Capital & Conflict – brought to you by Fortune & Freedom Yesterday’s Fortune & Freedom explained how central bankers have managed to avoid acknowledging the side-effects of their misbehaviour for so long. But the trends which kept a lid on…

Capital & Conflict – brought to you by Fortune & Freedom What happens when you mistake a symptom for a disease? Because that’s just what central bankers are doing right now. And their mistake is all that’s keeping stocks afloat….

In keeping with what Boaz Shoshan and John Butler spoke about, let’s kick off today’s Fortune & Freedom with a clever point made by a reader about the collapse of the global reserve currency, the US dollar…

If you liked the tech bubble and the housing bubble, you’re going to hate the consumer price inflation bubble.

My daughter, much like the stock market, is at that age when she can’t quite communicate what she wants, but all hell breaks loose if she doesn’t get it.

Is the Bank of England addicted to QE? Or did the pot call the kettle black?

The UK’s exports to the EU have surged well above pre-referendum and pre-Brexit averages. What does it mean for UK politics going forward if Project Fear is vanquished?

CHEDDAR, SOMERSET – What is it about the subject of finance that lends itself so much to squid metaphors?

In 2010, Rolling Stone famously described Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

THE HOWFF, DUNDEE – Political agendas favouring renewable energy (such as the “Green New Deal” which we see touted in the States) are, like all political agendas, polarising issues. There was a time when investors could remain “above the fray”…

SODERMALM, STOCKHOLM – It’s all so damned… banal. Source: The Telegraph Our monetary oracle has spoken. Behold his wisdom. From The Telegraph: A widely used digital currency could pave the way for negative interest rates by making it harder to…

Take a moment to think about the following phrase: “risk-free rate of return”. It’s part of the everyday language of finance – one of those terms bandied about so much that we rarely stop to think about what it actually…

THE NAVIGATION INN, STAFFORDSHIRE – “No interest? No problem!” So cry investors as the Italian government beats them bloody with a brand new stick: the zero-coupon bond. While it’s the first time the Italian government has been able to get…

THE ECCLIAN, STAFFORDSHIRE – A hot air balloon hangs above the horizon like a dreamcatcher for the county. And the last squeezes of sunshine the season has to offer linger warm in the air. It’s a fine day indeed. And…

So here we are again dear reader, at the end of another wild week. It’s been a barnstormer for precious metals, as we’ve been writing about in recent days. We’re also seeing further signs of exhaustion in the tech sector,…

Some more comedy relief to start us off today. This statement comes courtesy of the European Central Bank (ECB), via its Twitter account: ECB asset purchases have reduced inequality in the eurozone, our research shows. They have especially benefited low-income…

DELRAY BEACH, FLORIDA – Stocks got off to a rough start on Monday. Heavy equipment maker Caterpillar reported punk numbers; investors took it as a sign that the world economy is slowing. That’s our guess too. Night Is Day After…

Getting hammered in a central bank is an experience reserved only for the financial elite. The idea of proles like you or I knocking back drinks in such ivory towers borders on heresy. But believe it or not, the Public…

The French central bank on fire… fork lifts rammed into banks and the ministry of finance… brutal fights between riot police and protestors… cars set ablaze… and yet the market is still willing to lend to the French government at…

I read a history of the Bank of England (BoE) last year. It wasn’t very exciting. Even when armed guards took up positions to protect the bank from riots and during the war, not much happened. But one thing did…

If the government set the price of coffee or coal, you’d know what to expect. A mess. There’d be shortages and surpluses, quality problems, questionable business practices in the industry, and suspicious links between politicians and big business. But even…

4 July 1989. As Americans awoke to celebrate Independence Day, a lone Soviet fighter jet took off from Poland and began flying west. The pilot of the MiG-23 “Flogger” did not explain himself as he soared across Europe. Crossing Polish…

Bond investors are turning to John Denver songs to make money. Yes, you read that right. Country Roads and Leaving on a Jet Plane have become a substitute for bonds. Such is the state of the fixed income market. Who…

With Australia and Germany out, your editor’s interest in the World Cup has halved. But Japan and England play tonight. Yesterday, in anticipation of the game, I bought beer made by the Bank of Japan (BoJ). At a shopping centre…

