M-CS Metals Futures Markets Using Collars & Spreads

Performance November 2011 through November 2019

Recommended Starting Balance $50,000.00
Cumulative Net Profit
$467,832.64
Maximum Drawdown (32.76%)
($16,377.57)
Best Year 2016 +198.98% $99,429.09
Worst Year 2014 +39.37% $19,684.63
2005-2019 Average +115.75% $57,876.20
2019 +107.82%
$53,911.46

Performance is based on trading one $50,000 unit, never adding units and withdrawing all net profits annually. This program uses leverage, has a realistic risk factor of $30,000 USD per unit, if you are not in a position to comfortably assume this risk you should not participate in the program.

Risk Disclosure   Defining Account Risk

This program trades the major metals futures with the trend using  Collars and Spreads to define risk see this link for more on collars.

2) Primary Metals Futures Exchanges

2.01) Chicago Mercantile Exchange/Comex
2.02) London Metal Exchange

3) Markets Futures Traded

Analysis Pages Chart Trend
Gold Chart Opinion
Silver Chart Opinion
Platinum Chart Opinion
Copper Chart Opinion
Palladium Chart Opinion
All Metals Quotes Gold Versus Platinum S&P Gold Ratio
Metals News Past Hour News Past 24 Hours News Past Week

3) Metals Spreads

3.01) Platinum (PL) – Gold (GC) 20 year
3.02) PL–GC last 12 months
3.03) Understanding the Platinum Gold Spread (Video)

3.04) Gold GC) Silver (SI) Ratio 20 year
3.05) GC/SI last 12 months
3.06) Gold & Silver Ratio Spread (Video)

3.07) Palladium (PA) – Gold (GC) 20 year
3.08) PA – GC last 12 months

3.09) Gold (GC) Copper (HG) Ratio 20 year
3.10) GC/HG last 12 months using daily data

4) Educational Videos & Links

 

General Information on Future Contracts and Futures Options

4.01) Futures Educational Videos (60)
4.02) Futures Options Educational Videos (34)

Metals Educational Videos

4.03) How and Where Precious Metals Are Traded
4.04) Trading the Metals Markets
4.05) Fundamentals and Metal Futures
4.06) Understanding Supply and Demand: Precious Metals
4.07) Gold Futures Overview
4.08) Silver Futures Overview
4.08) Platinum Futures Overview
4.10) Understanding the Precious Metals Spot Spread
4.11) Understanding Futures Spreads
4.12) Understanding Intermarket Spreads: Platinum and Gold
4.13) Metals Intramarket spreads
4.14) Gold & Silver Ratio Spread
4.15) Understanding Intermarket Spreads: Platinum and Gold
4.16) Precious Metals Risk Management/Hedging and Ratios
4.17) What is the Precious Metals Delivery Process?
4.18) Introduction to Base Metals
4.19) Base Metals Supply and Demand
4.20) Supply and Demand: Ferrous Metals
4.21) What is Contango and Backwardation

5) Review Links

5.01) Fundamentals 1987, 2000, 2007 versus 2019
5.02) Total purchased by the Fed with created money
5.03) Emergency purchases of bank debt by the Federal Reserve
5.04) Median household income
5.05) Median home price
5.06) Mortgage debt
5.07) Median Rent
5.08) Groceries indexed
5.09) Health care
5.10) Gasoline indexed
5.11) Consumer price
5.12) Gross Domestic product
5.13) Tax receipts. median home, M1, gold, CPI
5.14) Federal debt to debt service cost
5.15) National debt
5
.16) US debt service cost
5.17) CPI relative to short term deposit rates (negative rates of return)
5.18) CPI relative to long term deposit rates
5.19) US bank borrowing cost to lending rate
5.20) CPI using pre 1980 & 1990 calculations.
5.21) BLS.GOV “official” CPI
5.22) US debt to GDP ratio at 103.74%
5.23) US debt has grown 5 times faster than personal income ratio
5.24) US debt +859.05% employed population +6.80%
5.26) US credit rating versus other countries
5.27) 20 Year Chart US dollar Index

6) Program Structure and Account Opening Procedure

6.01) Automated Trading Accounts (ATA)
6.02) The Fee Structure For This Program
6.03) Defining Overall Risk For Your Account

6.04) How Balances Are Guaranteed Plus or Minus Trading
6.05) Exchanges Traded

6.06) Brokerage Firms
6.07) How To Open An Account

If you have any questions  contact me

Regards,
Peter Knight Advisor

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Privacy Notice

Disclosure

Watch 2

1) S&P

Long hedged at 3125 , daily and weekly both up

ESZ19 Daily
ESZ19 Weekly

ESZ opinion
E Mini CME Quotes
E Mini CME Options
E Mini BC Options
S&P Analysis Page

liquidate Micro

2) Gold 

Short hedged at 1475 daily is down weekly is still up turning to down.

GCG20 Daily
GCG20 Weekly
GCG20 Opinion
Gold Quotes
Gold BC options
CME Options
Gold Analysis Page

Liquidate Micro

3) Energy

WTI CLF20
Opinion
WTI BC Options
CME Options

Brent CBJ20
Brent Futures

HOJ20 daily
Harbor Futures Quotes

RBJ20 daily
Gasoline Futures

NGJ 20 daily
Nat Gas Futures 

Positions

Long WTI CLF20  59.03 + – 1.00 paid 0.15 all in

Long 1 CBG20 short 1 CLG20  +5.16 , at 5.18 looking to increase, daily is up weekly is up, look to get out at 6.00 or better, stay long.

Long 1 RBF20 Short 1HOF20  in at -0.3082 at -0.3203 need it to 0.00, daily is up weekly is up, stay long.

Long 1 RBF20 Short 1 RBJ20 Long RBF20 1.6651 Short RBJ20 1.8253 in at -0.1602, at -0.1883 need it at 0.00, daily is has just turned down, weekly is up and clean, stay long.

Long 1 HOM20 Short 1 HOZ20 in at -0.0044, at  +0.0059 need it  +0.0100  daily is up weekly is up, stay long.

Long 1 HOM20 Short 1 HOJ20  Long HOM20  1.8909 short HOJ20 18909, in at -0.0192 looking for a move to 0.0000, daily is up,

Euros
Barchart quotes, all deliveries
Barchart options quotes
CME Euro Quotes
CME Fed Funds Quotes

Fed Funds
Barchart quotes, all deliveries
Fed Funds CME quotes
3 month Fed Funds chart, daily

Positions

Long 9 ZQJ20 short 15 GEZ20 in  0.1650 at –0.0200 need it at 0.20, 3 year low -0.0650, daily is down, weekly is turning short

Long 16 GEM20 short 16 GEH20  in 0.1515 at 0.115 need it at 17.00, -0.900 5 year low, daily is long, weekly is short, sell 12 GEM20, to start unwinding this leaves you long 16 GEM20, short 16 GEH20.

Long 4 GEH20 Short 4 ZQH20  in at -0.1450 need it to move to 0.00

Resting orders

GEM20-GEZ20  at -0.1150, 15 year low -0.01400 need it at 0.00, leave a resting price buying 4 GEM20 selling 4 GEZ20 at -0.1400. 

What has and continues to support U.S. Equity Markets

Market price action, the yield curve and rate expectations are all telling us the bear market on deck could equal or exceed 1987, 2000 and 2007.

Source

S&P price action 1987, 2000 & 2007 versus 2019

Source

Source

Source

Source

The yield curve 1987, 2000 & 2007 versus 2019.

1987, the curve didn’t invert until 1988 but it was a different world in 1987, 10 year AAA Treasuries were yielding over 9.00%, 3 month over 8.00%, reported inflation 3.58% and Treasuries had a real rate of return in excess of 4.42%, total Federal debt 2.34 trillion (5.20 trillion in 2019 USD).

Source

2000, The curve inverted in June, the bear market fully engaged in October, average Treasury yields were 6.43%, reported inflation 3.37%, AAA Treasuries were paying an average real rate of return of 3.06%, total Federal debt 5.62 trillion (8.27 trillion in 2019 USD)

Source

2007, The curve inverted in January 2007, the bear market engaged in October, average Treasury yields were 4.80%, reported inflation 1.93%, AAA rated Treasuries were paying an average real rate of return 2.15%, total Federal debt was 8.95 trillion (10.97 trillion in 2019 USD)

Source

2019, The curve inverted in January, current 10 year Treasury yield 1.83%, current reported inflation 1.71%, downgraded AA+ Treasuries have a pre tax real rate of return of 0.12%, with total Federal debt now exceeding 22.51 trillion.

Source

Rate expectations 1987, 2000 & 2007 versus 2019.

1987, 17 August, the S&P was trading at 335.40, 3+ trillion in interest rate derivatives were pricing in 1.60% in rate hikes.

13 October 1987, the S&P was trading at 314.52, -20.88, -6.22%, 3+ trillion derivatives was now pricing in 1.07% in rate hikes 0.53% less than August.

20 October 1987 (1 week latter) the S&P had sold off a total of 35.90%.

Source

2000, 25 January, the S&P was trading at 1,410.03, 5+ trillion in interest rate derivatives were pricing in 0.45% in rate hikes.

15 December 2000, the S&P was at 1,336.60, -73.70, -5.21%, the 5+ trillion in derivatives had gone from pricing in 0.45% in rate hikes to 0.59% in rate cuts.

October 2002 the S&P had sold off a total of 50.50% and didn’t see a significant new high until September 2013.

Source

2007, 12 June, the S&P was trading at 1,509.12, 9+ trillion in interest rate derivatives were pricing in a 0.1950% rate hike.

15th of November, the S&P was at 1,443.49, -65.63, -4.34%, the 9+ trillion in rate derivatives had gone from pricing in a 0.195% rate hike to 0.77% in rate cuts.

March 2009, the S&P had sold off a total of 57.70% and didn’t see a significant new high until September 2013.

Source

2018 to 2019, 5 October 2018, the S&P was at 2,909.65, 17+ trillion in rate derivatives were pricing in a 0.2550% rate hike.

6 December 2018, the S&P was at 2,696.15, -213.50, -7.33%, the 17+ trillion in derivatives had gone to pricing no rate hikes.

26 December 2108, the S&P was at 2,346.60, -563.05, -19.35%, the 17+ trillion had gone to pricing in 0.15% rate cut.

14 June 2019, the S&P was at 2,895.25, +548.65, +18.95%, the 17 trillion had gone to pricing in 0.79% in rate cuts.

28 October 2019 the S&P had rallied a total of 673.40 points to 3,020.00 +28.70%.

Either this was the shortest bear market in history or something in 2019 has fundamentally changed and in a very big way.

Source

Market price action and interest rates are telling us the S&P should be on it’s way to 2,000 not putting in a new high.

Source

What has and continues to support the market in 2019

In 1987, 2000 and 2007 AAA rated U.S. Treasuries qualified as a safe have alternative to quality stocks, they had a real rate of return of between 1.00% to nearly 5.00% with upside instrument appreciation potential when the Fed cut rates to stimulate the U.S. economy, this motivated investors to sell stocks as the market softened and reallocate funds to Treasuries.

In 2019 the U.S.’s credit rating is the worst in it’s history, 10 year yields recently traded at 1.66% near their all time historic low and 0.05% below reported inflation. Aside from a guaranteed post inflation loss what adds the most amount of risk to Treasury ownership in 2019 is instrument risk which is currently 3 times greater than potential reward with dollar devaluation risk a close second.

In 2019 U.S. Treasuries don’t qualify as a good investment much less a safe haven alternative to quality stocks.

Sources; 10 Year Yield, Reported Inflation, Treasury Calculator

The risk reward of owning a Treasury in 1987, 2000, 2007 versus 2019.

1987, there was motivation to sell stocks and buy AAA rated U.S. Treasuries with a real rate of return of 4.99% that had upside instrument appreciation potential as the Federal Reserve lowered rates.

In 1987 if 10 year yields returned to the current 50 year low of 1.50% a 10 year Treasury with a 5.00% coupon, yielding 9.52% would have appreciated by $60,640 from $71,640 to $132,280 for a profit on the Treasury’s liquidation value of +84.65%.

If 10 year yields went to their current 50 year average of 6.35% a 10 year in 1987 would have appreciated in price by $21,421 from $71,640 to $93,061 for a profit on the Treasury’s liquidation value of +29.90%.

At the 50 year high of 15.32% a 10 year would have fallen by -$22,810, from $71,640 to $48,830 for a loss on the Treasury’s liquidation value of -31.84%.

1987 to High, Average & low Price 5.00% Coupon Yield Reported Inflation Real Rate of Return
October 1987 $71,640 9.52% 4.53% 4.99%
Lifetime High $132,280 1.50% 0.83% 0.68%
Profit $60,640
Average $93,061 6.35% 4.02% 2.33%
Profit $21,421
Low $48,830 15.32% 10.95% 4.37%
Loss -$22,810

Sources; 10 Year Yield, Reported Inflation, Treasury Calculator

The favorable risk/reward of owning a Treasury in 1987 helped fuel the sell off in stocks with stock sale proceeds being reallocated to buy U.S. Treasuries pushing Treasury prices higher and yields lower. Lower yields reduced borrowing costs for the Federal Government on new debt and more importantly debt service cost on existing Federal debt.

Lower interest rates enabled the Federal Government to borrow and spend their way out of the recession.

The downside is that it left debt the Federal Government had no intention of paying back or reducing confirmed by their complete lack of fiscal restraint when the U.S. economy “recovered”, strike 1.

U.S. Debt Owned 1987 Billions Percent
Private Domestic $1,450.15 62.12%
Foreign $283.28 12.13%
Government Trusts $390.28 16.72%
Federal Reserve $210.80 9.03%
Total Debt Owned by Government Trusts (Special Issues) & the Federal Reserve $601.08 25.75%
Total Federal Debt $2,334.50
Annual Federal Revenue and as a percentage of total Federal Debt $816.14 34.96%

Sources; Federal Debt owned by Federal Reserve Banks, Federal Debt held by Foreign Investors, Total Federal Debt, Total Federal Income.

2000, again there was motivation to sell stocks and buy AAA rated U.S. Treasuries with a real rate of return of 2.50% that had upside instrument appreciation potential when the Fed cut rates.

In 2000 if 10 year yields returned to the current 50 year low of 1.50% a 10 year Treasury with a 5.00% coupon, yielding 6.26% would have appreciated by $41,440 from $71,640 to $132,280 for an appreciation in liquidation value of +45,62%.

If 10 year yields went to their current 50 year average of 6.35% a 10 year in 2000 would have appreciated in price by $2,221 from $90,840 to $93,061 for a profit on the Treasury’s liquidation value of +2.44%.

At the 50 year high of 15.32% a 10 year would fall in value by -$41,010, from $90,840 to $48,830 for a loss on the Treasury’s liquidation value of -46.25%.

2000 to High, Average & low Price 5.00% Coupon Yield Reported Inflation Real Rate of Return
March 2000 $90,840 6.26% 3.76% 2.50%
Lifetime High $132,280 1.50% 0.83% 0.68%
Profit $41,440
Average $93,061 6.35% 4.02% 2.33%
Profit $2,221
Low $48,830 15.32% 10.95% 4.37%
Loss -$42,010

Sources; 10 Year Yield, Reported Inflation, Treasury Calculator

In 2000 the favorable risk/reward of Treasury ownership helped fuel the sell off in stocks with the proceeds being reallocated to U.S. Treasuries pushing Treasury prices higher and yields lower reducing borrowing cost to the Federal Government on new debt and debt service cost on existing Federal debt.

This time round when demand in the free market for Treasuries at non competitive rates dried up the Federal Government borrowed from Government Trusts like Social Security, Military and Civilian pension funds and used this money to buy more U.S. Treasuries at non competitive rates to force Treasury prices to artificial highs and yields to artificial lows.

Lower borrowing and debt service costs made it easier for the Federal Government to again borrow and spend their way out of recession rather than addressing the fundamental problems that created the recessions of 1987 & 2000.

The downside is it left more debt the Federal Government had no intention of paying back or reducing confirmed by their complete lack of fiscal restraint when the U.S. economy “recovered”, strike 2.

U.S. Debt Owned 2000 Billions Percent
Private Domestic $2,051.43 36.00%
Foreign $1,049.93 18.42%
Government Trusts $2,090.16 36.68%
Federal Reserve $507.43 8.90%
Total Debt Owned by Government Trusts (Special Issues) & the Federal Reserve $2,597.58 45.58%
Total Federal Debt $5,698.93
Annual Federal Revenue as a Percentage of Total Federal Debt $1,966.70 34.51%

Sources; Federal Debt owned by Federal Reserve Banks, Federal Debt held by Foreign Investors, Total Federal Debt, Total Federal Income.

2007 selling stocks to buy AAA rated U.S. Treasuries with a real rate of return of 0.99% that still had limited upside instrument appreciation potential could still be justified. The demand for Treasuries helped fuel the sell off in stocks, rally in U.S. Treasuries and pushed yields lower which initially helped fund the U.S.’s record deficit spending.

In 2007 if 10 year yields returned to the current 50 year low of 1.50% a 10 year Treasury with a 5.00% coupon, yielding 4.53% would have appreciated by $28,570 from $103,710 to $132,280 for a gain in liquidation value of +27.55%.

If 10 year yields went to their current 50 year average of 6.35% a 10 year Treasury would have depreciated in price by -$10,649 from $103,710 to $93,061 for a loss on the Treasury’s liquidation value of -10.27%.

At the 50 year high of 15.32% a 10 year would have fallen in value by -$54,880, from $103,710 to $48,830 for a loss on the Treasury’s liquidation value of -52.92%.

Current, High, Average & low Price 5.00% Coupon Yield Reported Inflation Real Rate of Return
October 2007 $103,710 4.53% 3.54% 0.99%
Lifetime High $132,280 1.50% 0.83% 0.68%
Profit Potential $28,570
Average $93,061 6.35% 4.02% 2.33%
Profit Potential -$10,649
Low $48,830 15.32% 10.95% 4.37%
Risk -$54,880

Sources; 10 Year Yield, Reported Inflation, Treasury Calculator

U.S. Debt Owned 2007 Billions Percent
Private Domestic $2,151.95 23.94%
Foreign $2,243.83 24.96%
Government Trusts $3,819.87 42.50%
Federal Reserve $772.90 8.60%
Total Debt Owned by Government Trusts (Special Issues) & the Federal Reserve $4,592.77 51.10%
Total Federal Debt $8,988.54
Annual Federal Revenue as a Percentage of Total Federal Debt $2,272.30 25.28%

Sources; Federal Debt owned by Federal Reserve Banks, Federal Debt held by Foreign Investors, Total Federal Debt, Total Federal Income.

