Financial A-Bomb: Brace for Impact

Posted On Mar 22, 2016 By Dave Gonigam

  • The Rickards skeptics emerge…
  • Two of Jim’s big calls come to life in today’s papers
  • Japanese leaders’ no-win situation… and how you can profit
  • Does a confident regime hang five headless corpses from cranes?
  • Saudi Arabia amps up its Washington lobbying force
  • A suggestion to sidestep the cashless society… the critics of cash-back cards strike back… and more!

“After all the hype and movie trailers,” a reader warns us, “this production on the life and times of Jim Rickards in the land of sushi, tea and bamboo shoots (or the trials and tribulations of getting there) tonight had better be good!”

Evidently, the reader signed up last week for Jim’s event live from Tokyo — which gets underway just hours from now. Folks who signed up have been getting video vignettes from Jim and his entourage — aboard the plane, in the taxi from the airport, at various sites around Tokyo.

Since landing early Saturday, Jim’s had a packed schedule of meetings with experts who are adding detail to the rumblings of a “Japanese doomsday detonation” that prompted his trip. Tonight at 7:30 p.m. EDT, he reveals all. There’s still time to sign up.

“You ought to lighten up on Jim Rickards,” another reader warns us — “he’s only going to embarrass The 5, and Agora Financial.

“A madman whose ideas are only ‘theory.’” That was all the email said.

Hmmm… We see this morning that one of the “theories” Jim espoused more than a year ago is coming to life right now.

In January 2015, Jim identified a $5 trillion tsunami of debt issued by energy companies — debt issued on the assumption that oil would sell for $80–110 a barrel indefinitely.

The day we passed along Jim’s warning in The 5, oil was $45.94. This morning as we check our screens, it’s $41.57. We’re talking about debt that can’t possibly be repaid or rolled over.

“Investors have suffered losses of at least $150 billion in the value of oil and gas company bonds,” says this morning’s Financial Times.

Well, you read it here first.

In addition, the salmon-colored rag says the market cap of the 300 largest oil and gas companies worldwide has slid 39% since oil began its decline in mid-2014. That’s $2.3 trillion in paper wealth vaporized.

“Banks have also been increasing their provisions for energy-related losses on their lending,” the FT continues.

“With several banks having loans to the industry equivalent to more than 40% of their equity, lenders have tightened loan agreements with oil producers, and capital markets remain closed to the lowest-rated groups.”

If this too sounds familiar, it should: Six weeks ago, Jim warned us the banks have been papering over their losses in the energy sector — just as they did with subprime mortgage securities a decade ago.

We don’t point this out to gloat on Jim — well, not too much anyway. After all, insight is no good unless you can put it to work in the markets and make money.

Fortunately, Jim has delivered. A small group of his followers has been taking advantage of recent market volatility for the chance to claim gains like these…

  • 134% betting against Goldman Sachs…
  • 112% on First Quantum Minerals…
  • 141% on TIF as global deflation took hold…
  • 150% on CAR…
  • 102% on CNW…
  • 90% on FIVE…
  • And 162% on URI…

Which brings us back to Japan and the “financial A-bomb” Jim’s contacts began warning him about a few weeks ago.

As we said yesterday, Jim believes a rogue group of individuals is fed up with Japan’s terrible monetary and fiscal policy.

“Japan has been gripped by a deflationary depression since 1990,” he elaborates today. Recall that by “depression” Jim doesn’t mean people starving in the streets — he simply means a long period of “below-trend” economic growth.

“In April 2014, Japan raised its consumption tax (a kind of sales tax) to deal with its fiscal fiasco (Japan has the highest debt-to-GDP ratio of any major developed economy — well over 200%).

“But raising taxes in a depression was exactly the wrong medicine. The Japanese economy immediately went into a technical recession (one of several during this long depression).

“Now Japan is preparing to raise the consumption tax again, in April 2017,” says Jim.

“That may seem like a long way off, but markets discount future events, so the impact is already showing up in Japanese stock prices. Prominent U.S. economists are on their way to Japan to urge the Japanese not to raise the consumption tax.”

Japanese leaders have painted themselves into a corner. If they backtrack and don’t raise the tax, the government’s tax receipts will fall… and Japan’s desperate finances only get worse.

But if they follow through and do raise the tax, the economy will surely take another hit it can’t afford. Which means tax receipts will fall… and Japan’s desperate finances only get worse.

Jim says this rogue group of individuals will call BS very soon — detonating a financial A-bomb whose fallout will be felt worldwide.

Not to put too fine a point on it, Jim says you’ll feel the effects “if you have any money in the markets at all, or in a retirement account.”

All the same, Jim’s identified three alternative investments that could not only help you survive the shock… but come through with up to 450% gains over the next six months.

Again, Jim will convene his exclusive online briefing tonight at 7:30 p.m. EDT.

Fallout 2016

If you already have plans tonight, a replay will be available. It won’t cost you a thing to watch. All we ask is that you sign up in advance. You can do so at this link.

To the markets today, where traders are keeping half an eye on the aftermath of the attacks in Brussels.