What sort of policies will be passed under the cover of Brexit? My worry is that you can twist the referendum any way you like and claim a mandate for whatever you want. As long as you include the word…

It turns out that investing is really very simple… in a way. Howard Wang of Convoy Investments explains that investment prices are driven by the amount of money and the amount of assets. Asset price = quantity of money/supply of…

YOUGHAL, IRELAND – Our screen last Friday was showing the 10-year U.S. Treasury Note with a yield of 3.11% – further evidence that the credit cycle has turned. Everything else is noise. Primary Trend We got the idea from the…

A spat about bank capital hit the news late last week. Not only is the topic immensely boring, but it’s also completely misguided. That should make you stop reading, unless you’re aware of the implications. If banking were to blow…

Warning: your bank does NOT want you to read this report Deep down, you probably knew something wasn’t quite right. It’s a decade since the global financial crisis. It was a unique moment in history – a single event that…

An apex predator is an animal at the top of the food chain, with prey to hunt, but no predator to fear. They are the royalty of an ecosystem. Beasts are often used as symbols to explain the abstractions of…

Everyone agrees. The biggest risk to the markets is obvious. Central bankers are swapping quantitative easing (QE) for quantitative tightening (QT). And QT could make the world blow up in all sorts of ways. Citibank credit strategist Matt King told…

The FTSE 100 is back where it was 18 years ago. Less than half the companies from back then are still in the index today. The Goldman Sachs Commodity Index is back where it started too. The oil price touched…

GUALFIN, ARGENTINA – Friday evening after the bell rang on the New York Stock Exchange, traders and analysts, sell side and buy side, 2018 quants and deep value dinosaurs, million-dollar-a-year partners as well as the order takers and clerks, all…

Getting into a sports stadium is always easier than getting out. Unless you leave early. The stockmarket is much the same. Up the escalator and down the elevator is the mantra describing the nature of the stockmarket’s booms and busts….

Australia didn’t even have a recession in 2008 or 2009. China’s enormous stimulus programme and a wave of immigration saw to that. It was a demonstration of the power of countercyclicality. As long as some parts of the world are…

GUALFIN, ARGENTINA – Over the weekend, we went to visit our new property. The house, which we are renovating, is on the far side of the river. We’re just realizing what a challenge that poses. In order to get over to…

GUALFIN, ARGENTINA – Investors were cheered up last Friday by the jobs report, which showed that the number of new jobs is about equal to the high set back in 2006 – just before the last crisis. As near as…

GUALFIN, ARGENTINA – Another miracle! It rained. “We got 200 millimeters (about 8 inches) this year,” reported the capataz, Gustavo. After two years of drought, finally, the fields, mountains, and pastures are green. And the river that separates the house…

BUENOS AIRES, ARGENTINA – We went to dinner last night at a little neighborhood restaurant in Palermo Soho. It was already crowded when we arrived after 9 p.m., with a warm buzz of conversation. But scarcely had we been there…

Trainspotting provides today’s economic analysis. The movie is about a drug addict’s attempts to come clean. It doesn’t go so well. Perhaps because he’s trying to do it in Scotland. In the end, he steals thousands of pounds from his…

Today’s Capital & Conflict comes from the latest issue of The Price Report by investment director Tim Price. Within my asset management business, we deal with two levels of emotional responses to the state of the financial markets. At one…

I’ve got so much honey You know the bees envy me I’ve got a sweeter song Oh, than the birds in the trees Oh and I know, I know, I know what you’re gonna say What, what could make me…

YOUGHAL, IRELAND – Ireland is a friendly place. People are relaxed and direct. They tell you things… even without you asking. For example, there seems to be a curse on the property next door. Broken Heart “Oh, yes…” the custodian…

BALLYNATRAY, IRELAND – We have bought a place nearby. But it will be months before it is habitable. In the meantime, we need a place to stay. So we’re renting a place on the estate next door. It’s an apartment built over…

Sometimes things are simple. Perhaps this is one of those times. Stocks are crashing, bonds are stumbling, and investors are worrying. When will it stop? Last week we tried to take stock of what happened so far. And how it…

