The Black Swan Your Broker Won’t Tell You About

Posted on April 15, 2015 by The Phoenix

The US Dollar as we know it, derives its value based on where it trades against a basket of other currencies. Some 56% of this basket is comprised of Euros. Because of this, moves in the Dollar and the Euro tend to be closely correlated.

So, when the ECB cut interest rates to negative in June 2014, capital began to flow aggressively away from the EU and into the US Dollar. This in turn kicked off a strong US Dollar rally.

Which in turn began to implode the $9 trillion global US Dollar carry trade.

Globally, the world is awash in borrowed money… most of it in US Dollars. The US Dollar carry trade is north of $9 trillion… literally than the economies of Germany and Japan COMBINED.

When you BORROW in US Dollars you are effectively SHORTING the US Dollar. So when the US Dollar rallies… you have to cover your SHORT or you blow up.

Below is a chart showing the inverse US Dollar (meaning that when the Dollar strengthens, the black line falls) and the Euro (blue line). Note that the two move almost lockstep together:

This situation is not over. The US Dollar carry trade did not clean itself out in the space of six months. Again, there are over $9 trillion in borrowed Dollars floating around the financial system. If the US Dollar continues to strengthen at a bare minimum 50% of this will need to be unwound.

If you’re looking for actionable investment strategies to profit from the coming collapse, we highly recommend you take out a trial subscription to our paid premium investment newsletter Private Wealth Advisory.

Private Wealth Advisory is a WEEKLY investment newsletter that tells you what stocks to buy, and what stocks to avoid to insure you see consistent gains. Our track record is rock solid with recent positions closed out with gains of 26%, 29%, and 37%… all held for six months.

In fact, we just closed two new winners of 20% and 52% last week!!!

And we’ve only closed ONE loser in the last 7 months!

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The Fed is Twice As Leveraged As Lehman Was

Posted on April 21, 2015 by The Phoenix

The 2008 Crisis was caused by too much debt/ leverage, particularly in the form of illiquid derivatives (mortgage backed securities get the most attention, but the derivatives market was well over $800 trillion at the time of the crisis).

To combat the financial crisis, the Fed did three things:

1)   Cut rates to zero.

2)   Abandon accounting standards.

3)   Engage in Quantitative Easing/ QE.

None of these policies represented “solutions” to the crisis. In fact, you couldn’t even accurately argue that they represented “containment.” What the Fed did was permit the very cancerous securities that nearly imploded the Wall Street banks to spread beyond from the private sector onto the public’s balance sheet.

You cannot cure cancer by letting it spread from one area of the body to the next. You cannot solve a termite problem by letting the termites move somewhere else in a house. So how could one argue that you could solve a financial crisis by letting the problems spread elsewhere in the financial system?

Consider mere leverage levels. Going into the 2008 crisis, the investment banks sported leverage levels in the 30-40s. Lehman was leveraged at 31 to 1. Morgan Stanley was leveraged at 30 to 1. Merrill Lynch peaked out in the low 40s.

Today, the Fed’s has $57.6 billion in capital and $4. 4 TRILLION in assets. That represents a leverage level of 75 to 1.

The Fed will argue that this leverage does not matter because it can print money to increase its leverage levels. This is technically true, but doesn’t alter the fact that the Fed has backed itself into a corner by buying up over $3.5 trillion worth of stuff… which the Fed has no idea how to exit.

Indeed, we know that Janet Yellen was “somewhat concerned about exit strategies”back in 2009 when the Fed’s balance sheet was $2 trillion or so. Today it’s more than TWICE that. One wonders just how “concerned” she is today, with the Fed’s balance sheet larger in size than the GDP foremost developed countries.

Even more absurd is the Fed’s ongoing issue with interest rates. Never before in history has the Fed kept rates at zero for 5+ years. But then again, never before has the Fed’s real taskmasters, the TBTFs, been sitting on over $180 trillion in interest rate based derivatives.

Those who shrug off these issues are overlooking the fact that the treasury dept. has ordered survival kits for employees at the TBTFs… while the New York Fed, has been boosting its satellite office in Chicago in preparation for potential market dislocations when the inevitable interest rate hike hits.

Indeed, nothing exposes the fallacies of the Fed’s policies of the last five years like its horror at the prospect of raising rates even a little bit. Rates have been effectively zero for five years. Today, the Fed is so concerned about what even ONE rate hike would do that it is actively preparing for potential systemic risk.

A second round of the great crisis is coming. The Fed didn’t fix 2008.; it simply set the stage for something even worse.

Smart investors are preparing now.

If you’re looking for actionable investment strategies to profit from the coming collapse, we highly recommend you take out a trial subscription to our paid premium investment newsletter Private Wealth Advisory.

Private Wealth Advisory is a WEEKLY investment newsletter that tells you what stocks to buy, and what stocks to avoid to insure you see consistent gains. Our track record is rock solid with recent positions closed out with gains of 26%, 29%, and 37%… all held for six months.

In fact, we just closed two new winners of 20% and 52% last week!!!

And we’ve only closed ONE loser in the last 7 months!

You can try Private Wealth Advisory for 30 days (1 month) for just $0.98 cents

If you don’t like it… just drop us a line and you won’t be charged again. Everything you received during your 30 day trial (the reports, investment ideas, etc.) are yours to keep…

To take out a $0.98 trial subscription to Private Wealth Advisory…

Best Regards
Graham Summers
Phoenix Capital Researc