What the Return of Global Stimulus Means For Markets in 2020

At the end of 2017, investors witnessed one of the steepest climbs in stock market history. But the expectation that economic growth would continue into 2018 didn’t fuel these new all-time highs. Instead, it was the massive injection of fiscal stimulus pumped into markets worldwide — especially into the Chinese financial system — at the start of 2016.

The aim was to recreate the Plaza Accord: a global, coordinated effort to devalue the U.S dollar, reigniting economic growth in response to a recent U.S manufacturing recession that took its toll on the global economy. The decision to enact loose monetary policy created an abundance of liquidity in the global financial system, and when paired with the corporate tax cuts from President Trump, cheap money ebbed and flowed throughout the world.

As 2018 began, stock markets looked unstoppable; their charts resembled a parabolic curve. But for investors who thought they made a fortune were about to experience one of the worst weeks in stock market history: During the first week of February 2018, out of nowhere, all gains from the previous quarter were wiped out as the S&P500 Index fell 12.1% and the Dow Jones Industrial Average fell 11.7%.

This particular crash, however, was in a league of its own due to the absence of an obvious catalyst. There was no “Lehman Moment” or a natural disaster like Fukushima that would explain a sudden market sell-off. To find out what really caused the crash you had to overlook market fundamentals and dive deep below the surface of the global monetary system. There you will have found liquidity transitioning from net-positive to net-negative for the first time in over a decade.

The actual cause was the initial shock of several monetary policy changes made by central banks around the world. For a start, the ECB (European Central Bank) began to buy fewer bonds that provided essential liquidity to key European financial institutions, and this paired with regular interest rate hikes from the Federal Reserve, caused credit markets to gradually become illiquid. This not only had a negative impact on U.S markets but global markets too as a rise in dollar strength made it expensive for emerging markets to repay their dollar-denominated debts. With all these policy decisions creating a strain on the availability of credit, a shift from loose liquidity to tight liquidity spelled disaster for markets addicted to cheap money.

As we move into 2020, what’s interesting are the similarities between now and the spring of 2016, and the potential for history to repeat itself.

In response to U.S manufacturing indicators falling to recessionary levels, central banks around the world have reopened the credit taps by cutting interest rates and reintroducing QE (quantitative easing). From October 5th, 2019, the Federal Reserve has been injecting billions of dollars into the financial system on a daily basis — which has been infamously coined “Not QE” by many financial journalists and commentators. The European Central Bank (ECB) has also joined the QE party by reintroducing its bond-buying program; a farewell gift from long-standing ECB chairman Mario Draghi.

With loose monetary policy set to continue in 2020, if central banks and governments can achieve a Plaza Accord 2.0, markets will have a decent start to 2020. Though, the numerous market corrections we saw recently demonstrate that risk is increasing every year and markets need more than investors’ liquidity to support them. It’s also becoming clear that stocks no longer trade on company fundamentals, valuations, price-earnings ratios, and earnings growth which had a major impact on investment decisions in the past but are now more irrelevant than ever.

In the modern financial world, liquidity is the new king of global stock market sentiment, and, at some point, markets will have to face the reversal of the risk parity trade that has caused an epic rise in stock prices over the past few months.

Judgment day in 2020 will be the central banks deciding — once again — to turn off the credit taps and tighten liquidity by becoming overconfident in the market’s ability to support itself without regular interventionism. When that day comes, anyone hoping to invest in the future will want to know the answer to the following question: If central banks are no longer supporting asset prices then who is?

Did Wall Street & The Fed Ignore A Potential Market Crash?

It’s business as usual after a significant liquidity panic rocked funding markets not seen since the Global Financial Crisis of 2008. Overnight Repo — the rate at which a central bank repurchases government securities from commercial banks — spiked 7% after remaining steady for over a decade.

A surge in repo rates shows shrinking confidence among dealers who — for some unknown reason — aren’t willing to lend, even though it’s in their best interests to do so. If the Federal Reserve offers an overnight rate of 1.8% but a commercial bank raises its bid to 10%, why wouldn’t you choose the latter option?: If you don’t believe you’ll be paid back the following day.

Markets expected tighter liquidity conditions during a period of seasonal bottlenecks as the US Treasury attempts to rebuild its cash balance over the coming months, but here’s the perplexity: despite everyone knowing a squeeze was imminent, the Federal Reserve still had to step in and provide liquidity.

During summer, China experienced similar difficulties resulting in the destabilization of sentiment within the economy and currency: Starting in May; Baoshang, Jinzhou, and Heng Feng Bank fell into administration which ended in the Chinese government bailing them out to limit any systemic risk, highlighting notable funding issues in the Asia Pacific region.

You’d expect Wall Street’s response during the U.S repo rate fiasco to be panic, but no, flash crashes in key funding markets are a bullish signal for equity & debt as bank stocks and risky high yield credit accelerated higher. Although most financial media did cover the story, you got the impression risks were being downplayed by the majority of pundits. Let’s be realistic, the repo rate spike is a big deal. It validates the contrarian view that without an abundance of liquidity pumping through the system it starts to fall apart. No credit supply equals no economic growth.