PARIS – Yesterday’s screens were full of green numbers (things going up). Investors may breathe a sigh of relief. “Whew! Glad that’s over…” they are likely to say. But it’s way too early to relax… and way too late to…

[Editor’s note: because Bill is usually writing from the US, we don’t publish his copy until the day after he’s written it. So if you’re a bit confused as to why he’s predicting events that have already happened, that’s why.]…

A recent report from Oxfam revealed that last year, somebody new was anointed as a billionaire every two days. By its estimation, 82% of all the wealth created last year went to the wealthiest 1% on the planet, while the…

The Bayeux Tapestry is coming to Britain. All 70 metres of it. So when can you go and see the embroidered cloth to discover the history of the Norman conquest of England? No, not next week. Not even next month….

BALTIMORE – “Investors Prepare for Inflation,” warned the front page of The Wall Street Journal last Wednesday. “Rising Treasury Yields Ripple Through Markets,” it added on Thursday. “U.S. Treasurys lead bonds sell-off,” the Financial Times piled on, “as investors fear…

Yesterday we looked into stocks. But they’re a sideshow. The financial world really runs on debt. Bonds are the main event. Bond markets are twice the size of stockmarkets. The survival of governments, giant corporates and pensions funds depends on…

The stockmarket is a cyclical thing. Sometimes it goes up, sometimes it goes down. That’s supposed to make the whole thing predictable, in a way. If you’re at the top of the cycle, sell. If you’re at the bottom, buy….

The Bank of Japan has done it! It’s shrunk its balance sheet. Without triggering mass financial panic. Drawing money out of the economy tightens financial conditions in Japan. That’s not what central banks are supposed to be doing when inflation…

“But I don’t want to go among mad people,” Alice remarked. “Oh, you can’t help that,” said the Cat: “we’re all mad here. I’m mad. You’re mad.” “How do you know I’m mad?” said Alice. “You must be,” said the…

BALTIMORE – In all the excitement surrounding the passing of the GOP tax bill, we almost missed it. But on Tuesday, as stocks rose to a record high in anticipation of a huge payoff to corporate America, bonds fell. The…

BALTIMORE – We attended a family wedding in Nicaragua over the weekend. Asked to make a little speech, we opined on the differences between men and women, and the sacred role of marriage… the ultimate and most ancient win-win deal. As…

[Editor’s note: because Bill is usually writing from the US, we don’t publish his copy until the day after he’s written it. So if you’re a bit confused as to why he’s predicting events that have already happened, that’s why….

You’ve heard plenty about Greece’s financial mess, Italy’s non-performing loans and the property busts in Ireland and Spain. We love covering Europe in Capital and Conflict. But the simple truth is, the Eurozone remains a comparatively decent banking sector. At…

Do you remember the retirement of Alan Greenspan? Probably not, everyone seems to want to forget about what happened after 2006. The monetary maestro had presided over an extraordinary period of stability, calm and growth. They called it the Great…

The butterfly effect explains how a fluttering of little wings can trigger a hurricane on the other side of the world. Central bankers have been fluttering their little fingertips over the “0” key, generating trillions in digital money. Today, we…

RANCHO SANTANA, NICARAGUA – If you run over a pedestrian in Washington, D.C., it might be wise to keep going. Because the person under your bumper could be a swamp rat. In fact, it could be Jerome Powell, whom President…

A new high for the stockmarket. Huzzah! Which one? Lots of them! The FTSE 100 hit an all-time high yesterday. The French and German indices last week. The Nasdaq broke an all-time record with 63 all-time highs this calendar year…

It’s an irony of the financial world. The bigger the event, the less anyone cares. Because everyone sees it coming in advance. Everything had already adjusted, the moves were priced in months ago, and all eyes are on the next…

I’ve lost my faith in money printing for today’s Capital & Conflict. It’s always a good idea to ask yourself, “What if I’m wrong?”. Especially when you’ve got Southbank Investment Research’s best and brightest giving you funny looks for temporarily…

POITOU, FRANCE – For nearly two decades, the world’s central banks have labored hard, sweating to coax more digital money out of a stony and grudging economy. More than $20 trillion did they bring forth via QE (buying stocks and…

A few years ago, a group of my friends and I had the clever idea to update the lyrics to Billy Joel’s We Didn’t Start the Fire. Adding three decades’ worth of events in song form didn’t go so well….