During the last recession when free market demand to buy U.S. Treasuries dried up the Federal Government had a problem.

Up until 2007 whenever the free market no longer wanted to purchase Federal debt at non competitive rates the Federal Government borrowed any additional funds they needed to sustain record deficit spending from Government Trusts, by the end of 2007 Government Trusts owned 42.50% of total Federal debt up from 16.72% in 1987. By 2007 the marketable liquidity in these trusts had been cleaned out and replaced with non marketable “Special Issue Securities” that paid these Trusts non competitive yields with duration of up to 15 years.

In 2007 with the Government facing yet another financial crisis and recession with every source of funds exhausted had three choices, they could reduce record deficit spending and deal with the harsh realities of budget cuts, raise taxes, or they could create trillions of dollars from nothing backed by nothing to fund additional record deficit spending projected to be 8 trillion dollars through 2018. This 8 trillion would have increased total Federal debt by the end of 2018 to 17 trillion or 4.5 trillion less than the actual deficits of 12.5 trillion dollars.

The decision was made to escalate Federal deficit spending rather than control it and pay for it by instructing the Federal Reserve to create trillions of dollars to buy all the debt at non competitive rates the free market wouldn’t touch or that could not be offed in Government Trusts through “Special Issue Securities” cleaning out any surpluses that would be collected in payroll taxes.

The Federal Government’s first priority was to bailout a select group of financial institutions that were blamed for igniting the financial crisis and recession. These institutions had extended excessive amounts of unjustified credit to banks & mortgage companies who lent these borrowed funds at artificially low rates to “sub prime borrowers” and collected very high fees. This enabled the “sub primers” to buy real estate they couldn’t afford and/or to borrow and spend money against real estate they owned (using inflated appraisals) they couldn’t pay back.

Total debt levels became extraordinary high relative to total annual income, when the economy stalled delinquency rates on this debt soared putting the institutions that had condoned and promoted this irresponsible lending in jeopardy of being insolvent. The Federal Reserve immediately created over 1 trillion dollars to bailout a select group of these institutions letting others fail. Now in 2019 some of these bailout recipients and their cohorts pay Bernanke (who was chairman of the Fed at the time) and other Fed board members $10,000 to as high as $400,000 for a single “speaking engagement”.

Over a trillion more was then created by the Federal Reserve to buy Treasuries at non competitive rates to force Treasury prices to record highs and yields to record lows, this would slash the cost of financing over 8 trillion in new Government debt and more importantly for the Federal Government reduced the debt service cost on 9 trillion in existing Federal debt, strike 3.

U.S. Federal debt was downgraded twice, the first time to AAA negative in March 2011 with a harsh warning to control record deficit spending and cease “Quantitative Easing” when these warnings went ignored the U.S.’s debt rating was downgraded again to AA+ in August 2011.

A debt rating of AA+ is the same as Finland & Hong Kong and below the AAA ratings of Canada, Denmark, Germany, Lichtenstein, Luxembourg, Netherlands, Norway, Singapore, Sweden, Switzerland and Australia.

The next recession will be the first in the U.S.’s history that it enters without it’s coveted AAA debt rating.

Even with the loss of their AAA rating the Federal Government still had no intent of trying to restore their AAA rating, paying this debt back or reducing record deficit spending again confirmed by their continued lack of fiscal restraint when the U.S. economy “recovered”.

In 2019 it makes absolutely no sense to liquidate a tangible asset like gold, real estate or a quality stock to buy a downgraded U.S. Treasury paying a near record low yield of 1.83%, with a 0.12% pre tax real rate of return carrying record high instrument and currency risk.

In 2019 if 10 year yields returned to the 50 year low of 1.50% a 10 year with a 5.00% coupon, yielding 1.83% would appreciate by $3,350 from $128,730 to $132,280 for an appreciation in liquidation value of +2.76%.

If 10 year yields went to their 50 year average of 6.35% a 10 year Treasury would depreciate in price by -$35,669 from $128,730 to $93,061 for a loss on the Treasury’s liquidation value of -27.70%.

At the 50 year high of 15.32% a 10 year would fall in value by -$79,900, from $128,730 to $48,830 for a loss on the Treasury’s liquidation value of -62.06%.

What makes U.S. dollars and debt even less attractive relative to tangible assets and quality stocks is the fact that the Federal Reserve has now scheduled the creation of 760 billion dollars annually to continue to buy debt at non competitive rates.

Current, High, Average & low Price 5.00% Coupon Yield Reported Inflation Real Rate of Return
October 2019 $128,730 1.83% 1.71% 0.12%
Lifetime High $132,280 1.50% 0.83% 0.68%
Profit Potential $3,350
Average $93,061 6.35% 4.02% 2.33%
Loss -$35,669
Low $48,830 15.32% 10.95% 4.37%
Loss -$79,900

Sources; 10 Year Yield, Reported Inflation, Treasury Calculator

U.S. Debt Owned 2018 Billions Percent
Private Domestic $6,916.83 32.26%
Foreign $6,234.15 29.07%
Government Trusts $5,569.26 25.97%
Federal Reserve $2,723.48 12.70%
Total Debt Owned by Government Trusts (Special Issues) & the Federal Reserve $8,292.74 38.67%
Total Federal Debt December 2018 $21,443.72
Annual Federal Revenue as a Percentage of Total Federal Debt $3,235.86 15.09%

Beyond Repair?

Annual Federal Revenue as a percentage of total Federal debt has declined from 56.89% in 1980 (when rates were near record highs) to a new low in 2018 of 15.09% (with rates near record lows). This ratio should make it absolutely clear what the Federal Government’s motivation has and continues to be to keep rates at record lows.

Sources; Federal Debt owned by Federal Reserve Banks, Federal Debt held by Foreign Investors, Total Federal Debt, Total Federal Income.

What is “Quantitative Easing” and it’s true purpose?

“Quantitative Easing” is nothing more than the creation of money from nothing, backed by nothing.

The primary purpose of “Quantitative Easing” (QE) is not to simulate the economy as represented by the Federal Government and Federal Reserve but to buy debt at non competitive rates to force debt prices to artificial highs and yields to artificial lows.

Low rates enable the Federal Government to continue to finance record deficit spending for less and more importantly contain Federal debt service cost on the 22.5 trillion dollars in existing Federal debt.

No one can create a valid argument that by removing trillions of dollars in interest income from the owners of Treasury debt (who would have paid taxes on and spent this money in the Global economy) has or ever will stimulate the economy.

If the true purpose of low rates was to help citizens through the last recession and stimulate the economy then why at the same time savers were stripped of trillions of dollars in interest income did the personal loan rate remain above 10.00%, credit card rates remain above 12.50% when bank borrowing and deposit rates went below 0.25%?

Source

Forcing rates to artificial lows to enable Governments, Corporations and individuals to borrow and spend money they don’t’ have never has or will make an economy stronger and more stable in the long run. The mortgage crisis that ignited the last recession clearly demonstrates this.

Debt and lack of liquidity have now put the Federal Reserve once again in QE “bailout mode”.

September 2019, in less than 1 week a “cash crunch” in the Repurchase Market (REPO) drove the overnight lending rate from 2% to over 10% and the Federal Funds rate to 2.30% or 0.30% above the Fed’s current 2.00% upper limit. The only way the Federal reserve was able to contain this spike higher in rates was to create hundreds of billions of dollars from nothing backed by nothing to intervene in the repo market.

In its first direct injection of cash into the banking sector since the financial crisis the Fed created $203 billion in “temporary cash” over several days to quell the funding crunch and push the overnight down in what’s know as an overnight system Repo.

October 2019 the Fed has now scheduled to create 60 billion per month to facilitate “temporary asset purchases” or 720 billion annually indefinitely to continue to buy debt at non competitive rates the free market can’t or won’t. to continue to hold rates at artificial lows.

No one can create an argument that the creation of trillions of dollars from nothing & backed by nothing will support the long-term value of the U.S. dollar as qualified by it’s buying power.

In a healthy economy a Government does not have create trillions of dollars to buy record amounts of their own debt at non competitive rates to contain their borrowing and debt service costs.

Reality

The Federal Reserve still owns over over 3.96 trillion in “temporary debt purchases” they made with money they created from 2008 through 2017, the total of “temporary” asset purchases will now be increasing by 60 billion per month indefinitely.

Last available Date Mortgage Back Securities owned by the Federal Reserve Federal debt owned by the Federal Reserve Total debt owned by the Federal Reserve
2019-07-01 $1,508,811,000,000 $2,452,784,000,000 $3,961,595,000,000

Sources; Treasury Debt, Mortgages from the “last recession’s banking crisis”

In 2019 the U.S.’s AAA debt rating and fiscal credibility aren’t the only things that have disappeared, so have real rates of return .

The average Treasury rate above reported inflation (real rate of return) has gone from the 1968 -2007 average of +3.58% to -0.05% and it’s headed lower.

Period Average Treasury Yield Average Reported Inflation Average Real Rate of Return Credit Rating
1968-2007 Pre QE Average 8.29% 4.71% 3.58% AAA
2007-2019 Average 2.67% 1.76% 0.91% AAA to AA+ 2011
October 2019 1.66% 1.71% -0.05% AA+

Sources: Interest Paid, Federal Debt, Reported Inflation

The primary purpose of eliminating real rates of return and removing trillions of dollars in interest income from the free market economy was done to further contain Federal borrowing and debt service costs. There is absolutely no valid argument that that would support the removal of nearly 4 trillion dollars of interest income from beneficiaries of Trusts and the economy stimulates or stabilizes it.

Debt service cost as a portion of total Government debt

The table & chart below compare the cumulative total increase in Federal debt to the cumulative total of U.S. Federal debt service cost from 1968 through 2018.

Year Total Increase in Federal Debt Total of Debt Service Cost
1968-1987 $2,345,953,000,000 $2,021,376,000,000
1968-2000 $5,628,703,000,000 $6,019,897,177,868
1968-2007 $8,950,752,000,000 $8,539,856,984,764
1968-2018 $21,462,300,000,000 $13,265,371,710,584

Sources: Interest Paid, Federal Debt,

The reduction and elimination of real rates of return has reduced Federal Debt Service cost by more than 3.795 trillion since the inception of “Economic Stimulus”.

Year Eliminated Real Rate of Return Cumulative Total
2008 $286,600,409,900 $286,600,409,900
2009 $3,648,735,123 $290,249,145,023
2010 $262,787,741,532 $553,036,886,555
2011 $452,411,482,671 $1,005,448,369,226
2012 $439,252,274,391 $1,444,700,643,617
2013 $341,006,096,477 $1,785,706,740,093
2014 $379,791,277,375 $2,165,498,017,468
2015 $207,811,950,659 $2,373,309,968,126
2016 $376,177,823,159 $2,749,487,791,285
2017 $504,574,153,799 $3,254,061,945,084
2018 $541,650,847,634 $3,795,712,792,718

Sources: Interest Paid, Federal Debt, Reported Inflation

Projected U.S. Federal deficits through 2024

The Federal Government’s 2019-2024 projected deficits total 5.918 trillion. These estimates were calculated with the optimistic assumption the U.S. will have contained debt service cost (less than 2.00%) contained inflation, continued economic expansion and no recession through 2024.

They also exclude “Off Budget Expenditures”

2019 -2024 Projected Budget Deficits

Source

“Off Budget Expenditures” are not included in reported budget deficits because they are considered “mandatory” expenses and U.S. politicians don’t get to vote on them therefore the Federal Government has deemed they don’t count.

“Off Budget Expenditures” include incidentals like the cost of Social Security, the cost of running the Federal Reserve, the U.S. Postal Service and hundreds of other Government programs.

Impact of “Off Budget Expenditures” from 1968 through 2018

In 2018 the reported Budget Deficit was 779.14 billion yet the increase in total Federal Debt was 1.256 Trillion, the 447.48 billion dollar difference was generated by “Off Budget Expenditures”.

Since 1968 “Off Budget Expenditures” represent 7.365 trillion of the 21.128 trillion total increase in Federal debt though 2018.

Period Reported Deficit (Millions USD) “Off Budget Expenditures” (Millions USD) Actual Budget Deficits (increase in Federal Debt Millions USD)
1968-2018 Average $269,870 $144,418 $414,288
2000-2018 Average $539,402 $271,718 $811,120
2008-2018 Average $839,841 $285,652 $1,125,493
2018 $779,140 $477,480 $1,256,620
1968-2018 Total Reported Deficits (Millions USD) 1968-2018 “Off Budget Expenditures” (Millions) 1968-2018 Actual Budget Deficits
$13,763,371 $7,365,329 $21,128,700

Source

Including “Off Budget Expenditures” actual Federal deficits as qualified by the increase in total Federal debt are expected to be a minimum of 7.20 trillion dollars through 2024, this assumes contained debt service cost (yields less than 2.00%), continued economic expansion, no inflation despite creating trillions of dollars from nothing and back by nothing and no recession.

Source

Projected Growth in Annual Federal Revenue

Projected deficits including “Off Budget Expenditures” though 2024 also assume total Federal Revenue will magically start to grow 7.5 times faster over the next 6 years (+6.12% per year or more than 3 times projected inflation) than it has over the last 3 years (+0.82% per year).

Source

Year Projected Federal Revenue (Billions USD) Projected Annual Growth in Revenue (Percent)
2016 $3,267.96 0.56%
2017 $3,316.18 1.48%
2018 $3,329.90 0.41%
2016-2018 Average $3,304.68 0.82%
2019 $3,437.66 3.24%
2020 $3,644.77 6.02%
2021 $3,876.86 6.37%
2022 $4,128.63 6.49%
2023 $4,421.45 7.09%
2024 $4,752.52 7.49%
2019-2024 Average $4,043.65 6.12%

Increases in Social Security

Social Security is an “Off Budget Expenditure” and has increased by 141.26% since 2000 from 409.47 billion annually to 987.89 billion in 2018 and is projected to be at least 1.389 trillion by 2024.

Social Security is also scheduled to run out of money by 2035, in 2035 according to the Trustee’s Report May 2019 they plan to drop benefits across the board by 20% or raise payroll taxes by 2.00%.

The problem the Federal Government is facing more immediately is they’ve already borrowed out the 2.895 trillion in the Social Security Trust Funds by issuing these Trusts non marketable “Special Issue Securities” at non competitive rates.

As of 2020 the Federal Government has lost one of their major sources of cheap money (the Social Security Trust Funds) that have up until now financed 12.89% of total Federal debt.

In 2020 Social Security is scheduled to have it’s first deficit in decades which means the Federal Government instead of borrowing from the Social Security Trust funds at non competitive rates will have to pay the projected deficit between payroll taxes and benefits of 187.13 billion this number escalates to 455.86 billion plus interest by 2024.

If the Federal Government doesn’t borrow the money from another source or raise payroll taxes benefits to 63 million Americans who depend on Social Security will be cut sooner than the May 2019 Trustee’s Report of 20% by 2035.

Period Old Age Survivor Ins (OASI) (Billions USD) Disability Ins (Billions USD) Total Annual Social Security (Billions USD)
2000 $353.43 $56.04 $409.47
2007 $486.31 $99.83 $586.14
2018 $841.29 $146.60 $987.89

Annual cost increases in Social Security use projections for a “reported inflation rate” of less than 2.00% and the retirement of baby boomers will be less than any independent projection.

Source

Increases in Medicare

Federal Government Medicare costs have increased by 199.13% since 2000 from 196.27 billion to 587.11 billion in 2018, Medicare has no reserves, by 2024 annual Federal Medicare expenditures are expected to increase by 47.35% to 865.13 billion annually.

To put the current cost of $987.89 billion of Social Security and 587.11 billion for Medicare into proper perspective total Federal Revenue for 2019 is expected to be $3.437 trillion.

Year Part A (Hospital Insurance)-fed $ billion nominal Part B (Suppl. Med. Ins.) (Billions USD) Part C (Medicare Advantage) (Billions USD) Part D (Sup. Med. Ins. Drug) (Billions USD)
2000 105.6 55.09 35.58 0 196.27
2007 158.36 105.06 69.46 41.53 374.41
2018 189.35 137.57 194.63 65.56 587.11

Source

What Federal deficit spending has done for Social Security Recipients, Military & Civilian Pensioners.

“Special Issue Securities” are non marketable Treasuries with a duration of up to 15 years, they’re issued at non competitive rates, then placed into Government Trusts like Social Security, Military & Civilian Pension Funds.

In 2019 the “Special Issue” well has run dry, the Federal Government has cleaned out every trust they oversee including Social Security by issuing them non marketable “Special Issue Securities” whenever they needed money to sustain their record deficit spending.

By borrowing all the money out of these Trusts at noncompetitive rates the Federal Government has jeopardized the pension benefits of over 100 million Americans that made involuntary lifetime contributions to these Trusts. These Americans in their retirement will more likely be living in poverty than security because of reckless Government spending.

Buy the end of 2018 the Federal Government had borrowed all reserves out of every government trust they have a duty to protect & oversee by issuing them more than 5.54 trillion in non marketable “Special Issue Securities” at non competitive rates.

Source Committee for a Responsible Federal Deficit & U.S. Treasury

To maintain the retirement benefits for over 100+ million Americans the Federal Government will have to lower the standard of living of every American taxpayer by raising payroll taxes to meet benefit obligations and/or lowering benefits to the 100+ million recipients, my guess is they’ll do both to try and solve the problem they created and to pump up their special issue slush funds.

What Federal spending did for the American taxpayer, their children and grandchildren.

1979, Federal debt per taxpayer, $9,222, equivalent to 99.69% of median annual income.

1987, Federal debt per taxpayer $22,974 or 140.83% of median income.

2000, Federal debt per taxpayer $42,631 or 139.14% of median income.

2007 Federal debt per taxpayer $64,863, or 162.97% of median income.

2018 Federal debt per taxpayer $143,980 or 268.33% of median income.

From 2007 through 2018 Federal debt per taxpayer increased by $79,117, $7,192 per year, $599 per month for 11 years, this trend is continuing and there is no viable plan on deck in 2019 by any U.S. political candidate to even to try and contain this.