In the next few months, economists will be required to ask a controversial question: will the Fed contemplate another round of quantitative easing now they’ve been forced to inject billions of dollars back into the system until October 10th? Insiders are starting to wonder if it’ll be permanent; which is no longer a crazy idea but almost a reality based on historical periods of economic pressure. Disorder in repo markets signal to officials that the end of quantitative tightening and two rate cuts haven’t eased conditions at all, rocking Fed Chairman Powell’s assessment of policy as a “mid-cycle adjustment”.

Markets recognize that the Fed is dead wrong and by a big margin, so to restore confidence, short term rates must move significantly lower, fast. Being overly optimistic is dangerous in a time where caution should be taken; an art which Federal Reserve members never seem to master: Investors always think back to the subprime era where then-Chairman Ben Bernanke stated those famous two words, “subprime contained.” Hopefully, we aren’t going to see a “Lehman Moment” anytime soon but investors may think twice about moving into risky assets in the near future.

If funding markets gain stability once again the next dilemma facing officials is the need to restore risk appetite, despite lackluster consumer confidencea contraction in manufacturing, and a global slowdown. Can the Fed print their way out of a mess and in the process manage to convince the majority that this time really is different? It’s a hard sell for sure.

Technology Unicorns Expose the Malinvestment Bubble

Only a month ago, Adam Neumann, CEO of WeWork, had it all: a top job, luxury lifestyle, even a Gulfstream G650 private jet. But now, it’s all gone, including hopes of becoming the world’s first trillionaire.

As for WeWork, Softbank — it’s largest backer — led the board into damage control mode by ousting Neumann, followed shortly by his wife, Rebekah. Accusations of fraud and questions about SEC filings are circling the internet while the tech unicorn’s valuation continues to decline from a cool $47 billion to rumors of bankruptcy in just a six week period.

While the drama remains centric around one company, WeWork is just the poster child of a bubble in tech malinvestment: panic is spreading to other popular unicorns’ IPOs such as Peleton, a fitness tech company, as its stock fell 11% on opening day. These two are not alone having joined a long list of failed public offerings; Uber, Lyft, and lesser-known Smile Direct Club, to name a few, who are trading at significant discounts, proving valuations are outpacing reality.

According to Pitchbook, there are over 177 tech unicorns — private startups valued at more than a billion dollars — in the United States alone, implying there’s a lot more pain for investors who buy into the hype of a heightening IPO boom.

We’re soon to find out whether Millenial investors are holding the post-IPO bag as they come to realize they’ve been duped by Wall Street and salesmen masquerading as CEOs. Baby Boomers, on the other hand, may have experienced déjà vu, due to stark similarities between now and the Tech Bubble of 1999/2000; all-time highs in the stock market, record-high valuations, and CEOs pretending to be philanthropists that all fueled numerous malinvestments in tech companies for years.

During the Dotcom bubble, investors were left with a “hard” choice: buy a country or a tech company as some enterprises were valued higher than the GDP of New Zealand when in reality, all they owned was an office in New York and a dinky webpage.

Identifying we’re in a bubble isn’t rocket science and coincidentally it’s the main takeaway from WeWork’s rapid rise and fall; Having a view on the world economy as well as company fundamentals, perceiving companies for what they really are, and recognizing you’re in fear of missing out are the ultimate anti-bubble skills to master.

The problem with valuations is the dislocation between macro and micro drivers of companies, especially in tech: everyone becomes overly excited at the end of the business cycle — which we’re in right now — when bubbles begin to blow up. For earnings to keep rising, economic growth needs to be in great shape, but it’s not, despite what we hear from officials and the number of publicly listed tech companies reporting negative earnings guidance is the highest since, well, ever! How is it possible for valuations to keep rising when earnings are negative year-on-year? That’s bordering on madness. Hopium, maybe? It’s the reason we’re seeing disaster IPO after disaster IPO: growth is slowing at a rapid pace and the big boys — institutional investors — know the party is over.

Not only is it important to understand where we are in the business cycle but circumventing the guise of fake glamour and philanthropy is a must for anyone thinking of investing in a unicorn: you’ll recognize the difference between an Amazon and an Enron immediately: Technology, for a start, has to be innovative, that’s what makes a company, a tech company.

If your business utilizes technology, that doesn’t necessarily mean you’re a tech company.

Tech unicorns naturally inherit the highest valuations, therefore, claiming your company is one when it’s not, is a risky move. Taking on a fake moniker always results in your company becoming a victim of an overcooked market, as demonstrated by tech during the Dotcom bubble and banks during the Subprime bubble.

