…if governments and corporations succeed in hacking the human animal, the easiest people to manipulate will be those who believe in free will… Humans certainly have a will – but it isn’t free. You cannot decide what desires you have… Every choice depends on a lot of biological, social and personal conditions that you cannot determine for yourself. I can choose what to eat, whom to marry and whom to vote for, but these choices are determined in part by my genes, my biochemistry, my gender, my family background, my national culture, etc. – and I didn’t choose which genes or family to have.

– Yuval Noah Harari, 21 Lessons for the 21st Century

YOUGHAL, IRELAND – The Dow closed down yesterday. Last Friday marked five straight weeks of losses on the index. It hasn’t done that in eight years.

Then, yesterday, it tried to rally… and failed.

The yield curve – the difference between short- and long-term bond yields – is inverted… a classic sign of a recession.

Retail sales are headed down. Appliances, too. GDP growth. Industrial production. Hours worked. New hires. Durables. Manufacturing new orders (excluding defense). Construction spending. All down…

A recession is approaching. And our Crash Alert Flag is up on the pole… flapping… waiting… warning.

The signals are there. They are unmistakable. But we don’t know the future. All we know for sure is that almost everything that is said about the economy of the present is fraudulent, incorrect, or misleading.

It is “solid,” say the folks on CNBC. It is “doing great,” says the Fed. It’s the “best economy we’ve ever had,” says Donald Trump, and it’s going to get a lot better.

None of this is true. Zero.

Fake, Fragile, and Failing

The numbers, the charts, the anecdotes, the old-timers, the tea leaves, and the stars tell us to take cover. This is almost exactly the same economy that we had under Barack Obama – fake, fragile, and failing.

Put real interest rates back up to 5%, and it would shrivel up and die in minutes. Take away the fake money, and the net worth of America’s richest families would fall by some $30 trillion (as we will see in a moment). Come the next crisis – the whole shebang falls apart.

And now, shuffling along, bent by age, infirmity, and self-delusion… one of the longest expansions in history is nearing its end.

That is important enough… since it will unleash some nasty beasts: a stock market collapse, a depression, Modern Monetary Theory (MMT), inflation, money-printing, $2 trillion deficits, foolish, “shovel-ready” infrastructure programs, negative lending rates… and more!

Where’s the Money?

But we have even bigger, more important dots to connect today.

Markets make opinions. Today, we linger over what opinions markets are making now. Household net worth is at an all-time high, at 535% of GDP. Surely, people must feel fat and sassy, no?

And with the Dow near its top, people think “stocks for the long run” is a pretty good idea. No matter what else you may say about Donald J. Trump, they think, “He’s done a great job with the economy.”

But these are opinions, not facts.

Real growth rates have been sinking for years. Officially, GDP growth per person now creeps along at about 1% per year. As low as that is, it doesn’t really tell the full story.

Nor does household net worth (HNW). The total wealth of U.S. households is about $105 trillion. It puts the average over $800,000 per household.

But half of retirees have saved nothing. And 40% of households can’t scrape together $1,000 for an emergency.

So, where’s the money?

It must be concentrated in a very few hands – at the top. Real wealth is created by the economy. And HNW normally measures about 380% of GDP. For every dollar of GDP output, the capital markets score about $3.80 worth of capital value (in housing, stocks, bonds, and other assets).

Occasionally, markets get ahead of themselves. HNW hit a high of 450% of GDP in the dotcom bubble of 1999… and then, it hit 486% in the housing bubble of 2007. Both were followed by corrections.

And now, at 535% of GDP, HNW is not only higher than ever… it’s about 150% of GDP higher than usual. With GDP around $20 trillion, that means it must reflect about $30 trillion of wealth that wasn’t produced by the economy…

The average person got none of this fake wealth. Real wages have remained almost unchanged for nearly 40 years. But prices for average things have gone up. Medical care and education, for example, are far more expensive than they were during the Carter Administration.

