Robert Kiyosaki: Money and Debt 101

This quick little compilation video, featuring an interview with Rich Dad, Poor Dad author, Robert Kiysaki, really gives a good explanation of money and debt in five minutes.  This is a real quick video, and there's a lot more detail to the whole picture, obviously, but this is a great overview of how money and debt function in society.  It you're new to investing, or are confused by all the jargon people throw around, this helps begin to explain things.

The Bubbles still left to pop- With Robert Kiyosaki, Harvey Dent, Stan Harley

Robert Kiyosaki, best known as author of Rich Dad, Poor Dad, does a regular (weekly, I think) radio show/podcast about different aspects of money, investing, and the economy.  He gets some really good, really smart people on this show.  This is a scary, but very good show, with Harry Dent and Stan Harley talking about the current bubbles in stocks and real estate.  These guys are seeing historically economic BIG bubbles that are getting close to popping.

"The greater the bubble, the greater the burst." 

- Harry Dent, in the interview above

It's late August 2020, as I'm writing this.  In my opinion, we are now 11 months into what I'm calling The Phoenix Great Depression.  That's my own term, but I see this as the beginning of a 5 to 7 year (minimum) economic downturn.  There are a couple of long term trends and cycles, and several shorter term ones, that have brought me to my conclusion.  This current crisis started with the seizing up of the Repo Market, in the banking industry, in September of 2019.  The Federal Reserve (aka The Fed), had to begin injecting billions of dollars, weekly, then daily, into the financial system, to simply keep the banking system from collapsing.  That slipped under most people's radar.

Then, the Covid-19 coronavirus (aka Sars Cov-2), hit U.S. shores, which was the "black swan" event that tipped the U.S. stock markets into collapse.  As we all know, the shutdowns have led to all kinds of problems, millions have lost their jobs, mandatory business shutdowns, and tens of millions of people now struggling to simply pay rent.  I saw a huge economic collapse coming, and have been blogging about it for three years.  

The two guys in the interview above, Harry Dent and Stan Harley, have come so very similar conclusions, using completely different cycles and models.  One of the things that is amazing to me about our current economic mess, is that several, really smart economic thinkers, investors, and forecasters, have come to the same conclusion about a huge peak and then crash, right now, in this 2019-2022 period.  But all of these thinkers (myself included), have come to very similar conclusions, from very different forecasting directions.  We're all looking at different data sets, different cycles and theories, but coming to the conclusion that this is going to be a historically huge economic downturn.  You can easily discredit me, I'm a bum, but it's hard to deny the thinking of Robert, Harry, and Stan above, as well as Ray Dalio, Jim Rogers, and several others.  Even internet marketing expert and entrepreneur Gary Vaynerchuk has been waiting for this collapse, and has talked about it.

That said, this interview above is one of the most intelligent looks at what's happening in the economy these days.  If you're interested in running a business in the next few years, and/or investing, watch/listen to this interview above.  It's a lot to take in, so maybe watch it a couple times, or until it begins to make sense.  

Yesterday, I predicted that the Nasdaq would drop before 8,000, before the November 3rd U.S. presidential election, and I predicted really low numbers for the Dow and the S&P 500 as well.  All conventional wisdom, all common sense right now, says it's completely INSANE to think that The Fed would let the stock markets drop before the election.  The Fed's main job right now (in many people's eyes), is to get Donald Trump re-elected.  I know my prediction seems completely nuts.  My January 26th prediction that the Dow would drop below 19,000, was also completely nuts, according to conventional wisdom then.  Yet, it happened.  

My reasoning for yesterday's crazy prediction is that we are now sitting on several financial bubbles, any of which could collapse at any time, triggering the collapse of the rest.  When one really begins to go, it will start to topple the others.  That toppling will lead to a world financial system wide crisis, and that will bring down the currently over-inflated stock markets.  Here's a quick list of businesses and markets that will hit crisis point, could reach a collapse point, and trigger a mess that would bring down stocks, and everything else.

-SLABS (Student Loan Asset Backed Securities) market- There's no good data, but probably 50%-70% of student loans are being paid right now.  When this market goes, everything topples.

-CMBS (Commercial Mortgage Backed Securities) market- Commercial real estate?  Yeah, not good these days.  When this market collapses, like subprime MBS and CDO's in 2008, other things start collapsing as well.

-CLO (Collateralized Loan Obligations) market- CDO-type investments made from business loans.  Business loans in 2020?  Yeah, not a good bet after the Covid-19 shutdowns.  Smaller than the two above, but if this collapses, it will start the other two above toppling.

-Deutsche Bank- It's been struggling for many years.  If it goes bankrupt, it will send shock waves through the worldwide financial system.  That will start other houses of cards falling.