Ask yourself, does Peleton sound like the next gadget that’ll carry us forward into a new age of discovery? Of course not, it’s an exercise bike with a flatscreen TV attached, valued at $8.1 billion. And WeWork? It’s a real estate leasing company that’s yet to make gains; pure and simple. For contrast, it’s their competitors that produce a profit, which, on paper, would be a much better investment.

Do our anti-bubble indicators suggest we’re in the middle of another tech wreck today? Yes. Absolutely. Our indicators are screaming, “recession,” loud and clear. The warning signs are visible for everyone to see. If so, what’s the best course of action?

Avoid temptation. Fade the FOMO in hot “technology” stocks, yet to prove they are in fact, that. Insiders will do everything and anything to sell their stake to unsuspecting bagholders even if that’s by creating a botched IPO.

You’ll be buying high and selling low.

To Combat Wealth Inequality, We Need to Stop Share Buybacks


When it comes to profit, everyone can agree there are two kinds of greed: The positive kind allows businesses to create productivity and prosperity in society while the opposite hurts people during that process.

Manipulating a company’s stock then selling at a higher price for personal gain isn’t just negative greed, it’s against the law. But regardless of illegality, CEOs have the power to do so via share buybacks.

By purchasing shares in the open market, any company can acquire its stock, creating a reduced amount for investors to trade. Demand increases over supply, sending the stock price higher. And due to the lower net number of shares available, the company’s EPS (earnings per share) increases as if by magic, meaning they can legally and publicly cook the books, creating an illusion of growth.

You might wonder why Apple’s stock price keeps rising, despite recession fears, negative earnings growth, and slowing semiconductor sales. It’s all about buybacks. They are the mothership of markets.

But, to even fathom how they became a thing, we need to go back to the 80s.

Until 1982, share buybacks were illegal and classed as insider trading by the Securities & Exchange Commission to penalize individuals for manipulating stock prices. That is, until ex-President Ronald Reagen, feeling pressured by Wall Street, decided to legalize them.

Over the next few decades, nobody made a fuss. There was no need for them. But in 2016, that changed: corporate tax breaks were introduced by President Trump and all of a sudden, corporations had a lot of spare cash to spend.

Coincidentally, corporate profits peaked around the same time, so making up for the fact struggling companies had, and still have, little to no earnings growth, they spent their spare change on buybacks destroying shareholder value and keeping the company’s newfound wealth out of workers’ pockets.

Corporations should be using their tax breaks to pay shareholders via dividends and reward employees.

Instead, Wall Street & CEOs, under the watchful eye of the government, have knowingly or unknowingly inflated a precarious bubble from which only they gain, transforming the stock market into a temporary Ponzi scheme fueled by corporate greed.

Fearing a substantial correction in stock prices due to late-cycle indicators deteriorating, 159 CEOs left their roles in August 2019 alone, surpassing the highest rate in more than a decade. Insiders know when business turns sour, easily identifying the perfect time to get out, but what about working & middle-class shareholders who, according to FRED, own almost 50% of corporate equities? When the “share buyback bubble” bursts, they are going to be the ones left holding the bag.

Not only is the bubble concerning but also the increasing wealth divide that comes with it. The latest figures are scary, to say the least, and it’s set to worsen as we move into 2020.

Workers are taking a stand within companies such as General Motors, who are currently entering their 4th straight week of strikes over wage disputes. Coincidentally, “corporate profits” at GM are at all-time highs, but employee demands still haven’t been met. This situation is just one of many occurring in America and across the world today as workers are struggling to get by while shareholders receive unrealized profits, soon to be realized losses.

Asset bubbles continue to repress young & low-income investors as the bottom 50% own only 0.8% of the stock market, which is no surprise, considering the appreciation of asset prices with stocks and housing being the main culprits. How can a college undergrad buy even one share in popular companies such as Amazon & Netflix when their stock prices are grossly overvalued at $1,739.65, $272.79 respectively? Hopefully, they don’t believe the hype that tech stocks can continue to rise indefinitely.

Although a blanket ban on buybacks is a radical idea, both sides of the political spectrum get something out of it. In this scenario, employees receive greater rewards for their efforts from the cash used to finance buybacks: a pay rise, increase benefits, etc., while a dishonest buyer and seller no longer influence the stock market’s price discovery mechanism. Free-market advocates can call this a win.

And let’s not forgot share buybacks are part of a bigger problem that exists today: big business and government are still in cahoots. Popular movements like Occupy Wall Street that sought to limit this type of corruption have been ineffective, not because their aim isn’t achievable, it’s just improbable.

With most politicians invested in large-cap companies who operate the biggest buyback programs in the stock market, it’s hard to imagine trying to get a ban through Congress. If you proposed this, take a wild guess on the type of response you’d receive — if any.

You’d be lucky to get a reply.

How Markets Rallied On Fake News

If you had to take a guess of how Trump measures his success, you’d likely choose the performance of the U.S stock market. As of now, POTUS is sitting comfortably with the S&P500 near all-time highs. But to anyone following the business news, they know trading over the past year hasn’t been plain sailing but a volatile ride.

