Prepare For "Manias, Panics And Crashes": A Stunning Warning From Bank Of America

Bank of America's Michael Hartnett is back with another controversial note overnight, reminding readers that "it ain't a normal cycle" for one overarching reason: central banks. 

As Hartnett explains, the catalyst for bull in equity and credit markets since 2009 was the "revolutionary monetary policy of central banks" who, since Lehman, "have cut rates 679 times and bought $14.2tn of financial assets." And, once again, he warns that this central bank “liquidity supernova” is coming to an end, as is "the period of excess returns in equities and corporate bonds, as is the period of suppressed volatility."

With an entire generation of traders having grown up "trading" in centrally-planned markets, few can make sense of the fundamentals that accompany the market. As a result, Harnett writes that "risk markets continue to climb a wall of worry, defying bearish structural trends in the financial industry, taunting skittish skeptics by paraphrasing Margaret Thatcher…”You turn if you want to. The market’s not for turning.” 

Demonstrating how insane just the past year has been in markets, Hartnett reminds us that just eight months ago belief in debt deflation & secular stagnation induced lowest interest rates in 5000 years.

• On July 11th 2016 Swiss government could have issued 50- year debt out to 2076 at a negative yield (of -0.035%)… 
• …and in 1989 the Imperial Palace in Tokyo worth more than all real estate in California…
• …and in March’2000 the market cap of Yahoo was 25X greater than market cap of Chinese equity market (MSCI)…
• …and in 2008 the combined assets of Iceland’s three biggest banks were 14 times the size of the nation’s GDP…
• …all manias, all over now.

While the current mania almost ended in early 2016, it was once again China that was responsible for the latest leg higher:

• The current rally was kick-started by China, commodities and credit (the “3C’s”) in February 2016: since then stocks are up 31%, commodities 27% and HY bonds 23%.
• Watch the 3C’s…China, commodities, credit.
• We believe commodity prices must rise to maintain equity outperformance versus bonds; BofAML forecast oil at $57/b in Q2. Note commodity/claims driver hooked lower last month or two.

And yet, this period of great confusion is slowly coming to an end: what happens next is split into two phases - the famous "Icarus Trade" popularized by Hartnett several months ago, which the BOFA strategist believes will send the S&P above 2,500 and the yield on the 30Y to 3.5%, before the next "Great Fall" trade emerges.

First, a look at the near-term forecast:

We believe we are closer to the highs than lows in risk markets. But tops are a process; lows are a moment. The hubris, monetary tightening and macro peak that normally ends a strong bull trend feels H2 not Q2. So our base case unchanged heading into spring:

• Long stocks, commodities, US dollar; short bonds; we see double digit returns for Japan, Europe, UK stocks, oil in 2017, single digit returns for US stocks, commodities, US$ and EM, and low/negative returns for bonds
• Q2 combo of bullish but light Positioning, fiscal Policy expectations, “hard” Profit data keeps our Icarus Trade targets alive…SPX 2500, GT30 3.5%, DXY 110 

For those who wish to trade this last, marketwide blow-off top, Hartnett has several "favorite Q2 trades": the US$, sterling, oil and banks.

We think Q2 driver will be stronger growth expectations; tactical contrarians would play via long US dollar, long sterling-short EM FX, long oil, long EAFE banks-short US tech.

The risk to our bullish Q2 call is the price action of 3C’s (China, commodities, credit) deteriorates and signals synchronized global Profit top, on back of PBoC tightening. Commodity prices must rise to maintain equity outperformance versus bonds: BofAML forecast oil @ $57/b in Q2. EPS resilience required for stocks to continue to outperform bonds.

Hartnett also presents "a nice Icarus stat": "should the S&P500 exceed 2540 in conjunction with a 3% yield on the 10-year Treasury bond then US stocks will reach an all-time high versus US bonds, exceeding the prior tech bubble peak reached in March 2000"

Still, all great - if abnormal and fake - bull markets and manias come to an end eventually, and Hartnett warns that what follows the final, Q2 "Icarus" rally will be far less enjoyable, because that's when the infamous "great fall" is set to take place.

