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What headline to write when the financial system changes before our eyes…

But there are questions that every one of us should be asking.

I bumped into a woman today while grocery shopping. Don’t worry, it was a light bump and she started it. She recognized me despite looking like I was on my way to the operating room and asked if it was OK to ask me about a few investment and economic questions.

I said, “sure, but my experience is that people are interested in brief, superficial answers to the deep structural variables that are driving social, economic and financial changes.”

The problem is, if you don’t at least have an inkling about these historic changes you have absolutely no chance of understanding what’s been happening, and more importantly, what’s going to happen – until it hits you right between the eyes financially.

So what does historic change look like anyway? Well, how about the central banks taking over private banking in some countries, or the break-up of some nations as regionalism grows at the subnational level?

The other big obstacle most people have to overcome is a tendency to politicize any discussion, which misses the whole point. For example, the US municipal and state pension crisis is coming whether Trump or Biden won. Whatever party you support or is in power will make no difference in the face of up to $277 trillion in global debt. The size of that global debt, including the $500 billion in provincial and federal deficit Canada is adding this year, has consequences regardless of your political preferences.

The Pivotal – Life Changing Question

The big question – make that the question of a lifetime – is how is it going to play out? What are the consequences of the massive debt build-up?

Getting that answer right will literally determine your investment success going forward, but also your standard of living.

How are governments going to handle debt of this magnitude? We’ve already seen the first answer and that is central banks will buy up the debt. Then the question becomes what does the financial world look like if they continue and what does it look like if they’re not successful in controlling those markets?

The second answer is more straightforward. Interest rates will go through the roof. Government finances will be destroyed. Private sector bankruptcies in some industries will overwhelm much of the banking sector and those people who have lots of debt will be in big trouble. It would also be massively deflationary with asset prices taking a huge dive.

Not a nice prospect, which is precisely why the central banks have pumped trillions of dollars into the credit markets to keep them functioning since mid September 2019. The pandemic just exacerbated the problem. Let me give you an example of how aggressive the central banks have been. Between March and the end of May, the US Federal Reserve bought about $2.3 trillion worth of government bonds and asset backed securities while promising to buy an unlimited amount of virtually every other kind of debt. In Canada, the central bank bought about $400 billion worth of government debt and mortgage backed securities while promising to buy a boatload of provincial and corporate bonds if needed.

I could give you other examples from around the world but you get the idea. And there’s no end in sight, so determining the consequences is key. What does the financial world look like and what are the implications for you personally as this program of creating trillions of dollars out of thin air continues?

Alternatively, let me share one example of a consequence that could make you a lot of money. About 18 months ago, without much company, I thought one of the major consequences of the massive debt build-up was that it could form the foundation of a new commodity bull market, which is why we kicked off last year’s World Outlook Financial Conference with a special section called, “The Coming Commodity Bull Market.”

What’s Next

I now feel even stronger about the 3 to 5 year prospects for commodities than I did last year. That’s mainly because, while we talked about the pandemic and Martin Armstrong warned about the panic selling that would hit stocks starting in the last week in February with a bottom coming on March 23rd, I never anticipated the unprecedented amount of money the Feds and other central banks would be willing to create – i.e. Unlimited.

(By the way, the Armstrong model’s call for a bottom on March 23rd – made months in advance – was amazing. He’ll be back at this year’s Conference in February and I have a lot of questions about stocks, gold, base metals, the US and Cdn dollars.)

One of the principal consequences of this level of money creation is that all paper currencies will be devalued against not just gold and silver but also base metals like copper, zinc, nickel. They’re all up quite bit since last year’s Outlook Conference – but I think commodities have got a lot further to go because of the massive proposed infrastructure spending and the renewal energy revolution. Both mean huge increases in demand for aluminum, copper, iron ore, copper, silver, nickel, cobalt, graphite etc. etc.

Let me share one question that you’ll hear at the 2021 Outlook Conference next month but I doubt you’ll hear anywhere else. And that is – will high “in demand” commodities like copper be seen as a better way to hedge against the debasement of paper currencies than gold…maybe even Bitcoin?