Sentiment of newsflow shifts rapidly from positive to negative within hours, sometimes minutes. The “markets rally on trade war optimism,” headline published by mainstream financial media yields over 17,300,000 results on Google, followed shortly by its nemesis, “trade war optimism fades as stocks fall.”

At the same time, Trump and the Chinese have figured out a way to reduce the pain of declining sentiment in both economies. By publicly releasing any positive — but totally misleading or fake — news, it causes panic buying in the stock market. But humans aren’t going to fall for the same “pump and dump” strategy over and over again. They aren’t the one’s trading. The actual buyers are computer algorithms programmed to react to news-based events.

If you went back in time and told any famous market guru, “the President’s social media account and algorithms drive market sentiment,” they’d laugh at you profusely. Yet the machines fall for the same trick every time. Any period of substantial decline is met by the Plunge Protection Team stepping in, pumping stock prices.

As news of potential impeachment keeps spreading like a wildfire, it’s puzzling why nobody brings up the fact this happens in the stock market every day. According to the Security Exchange Commission’s website, it appears the Trump administration is engaging in acts of market manipulation on a daily basis:

“Intentional conduct designed to deceive investors by controlling or artificially affecting the market for a security.”

Now that sounds familiar.

While the narrative of a potential trade agreement stays in motion from both sides, the stock market remains bullish, thanks to algos trading stocks on the buy-side until they’re programmed to do differently. They are concealing the harsh truth for Trump: he knows deep down there’s no hope of a deal.

Traders will just have to get used to the current state of affairs as Xi Jinping and the Chinese Communist Party employ a “sit and wait” policy, choosing to delay their plans for Belt & Road, just so they outlast the current U.S President and his policies. It wouldn’t be in their best interest to contemplate any kind of deal until he’s out of office. They’ll keep talking, but only that.

China’s priorities are more in line with Democrat leaders who are in favor of a more globalist order, therefore, it makes sense for Xi to wait till after the 2020 U.S election before hinting at any kind of agreement with Trump. One thing is for sure: they won’t allow a populist U.S President to undo all the progress they’ve made over the past few decades.

And that’s exactly what a trade deal with the U.S will do.

Why You Shouldn’t Keep Your Money in the Bank

A close friend once asked me why I don’t keep a single cent in the bank. I replied, “It’s simple. If the inflation rate is 1.7% and my bank pays me 0.01% interest, I’m losing 1.69% in purchasing power every year.”

He gave me a puzzled look. Unfortunately, my friend was unaware of the negative real inflation rate, interest minus inflation, that’s causing the value of his savings to decay over time. Though he wasn’t alone: surprisingly, I asked around and the majority of people had no idea.

So to expose how damaging a negative real rate is on your savings, let’s start with a $10,000 deposit that earns 0.01% interest. The balance increases over time, but your purchasing power — the ability to buy real, tangible assets — decreases by 1.69% each year. It’s unpleasant to know every dollar you save now will depreciate by more than half over your lifetime. During retirement, you’ll want to spend the money you’ve saved but whether it’s a new car, house, or jacuzzi, the price will have increased dramatically.

Savings accounts offered by retail banks are a great illustrator of how our purchasing power is under threat. They wouldn’t dare mention the negative real rate because you wouldn’t think of opening an account. On top of the fees and inflation, you have to increase your balance by around 2% a year just to break even.

It comes as no surprise, then, that most of us acknowledge we’re in a financially repressive era. But it isn’t just a western world phenomenon: it’s global.

For savers worldwide, this is the reality.

  • U.S Chase Bank Deposits
    0.01% Interest Rate — 1.70% Inflation Rate =
    -1.69% loss of purchasing power per year
    $50,000 becomes $21,323.32 in Year 50
  • U.K Natwest Bank Deposits
    0.25% Interest Rate — 1.70% Inflation Rate =
    -1.45% loss of purchasing power per year
    £50,000 becomes £23,604.02 in Year 50
  • Bank of Japan Deposits 
    -0.1% Interest Rate — Inflation Rate 0.5% =
    -0.6% loss of purchasing power per year
    ¥100,000 becomes ¥37,007 in Year 50
  • Westpac Australia Bank Deposits
    0.15% Interest Rate — 1.90% Inflation Rate =
    -1.75% loss of purchasing power per year
    AUD$50,000 becomes AUD$20,682.26 in Year 50

With interest rates artificially low and inflation rampant, relying on banks is no longer a viable retirement strategy. Everyone’s on a timer, and it’s a race to zero. So in this kind of environment, what should you be doing?

Know your options and make a choice:

  • Beat inflation by making 2% or more than last year.
  • Spend your savings before they depreciate.
  • Do nothing and let your savings depreciate.

Although I’ve ranked those in preferred order, the choice you make is indicative of your attitude to life. You’ll break free in one way or another, having made the remarkable decision to invest in yourself.

It’s down to you.

