March 15, 2017 End of the US Bull Market

FOMC meeting is today March 15, 2017 with an almost certainty of a rate hike by the Fed.

Here are my notes on why this may be the start of a decline (Source: David Stockman Contra Corner podcast).

History
- Greenspan came into the Fed, the market dropped 25% in one day in Oct 1987.
- He panicked and found the printing press and started printing money at a very high rate
- Pumping liquidity into the market and supporting Wall Street.
- Bought Government Bonds with money made out of thin air.
- All the debt started with Regan, which kept building and got parked on the balance sheet of the Federal Reserve and other central banks.
Today 2017
- Trump is faced with a massive debt of US $20 Trillion
- Currently this is not realized on the balance sheets as Obama in 2015 put a temporary holiday on the debt ceiling. Which means the treasury can borrow as much as they want since then and they did.
- On March 15, 2017 this debt ceiling expires so whatever is the number on that day will be realized on the balance sheets
- The treasury will have about $200 billion or so of cash and they are burning cash at a rate of $75 billion/mon which means by June/July they will be out of cash and the government will be in a state of crisis as they cannot borrow and all issues with this debt will come into play.
- This may prevent Trump’s plans for tax cuts and spending on Defense that he wants to do.
- Things that Wall Street thinks will jump start the economy may not happen.
On March 15th, the debt ceiling expiry is automatic and both Republicans and Democrats have to agree on what’s next, and they only have a few months to spend the surplus. Whether the result is an additional raising of the debt ceiling or something else, it may eventually lead to the US Government defaulting on debt and shutting down.

Conclusion

Although Stockman is an insider and contrarian, it does not rule out some of the facts mentioned. If the story does play out as he foresees then Wall Street would take a beating. Therefore in being ready for this potential correction, I will be considering more of a defensive position in gold and cash.

Best,
Michael

Before proceeding to the Mypfund.com website, please note the following terms and conditions.

Mypfund.com is an information sharing website with topics affecting the personal financial statement. With fund investments, we do not provide any personal investment advice. All information is strictly for information purposes only and does not contain any advice, suggestion or view in whatsoever form by Mypfund and its affiliates. Therefore no investment decision should be made upon the information or data mentioned in this website. Some information contained here is provided/sourced by information providers or it is being re-transmitted in the ordinary course of business to you for information and reference purposes only.

Mypfund endeavours to ensure the accuracy and reliability of the information provided but does not guarantee its accuracy or reliability and accepts no liability (whether in tort or contract or otherwise) for any loss or damage arising from any inaccuracies or omission. Some of the information in this document may contain projections or other forward-looking statements regarding future events or future financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ significantly. Any opinion or estimate contained in this document is made on a general basis and is not to be relied on by the reader as advice. Mypfund reserves the right to make changes and corrections to its opinions expressed in this document at any time, without notice. Any unauthorised disclosure, use or dissemination, either whole or part, of this website is prohibited and this website or its parts are not to be reproduced, copied, made available to others without the written consent of Mypfund.

Investment involves risks and the values of investments may go up and down. Investment returns are not guaranteed. Past performance is not indicate of future performance. This material is intended for educational and sharing purposes using real live accounts and examples. It is not to persuade you into making specific investments. For funds, investors should read the relevant fund’s prospectus for further details including risk factor before making any investment decision. The contents of the website have not been review by the Hong Kong Securities and Futures Commission (SFC).

Your use of our website is governed by the Terms of Use in effect on the date this website is accessed by you.