-A major banking/corporate bankruptcy in the U.S.-  Boeing is known to be struggling.  GE is known to be struggling.  Capital One is known to be struggling.  Many other major corporations are loaded with debt and struggling under the crazy conditions the pandemic and 2020 has thrown at us.  If one MAJOR corporation goes bankrupt, especially one tied to banking, it will send shock waves through the financial system, and these other things begin to topple.

-Serious evidence of a likely Joe Biden presidential win-  If the polls turn dramatically in Biden's favor, Wall Street will react, believing much less money will be thrown at them in the future, sending markets down.  The stock markets are completely detached from the real world economy, and from reality, at this point.  We're at a Tulip Mania level, and there WILL be a huge correction sometime.  Personally, I think a Democrat presidential victory is likely, and is basically our only hope of survival as a nation and democracy.  Just for the record, I'm an independent, and not a fan of Joe Biden.  But we need a semi-functional government, and less money thrown at Wall Street, and more at the American Public, to get through the current, and the coming crises.  Short term, the markets will throw a temper tantrum, and drop significantly, giving us the much needed correction.  In the long term, this will help the economy, bringing all types of assets down to real world values.  This alone could drop the stock markets before the election.  My personal thinking right now is that one of the things above, not a big Biden lead in the polls, will be the cause of the drop, but huge poll numbers for Biden COULD send markets down pre-election.

-There are many other things that could send all these houses of cards tumbling before the election.  Bad Q3 earnings for major businesses, major commercial real estate numbers dropping significantly, national residential real estate numbers dropping significantly, a large virus surge in a major city, causing another short term shutdown.  Lots of things COULD happen, any one of which would send all these houses of cards toppling down.  My bet is that one of these will happen before the election, and will cause massive chaos in other areas, which will ultimately bring down the hyper-inflated stock prices.  There are just too many possible triggers of potential collapse for The Fed to continue to prop everything up for two more months.  This is very similar to my thinking in January.  

I know this is a very controversial call, we'll see how things play out.

Prediction: The next stock market collapse will come BEFORE the election

What goes up, must come down.  A little Blood, Sweat & Tears (lots of tears), for you today.  

I'm back from a few days of not thinking about the economy, and the depression we are now 11 months into.  Ip'm utting my ass on the line again, with some hard number, hard date predictions.  Here they are.

The Nasdaq will drop below 8,000 points BEFORE November 3rd, 2020

The Dow Jones Industrial Average will drop below 20,000 points BEFORE November 3rd, 2020.

The S&P 500 will drop below 2,500 points BEFORE November 3rd

Call if the Trump Dump, if you need a catchy nickname. Or not, he didn't cause this, he just helped make it worse.

Will these ridiculous predictions come true?  Of course not, as anyone in the market right now.  "It will never go down!"  Right?  We'll see.  

By the way, here are my last set of ridiculous predictions.  No one in any serious position of expertise thought ANY of these would happen in 2020 when I wrote this post.  Three of the nine predictions have come true, and they were all for calendar year 2020, so there's four months left to see if any of the others happen.  Once again, let's hope I'm wrong...

Remember to vote for someone, for every office open, on November 3rd.   

A few days off...

 

 

 I'm taking a few days off from thinking and writing about economic stuff...  I don't expect anything overly huge to happen in the next few days...  Back in a few.

 

Warren Buffet sold all his Goldman Sachs stock? But they run the world...

This video talks about the recent stock trades of Berkshire Hathaway, the investment business headed by legendary investor Warren Buffet, and his lesser known partner, Charlie Munger.  If you go to about 1:12 in the video, you can pause it and read the list.  

Way back in the early 1990's, as a geeky, 20-something, BMX freestyler guy, I wanted to be ridiculously rich.  Like most young guys, I thought that if I could find a way to become rich quickly, I could avoid working lame jobs, and do what I wanted all day, which was mostly riding my BMX bike.  

Unlike most young guys, I started reading and learning about real estate, money, economics, and all things money related.  One thing I began to do was study the Forbes 400 magazine every year.  That was a pretty new thing back then, and had been coming out annually for 6 or 8 years when I first picked on up.  The Forbes 400 is an issue of Forbes magazine where they listed the 400 richest people in the United States, how much those people were worth, and two or three paragraphs about each person.  It comes out each fall.  Reading the Forbes 400, year after year, was incredibly enlightening in a financial sense.  First I learned that about 1/3 of the 400 richest people inherited their money.  So the first lesson, if you want to get rich really quick, is to find one of those people with a huge inheritance, and marry them.  That didn't appeal to me.  There were no hot, young, Kylie Jenner types on the list then.  

