Money Matters Update November, 2015

 

Can you help me feed the poor this Thanksgiving?

My "match your funds' Turkey Matters program is officially underway. Mail in your check to any food bank you choose. I will drop a digit and match your funds (up to $5,000) and mail my check to that food bank. Make your donation go farther! 

Let's buy Turkeys for the poor! Your Thanksgiving will never be better knowing you helped me feed thousands of hungry people! Just mail me a receipt of your donation to the below address. (New regulations on me require you make the donation yourself- do NOT mail the check to me)

 Mail me the receipt then I will mail a check to that particular food bank.

 

                  Mail your receipt to address exactly as listed below:

Money Matters/Turkey Matters

PMB 101

578 Sutton Way

Grass Valley, Ca 95945

 

 

Money Matters airs this Thursday, December 3, 2015 NOON PACIFIC TIME on KVMR Fm and worldwide at KVMR.ORG

 

 

 

Dear fans,

For years people have listened to my show and read my columns. Because many thought I made sense and agreed with my economic views, they requested I manage their funds and for years I have refused. I simply had too much work in the radio/ media business. But after so many requests and having given it serious consideration, I have joined a very dear friend at his firm MKB Financial Services in Auburn. Matt Baltz and I think alike. We are like family. We strive to provide the best service, with integrity, straight forward analysis with detailed and concise communication. We offer a full range of money management, retirement planning, income planning, family planning, investment recommendations and more. We have developed 3 portfolios to help meet the needs of our clients. The cost will be a simple fee commensurate with the industry on the amount invested.

I will talk with you quarterly to review your investments and more often if you require it.

Annually we meet and you and I will update your financial information to keep us on track and make sure you and I are up to date on your situation and your expectations.

We will handle the transfer paperwork for you. I will sit down with you and gather your individual situation and your needs, basically getting to know your financial picture so together we can decide what is best for you and your family.

I am excited to be able to offer you this opportunity to go "Money Matters"!

Call me today at my personal number (530) 559-1214 (private cell- do not give out ) to talk with me about meeting with you or just to get more information. I expect to be busy with this announcement so give me a call to beat the expected rush! Or send me an email at  mcuniberti@cambridgesecure.com

Thank you again and I look forward to meeting of all of you!

Website news:

The website moneymanagementradio.com was overhauled to reflect this new opportunity.  It is more streamlined and is at no cost. Recent shows are up and posted. Some older shows are absent but the recent ones are there. It takes about 2- 3 weeks for us to post a show. Newsletters are obviously going out.

Thanks again for your patience and I look forward to speaking with you on and off air! All the best and I am so excited to hear from all of you on my new role in managing your finances if you would like me to fill that roll.

Marc

 

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With the November Federal Reserve meeting behind us, it has left in it immediate wake a market that has complained bitterly by moving down almost relentlessly over a span of a week or so, dropping 3.5 % at the time of I wrote this newscast off its recent high of about 17800 on the Dow.

 

Initially the markets convulsed then headed south as stronger Fed speak indicated that next month interest rates would most likely be increased, the first such increase in over 7 years or so.

One would think with so many promises by the Fed to raise rates in the last few years or so would have been baked into the markets price but apparently they were not.

Perhaps the many times the Fed threatened to raise rates and didn’t now left market participants doubting the Feds resolve to actually do so, and this time around the markets actually think it could happen.

 

Who really knows but the reality is the recent market downturn has been broad-based and for the most part unforgiving to most assets. Particular markets have performed better than some as is usually the case with broad based declines but it is safe to say most asset classes other than cash have been tested.

 

It remains to be seen whether this set back in the markets have more to run or have run their course. It would be not a total surprise to see the Dow retest the 16300 level it hit in August as some analyst have predicted. No one can say for sure.

 

Energy stocks looked to stabilize earlier in the month but softened again with the general market. The same pattern mirrored the health care sector, commodities, and certain emerging markets.

 

Global events such as the Paris attacks, talk of more QE in Europe and rising tensions in the Baltics may weigh heavily on investor sentiment in the coming weeks.

 

Obvious currents and not so obvious cross currents could move markets in either direction with a high degree of volatility possible.

 

Once again cash positions will likely fare better in market upsets maintaining value if stocks and bonds fall.

 

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With more tensions overseas energy and precious metals could attract investor attention as a flight to safety play or could sell off in a broad based fall.

 

No doubt last week’s volatility will also be on the minds of investors this week and the Paris attacks will likely add to uncertainty.

(Indices mentioned are unmanaged and cannot be invested directly. Past performance is not a guarantee of future results).

 

With the recent Paris attacks, once again talks surrounding the benefit or drawbacks of mass and unfettered immigration begin to swirl. Conservativepapers.com claims the fall of Rome was partly brought about by massive immigration into Rome’s borders.

 

Now the news is out that one of the French terrorists was a Syrian immigrant.

With more still to be known about the attacks, it is possible more of the attackers may be found to be of non- French origin.

 

Many argue that crime has no correlation with immigration but some statistics illustrate otherwise. (see https://en.wikipedia.org/wiki/Immigration_and_crime)

 

Depending on the study used and the country in question, the conclusions are mixed at best.