Zeitgeist Shift

But let’s stick with the basics. Technology and credit have made today’s houses and pickup trucks bigger and better than 1979 models. But the poor working stiff only has his time to sell, and he has to sell twice as much of it to buy them.

What kind of progress is this? And what opinions do you develop when this happens to you?

You are not getting richer; you’re getting ripped off. The positive-sum game has become a negative-sum game.

Over the last couple of weeks, we’ve identified the shift already taking place. It is a shift of attitude… of the zeitgeist… from win-win to win-lose.

It is happening not just in the U.S., but all over the world. And not just in trade policy, but in foreign policy, monetary policy, and domestic policies, generally.

It is a shift away from risk… away from open societies with open markets… away from independence and free speech… away from the European Union… away from the free movement of people and goods… and away from the “liberalizing,” “globalizing” trends of the last 70 years.

And where does it lead? Towards what? Is that civilization itself we see backing up?

More tomorrow…

Regards,

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Bill

MARKET INSIGHT: WHY CRYPTO IS GROWING UP

Editor’s Note: Regular readers know Bill is skeptical of cryptocurrencies. But the crypto market is rebounding after a long “Crypto Winter.” Bitcoin is up 132% year-to-date.

So today, we pass the baton to world-renowned crypto expert, Teeka Tiwari. He believes this rally is just getting started. And below, he shows readers why the next crypto boom will be bigger than the last… as will the profits…

By Teeka Tiwari, Editor, Palm Beach Confidential

I recently came back from cryptocurrency conferences in Hong Kong and Singapore.

I had many meetings with a lot of different folks who serve the cryptocurrency space. The general mood was, to be blunt, quite glum.

I don’t take joy in other people’s suffering. But I was excited because removing the carnival atmosphere we had in previous years was long overdue.

What we’re now seeing is the great projects in the space not only survive, but thrive. They’re executing along their road map.

People are now asking better questions, and they’re focusing on the underlying technology and the use cases of these projects.

It’s wonderful to see because, in any technologically driven market – whether it’s in the stock market or cryptos – you go through these periods of excess.

And with cryptocurrencies, this is not our first rodeo.

In 2011, we saw the entire market drop 94%. In 2013, we saw the entire market drop more than 85%. Coins like Litecoin went from the mid-$50s down to about $1. Then, in the next bull market, it went to over $300.

Many of my friends, acquaintances, and contacts were in the space in 2011 and 2013. I’ve asked them, “What was it like back then, versus what it’s like now?”

And the answer’s the same: People come in, prices get ahead of themselves, they crash. Everybody thinks it’s all dead and done.

But about a year and change goes by, and suddenly, it starts to percolate again. It explodes to a higher high, gets overdone, and crashes. And then, you have this base-building process all over again.

That’s where we’ve been for the past few months.

But here’s what’s interesting about where we are right now: Never in the history of this asset class have so many credible players started to take the underlying asset seriously.

The key takeaway I got from my meetings in Hong Kong and Singapore is that we are seeing many large corporations start to actively use blockchain technology and cryptocurrencies in different aspects of their businesses.

For example, you may have heard that JPMorgan Chase is creating its own internal coin to move capital around.

Now, it’s not really a coin, it’s a derivative. But the fact that JPMorgan is positioning it as a crypto is educating the entire market on the benefit of this technology.

Then, there’s Facebook Coin. Facebook has about 2.7 billion subscribers. And now, it’s going to have to train them on how to use what they are calling a cryptocurrency.

Again, it’s not a real cryptocurrency. But Facebook is riding the coattails of the interest around this technology. And it’s going to introduce a lot of people to this space.

It’s bringing cryptos to mom-and-pop investors – a huge global audience that ordinarily would not be exposed to them. And that is incredibly bullish for the underlying market.

Bit by bit, we are seeing the maturing of the space in front of our eyes. This adolescent is growing into a young adult.

As we look forward, any number of events can trigger a new boom in this space, including:

  • An exchange-traded fund (ETF)

  • The Bakkt or another trading platform coming live

  • New financial products built around a cryptocurrency that make it easier to buy, sell, and hold.