The next lesson in the early 1990's, was that most of the major fortunes were families who owned old, well known, industrial companies, like Levi Strauss, Seagrams, and M&M/Mars candy, businesses like that.  In the early 1990's, tech billionaires were a new thing, and there were only a few.  Most of the fortunes were from old, well established, industrial age companies, ones that were still primarily owned by one family.  Another big category then was real estate tycoons, largely self-made developers who bought lots of apartment buildings over their lifetimes.  No, not Donald Trump, he was (and still is) anything BUT self-made.  As we know now, his dad set him up in business, and he's been propped up by his late father, others ever since.  But guys like Donald Bren with the Irvine Company, and some other New York real estate magnates then, actually did build real estate empires, and become super rich.

One of the biggest surprises I learned from studying those early Forbes 400 magazines, was that only one guy (later his partner Charlie Munger made the list), Warren Buffet, actually became super rich from investing in stocks.  One guy.  That's it out of the 400 richest Americans.  As it turns out, investing in the stock market is actually one of the worst ways to try and become super rich.  Stocks have their place, in "normal" times.  But they get sketchy during recessions and depressions, particularly for inexperienced investors and speculators.  The vast majority of the super rich back then, and now, built a huge business, and then took that already successful business public, so everyone could buy stock shares in it.  The billionaires of the world, old and new, made their billions by taking a large company public.  Buffet did that to a degree, but primarily built the nation's third biggest fortune by investing in stocks of other businesses.

 Even more interesting, Buffet and Munger are the most boring kind of investors that exist.  They spend their days reading, back home in Omaha, Nebraska.  They research all kinds of companies, and try to find established businesses with well known brand names (like Coca-Cola or Dairy Queen).  Then they watch the markets, day by day.  When a recession, or some kind of downturn hits, the everyday stock traders would freak out, and often sell lots of shares of a perfectly good company, really cheap.  The market panic days are what Warren and Charlie lived for, and still live for.  Basically, they had a list of companies they thought were solid in business and in management, and when the markets sold those companies cheap, Warren and Charlie would buy a big position.  Then they went back to reading and researching every day... and they waited.  Once the market turmoil calmed down, people realized the solid companies were still solid companies, and stock prices went back up.  And so did the stock price of Berkshire Hathaway.  That's called "value investing," and Warren Buffet learned it from an early mentor.  Value investing is the exact opposite of what dumb ass Millennial investors (and dumb ass Gen Xers and Boomers), are doing right now, which is buying hype, not businesses.  They'll learn... pretty soon.

Berkshire Hathaway was originally a textile mill that Buffet invested in.  Later, he bought chunks of insurance companies, which got a lot of money coming in from premiums.  That money needed to be invested well, so the companies would have the money needed to pay for insurance claims.  Berkshire morphed into a holding company as the textile business faded, and Warren and Charlie just kept buying large positions in solid businesses, with well known brand names, when those businesses shares were selling cheap.  Even more weird, Buffet very rarely sells shares.  

But we're in really crazy times right now, largely unprecedented, even in the decades Warren and Charlie have been investing.  Buffet will turn 90 in a week, and Munger is 96 now.  They've seen A LOT.  These guys both were kids DURING the Great Depression.  They remember it, to some degree.  That's probably why they're sitting on about $140 billion in "cash" right now.  They know shit's gonna get a lot crazier in the next couple of years, and they're ready for some chaos. 

In the video above, we see Buffet sold their positions in several airlines.  OK, that makes sense right now, airlines are screwed for at least a couple of years.  He sold out of RBI (Burger King, Popeye's Chicken, and Tim Horton's in Canada).  Hmmmm, OK, restaurants are struggling I can see that one.  But then I saw Buffet sold a huge chunks of several banks.  OK, that's big, Warren and Charlie see trouble in banking in the future.  But they sold 100% of Goldman Sachs?  Wow.

Goldman Sachs is basically the investment bank that tells the U.S. government what to do with money.  Seriously.  Check out this article, current Treasury Department secretary Steve Mnuchin is a Goldman guy.  Steve Bannon worked for Goldman.  Former Goldman Sachs people have been Tresaury Secretaries, economic advisors, worked at The Fed.  No bank in recent times has had more influence on the U.S. government, than Goldman Sachs.  And Warren Buffet just sold ALL of Berkshire Hathaway's shares in Goldman Sachs.  Warren and Charlie see something pretty brutal coming our way to make a decision like that.  They've literally walked away from one of the 2 or 3 most powerful banks in the world.  Wow.  That's big.  

Oh, by the way, Berkshire Hathaway stock can be yours for $322,126 per share, right now, if you're interested...