Sources Fed Reserve, Income, Federal Debt, Employed Population

Did the U.S. economy and Taxpayer get their 12.51 trillion worth from 2007 through 2018?

U.S. taxpayers responsible for this debt were told the majority of the 12.51 trillion borrowed was to “stabilize”, “stimulate” and “protect” the U.S. economy.

From 2007 through 2018 the percentage of the employed U.S. population declined by 0.20% from 45.76% in 2007 to 45.56% in 2018.

The population increased by 25,587,000, the number of jobs increased by 11,069,750, median Personal Income averaged $45,316 per year.

To put this 12.511 trillion dollars into proper perspective 12.511 trillion could have employed 23,008,009 Americans for 11 years from 2007 through 2018 and paid each of them $45,316 per year for 11 years for total of $543,791 each, monies generated in income taxes on these 23,009,009 jobs could have created over 5 million more American jobs or initially funded projects these people would have been working on.

Percent of the population working in 2007 45.76%, percent of the population working in 2018 45.56% (0.20% less) Jobs created from 2007-2018 = 11,069.750

Jobs that could have been paid for by a 12.511 dollar trillion deficit = 23,008,009 to 28,000,000.

Bernanke’s & Obama’s Economic stimulus was the most expensive policy failure in U.S. history there is nothing in U.S. history that comes close to the money that was wasted during BO economic stimulus.

FDR’s “New Deal” that fueled the U.S. out of the great Depression was done at a fraction of the cost (in 2019 USD) many of the projects built by the “New Deal” programs still serve the American public today like the Hover Dam and Golden Gate Bridge. Can you name one project of the same scale that was done with the monies spent during BO economic stimulus that still serves the American public in 2019?

For more on the failure of Bernanke’s & Obama’s Economic stimulus see the article I wrote on Seeking Alpha explaining the difference between failed 2007-2017 BO Stimulus versus FDR’s New Deal.

Yes, unemployment did improve but it’s not at a 50 year low as qualified by the percentage of the U.S. population working.

Sources Employed Population & Total Population. The percentages account for employee entries, exits and aging population resulting from an increase in Retirees and & Social Security Beneficiaries.

Federal deficits cannot be blamed on American productivity, lack of growth in Personal Income or lack of growth in Annual Federal Revenue.

GDP Per Employed Person

From 1997-2018 GDP per employed person outpaced reported inflation 17 out of 22 years by an overall average of 1.32% per year.

From January 1997 through December 2007 the growth in GDP per employed person outpaced reported inflation by an average of 1.82% per year with GDP per employed person outpacing inflation 10 out of 11 years.

From January 2008 – December 2018 the growth in GDP per employed person outpaced reported inflation by an average of 0.75% per year with GDP per employed person outpacing reported inflation 7 out of 11 years.

In theory Americans should be proud of the growth in their GDP, businesses should be thriving, jobs secure, the economy stable and quality of life good.

Sources GDP, Total Population, Total Employed, Reported Inflation

Growth in Personal Income

From January 1997 – December 2008 Personal Income outpaced reported inflation in 18 out of the last 22 years by an overall average of 1.44% per year

From January 1997 through December 2007 growth in annual personal income outpaced reported inflation by an overall average of 1.85% per year with growth in personal income outpacing reported inflation 10 out of 11 years.

20082018 personal income increased faster than inflation by an average of 1.02% per year with the growth in Personal Income outpacing reported inflation in 8 out of 11 years.

Sources Reported Inflation, Personal Income

According to the BLS.GOV since 2000 prices have increased by 48.83%.

According to the U.S. Bureau of Economic Analysis, Median Income has increased by 76.30%.

In theory with growth in personal income outpacing inflation by 27.47% since 2000 quality of life should be exceptional with disposable income at a new high in 2019

Sources: Personal Income, BLS.GOV Inflation calculator

Growth in Total Annual Federal Revenue

From January 1968 through December 2018 growth in total Federal Revenue per capita outpaced reported inflation by an average of 1.41% per year.

From January 1997 through December 2007 growth in total Federal Revenue per capita outpaced reported inflation by an overall average of 1.81% per year with growth in Federal Revenue outpacing reported inflation 7 out of 11 years.

From January 2008 – December 2018 total growth Federal Revenue per capita increased faster than reported inflation by an average of 0.16% per year with growth in Federal Revenue outpacing reported inflation in 6 out of 11 years.

In theory with growth in total Federal Revenue per capita outpacing reported inflation in 33 out of the last 50 years by an overall average of 1.41% per year the U.S should have been able to reduce or eliminate budget deficits, maintain their AAA debt rating and be able to properly fund everything from childcare to retirement rather than cranking up over 22 trillion in debt.

Sources; Reported Inflation, Total Federal Income

Reported inflation fact or fiction?

How can Personal Income , Federal Revenue per capita, Federal spending per capita, Federal debt per capita, GDP per capita, Median Home prices and everything else from College tuition to trash pick-up all outpace reported inflation for 50 years and/or during any economic cycle during the last 50 years?

Period Average Reported Inflation Federal Revenue Federal Spending Federal Debt Personal Income GDP Median Home
1968-2018 4.07% 5.40% 5.48% 7.34% 5.63% 5.39% 5.48%
1968-1987 6.36% 8.10% 8.23% 8.74% 8.25% 7.92% 8.08%
1988-2000 3.26% 5.36% 3.33% 5.78% 4.98% 4.68% 3.71%
2001-2007 2.69% 2.74% 5.23% 5.68% 3.82% 4.04% 5.65%
2008-2018 1.76% 1.92% 3.16% 7.57% 2.79% 2.48% 2.73%

Which inflation rate do you believe is more accurate?

The red line was complied by an Actuarial Mathematician based on actual revenue and cost increases.

The black line was complied by the BLS.GOV who has consistently massaged the Official Inflation Rate lower since 1980 using what they call “Hedonic Quality Adjustments”. I would have have expected a much more believable explanation from the BLS.GOV for “Hedonic Quality Adjustments” than this considering they have over 2.6 million employees with a median income of $104,980.

Inflation will continued to be misrepresented by the BLS.GOV on this link with Total Federal Income, U.S. Government Spending, GDP and Personal Income linked below continuing to outpace reported inflation by over 1.00% per year.

Sources: Reported Inflation, Total Federal Income, U.S Government Spending, Total Population, Total Employed, GDP, Personal Income

Everything else will continue to increase faster than reported inflation which you can monitor using the links on this spreadsheet.

Reality

Aside from 2 justifiable U.S. debt downgrades, record low yields, near record high instrument/currency risk and negative real rates of returns, professional traders, especially those that manage Family Offices believe the official BLS.GOV inflation rate has been intentionally misrepresented by the BS.GOV since 1980.

In 1980 when inflation soared forcing rates and debt service cost higher the Federal Government instructed the BLS.GOV to do their first round of “revisions” to make the “official inflation rate” more “accurate” to justify lower yields enabling the Federal Government to contain Federal borrowing and debt service costs.

Over the last 40 years as Federal spending spiraled out of control and total Federal debt soared the Federal Government has continued to instruct the BLS.GOV to “correct” the way that inflation is reported to the point in 2019 the “official inflation rate” as reported by the BLS.GOV has zero credibility with any advisor or money manger that has more than 1 functioning brain cell unless of course they sell long only fixed income investments.

It’s this simple, by misrepresenting the “official inflation rate” the Federal Government had and continues to reduce debt service cost by trillions giving them control of these trillions rather than paying the trillions to Treasury debt holders who would pay taxes on this income and spend this income in the free market economy.

Growth in Federal debt versus growth in Federal debt service cost tells the story.

Source; Total Federal Debt, Reported Inflation Debt Service Cost

A lower official inflation rate also contains all other Governmental expenditures that are linked to the “official inflation rate” such as increases in Social Security benefits and nearly all other Government programs, salaries, pensions and contracts.

Source

Personal Income outpacing reported inflation by an overall average of 1.44% per year?

Real Disposable Income tells us a very different story down 20% versus 2000.

Source: Real Disposable Personal Income

Since 2000 Personal Income in ounces of gold has declined by 62.74% from 112.48 ounces in 2000 to 41.87 ounces by the end of 2018.

Source: Gold, Personal Income

Fictitious inflation rates were tolerable when U.S. Treasuries had a real rate of return that bridged the gap between reported and actual inflation, not in 2019, yields and real rates of return have disappeared along with the U.S.’s AAA credit rating and any shred of fiscal credibility.

The demise of U.S. debt as a safe haven alternative to tangible assets and quality stocks initially helped fuel stock prices higher as investors sold U.S. debt and bought stocks through 2017.

With the credibility of U.S. debt continuing to deteriorate it’s helped to support the U.S. equity markets through 2019.

S&P 500

Source

Dow Jones

Source

Nasdaq 100

Source

Russell 2000

Source

S&P valuation, dollars versus gold

The U.S dollar may have appreciated against it’s foreign counterparts as these countries too lowered their rates to and below zero to contain their debt service costs but the U.S. dollar continues to depreciate against tangible assets like gold.

Since January 2007 gold has appreciated 132.84% from $642.05 per ounce to $1,495.10 in 2019. Federal debt during this same period increased by 147.78%.

Source

The S&P trading at 3,040.25 equates to 2.03 ounces of gold far from the high of 5.53 ounces in August 2008.

At 2.03 ounces it tells me equities still have profit potential trading them long, granted gains on long positions won’t provide the immediate gratification of shorting but longs are still very much in the 2019-2020 playbook.

1968-2019 Average 1.60
High 5.53 August 2008
Low 0.17 January 1980
Last 2.03 October 2019
S&P 3040.25
Gold 1,495.10

Sources; Gold, S&P

30 Stocks that have survived 2 bear markets and recessions

My “Old Timer Portfolio” in 2019 is up 35.16% further confirming the U.S. dollar’s continuing devaluation against tangible assets and quality stocks.

The “Old Timer Portfolio” is a collection of 30 stocks that have survived 2 bear markets and recessions, this portfolio has appreciated 17 out of the last 19 years from $300,000 in 2000 to $12.49 million in 2019, this is without using any leverage, doing any trading, hedging or reinvestment of profit.

To enhance performance you can trade any of these stocks using the same fully disclosed trading parameters I use in this S&P program which is very easy to learn and execute and has captured the majority of every major up and down trend over the last 40 years.

Seeking Alpha Link Oct-2000 Oct-2019 2000 – 2019
AAON $1.19 47.05 3853.78%
AAPL $3.23 235.32 7185.45%
AMZN $81.50 $1,767.38 2068.56%
CACC $4.50 468.24 10305.33%
CHDN $6.18 129.87 2001.46%
CSGP $32.25 600.14 1760.90%
EW $3.39 228.63 6644.25%
EXPO $0.84 69.32 8152.38%
FISV $5.66 106.89 1788.52%
GS $73.83 207.42 180.94%
HEI $2.44 122.41 4916.80%
HEI.A $2.07 93.46 4414.98%
IAC $22.31 232.14 940.52%
IDXX $3.77 279.57 7315.65%
INTU $27.65 269.15 873.42%
JPM $29.97 119.68 299.33%
KO $12.53 53.49 326.90%
MCO $7.19 217.15 2920.17%
MLAB $3.04 $217.50 7054.61%
MSFT $31.59 $140.41 344.48%
ODFL $1.55 $175.56 11226.45%
ORCL $21.94 $55.88 154.69%
ORLY $6.56 $407.75 6115.70%
PFE $18.70 $36.34 94.33%
ROP $14.73 $335.68 2178.89%
ROST $1.59 $112.25 6959.75%
SHW $17.63 $564.24 3100.45%
SLP $0.39 $33.90 8592.31%
T $16.30 $37.79 131.84%
TYL $4.38 $263.29 5911.19%
USPH $2.68 $133.85 4894.40%

This page provides data, splits, quotes, news and a spreadsheet enabling you to create your own portfolio of the 30 and monitor them forward.

Since 2007 Gold has appreciated by 132.84%, the S&P 104.63% consistent with the growth in M3 (Money Supply) of 111.73% and Federal debt of 147.78% indicating a good portion of the appreciation in Gold and the S&P is attributed to the dollar’s devaluation against tangible assets and quality stocks caused by the creation of trillions dollars from nothing and backed by nothing over the last 11 years.

The upside it tells me Gold at $1,490.10 and the S&P at 3,040.25 are not overvalued.

Sources; M3 CPI Gold Total Federal Debt

Aggressive dollar devaluation against tangible assets and quality stocks is on the horizon.

The creation of trillions of dollars by itself would eventually cave in the dollars buying power.

What will accelerate the dollars decline against tangible assets and quality stocks will be foreign liquidation of U.S. dollars and debt.

29.07% of total Federal debt is now owned by non U.S. investors increasing by over 380 billion from 6.256 to 6.636 trillion through June 2019.

July, August & September 2019 not reported yet by the Fed adds another 150 billion bringing the total up to 6.786 trillion though September 2019, up 530 billion or +8.47% in less than one year.

Source

Add this 6.79 trillion to the 44.21 trillion in non Treasury assets and the total exceeds 51 trillion U.S. dollars now owned by Non U.S. investors.

Source

This 51+ trillion makes the U.S. dollar extremely vulnerable to foreign liquidation when the long-term trend in the dollar changes from up to down.

When foreign liquidation of the U.S. dollar engages it will create a hemorrhage in the dollar’s value against tangible assets and quality stocks that the Federal Reserve won’t be able cauterize with their one and only remaining tool  “Quantitative Easing”

2008 – 2019 Dollar Index chart (updated every 10 minutes)

Is the U.S. Globally competitive in 2019?

Trade deficits will quickly tell you if the U.S. is Globally competitive or not and whether U.S. companies can maintain operations, jobs and pay taxes in the U.S.

Trade surplus = competitive in the Global marketplace keeping jobs, wealth and tax revenue in the U.S.

Trade Deficits = non competitive in the Global marketplace, loss of domestic wealth, jobs & tax revenue to non U.S. competitors.

The U.S has not had a meaningful and sustained trade surplus in over 50 years. In 2018 the reported trade deficit was 646.3 billion, 2019 year-to-date deficit through August 428.7 billion with the projected total trade deficit for 2019 between 655 billion to 721 billion depending on the outcome of tariffs and trade-wars.

Source

From 1968 to 2019 U.S. trade deficits tell us U.S. citizens & entities have lost over 12.54 trillion in wealth to foreign competitors, 10.56 trillion of this 12.54 since 2000.

Source

Manufacturing

Taxation, increasing but less effective regulation, product plagiarizing, escalating litigation and unrealistic unionization have gradually forced U.S. companies to move their manufacturing facilities out of the United States to survive.

From 1968 through 2019 the United States lost over 14 million manufacturing jobs alone, millions more non manufacturing jobs for the same reasons.

Loss of 14 million manufacturing jobs over the last 50 years equates losing over 7 trillion dollars in domestic consumer spending and over 2 trillion in total tax revenue that these jobs and companies would have generated for the Federal, State and local Governments, add in the loss of non manufacturing jobs and totals are well above 10 trillion.

From 1968 through 2007 manufacturing jobs represented an average of 17.86% of the total U.S. workforce, in 2018 only 8.51%, 0.04% from it’s all time historic low of 8.47% in 2017.

Source Federal Reserve

Who are the the BLS.GOV & Federal Reserve

The BLS.GOV

The BLS.GOV is a governmental statistical agency that collects, processes, analyzes and disseminates essential statistical data to the American public. It also is the main source of data for Congress, Federal agencies, State and local governments to determine cost increases for the majority of Governmental programs and business’s  that contract with the Federal Government.

The BS.GOV also serves as a statistical resource to the United States Department of Labor and conducts research into how much families need to earn to be able to enjoy a decent standard of living.

The BLS.GOV has 2,639,500 employees with a median income of $104,980 per year.

It’s ironic that median income for a BLS.GOV public servant is $104,980 or 92.90% higher than U.S median Personal Income of $54,420 when theses public servants determine the amount of money necessary for an American to have a “decent” standard of living.

The Federal Reserve

The Federal Reserve is represented as an independent Central Bank with a charter to protect the integrity of the U.S. economy, financial system and U.S dollar.

The members of the Board of Governors, including the Chairman, are nominated by the President of the United States and confirmed by the Senate.

The salaries for the board members and Chairman of the Federal Reserve are set by Congress. In 2019 Congress set Fed Chair J.H. Powell’s annual salary at $203,500 only $73,340 less than the U.S, postmaster general’s annual salary of $276,840. But don’t feel too bad for J.H. Powell when his term as Fed chair is over he’ll be able to join former Fed chair B.S. Bernanke and make up to $400,000 for a 2 to 4 hour speaking engagement.

The Federal Reserve unlike the U.S. postal service that lost nearly 4 billion last year makes money. Prior to “Economic Stimulus” and “Quantitative Easing” in 2008 the Federal Reserve had an average annual net income of 28.40 billion per year.

Since “Economic Stimulus” and “Quantitative Easing” their average annual income has jumped by 165.90% to 75.52 billion per year. I thought it would be higher since they can create trillions of dollars from nothing, backed by nothing to trade a market they control, guess you just can’t get good help these days $203,500 a year.

Unfortunately for the U.S.’s “Independent Central Bank” they have to forfeit all their profits to their boss the U.S. Treasury.

From 2008 through 2018 the Federal Reserve remitted over 830.7 billion in profits to the U.S. Treasury.

Source Federal Reserve

The impact

Including “Off Budget Expenditures” a minimum of 7.20 trillion in new issues will have to be sold to finance projected Federal deficits as qualified by the increase in total Federal debt through 2024.

The 7.20 trillion deficit projection is based on continued economic expansion, continued contained inflation, contained debt service cost (Treasury yields at less than 2.00%) that total Federal Revenue will grow 7.5 times faster per year over the next 6 years than it did over the last 3 years (0.82% annually) or 6.12% annually and Social Security and Medicare costs will increase below any independent analyst’s projections.

The 7.20 trillion in new issues will have the worst yields and debt rating in the U.S.’s history and have nearly highest instrument and currency risk in history.

Source

In 2019 the U.S. Federal Government can’t afford to pay a competitive rate on their existing debt much less a high enough rate that would attract buyers in the free market to purchase the 7.2 trillion in new debt to finance the projected Federal deficits through 2024.

In 2018 the average Treasury rate was 2.44% with debt service cost consuming 15.71% of total annual Federal revenue.