 

No doubt if would-be terrorists want to enter a country to attack it, legal immigration is one way to do it, the other being an illegal crossing of borders.

 

The obvious observation is if a-would be terrorist is not present in the country, he can do no damage.

 

One might point to the possibility of attacking via airplane but one still has to be in the country to be in the cockpit. A remote attack by hiding a bomb in a shipping container or stashing a bomb on a plane or boat bound for some country is possible but the majority of terror attacks are carried out by people actually present at the sight of the attack.

 

There is an assumption by some that most modern day terror attacks against democratic nations are carried out by middle easterners, mainly Muslim fanatics.

 

This belief has spurred discussions addressing profiling and prohibition based on race but this view goes against the basic assumption of being innocent until proven guilty. To start down the road of classification of what a terrorist looks like or what his religion is hatches a dangerous precedent.

 

Outside of Bulgaria, France has the highest percentage of Muslim immigrants, and with the worst terrorist attack in recent history occurring last week, many are asking if there is a correlation and whether closer scrutiny of immigration limits should be undertaken.

 

The latest flood of immigrants are coming from Syria, the home of one of the French attackers.

 

Since 2011, the ongoing conflict involving the government of Syrian President Bashar al-Assad, Syrian opposition forces, and ISIS has resulted in more than 200,000 deaths and caused more than half of the country's 22 million citizens to flee their homes. More than 4 million people, half of whom are children, have fled to neighboring countries, and 7.4 million people are displaced internally within Syria, making it the largest exodus of refugees in more than two decades.

 

The United States is increasing its acceptance of Syrian refugees. President Obama, under increasing pressure to demonstrate that the United States is joining European nations in the effort to resettle Syrian refugees, has told his administration to take in at least 10,000 displaced Syrians over the next year.

 

The question is how many terror incidents have to take place before nations aim their anger surrounding the attack of innocents toward a racial or profiled people.

 

The obvious fact is that if religious fanatics are not allowed into or allowed to remain in a country, they can do no damage. The question then becomes how do you determine a religious fanatic or a fanatic of any persuasion for that matter.

 

One might think terrorist attacks are committed mostly by Muslims. While the fear of religious extremists has again reached a new high since the terrorist attacks in Paris last week, you might be surprised to learn very few instances of terrorism in the EU over the past five years have been religiously motivated.

According to statistics from Europol, less than two per cent of all recorded acts of terror were perpetrated with religious motivations, with an even smaller number being committed by Muslim extremists. Estimates suggest only around two per cent of all terrorist attacks were committed by Islamic groups or individuals.

 

The solution to terrorism is indeed an elusive one. A consideration might be to look at the similarity of terrorism itself rather than the assumed profile of those committing it.

 

The difficulty with this approach is outside of the violence and their gruesome methods there are few obvious similarities. Many times there are no reasons given nor does the group responsible even identify itself. In fact, credible perpetrators claimed responsibility for only 14 percent of the more than 45,000 terrorist acts that have occurred since 1998, according to the University of Maryland’s Global Terrorism Database.

 

There will always be those that are dissatisfied with the status quo of something and no doubt some will take their dissatisfaction to unimaginable conclusions.

 

One consideration however is to insure the liberties of innocents are not caught up the vast net that is certain to be cast trying to catch those that resort to such heinous acts.

 

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Fed Minutes with my comments in ( )

Federal Reserve Statement dated October 28th, 2015:

Information received since the Federal Open Market Committee met in September suggests that economic activity has been expanding at a moderate pace. Household spending and business fixed investment have been increasing at solid rates in recent months, and the housing sector has improved further; however, net exports have been soft. The pace of job gains slowed and the unemployment rate held steady. Nonetheless, labor market indicators, on balance, show that underutilization of labor resources has diminished since early this year. Inflation has continued to run below the Committee's longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. ………..inflation expectations have remained stable. (My take on this is they want to keep a positive spin on the economy as to not panic the markets but also want to, as forecasted by many, keep the monetary spigots open- aka flood the banking `system` with more money. Nothing new here)

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring global economic and financial developments. Inflation is anticipated to remain near its recent low level in the near term but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate………... (The Feds own record of accuracy on their predictions is woeful at best. Wrong more often than right, I have little confidence they know what they are doing and according to Jim Rickards of Strategic Intelligence, admit same).

To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress………(Another in a long line of can kicks going on half a decade or more of ZIRP “zero percent interest rate policy. Monetary “crack” as it has been become to be known).

………………………... The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. (Again, their history of prediction accuracy has been very poor. They continue to desire inflation which is arguably the best thing to wish among many analysts)

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction……………………..(This is backdoor QE and is ongoing by their own admission).

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach…………………..(Which means tiny increases in the interest rate and well publicized in advance to insure the banking sectors don’t get caught with huge derivative losses causing another meltdown)

The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as……………………(Basically covering their bases so they won’t look bad if they kick the can once again at their next meeting).