LISBON, PORTUGAL – In Japan, incumbent prime minister Shinzō Abe has won a new super majority in parliament. And you know what that means? More laughs. Dumbbell Policies Yes, the whole world is doubling down on dumbbell policies that don’t…

Last week, the German and American stockmarket indices hit symbolic highs. Today, Japan is expected to break a 56-year record. Futures, a de-facto prediction of stockmarket performance before the market opens, were up over the weekend. This morning the actual…

Another day, another symbolic record high for a stockmarket. Yesterday it was the Dax at 13,000. Today the Dow at 23,000. One commentator complained on Twitter that he’d only just received his shipment of a “Dow 22,000” hat. Somebody else…

PARIS – Whoa! Bitcoin is up $1,457 since the start of the month; at writing, one bitcoin sells for $5,670. Look at the Dow. It is on its way to 23,000. And don’t even mention the tech darlings – Facebook,…

PARIS – “Don’t worry. We’re not hysterical like you North Americans.” We had arrived at the security gate at Salta Airport on our trip back from the ranch to Buenos Aires, with an onward ticket to Paris, France. In our…

In September I warned inflation is making a comeback. It’s central bankers’ age-old accountability mechanism. The reason quantitative easing (QE) never worked in the end. It’s not like we haven’t tried money printing. History is littered with examples of it….

BUENOS AIRES, ARGENTINA – First, a news update. The Washington Post: The Republican Party has largely abandoned its platform of fiscal restraint, pivoting sharply in a way that could add trillions of dollars in federal debt over the next decade….

TEMPLECOMBE, ENGLAND ­– We took the train from Paris to London… and then from London to the village of Templecombe in Somerset. We came to visit a friend. “This was the home of Lord Uxbridge,” our host pointed to an…

POITOU, FRANCE – We pause. We take a deep breath. We cease our normal sarcasm and kvetching. Today, we give thanks to the global elite… the people to whom we owe so much. Historic High The thought came to us…

POITOU, FRANCE – We took the ferry back to the mainland after our stay on Île d’Yeu with two kittens in our luggage. The kittens were scheduled for drowning if no homes could be found. Elizabeth volunteered to adopt them. One of…

I’ve just seen the news of another terror attack in London. I hope this letter finds you and your loved ones safe. “A large income is the best recipe for happiness I ever heard of…” “You intend to be very…

Yesterday we finished Capital & Conflict by describing how badly discredited the anti-immigration justification for Brexit is. The figures and the economic justification are simply wrong. But the real reason to favour Brexit is plastered all over the news this…

At the beginning of 2017, a major US bank handed $92 billion over to the US government. It was all “profit” from its operations. How did it make so much, and why did it have to give the money to…

The hurricanes came just in time for the Federal Reserve. Its policy committee faced the challenge of tightening monetary policy in coming months as promised. But chair Janet Yellen may have escaped by the skin of her teeth once more….

What a month we’re in. It could shape up to be the turning point for markets for years to come. September is a bad month for shares, historically. American indices fell in 60% of Septembers since World War 2. And…

In 1992, while the pound was tumbling, the Swedish central bank raised interest rates to 500% to prevent facing the same fate. “Want to make a grown nerd cry? Run that interest rate through his risk model,” wrote Eric Peters,…

Yesterday we pondered the beginning of the end of central bank control… over everything. Stockmarkets, corporate bond markets, house prices, exchange-traded funds (ETFs), mortgage lending and mortgage buying, bank regulation, but most of all government bonds, are in the hands…

Akhil Patel is the odd one out here at Southbank Investment Research. He uses a completely different way of looking at the markets. But if he’s right, then his way of thinking is all you need as an investor. It…

I may have found your black swan. The distant market shock that triggers a local crisis thanks to the long line of dominos reaching around the world and leading to your door. More below. But first, what did some of…

While stockmarkets are suspended from central bank balance sheets like marionettes, financial news isn’t important. The economy, company earnings, demographics, the insolvency of pensions… no, nothing but money printing, and the potential for money printing, matters any longer. Financial markets…

Next week the world’s central bankers head to Jackson Hole for the annual Economic Policy Symposium. And the financial world is fretting over their words more than ever in anticipation of what might be said at the event. Mario Draghi’s…

And it’s time, time, time And it’s time, time, time It’s time, time, time that you love And it’s time, time, time… – Tom Waits POITOU, FRANCE – “So how much did you make last night?” “We made about $15,000,”…

Fear is pulsing through the markets. Analyst after analyst at investment banks around the world are pointing out that only central bank money printing has kept the stockmarket afloat. And central bank money printing is set to decline in 2018….