For the record, Mark Leibovit recommended Bitcoin at last year’s conference when it was $10,000 (now $34,000). Note: I didn’t buy any. I’m too old school – and now I’m just too old to take the risk of government intervention. I worry that governments won’t like anyone else honing in on their currency monopoly but we’ll see. My guess is that governments will start adding regulatory restrictions – like you must report your Bitcoin holdings three times a year – in order to diminish the attraction of crypto currencies. It’s obvious that this environment is all about more government control and that’s the major risk to crypto currencies.

Sorry, I’m digressing from the more important questions surrounding how do we protect ourselves in this kind of environment. For example, I think there’s a growing probability governments will mandate that pools of capital like the Canada Pension and other pensions are forced to buy Government bonds in order to finance spending.

Who knows for sure, but that’s my point. There’s a ton of uncertainty as we navigate through this period of historic change.

Our goal is straightforward. We want to protect you from the changes that are coming as well as profit from them. That’s why I am so pleased with the performance of our recommendations at last year’s Conference. The 2020 World Outlook Conference Small Cap Portfolio is up 27%. Pretty good, but that’s not nearly as good as the 2019 WOFC Small Cap Portfolio which is up 220%.

In the last two years 15 of the 16 recommendations are up double digits with the big winner – XPEL Inc. recommended at the 2019 Outlook at $5.10 – trades today at over $58.

Obviously, that’s spectacular but there are lots of other winners. At last year’s conference we went big into renewable energy with Nuveen ESG ETF up 50%, Investco Solar ETF up 103%, Investco Wind ETF up 210% and Ballard Power up to 207%. There are other big winners but you get the idea – it was a heck of a year. And I’m certainly not suggesting that kind of performance can be repeated, but at the same time, we put the odds in our favour by having speakers like Greg Weldon, BT Global’s Paul Beatty, Investment Strategist extraordinaire Dr James Thorne, and RAI Advisor’s Chief Strategist, Lance Roberts.

What A Surprise

In case you haven’t guessed by now, I want you to join us at this year’s Conference.

Maybe one of the best calls we made in the last year was when, sitting around in June, we all agreed there was no way we’d be filling a room with 1200 people for the 2021 World Outlook Financial Conference like other years. Wasn’t that tough to predict a second wave given November through March is called the flu season.

So this year’s conference is online. No travel, no parking, no wardrobe decisions and instant access to your fridge. And you won’t just be able to watch the Conference broadcast on February 5 and 6th but you’ll also be able to review every part of the conference for months afterwards. Plus we’re able to feature more analysts given there’s no room size restrictions or travel considerations.

I’m really looking forward to it. I am absolutely sincere when I say that I’d pay to hear the recommendations of any one of our analysts – let alone the whole group. I know what some of them get paid to privately consult for mutual funds, investment firms and pension funds – and I can say with 100% certainty that the access pass to the 2021 World Outlook Financial Conference is a heck of a deal.

But you decide. After decades of broadcasting I certainly understand that a lot of people aren’t interested in economics or even their personal finances, (too bad so many work in the media.) As the old saying goes – “change brings opportunity”, and it sure as heck helps to know what’s coming.
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I hope you and your family are doing as well as can be expected in what author, Christopher Kock describes as “the year of living dangerously.”

My sincere best wishes,

Mike

PS – The 2021 World Outlook Financial Conference starts broadcasting Friday afternoon Feb 5th and all day Saturday, Feb. 6th plus the on-demand video archive offers unlimited access immediately following the broadcast. Your access pass includes both options. To order and for other details CLICK HERE.

“A sane person would know China was lying.”

“By late February, Ottawa seemed to be taking the official reports from China at their word, stating often in its own internal risk assessments that the threat to Canada remained low. But inside the Public Health Agency of Canada (PHAC), rank-and-file doctors and epidemiologists were growing increasingly alarmed at how the department and the government were responding.

“The team was outraged,” one public-health scientist told a colleague in early April, in an internal e-mail obtained by The Globe and Mail, criticizing the lack of urgency shown by Canada’s response during January, February and early March. “We knew this was going to be around for a long time, and it’s serious.”

– Investigation by Grant Robertson, Globe and Mail 

What Investors Need To Know About The US Treasury Cyberattack

U.S. stocks are trading higher despite a successful cyberattack on the U.S. Treasury and the U.S. Commerce Department.

What Happened? On Monday morning, the Trump administration acknowledged there was a security breach at the Treasury.

“We can confirm there has been a breach in one of our bureaus. We have asked CISA and the FBI to investigate, and we cannot comment further at this time,” a White House spokesperson said.