Everyone has various circumstances, outlooks, and views, while the world of money management is an unpredictable journey of danger and discovery but by understanding the environment you’re operating in, you’ll have a great headstart.

Central banks and governments are telling you loud and clear, “spend your money, or we’ll take it away slowly but surely.” The negative rate regime is financial repression in a nutshell and will cease to change as a monetary revolution is nowhere in sight.

Yet there are a million ways to grow your net worth by 2% or more a year; building a business, generating other streams of income, and investing are just a few great examples.

Depositing your savings in a bank, however, isn’t one.

How to Trade Out of Losing Investments

Knowing how irrational markets are can get you out of tough situations

Photo by Austin Distel

We’ve all done it: becoming way too attached to an investment or trade that just isn’t working. No matter what we do, we can’t bring ourselves to press sell in our brokerage accounts.

Instead, we average down until finally realizing we were wrong, but by then, it’s too late. The stock’s down 40% since last fall, and the company’s outlook doesn’t seem as bright as the analysts on television predicted.

But this behavior is quite normal. We are human. And the reason why we allow losses to run is our emotions. Whether it’s because we’ve done hours of research, can’t bear to lose money or just like gambling, humans are programmed to take small profits and heavy losses.

Though your mind is telling you a lot will go right, it blinds you from the harsh truth about markets: a lot can, and will, go wrong.

The late polymath and mathematician Benoit Mandelbrot exposed this in his book, The Misbehavior of Markets, highlighting the challenge you face when trying to make a profit in financial markets: “In theory, people have the same investment goals and the same time-horizon, so given the same information, they would make the same decisions.” He adds, “but patently people are not alike — even if differences in wealth are disregarded.”

In reality, the market and its participants are incredibly diverse in almost every regard. Some investors are compassionate while others are competitive, and some are complacent while others have strong convictions.

“Some investors buy and hold stocks for twenty years for a pension fund; others flip stocks daily speculating on the Internet. Some are “value” investors who look for stocks in good companies temporarily out of fashion and others are “growth” investors who try to catch a ride on rising rockets.”

— Benoit Mandlebrot

Knowing this, being able to ditch bad investments requires you to acknowledge two popular, false assumptions: people are rational, and they think and want the same thing as you.

If you add the sheer complexity of human psychology to the number of participants trading an asset, it’s clear that being right, even 50% of the time, is a tall order. For example, the most traded stock on the Nasdaq Exchange is Advanced Micro Devices, ticker $AMD, with an average daily share volume of 57.95 million. That’s 57.95 million potential reasons why you may end up losing money.

If that doesn’t convince you that things can go wrong more than right, it helps to think about the unsuccessful investments you’ve made over your lifetime.

Here are some common cases:

  • Research leads you to believe Microsoft’s stock will gain 25% or higher over the summer, but at the same time, the rest of the market decides — for any reason — to sell and the stock falls 25% over the same period.
  • You might have day traded the S&P500 to profit from a positive Trump trade tweet, but then he backtracks and decides to increase tariffs on China.
  • You were bullish on the stock market going into 2008. That’s a 60 percent drawdown in six months!

Clearly, these ideas didn’t go to plan. It happens to everyone, we can’t get all our trades right. It’s never been done before, and it never will. Yet admitting you were incorrect and limiting losses is a difficult skill to master.

Within the retail trading industry, statistics show non-institutional investors are way more likely to lose than make money in the current economic climate. In Brazil, for example, it was reported that 97% of day traders lost money. And if you visit any popular brokerage platform, you’ll see a regulatory message appear in the top banner: “70–90% of our customers lose money.”

Never think you’re alone in your failures. Looking back at the history of my own investing career, although remaining profitable, I’ve got about 45% of my investments right over time. When I’m wrong, I accept it and trade out before getting carried away.

Taking everything into account, succeeding in investing looks somewhat of a challenge, to say the least. But now if an investment or trade starts to go against you, you’ll be able to say, “maybe I got it wrong this time,” and cut your losses with conviction knowing there are a million or more reasons why.

The Smart Way To Use a Credit Card

In the digital age where methods of transacting become easier every year, there’s no obvious catalyst preventing us from becoming a full-blown, cashless society. Consequently, the temptation to increase spending habits has never been greater. By using your phone, tablet, or credit card, you can instantly pay for a spice pumpkin latté at your local coffee shop, followed by your favorite magazine, and that’s even before reaching the office.

While the average American is $8,000 in debt, consumer spending continues to rise, ballooning to record levels in 2019. However, this isn’t going to change any time soon as new research indicates we’re not only spending money on “stuff” but experiences too. A recent study by Harris Poll showed that more than 8 in 10 millennials (82%) participated in a variety of live experiences in the past year. But this doesn’t mean we are going to abandon materialism in the near future. Instead, it creates an illusion of choice: Not spending isn’t an option anymore. Consumers will prioritize one of the two: experiencesorstuff.