Central bankers were supposed to manipulate the economy for your benefit. But they’ve become the economy itself. The Swiss central bank has amassed more than £550 billion in stocks, bonds and cash. That’s slightly more than the country’s annual GDP….

POITOU, FRANCE – The Dow rose another 100 points on Tuesday. Can anything stop this bull market? At least we know the answer to that question: Yes. When? Longtime Diary sufferers know better than to trust our market timing advice. So rather…

Watching government policies fail is a favourite hobby of mine. The history of economics can’t help but be an illustration on the shortcomings of government for anyone willing to listen. Quantitative easing was supposed to restart inflation so that the…

It’s a banknote. Couldn’t be much simpler or more taken for granted. You’ve probably never really spared the time to think about what it really is. You just use them without a second thought. And always have. But all around…

Predicting the future has been easy in hindsight. We’re very closely following the script left by Japan, although in fast forward. So we had hindsight right in front of our noses, in a way. The Western world’s tech bubble, housing…

Today we ask ourselves who you’d rather have as your fund manager. There are two options to choose from. The first is Herbert Stein, an American economist who chaired the Council of Economic Advisers under Nixon and was on the…

Most things you can learn from economics are wrong. Figuring out why they’re wrong has plenty of value though. It allows you to predict things that others don’t see. The neutrality of money is a great example. Most people who’ve…

Feathers were thoroughly rustled yesterday. The accounts of Her Majesty’s Treasury were released in all their terrible glory. The fate of Britain’s finances laid bare across 150 pages. Britannia pawned her trident many years ago. It still stands, proud and…

POITOU, FRANCE – This morning, we are wondering: How dumb is the Fed? The question was prompted by this comment by former Fed insider Chris Whalen at The Institutional Risk Analyst blog: [O]ur message to the folks in Jackson Hole this week…

Something broke this morning. Bonds, stocks and commodities all fell. Government bond yields around the world surged. Australia in particular got kicked in the shins all round with a jump in bond yields and a big drop in stocks. Why…

There are two types of governments in this world. Those who can print money and those who can’t. The distinction will define your investing success. It already has, actually. Stock markets in countries with a printing press are doing just…

“Even God Himself could not sink this ship.” – Titanic crewman… The ship sank four days later “It is our will that this state shall endure for a thousand years.” – Adolf Hitler… 10 years before the Reich was destroyed…

The fixers are back. They promise us stability, wealth and safety. Will you buy in? Times have changed, though. Strongmen now come in the form of Janet Yellen, chairperson of the Federal Reserve. And they literally want you to buy…

The Austrian business cycle theory (ABCT) explains how central bankers engineer the booms and busts they’re supposed to prevent or mitigate. Ever since the theory was first derided by the German historical school economists, it was picked up by investors…

Predicting the next crisis is easy. It’ll happen when the central bankers want it to happen. This isn’t some sort of conspiratorial claim. It’s straightforward economics. Investment bank Goldman Sachs took a look at the trigger for recessions in the…

LONDON – “Nothing but bad news in the paper,” a colleague saves us the trouble of reading it ourselves. “A building caught fire here in London. Dozens dead. A guy opened fire on Republicans at a baseball field. He shot…

Say you knew somebody who had recently suffered a near fatal drug overdose. What would you suggest they do? Hopefully, your answer to that question is not “Take some more!” The idea of treating an excess of something with even…

It’s all about debt. We spend on our credit cards, even when there’s enough money in the bank. Business finances inventories with credit and equipment with loans. Houses are purchased with mortgages and cars with car loans. Education with education…

Predicting the Japanese bond market will crash is known as the Widowmaker trade. If you take a look at the fundamentals, the conclusion is obvious. A bond market crash in Japan has to happen. But it should’ve happened a very…