Why It’s Important: President Donald Trump fired top U.S. cybersecurity official Christopher Krebs in November following the election. The hack involved the Microsoft Corporation Office 365 platform, according to Reuters.

Reuters reported the hackers are suspected to work for Russia and have reportedly been monitoring internal emails within the Treasury and Commerce departments. The Russian Embassy in Washington denied the country was involved in the attacks…CLICK for complete article

Holiday Spending Already Soaring Amid Pandemic

f Joe Biden is elected, “Carson City will become a ghost town and the Christmas season will be canceled,” U.S. President Donald Trump said earlier this month at a rally, but new retail sales figures and holiday spending estimates tell a different story.

There are obvious flaws in the president’s proclamation, starting with the fact that  if elected, Biden would not take office until January 20th, well after the Christmas season and more feasibly into the “gift return” season.

But the biggest flaw was this: It seems that nothing and no one can ruin the holiday season for Americans. Not a pandemic, millions of lost jobs, bankruptcies, a struggling economy, social distancing or even a lockdown can crack the holiday spirit. Or more importantly, it can’t ruin holiday spending, which is already breaking new records.

As retailers encourage customers to shift to online shopping in order to avoid crowds during the pandemic, online sales are set to reach $189 billion this holiday shopping season.

According to Adobe Analytics, that is an increase of 33% from last year’s holiday spending.

Black Friday online sales are set to reach ?$10 billion, up 39% from 2019, while Cyber Monday will hit  $12.7 billion, an increase of 35%, the report found.

“This year is unlike any in the past, and for the first time we are no longer referring to peak holiday sales as Cyber Week — it’s now Cyber Month,” the analysis said.

They also estimate that a fresh stimulus package from the government would increase the holiday online sales by another $11 billion.

With cases of COVID-19 rising across the country, medical experts have warned that coronavirus cases could spike if people travel out of town and celebrate indoors….CLICK for complete article

Banks Are Getting Rich On Pandemic Overdrafts

America’s big banks make more than $11 billion worth of overdraft and related fees every year, and 2020 could break even more records due to the uncertainty caused by the pandemic. They’re counting on customers being disorganized, strapped for cash–or both.

But now, those practices are coming under intensified scrutiny.

The Center for Responsible Lending (CRL) recently released a report concluding that the biggest banks, “engage in a number of abusive practices that combine to drain massive sums from their customers’ checking accounts”.

The bulk of those fees, according to CRL, are “shouldered by banks’ most vulnerable customers, often driving them out of the banking system altogether”.

Last year, the report found that JPMorgan Chase pocketed $2.1 billion in income from overdraft and insufficient funds fees, followed by Wells Fargo and Bank of America (BAC) with $1.7 billion and $1.6 billion, respectively. According to CRL, TD Bank’s overdraft fees represent about one-third of its non-interest income.

The banks typically charge overdraft fees when the customer overdraws on their checking account. Rather than allowing a debit card to be declined or a check to bounce, the bank will cover the difference and charge an overdraft fee, usually about $30 to $35. CLICK for complete article

Credit Card Debt Plummets Amid COVID

A painfully slow economic recovery and elevated unemployment, combined with an abrupt end to government aid and no new stimulus in sight has Americans cutwith the end of government’s aid, has caused Americans to significantly cut back on their borrowing.

According to the newest Federal Reserve figures, consumer borrowing unexpectedly fell in August as credit card balances declined for a sixth consecutive month.

Total credit card debt decreased by $7.2 billion in the month of August after an upwardly revised $14.7 billion gain in July. It also represents the first decline since a $12-billion plunge in May.

Compared with July, revolving debt fell by $9.4 billion in the category that covers credit cards, the sixth decline in that area starting with a $25.4-billion drop in March.

But auto and student loans have defied that gravity, with the combined category rising by $2.2 billion in August, its fourth gain after its first decline in April.

The $2.2 trillion distributed by the government under the CARES Act passed in March is already spent. A $600-a-week federal benefit expired more than two months ago and the sequel of government aid any time soon is now unlikely.

According to new research by a team of economists from four American and European universities, the majority of the money from the first stimulus was spent on rent and bill payments, with extra for food and personal care.

Earlier this week, President Donald Trump called off negotiations on another coronavirus relief package and rescheduled them for after the November election. CLICK for complete article