If Average Treasury yields returned to the 1968-2007 pre “Quantitative Easing” average of 8.29% debt service cost would consume 53.43% of total annual Federal revenue.

If average Treasury yields went to 15.50% (levels we’ve seen before) debt service cost would consume 100% of total annual Federal Revenue.

Total Federal Debt, Reported Inflation Debt Service Cost Total Federal Income

To bridge the gap between the amount of debt the Federal Government can sell on the open market and what they want to spend the Federal Government will instruct their employees at the Federal Reserve to increase the creation of money from nothing backed by nothing from the current 720 billion to over 1 trillion annually.

Below is the amount of money the Federal Reserve has created to-date to buy Federal debt at non competitive rates the free market wouldn’t

The Federal Reserve updates this chart quarterly, by the end of 2024 the total will have increased from the current 2.54 trillion to more than 6 trillion USD.

S&P Global will threaten to downgrade U.S. debt again leading with a harsh warning when the next round of “Quantitative Easing” (or whatever the Fed calls it) increases from the current 720 billion to over 1 trillion annually. When the warning is ignored S&P Global will downgrade U.S. debt to AA potentially AA- depending how hard the the Federal Government instructs the Federal Reserve to hit the “Quantitative Easing” throttle.

The creation of additional trillions coupled with U.S. debt downgrades will cause the U.S. dollar’s long-term trend to reverse from up to down.

When the dollar’s price action moves below the, EMA9 (exponential moving average 9, the red line on the chart below) and the EMA9 moves below the EMA18 (blue line) trillions in U.S. dollar sales will engage as non U.S. investors liquidate long dollar positions and aggressive net new speculative short positions enter the market.

The upside is dollar devaluation will make U.S. produced goods more competitive in the Global market, tangible assets and quality stocks will appreciate as the dollar’s buying power implodes.

Dollar index 2010 through today

Federal debt owned by non U.S. investors that has enjoyed temporary demand through September 2019 it will peak before it get to 8 trillion and will aggressively sell off with the dollr, you can monitor the liquidation using this link.

Gold will will rally to a new all time high

Source

With the BLS.GOV‘s bag of “Hedonic Quality Adjustment” tricks empty inflation will engage with reported inflation moving above 5.00% and actual inflation moving above 7.50%.

Reported inflation 1950 forward, updated monthly

The Fed will continue to create money by the trillions trying to continue to hold rates down and contain Federal borrowing and debt service cost with Federal debt owned by the Federal reserve exceeding 7 trillion by the end of 2027, to monitor the Fed’s creation of money to buy Federal debt see this link.

By the end of 2029 total U.S. Federal debt will exceed 35 trillion with over 50% of total Federal debt owned by the Federal Reserve and U.S. Government Trusts to monitor the increase in Federal debt use this link.

Unable to contain dollar and debt devaluation the Federal Government will enact “emergency and temporary” increases in all taxes. State and local governments will follow the Federal Government’s lead.

Just as the “emergency and temporary rate cuts” of 2008 that have stripped savers of trillions in interest income became permanent “emergency and temporary” increases in all taxes will become permanent as well.

In addition to the tax increases by 2035 Social Security Benefits, Military and Civilian Pensions will be cut, interest income generated by retirement savings will have disappeared and income as qualified by it’s buying power will have been decimated by true inflation.

By 2035 Personal Income in ounces of gold will have declined from 41.87 ounces in 2018 to less than 20 by 2035.

Source: Gold, Personal Income

The poverty rate in the United States will take out the old 2012 high of 15.90% (unless the U.S. Census Bureau learns BLS.GOV inflation calculation math).

The majority of the poverty rate will be retirees that will be living in poverty as a direct result of the Federal Government using their payroll taxes for decades to pay for unchecked reckless deficit spending rather then investing these funds in markatable securities at competitive rates.

By cleaning out the liquidity in these Trusts and replacing it with non marketable “Special Issue Securities” at non competitive rates. They have reduced the returns the Trust funds assets would have generated by 1.00% to over 3.00% annually forever reducing the amount these trusts can pay in retirement benefits. Inflation misrepresentations will continue to contain benefit increases to further reduce the standard of living for these 100+ million American retirees.

To monitor the poverty rate in the U.S. use this link.

I truly wish we were trading off economic prosperity that was generated by ethical bipartisan Governments more concerned about the well being of the citizen rather the trying to destroy one another to gain control of Federal revenue and spending.

Over the last decade we’ve seen Global monetary credibility deteriorate at an accelerated pace forcing all of us to work harder, take greater risk, trade markets long and short to protect and enhance our family’s wealth.

The only upside to this mess is during the next decade as these extreme fundamentals fully engage it will fuel major market moves in metals, stocks, stock indices, energies, interest rates, currencies and commodities generating some of the best trading opportunities we will likely see in our entire trading careers.

The purpose of me writing these articles is not to generate new accounts, I’m set, all my clients are Qualified Eligible Participants all have the the risk tolerance of Satan. My purpose is to motivate U.S. citizens to address and solve the escalating debt crisis in the U.S. and once again lead the World in what would be in the best interest of future generations.

I am not a U.S. citizen but my two sons are, now they have graduated college and are entering the U.S. workforce both are disgusted with the legacy of debt the generation of the last 40 years has left their generation. My oldest said it best, if Government was a publicly traded company, the majority of politicians both Republican and Democrat would be living in a different kind of gated community called jail.

Additional disclosure: I’ve been a professional trader and have run a family office from Tortola, British Virgin Islands for the past 20+ years, zero income, corporate, sales and inheritance tax and would like to keep it that way. Because of the potential tax and regulatory implications I do not provide services for or am licensed to trade for U.S. retail accounts, I do however manage funds for a limited number “Qualified Eligible Participants” I may at times for my own accounts and/or for the accounts I manage have positions on that could be contrary to the ones mentioned in my reports.

Fundamentals 1987, 2000, 2007 versus 2019

Sections in this report

1) What S&P price action and interest rates are telling us about stock valuations.
2) What has and continues to support the market in 2019.
3) The risk reward of owning a Treasury in 1987, 2000, 2007 versus 2019.
4) Beyond Repair?
5) AAA rating and fiscal credibility aren’t the only things that have disappeared.
6) Projected U.S. Federal deficits through 2024.
7) Projected Growth in Annual Federal Revenue through 2024.
8) Increases in Social Security & fiscal impact.
9) Increases in Medicare & fiscal impact.
10) What deficit spending has done to Social Security & Pension beneficiaries.
11) What Federal spending did for the American taxpayer.
12) Deficits cant be blamed on growth in GDP, Personal Income or Fed Revenue.
13) Reported inflation fact or fiction?
14) The demise of U.S. debt as a safe haven alternative.
15) S&P valuation, dollars versus gold.
16) 30 Stocks that have survived 2 bear markets and recessions.
17) A fully disclosed S&P program that’s captured the majority of every major market over the last 40 years.
18) Aggressive dollar devaluation against tangible assets is on the horizon.
19)The U.S’s inability to finance escalating deficit spending and the impact.
20) Who are the BLS.GOV & Federal Reserve and who do they work for?
21) 20 trading programs designed to capture the moves generated.

1) S&P price action, the yield curve and rate expectations are all telling us the bear market on deck could equal or exceed 1987, 2000 and 2007

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S&P price action 1987, 2000, 2007 & 2019

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The yield curve 1987, 2000, 2007 & 2019.

1987, the curve didn’t invert until 1988 but it was a different world in 1987, 10 year AAA Treasuries were yielding over 9.00%, 3 month over 8.00%, reported inflation 3.58% and Treasuries had a real rate of return in excess of 4.42%, total Federal debt 2.34 trillion (5.20 trillion in 2019 USD).

Source

2000, The curve inverted in June, the bear market fully engaged in October, average Treasury yields were 6.43%, reported inflation 3.37%, AAA Treasuries were paying an average real rate of return of 3.06%, total Federal debt 5.62 trillion (8.27 trillion in 2019 USD)

Source

2007, The curve inverted in January 2007, the bear market engaged in October, average Treasury yields were 4.80%, reported inflation 1.93%, AAA rated Treasuries were paying an average real rate of return 2.15%, total Federal debt was 8.95 trillion (10.97 trillion in 2019 USD)

Source

2019, The curve inverted in January, current 10 year Treasury yield 1.83%, current reported inflation 1.71%, downgraded AA+ Treasuries have a pre tax real rate of return of 0.12%, with total Federal debt now exceeding 22.51 trillion.

Source

Rate expectations 1987, 2000, 2007 & 2019.

1987, 17 August, the S&P was trading at 335.40, 3+ trillion in interest rate derivatives were pricing in 1.60% in rate hikes.

13 October 1987, the S&P was trading at 314.52, -20.88, -6.22%, 3+ trillion derivatives was now pricing in 1.07% in rate hikes 0.53% less than August.

20 October 1987 (1 week latter) the S&P had sold off a total of 35.90%.

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2000, 25 January, the S&P was trading at 1,410.03, 5+ trillion in interest rate derivatives were pricing in 0.45% in rate hikes.

15 December 2000, the S&P was at 1,336.60, -73.70, -5.21%, the 5+ trillion in derivatives had gone from pricing in 0.45% in rate hikes to 0.59% in rate cuts.

October 2002 the S&P had sold off a total of 50.50% and didn’t see a significant new high until September 2013.

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2007, 12 June, the S&P was trading at 1,509.12, 9+ trillion in interest rate derivatives were pricing in a 0.1950% rate hike.

15th of November, the S&P was at 1,443.49, -65.63, -4.34%, the 9+ trillion in rate derivatives had gone from pricing in a 0.195% rate hike to 0.77% in rate cuts.

March 2009, the S&P had sold off a total of 57.70% and didn’t see a significant new high until September 2013.

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2018 to 2019, 5 October 2018, the S&P was at 2,909.65, 17+ trillion in rate derivatives were pricing in a 0.2550% rate hike.

6 December 2018, the S&P was at 2,696.15, -213.50, -7.33%, the 17+ trillion in derivatives had gone to pricing no rate hikes.

26 December 2108, the S&P was at 2,346.60, -563.05, -19.35%, the 17+ trillion had gone to pricing in 0.15% rate cut.

14 June 2019, the S&P was at 2,895.25, +548.65, +18.95%, the 17 trillion had gone to pricing in 0.79% in rate cuts.

28 October 2019 the S&P had rallied a total of 673.40 points to 3,020.00 +28.70%.

Either this was the shortest bear market in history or something in 2019 has fundamentally changed and in a very big way.

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Market price action and interest rates are telling us the S&P should be on it’s way to 2,000 not putting in a new high.

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2) What has and continues to support the market in 2019

In 1987, 2000 and 2007 AAA rated U.S. Treasuries qualified as a safe have alternative to quality stocks, they had a real rate of return of between 1.00% to nearly 5.00% with upside instrument appreciation potential when the Fed cut rates to stimulate the U.S. economy, this motivated investors to sell stocks as the market softened and reallocate funds to Treasuries.

In 2019 the U.S.’s credit rating is the worst in it’s history, 10 year yields recently traded at 1.66% near their all time historic low and 0.05% below reported inflation. Aside from a guaranteed post inflation loss what adds the most amount of risk to Treasury ownership in 2019 is instrument risk which is currently 3 times greater than potential reward, U.S. dollar devaluation risk coming in a close second.

In 2019 U.S. Treasuries don’t qualify as a good investment much less a safe haven alternative to tangible assets and quality stocks.

Sources; 10 Year Yield, Reported Inflation, Treasury Calculator

3) The risk reward of owning a Treasury in 1987, 2000, 2007 versus 2019.

1987, there was motivation to sell stocks and buy AAA rated U.S. Treasuries with a real rate of return of 4.99% that had upside instrument appreciation potential when the Federal Reserve lowered rates to stimulate.

In 1987 if 10 year yields returned to the current 50 year low of 1.50% a 10 year Treasury with a 5.00% coupon, yielding 9.52% would have appreciated by $60,640 from $71,640 to $132,280 for a profit on the Treasury’s liquidation value of +84.65%.

If 10 year yields went to their current 50 year average of 6.35% a 10 year in 1987 would have appreciated in price by $21,421 from $71,640 to $93,061 for a profit on liquidation value of +29.90%.

At the 50 year high of 15.32% a 10 year would fall in price by -$22,810, from $71,640 to $48,830 for a loss on the Treasury’s liquidation value of -31.84%.

1987 to High, Average & low Price 5.00% Coupon Yield Reported Inflation Real Rate of Return
October 1987 $71,640 9.52% 4.53% 4.99%
Lifetime High $132,280 1.50% 0.83% 0.68%
Profit $60,640
Average $93,061 6.35% 4.02% 2.33%
Profit $21,421
Low $48,830 15.32% 10.95% 4.37%
Loss -$22,810

Sources; 10 Year Yield, Reported Inflation, Treasury Calculator

The favorable risk/reward of owning a Treasury in 1987 helped fuel the sell off in stocks with stock sale proceeds being allocated to buy U.S. Treasuries pushing Treasury prices higher and yields lower. Lower yields reduced borrowing costs for the Federal Government on new debt and debt service cost on the 2.33 trillion in existing Federal debt.

Lower rates enabled the Federal Government to borrow and spend their way out of the recession.

The downside is it left debt the Federal Government had no intention of paying back or reducing confirmed by their complete lack of fiscal restraint when the U.S. economy “recovered”, strike 1.

U.S. Debt Owned 1987 Billions Percent
Private Domestic $1,450.15 62.12%
Foreign $283.28 12.13%
Government Trusts $390.28 16.72%
Federal Reserve $210.80 9.03%
Total Debt Owned by Government Trusts (Special Issues) & the Federal Reserve $601.08 25.75%
Total Federal Debt $2,334.50
Annual Federal Revenue and as a percentage of total Federal Debt $816.14 34.96%

Sources; Federal Debt owned by Federal Reserve Banks, Federal Debt held by Foreign Investors, Total Federal Debt, Total Federal Income.

2000, again there was motivation to sell stocks and buy AAA rated U.S. Treasuries with a real rate of return of 2.50% and upside instrument appreciation potential when the Fed cut rates.

In 2000 if 10 year yields returned to the current 50 year low of 1.50% a 10 year Treasury with a 5.00% coupon, yielding 6.26% would have appreciated by $41,440 from $71,640 to $132,280 for an appreciation in liquidation value of +45,62%.

If 10 year yields went to their current 50 year average of 6.35% a 10 year in 2000 would have appreciated by $2,221 from $90,840 to $93,061 for a profit on the Treasury’s liquidation value of +2.44%.

At the 50 year high of 15.32% a 10 year would fall in value by -$41,010, from $90,840 to $48,830 for a loss on the Treasury’s liquidation value of -46.25%.

2000 to High, Average & low Price 5.00% Coupon Yield Reported Inflation Real Rate of Return
March 2000 $90,840 6.26% 3.76% 2.50%
Lifetime High $132,280 1.50% 0.83% 0.68%
Profit $41,440
Average $93,061 6.35% 4.02% 2.33%
Profit $2,221
Low $48,830 15.32% 10.95% 4.37%
Loss -$42,010

Sources; 10 Year Yield, Reported Inflation, Treasury Calculator

The favorable risk/reward of Treasury ownership again helped fuel the sell off in stocks with the proceeds being allocated to U.S. Treasuries pushing Treasury prices higher, yields lower reducing borrowing cost to the Federal Government on new debt and debt service cost on the 5.63 trillion in existing Federal debt.

This time round when demand in the free market at non competitive rates dried up the Federal Government borrowed from Government Trusts like Social Security, Military and Civilian pension funds and used this money to buy more U.S. Treasuries at non competitive rates to force Treasury prices to artificial highs and yields to artificial lows.

Lower borrowing and debt service costs made it easier for the Federal Government to borrow and spend their way out of recession rather than addressing the fundamental problems that created the recessions of 1987 & 2000.

The downside is it left more debt the Federal Government had no intention of paying back or reducing confirmed by their complete lack of fiscal restraint when the U.S. economy “recovered”, strike 2.

U.S. Debt Owned 2000 Billions Percent
Private Domestic $2,051.43 36.00%
Foreign $1,049.93 18.42%
Government Trusts $2,090.16 36.68%
Federal Reserve $507.43 8.90%
Total Debt Owned by Government Trusts (Special Issues) & the Federal Reserve $2,597.58 45.58%
Total Federal Debt $5,698.93
Annual Federal Revenue as a Percentage of Total Federal Debt $1,966.70 34.51%

Sources; Federal Debt owned by Federal Reserve Banks, Federal Debt held by Foreign Investors, Total Federal Debt, Total Federal Income.

2007 selling stocks to buy AAA U.S. Treasuries with a real rate of return of 0.99% that had limited upside instrument appreciation potential could still be justified. The demand for Treasuries helped fuel the sell off in stocks, rally in Treasuries and pushed yields lower which initially helped fund the U.S.’s record deficit spending.

In 2007 if 10 year yields returned to the current 50 year low of 1.50% a 10 year with a 5.00% coupon, yielding 4.53% would have appreciated by $28,570 from $103,710 to $132,280 for a gain in liquidation value of +27.55%.

If 10 year yields went to their current 50 year average of 6.35% a 10 year Treasury would have depreciated in price by -$10,649 from $103,710 to $93,061 for a loss on the Treasury’s liquidation value of -10.27%.

At the 50 year high of 15.32% a 10 year would have fallen in value by -$54,880, from $103,710 to $48,830 for a loss on the Treasury’s liquidation value of 52.92%.

Current, High, Average & low Price 5.00% Coupon Yield Reported Inflation Real Rate of Return
October 2007 $103,710 4.53% 3.54% 0.99%
Lifetime High $132,280 1.50% 0.83% 0.68%
Profit Potential $28,570
Average $93,061 6.35% 4.02% 2.33%
Profit Potential -$10,649
Low $48,830 15.32% 10.95% 4.37%
Risk -$54,880

Sources; 10 Year Yield, Reported Inflation, Treasury Calculator

U.S. Debt Owned 2007 Billions Percent
Private Domestic $2,151.95 23.94%
Foreign $2,243.83 24.96%
Government Trusts $3,819.87 42.50%
Federal Reserve $772.90 8.60%
Total Debt Owned by Government Trusts (Special Issues) & the Federal Reserve $4,592.77 51.10%
Total Federal Debt $8,988.54
Annual Federal Revenue as a Percentage of Total Federal Debt $2,272.30 25.28%

Sources; Federal Debt owned by Federal Reserve Banks, Federal Debt held by Foreign Investors, Total Federal Debt, Total Federal Income.