“Great Fall” potentially comes in H2 as hubris, synchronized monetary tightening, EPS peak coincide; buy long-dated puts in anticipation; we believe best time to sell would likely be after a pop induced by a US tax reform bill (March Fund Managers Survey showed only 10% of institutions expect US tax reform passed before summer recess).

And yes, the Fed will likely try to step in again with more rate cuts to prevent a crash, although this time it won't work at least according to Hartnett, because after the "Great Fall" comes the Long View, which Bank of America describes simply as: Manias, Panics, Crashes

Longer-term, we continue to remind ourselves it’s not a normal cycle. “Normalization” from 5,000-year low in rates, 70-year low in G7 fiscal stimulus, 35-year high in US-German rate differential, all-time high US stocks vs. EAFE, 75-year low in bank stocks is unlikely to be peaceful. 

• Humiliation remains one of the best assets to buy.
• In Feb 2009 the 10-year rolling return from US large-cap stocks humiliatingly dropped to -3.4%, lowest since 1930s.
• Since then S&P 500 up from 676 to 2368; now second longest bull ever (longest ever if runs past August 22nd 2018), and becomes 3rd largest ever at 2467.

His conclusion is two fold.

On one hand, "our Longest Pictures argue for a treacherous period of potential manias, panics or crashes as policy makers try to normalize policy."

On the other, the response will be the same one we have said since day one will ultimately take place: runaway inflation as central banks literally throw everything at the next mega crash, or as Hartnett calls it, "further outperformance of inflation assets versus deflation assets."

And this is how to trade it: 

• The beneficiaries of rising inflation and rates are many.
  • The long-run price relative of real assets (real estate, commodities, and collectibles) to financial assets (stocks and bonds) is at its lowest level since 1926.
  • Bull markets in real assets have coincided with war and fiscal stimulus programs in 1940s, rise of inflation in 1960s and 1970s, and 9/11 & China accession to WTO in the early years of this century.
  • Higher inflation and interest rates are consistent with real assets outperforming financial assets: since 1970, relative performance of real assets 83% correlated with inflation.

Credit to Zero Hedge

Meet The CIA's Big Brother, That You Need to Know About - Mapping The Human Domain

Damascus Destroyed-Mark of the Beast- World War III Is Knocking On the Door

Every week, I get approzimtely 1-2 notices of massive troop and equipment movement. Now, I am getting 9-10 notices per day. Yesterday, I received 3 notices about the extreme uptick in fighter aircraft landing at Wright Patterson Air Force Base in Ohio. Another armored division is going to Europe. Putin is drafting 150,000 men this Spring. Clearly the world is on a path for war.

I am now of the opinion that the globalists (ie Deep State) are ridiculously investigating Trump’s (non-threatening) ties to Russia so that he cannot diffuse the march to war. The globalists want war and Trump is being neutralized as instrument of reason and compromise. He cannot appear to be soft on Russia.

Where will the war start? It will begin in Syria. Why? Because the Bible tells us so!

Syria and Saraevjo

The winds war are blowing. Syria looks like and feels like Sarajevo prior to the commencement of World War I in which one assassination set up a war that killed millions. This conflict, which will go nuclear, looks and feels like World War I from our past. However, these events and their outcome have been foretold thousands of years ago in the Bible. As I review the relevant passages, perhaps you will get the same sinking feeling in my stomach that I did when I began to realize the inevitability of it all.

Biblical Prophecy

The Bible predicts that Damascus, Syria will be destroyed in the last days before a terrible time of God’s judgment. This will precede the day that Jesus Christ returns to defeat Israel’s enemies.

Isa 17:1 The burden of Damascus. Behold, Damascus is taken away from being a city, and it shall be a ruinous heap.

The destruction of Damascus is a prophecy that some mistakenly think that it stands alone in the Bible. However, it turns out that it is only the first in a sequence of events that are increasingly more serious with much more profound effects on the human race.

Ezekiel Chapter 38 tells us about a Turkish led invasion into Israel. Turkey is accompanied by Iran, Sudan, and Libya (Ezekiel 38:5).