But I promise you, the next boom will be bigger than the last – whether an ETF or a new exchange kicks it off.

And when it does, the amount of money coming into this market will far eclipse any amount of money that came in before.

– Teeka Tiwari

P.S. Is the Crypto Winter over? What can you expect for the rest of 2019? What am I hearing from my insider network?

I know you have plenty of questions about the current crypto rally… That’s why, tonight at 8 p.m. ET, I’m hosting my first crypto event of the year… and devoting the entire time to answering your questions.

Now, I can’t give personalized investment advice, but I’ll go as long as it takes to cover everything.

To reserve your spot and submit your questions to this free event, click here and enter your email address…

FEATURED READS

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While it may be easy to find a job in the U.S., finding a good one is another story. And according to the Federal Reserve’s latest report on economic well-being, the “gig economy” is partly to blame. Gig workers – independent workers with short-term jobs – have struggled much more than the average person to make ends meet…

Why Mom-and-Pop Suppliers Will Lose Business With Amazon
Amazon is poised to make one of its biggest strategy shifts in almost 20 years. The e-commerce giant is looking to part ways with thousands of mom-and-pop suppliers over the next few months. This purge could send these small sellers scrambling, while big-name brands like Procter & Gamble take their place…

A Regulatory Agency Takes a Shot at Blockchain
The Financial Action Task Force is an international regulatory body with 38 member countries. Its stated purpose is to combat money laundering. And it just took a shot at the budding blockchain industry…

MAILBAG

Today, readers compare modern America to its oldest pastime… offer their perspective from Down Under… and claim Trump’s supporters are pulling a trick from Star Wars…

The U.S. economy and stock market are like a baseball game in its 20th inning. The umpire (whose name starts with “T” and ends with “P”) has ejected all non-players and is calling all strikes as balls and all outs as safe. He has shut down video replay and intends to prolong the game as long as possible, rain or shine, as the audience in the stands cheers on.

– Diary Reader

As an Australian looking from the outside, I think you are tough on Trump. He never had a working majority in the Senate. Too many Republicans in name only as well. It seems to me he is trying, but the odds are against him. And if he goes too hard too fast, well, I think he would be lucky to survive.

– David H.

Many years ago, a man asked Donald Trump why he lies so much. Trump replied, “You just say it and they’ll believe it.” Do the Trump supporters think the same about you and about us? Do they think that they can just say things and we’ll believe it? Or do they think that they’re using a Jedi mind trick like Obi-Wan in the 1977 movie Star Wars? “These aren’t the droids you’re looking for.”

Or do they just blindly worship Donald Trump, and believe whichever lie he’s saying at this moment? Trump supporters just use simple phrases like “on the Donald Trump bandwagon,” or “You should thank God for Donald Trump,” or “Trump will turn around these huge deficits,” with no supporting evidence whatsoever.

Trump detractors can give detailed reasons why they think Trump isn’t being honest, isn’t following the Bible, isn’t following the Constitution, isn’t following traditional American values (like liberty and justice for all, granting asylum to those seeking refuge from violence, working with our allies instead of our enemies), nor traditional Republican values (like fiscal responsibility, free trade, law and order, and family values).

Trump supporters say that if you believe in the truth, the Bible, the Constitution, traditional American values, and traditional Republican values, you must be a liberal, communist, socialist moron that voted for Hillary. And they give no proof to support their claims. Keep up the good work, Bill. Many of us still believe in those things.

– Don H.

IN CASE YOU MISSED IT…

Crypto expert Teeka Tiwari is putting on a live cryptocurrency “Ask Me Anything” Q&A… and you’re invited.

This is your chance to hear from a man who’s delivered gains as high as 14,354%. And he’s devoting the entire event to answering your questions, live.

There’s still time to reserve your spot for this free event. But you’ll want to act fast. The event airs tonight at 8 p.m. ET. Click here to lock in your spot.

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