examples that sounded cruel at the time, but I’ve never forgotten them.

My vision widened that day, and I began to see the trap that lay ahead for most people.

“You see, we’re all employees ultimately. We just work at different levels,” said rich dad. “I just want you boys to have a chance to avoid the trap caused by those two emotions, fear and desire. Use them in your favor, not against you. That’s what I want to teach you. I’m not interested in just teaching you to make a pile of money. That won’t handle the fear or desire. If you don’t first handle fear and desire, and you get rich, you’ll only be a highly paid slave.”

I asked him,

“So how do we avoid the trap?”

“The main cause of poverty or financial struggle is fear and ignorance, not the economy or the government or the rich. It’s self-inflicted fear and ignorance that keep people trapped. So you boys go to school and get your college degrees, and I’ll teach you how to stay out of the trap.”

The pieces of the puzzle were appearing.

My highly educated dad had a great education and a great career, but school never told him how to handle money or his fear of it. It became clear that I could learn different and important things from two fathers.

“So you’ve been talking about the fear of not having money. How does the desire for money affect our thinking?” Mike asked.

“How did you feel when I tempted you with a pay raise? Did you notice your desires rising?”

We nodded our heads.

“By not giving in to your emotions, you were able to delay your reactions and think. That is important. We will always have emotions of fear and greed. From here on in, it’s imperative for you to use those emotions to your advantage, and for the long term to not let your emotions control your thinking. Most people use fear and greed against themselves. That’s the start of ignorance. Most people live their lives chasing paychecks, pay raises and job security because of the emotions of desire and fear, not really questioning where those emotion-driven thoughts are leading them. It’s just like the picture of a donkey dragging a cart with its owner dangling a carrot in front of its nose. The donkey’s owner may be going where he wants to, but the donkey is chasing an illusion. Tomorrow there will only be another carrot for the donkey.”

“You mean the moment I picture a new baseball glove, candy and toys, that’s like a carrot to a donkey?” Mike asked.

“Yes, and as you get older, your toys get more expensive—a new car, a boat, and a big house to impress your friends,” said rich dad with a smile. “Fear pushes you out the door, and desire calls to you. That’s the trap.”

“So what’s the answer,” Mike …read more

From:: Daily Reckoning