During the last recession when free market demand to buy U.S. Treasuries dried up the Federal Government had a problem.

Up until 2007 whenever the free market no longer wanted to purchase Federal debt at non competitive rates the Federal Government borrowed any additional funds they needed to sustain record deficit spending from Government Trusts, by the end of 2007 Government Trusts owned 42.50% of total Federal debt up from 16.72% in 1987. By 2007 the marketable liquidity in these trusts had been cleaned out and replaced with non marketable “Special Issue Securities” that paid these Trusts non competitive yields with duration of up to 15 years.

In 2007 with the Government facing yet another financial crisis and recession had cleaned out neraly every source of funds and had three choices, they could reduce record deficit spending and deal with the harsh realities of budget cuts, raise taxes, or they could create trillions of dollars from nothing backed by nothing to fund additional record deficit spending which was projected to be 8 trillion dollars through 2018. This 8 trillion would have increased total Federal debt by the end of 2018 to 17 trillion or 4.5 trillion less than the actual deficits of 12.5 trillion dollar increase.

The decision was made to escalate Federal deficit spending rather than control it. They instructed the Federal Reserve to create trillions of dollars to buy all the debt at non competitive rates the free market wouldn’t touch or couldn’t be offed in Government Trusts through “Special Issue Securities” cleaning out any surpluses that would be collected in payroll taxes.

The Federal Government’s first priority was to bailout a select group of financial institutions that were blamed for igniting the financial crisis and recession. These institutions had extended excessive amounts of unjustified credit to banks & mortgage companies who lent these borrowed funds at artificially low rates to “sub prime borrowers” and collected very high fees. This enabled the “sub primers” to buy real estate they couldn’t afford and/or to borrow and spend money against real estate they owned (using inflated appraisals) the “sub primers” couldn’t pay back.

Total debt levels became extraordinary high relative to total annual income, when the economy stalled delinquency rates on this debt soared putting the institutions that had condoned and promoted this irresponsible lending in jeopardy of being insolvent. The Federal Reserve immediately created over 1 trillion dollars to bailout a select group of these institutions letting others fail. Now in 2019 some of these bailout recipients and their cohorts pay Bernanke (who was chairman of the Fed at the time) and other Fed board members $10,000 to as high as $400,000 for a single “speaking engagement”.

Over a trillion more was then created by the Federal Reserve to buy Treasuries at non competitive rates to force Treasury prices to record highs and yields to record lows this slashed the cost of financing over 8 trillion in new Government debt and more importantly for the Federal Government reduced the debt service cost on 9 trillion in existing Federal debt, strike 3.

U.S. Federal debt was downgraded twice, the first time to AAA negative in March 2011 with a harsh warning to control record deficit spending and cease “Quantitative Easing” when these warnings went ignored the U.S.’s debt rating was downgraded again to AA+ in August 2011.

A debt rating of AA+ is the same as Finland & Hong Kong and below the AAA ratings of Canada, Denmark, Germany, Lichtenstein, Luxembourg, Netherlands, Norway, Singapore, Sweden, Switzerland and Australia.

The next recession will be the first in the U.S.’s history that it enters without it’s coveted AAA debt rating.

Even with the loss of their AAA rating the Federal Government still had no intent of trying to restore their AAA rating, paying this debt back or reducing record deficit spending again confirmed by their continued lack of fiscal restraint when the U.S. economy “recovered”.

In 2019 it makes absolutely no sense to liquidate a tangible asset like gold, real estate or a quality stock to buy a downgraded U.S. Treasury paying a near record low yield of 1.83%, with a 0.12% pre tax real rate of return carrying record high instrument and currency risk.

In 2019 if 10 year yields returned to the 50 year low of 1.50% a 10 year, 5.00% coupon, yielding 1.83% would appreciate by $3,350 from $128,730 to $132,280, +2.76%.

If 10 year yields went to their 50 year average of 6.35% a 10 year Treasury would fall in price by -$35,669 from $128,730 to $93,061 for a loss of -27.70%.

At the 50 year high of 15.32% a 10 year would fall in value by -$79,900, from $128,730 to $48,830 for a loss on the Treasury’s liquidation value of -62.06%.

What makes U.S. dollars and debt even less attractive relative to tangible assets and quality stocks is the fact that the Federal Reserve has now scheduled the creation of 760 billion dollars annually to continue to buy debt at non competitive rates.

Current, High, Average & low Price 5.00% Coupon Yield Reported Inflation Real Rate of Return
October 2019 $128,730 1.83% 1.71% 0.12%
Lifetime High $132,280 1.50% 0.83% 0.68%
Profit Potential $3,350
Average $93,061 6.35% 4.02% 2.33%
Loss -$35,669
Low $48,830 15.32% 10.95% 4.37%
Loss -$79,900
U.S. Debt Owned 2018 Billions Percent
Private Domestic $6,916.83 32.26%
Foreign $6,234.15 29.07%
Government Trusts $5,569.26 25.97%
Federal Reserve $2,723.48 12.70%
Total Debt Owned by Government Trusts (Special Issues) & the Federal Reserve $8,292.74 38.67%
Total Federal Debt December 2018 $21,443.72
Annual Federal Revenue as a Percentage of Total Federal Debt $3,235.86 15.09%

4) Beyond Repair?

Annual Federal Revenue as a percentage of total Federal debt has declined from 56.89% in 1980 (when rates were near record highs) to a new low in 2018 of 15.09% (with rates near record lows). This ratio should make it absolutely clear what the Federal Government’s motivation has been to keep rates at record lows.

Sources; Federal Debt owned by Federal Reserve Banks, Federal Debt held by Foreign InvestorsTotal Federal Debt, Total Federal Income.

What is “Quantitative Easing” and it’s true purpose?

“Quantitative Easing” is nothing more than the creation of money from nothing, backed by nothing.

The primary purpose of “Quantitative Easing” (QE) is to buy debt at non competitive rates to force debt prices to artificial highs and yields to artificial lows.

Low rates enable the Federal Government to continue to finance record deficit spending for less and more importantly contain Federal debt service cost on the 22.5+ trillion dollars in existing Federal debt.

No one can create a valid argument that by removing trillions of dollars in interest income from the owners of Treasury debt has or ever will stimulate an economy.

If the true purpose of low rates was to help citizens through the last recession then why at the same time savers were stripped of trillions of dollars in interest income did the personal loan rate remain above 10.00%, credit card rates remain above 12.50% when bank borrowing and deposit rates went below 0.25%?

Source

Forcing rates to artificial lows to enable Governments & Corporations to borrow and spend money they don’t’ have never has or will make an economy stronger and stable in the long run. The mortgage crisis that ignited the last recession demonstrates this.

Debt and lack of liquidity have now put the Federal Reserve again in QE “bailout mode”.

September 2019, in less than 1 week a “cash crunch” in the Repurchase Market Repo drove the overnight lending rate from 2% to over 10% and the Federal Funds rate to 2.30% or 0.30% above the Fed’s current 2.00% upper limit. The only way the Federal reserve was able to contain this spike higher in rates was to create hundreds of billions of dollars from nothing backed by nothing to intervene in the repo market.

In its first direct injection of cash into the banking sector since the financial crisis the Fed created $203 billion in “temporary cash” over several days to quell the funding crunch and push the overnight rate down in what’s know as an overnight system Repo.

October 2019 the Fed has now scheduled to create 60 billion per month to facilitate “temporary asset purchases” or 720 billion annually indefinitely to continue to buy debt at non competitive rates the free market can’t or won’t to continue to hold rates at artificial lows.

No one can create an argument that the creation of trillions of dollars from nothing & backed by nothing will support the long-term value of the U.S. dollar as qualified by it’s buying power.

In a healthy economy a Government does not have create trillions of dollars to buy record amounts of their own debt at non competitive rates to contain borrowing and debt service costs.

Reality

The Federal Reserve still owns over 3.96 trillion in “temporary debt purchases” made with money they created from 2008 through 2017, the total of “temporary” asset purchases will now be increasing by 60 billion per month indefinitely.

Last available Date Mortgage Back Securities owned by the Federal Reserve Federal debt owned by the Federal Reserve Total debt owned by the Federal Reserve
2019-07-01 $1,508,811,000,000 $2,452,784,000,000 $3,961,595,000,000

Sources; Treasury Debt, Mortgages from the “last recession’s banking crisis”

5) In 2019 the U.S.’s AAA debt rating and fiscal credibility aren’t the only things that have disappeared, so have real rates of return .

The average Treasury rate above reported inflation (real rate of return) has gone from the 1968 -2007 average of +3.58% to -0.05% and it’s headed lower.

Period Average Treasury Yield Average Reported Inflation Average Real Rate of Return Credit Rating
1968-2007 Pre QE Average 8.29% 4.71% 3.58% AAA
2007-2019 Average 2.67% 1.76% 0.91% AAA to AA+ 2011
October 2019 1.66% 1.71% -0.05% AA+

Sources: Interest Paid, Federal Debt, Reported Inflation

The primary purpose of eliminating real rates of return and removing trillions of dollars in interest income from the free market economy was done to further contain Federal borrowing and debt service costs. There is absolutely no valid argument that that would support the removal of nearly 4 trillion dollars of interest income from beneficiaries of Trusts and the economy stimulates or stabilizes it.

Debt service cost as a portion of total Government debt

The table & chart below compare the cumulative total increase in Federal debt to the cumulative total of U.S. Federal debt service cost from 1968 through 2018.

Year Total Increase in Federal Debt Total of Debt Service Cost
1968-1987 $2,345,953,000,000 $2,021,376,000,000
1968-2000 $5,628,703,000,000 $6,019,897,177,868
1968-2007 $8,950,752,000,000 $8,539,856,984,764
1968-2018 $21,462,300,000,000 $13,265,371,710,584

Sources: Interest Paid, Federal Debt,

The reduction and elimination of real rates of return has reduced Federal Debt Service cost by more than 3.795 trillion since the inception of “Economic Stimulus”.

Year Eliminated Real Rate of Return Cumulative Total
2008 $286,600,409,900 $286,600,409,900
2009 $3,648,735,123 $290,249,145,023
2010 $262,787,741,532 $553,036,886,555
2011 $452,411,482,671 $1,005,448,369,226
2012 $439,252,274,391 $1,444,700,643,617
2013 $341,006,096,477 $1,785,706,740,093
2014 $379,791,277,375 $2,165,498,017,468
2015 $207,811,950,659 $2,373,309,968,126
2016 $376,177,823,159 $2,749,487,791,285
2017 $504,574,153,799 $3,254,061,945,084
2018 $541,650,847,634 $3,795,712,792,718

Sources: Interest Paid, Federal Debt, Reported Inflation

6) Projected U.S. Federal deficits through 2024

The Federal Government’s 2019-2024 projected deficits total 5.918 trillion. These estimates were calculated with the optimistic assumption the U.S. will have contained debt service cost and inflation, continued economic expansion and no recession through 2024.

They also exclude “Off Budget Expenditures”

2019 -2024 Projected Budget Deficits

Source

“Off Budget Expenditures” are not included in reported budget deficits because they are considered “mandatory” expenses and U.S. politicians don’t get to vote on them therefore the Federal Government has deemed they don’t count.

“Off Budget Expenditures” include incidentals like the cost of Social Security, the cost of running the Federal Reserve, the U.S. Postal Service and hundreds of other Government programs.

Impact of “Off Budget Expenditures” from 1968 through 2018

In 2018 the reported Budget Deficit was 779.14 billion yet the increase in total Federal Debt was 1.256 trillion, the 447.48 billion dollar difference was generated by “Off Budget Expenditures”.

Since 1968 “Off Budget Expenditures” represent 7.365 trillion of the 21.128 trillion total increase in Federal debt though 2018.

Period Reported Deficit (Millions USD) “Off Budget Expenditures” (Millions USD) Actual Budget Deficits (increase in Federal Debt Millions USD)
1968-2018 Average $269,870 $144,418 $414,288
2000-2018 Average $539,402 $271,718 $811,120
2008-2018 Average $839,841 $285,652 $1,125,493
2018 $779,140 $477,480 $1,256,620

 

1968-2018 Total Reported
Deficits (Billions USD)
1968-2018 “Off Budget
Expenditures”
1968-2018 Actual
Budget Deficits
$13,763,371 $7,365,329 $21,128,700

Source

Including “Off Budget Expenditures” actual Federal deficits as qualified by the increase in total Federal debt are expected to be a minimum of 7.20 trillion dollars through 2024, this assumes contained debt service cost, continued economic expansion and no inflation despite creating trillions of dollars from nothing and backed by nothing.

Source

7) Projected Growth in Annual Federal Revenue

Projected deficits including “Off Budget Expenditures” though 2024 also assume total Federal Revenue will magically start to grow 7.5 times faster over the next 6 years (+6.12% per year or more than 3 times projected inflation) than it has over the last 3 years (+0.82% per year).

Source

Year Projected Federal Revenue (Billions USD) Projected Annual Growth in Revenue (Percent)
2016 $3,267.96 0.56%
2017 $3,316.18 1.48%
2018 $3,329.90 0.41%
2016-2018 Average $3,304.68 0.82%
2019 $3,437.66 3.24%
2020 $3,644.77 6.02%
2021 $3,876.86 6.37%
2022 $4,128.63 6.49%
2023 $4,421.45 7.09%
2024 $4,752.52 7.49%
2019-2024 Average $4,043.65 6.12%

8) Increases in Social Security and fiscal impact

Social Security is an “Off Budget Expenditure” and has increased by 141.26% since 2000 from 409.47 billion annually to 987.89 billion in 2018 and is projected to be at least 1.389 trillion by 2024.

Social Security is also scheduled to run out of money by 2035, in 2035 according to the Trustee’s Report May 2019 they plan to drop benefits across the board by 20% or raise payroll taxes by 2.00%.

The problem the Federal Government is facing more immediately is they’ve already borrowed out the 2.895 trillion in the Social Security Trust Funds by issuing these Trusts non marketable “Special Issue Securities” at non competitive rates.

As of 2020 the Federal Government has lost one of their major sources of cheap money (the Social Security Trust Funds) that have up until now financed 12.89% of total Federal debt.

In 2020 Social Security is scheduled to have it’s first deficit in decades which means the Federal Government instead of borrowing from the Social Security Trust funds at non competitive rates will have to pay the projected deficit between payroll taxes and benefits of 187.13 billion this number escalates to 455.86 billion plus interest by 2024.

If the Federal Government doesn’t borrow the money from another source or raise payroll taxes benefits to 63 million Americans who depend on Social Security will be cut sooner than the May 2019 Trustee’s Report of 20% by 2035.

Period Old Age Survivor Ins (OASI) (Billions USD) Disability Ins (Billions USD) Total Annual Social Security (Billions USD)
2000 $353.43 $56.04 $409.47
2007 $486.31 $99.83 $586.14
2018 $841.29 $146.60 $987.89

Annual cost increases in Social Security use projections for a “reported inflation rate” of less than 2.00% and the retirement of baby boomers will be less than any independent projection.

Source

9) Increases in Medicare

Federal Government Medicare costs have increased by 199.13% since 2000 from 196.27 billion to 587.11 billion in 2018, Medicare has no reserves, by 2024 annual Federal Medicare expenditures are expected to increase by 47.35% to 865.13 billion annually.

To put the current cost of $987.89 billion of Social Security and 587.11 billion for Medicare into proper perspective total Federal Revenue for 2019 is expected to be $3.437 trillion.

Year Part A (Hospital Insurance)-fed $ billion nominal Part B (Suppl. Med. Ins.) (Billions USD) Part C (Medicare Advantage) (Billions USD) Part D (Sup. Med. Ins. Drug) (Billions USD)
2000 105.6 55.09 35.58 0 196.27
2007 158.36 105.06 69.46 41.53 374.41
2018 189.35 137.57 194.63 65.56 587.11

Source

10) What Federal deficit spending has done for Social Security Recipients, Military & Civilian Pensioners.

“Special Issue Securities” are non marketable Treasuries with a duration of up to 15 years, they’re issued at non competitive rates, then placed into Government Trusts like Social Security, Military & Civilian Pension Funds.

In 2019 the “Special Issue” well has run dry, the Federal Government has cleaned out every trust they oversee including Social Security by issuing them non marketable “Special Issue Securities” whenever they needed money to sustain their record deficit spending.

By borrowing all the money out of these Trusts at non competitive rates the Federal Government has jeopardized the pension benefits of over 100 million Americans that made involuntary lifetime contributions to these Trusts. These Americans in their retirement will more likely be living in poverty than security because of reckless Government spending.

Buy the end of 2018 the Federal Government had borrowed all reserves out of every government trust they have a duty to protect & oversee by issuing them more than 5.54 trillion in non marketable “Special Issue Securities” at non competitive rates.

Source Committee for a Responsible Federal Deficit & U.S. Treasury

To maintain the retirement benefits for over 100+ million Americans the Federal Government will have to lower the standard of living of every American taxpayer by raising payroll taxes to meet benefit obligations and/or lowering benefits to the 100+ million recipients, my guess is they’ll do both to try and solve the problem they created and to pump up their special issue slush funds.

11) What Federal spending did for the American taxpayer

1979, Federal debt per taxpayer, $9,222, equivalent to 99.69% of median annual income.

1987, Federal debt per taxpayer $22,974 or 140.83% of median income.

2000, Federal debt per taxpayer $42,631 or 139.14% of median income.

2007 Federal debt per taxpayer $64,863, or 162.97% of median income.

2018 Federal debt per taxpayer $143,980 or 268.33% of median income.

From 2007 through 2018 Federal debt per taxpayer increased by $79,117, $7,192 per year, $599 per month for 11 years, this trend is continuing and there is no viable plan on deck in 2019 by any U.S. political candidate to even to try and contain this.

Sources Fed Reserve, Income, Federal Debt, Employed Population

Did the U.S. economy and Taxpayer get their 12.51 trillion worth from 2007 through 2018?

U.S. taxpayers responsible for this debt were told the majority of the 12.51 trillion borrowed was to “stabilize”, “stimulate” and “protect” the U.S. economy.