It’s no surprise, then, that credit card companies — the biggest financiers of consumer spending — are reporting record profits this year. They are enabling a dark premise to spread throughout society: the belief that you can avoid hard work and borrow money to achieve happiness.

But financing pleasure through debt only leads to a temporary high and the comedown is having to deal with the mental stress of what you owe. In the U.K, studies show that 50% of adults who are struggling with debt, also have a mental health issue. It’s becoming clear to most that taking on liabilities to fund lifestyle habits increases the likelihood that you’ll experience setbacks later in life. Spiraling into indebtedness starts with credit cards. Then you go down a rabbit hole. Feeling dejected, you accumulate more and more liabilities, funding experiences and luxury items in an attempt to feel better. Until you realize you have to pay off the previous fix— it’s a vicious cycle.

So if loading up on debt via credit cards isn’t going to improve your life in the long run, how could you possibly benefit by using one?

Money-savvy individuals have discovered a niche in credit card companies’ business models: ironically, they reward customers who embrace the principle of sound money. It’s not a loophole or an elaborate hack. It’s simple: they only use a credit card when it’s possible to pay the debt off upfront.

The smart way to use a credit card is to use it like a debit card — with no overdraft.

If you’re able to pay off the balance in full every month, there’s no reason to transact using your current account. Instead, credit card companies allow you to set up a monthly direct debit and by directly transferring the amount of money spent, you don’t owe a single penny of interest. Except by doing this, you reap several rewards in the process.

Irresponsible lending habits allow consumers who are sensible with their spending to benefit from card companies’ reward schemes. Most companies offer a concierge, luxury consumer goods, and holidays for zero cost. Over your lifetime, while living within your means, your reward points could earn things like flatscreen TVs, first-class lounge access, first-class flights, and holidays — all free of charge. But it’s only free if you aren’t spending more than you own.

On top of that, by financing your purchases with credit, you maintain free cash flow: a fancy way of saying, “I have the cash to buy things right now but I want to maintain liquidity for, say, an emergency.”

If you have $3,000 available in your current account and you want to buy a MacBook Pro for $2,500. You have two options: buy the laptop outright or on finance for 0% interest over 12 months. Although technically the latter option means you are taking on debt, subjectively, your liability becomes an asset. Instead of instantly removing $2,500 of your liquidity, you’re only giving up $125 each month. Rather than the original $500 left over after a full purchase, you now have $2,875, then $2,750 the next month, and so on.

But because you have the money upfront it’s an asset and not a liability knowing you can pay it off, in full, any time you want. The extra cash flow you’ve gained could mean a lot when things go wrong elsewhere in life.

A few months after taking advantage of credit card companies you start to get the impression they don’t like you — for obvious reasons. The minority of people who ignore temptation definitely aren’t the card companies’ favorite customers.

But they wouldn’t just kick you off their platform straight away. Instead, they try to tempt customers who are living within their means to make extravagant purchases by increasing the amount of credit available to borrow. “We’ve increased your line of credit” is code for “If we can’t turn you into a slave on a $50,000 credit limit, we’ll try a $250,000 limit.” That’s how they work. The conflict of interest is clear.

Knowing all this, should you feel remorse about receiving a free lunch from a company exploiting those who are vulnerable? Not at all. They think you’re irresponsible and they rely on that to make money. They know it’s happening, and will keep happening until the credit system is replaced by something monetarily sound.

As a debt-free human, you’ll start to appreciate life a lot more. Becoming and staying financially free requires sacrifice; more for some than others. If you are deep in debt, don’t make it worse. Be prepared to downgrade and drop everything and anything; your status, fancy apartment, but most of all your pride. Life is a lot easier and fulfilling when you’re living it debt-free. You are able to focus on the important things without the burden of liabilities hanging over your shoulders.

If you’re constantly tempted to live beyond your means, there’s a simple solution: Remember this quote from the People’s President, Andrew Jackson: “When you get in debt you become a slave.” And that’s exactly what happens. It’s an endless conveyor belt of payments to a subservient.

Would you rather become a slave to the debt industry or exploit their exploitative capitalism? Now that’s an easy decision to make.

How to Invest For an Apocalypse

Credit: Comfreak

How to Invest For an Apocalypse

An introduction to armageddon-style investing

Since 2011, Alex Mason has been planning for an apocalypse. By joining the “Doomsday Prepper” craze the 17-year-old has mastered the art of survival, teaching himself how to fish, hunt with a crossbow, and stockpile resources. Despite the obvious backlash from his friends and family he continues to prepare for a doomsday scenario.

Meanwhile, the ultra-wealthy are also taking precautions but without all the hassle. Instead of confronting the harsh reality of a post-apocalypse world they are eager to obtain one of 573 billionaire bunkers: luxury underground accommodation designed to shield against anything Mother Nature throws at you.