The REAL U.S. unemployment rate is somewhere between 10% and 30%

The Money GPS puts out daily videos with a whole bunch of firsthand chart, stats, and articles, about the economy and current trends.  These can be depressing, but it's a lot of solid economic data from firsthand sources, and he includes the links so you can dig deeper into any issue, if you like.  For these reasons, I watch his videos every day.  

This Money GPS video from August 16th, 2020, shows a Shadow Stats chart about the different unemployment rates available today.  He shows the chart at 8:08, and talks about it.  Here's the chart from shadowstats.com.  

The red and gray lines are official statistics from the U.S. Bureau of Labor Statistics.  The red line is the U3 unemployment rate, which primarily counts people who have recently applied for unemployment.  This is the unemployment rate you'll hear in the mainstream and business media, because they want things to look as positive as possible.  But it does not count everyone in the U.S. who's out of work, not even close.

The gray line is the BLS U6 unemployment number, down to about 16% to 17% right now.  This is also an official U.S. government stat, and includes people who may have been forced to work part time, but would prefer to work full time.

The blue line is the shadow stats number, which adds in the people could work, but are discouraged, or have given up looking for a traditional job, for whatever reason.  Before the year 1970 or so, there were very few people in this category, but the number has grown dramatically since, and no one knows exactly why.  

Think tank brainiac, and author, Nicolas Eberstadt, wrote a book on this group of people in 2016, called Men Without Work: America's Invisible Crisis (not a paid link).  Here's Eberstadt speaking on this topic, in 2017.  The number of these men was about 7 million then, and has grown since, by all accounts.  This number of long term unemployed people, not even looking for work, will most likely grow dramatically in the next couple of years. 

 Ebertadt says there is a growing number of women in this category, as well.  These are able bodied people, of working age, who are not even looking for work anymore.  Some of these people have felony records, and could not find good work after release from prison.  Many seem to be former low skilled factory workers who couldn't find decent employment after their local factories shut down, 10-20-30 years ago.  Many now get government checks, largely Social Security Disability.  I met dozens of these people when I was living in North Carolina, in the low income areas there.  All in all, very little is know about this huge group, and no one is really researching this issue in a serious way.  In addition, the nation's opiate addiction epidemic, is very highly tied to this group of people.

Whatever the cause, they are part of the "working age American" group, and they are unemployed over the long term.  So when you count the unemployed, if you want to be accurate, they should be counted.  Hell, I'm officially in this group, though I do freelance artwork, and and I'm working on building a viable business out of that.  

But the shadow stats number, now around 30% of the U.S. workforce, shows the most accurate total  number of working age people who are not working, for whatever reasons.  And that puts our current situation right up there with the numbers unemployed during the Great Depression of the 1930's.  Long term solution ideas should take this large group of people into account.

Even super smart Norway's wealth fund lost money this year...

 Having trouble making ends meet after these last crazy 6 months?  Don't feel bad.  Norway's huge sovereign wealth fund, the largest in the world, lost $21 billion.  According to this CNBC article today, the Norwegian fund, invested largely in North American stocks, lost a ton on its investments.  The fund is still sitting on 10.4 trillion NOK (Norwegian Kronor), about $1.144 trillion, if I did the math right.

Norway invests a huge portion of its oil and gas money into this fund, which is a big source of pride and assurance for the Norwegian people.  When it comes to long term financial thinking about the financial health and security of its people, Norway's probably the best country out there.  

On the flip side, Tesla founder Elon Musk's wealth gained $8 billion yesterday, as Tesla shares surged.  And the 2020 craziness keeps on going...

Seth Godin in August 2020: The Difference between leaders and managers

Business people everywhere are freaking out over all the change that's been thrown at them in the last 5 months.  Seth Godin has been telling business people about the change that's coming for about 35 years.  His blog has 7,000 posts or something like that.  He's written 20 books.  He's been trying new ideas and failing, and having some great successes the whole time.  

This podcast interview goes all over the place, in a good way.  But some big themes of it, where Seth has great insights, are the difference between being a leader, and being a manager.  There's a lot of change now, it's a good time to be a leader.  Another theme of this interview, is that artists and creative people are leaders.  They may not have a huge organization, but they open up "new territory" in some way.  Other people follow.

Another big theme of this interview, is the difference between talent and skill.  Are you willing to put in the time to learn whatever skills you need, in today's world? The concept "talent" is really overrated.  More than anything, a good talk with Seth Godin is full of all kinds of insights, and one or two of them may be exactly the insights you needed to hear today, to move forward in today's weird and fast changing business world.

"We're living with a whole bunch of revolutions at once." 