Saudi Arabia is also mentioned in Ezekiel 38:13. Do you think it is a coincidence that all of these nations are fighting in Syria as I write these words?

Gog and Magog

Geographically, Turkey and Syria have a common border. Many Biblical scholars think that the stage has been set for the Ezekiel 38 battle of Gog and Magog.

Today Magog represents the “primary governor” of Turkey. I would call him the Prime Minister of Turkey. Turkish Prime Minister Erdogan is the modern day manifestation of Magog as predicted in Ezekiel 38. Some believe that Erdogen is also the fulfillment of the Assyrian in Isaiah 10.

Modern day World War III will end with the destruction of Damascus. The rogue Turkish Prime Minister Erdogan will then  lead terrorists from  Al-Qaeda and ISIS from Libya and also Hezbollah and Muslim Brotherhood  jihadists from Iran and Sudan in an invasion into Israel.

This is where things get very serious as the bible identifies the leader of this invasion will be none other than the Antichrist. 

America’s Place

The following shakes me to my core as I realize that fro a Biblical prophecy standpoint that my nation could soon be no more and the followers of Christ will be persecuted in ways that make the Holocaust look tame by comparison.

The dragon spoken of in the Bible  is Satan, who works through various governments of the earth to establish his evil kingdom and destroy God’s church by persecuting and destroying His followers. Satan’s aim always has been to usurp God’s power and throne and to force people to worship and obey him. This means that the United States, which is unquestionably under the influence of Satan as evidenced by the fact that we are about to elect a confirmed witch as President, will, in the end time will force people to worship contrary to conscience or be punished.

16 And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:

Here the “he”, still the U.S., will be responsible for bringing in the government that will demand a mark to be placed on all inhabitants of planet earth. The Greek word from which our English word “mark” is derived means “sharpened to a point.” This is interesting since the latest technology designed to help governments monitor their citizens is a lithium-based computer chip which can be injected into humans. The chip can store volumes of information and can be programmed.

17 And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.

The day will come when remaining true to God will mean going underground from the superstructure’s commercial system. Buying and selling in the economic system of the coming one-world government will be treason to the Kingdom of Heaven. The Bible says that whoever takes the mark will be separated from God. Read it in Revelation 14:9-10:

9 And the third angel followed them, saying with a loud voice, If any man worship the beast and his image, and receive his mark in his forehead, or in his hand,

10 The same shall drink of the wine of the wrath of God, which is poured out without mixture into the cup of his indignation; and he shall be tormented with fire and brimstone in the presence of the holy angels, and in the presence of the Lamb:

Mankind would be well advised to try to become intelligent in regards to the beast and his mark.  Here is the last verse of Revelation 13:

18 Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six.” This is the anti-Christ and it appears that America is having a hand of facilitating his rise to power and I suspect it is through the UN.

Revelation 18 talks of a country the Bible calls “Babylon” that is destroyed by fire in “one hour” and plagued with “death, mourning and famine”. Revelation 18:8     I believe that this passage represents America.

Welcome to the USA:

The US is a place of tremendous wealth  Rev. 18:12-13

The country even sells its money (gold & silver & the Petrodollar which is the root cause of the coming war in Syria). Rev. 18:11-12

It spreads its sexual immorality to other countries. Rev. 18:3

It lives in luxury. Rev. 18:7

It is suddenly and utterly destroyed by fire. Rev. 18:8, Rev. 18:9-10, Rev. 18:17-18    I believe that this is the fate of the US should we pursue war in Syria.

Conclusion

To those who have followed my writings for sometime, the formation of the Clergy Response Team and the imposition of the restrictions on the tax exempt churches should make a lot sense.

Understanding Biblical prophecy is an art form. I do not make any claim of special talent or unique understanding. But as I read and understand the word of God a very clear picture emerges that is becoming more difficult to deny.

