A suitcase full of Trump…

  • Limited time
  • A spring recession
  • Jim knows
  • A ‘house of cards’
  • The best and the greatest
  • Junior executives

We’re not sure we’ve ever stayed at a hotel quite like it.

Your editor is back in New York for the night, before we begin the trip back to Melbourne.

And so, in the interests of getting into the spirit of the US presidential election, we’ve checked in to the Trump International Hotel opposite Central Park.

Already, we’ve enjoyed a bottle of Trump Ice bottled water. We’ve washed our hands using Trump soap (made in Canada — damn you NAFTA). And we can’t wait to get stuck into that bar of Trump chocolate ­– in the shape of a bar of silver bullion.

Nice touch. That’s what we like about Trump — always subtle and understated!

We’ll be sure to fill our suitcase with as much Trump paraphernalia as we can.

And it has been a delight to watch Trump #1 and Trump #2 on the hotel widescreen TV. They are, of course, the dedicated Trump TV channels…screening all things Trump – Trump golf courses, Trump hotels…Trump everything.

But heck, what else would you expect? A Clinton Foundation telethon? We don’t think so. More Trump bonkersness later. First…


Overnight, the Dow Jones Industrial Average fell 40.27 points, or 0.22%.

The S&P 500 index fell 2.95 points, or 0.14%.

In Europe, the Euro Stoxx 50 index gained 20.69 points, for a 0.68% gain. The FTSE 100 added 0.07%, while Germany’s DAX index gained 0.52%.

In Asian markets, Japan’s Nikkei 225 index is up 33.19 points, or 0.19%. China’s CSI 300 index is up 0.03%.

In Australia, the S&P/ASX 200 index is down 2.04 points, or 0.04%.

On the commodities markets, West Texas Intermediate crude oil is trading for US$50.42 per barrel. Brent crude is US$51.23 per barrel.

Gold is US$1,263.20 (AU$1,657.95) per troy ounce. Silver is US$17.43 (AU$22.88) per troy ounce.

The Aussie dollar is worth 76.19 US cents.

Limited time

A quick one before we move on. We’ve reopened the doors to one of our most popular (and controversial) trading services – Time Trader.

But already the doors are starting to close again. So if you want to be in, you better not hang around.

Time Trader has been an idea 20 years in the making. Finally, it’s now available. But once we close the doors again next Monday at midnight, we likely won’t allow more new members until next year.

Quick, time’s running out. Go here.

A spring recession

From our vantage point here in the US, we’ve warned that the US economy is heading for trouble.

The evidence we’ve presented to the court (you dear reader) includes the continued decline of US company earnings.

Earnings have declined each quarter since the end of 2014.

We’ve pointed out that, of the companies in the S&P 500 index, only 277 of them had grown revenues over the past year.

That compares to 425 companies that grew revenues in 2011.

To us, that doesn’t appear to be an economy that’s breaking out into a sustained recovery. To us, it’s an economy that’s on the verge of breaking point.

And yet, we’re led to believe, and the financial markets lead us to believe, that the US Federal Reserve plans to raise interest rates this December.

The futures market has the chance of a rate rise at 67.6%. Incredible (we mean that in the literal sense of it being not credible.)

So with this view in mind, your editor was interested to see the commentary by Ambrose Evans-Pritchard in the UK’s Telegraph newspaper.

As Evans-Pritchard writes:

The risk of a US recession next year is rising fast. The Federal Reserve has no margin for error.

Liquidity is suddenly drying up. Early warning indicators from US ‘flow of funds’ data point to an incipient squeeze, the long-feared capitulation after five successive quarters of declining corporate profits.

Evans-Pritchard goes further by quoting Michael Howell from CrossBorder Capital:

We are seeing a serious deterioration on a monthly basis. We think the US is heading for recession by the Spring of 2017. It is absolutely bonkers for the Fed to even think about raising rates right now.