-Seth Godin, in this interview

Jim Rickards explains the velocity of money in 2 1/2 minutes

Here's one aspect of the economy I wasn't familiar with until seeing Robert Kiyosaki interview Jim a couple of month s ago.  In this quick video, from 2015, Jim quickly explains the "velocity of money," and how important it.  

In this crisis of the last few months, The Fed has created enormous amounts of money, but the money, for the most part, isn't moving through the everyday economy much at all.  These 3 1/2 trillion dollars or so, mostly went into the banking system, the stock market and to a lesser extent, real estate, propping up those markets.  

To create the inflation that The Fed is trying desperately to create, according to Jim, we also need more velocity of all this newly created money.  While stock traders are staying busy, most everyday people are holding back on a lot of extra spending, and just trying to pay the day to day bills.  The tens of millions of people who got laid off, or have taken pay cuts, or are working fewer hours, are struggling to just pay their rent or mortgages.  They are not spending near as freely, as far as we can tell now, than they were a year ago.  Will the velocity of money pick up?  We'll see how this all plays out in the next several months.

The difference between mass psychology and economics in predicting markets

Tom Petty's "Don't Come Around Here" video seems the perfect lead into this post.  In the economics and social world, we're down the rabbit hole, and everything is crazy and hard to predict right now.  But that just makes it more interesting...

For over 30 years now, when I explained to average people why I read a lot of business books, real estate books, futurist books like those by Alvin Toffler, and studied the Forbes 400 magazine every year, I would tell people I'm an "economics geek."  That shut people up, and they'd leave me alone.  Even traditional geeks don't want to talk economics.  I got interested in real estate in 1986, when I moved to Southern California, and the market was hot.  I thought it might be a way to earn extra money as a young man.  I started reading books on it, and kept following my interests, from there.  I never went to college, I'm self-educated in this respect.

Being totally shy, scared of losing money, and a horrible salesman as a young guy, I wasn't able to raise money, or earn enough, to buy any houses then.  In 1990, we went into a long recession, and I started getting more interested in the long term dynamics of real estate, business, and the financial markets.  I began to watch the stock and precious metals markets daily, just seeing what happened, and trying to figure out why it happened.  Rather than just "get rich," I wanted to grasp the long term dynamics of why different markets moved, and truly understand them.  Then I could eventually invest in things when prices were low, and wait until the values rose, and make a profit.  Without realizing it then, my natural way of thinking about business and investing was very similar to Warren Buffet and Charlie Munger's style of investing, at Berkshire Hathaway.  Study, watch, wait for the prices to drop on things with inherent value, and then pounce and buy.  Then wait for the markets to return, and prices to rise. 

Basically, I wanted to truly understand markets, so I could predict the future of where they were heading.  I predicted the 1993-94 interest rate spike that sent Orange County, California into bankruptcy.  By late 1998, I sat the DotCom stock craze was getting ridiculous, and started talking about the eventual crash, which everyone then thought would never come.  In 2000, it came.  By late 2005, the California real estate market was going nuts, and I thought the inevitable crash was a year or so away.  It took until 2008, but it came, big time.  In all of those events, I was living on a low budget, and had no money to invest, but the dynamics of markets still fascinated me.  I watched them from a distance, and kept reading, and kept learning. 

When I saw the forces building for this current economic downturn, back in 2017, I was able to watch things much closer, and share my thoughts in my personal blog.  I actually got threatened by a group, they were one step away from a lynch mob, because of my blogging, in North Carolina, in May of 2018.  Despite the threat of being beaten by clubs, I kept blogging about the economy (and art and Old School BMX).  Southern lynch mobs aren't used to people standing up to them, so the beatings didn't happen.  Instead I managed to spend three days in jail in solitary, for heinous act buying donuts (after being told to leave a store, 2nd degree trespassing), and then get sentenced to $600 in fines, 50 hours of community service, and a 30 day suspended sentence.  Pretty crazy for my first criminal offense, EVER, at age 51.  These charges were dropped a year after I left North Carolina.  The South is still The South.  But I digress...

Anyhow, with years of watching markets, a few hundred books read, and a growing understanding of market dynamics, I had more time, and the internet and YouTube for research, heading into this recession (now actually a depression, technically).  I decided to do my best to predict what I saw coming our way in the economy as this recession headed our way.

But this economic crisis is unlike any before in my life, or anyone's life.  We headed into this downturn already living in Economic Never Never Land.  Interest rates had been held incredibly low since the Great Recession.  Major corporations, many former Industrial Age blue chips among them, loaded up on debt billions of dollars in debt, in the low interest rate environment.  The Trump tax cuts, signed by the most corrupt president in modern history, were yet another windfall for major corporations, and high net worth people.  Meanwhile, government bonds around the world went negative in many countries, and were ultra-low (and still are) in the U.S..  All the while, since late 2008, The Fed has been propping up Big Business and Wall Street, with the low interest rates and  trillions of dollars in quantitative easing.  The Fed is the "crack dealer" letting cheap money flow to the major economic players, who are now addicted to cheap money.

