The end of last week and the beginning of this week has given us a glimpse of just how bad things are.

I do not say this because of the massive downdraft in Japan (Nikkei down 20% in 3 days) or the beatdown of most “markets” around the world.

The reason I say this is because this was supposedly (and likely) caused by a mere 0.25% raise in interest rates in Japan. It appears to me that the “markets” are so dependent upon cheap “money” that even the slightest jolt can cause shockwaves around the globe.

Since the selloff we have seen a recovery- again just after Japanese authorities met and let the world know that no more rate hikes will be coming anytime soon. I guess when you owe over a QUADRILLION (1000 trillions) even a 0.25% rate is too much to handle.

The Japanese have total debt of 1.3 quadrillion Yen (who has ever heard of that number before?) and the Japanese Central bank owns 753 TRILLION Yen assets on their balance sheet - mostly Japanese Government bonds. If rates rise, can you imagine the scope of their losses? They can, and have, just conjured up cash to manipulate interest rates lower but we must keep in mind that EVERY intervention widens the chasm between PRICE and VALUE. They also buy ETFs and own a significant percentage of the Nikkei index because of that. (Wikipedia)

The interventions in Japan and now many other nations- including ours- has caused MASSIVE divergences in PRICE and VALUE. It is no wonder people are so confused. They see an economy in economic freefall and rising stock AND bond prices. There is a simple explanation. Central banks are conjuring up TRILLIONS in currency units and BUYING IT ALL.

What this tells me is when the stuff hits the fan the repercussions are going to be monumental. Price and value have NO CORRELATION in this environment. Look for propped-up assets to fall far more than most can imagine and assets that have been artificially suppressed to rise far more than most can imagine. This should lead to a MASSIVE opportunity for those that have the foresight to prepare for the great unwinding- or RESET as those “in charge” call it. Just one more reason that Central Banks are buying gold in record amounts for years now.

Just so we are clear- the central banks “print” money, buy assets to move prices where they want them to go- as well as BUYING ASSETS FOR themselves- and charge us interest on the “money” they conjured up from nowhere and with no corresponding VALUE or assets to back it up. I cannot think of anything more inflationary than that, other than the CBDC scheme where “money” gets handed out and can be made to expire.

The central banks seem to me to be pretending that they care about inflation while conjuring up possibly hundreds of trillions in currency units that will be chasing fewer goods going forward and will likely lead to massive inflation going forward. History has hundreds of examples that all end the same way- disaster for the currency. I believe that the only reason this is taking so long to play out is that virtually all the countries in the world are debasing their fiat currencies at the same time. This allows them to hide the real carnage taking place in purchasing power of ALL fiat currencies. Suppressing the price of gold and other commodities with the use of paper contracts also allows them to hide the true loss of purchasing power.

As the Japanese have been trying to prop up the Yen and curtail their inflation it is now obvious that they look like they are willing to sacrifice the Yen to prop up their debt and stock “markets.” I have said many times that you can prop up your currency, you can prop up your “markets” but as is now, becoming obvious, you cannot do both when you get to this point. The countries of the world are all following right behind.

Another observation that I have made is that this pullback appears to have been telegraphed to the select FEW. Insiders were selling for a month prior to the pullback and Warren Buffett was shedding shares at the fastest pace in his history in the weeks leading up to the event. A major tech CEO was selling 120,000 shares a trading day from the beginning of June until August 1st. (Rule 10b5-1 Trading plan info and Bloomberg)

While I cannot say that this was orchestrated it does seem suspicious to me that those who are insiders seemed to have some advanced knowledge that you and I were not privy to.

I wrote earlier this year about many CEOs and insiders dumping BILLIONS in shares of their own stock. This leads me to believe that this pullback could be the first of many where we see a fall and rise but we may see lower lows and lower highs going forward. I also believe that at some point there will be that snowflake which causes the avalanche. That could be monetary, geopolitical or it could just be the central banks deciding now is the time.

In any case I think it is obvious that our economy is cratering, it is being propped up with “money” from nowhere which is being consumed and is leading to an exponential growth in our debt load and interest expenses while putting our future prosperity in grave danger.

I would LOVE to write that if things do not change soon… but I believe we are long past any easy way out of this. Keep “printing” and we may be paying $10,000.00 for a cup of coffee. Stop and we could have an instant collapse. I do not see any good choices here.

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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The Nikkei is Japan’s leading stock index comprised of the country’s 225 blue-chip stocks. The Nikkei is a price-weighted index, which means the index is an average of the share prices of all the companies listed.