But for those of us who don’t have time to learn survival skills — or can’t afford a luxury bunker — how do we prepare for what author Richard Goswiller describes in his book, Revelation, as “an unveiling or unfolding of things not previously known?” Whether the next apocalypse is a depression, a rapture, or a nuclear war, there are a few ways to prepare ourselves for the day of reckoning while also benefiting our normal day to day lives.


During the Q&A of an investment conference I attended last year, speakers were asked the following question: “If you were given $1,000, what would you invest in?”

While most recommended particular stocks, bonds, and real estate, one man gave an answer nobody was expecting: tinned food. At first, the audience chuckled under their breath, but their amusement turned into astonishment when they heard his rationale: “It’s currently the most undervalued asset in human history.”

With a quick Google search showing tinned food selling at a rate of roughly $150 per 60,000 calories, right now, it’s a bargain to invest in your survival. This makes sense when everyone is expecting a brighterfuture, so it’s cheap to protect yourself against certain risks, no matter how absurd or unlikely, turning the famous “buy when there’s blood in the streets” quote by Baron Rothschild on its head.

But in preparation for an apocalypse, we don’t want to stock up solely due to the cost or durability. Having a food reserve is the ultimate protection against hyperinflation: a long and accelerating period of rising consumer prices. Most people in the western world have yet to experience such an event, though it happens more often than you think.

Venezuela is at the mercy of hyperinflation, where the price of coffee rose 285,614% in a year costing consumers over a whopping one million bolivares per cup. While convenience stores remain almost empty, there are even reports of citizens eating rodents to survive.

But developed economies are no stranger to disaster either with the textbook example being the Weimar Republic. In 1923, to pay off their debts during the First World War, the German government suspended the exchange of the Papiermark into gold. In the coming months, the German central bank, Reichsbank, inflated the money supply tenfold to try and pay off the ever-increasing debt. But this caused a steep devaluation causing the currency to lose almost all its value. Just before the introduction of the succeeding German currency, the Reichsmark, you could exchange 4,200,000,000,000 Papiermarks for 1 U.S dollar — what a bargain.

Now imagine hyperinflation spreads to your economy. While everybody else is busy spending millions — if not billions — on food with worthless paper currency, your once-crazy tinned food purchase turns out to be the best investment you’ve ever made. In an economy in freefall, a bunker full of the stuff becomes a goldmine. You’ll either consume it to stay alive when times are tough or sell it for a tidy profit — providing there’s anyone to sell too.

Though if you hate the taste of Spam and favor fresh food, acquiring an allotment is a better approach to counteract a monumental surge in prices. You’ll have the freedom to grow fruit, vegetables, and other plants without having to fret about Walmart hiking food prices 10,000% overnight in response to a hyperinflation disaster. But when chaos arrives, remember to harvest your crop before someone else does it for you.

Preserving your capital during an apocalypse presents many challenges if you aren’t holding the right assets. Though you don’t need to worry about financial crises because, first, an apocalypse would spell the end of the modern monetary system, and second, it’s underway already. The U.S Dollar is the preferred global medium of exchange due to its reserve currency status but as is starts to lose dominance and value, the Greenback is heading in the same direction as every other fiat currency in history. Since 1913, it has lost over 97.5% of its value due to inflation, and with prominent world powers like the Chinese and the Russians making a consolidated effort to decouple from its hegemony, the U.S dollar is a ticking time bomb.

It’s scary but useful to know that throughout history all fiat currencies collapse, so there’s no harm in protecting yourself against an inevitable devaluation. Instead, we want a reliable store of value for our hard-earned capital, and if there’s one asset class that’s stood the test of time, it’s precious metals: gold, silver, platinum, and palladium — to name a few.

Over the past century, as we’ve moved into an era of debt and confidence-backed currencies, precious metals continue to flourish in an environment of loose monetary policy. Demand has skyrocketed, forcing the financial industry into action. As a result, there are many ways to buy, sell, and transact precious metals: metal-backed Exchange Traded Funds (ETFs), metal-backed bank accounts, and metal-backed cryptocurrencies. When the apocalypse hits, the problem is they only mirror the price of metals. Their digital infrastructure will be wiped out and you’ll have no liquidity; nothing physical to trade in your possession. There will be no market, bank, or exchange.

Without a currency and digital means of transacting, bartering will become the norm as the only way to buy and sell anything will be through physical means. That’s why physical assets, with real, intrinsic value are the only means of exchange during tough times.

But to keep those assets safe, you’ll need more security than the storm cellar Dorothy uses in the opening scene of The Wicked Wizard of Oz. Instead, it’s time to build a personal Fort Knox: a place to store prized possessions, capital, and reserves.

If you’re lucky enough to join the billionaires club in a luxury underground bunker then go for it. Still, for the average citizen, the smallest size bomb shelter will set you back $37,000 — and that’s without ongoing costs. Of course, the cheaper alternative is to board up your windows and doors, pray, and hope for the best. But if Hollywood’s apocalyptic genre of movies is anything to go by, for you, this doesn’t bode well. It’s clear that despite preserving food and capital being somewhat affordable, finding a place to preserve those assets is the real expense when preparing for an apocalypse.