 In addition, we have widespread smartphones, the internet, and a level of inter-personal and business connectivity never seen in human history.  The newer, high tech businesses cluster together in a handful of major metros, like the San Francisco Bay Area, New York City, Boston, Seattle, L.A./SoCal, and Austin, Texas.  A huge percentage of the U.S. economy is centered in those metros, while rural, small town, and small city America struggled to recover form the Great Recession.  This helped create a huge economic polarity, which helped create a huge political polarity.  In the lead up to this current economic collapse, we had crazy stuff happening that most business people and economists had never seen before.  This wasn't going to be "just another recession."  It was all new territory, and nobody knew what would happen.  

In this chaotic mix, as stocks soared to all time highs on Fed created money in January, I predicted the unthinkable (here's that post), that the Dow would drop about 40%, and slide below 19,000 points.  It was at about 28,800 and rising when I made that prediction, and other predictions, in my blog post.  But I saw a change in momentum coming, soon.  Three weeks later, a "black swan event" came, the Covid-19 pandemic hit U.S. shores, and businesses were forced to shut down for a couple of months.  My "crazy" predictions for the Dow, the S&P 500, and the Russell 2,000, all came true within 8 weeks.  I missed on my Nasdaq prediction, because that's where investors put their money as the market dropped.

Then shit went crazy, because the official financial world didn't see this crisis coming.  Most of the "experts" didn't think there would even be a mild recession in 2020.  As most people sheltered at home, the business news channels tried to make sense of what was going on.  Being homeless, I struggled to simply find places to power up my laptop, and then find wifi spots I could use.  You can't shlter at home, when you don't have a home.  In yet another crazy aspect to the 2020 stock market crash, it was me, a homeless man, who accurately predicted the crash, and the depth of the crash.  Nothing makes sense now.

As the reality of the pandemic, and the much needed, but financially catastrophic, business closures set in, everyone in the business media tried to figure out what happened. Then they try to find some happy ending to this mess.  Everyone had opinions, and economists and public officials weighed in on this growing crisis.  By late April, I was able to start consuming these ideas from others, and to try to find accurate information on what was actually happening.  

I quickly began to figure out that, as I predicted the interest rate spike in 1993-94, the coming DotCom crash in 2000, and the real estate crash/Great Recession in 2008, I wasn't using hard number, nuts and bolts economics to make my preicitons.  Most of what I was looking at was actually the mass psychology of investors, and the public at large.  I did look at all kinds of economic trends, but I never got deep into the actual numbers.  

So I've been learning more about actual economics, as I tried to figure out where we're going now.  Economics is the study of financial data (technically, the study of "scarce resources").  But economists are notoriously not known for accurate predictions.  They look at the data after events happen, and analyze what happened.  I wanted to understand the dynamics, dig into the myriad of forces at play in the financial markets, and then be able to get a good idea of what's coming next. 

Ideally, I will actually have resources to invest at some point, and make some money off of my thinking. My drive has always been to try and figure out what's coming next.  And all that thinking led me to seeing a bunch of forces at work, social trends, social cycles, and things no one else pays attention to.  But financial markets, even completely manipulated markets, like the stock markets right now, held up entirely by Fed money creation, are still a result of human psychology.  Humans look at things, they make decisions and take actions, or don't take action.  Lots of actions, driven by mass psychology, drive the markets.  When the thinking in a large group of people changes, markets change soon after.  And when you study the trends, and try to figure out what idea caused a market change, you begin to get an idea where things will head in the coming days, weeks, months, and years.  

So I don't really tell people I'm an "economics geek" anymore.  I'm really a futurist, fascinated by Big Picture social dynamics and economics.  I try to accurately see the long term, mid term, and short term social trends going on, and get a grasp on the dynamics of these different trends, and how they affect and interact with each other.  Then I look at the economics world, and lay the economic trends on top of my world view of social trends.  That gives me some sense of where things are going.  That's how I made the call that the Dow would drop below 19,000 in January, when most people were expecting Dow 30,000 and Dow 35,000 soon after.  My thinking is a lot more like the late futurist Alvin Toffler, and his wife Heidi, than it's like Paul Krugman's, for example.  