 

(In conclusion, their stance remains the same. Emergency interest rates initiated during 2008/9 have morphed into ongoing QE. They have addicted the economy and the banking `system` to ongoing QE and now neither can survive without it. They have painted themselves into a box from which the only way out is to “keep digging” as they say.

Their forecasting accuracy is unreliable and their policy results are unknown even to them. At best it is a grand experiment on the scale never seen before in world history. We can only hope with any luck (and luck is all it will be) it will end without imploding the system, an outcome of which I suspect is in our future at some point. Do the math.

The Federal Reserve as expected held fast on interest rates in their latest meeting once again saying they need to see more data on the economy before lifting off the near zero percent interest rate policy (ZIRP) they have been on since the banking crisis of 08/09.

The Feds again warned and more strongly this time then previous meetings that a December lift off for rates was likely in the cards but no guarantees).

 

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Much like the taper tantrum the market threw years ago when then Fed Chief Ben Bernanke talked about slowing QE, the markets again sold off with interest rate sensitive

Equities showing the worst damage.

 

Fixed income assets such as bonds sold off bringing some bond funds down, while utilities, preferred stocks and some Real Estate Investment Trusts (REITS) also suffered.

Gold and mining stocks also sold off. The underlying cross current is rising rates will likely cause a US dollar rally and that will lead to lower prices in all things priced in US dollars although assets priced in other currencies will likely rise as one currency moves against another.

 

One would think the interest rate threat from the Fed was already baked into the price of rate-sensitive assets but investors none the less abandoned some issues that move with rates.

 

Assets sold off during a news announcement sometimes rebound later on and only time will tell if that is the case this time around.

 

With the investing world on alert to increasing rates, the markets seem sensitive and volatile at this particular point in time.

 

With December approaching the chance of a Santa Claus rally looms, where historically the Christmas season can lift investor spirits into a buying spree. With the election year also approaching, politics can also play a part in making an appearance into the markets as administrations look to culture a rising market to appease the voting public.

 

Nothing is cast in stone however and there are as many exceptions to historical precedents as there are precedents.

 

The good news may be that if the Feds do raise rates, the correction we see now may lead to acceptance without incidence later.

 

International Monetary Fund (IMF) representatives have given China strong signals that the yuan is likely to soon join the fund’s basket of reserve currencies, known as Special Drawing Rights (SDR) , Chinese officials with knowledge of the matter told Bloomberg News this week. 

 

A SDR is sort of like the currency of currency. Naysayers of SDR’s think of them as just a higher step on the paper money ladder while central banks think SDR’s are the last bastion of monetary elixir.

 

The IMF created the SDR `system` in 1969 to boost global liquidity as the Bretton Woods `system` of fixed exchange rates unraveled. While the SDR is not technically in actuality a currency, it gives IMF member countries who hold it the right to obtain any of the currencies in the basket -- currently the dollar, euro, yen and pound.

 

When national currencies consistently fall in value because of over abundant use of the printing press, the IMF uses the SDR to provide a backstop to nations when individual national currencies suffer, as they did during several crisis of the last decade or so.

 

Although the world average Joe will never get his hands on an SDR, they are used by world banks to purchase other currencies when times get tough and things get critical.

 

Sounds like bit of a shell game and it is. A game involving the last stop (we hope) in a world of currencies going bad. Think of climbing higher on the super structure of a sinking ship. The SDR is the highest piece (so far).

 

The equivalent of about $280 billion in SDRs have so far been created and allocated to IMF members as of September 2015, compared with about $11.3 trillion in global reserve assets. Small potatoes by comparison, but the path is clear. When your currency goes bad, you simply go to the IMF and get some more of theirs.

 

China is pushing for inclusion in the basket of currencies that make up the SDR and the IMF is said to be seriously considering it.

 

Global use of the yuan has surged since the IMF rejected SDR inclusion in the last review in 2010. By one measure, the currency became the fourth most-used in global payments with a 2.79 percent share in August, surpassing the yen, according to the Society for Worldwide Interbank Financial Telecommunication, known as Swift, the `system` that keeps track of and facilitates such monetary conduits.

 

If the Chinese yuan becomes part of the SDR, central-bank reserve managers and institutional investors will automatically want to accumulate yuan-denominated assets, which will help the Chinese economy by having a more desirable and internationally accepted

Currency.

 

In the grand scheme of things and likely in the eye of the average citizen, such things are beyond everyday comprehension and the world’s central banks are just fine with that.

 

After all, if you’re going to monkey with global assets and control everything money from the top down, keeping your customers (which is all of us) in the dark serves the purpose well.

 

What better way to get away with something than have a `system` so convoluted and confusing to the common observer that nobody really understands it anyway.

 

The best anyone can do is hope it is all done for the common good and that no one is getting ripped off by the whole thing.

 

Now how many of you believe that?

 

This article(s) and website express the opinions of Marc Cuniberti should not be construed or acted upon as individual investment advice. Mr. Cuniberti is an Investment Advisor Representative through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Marc can be contacted at MKB Financial Services 164 Maple St #1, Auburn, CA 95603 (530) 823-2792. Their website is MKBFINANCIAL.COM. MKB Financial Services and Cambridge are not affliated.