As everybody on your street starts to notice the silo in your front yard and the food reserves in your garage, prepare to face your critics. Exposing yourself as an ultra-contrarian means you’re perceived as a crazy person similar to the characters you see in the movies, the Charlie Frosts, the Russell CassesBut never mind what your critics say. You’ve got the supplies, capital, and shelter you need to have a better chance of surviving the next apocalypse.


Now all you have to do is play a waiting game, yet it isn’t a waiting game: it’s a game of hope. Though the subject I’m writing about is naturally pessimistic, I am optimistic about the future. I hope we survive the next apocalypse whether it’s a nuclear war, a financial meltdown, or an asteroid collision — like the Chicxulub. But, ultimately, we also rebuild and learn from our previous mistakes.

Being preemptive by avoiding reactionary thought helps us prosper because risk happens slowly then all at once. So to have any chance of surviving for an apocalypse — and what’s to come after — we need to study our history. It prepares us for events that happen over and over again, but that nobody else sees coming. As the famous philosopher, Edmund Burke, once said, “Those who don’t know history are doomed to repeat it.”

By now it’s evident that apocalyptic investing isn’t investing: it’s more of an insurance policy protecting you from events most people don’t believe will happen. If an apocalypse does occur you’ll hit the jackpot, but you won’t be driving a flash car or sailing a luxury yacht. Sadly, there are no modern luxuries in a post-apocalyptic world.

Why the Entire World Is Heading For Negative Interest Rates

The threat of Japanification spreads across the globe

Credit: Jase Bloor

In January 2016, the Central Bank of Japan made a remarkable decision: for the first time, the Japanese economy would feel the effects of a negative interest rate. After decades of low productivity and commerce, the central bank had no other option after running out of ideas on how to create economic growth.

Ever since the 1980s, Japan’s economy remains in limbo due to an aging population. As the ratio of workers to retirees keeps decreasing, Japan has hit a breaking point and continues to experience stagflation with little to no improvement in GDP growth. A Goldilocks state: not too hot and not too cold.

Originating from The Lost Decade: a prolonged period of slow economic growth in the Japanese economy, “Japanification” is the latest phrase to describe the ongoing problem of stagnation we see across the world. As economies globally experience little to no prosperity under the current fiat monetary system, many are starting to undergo the process themselves.

Following Japan’s population peak in 2008, there are clear signs of Japanification in other parts of the world. Countries with low birth rates such as Sweden, Denmark, and Switzerland, are already following in the footsteps of Japan having introduced negative deposit rates in their interbank markets— the overnight lending market between banks.

If the global trend of Japanification continues, the next economy to experience its full effect is China with its population set to peak in 2029 — mainly due to the one-child policy launched by the Chinese government in the 1970s. And while the European Central Bank (ECB) is predicting Europe’s population will peak in 2044, the biggest economy in the world, the U.S, has the slowest rate of population growth since 1937 during the midst of the Great Depression — now that’s food for thought.

Recent political and monetary concerns around the world have exposed the fragility of economies with slowing population growth: Trade war tariffs, a crisis in money markets, and Brexit uncertainty caused the majority of central banks to stop raising interest rates and reverse the process trying to counteract any damage done.

As the most influential financial institution, The Federal Reserve, cuts rates from 2.5% to 1.75%, along with other major central banks like the Reserve Bank of Australia, clearly there’s something very wrong with the global financial system as it fails to stabilize in an environment of rising borrowing costs. Monetary stimulus is the screw missing from the global economic engine and without it, consumers — who have little to no savings — can’t borrow money on the cheap, causing the system to fall apart.

Therefore, central banks will do, in the words of Mario Draghi, “whatever it takes,” to maintain stability within the financial system even if that’s by introducing negative rates. Many central bankers around the globe are open to the idea with former Federal Reserve chair, Janet Yellenconsidering them in 2016, and recently the new head of the ECB, Christine Lagarde, saying, “in the absence of the unconventional monetary policy adopted by the ECB — including the introduction of negative interest rates — euro area citizens would be, overall, worse off.”

But while central bankers are hinting at the possibility of going or staying below zero, the consensus within the finance community is it’s unlikely to become part of central bank policy in major economies like the U.S, United Kingdom, and Australia. Jim Cramer, the Mad Money host, says, “It’s a sign of weakness,” and Wall Street veteran, Milton Ezrati, remarks, “Not any time soon,” showing distinct signs of a confidence bubble in central banks being able to save economies in the developed world without implementing negative rates.

But here’s the status quo: every major economy is echoing Japan’s issues: the declining demographics, the central bank stimulus, and the excessive printing of money — problems that aren’t going away any time soon.

As the entire world follows the same economic model and design, it’s almost a certainty that we’ll voluntarily or involuntarily embark on one of the riskiest monetary experiments of our time: a globally synchronized world of negative interest rates.