If you want specifics, you’ve got specifics. Spring of 2017. That’s somewhere around March or April of next year.

Pop that in your calendar if you will.

But it’s not all just about corporate profits. Evans-Pritchard points to the 40-year low in the M1 velocity of money. You can see this in the chart below:

chart image

Source: Bloomberg
Click to enlarge

If you’re not familiar with the term ‘velocity of money’, in simple terms, it means how often a dollar (or any other unit of currency) turns over during a specified time.

In other words, when you spend a dollar at the shop, what happens to that dollar next? Does it make its way to the bank and stay in the bank, or does it churn through the economy as folks keep spending that dollar?

So, what could this slowdown in the velocity of money mean? Does it definitively mean a recession is on the way?

Let’s see. Below, we’ve reproduced the same chart as above. Except this time, we’ve overlaid periods of confirmed US recessions. These are represented by the red shaded areas.

chart image

Source: Bloomberg
Click to enlarge

As you can see, historically, recessions haven’t necessarily occurred as the M1 velocity of money hits a low.

But you’ll notice something else. Since 1959 (when the data begins), the velocity of money has never fallen as steeply, nor for as long. Both in nominal terms and percentage terms.

Then again, during the period of this data, the US Federal Reserve has never kept interest rates as low for this long…and nor has it printed as much money in order to buy US government debt.

So when we say that governments and central banks of the world have taken economies into an unprecedented period of monetary policy, it’s not an exaggeration.

As we’ve said for some time, we can’t, and don’t, know when a recession and market collapse will come. But we’re convinced it will come.

Investors would do well to heed the warning. We’ve long recommended no more than a 40% exposure to stocks in any portfolio.

The more we see and learn, the more we’re starting to think that even that is an aggressively allocated portfolio.

Jim knows

If we’re right, and a crisis is coming, who else do you want to help analyse the situation than Jim Rickards?

Jim was at the centre of the collapse and bailout of Long Term Capital Management (LTCM), a hedge fund.

The collapse of LTCM was an event that nearly brought down the entire global financial system. The way things are now, the next financial crisis could bring about an even bigger calamity.

And whereas the US government and Federal Reserve were able to patch together a bailout then, the problems today are bigger…much bigger…by many factors more.

For that reason, Jim Rickards will be a must-see speaker at next week’s investment conference in Port Douglas.

But if you can’t make it there on the day, don’t worry. Because we’ve come up with a way to make sure you won’t miss a minute of it.

To find out how, go here.

A ‘house of cards’

While we’re on the cheery subject of complete financial Armageddon, here’s a story we missed last week, also from Ambrose Evans-Pritchard:

The European Central Bank is becoming dangerously over-extended and the whole euro project is unworkable in its current form, the founding architect of the monetary union has warned.

“One day, the house of cards will collapse,” said Professor Otmar Issing, the ECB’s first chief economist and a towering figure in the construction of the single currency.

What else can we say, but ‘Oh dear’!

The best and the greatest

When we saw these at the Washington National Ronald Reagan Airport, we couldn’t resist. It was the perfect way to get psyched up for our stay at the Trump Hotel.

chart image

We’re sure Donald Trump would agree that this is the best bobble head that you’ll find anywhere in the world. As for the coffee mug, it’s surely the most beautiful example of a drinking vessel known to man (we actually bought two: one for home, one for the office).

They are spectacular. A tribute to American (Chinese and Thai, actually) design and manufacturing ability.

But you’ll be pleased to know that we stopped short of buying the ‘Trump: Make America Great Again’ t-shirt. We’d already wasted 50 bucks on ridiculous tat. Another US$20 was a step too far.

Junior executives

In the world of Trump Hotels, a kids’ menu isn’t just a kids’ menu. Here, it’s a ‘Junior Executive Menu’, where junior executives (aka, kids) can get spaghetti and meatballs for US$20 and Mac & Cheese for US$9.

That’s among many other top-notch meals for kids…junior executives. Delicious.