Why Wall Street’s seasoned pros are jumping ship

[Bill Bonner's Diary]( Why Wall Street’s Seasoned Pros Are Jumping Ship By Bill Bonner, Chairman, Bonner & Partners [Bill Bonner] GUALFIN, ARGENTINA – We’re getting into an agreeable and relaxed routine here at the ranch. We go for a hike up the little hill behind the house in the morning. A trail zig-zags up, with the stations of the cross at each zig. We stop and say a little prayer at each one. We’re not really a religious person. But it gives us a chance to catch our breath. Then, before breakfast, we meet with the ranch foreman who lets us know what the cowboys are up to. We would like to give him more direction; but we hardly know what is going on ourselves, let alone know enough to give advice. We have breakfast out on the veranda. At about 9 a.m., we get to work… writing this message to you, responding to emails, planning, and working on various projects. [image]Bill’s breakfast room with a mud roof The work goes on until 4 p.m., when we saddle the horses and go for a 2-hour ride, exploring the riverbeds, checking the cows, and making sure the irrigation ditches are working properly. Yesterday, we discovered an abandoned house that we hadn’t seen before. There are at least a half dozen on the ranch, remnants of an era when there was more water. Often, we find ancient mortars or large grinding pans made of stone, evidence of lives lived there. After our ride, we return to work and put in a couple more hours before dinner. The weekends, of course, are a different story. Recommended Link [Teeka’s new cryptocurrency prediction could make you 10x your money]( [image]( Crypto expert Teeka Tiwari accurately predicted the 2017 crypto bull market… as well as January’s sell-off. For the next few days only, he’s revealing his cryptocurrency prediction for 2018 – and why those who get in now could make ten times their money. [Details here]( -- Same Corral Meanwhile… It was a slow day on Wall Street yesterday. So let us take advantage of this quiet time to get everyone into the same corral. We began writing a daily e-letter about 20 years ago. At that time, the dot-coms were running wild. We saw trouble ahead. Why should a company with no real business plan, no revenues, and no assets suddenly be worth so much money? But we didn’t really understand what was behind it. Besides, readers didn’t want to hear about the downside. Many had staked their financial futures on these fast-moving tech companies. Many believed that these companies represented something so new that the old investment rules no longer applied. It was obvious then, as it is now, that there was something going on beyond traditional finance. Markets always go up and down. But this was extraordinary. From 1990 to 2000, the Nasdaq had gone up by a factor of 12. Fake money had already been around since 1971. Alan “Bubbles” Greenspan had shown in 1987 that he would use the Fed to lower interest rates and backstop stock prices. The “Greenspan Put,” it was called. The Nasdaq cracked in January 2000. It lost about 80% of its value in the months following. Recovery took about a decade. But it took another crisis… a bigger one… to fully appreciate what was going on. Recommended Link [[Time Sensitive] James Altucher: My Golden “Income Pledge” for 2018]( [image]( See this scrap of paper? I wrote something there that could seriously improve the next 12 months of your life. Specifically, it’s my resolute pledge that says… [Over the next 12 months, I swear I’ll show you how to pocket at least $24,000 in extra cash… guaranteed]( Does that sound good? [If your answer is yes, click this link]( But hurry – this offer ends at Midnight on March 20th. -- Hell to Pay In the run-up to the crisis of ’08–’09, real estate had gotten way out of whack. Here again, we guessed that there would be hell to pay. We were right. But we still didn’t understand the full implications of the fake-money system. Those only became apparent in the aftermath, when the Fed took never-before-seen measures to try to keep the system afloat. It had taken America’s central bank nearly 100 years to accumulate about $800 billion of assets. But over the following 5 years, it added nearly $4 trillion. And whatever magic mushroom the Fed was ingesting, the federal government was soon high off of, too. It had taken 230 years to run up a national debt of $10 trillion. But in the next 8 years, it added $10 trillion more. In a way, the dot-com investors were right. The old rules, the old standards, and the old truths seemed to have been suspended. Prior to the 21st century, no Federal Reserve chairman would have dreamed of adding so much debt to the bank’s holdings. Nor