Habakkuk 1:5 Look among the nations, and see; wonder and be astounded. For I am doing a work in your days that you would not believe if told. -LORD God
Ecclesiastes 8:6 For there is a right time and procedure to every purpose, though a man’s misery weighs heavily upon him.
In the Business World, Love does not make the World go round, it is LIQUIDITY that makes the world go round. Without liquidity, the Business World slows. The quicker it is withdrawn, the quicker we head into Recession.
Between March 2020 and March 2022, the Treasury and The Federal Reserve added $10 Trillion. What do you think is going to happen? Do you think Inflation may appear? Well now the “Powers to be” are removing Liquidity at a startling rate.
Places like Sri Lanka, and Lebanon are encountering civil disruption because food and fuel cannot be purchased. Even the Swiss National Bank has received a cash infusion from the FED.
The Inverted Yield is rivaling Paul Volcker’s era and the Fed is not through yet. The cost of Capital has doubled or tripled.
I believe the Economy will follow Liquidity into a Recession.
Ezekiel 38:1-3 The word of the Lord came to me: “Son of man, set your face toward Gog, of the land of Magog, the chief prince of Meshech and Tubal, and prophesy against him and say, Thus says the Lord God: Behold, I am against you, O Gog, chief prince of Meshech and Tubal.
For evidence pointing to modern day Russia, see the link below.
Russia has an impressive military with Nuclear Weapons, but when it comes to Economic prowess, it is an Emerging Market! It has been only 20 years since Russia collapsed financially and it is still working through the economic disruption. Although blessed with huge Natural Resources, Russia is still very dependent on Foreign Capital to develop it’s mining, gas and oil fields. Foreign Capital is needed not only for developing the resources themselves, but the infrastructure to bring them to market. Global Markets dictate much of Russia’s income as the price of basic materials fluctuate with the Business Cycle. As one of the World’s leading oil producers, Russia has benefited from the recent run up in Oil prices which are expressed in US Dollars. Basic Materials are also expressed in US Dollars, but are very sensitive to demand dynamics; much, much more sensitive. Dollar dependency is a two edged sword for although the demand for the energy component is less elastic, the price can fluctuate wildly. The price of Natural Resources can plummet as the Global Slowdown intensifies; as with any Emerging Market repayment of Foreign Loans becomes more and more difficult.
The BRICs were the darling of the Investment Community. Now Brazil and India are struggling. China financed much of it’s Capital needs with internal financing through it’s Shadow Banking and while these loans are certainly at risk, they are less visible. Russia has done much better than many Emerging Market Nations, but Russia is still affected by a rising US Dollar and rising Global Interest Rates. The balance of Trade impacts the International repayments. A Global Slowdown is underway and many Emerging Markets are at risk of depleting Dollar Reserves and thus entering a Liquidity Crisis. Which leads to Turkey!
Commodity prices will fall crushing the Emerging Markets which will cause Turmoil throughout the World. Debts will not be paid and alliances will be stretched if not completely broken.
Turkey, along with Argentina and Brazil, is rapidly running out of Dollar Reserves. Turkey imports much more than it exports and as it’s currency declines, purchasing power falls dramatically. Turkey needs Cash to not only finance Government offices, public utilities, and to service domestic needs, but any recent Military adventures such as last year’s excursion into Iraq and just recently Syria. Everything needs to be financed. The Credit lines from Western Nations and the US come with restrictions which the Turkish Government seems to be unwilling to accept. Turkey is now in overtures to Russia and China to provide US Dollars to solve it’s Liquidity demands. Currently, Turkey is involved in operations with Russia in Syria; an operation that benefits both Geo-politically, but is adverse to Turkish Allies objectives. This becomes a very interesting puzzle!
Russia and China can forestall Turkey’s liquidity crisis for awhile; a few months, maybe a year. However, both are still Emerging Markets themselves and a prolonged Global downturn will inevitably affect any extension of Credit.
A Global Downturn has been evident for months. Demand for natural Resources and eventually Energy will fall, slowly at first then much more rapidly. Commodity prices will fall crushing the Emerging Markets which will cause Turmoil throughout the World. Debts will not be paid and alliances will be stretched if not completely broken. There is still time to prepare; payoff debt, build reserves, store things like food, water, and medicine. As quickly as possible, build a personal cash reserve held outside of financial institutions and as important, build a Financial Lifeboat of Cash Flowing assets.
Remember, the reason for Russia’s future invasion of Israel is economic. Russia will seek to take Israel’s resources.
Ezekiel 38:13 Sheba and Dedan and the merchants of Tarshish and all its leaders will say to you, ‘Have you come to seize spoil? Have you assembled your hosts to carry off plunder, to carry away silver and gold, to take away livestock and goods, to seize great spoil?’
Proverbs 1:5 A wise man will hear and increase in learning, and a man of understanding will acquire wise counsel…
From the lows in March of 2009 to the lofty levels of today, by any metric, the Stock Market has done extremely well. Hardly anyone caught the very bottom, but even those that came close have doubled or tripled their investment; very well done! Lucky Investors have ridden the S&P and The Dow up to 2582 and 23,517 respectively and the ride UP has been FUN! Please pay very close attention to this chart, the Other Side is a completely different World. The higher the Peak becomes, the steeper the Other Side! There is no Plateau!
In order to preserve the Gains, a Courageous decision MUST be made; when to EXIT! Greed dictates grabbing every extra dollar one can; Prudence cautions that it is not what you make, but what you keep that counts! The climb to the Peak is exhilarating, even intoxicating. The Fall is depressing. Unfortunately, typical Human fashion, the average Investor believes that the “Peak” will be recognized and they will escape in plenty of time to capture the Maximum gains. This “Time is Different” always becomes the Mantra! The brutal lessons of History teach that most Investors ride the wave up and then ride the wave down; this time the Fall may be devastating. The Central Banks of the World have exaggerated the Bubble with their Trillions of Dollars of Liquidity. The Federal Reserve has stated they will begin removing liquidity the 4th Quarter of 2017 at the rate of $10 Billion a month growing to $510 Billion withdrawn in 2018. The World Central Banks have pledged to reduce their liquidity injections from $2 Trillion annually to ZERO by April 2018.
Without Global Central Banks participation Risk will rise substantially. The Doctrine of Enough (or How Much do I Need?) prescribes taking the profits gained and moving to another Asset Class; reducing risk. Bonds have traditionally been the choice of risk adverse Investors. However, the Debt Binge of most Government Entities as well as many Corporate Entities make Bonds as risky or maybe even more so than Equities; this Asset Class should also be avoided. Precious Metals and the larger class of Real Assets and Commodities are just starting to bottom after years of decline; the process has not yet completed. They are at or near the lowest values in decades.
Recognizing the coming shift in Cycles is not easy. However, the basic industrial components such as Iron Ore, Copper, Lumber, Oil, and Aluminum will soon cycle off their bottoms. These are the components of Single Family homes which as the raw materials rise, house prices will also rise. Housing unlike Gold has a “Use Factor” of “Shelter” and is a necessary component of Life. Accumulating Single Family homes and providing “Shelter” by leasing them to families may not only transfer profits from an aging, riskier asset class to an emerging class, but also provide conservative, consistent, and monthly Income to weather an Economic Storm.
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Proverbs 1:5 A wise man will hear and increase in learning, and a man of understanding will acquire wise counsel…
