| By Bill Bonner, Chairman, Bonner & Partners BALTIMORE, MARYLAND – One company’s stock soared yesterday. Kawamoto, Japanese maker of face masks, was up some 24%. The rest of the market looked a little droopy. Stocks had caught the Wuhan bug, said commentators. The Dow ended the day down 454 points. And what next? Will stocks go up from here? Or keel over? We don’t know. Markets are unpredictable. But the Federal Reserve is not. If stocks go down, we know what the Fed will do… It will intervene to push them back up. That is, it will inflate, with ultra-low rates, repo madness, quantitative easing (QE), and “not QE” programs. That has been Fed policy since former chief Alan Greenspan first did the trick in 1987. In the years ahead, as it becomes more desperate to keep inflation going, it will probably try some new tricks, too, such as buying stocks directly, and “curve control,” where it attempts to set interest rates all along the yield curve. We know, too, that the Fed can’t sit still. Without more inflation, asset markets will deflate… and the economy will go into recession… forcing the Fed to inflate even more. It is what it is. Inflation is here to stay. And inflation is always and everywhere a political phenomenon. It is intentional, like a street mugging, designed to separate people from their money. So, today’s question: Who gets ripped off? Repo Madness We need to put on our thinking caps. Because the Fed’s repo madness program brings us into a bigger, bolder phase of larceny. Until last September, the Fed had at least been pretending to follow traditional central bank principles. Its 2009-2015 excesses, it said, were just emergency measures. It would “normalize,” it promised, as soon as conditions permitted. But then, without a cloud in the sky, the Fed began printing money – beaucoup money. FX Empire describes the new program: To simplify, there is too little cash and too many government bonds. Well, traders can thank President Trump who has increased significantly the fiscal deficit. As the Congressional Budget Office estimated last week, the federal deficit rose 12 percent in the first quarter of fiscal year 2020 compared to the same period last year. Larger deficit means more Treasuries coming into the market, putting an upward pressure on interest rates. In short, the Fed began acting like the central bank of a “sh*thole” country… printing the money to pay the nation’s bills. Who will be left holding the bag? | Recommended Link | | Do You Know About "Tech Royalty" Investing? Silicon Valley venture capital investors are going all-in on a brand new kind of tech investment we call "Tech Royalties." This is the exact kind of insider opportunity the general public usually never hears about. But this time is different… Because globetrotting tech guru Teeka Tiwari discovered "Tech Royalties" in 2018. And best of all, Teeka knows a way for regular folks to profit – before 99% of the investing public catches on. A top Silicon Valley VC recently said, "[Tech Royalties] will revolutionize our society the way the internet did more than twenty years ago. Smart investors stand to make 21 times their money over the next few years." The former CEO of Nasdaq called it, "The biggest opportunity we can think of over the next decade." And Apple co-founder Steve Wozniak calls it, "the next major IT revolution." The best part? You can get started with a small amount in this idea… Retire in a year… and collect $180,472… year after year. | | | -- | Best Bet In the crash of ’87, the Dow fell 22% to under 1,800. The best bet then was simply to buy the dip, hold, and let the Fed’s money-printing push up prices. The Dow rose 17 times from 1987 to 2020. In that phase, the Fed’s inflation shortchanged the 90% of the population that didn’t have substantial financial assets. The rich got richer. Relatively, everyone else got poorer… with the bottom half losing about 30% of the wealth they had in 1999, according to the feds’ own measures of inflation. And today? | Recommended Link | | Millionaire Trader Reveals “5 Minutes A Day” Retirement Blueprint Jeff Clark, the self-made multimillionaire, has helped people from all walks of life retire wealthy for the past 36 years… His plan is designed to get your retirement on the fast track with his unique strategy. What’s more… it’s a piece of cake. “With my strategy, you can take advantage of it with as little as a few minutes a day.” – Jeff Clark Do you know what it really takes to become a successful trader? | | | -- | Whip Inflation Now! Last week, visions of “Whip Inflation Now” and gas lines haunted our sleep… with a soundtrack of “Stayin’ Alive” and “You Light Up My Life” playing in the background. We wondered whether the coming decade might resemble the ’70s, when the Fake-Money Express first left the station. Let’s look at the two periods. And let’s see who got ripped off then… and who’ll get ripped off this time… Then: The ’70s followed a 20-year period of low interest rates. Now: Interest rates have generally been on a downtrend for 40 years. Then: The stock market had been rising since the end of WWII. The Dow hit an all-time high in 1968, over 950. Now: Stocks have been rising since 1980, with two major interruptions. In 2000, the dot-com bubble burst. In 2007, the real estate bubble burst. Each time, the Fed came to the market with more money (inflation). Then: Unemployment was low in 1970. Now: Ditto. Then: GDP growth had been strong since the war. Now: We are still in the longest business expansion in U.S. history. Then: The federal government had overspent in the 1960s… on its Great Society and War in Vietnam flimflams. Now: It has overspent on entitlements at home and the War on Terror abroad. Then: By the early ’70s, officials felt they could no longer continue with normal financial policies. They had made a mess of U.S. finances and couldn’t trust markets to sort it out. Normally, the U.S. government would honor its commitments to overseas governments, who held billions of U.S. dollars. They had enjoyed the right to exchange them for gold, at a fixed rate, since 1792, with only occasional interruptions during times of war. Instead, the feds pulled a switcheroo, introducing a new money that was not backed by gold. That act was viewed as a “technical” adjustment, not something ordinary citizens should worry about. Now: In August 2019, under pressure from Donald Trump, the Fed ceased normalizing interest rates. And on September 17, 2019, overnight interest rates spiked to 10% – a clear sign of too much borrowing and too little savings. The normal thing would have been to let buyers and sellers work it out. That’s what markets are for. Instead, the Fed stepped up its inflation, feeding new money into the short-term lending markets at the rate of about $60 billion a month. Then: Consumers got ripped off in the ’70s. On average, prices doubled. And overseas dollar-holders lost out, too, when they could no longer redeem their dollars at the old rate. But investors fared even worse. In nominal, new-money terms, stockholders ended the decade about where they started it. But if they tallied it in old, gold-backed, pre-1971 dollars, they lost 92% of their wealth. Bond investors didn’t fare much better. In gold-backed dollar terms, investors who bought 10-Year U.S. Treasury bonds lost 87% of their wealth. In short, bondholders, stockholders, and dollar-holders all ended up as bag holders. Now: Our guess is that the 2020s won’t turn out much different. Regards, Bill Like what you’re reading? Send your thoughts to feedback@bonnerandpartners.com. FEATURED READS College Used to Make Families Wealthier. That’s No Longer True.
Going to college used to be a surefire way to guarantee financial success. Today, the wealth gap between college graduates and non-college-educated adults is shrinking, likely because of rising education costs and mounting student loan debt… Spending on Washington Lobbying Rises to Nine-Year High
The Tax Cuts and Jobs Act, which Trump signed in 2017, may have changed public opinion on lobbying… and opened the door to more spending. That begs the question: Did Trump break his promise to “drain the swamp” for good? MAILBAG Dear Readers echo Bill’s financial concerns in “The Greatest Financial Train Wreck the World Has Ever Seen”… Our financial and national security problems have all stemmed from our obsession with the military/industrial complex, which President Eisenhower warned us about. Unless, and until we constrain this monster, we will not be safe militarily or financially. – Allen S. Investors, today, with their billions, are poorer than in the past when they only had millions, because their billions today can’t buy as much as their millions could in the past. That’s because production of goods and services has been overrun by production of money. The big train wreck, or demolition derby, has been “right around the corner” since 1970 (or 1971), or even earlier, I think. I’ve been hearing about it for at least 50 years. But, today, maybe it IS right around the corner, which will take down the whole world, not just the U.S. There can come a point where the thugs will, and must, by their own program, pull the guns out from under all the paper and start using them. Or, some other person or group will take action to get even on their terms. But I still think the U.S. can and might recover. But that doesn’t mean it will. I think we’ll know soon, very soon. – Mike K. Do America’s problems stem from an “obsession” with the military/industrial complex, as Allen says? Do you believe the U.S. can financially recover, as Mike does? Write us at feedback@bonnerandpartners.com. IN CASE YOU MISSED IT… How To Get 153 Shares In Jeff Brown's #1 “Timed Stock” (Expires tonight at 11:59 pm) What's worth $2,003 now… But could be worth $128,000 or more in the coming weeks? 153 shares in Jeff's #1 “Timed Stock.” And right now, you can get those 153 shares. And be a potential $128,000 richer in the coming weeks. But only if you act before tonight at 11:59 pm. Details here. 
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