would any have imagined he could bring the Fed’s key lending rate down to effectively zero… and keep it there for nine years. Nor would any old-school Republican have thought it possible – and certainly not advisable – to cut taxes at the tail end of a recovery. There’s always a ready market for a tax cut. But Republicans were supposed to be the party of sensible business people. They scarcely believed in Keynesian counter-cyclical policies, let alone “pro-cyclical” policies that would amplify the trends rather than offset them. But heck. Now, at least, we see where we’re going. And so does the Fed. Recommended Link [Doug Casey’s secret gold trade delivers 27x more profits]( [image]( There’s a gold trade that has nothing to do with bullion, ETFs, or futures. And our firm’s legendary founder, Doug Casey, has put $1 million into this trade… and seen unbelievable profits. Now, this secret gold trade is set to become the most profitable move of 2018. You won’t believe why. [Click here to see]( Please note: Per our trading policy, Doug is not recommending any investment he personally owns or has a vested interest in. -- Booms and Busts Despite the remarkable new developments, markets still work in cycles. Booms are followed by busts, bull markets by bear markets, upswings by downswings, summer by fall, and a drinking binge by a hangover. The Fed, at least, has recognized the problem. It’s gone on the wagon. This expansion is already in record territory (in terms of length). It will end soon. And when it does, the Fed will want to stimulate the economy by cutting interest rates. So it needs interest rates to cut. The trouble is, there are limits to everything. And it appears that the economy has reached the point where more fake money lent at fake rates won’t have the desired effect. The economy already has plenty of debt, far more than it had in the ’70s. When Ronald Reagan entered the White House at the start of the ’80s, the federal government had only $1 trillion in debt. Now, it has $20 trillion. And auto loans, mortgages, federal deficits, and corporate borrowing all depend on being able to roll over debt at the low rates. Should rates rise, whether driven by market forces or by the Fed, the whole kit and caboodle will come apart. And now, both the market… and the Fed… are pushing rates up. The Fed has announced a program of QT – quantitative tightening – in which it sells (or simply allows to expire) the bonds in its portfolio at a rate of $600 billion a year. Meanwhile, the federal government itself has cut taxes, forcing it to cover its shortfall by borrowing nearly $1 trillion in 2018. The combination will add nearly $2 trillion a year to the supply of bonds available for purchase. Who will buy them? At what price? Most likely, no one will buy… unless rates rise to make it worth their while. Most likely, rates will rise. Most likely, asset prices will fall. And some of Wall Street’s most seasoned pros are bailing out. Bloomberg says famous analyst Dennis Gartman is selling: In Wednesday’s edition of his eponymous newsletter, the economist said he is “calling for a major, multiyear top on the equity markets following the recent volatility and following the reversals to the downside that took place yesterday in the Dow Industrials; the Nasdaq; the S&P and the Russell 2000.” He said the forecast represented a “watershed” moment. And founder of the DoubleLine Capital investment firm, Jeffrey Gundlach says so, too: We are late in the economic cycle… and it is unusual that the deficit is expanding… [adding stimulus this late in the cycle] has never happened before. Gundlach sees the deficit getting worse, with “a lot of bonds supplied to the market.” He predicts a negative rate of return for the S&P 500 this year. My conviction is high, higher than that the 10-year yield will break to the upside. And most likely, the feds will respond with even more EZ money policies. The Fed will cut rates to zero… and beyond. And the federal government will both cut taxes… and expand spending. But… will that be a bad thing? Will investors double… or triple… their money by buying the dip as they did the last time the Fed went on a spree? Will the economy recover, however weakly, as it did in 2009? As always, there’s more to the story. Stay tuned. Regards, [signature] Bill MARKET INSIGHT: THE BEST-PERFORMING ASSET CLASS OF THE PAST 25 YEARS By Chris Lowe, Editor at Large, Bonner & Partners [Chris Lowe] Last month, [we reported]( that lumber prices had shot up 139% from their 2015 low. That’s more than three times the returns of the S&P 500 over the same time period. And it’s not just the past two years that have been kind to lumber investors. Today’s chart is courtesy of Nick Rokke at The Palm Beach Daily. [Chart] As you can see, lumber outperformed stocks, bonds, gold, and hedge funds going back to 1993. – Chris Lowe P.S. Last year, Bill reported to readers that he owned some timberland acreage in Virginia. To catch up on that story, [read here.]