From 2007 through 2018 the percentage of the employed U.S. population declined by 0.20% from 45.76% in 2007 to 45.56% in 2018.

The population increased by 25,587,000, the number of jobs increased by 11,069,750, median Personal Income averaged $45,316 per year.

To put this 12.511 trillion dollars into proper perspective 12.511 trillion could have employed 23,008,009 Americans for 11 years from 2007 through 2018 and paid each of them $45,316 per year for 11 years for total of $543,791 each, monies generated in income taxes on these 23,009,009 jobs could have created over 5 million more American jobs or initially funded projects these people would have been working on.

Percent of the population working in 2007 45.76%, percent of the population working in 2018 45.56% (0.20% less) Jobs created from 2007-2018 = 11,069.750

Jobs that could have been paid for by a 12.511 dollar trillion deficit = 23,008,009 to 28,000,000.

Bernanke’s & Obama’s Economic stimulus was the most expensive policy failure in U.S. history there is nothing in U.S. history that comes close to the money that was wasted during BO economic stimulus.

FDR’s “New Deal” that fueled the U.S. out of the great Depression was done at a fraction of the cost (in 2019 USD) many of the projects built by the “New Deal” programs still serve the American public today like the Hover Dam and Golden Gate Bridge. Can you name one project of the same scale that was done with the monies spent during BO economic stimulus that still serves the American public in 2019?

For more on the failure of Bernanke’s & Obama’s Economic stimulus see the article I wrote on Seeking Alpha explaining the difference between failed 2007-2017 BO Stimulus versus FDR’s New Deal.

Yes, unemployment did improve but it’s not at a 50 year low as qualified by the percentage of the U.S. population working.

Sources Employed Population & Total Population. The percentages account for employee entries, exits and aging population resulting from an increase in Retirees and & Social Security Beneficiaries.

12) Federal deficits cannot be blamed on American productivity or the lack of growth in Annual Federal Revenue.

GDP Per Employed Person

From 1997-2018 GDP per employed person outpaced reported inflation in 17 out of 22 years by an overall average of 1.32% per year.

From January 1997 through December 2007,by an average of 1.82% per year with GDP per employed person outpacing inflation 10 out of 11 years.

From January 2008 – December 2018 by an average of 0.75% per year with GDP per employed person outpacing reported inflation 7 out of 11 years.

In theory Americans should be proud of the growth in their GDP, businesses should be thriving, jobs secure, the economy stable and quality of life good.

Growth in Total Annual Federal Revenue per capita

From January 1968 through December 2018 growth in total Federal Revenue per capita outpaced reported inflation in 33 out of 50 years by an overall average of 1.41% per year

From January 1997 through December 2007 by an average of 1.81% per year with growth in Federal Revenue outpacing reported inflation 7 out of 11 years.

From January 2008 – December 2018 by an average of 0.16% per year with growth in Federal Revenue outpacing reported inflation in 6 out of 11 years.

In theory the U.S should have been able to reduce or eliminate budget deficits, maintain their AAA debt rating and be able to properly fund everything from childcare to retirement rather than cranking up over 22 trillion in debt.

Sources; Reported Inflation, Total Federal Income

Growth in Personal Income

From January 1997 – December 2008 Personal Income outpaced reported inflation in 18 out of the last 22 years by an overall average of 1.44% per year

From January 1997 through December 2007 by an average of 1.85% per year with growth in personal income outpacing reported inflation 10 out of 11 years.

From January 2008 – December 2018 by an average of 1.02% per year with the growth in Personal Income outpacing reported inflation in 8 out of 11 years.

Sources Reported Inflation, Personal Income

According to the BLS.GOV since 2000 prices have increased by 48.83%.

According to the U.S. Bureau of Economic Analysis, Median Income has increased by 76.30%.

In theory with growth in personal income outpacing inflation by 27.47% since 2000 quality of life should be exceptional with disposable income near a new high in 2019

Sources: Personal Income, BLS.GOV Inflation calculator

Not the case sone 2000 Real Disposable Income is down 20%.

Source: Real Disposable Personal Income

Income in ounces of gold has declined by 62.74% from 112.48 ounces in 2000 to 41.87 ounces by the end of 2018.

Source: Gold, Personal Income

13) Reported inflation fact or fiction?

How can Personal Income , Federal Revenue per capita, Federal spending per capita, Federal debt per capita, GDP per capita all out pace inflation?

Period Average Reported Inflation Federal Revenue Federal Spending Federal Debt Personal Income GDP Median Home
1968-2018 4.07% 5.40% 5.48% 7.34% 5.63% 5.39% 5.48%
1968-1987 6.36% 8.10% 8.23% 8.74% 8.25% 7.92% 8.08%
1988-2000 3.26% 5.36% 3.33% 5.78% 4.98% 4.68% 3.71%
2001-2007 2.69% 2.74% 5.23% 5.68% 3.82% 4.04% 5.65%
2008-2018 1.76% 1.92% 3.16% 7.57% 2.79% 2.48% 2.73%
Nearly everything else has as well from college tuition to trash pick-up for 50 years and during any economic cycle over the last 50 years?

 

Which inflation rate do you believe is more accurate?

The red line was complied by an Actuarial Mathematician based on actual revenue and cost increases.

The black line the BLS.GOV who has consistently massaged the Official Inflation Rate lower since 1980 using what they call “Hedonic Quality Adjustments”. I would have expected a much more believable explanation from the BLS.GOV for “Hedonic Quality Adjustments” than this considering they have over 2.6 million employees with a median income of $104,980.

Sources: Reported Inflation, Total Federal Income, U.S Government Spending, Total Population, Total Employed, GDP, Personal Income

Lower inflation justifies lower Treasury rates which has and continues to reduce Federal Government borrowing and debt service costs.

Growth in Federal debt versus Federal debt service cost tells the story.

Source; Total Federal Debt, Reported Inflation Debt Service Cost

A lower official inflation rate also contains all other Governmental expenditures that are linked to the “official inflation rate” such as increases in Social Security benefits and nearly all other Government programs, salaries, pensions and contracts.

Source

Fictitious inflation rates were tolerable when U.S. Treasuries had a real rate of return that bridged the gap between reported and actual inflation, not in 2019, yields and real rates of return have disappeared along with the U.S.’s AAA credit rating and any shred of fiscal credibility.

Reported Inflation Personal Income

14) The demise of U.S. debt as a safe haven alternative to tangible assets and quality stocks initially helped fuel stock prices higher as investors sold U.S. debt and bought stocks through 2017.

With the credibility of U.S. debt continuing to deteriorate it’s helped to support the U.S. equity markets through 2019.

S&P 500

Barchart

Dow Jones

Barchart

Nasdaq 100

Barchart

Russell 2000

Barchart

15) S&P valuation, dollars versus gold

The U.S dollar may have appreciated against it’s foreign counterparts but continues to depreciate against tangible assets like gold.

Since January 2007 gold has appreciated by 132.84% from $642.05 per ounce to $1,495.10 in 2019. Federal debt during this same period increased by 147.78%.

Barchart

The S&P trading at 3,040.25 equates to 2.03 ounces of gold far from the high of 5.53 ounces in August 2008.

1968-2019 Average 1.60
High 5.53 August 2008
Low 0.17 January 1980
Last 2.03 October 2019
S&P 3040.25
Gold 1,495.10

Sources; Gold, S&P

The appreciation in Gold of 132.84%, the S&P 104.63% is consistent with the growth in M3 (Money Supply) of 111.73% and Federal debt of 147.78% indicating a good portion of the appreciation in Gold and the S&P is attributed to the dollar’s devaluation against tangible assets and quality stocks caused by the creation of trillions dollars over the last 11 years.

Sources; M3 CPI Gold Total Federal Debt

16) 30 Stocks that have survived 2 bear markets and recessions

My Old Timer Portfolio in 2019 is up 35.16% further confirming the U.S. dollars continuing devaluation against tangible assets and quality stocks.

The Old Timer Portfolio is a collection of 30 stocks that have survived 2 bear markets and recessions, has appreciated 17 out of the last 19 years from $300,000 in 2000 to $12.49 million in 2019, this is without using leverage, doing any trading, hedging or reinvestment of profit.

This page provides data, splits, quotes, news and a spreadsheet enabling you to create your own portfolio of the 30 and monitor them forward.

17) This link provides an easy to learn and execute S&P trading program that has captured the majority of every major up and down trend over the last 40 years.

18) Aggressive dollar devaluation against tangible assets and quality stocks is on the horizon.

The Federal Reserve’s creation of trillions of dollars from nothing backed by nothing by itself will eventually cave in the U.S. dollar’s buying power.

What will accelerate the dollars decline will be foreign liquidation of U.S. dollars and debt.

The U.S has not had a meaningful and sustained trade surplus in over 50 years. In 2018 the reported trade deficit was 646.3 billion with 2019 projected at 655 billion to 721 billion.

Source

Aside from the loss of 14 million manufacturing jobs.

Source Federal Reserve

U.S. trade deficits tell us U.S. citizens & entities have lost over 12.54 trillion in wealth to foreign competitors, 10.56 trillion of this 12.54 since 2000.

Source

In 2019 29.07% of total Treasury debt is now owned by non U.S. investors.

Sources Federal Reserve & Trading Economics

Add this 6.80 trillion to the 44.20 trillion in non Treasury assets and the total exceeds 51 trillion

Source

Should liquidation of U.S. dollars by Non U.S. investors engage it will create a hemorrhage in the dollar’s value against tangible assets that the Federal Reserve won’t be able cauterize with their one and only remaining tool “Quantitative Easing”.

2008 – 2019 Dollar Index chart (updated every 10 minutes)

19) The U.S’s inability to finance escalating deficit spending and the impact

Including “Off Budget Expenditures” a minimum of 7.20 trillion in new issues will have to be sold to finance projected Federal deficits as qualified by the increase in total Federal debt through 2024.

This 7.20 trillion deficit projection assumes that,

Total Federal Revenue will grow 7.5 times faster per year (6.12% annually) over the next 6 years than it did over the last 3 years (0.82% annually).

The U.S. economy will continue to expand while inflation remains contained between 1.75% to 2.25% and debt service cost on existing Federal debt stays below 2.00%.

Cost increases in Social Security and Medicare costs will be below any independent analyst’s projections.

Their will be a market for 7.20 trillion in new issues will have the worst yields and debt rating carrying nearly highest instrument and currency risk in history.

Source

Reality

In 2019 the U.S. Federal Government can’t afford to pay a a high enough rate to keep investors in existing Federal debt much less a high enough rate that would attract new buyers in the free market to purchase 7.2 trillion in new debt the Federal Government needs to sell to finance their projected deficit spending through 2024.

In 2018 the average Treasury rate was 2.44%, debt service cost consumed 15.71% of total annual Federal revenue.

If Average Treasury yields returned to the 1968-2007 pre “Quantitative Easing” average of 8.29% debt service cost would consume 53.43% of total Federal revenue.

At 15.50% (levels we’ve seen before) debt service cost would consume 100% of Federal Revenue.

Total Federal Debt,  Reported Inflation  Debt Service Cost Total Federal Income

To bridge the gap between the amount of debt the Federal Government can sell on the open market and what they want to spend they’ll instruct their employees at the Federal Reserve to increase the creation of money from the current 720 billion to over 1 trillion annually.

Below is the amount of money the Federal Reserve has created to-date to buy Federal debt at non competitive rates the free market wouldn’t

The Federal Reserve updates this chart quarterly, by the end of 2024 the total will have increased from the current 2.54 trillion to more than 6 trillion USD.

S&P Global will threaten to downgrade U.S. debt again leading with a harsh warning when the next round of “Quantitative Easing” (or whatever the Fed calls it) increases to over 1 trillion annually. When the warning is ignored S&P Global will downgrade U.S. debt to AA potentially or AA- depending how hard the the Federal Government instructs the Federal Reserve to hit the “Quantitative Easing” throttle.

The creation of additional trillions coupled with U.S. debt downgrades will cause the U.S. dollar’s long-term trend to reverse from up to down.

When the dollar’s price action moves below the, EMA9 (exponential moving average 9) and the EMA9 moves below the EMA18 (blue line) trillions in U.S. dollar sales will engage as non U.S. investors liquidate long dollar positions and aggressive net new speculative shorts enter the market.

The upside is dollar devaluation will generate major market moves in tangible assets and quality sotcks, as the dollar’s buying power implodes. A lower dollar will also make U.S. produced good and services more competitive on the Global market.

Dollar index 2010 through today

When the the dollar turns lower Federal debt owned by non U.S. investors will follw the dollars lead and aggressively sell off, you can monitor this liquidation using this link.

Gold will will rally to a new all time high

Chart to monitor gold

With the BLS.GOV‘s bag of “Hedonic Quality Adjustment” tricks exhausted inflation will engage with reported inflation moving above 5.00% and actual inflation moving above 7.50%.

Reported inflation 1950 forward, updated monthly

The Fed will continue to create money by the trillions trying to continue to hold rates down and contain Federal borrowing and debt service cost with Federal debt owned by the Federal reserve exceeding 7 trillion by the end of 2027, to monitor the Fed’s creation of money to buy Federal debt use this link.

By the end of 2029 total U.S. Federal debt will exceed 35 trillion with over 50% of total Federal debt owned by the Federal Reserve and U.S. Government Trusts to monitor the increase in Federal debt use this link.

Unable to contain dollar and debt devaluation the Federal Government will enact “emergency and temporary” increases in all taxes. State and local governments will follow the Federal Government’s lead.

Just as the “emergency and temporary rate cuts” of 2008 that have stripped savers of trillions in interest income became permanent “emergency and temporary” increases in all taxes will become permanent as well.

In addition to the tax increases by 2035 Social Security Benefits, Military and Civilian Pensions will be cut, interest income generated by retirement savings will have disappeared and income as qualified by it’s buying power will have been decimated by true inflation.

By 2035 Personal Income in ounces of gold will have declined from 41.87 ounces in 2018 to less than 20 by 2035.

Source: Gold, Personal Income

The poverty rate in the United States will take out the old 2012 high of 15.90% (unless the U.S. Census Bureau learns BLS.GOV inflation calculation math).

The majority of the poverty rate will be retirees because of the Federal Government’s use of their payroll taxes for decades to pay for reckless deficit spending rather than investing their funds in marketable securities at competitive rates.

By cleaning out the liquidity in these Trusts and replacing it with non marketable “Special Issue Securities” at non competitive rates they have permanently reduced the amount these trusts can pay in retirement benefits.

Inflation misrepresentations by the BLS.GOV will continue to contain benefit increases to further reduce the standard of living for these 100+ million American retirees.

To monitor the poverty rate in the U.S. use this link.

20) Who are the the BLS.GOV & Federal Reserve and who do they work for?

The BLS.GOV

The BLS.GOV is a governmental statistical agency that collects, processes, analyzes and disseminates essential statistical data to the American public. It also is the main source of data for Congress, Federal agencies, State and local governments to determine cost increases for the majority of Governmental programs and business’s that contract with the Federal Government.

The BS.GOV also serves as a statistical resource to the United States Department of Labor and conducts research into how much families need to earn to be able to enjoy a decent standard of living.

The BLS.GOV has 2,639,500 employees with a median income of $104,980 per year.

It’s ironic that median income for a BLS.GOV public servant is $104,980 or 92.90% higher than U.S median Personal Income of $54,420 when theses public servants determine the amount of money necessary for an American to have a “decent” standard of living.

The Federal Reserve

The Federal Reserve is represented as an independent Central Bank with a charter to protect the integrity of the U.S. economy, financial system and dollar.

The members of the Board of Governors, including the Chairman, are nominated by the President of the United States and confirmed by the Senate.

The salaries for the board members and Chairman of the Federal Reserve are set by Congress. In 2019 Congress set Fed Chair J.H. Powell’s annual salary at $203,500 only $73,340 less than the U.S, postmaster general’s annual salary of $276,840. But don’t feel too bad for J.H. Powell when his term as Fed chair is over he’ll be able to join former Fed chair B.S. Bernanke and make up to $400,000 for a 2 to 4 hour “speaking engagement”.

The Federal Reserve unlike the U.S. postal service that lost nearly 4 billion last year makes money. Prior to “Economic Stimulus” and “Quantitative Easing” prior to 2008 the Federal Reserve had an average annual net income of 28.40 billion per year.

Since “Economic Stimulus” and “Quantitative Easing” their average annual income has jumped by 165.90% to 75.52 billion per year. I thought it would be higher since they can create trillions of dollars from nothing, backed by nothing to trade a market they control.

Unfortunately for the U.S.’s Independent Central Bank they have to forfeit all their profits to their boss the U.S. Treasury.

From 2008 through 2018 the Federal Reserve remitted over 830.7 billion in profits to the U.S. Treasury.

Source Federal Reserve

I truly wish we were trading off economic prosperity that was generated by ethical bipartisan Governments more concerned about the well being of the citizen rather the trying to destroy one another to gain control of Federal revenue and spending.

Over the last decade we’ve seen Global monetary credibility deteriorate at an accelerated pace forcing all of us to work harder, take greater risk, trade markets long and short to protect and enhance our family wealth.

The only upside to this mess is during the next decade as these extreme fundamentals fully engage it will fuel major market moves in metals, stocks, stock indices, energies, interest rates, currencies and commodities generating some of the best trading opportunities we will likely see in our entire trading careers.

21) These fully disclosed Automated Trading Account (ATAs) were designed to capture these moves.x

Link ATA Info
Page
Mini-mum Start Date Average Per Year Maximum Drawdown 2019
21.01 GSI-NC 250K 2011 65.56% -22.46% 70.49%
21.02 FX-C 100K 2007 74.02% -25.07% 8.10%
21.03 GE-F 50K 2014 106.19% -31.27% 156.94%
21.04 CFD-NC 50K 2015 96.19% -33.99% 105.01%
21.05 EUR-X 50K 2013 88.22% -33.99% 51.78%
21.06 FX-C 2X 50K 2007 149.02% -50.14% 16.24%
21.07 S&P-NC 35K 2011 100.96% -54.45% 100.31%
21.08 GC-NC 30K 2009 107.13% -39.68% 194.74%
21.09 LS Rates 30K 2015 73.89% -51.79% -16.87%
21.10 GC-C 25K 2005 105.82% -49.10% 150.49%
21.11 FX-NC 25K 2012 90.43% -51.89% 47.90%
21.12 S&P-C 25K 2007 113.94% -49.83% 102.63%
21.13 FX-CA 25K 2007 126.61% -54.85% 4.95%%
21.14 GCM-NC 12.5K 2009 89.43% -45.78% 154.44%
21.15 SPM-NC 12.5K 2011 92.11% -53.31% 81.83%
21.16 3M-FF 12.5K 2014 104.93% -49.48% 117.50%
21.17 LSR-M 10K 2015 78.55% -47.36% 0.01%
21.18 EUR-XM 7.5k 2015 71.69% -35.70% 42.53%
Risk Risk Disclosure Defining Risk Suspended & Closed

22) Create your own ATA portfolio using this link.