At last check, the major U.S. stock indexes were little moved, the S&P down fractionally at 2,051. Gold has perked up a bit, recovering the $1,250 level.

Only one economic number of note today, and it’s a stinker: The “flash PMI” of nationwide factory activity so far in March came in way below expectations. Any talk that manufacturing has bottomed appears premature.

We can’t help but notice a sick irony to the timing of the Brussels attacks.

Tonight, Britain’s ITV network is scheduled to air a blockbuster documentary called Saudi Arabia Uncovered.

A preview story from the Daily Mail website went viral worldwide yesterday: “A woman beheaded in the road. Five headless corpses hanging from cranes. As a documentary exposes the horror of life in Saudi Arabia, why DOES Britain cozy up to this kingdom of savagery?”

“No sign of pre-revolutionary fervor — everything is copasetic,” said a snarky email from our Byron King, who spotted the Daily Mail story.

It was Byron who forecast at the start of this year that 2016 would be the year war and revolution came to Saudi Arabia. The year began with the mass execution of 47 prisoners, most of whom were beheaded. Not the sort of thing a regime does when it’s confident it has the support of the people, no?

Alas, the attacks in Brussels — ISIS is claiming responsibility at last check — are sucking all the media oxygen now. The documentary will be gasping for air. (It runs in the United States on PBS’ Frontline a week from tonight.)

Meanwhile, the Saudi princes are cranking up their public relations and lobbying machine in Washington.

The kingdom just hired BGR Government Affairs — an outfit founded by former Mississippi governor and former Republican Party chairman Haley Barbour — for $500,000 a year. So we learn from filings disclosed last week and reported yesterday at The Intercept.

Back in January, we noted the kingdom spends an estimated $6.78 million a year to wield influence in Washington.

That number is growing, substantially. The kingdom’s main PR firm, Qorvis, billed $7 million for services rendered from April through September of last year alone.

“If cash is ever banned in the U.S.,” begins today’s mailbag, “I predict it may be possible, among parties who trust each other, to pay with gift cards to businesses where the recipient does enough shopping.

“A $300 gift card to a popular department store or gas station would be worth as much to its owner as the same amount of cash is today.

“I know a few people who pay their rent in cash, and their landlords do not report the rent as income. This might work for them. The key element, of course, is that the payee is able to verify the value of a card immediately.”

The 5: Hmmm…

“Last Friday, I took $1,300 cash out of one of my credit union accounts,” writes another.

“Put $300 into one son’s checking account at 5/3 Bank. Took the other $1,000 and put into another son’s checking account at Chemical Bank. Both these bank are regional banks as best as I can tell. No problems with any of the three transactions. If my bank/credit union told me what some readers have reported, I would have pulled all my money. Right then.

“As for the folks who love using the cash-back cards, it does hurt me to know that my desire to maintain my privacy is subsidizing them. Also, they are feeding the beast, instead of starving it. That is the part I just can’t get. It’s like being tied to the stake to be burned and then offering a match to get the fire started. They are financing their own destruction. Brilliant, but then, anything for a buck! Right?

“Enjoy The 5. Thanks for listening.”

“The idea of saving money by spending is nuts,” writes another critic of cash-back credit cards.

“There was a study by the major banks in the 1980s that showed the average American spent over 8% more when they used credit cards versus cash. Your 1% or 2% cash-back programs on credit cards are an illusion of savings. You are spending much more than you would if you saw the cash leaving your hand. A better saving or budget program is not to spend it in the first place.

“P.S. I dumped Chase a few years over the war on cash. I moved two mortgages by refinancing them, two checking accounts (personal and business), one savings account and two credit cards.

“Why? Because the CEO of Chase said only terrorists and criminals use cash. I am not a criminal trying to put money into my adult children’s account (they were in college)…

“Stop letting the bank treat you like a terrorist or criminal — move your accounts.”

“Shouldn’t ‘SIFI’ actually be ‘sci-fi’?” a reader writes after we discussed “systemically important financial institutions” last week — or as you and I know them, “too big to fails.” “It seems we have entered the Twilight Zone.

“As to the war on cash, it appears the hoo-ha is mostly involving the ‘big banks.’ We have used the same regional bank for the past 25-plus years and have not had any issues. (YET?) We write checks to cash from our SS deposits every month. We also deposit and withdraw cash from savings occasionally.

“As far as the clad coins,” the reader pivots to another recent topic, “I use the ‘gold’ dollar coins for tips. It makes the waitresses remember me. (For better or worse?)”

The 5: To each his own…

Best regards,

Dave Gonigam
The 5 Min. Forecast

P.S. Last chance: If you want to be clued in to the “Japanese doomsday detonation” Jim Rickards anticipates, you need to be signed up for the event he’s hosting live from Tokyo at 7:30 p.m. EDT.

You’ll learn about the rogue group that’s about to set off a “financial A-bomb”… learn how to shelter your hard-won funds… and even transform the turmoil into a gain of up to 450%.

But you can’t watch if you’re not signed up. Click here now to ensure you’ll have access


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