( FEATURED READS [Fund Managers Should Be Terrified of This]( biggest challenge for fund managers in recent years hasn’t been finding ways to raise fees, it’s been finding ways to not cut them. But now, new research shows the possible future of Wall Street money managers, and it isn’t pretty… [How Not to Run a Retail Business]( last year, Bill [showed readers]( the rise and fall of one of America’s most recognized retail brands: Toys “R” Us. The company recently announced that it will likely close all of its stores. Here’s where the toy giant went wrong… [Don’t Fall for These Crypto Scams]( crypto market has some of the most exciting growth potential of any investment today, but that comes with risks. Jeff Brown, Bill’s top technology analyst, shows readers how to avoid a crypto scam. MAILBAG In the mailbag, readers weigh in on Bill’s [solution to permanently ending inequality]( I enjoy your writing and often have a really good laugh! Yes, most definitely. But hang on… don’t they already work for the government? – James J. Hey Bill, I think you have been breathing the oxygen-starved air of the mountains of Gualfin, Argentina for too long and need to come down to earth. Or, you have a severe case of diarrhea of the brain or mouth, or both, because your ramblings of the past few weeks purely don’t make sense to us poor simpletons who can’t afford to live a life of leisure and criticize from afar what Trump is trying to do to change the economic and political landscape in America. If you think you can do a better job solving our nation’s problems, I suggest you get your butt off that mountain in Gualfin and come back to your home state of Maryland and try solving its many social, moral, political, and economic problems. When you have been successful doing that, then maybe we simple folk will begin to take you more seriously concerning all the problems in the U.S. At least Trump is physically trying to clean the swamp that you only talk about. He is not doing it for money or prestige, as he had those things before he ran for president. But you and all the elites like you never expected him to win! Are we to assume that you and all your associates would have preferred Hillary? Then where would we be today? Come on, Bill, get real and stop pontificating! I am really concerned about the state of your mental health. – Rem B. Always entertaining. Alas, I’m sure there are not enough skinny wives to trade for the fat ones. I agree that it’s all a flim-flam and will run headlong into its inglorious end. I’m just wondering how long this train wreck in slow motion is going to take??? – Ken H. Meanwhile, another dear reader writes in after Bill’s [run-in with a snake](. You say you are 70 years old; I am 76. Our generation had manners and we lived by biblical principles, as best we could. So I was impressed when I saw the Bible quotation regarding the serpent at the beginning of today’s email. I was thinking, “This Bill Bonner is probably someone I could trust…” I continued to read with interest as the story of your adventures unfolded. Then I was shocked to see this: “The Fed will never ‘normalize’ policy. And when the next recession/crisis comes, the King of Debt, Donald J. Trump, will respond with even more budget-busting initiatives. (What else could he do?)” Why do you feel it is appropriate or necessary to resort to name-calling when you speak of the president of the United States? You were not raised that way! We can disagree without name-calling or insults. (I certainly felt like calling Obama a snake, but I did not do that.) So are you someone I can trust, or not? How does one quote the Bible and moments later, malign the president? – Joana L. IN CASE YOU MISSED IT… I couldn’t put this book down… Bill’s coauthor on The Bill Bonner Letter, Dan Denning, just published a new book. And what it reveals is startling. Dan writes that the next market crash is looming. But this one won’t be an accident. Dan believes the next crisis could be orchestrated by a shadowy group right here in America. Dan calls them “the Oathkeepers.” Get your very own copy [right here](. [image]( [Bonner and Partners]( © Bonner & Partners 55 NE 5th Avenue, Suite 100, Delray Beach, FL 33483 [www.bonnerandpartners.com]( This e-mail was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. 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