I came to my conclusion that we're heading into an actual great depression from underlying, long term, social trends, combined with economic trends.  I'm working on putting the basic idea into a concise report.  But there are so many tangents and offshoots to what's happening today, that I'm going to dive deeper into pieces of the big picture in this blog.  This was not the blog post I sat down to write, but I hope it helps you readers get a better idea on where I'm coming from.  Much more to come...

Jim Rickards and Peter Schiff both see $15,000 gold as a possibility

This Kitco interview from July 31, 2020, has a couple of the best guys to listen about gold.  Gold just hits its all time high in dollars, though it's still a bit below the inflation adjusted high from  2011.  Is gold a bubble about to pop?  Or does it have room to run as the dollar get devalued?  Both of these guys see gold likely going much higher in the next few years, and see $15,000 and ounce gold by 2025 a serious possibility.  

Part 2 of this interview

Part 3 of this interview 

Peter Schiff, who's been predicting the collapse of the dollar for 15 or 20 years or more, takes over at the end of part 3 of the interview, and doesn't let Jim finish explaining his idea on the "velocity of money," which is an important concept to understand right now.  So here's a quick video of Jim Rickards explaining the idea.

Ray Dalio says cash is trash

In a quick history lesson, well known investor Ray Dalio compares our current economy to the 1930's era.  "We're in a new paradigm."

The many waves of The Phoenix Great Depression

This is The Wedge, in Newport Beach, California, on BIG day.  This video is about the best analogy I can think of for today's economic world.  One big, gnarly, dangerous waves after another.  The main plan is to not get destroyed by the economic waves, and then, try to ride one or two of them, if you can.

Last night I watched several CNBC interviews with top economists, about where the economy, and our financial world is headed.  None of them really seem to have a good grasp on the Big Picture.  Yes, I'm calling out Paul Krugman, Joseph Stiglitz, and several others.  These are all very smart guys, and they have good insights on pieces of what's happening.  But none seems able to predict the world that a handful of top investors see coming.  For months, in some cases years now, top business guys and investors, like Ray Dalio, Robert Kiyosaki, Jim Rogers, and a few more, have been talking about a historic level economic downturn.  OK, now we are definitely in it, and as of yesterday, this officially qualifies as an economic depression (see last blog post).  So... what's going to happen now?  And how long will this last?  The top economists don't have good answers to these questions.

Here's my take on today's economic mess.  First, as I wrote a few weeks ago, I've been watching several ultra long term trends, cycles, and shorter term trends, converge in recent years.  I spelled out the basic idea in this blog post, and a few earlier ones.  With so many major issues happening all at once in the economic/business world, and then the pandemic hitting hard on top of that, I saw several years of tough economic times heading our way.  I've been blogging about some of these issues for three years now, like in this post, from June 2017.

There are so many different things that need to get worked out in this economic downturn, that I think it will feel much like the video of The Wedge, above.  One big gnarly economic wave after another.   
Here are the "waves" that have hit in the last 11 months:

-September 2019- The Repo Market seized up- The little known repo market, a sort of "pawn shop" for major banks and shadow banking businesses to get overnight loans, froze up.  The Fed had to jump in to try and save it, by creating billions of dollars, and throwing that money into these markets, so banks and lenders needing short term loans could keep getting them.  What started as a "week or two" of "adding liquidity to the markets" turned into $20 to $100 billion A DAY being shoved into the financial system, to keep it from collapsing.  Most of America paid little attention to this issue.
-February/March2020- Stock Market collapse triggered by Covid-19 Pandemic/business shutdown- The financial world was teetering all last winter, but stocks surged, as The Fed pumped tens of billions daily into Wall Street and the banking system to shore up the Repo Markets.  No bad news had much effect, a true sign of market euphoria.  Then the pandemic hit U.S. shores, and national leadership didn't take it seriously.  The completely inept, and late response to the pandemic has now led to the deaths of over 157,000 Americans.  Though much needed for public safety, the mandatory business shutdown that has threatened millions of businesses, small, medium, and large.  Several large businesses, and many smaller ones, have already gone bankrupt, and 25,000 stores are expected to close this year, far more than double the number that closed last year, the highest number ever.  Because of this GDP dropped 32.9%, the biggest quarterly drop on record, EVER, in the second quarter of 2020.  This has put the U. S. in completely unknown territory, economically. 
April 2020 on- The first wave of business bankruptcies- Among the big names that have entered bankruptcy, are Pier 1 Imports, J.Crew, Lucky's grocery stores, Neiman Marcus, J.C. Penney's, GNC, Chuck E Cheese, Brooks Brothers, California Pizza Kitchen, and Hertz along with many other smaller businesses.  Most of America's major corporations (except for the tech giants), were near insolvency in March and April, but the bailouts saved them... for now.  There will be thousands more businesses going bankrupt as the other "waves" crash on our shore.