23) ATA structure

23.01 Automated Trading Accounts (ATAs) what they, are how they work
23.02 The ATA Fee Structure
23.03 Defining Overall Risk For Your ATA Account
23.04 Exchanges Traded
23.05 Brokerage Firms
23.06 How Balances Are Guaranteed Plus or Minus Trading
23.07 How To Open An Account

24) In addition to the ATAs we provide portfolio strategy for Hedge Funds, ETFs and CTA’s to provide our clients with additional diversification using the top performing programs though the safest most capable firms worldwide.

Ranking services we use

24.01 BarclayHedge
24.02 MorningStar
24.03 TipRanks
24.04 Institutional Investor
24.05 Stark 300
24.06 Autumngold

If you have any questions or you’d like me to walk you through any of our programs enabling you to verify performance and track them forward contact me.

Regards,
Peter Knight Advisor
Contact details

—————————————————————-

Privacy Notice

Disclosure

30 stocks that survived 2 recessions & bear markets.

Year-to-date performance +35.16%

Any company that has survived and profited in the United States over the last 20 years represents to me a far safer haven for mine and my families wealth than any Government debt instrument in 2019.

1.01) To create your own 2000 – 2019 portfolio of these stocks

Download this spreadsheet, open, enable editing, if you need a hand contact me

1.02) Trading all 30 the initial valuation January 2000 = $300,000,

Valuation September 2019, $12,619,207

Two losing years, 2002 -4.73% & 2008 -22.53%.

This assumes zero trading from January 2000 through September 2019.

1.03) With a little effort you can structure a portfolio that hasn’t had a losing year this century.

1.04) Initial valuation January 2000 $100,000,

Valuation September 2019 $5,190,844, no losing years.

This assumes zero trading from January 2000 through September 2019.


2) 1980 – 2019 performance for 29 of my “Old Timers”

2.01) Aaon Inc. (AAON) 2000-2019 +3,960.84%

Date Split
17-Jul-14 2/3 Stock split
03-Jul-13 2/3 Stock split
14-Jun-11 2/3 Stock split
22-Aug-07 2/3 Stock split
05-Jun-02 2/3 Stock split
01-Oct-01 2/3 Stock split

Source

2.02) Apple Inc. (AAPL) 2000-2019 +6,798.88%

Date Split
09-Jun-14 1/7 Stock split
28-Feb-05 1/2 Stock split
21-Jun-00 1/2 Stock split

Source

2.03) Amazon Inc (AMZN) 2000-2019 +2,755.45% (no splits)

Source

2.04) Credit Acceptance (CACC) 2000-2019 +10,460.44% (no splits)

Source

2.05) Churchill Downs IN (CHDN) 2000-2019 +1,900.16%

Date Split
28-Jan-19 1/3 Stock split

Source

2.06) Costar Group Inc. (CSGP) 2000-2019 +1,709.83% (no splits)

Source

2.07) Edwards Lifesciences (EW) 2000-2019 +6,401.75%

Date Split
14-Dec-15 1/2 Stock split
28-May-10 1/2 Stock split
27-May-10 1/1 Stock split

Source

2.08) Exponent Inc (EXPO) 2000-2019 +8,255.55%

Date Split
08-Jun-18 1/2 Stock split
05-Jun-15 1/2 Stock split
12-Jun-06 1/2 Stock split

Source

2.09) Fiserv (FISV) 2000-2019 +1.736.73%

Date Split
20-Mar-18 1/2 Stock split
17-Dec-13 1/2 Stock split
04-Sep-01 2/3 Stock split

Source

2.10) Heico Corp (HEI) +5,059.52%

Date Split
08-Jun-18 100/125 Stock split
20-Jun-18 4/5 Stock split
18-Jan-18 100/125 Stock split
02-Jan-18 4/5 Stock split
19-Apr-17 4/5 Stock split
05-Apr-17 100/125 Stock split
23-Oct-13 4/5 Stock split
25-Apr-12 4/5 Stock split
26-Apr-11 4/5 Stock split
27-Apr-10 4/5 Stock split
02-Jan-04 10/11 Stock split
08-Aug-01 10/11 Stock split
06-Jul-00 100/110 Stock split

Source

2.11) Iac/Interactive (IAC) 2000-2019 +930.81%

21-Aug-08 2000/2292 Stock split
09-Aug-05 20/18 Stock split
25-Feb-00 1/2 Stock split

Source

2.12) Idexx Laboratories (IDXX) 2000-2019 7,594.34%

Date Split
16-Jun-15 1/2 Stock split
27-Nov-07 1/2 Stock split

Source

2.13) Intuit Inc. (INTU) 2000-2019 870.06%

Date Split
07-Jul-06 1/2 Stock split

Source

2.14) JP Morgan Chase (JPM) 2000-2019 +293.43%

Date Split
12-Jun-00 2/3 Stock split

Source

2.15) Coca Cola Company (KO) 2000-2019 +337.35%

Date Split
13-Aug-12 1/2 Stock split

Source

2.16) Moody’s Corp (MCO) 2000-2019 +2,862.88%

Date Split
19-May-05 1/2 Stock split

Source

2.17) Mesa Labs Inc. (MLAB) +7,587.22% (no splits)

Source

2.18) Microsoft Corp (MSFT) 2000-2019 +335.31%

Date Split
18-Feb-03 1/2 Stock split

Source

2.19) Old Dominion Freight line (ODFL) 2000-2019 +11,143,06%

Date Split
10-Sep-12 2/3 Stock split
24-Aug-10 2/3 Stock split
23-Aug-10 1/1 Stock split
01-Dec-05 2/3 Stock split
21-May-04 2/3 Stock split

Source

2.20) Oracle Corp (ORCL) 2000-2019 +145.61%

Date Split
13-Oct-00 1/2 Stock split
19-Jan-00 1/2 Stock split

Source

2.21)  O’Reilly Automotive (ORLY) +5,902.29%

Date Split
16-Jun-05 1/2 Stock split

Source

2.22)  Pfizer (PFE) 2000-2019 +99.38% (no split)

Source

2.23) Roper industries (ROP) 2000-2019 +2,332,97%

Date Split
29-Aug-05 1/2 Stock split

Source

2.24)  Ross Stores (ROST) 2000-2019 +6,761.80%

Date Split
12-Jun-15 1/2 Stock split
16-Dec-11 1/2 Stock split
19-Dec-03 1/2 Stock split

Source

2.25) Sherwin Williams Company (SHW) 2000-2019 +2,957.87%

Date Split
24-Jun-16 2/1 Stock split

Source

2.26) Simulations Plus Inc (SLP) 2000-2019 +8,756.30%

Date Split
02-Oct-07 1/2 Stock split
14-Aug-06 1/2 Stock split

Source

2.27)  AT&T (T) 2000-2019 +135.40% (no splits)

Source

2.28) Tyler Technologies (TYL) 2000-2019 +5,806.06 (no splits)

Source

2.29) U.S. Physical Therapy (USPH) 2000-2019 +4,807.72%

Date Split
29-Jun-01 2/3 Stock split
08-Jan-01 1/2 Stock split

Source

Obviously you can enhance performance trading anything long and short or at the very least hedging your portfolio during major down trends using option collars, futures or if you’re non U.S. investor CFD’s

3) Linked here is an easy to learn & execute long/short trading program that has outperformed the market and captured the majority of all up and down trends since 1980.

The program is by no means the end all but it’s a great place to start and will demonstrate the benefits of trading long and short using a durable long-term trading methodology.

As simple as it is it’s captured the majority of every major trend up and down in these stocks since they went on the board and the overall market since 1980. I’ve fully disclosed it, provided all supporting charts & links enabling you to objectivity verify performance over last 39 years.

To walk you though it I’m going I’m using the S&P 500 from 1980 through 2019. The instrument I’m trading, the S&P 500 futures contact to keep it simple.

By getting familiar with the S&P 500 futures contact you can cost effectively hedge a diversified stock portfolio in nano seconds, 23.5 hours a day, 5.5 days a week or you can capture the trends up or down with zero restrictions on shorting.

Margin cost is also far more cost effective, current maximum margin rates for leveraged long S&P positions, 0.75% annually, on short you get paid 0.75% annually.

S&P futures also offer more leverage than any responsible trader would use (currently up to 23 to 1). Very low margin requirements, cost effective leverage and zero shorting restrictions do come in handy when you’re laying down a hedge after a 11 pm Trump Tweet that’s causing a market hemorrhage.

4) The S&P 500 has two contacts with high liquidity

4.01) The S&P Mini (ES) each 1.00 move = $50.00, contact value $50 X the Index price (2,975.00 X $50.00 = $148,750) margin requirement to control this position long or short is currently $6,300, daily dollar volume is approximately 300 billion USD, total clearing cost including all bid/ask spreads, brokerage commissions, exchange and regulatory fees less than $50.00 USD per $148,750 position.

4.02) S&P Micro (MES) each 1.00 move = $5.00, position value $5.00 X the Index price (2,975.00 X $5.00 = $14,875) current margin requirement to control this position long or short $630, daily dollar volume is approximately 7 billion USD, total clearing cost including all bid/ask spreads brokerage commissions, exchange and regulatory fees less than $25.00 USD per $14,875 position.

5) Index programs that use enhanced EMA trading methodology.

Link ATA Mini-mum Start Date Average Per Year Maximum Drawdown 2019
5.01 GSI-NC 250K 2011 63.85% -22.46% 50.82%
5.07 S&P-NC 35K 2011 99.67% -54.45% 85.13%
5.12 S&P-C 25K 2007 113.22% -49.83% 81.21%
5.15 SPM-NC 12.5K 2011 91.07% -53.31% 65.56%

6) Index Analysis, charts & quotes are updated every 10 minutes

# Analysis Page Hour 2 Hour Day Week
Trend
6.01 S&P 500 H 2H D W T
6.02 NASDAQ H 2H D W T
6.03 Dow H 2H D W T
6.04 Russell 2000 H 2H D W T
6.05 Euro Stoxx 50 H 2H D W T
6.06 Euro Stoxx E600 H 2H D W T
6.07 DAX Index H 2H D W T
6.08 CAC 40 H 2H D W T
6.09 Swiss Index H 2H D W T
6.10 Hang Seng H 2H D W T
6.11 Nikkei H 2H D W T
6.12 ASX 200 Index H 2H D W T
6.13 FTSE 100 H 2H D W T

7) Educational Resources

7.01) Futures  Educational Videos (60)
7.02) Futures Options Educational Videos (34)

Stock Index Educational Videos

7.03) What is a Futures contract?
7.04) What is an Equity Index Futures
7.05) About S&P Futures and Contract Specifications
7.06) Definition of Margin
7.07)
The Benefits of Futures Margins
7.08) Fundamentals and Equity Index Futures
7.09)
Who Uses Equity Index Products?

7.10) Why Trade Futures instead of ETFs?
7.11)
Hedging and Risk Management for Equity Index Futures

7.12 Trading Opportunities in Equity Index Futures
7
.13) How to Trade Select Sectors
7.14)
Explaining Call Options (Short and Long)
7.15) Explaining Put Options (Short and Long)
7.16) Trading Options During Economic Events
7.17 Option Collars what they are and the basics of how they work
7.18) Working Example of Collaring a Position
7.19) Equity Index Daily & Final Settlement
7.20) Rolling an Equity Position Using Spreads
7.21) What is Equity Index Basis?
7.22) Equity Index Notional Value and Price
7.23) The Importance of Depth (Volume)
7.24) Equity Intermarket Spreads
7.25) Implied Liquidity in Select Sector Futures
7.26
) Influence of Pricing on the Option for Equity Traders
7.27) Why Options on Futures Gives Added Benefit of Diversifying Risk
7.28) Alpha/Beta and Portable Alpha
7.29) Cash Equitization – Cash Drag in the Cross Hairs
7.30) Transition Management using Stock Index Futures
7.31) Beta Replication and Smart Beta
7.32) Additional Educational Information on Stock Indices

8) ATA summary & account opening procedure

8.01) Automated Trading Accounts (ATA)
8.02)
The ATA Fee Structure
8.03) Defining Overall Risk For Your Account

8.04) Exchanges Traded
8.05) Brokerage Firms
8.06) How Balances Are Guaranteed Plus or Minus Trading
8.07)
How To Open An Account

If you have any questions contact me

Regards,
Peter Knight Advisor

—————————————————————-

Privacy Notice

Disclosure

Trading the S&P Using EMAs

Sections in this report

1)_Performance Summary July 1980 – October 2019
2) Indicators
3) Trading Procedure
4) Qualifying this procedure over the last 39 years in less than 10 minutes
5) Trading multiple time periods simultaneously
6) Performance trading multiple time periods simultaneously
7) To track this procedure forward
8) Enhancing performance using collars
9) Automated Trading Accounts that use EMA Trading methodology

1) Performance Summary July 1980 – October 2019

Start Date Jul-80 Net No leverage 3,620.49%
End Date Oct-19 Net 2 to 1 leverage 7,240.98%
Net Gain $221,145.50 Net 3 to 1 leverage 10,861.47%
Max-Draw -$13,973.00 Net 4 to 1 leverage 14,481.96%
Winning % 62.50% Net 5 to 1 leverage 18,102.45%
AVG Win $11,164.11 Current (E-Mini ES) Margin 
Losing % 37.50% S&P (E-Mini ES) 1.00 = $50.00
AVG Loss -$1,814.71 S&P Micro (MES) 1.00 $5.00
All in -$100.00 Risk Disclosure Statement

2) Indicators

This program uses two exponential moving averages (EMA’s) an EMA9 and EMA18, rules are the same for any data period your trading from 30 seconds to monthly.

In this example I’m using weekly data, slow and easy enabling you to track this procedure is less than 20 minutes a week.

3) Trading Procedure

Longs:

If price action is cleanly above the EMA9 (the red line on the charts below) and the EMA9 is above the EMA18 (blue line) trade long. Risk on long positions, if price action moves below the EMA9, and the EMA9 moves below the EMA18 exit longs and reverse to short.

Shorts:

If price action is cleanly below the EMA9 and the EMA9 is below the EMA18 trade short. Risk on short positions, if price action moves above the EMA9, and EMA9 moves above the EMA18 exit shorts and reverse to long.

The EMA4.5 (green line) crossing the EMA9 and EMA18 is a wake up call warning you to get prepared to modify your position should the EMA9 cross the EMA18.

There are no secret filters, no holy grail algorithms and you don’t a direct line to Federal Reserve chair Powell or Trump to trade this.

4) Qualifying this procedure over the last 39 years in less than 10 minutes

To make performance verification easy I’ve divided the last 39 years into 13, 3 year periods, circled all trades and linked all charts with trade date, price, entries & reversals enabling you to easily verify performance.

Cumulative net profit trading 1 S&P E-Mini (ES) is shown in the last vertical column on your right.

I’m deducting a ridiculously high all in cost $100.00 per trade (all in = bid/ask spreads, brokerage, all exchange & regulatory fees)

Period 1 July 1980 – July 1983

Date & Chart L /S Price Position Profit Loss Cumulative
28-Jul-80 Long 120.78 $6,039.00 $0.00
06-Jul-81 Short 129.37 $6,467.50 $329.50 $329.50
06-Sep-82 Long 120.97 $6,048.50 $320.00 $649.50

Date – Chart L or S Price Value Profit/Loss Cumulative
30-Jan-84 Short 160.91 $8,045.50 $1,897.00 $2,546.50
14-Jan-85 Long 171.32 $8,566.00 -$620.50 $1,926.00
06-Oct-86 Short 233.84 $11,692.00 $3,026.00 $4,952.00

Period 3 Chart July 1986 – July 1989 & Daily here for 1987 crash

Date – Chart L or S Price Value Profit/Loss Cumulative
03-Nov-86 Long 245.77 $12,288.50 -$696.50 $4,255.50
15-Oct-87 Short 298.08 $14,904.00 $2,515.50 $6,771.00
06-Jun-88 Long 266.45 $13,322.50 $1,481.50 $8,252.50

Period 4 July 1989 -July 1992

Date – Chart L or S Price Value Profit/Loss Cumulative
15-Jan-90 Short 339.93 $16,996.50 $3,574.00 $11,826.50
07-May-90 Long 340.53 $17,026.50 -$130.00 $11,696.50
30-Jul-90 Short 344.86 $17,243.00 $116.50 $11,813.00
14-Jan-91 Long 332.23 $16,611.50 $531.50 $12,344.50
18-Nov-91 Short 376.14 $18,807.00 $2,095.50 $14,440.00
23-Dec-91 Long 387.05 $19,352.50 -$645.50 $13,794.50

Period 5 July 1992 -July 1995

Date – Chart L or S Price Value Profit/Loss Cumulative
28-Sep-92 Short 414.27 $20,713.50 $1,261.00 $15,055.50
26-Oct-92 Long 418.68 $20,934.00 -$320.50 $14,735.00
28-Mar-94 Short 460.58 $23,029.00 $1,995.00 $16,730.00
01-Aug-94 Long 458.28 $22,914.00 $15.00 $16,745.00
21-Nov-94 Short 461.69 $23,084.50 $70.50 $16,815.50
16-Jan-95 Long 464.78 $23,239.00 -$254.50 $16,561.00

Period 6 July 1995 – July 1998

The EMA9 never crossed below the EMA18, the long was maintained during this 3 year year period (not you’d have to roll this position quarterly from one delivery month the the next)

Period 7 July 1998 – July 2000

Date – Chart L or S Price Value Profit/Loss Cumulative
03-Aug-98 Short 1089.5 $54,472.50 $31,133.50 $47,694.50
26-Oct-98 Long 1070.7 $53,533.50 $839.00 $48,533.50
27-Sep-99 Short 1282.8 $64,140.50 $10,607.00 $59,140.50
25-Oct-99 Long 1362.9 $68,146.50 -$4,106.00 $55,034.50