GUALFIN, ARGENTINA – “The U.S. Economy Is Back on Track,” read a Bloomberg headline over the weekend. Apparently, inflation and consumer spending picked up last month. We are so glad to hear it. And last week, New York Fed President…

Central bankers are tasked with making our economy run smoothly. But what if central bank policies are the cause of economic problems, not the solution to them? Britain used to have the National Coal Board, the British Gas Corporation, and…

The secret to walking on a tightwire is looking where you’re going. Not at your feet and the plunge either side of the cable! At the fixed point you’re hoping to make it to. Preferably without a chunk of your…

It’s been five long years. But the American central bank can finally claim victory. After five years of undershooting, it’s hit its inflation target at last. America’s year-over-year PCE deflator hit 2.1% in February. That’s impressively close to its 2%…

Today’s Capital & Conflict continues the theme of stockmarket crashes. They’ve been banned. Someone should put up a sign on the corner of Threadneedle Street and Princes Street – “Stockmarket crashes prohibited, by order of the Bank of England”. Over…

The world’s stockmarkets reached an all-time high yesterday. Based on the MSCI All Country World Index, we’re above 2007’s peak. Whoop-dee-doo! It’s a bit embarrassing to have only just surpassed the peak from ten years ago. Stockmarkets are supposed to…

Today’s Capital & Conflict is about the biggest change to the world economy in ten years. It’s happening slowly. But it will be the sea change that sets the scene for the next ten years of investing. The government doesn’t…

GUALFIN, ARGENTINA – The Dow rose 174 points on Thursday. And Treasury Secretary Steve Mnuchin said we’d have a new tax system by the end of the year. Animal spirits were restless. But which animals? Dumb oxes? Or wily foxes?…

Yesterday we looked into how tightening monetary policy is just stimulus in disguise. Even if central banks raise interest rates, as they did in the US recently, they’re still spiking the economic punch bowl. We’re practically a bunch of drunks!…

The Federal Reserve moved interest rates up 0.25% last week. The US stockmarket jumped. Market commentators are mystified by the paradox. But it’s not hard to explain. Or to invest accordingly. Today you’ll discover when a hawk is really a…

It’s the beginning of a busy week. The Dutch elections are tomorrow. And both the Bank of England and Federal Reserve are due to announce their updated manipulation of interest rates on Wednesday. President Donald Trump is expected to send…

Well now. It seems my letter yesterday about how rich retirees feel has really struck a chord. The consensus? The figures may say retirees today are richer than those in work. But it doesn’t feel like it! That’s because there’s…

LOVINGSTON, VIRGINIA – Amid all the sound and fury of the Trump news cycle, hardly anyone noticed. There is a specter haunting this economy. It is the specter of inflation… Exterminating Angel Bloomberg has the report:

BALTIMORE – Again, the Dow was scheduled to go over the psychologically important 20,000-point mark yesterday. And again, it backed off. We are studying the life and times of former Fed chief Alan Greenspan. Not that we expect to discover…

Should the bank of England have seen the 2008 financial crisis coming? Everyone’s favourite economist Andrew Haldane – chief Bank of England economist and “let’s abolish cash and impose negative interest rates” proponent – certainly thinks so. He may or…

Let’s look beyond the weekend to what is likely to be the defining financial story of next week. In five days’ time – next Wednesday – the Federal Reserve meets to decide its next move for US interest rates. The…

You may have seen details of Mark Carney’s speech earlier in the week reported in the press. The headline story was Carney’s claim that we’re experiencing our first “lost decade” in terms of income growth since the 1860s. There was…

In today’s Capital & Conflict… a trillion dollar loss in the bond market… inflation rising… the new monetary playbook… what is MFFP?… introducing a map for your money… and more Ouch. Hidden behind the madness of last week’s momentous events,…

Will the UK monetary system have a new master by the end of the week? It just might. It seems autumn 2016 could be shaping up to be the “crowded hour” of UK monetary policy in the 21st century. At…

A guest essay from Jim Rickards, editor of Strategic Intelligence. The greatest debt debacle of all time is staring us in the face. Don’t take it from me. The International Monetary Fund (IMF) agrees. It’s one thing when frantic voices…