June 2020- Tens of millions of Americans are laid off, 40-50 million so far/unemployment claims spike to historic levels- While most of these layoffs were deemed "temporary" at first, it's obvious that a huge number of these will be permanent.  The Fed and Congress has thrown 3 1/2 to 4  trillion dollars into the economy, most to major corporations, but a large amount into extra unemployment payments.  This bought the country time.  But the time is ending right now, as the $600 extra unemployment payments end.

Now, what other huge waves are headed our way?  This is where the economists either are afraid to make forecasts, or are simply not sure what will happen soon.  To be fair, economists, by nature, study what has already happened, not what might happen soon.  This is where I come in.  Here are several of the major "waves" I see headed our way.

-August-November 2020- The first big wave of evictions and foreclosures- (28 million people are on the verge of eviction according to this report).  The moratoriums on evictions and foreclosures just ended, along with those extra unemployment checks.  This inaction by Congress is putting the very survival of the United States of America at risk, holding back help for tens of millions of people who are in survival mode now, trying to figure out what to do.

-September- December 2020- Residential real estate market heads downward- This wave of evictions and foreclosures will begin to tip the residential real estate market downward, into a major collapse nationwide.  The major metros, where real estate prices are highest, like New York City, San Francisco Bay area, L.A., and others, will probably get hit the hardest, at first.  The trillions of dollars pumped into the financial markets buoyed up residential real estate these last few months, but that's ending soon.  We'll see sales and prices begin to drop in the remaining months of 2020, and plummet in in 2021, in most areas.  As I said, the major cities, with highest prices, will be hit first and hardest, but will also be the most likely to recover first, in 3 to 5 years or so, in my opinion.  Why will it takes so long?  Because there are a whole lot of other things that need to shake out, besides overly high real estate prices.  Those things are subjects of other posts in this blog, and more coming in the future.

The wave of upscale people leaving cities and working from home, is much hyped right now, and is a factor.  But once we get a Covid-19 vaccine, or quality treatment, I think major metro areas, particularly those with lots of high tech, will try to rebound.  Those same cities will also have a lot more people homeless, in poverty, and struggling, at the same time.  Dealing with these issues may delay a rebound.  Smaller cities, towns, and rural areas will struggle much harder, and for much longer.  We will see a bunch of mid-sized and smaller cities get hit the way Detroit got hit by the loss of manufacturing jobs, many years ago.  This will be due to a lot of colleges and universities going bankrupt, and perhaps cities themselves.  This, again, is an issue for other blog posts, coming soon.

-September-December 2020- Retail and commercial real estate market really begins to fall- Obviously, this has been happening for years, to some extent, we've all heard of the Retail Apocalypse, by now.  But now we will have millions of square feet of office space open up, and ripple effects through mixed use, warehouse, and industrial properties.  You've probably heard the term "Dead Mall," by now.  For years, 400 or so of the nation's 1100+ shopping malls have been expected to close down eventually. A small number have, and some have been repurposed.  But I think this amplified closing of an estimated 25,000 retails stores this year will start the malls to tumbling.  We'll probably see 400 to 600 enclosed malls close down by 2025.  Thousands of smaller shopping centers will have vacancy issues, as well.  On the positive side, the malls expected to fair the best are the very high end malls, and the low end ones, where lots of lower income people shop.  Generally speaking, those people are much less likely to buy a lot of items online, to be delivered.  It's the mid-range malls (and cities) that are most likely to struggle.

Future economic "waves" coming at some point:

-Some kind of debt collapse in the SLABS (Student Loan Asset Backed Securities) market, the CLO's (Collateralized Loan Obligations), and the CMBS (Commercial Mortgage Backed Securities) markets- All three of these are similar to the Subprime mortgage securities that triggered the 2008 economic collapse.

-Crisis in auto loans, credit cards, and other consumer debt that's not being paid right now.

-Huge protests and social unrest caused by the millions of people who will likely drop into poverty in the coming months and years- Major healthcare and social programs will be needed to deal with this, much like the 1930's.


-The College Apocalypse- The collapse of the student loan system, along with the pandemic slowing down enrollments, AND the huge loss of revenue from college sports during the pandemic, will bankrupt colleges and universities.  Dozens of small colleges have closed or merged, for other reasons, in recent years.  But this financial crisis will cause major disruption to the whole college system, and I think we'll see a "College Apocalypse," something like the current Retail Apocalypse, starting in late 2021, and throughout the 2020's.  This will cripple cities dependent on colleges and universities, as well.  Higher education will have to re-invent itself for the 21st century, and the Information Age.

There will be others... but that's enough to bum you all out right now.  Watch that video above again, and remember that metaphor.