Period 8 July 2000 – July 2003

Date – Chart L or S Price Value Profit/Loss Cumulative
25-Sep-00 Short 1450.3 $72,515.00 $4,268.50 $59,303.00
24-Dec-01 Long 1161 $58,051.00 $14,364.00 $73,667.00
28-Jan-02 Short 1122.2 $56,110.00 -$2,041.00 $71,626.00
04-Mar-02 Long 1164.3 $58,215.50 -$2,205.50 $69,420.50
15-Apr-02 Short 1125.2 $56,258.50 -$2,057.00 $67,363.50
28-Apr-03 Long 930.08 $46,504.00 $9,654.50 $77,018.00

Period 9 July 2003 – July 2006

Date – Chart L or S Price Value Profit/Loss Cumulative
12-Jul-04 Short 1101.4 $55,069.50 $8,465.50 $85,483.50
06-Sep-04 Long 1123.9 $56,196.00 -$1,226.50 $84,257.00
18-Apr-05 Short 1152.1 $57,606.00 $1,310.00 $85,567.00
23-May-05 Long 1189.3 $59,464.00 -$1,958.00 $83,609.00
10-Oct-05 Short 1186.6 $59,328.50 -$235.50 $83,373.50
31-Oct-05 Long 1220.1 $61,007.00 -$1,778.50 $81,595.00
05-Jun-06 Short 1252.3 $62,615.00 $1,508.00 $83,103.00

Period 10 June 2006 – July 2009

Date – Chart L or S Price Value Profit/Loss Cumulative
21-Aug-06 Long 1295.1 $64,754.50 -$2,239.50 $80,863.50
30-Jul-07 Short 1458.9 $72,946.50 $8,092.00 $91,195.00
17-Sep-07 Long 1484.2 $74,212.00 -$1,365.50 $89,829.50
05-Nov-07 Short 1453.5 $72,676.50 -$1,635.50 $88,194.00
04-May-09 Long 879.21 $43,960.50 $28,616.00 $116,810.00

Period 11 July 2009 – July 2012

Date – Chart L or S Price Value Profit/Loss Cumulative
17-May-10 Short 1136.5 $56,826.00 $12,765.50 $129,575.50
06-Sep-10 Long 1109.3 $55,462.50 $1,263.50 $130,839.00
01-Aug-11 Short 1286.9 $64,347.00 $8,784.50 $139,623.50
17-Oct-11 Long 1224.5 $61,223.50 $3,023.50 $142,647.00
14-May-12 Short 1351.9 $67,596.50 $6,273.00 $148,920.00
02-Jul-12 Long 1362.3 $68,116.50 -$620.00 $148,300.00

Period 12 July 2012 – July 2015 The EMA9 never crossed below the EMA18, maintained the long for this 3 year year period.

Period 13 July 2015 – Current

Date – Chart L or S Price Value Profit/Loss Cumulative
17-Aug-15 Short 1970.9 $98,544.50 $30,328.00 $178,628.00
12-Oct-15 Long 2033.1 $101,655.50 -$3,211.00 $175,417.00
04-Jan-16 Short 1922 $96,101.50 -$5,654.00 $169,763.00
07-Mar-16 Long 2022.2 $101,109.50 -$5,108.00 $164,655.00
08-Oct-18 Short 2767.1 $138,356.50 $37,147.00 $201,802.00
04-Feb-19 Long 2707.9 $135,394.00 $2,862.50 $204,664.50
31-Oct-19 Settle 3037.5 $151,875.00 $16,481.00 $221,145.50

Risk Disclosure Statement

When you get the hang of the weekly you’ll find trading multiple time periods will produce and better return on risk (based on OTE)

5) Trading multiple time periods simultaneously

In this example I’m trading the same EMA9 and EMA18 on 4 different time periods, 120 minute, daily, weekly and monthly simultaneously over an 18 month period.

I’ve deducted $38.90 per round-turn trade to cover all bid/ask spreads, clearing, and regulatory fees including automated order entry and 24 hour a day position monitoring.

The ATA brokerage team in Chicago places and monitor all trades, guarantee order accuracy and an an account risk (called a maintenance balance) defined in writing before the first trade goes on.

A maintenance balance is a stop loss based on the equity of the account, should the account balance go down to the defined maintenance balance all positions would be liquidated automatically on or before the next close or the ATA team is liable. A maintenance works like a stop close only order for example if your maintenance balance is 100K and your balance drops to 99.5K the firm has until the next settlement to get you flat which could leave  liquidation value below 99.5K.

6) Performance trading multiple time periods simultaneously

Linked here  is a spreadsheet containing the trade-by-trade performance, I’ve linked all charts with entry, offsets, dates & prices enabling easy performance verification, download, open and enable editing (with some operating systems you may have to save it as a new file)

On the spreadsheet you can change the number of contracts traded for each time period in cells B5, B7, B9 & B11.

To change the staring balance see cell C3.

Contract size cell B3, use $50.00 a point for trading the E-Mini S&P (ES) or $5.00 a point for S&P Micro (MES).

To modify the Bid/Ask spread and all fees deducted per trade change cell B13 to $39.80 for the E-Mini S&P (ES) or $12.95 for the S&P Micro (MES).

Margin requirement, cell B15, use $6,300 for S&P E-Mini (ES) or $630 for S&P Micro (MES)

Performance below is based on trading one E-Mini S&P (ES) contract for each time period, 120 Minute, Daily, Weekly and Monthly.

Net profit = $163,147.10
Maximum drawdown = -$23,158.90
Drawdown period 26 March 2018 – 6 July 2018
Total number of trades = 180
Average winning trade = $2,565.57
Average losing trade = $819.64
Percent winning trades = 41.67%
Percent losing trades = 58.33%
Maximum margin requirement = $25,200 (shown in cell D17)
Closed out trades = $140,798.40 (shown in cell D13)
Open trade equity (14 August) = $23,348.60 (cell D15)
Starting balance 2 January 2018 = $100,000.00 (cell D3)
Ending balance 28 June 2019 = $263,147.00 (cell D17)
Trade-by-trade performance = vertical column M

Linked here is the spreadsheet

7) To track this procedure forward

Follow procedure reviewed in section 3, use the same procedure for all 4 time periods.

The EMA’s are already dropped into to charts, charts are updated every 10 minutes enabling you to track trades for the period(s) of your choice as they occur.

120 minute price bars use this chart  
Daily
price bars this chart
Weekly
this chart
Monthly
this chart

When all 4 periods generate a short you’ve just confirmed the beginning of the next bear market, 119 years of price history tells us we won’t see a new significant high for a minimum of 2 years and up to 13.5 years.

8) Obviously you can enhance performance using additional indicators for trend confirmation like the ones linked here, trading additional time periods simultaneously and/or implementing strategies like collars that define risk on every trade and for the duration of every trading period. I did this S&P 500 Collar Spreadsheet a few years back it’ll help you with collars.

9) Automated Trading Accounts that use EMA Trading methodology

Link ATA Info
Page
Mini-mum Start Date Average Per Year Maximum Drawdown 2019
9.01 GSI-NC 250K 2011 65.56% -22.46% 70.49%
9.02 FX-C 100K 2007 74.02% -25.07% 8.10%
9.03 GE-F 50K 2014 106.19% -31.27% 156.94%
9.04 CFD-NC 50K 2015 96.19% -33.99% 105.01%
90.05 EUR-X 50K 2013 88.22% -33.99% 51.78%
9.06 FX-C 2X 50K 2007 149.02% -50.14% 16.24%
9.07 S&P-NC 35K 2011 100.96% -54.45% 100.31%
9.08 GC-NC 30K 2009 107.13% -39.68% 194.74%
9.09 LS Rates 30K 2015 73.89% -51.79% -16.87%
9.10 GC-C 25K 2005 105.82% -49.10% 150.49%
9.11 FX-NC 25K 2012 90.43% -51.89% 47.90%
9.12 S&P-C 25K 2007 113.94% -49.83% 102.63%
9.13 FX-CA 25K 2007 126.61% -54.85% 4.95%%
9.14 GCM-NC 12.5K 2009 89.43% -45.78% 154.44%
9.15 SPM-NC 12.5K 2011 92.11% -53.31% 81.83%
9.16 3M-FF 12.5K 2014 104.93% -49.48% 117.50%
9.17 LSR-M 10K 2015 78.55% -47.36% 0.01%
9.18 EUR-XM 7.5k 2015 71.69% -35.70% 42.53%
Risk Risk Disclosure Defining Risk Suspended & Closed

10) Create you own ATA portfolio using this link.

10) ATA summary & account opening procedure

Automated Trading Accounts (ATA)
The ATA Fee Structure
Defining Overall Risk For Your Account
Exchanges Traded
Brokerage Firms
How Balances Are Guaranteed Plus or Minus Trading
How To Open An Account

If you have any questions contact me.

Regards,
Peter Knight Advisor

—————————————————————-

Privacy Notice

Disclosure

 

 

3MFF (3 Month & Fed Funds – NC Trend)

1) Performance February 2014 – November 2019

Recommended Starting Balance $12,500.00
Cumulative Net Profit
$69,744.45
Maximum Drawdown (49.48%)
($6,184.43)
Best Year 2016 +180.00%
$22,500.20
Worst Year 2018  +3.33%
$415.63
2014-2019 Average +95.19%
$11,956.19
2019  72.13%
$9,015.77

2) Charts for online reviews, full disclosure of methodology in section 5

3 Month Weekly 3 Month Daily
Fed Funds Weekly Fed Funds Daily
2014 2015
2016 2017
2018 2019

3) Monthly and Annual Performance

This program trades intra & inter market spreads with the trend. Performance is based on trading one $12,500 unit, never adding units and withdrawing all net profits annually.  The program has a realistic risk factor of $8,000 USD per unit, if you are not in a position to comfortably assume this risk you should not participate in this program.

4) What were trading

4.01) Eurodollar Interest Rate Futures Contracts
4.02) Fed Fund Futures contracts

5) Trading Procedure

Indicators
5.01) This program trades with 2 exponential moving averages (EMAs),
an EMA9 (red) and EMA18 ( (blue).

Long trades
5.02) If price action is above the EMA9 and the EMA9 is above EMA18 establish a long position, risk on long positions, if price action moves below the EMA9 & EMA9 moves below EMA18 reverse to short.

Short trades
5.03) If price action is below the EMA9 and the EMA9 is below EMA18 establish a short position, risk on short positions, if price action moves above EMA9 & EMA9 moves above EMA18 reverse to long.

5.04) Trades 1 May 2017 – 7 October 2019
97.7450 = long entry 1 May 2017.
97.9100 = reverse to short , 9 October 2017, gain = $2,062.50.
97.0000 = reverse to long, 26 November 2017, gain = $11,375.00.
98.6650 = 7 October 2019, open trade equity (OTE) = $$20,812.50.
Total gain including OTE 1 May 2017 – 7 October 2019 = $34,250.00.
Contract = GEM20 (3 month rates June 2020 delivery).
Position size = 5 contracts GEM20, for the entire period, no rollovers.
Maximum margin requirement from 1 May 2017 to 7 October 2019 = $2,900 USD

March 2017 through today chart using weekly data

6) Links to monitor trades forward

Link Analysis Pages Daily Weekly Trend
6.08 3 Month Deposits Daily Weekly Trend
6.09 30 Day Fed Funds Daily Weekly Trend

7) Try it on 3 month rates using the weekly EMA 9, EMA18 data  from 2014 – 2019 charts linked below.

Each 0.01 =$125.00 per trading unit

Charts
2014 2015
2016 2017
2018 2019

8) Or any of the 18 interest rate contacts we trade using any data period from 2 hours to monthly 

Link US Rate Analysis Pages 2 Hour Day Week Trend
8.01 3 Month Deposits 2 Hour Day Week Trend
8.02 30 Day Fed Funds 2 Hour Day Week Trend
8.03 2 Year Treasury 2 Hour Day Week Trend
8.04 5 Year Treasury 2 Hour Day Week Trend
8.05 10 Year Treasury 2 Hour Day Week Trend
8.06 Ultra 10-Year T-Note 2 Hour Day Week Trend
8.07 Ultra T-Bond (30 year) 2 Hour Day Week Trend
8.08 30 Year Treasury 2 Hour Day Week Trend
Link Non US Analysis Pages 2 Hour Day Week Trend
8.09 3 Month EuriBor 2 Hour Day Week Trend
8.10 3 Month Sterling 2 Hour Day Week Trend
8.11 Euro Schatz (2 year) 2 Hour Day Week Trend
8.12 Euro Bobl (5 year) 2 Hour Day Week Trend
8.13 Euro Bund (10 year) 2 Hour Day Week Trend
8.14 Euro OAT (10 year) 2 Hour Day Week Trend
8.15 Long Gilt (10 year) 2 Hour Day Week Trend
8.16 Euro BTP Long-Term 10 2 Hour Day Week Trend
8.17 Euro Buxl (30 year) 2 Hour Day Week Trend
8.18 Euro Bono Long-Term 2 Hour Day Week Trend

9) Interest Rate Futures/Options Educational Videos and Resources

9.01) Futures Educational Videos (33)
9.02) Futures Options Educational Videos (34)

9.03) Today’s Treasury Rates (Bloomberg)
9.04) Today’s probability of a rate cut or hike at the next Fed meeting
9.05) Federal Reserve,  3 month 2 year, 5 year, 10 year & 30 year data
9.06) Today’s priced in rate or cut or hike though December 2020
9.07) Treasury calculator
9.08) BLS.GOV Inflation Calculator
9.09) Interest Rate Futures Educational Page
9.10) Interest rate 3 month to 30 year curve
9.11) Fed Meetings and Press Conferences
9.12) Understanding the FOMC Report

10) Program Structure and Account Opening Procedure

10.01) Automated Trading Accounts (ATA)
10.02) The Fee Structure For This Program
10.03) Defining Overall Risk For Your Account

10.04) Exchanges Traded
10.05) Brokerage Firms
10.06) How Balances Are Guaranteed Plus or Minus Trading
10.07) How To Open An Account

If you have any questions contact me.

Regards,
Peter Knight Advisor

—————————————————————-

Privacy Notice

Disclosure

EUR-X Mini

1) Performance Summary March 2013 – November 2019

Recommended Starting Balance $12,500.00
Cumulative Net Profit
$55,718.55
Maximum Drawdown (-43.19%)
($5,398.70)
Best Year 2014 +116.96% $14,619.97
Worst Year 2013 +35.43% $4,428.30
2013-2019 Average +69.47% $8,683.41
2019 +40.21%
$5,025.72

Performance is based on trading one $12,500 unit, never adding units and withdrawing all net profits annually. The program uses leverage, has a realistic risk factor of $6,750 per unit, if you are not in a position to comfortably assume this risk you should not participate in this program.

Risk Disclosure Defining Account Risk

1) Markets Traded, contact me and I’ll walk you through how we trade this program when we’re done you’ll be able to verify past performance and track trades as they occur.

# Cross Daily Weekly Opinion
1.01 EURAUD Daily Weekly Opinion
1.02 EURCAD Daily Weekly Opinion
1.03 EURCHF Daily Weekly Opinion
1.04 EURDKK Daily Weekly Opinion
1.05 EURGBP Daily Weekly Opinion
1.06 EURHKD Daily Weekly Opinion
1.07 EURHUF Daily Weekly Opinion
1.08 EURJPY Daily Weekly Opinion
1.09 EURNOK Daily Weekly Opinion
1.10 EURNZD Daily Weekly Opinion
1.11 EURSEK Daily Weekly Opinion
1.12 EURSGD Daily Weekly Opinion
1.13 EURTRY Daily Weekly Opinion
1.14 EURUSD Daily Weekly Opinion
1.15 EURZAR Daily Weekly Opinion

4) Program Structure and Account Opening Procedure

2.01) Automated Trading Accounts (ATA)
2.02) The Fee Structure For This Program
2.03) Defining Overall Risk For Your Account

2.04) Exchanges Traded
2.05) Brokerage Firms
2.06) How Balances Are Guaranteed Plus or Minus Trading
2.07) How To Open An Account

If you have questions contact me.

Regards,
Peter Knight

—————————————————————-

Privacy Notice

Risk Disclosure

 

 

EUR-X

1) Performance Summary March 2013 –  November 2019

Recommended Starting Balance $50,000.00
Cumulative Net Profit
$278,096.97
Maximum Drawdown (43.97%)
($21,986.72)
Best Year 2014 +146.20% $73,099.85
Worst Year 2013 +44.28% $22,141.52
2013-2019 Average +86.68% $43,339.79
2019 +49.27%
$24,632.85

Performance is based on trading one $50,000 unit, never adding units and withdrawing all net profits annually. The program uses leverage, has a realistic risk factor of $25,000 per unit, if you are not in a position to comfortably assume this risk you should not participate in this program.

Risk Disclosure    Defining Account Risk

1) Markets Traded, contact me and I’ll walk you through how we trade this program when we’re done you’ll be able to verify past performance and track trades as they occur. (Primary markets in bold)

# Cross Daily Weekly Opinion
1.01 EURAUD Daily Weekly Opinion
1.02 EURCAD Daily Weekly Opinion
1.03 EURCHF Daily Weekly Opinion
1.04 EURDKK Daily Weekly Opinion
1.05 EURGBP Daily Weekly Opinion
1.06 EURHKD Daily Weekly Opinion
1.07 EURHUF Daily Weekly Opinion
1.08 EURJPY Daily Weekly Opinion
1.09 EURNOK Daily Weekly Opinion
1.10 EURNZD Daily Weekly Opinion
1.11 EURSEK Daily Weekly Opinion
1.12 EURSGD Daily Weekly Opinion
1.13 EURTRY Daily Weekly Opinion
1.14 EURUSD Daily Weekly Opinion
1.15 EURZAR Daily Weekly Opinion

4) Program Structure and Account Opening Procedure

2.01) Automated Trading Accounts (ATA)
2.02) The Fee Structure For This Program
2.03) Defining Overall Risk For Your Account

2.04) Exchanges Traded
2.05) Brokerage Firms
2.06) How Balances Are Guaranteed Plus or Minus Trading
2.07) How To Open An Account

If you have questions contact me.

Regards,
Peter Knight

—————————————————————-

Privacy Notice

Risk Disclosure