Steve Quayle once said on my show that America would soon be finished, but individual survival and salvation was still possible. I did not want to believe his words when he said them. However, if our time is indeed the fulfillment of Biblical prophecy, we Christians need to remove our veil of blindness and conscientiously prepare for the dark days ahead. American Christians are about to be thrown to the lions and our nation will be destroyed. And if anyone is not convinced that Obama and Clinton are not agents of this destruction foretold thousands of years ago, then you are not paying attention.

 CREDIT TO COMMON SENSE

UFO SOFT DISCLOSURE

Internet Censorship: The Ugly Truth

12 Signs That America Has Become A Politically-Correct Madhouse

What in the world has happened to the United States? We are rapidly getting to the point where political correctness is in danger of becoming our national religion. Of course most people would not even call it a “religion”, but for most Americans this unwritten set of rules shapes everything that they think, do and say. Many had been hoping that the spell of political correctness would be broken by the election of Donald Trump, but that obviously has not happened. The forces of political correctness still have a stranglehold on our education system, on all forms of entertainment, on our legal system, and on most of the politicians in both political parties.

The unwritten rules of political correctness are shifting and changing all the time, and if you don’t keep up with them the penalties can be extremely severe.

If you do or say the wrong thing at the wrong time, you could lose your friends, you could lose your job, and you could potentially even lose your reputation.

In fact, there have been numerous people over the past year that have been publicly crucified in the court of public opinion for doing or saying something that was not politically-correct.

And with each passing day, the forces of political correctness take a little bit more ground. The following are 12 signs that America has become a politically-correct madhouse…

#1 According to Time Magazine, a book entitled “Santa’s Husband” will be released on October 10th by a major U.S. publisher that depicts Santa as “a gay man in an interracial relationship”.

#2 A middle school in North Hollywood is facing substantial budget cuts because they have too many non-minority students…

Outrage has grown at Walter Reed Middle School in North Hollywood, as the school faces layoffs and increased class sizes due to a law limiting funds for schools with a higher white student body.

The Los Angeles Unified School District provides more funding for schools where the white population is below 30 percent.

In a letter to parents, the district noted the highly regarded middle school had been above the percentage for the past couple years.

#3 According to Michael Moore, historians will mark “March 28, 2017, as the day the extinction of human life on earth began” because Donald Trump has rolled back Obama’s climate change regulations.

#4 One of my readers just sent me a photo that his 16-year-old son took at school. It is a photo of a slide that was being projected on to a large screen at the front of his classroom that contained this message: “Polls show that young people today are more accepting of lesbian, gay, bisexual and transgender people than ever before. Why do you think that is?”

#5 An elementary school in California has banned the game of “tag” because it is too dangerous.

#6 At one high school in Iowa, students were recently denounced as “racists” for dressing up in red, white and blue for a basketball game.

#7 In North Carolina, as early as the first grade a “gender unicorn” is being used to teach children “about sexual orientation and gender identity“…

Just last year in our home city of Charlotte, North Carolina, the Charlotte Mecklenburg School System used the “gender unicorn” to teach students—as young as first grade—all about sexual orientation and gender identity. This cute, little, fury animal was used to promote the idea that sexual orientation asks the question, “Who do you go to bed with?” while gender identity asks the question, “Who do you go to bed as?” And these can be fluid, of course. Kids can change whenever and however they want.

#8 According to Dr. Michael Brown, bathroom scales have been taken out of the gym at one college campus for a very strange reason: “Administrators at Carleton University have removed the bathroom scales from the campus gym, claiming that ‘being fixated on weight’ does not ‘have any positive affect [sic] on your health.'”

#9 A Christian university in Minnesota has told professors “to stop using terms such as ‘man’ and ‘mankind’ because they are too masculine“.

#10 Snickers bars will soon be sold in rainbow wrappers “as part of a pro-LGBT ad campaign“.

#11 A 32-year-old man will now compete in international volleyball events as a transgender woman, and may end up qualifying for the Olympics as a female athlete…

The now 32-year old says volleyball has been the constant in a life full of changes. In January, she was just approved by USA Volleyball to compete as a woman. Before that, she was required to play in the men’s division at all USAV sanctioned events.

