I am convinced that by any historical standards we are seeing “markets” that are in the largest bubble of our lifetimes. Any valuation metric you would like to use shows that we are at historic levels of overvaluation in our “markets”. Remember, I always use the ““ because we really do not have true markets where a willing buyer and a willing seller determine a fair price.

Central banks, major banks, hedge funds, etc. are all participating to prop up stock, bond and property prices. While most central banks are BUYING gold, the Fed and its owners- the major banks are gifting them the ability to buy it for a deep discount as they manipulate the price lower so the US dollar can maintain the illusion of strength.

It is my opinion that this overvaluation has been built on an unsustainable pile of debt. This debt has been issued by the US government and governments around the world. It has been issued by cities, states, and municipalities globally. It has been issued by corporations- large and small. It has been lent to individuals. In every circumstance we are seeing historic levels of debt that are gnawing away at our economy.

All of the “money” that is being spent on debt service is eating directly into economic activity and the development of new ventures. Debt is even being issued by many companies to buy back their own shares to give the illusion that the company is doing better than it is and to prop up their share price- mainly at bonus time. This also eats into Research and Development and also takes away from investing in future projects that could benefit the firm in the long run.

I have also seen many schemes where states and municipalities are BORROWING to make pension contributions. Even with this, many pension funds are woefully underfunded, and this is with “markets” at all-time highs. What happens when we get the pullback that will likely come?

A lot of people question me when I say to get out of debt. Many will argue that as inflation rages it will make the debts easier to pay because the debt stays the same but the VALUE of what you are paying back decreases as the purchasing power drops. This is a fair point BUT I have to ask these questions.

· What if prices rise so much that you spend so much on necessities that you cannot carry your debt?

· What happens if major corporations start to collapse under the weight of their own debt? Keep in mind the first to lose in a bankruptcy is the common shareholder followed by preferred shareholders, non-secured bondholders and finally secured bondholders. With the level of debt that most companies carry there could be a tsunami of bankruptcies at any time- particularly with the economy sputtering as it is. Also, what happens if you are employed by a major corporation that goes bankrupt? Will you still have the job that allows you to pay?

· What happens if cities and states have to default on their promises? This could have already happened if it were not for the lockdowns in 2020 and the hundreds of billions sent to states to prop them up. We do not have to look much further than what happened in Detroit a while back where the holders of Muni bonds took a substantial hit.

· What if federal governments default? This is a tricky one because the US already defaulted in 1971 when we severed the link to gold for our dollar. According to Central Bank reporting many- if not most developed nations- are already insolvent but are avoiding default- in the technical term- by conjuring up cash from nowhere with virtually no VALUE to feign solvency. My guess is that those “in charge” will always conjure up the cash and allow the governments to say- we paid what we promised. The problem with this scheme is that while you get paid every penny you were promised you cannot buy anywhere near what you could have bought when that promise was made. The more they “print” the more impoverished we all become since we are working for a currency that is being rapidly debased.

With this in mind I would like you to think about this. Is it better to have a lot of assets with a lot of debt or decent assets with little or no debt?

Let’s say we have two people. One has $2 Million in assets and ZERO debt. The other has $10 Million in assets and $8 Million in debts. Both have a net worth of $2 Million. What happens if asset prices collapse 25%?

The person with $2 Million has his net worth drop to $1.5 MILLION and has no debt payments so, while painful, it is not catastrophic.

The person with the $10 MILLION sees his assets fall to $7.5 Million and now has a net worth of MINUS 500k. In addition, he also has to continue to pay the cost of the debt at $8 Million. Unless there is a V shaped recovery Mr. overleveraged could be wiped out.

Let’s also keep in mind that the $8 Million owed by Mr. Leveraged is also looked at by someone else as their ASSET. If Mr. Leveraged goes down it could start a daisy chain of defaults that could be hard to contain.

I guess what this really comes down to is that while asset prices are artificially propped up by the debt and are likely to implode when the debt overwhelms the system the debt remains while the “assets” backing them up are not enough to satisfy the loan.

If we needed any more proof that our system is nothing but smoke and mirrors look no further than FARTCOIN. You may think this is a joke, but it is the embodiment of what our “financial system” has become. This meme coin has a market cap of over a BILLION dollars based upon nothing but the idea that someone else will pay more for a coin than you paid. In my humble opinion the likelihood that this thing could have any practical use is ZERO but that has not stopped the work from home rangers from bidding the price up to a level that does not make any sense.

In an article from Quoth The Raven the author notes that FARTCOIN has a price that gives it a market cap of $1.3 BILLION which is a higher PRICE than over 1000 companies in the Russell 3000 that actually produce goods and services. I use PRICE vs market cap because even though it has a high price it offers little to NO value except for the promoters who will likely quickly cash out and leave the “investors” holding the bag.

Do not buy stories! Buy assets that stand the test of time. Assets that are not someone else’s promise to repay when the numbers indicate that in most cases- it will not happen. To me, this means hard assets and companies that produce the same. Strong balance sheets matter also. Just because they have not recently does not mean that in the near future balance sheets could determine who survives and who dies.

BE PREPARED!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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