USAV requires transgender women to undergo hormone replacement therapy consistently for at least one year — with proper documentation — and they also have to change their identification, like passports and birth certificates, to female. Before, some organizations, including the Olympics, would require trans athletes to have sex reassignment surgery.

#12 Planned Parenthood has killed millions of children, but nobody from that organization ever seems to get into trouble with the law. Instead, two activists that exposed the fact that Planned Parenthood is auctioning off baby parts to the highest bidder have been charged with 15 felonies in the state of California.

In this type of environment, people like me are becoming dinosaurs. If you follow my work on a regular basis, you know that I am not afraid to do or say things that might offend some people.

Of course I am not actually trying to offend anyone, but I won’t let the forces of political correctness dictate what I can or cannot say about a particular topic.

Ultimately, political correctness is a tool that progressives use to silence the opposition.

They want to make it a crime to think or say anything that they might find offensive, and to a substantial degree it is working.

Our founders intended for us to permanently have a right to free speech, but now we have moved into a time when saying the wrong thing can get you brutally persecuted.

I would like to be optimistic that we can start to roll back the forces of political correctness, but as I noted at the beginning of this article, they have control of our schools, our courts, our entertainment and most of our political leaders.

But of course we can never give up the fight, because if they win life in America will ultimately become a complete and total nightmare.

Credit to End of the American Dream

Margin Debt Hits New Record High

The Wall Street Journal reports Margin Debt Hit an All-Time High in February. Given that Margin debt has a history of peaking right before financial collapses this seems like a warning to me but analysts say it’s different this time.

Margin debt climbed to a record high in February, a fresh sign of bullishness for flummoxed investors trying to navigate the political and economic crosscurrents driving markets.

The amount investors borrowed against their brokerage accounts climbed to $528.2 billion in February, according to the most recent data available from the New York Stock Exchange, released Wednesday. That is up 2.9% from $513.3 billion in January, which had been the first margin debt record in nearly two years.

Before January, the previous record high for margin debt was $505 billion in the spring of 2015. Margin debt then started falling, months ahead of a summer swoon that sent major indexes down more than 10%.

Analysts Say Don’t Worry

MarketWatch reports Record Margin Debt May Be a Red Flag, but Analysts Say Don’t Worry.

The latest warning sign — following underperformance by small-cap stocks, record inflows into exchange-traded funds and high levels of political uncertainty — is margin debt, which is seen as a measure of speculation and just broke a record that has stood for nearly two years.

Don’t worry.

According to the most recent data available from NYSE, margin debt hit a record of $513.28 billion at the end of January, topping a previous record of $507.15 billion that had held since April 2015. Margin debt refers to the money that investors borrow to buy stocks, and high levels of it, in periods of market volatility, and can lead to sharper declines. Records preceded both the dot-com market crash and the financial crisis.

However, expecting a similar correction because debt is at a record now would be “naïve,” said Jeff Mortimer, director of investment strategy for BNY Mellon Wealth Management.

“This isn’t a signal to me that markets are reaching an exuberant level like they did in the 1920s or 1990s, when speculation was rampant,” he said. “What our clients are doing is borrowing against the portfolios because interest rates are so low. They’re not leveraging up because they see the market exploding to the upside; they’re using leverage because they can pay it off at any time.”

Borrowing Against Portfolios

Don’t worry, clients are just borrowing against their portfolios because rates are low. Allegedly, they can pay this back anytime.

Excuse me for asking, but what if they spent the money?

Consumer Confidence a Leading Indicator of Market Tops?

In response to Consumer Confidence Strongest Since December 2000: A Strong Contrarian Indicator? I received an interesting chart from Doug Short at Advisor Perspectives.

Once again, here is a chart from John Hussman to which I added vertical bars.

For now, I am sticking with consumer sentiment as a coincident, not leading indicator unless the markets make a fresh set of highs.

Hussman Tweeted, and I strongly agree, “Multi-year highs in consumer confidence are less a sign of forthcoming consumer spending as a sign of forthcoming investor losses.”

Credit to Zero Hedge