IT NOW TAKES US$4 OF DEBT TO CREATE US$1 OF GDP

Student Loans have reached US$1.3T. Back in 2007, subprime mortgage reached US$1.3T as well.
The difference between the two? Subprime mortgage is backed by real estate as a collateral, but student loan? It is not backed by anything at all, save the US government guarantee. Lately the number of delinquencies have risen past the 10% level. Eventually it will require yet another government bailout.
Meanwhile used cars value has been collapsing which prompted a number of auto financing companies to warn of impending fall in earnings. By the way, auto loans too have moved past the US$1.0T mark.
It just need a sequence of events, one after the other before the house of cards built on endless supply of debt will fall and fall hard.
In the most recent research, it now takes US$4 of debt to grow the economy by US$1. How crazy is that?

PRECIOUS METALS RISE, STOCK MARKET TANKS, USD FALLS BELOW CRUCIAL 100 LEVEL

Precious metals proved their resilience as the stock market tanked and USD fell below the important 1.00 level. This is why it is important to own precious metals, especially in a scenario where global risks and uncertainties prevail.

Despite the stock market falling, most of the mining stocks and inverse ETFs gained. They are the best hedge against a falling stock market.

But what did actually happen?

Some reports pointed to the coming House vote on the repackaged Obamacare (ACA) on Thursday as a catalyst. There were only some minor changes on the original ACA and a group of the conservatives among the Republicans did not like the repackaged version, rather they wanted a full repeal of it.

Without this group support, the repackaged ACA will not likely be passed as the Democrats will also vote against the repackaged ACA.

Not only that, even if the House passes the bill on the ACA, it will be DOA (Dead On Arrival) at the Senate.

This is Trump's first and major hurdle. If he fails to get it passed by both House and Senate, it means a failure on his part to get the support he wanted and this could also affect and derail his tax reform and infrastructure plans.

Which let to the market finally waking up to the fact the Trump will not have it easy.

On top of that the Fed has been proven to be clueless with regard to the economy, hiking rate into a weakening economy and where wage growth is falling behind inflation.

We also have the debt ceiling where the US Government has just enough cash to last another two months (or less) as the suspension of the debt ceiling expires. And until today, nothing has been done to raise it. This adds to the risk of a government shutdown and more uncertainties in the market.

The recent fall could be the straw that finally breaks the camel's back and we could see further weakening in the stock market.

POTENTIAL US RECESSION DESPITE GOOD JOBS NUMBERS?

The ADP jobs report blew past expectations reaching 298k jobs in the month of February.  This immediately sent the 10 year bond yield spiking, the USD rising and the chance of a Fed hike, 100%.

The rise in ADP is a result of strong survey data such as Business Confidence which rose to highest levels in years, and strong consumer sentiment.

Precious metals of course weaken, as they normally do when the banks, hedge funds and algos worked in unison.

On surface it looks like a rosy picture. The ADP report was the headline feature but everyone seems to ignore 3 other reports which also came out the same day.

1) Productivity growth in Q4 was 1.3% vs 1.5% expectations, and after a 3.3% surge in Q3.

2) Wholesale inventories tumbled in January to -0.2% which was way below expectations. In the prior month it rose +1.0%  

3) The Atlanta Fed GDP Now has revised down the Q1 GDP to 1.2% from as high as 3% at the start of the year.

If the Q1 GDP falls below 1.9% then the US is in a TECHNICAL RECESSION. 

Against this backdrop the Fed is intent on raising the interest rate by 0.25% just as the US GDP is falling behind expectations. This could not end well for the stock market. 

Inflation is running above expectations and this suggests a potential stagflation if US GDP remains low.

Going back to the exuberant consumer confidence consider this. Major retailers are reporting Q4 earnings below expectations and many saw losses, resulting in several major retailers announcing bankruptcies and closure of stores. The chart below shows the severity of the situation.

This has put the shopping malls at risk due to a rise in vacancy. The commercial real estate debt is also at risk as some bonds are trading less than the par value. 

With trillions of dollars at stake, this could be a bubble that is worse than the 2008 housing bubble.

Source: Zerohedge

FORGET ABOUT THE MARCH RATE HIKE, THE LOOMING EXPIRATION OF DEBT CEILING HOLIDAY IS OF GREATER IMPORTANCE

Gold and silver continued to be hammered while miners lost more ground.

This is likely due to the upcoming March 15 Fed meeting which many banks have already priced in a 0.25% rate hike.  

The main stream media is down playing an important event on March 15 which is the expiry of the debt limit holiday. Upon the expiry, the government has a some $300B plus with which to sustain unless the debt ceiling is raised again.

Will the debt ceiling be raised?

It is expected that to continue spending the way the US currently does, the US government debt will double in a decade, that means by 2027, the debt will reach $40T!

With interest rate hike in March. An additional 0.25% hike in interest is equivalent to paying an additional $50B in interest payment based on the current debt of $20T, more if the debt ceiling is raised to meet Trump's spending requirements, ie: border wall, infrastructure and military spending, reduction in taxes, etc.

In an environment of worsening political tensions between the Republicans and Democrats and infighting among Republicans, will raising the debt ceiling be approved by Congress? The Democrats look set to go against Trump on all grounds, and Republicans being the conservative party have criticised Obama often on the amount of debt. So will they eat their own words  and vote to raise the debt ceiling themselves, which will anger their grassroots?

Some Republicans have come out to say that there won't any tax reduction without a spending cut, which could also put Trump's spending plans at risk. For Trumps plans to kick off, THE DEBT CEILING MUST BE RAISED.

If the debt ceiling is not raised, we could potentially see a government shut down and scaling back of payments in entitlements such as Social Security, Medicaid, etc.

Here's how I see it. 

1) Debt ceiling is raised, the stock market may respond positively, but the bond market could see a selloff. A selloff in the bond market will result in higher yields, which the market may misread as a stronger $, as such the price of the precious market may be kept in check. Eventually a skyrocketing debt will result in a weaker currency as it will deter investors from buying US treasuries as the inflation that comes with it may not be enough to yield a positive return. The Fed will have to step in and monetise the debt which in other words, another round of QE. And we know what happened to precious metals in the last QE. 

2) The debt ceiling is not raised, and turmoil erupts in the stock market which will also result in traders and investors losing faith in the US economy and a selloff in $$$ ensues.

So either way will be bullish for precious metals and miners.

Since the Fed is likely to hike rate in March, it will be pretty much like what happened in December. Precious metals and miners weakening ahead of the hike and resume an uptrend thereafter. 

The above is just my opinion.

SIGNS OF STRESS IN CHINA AND JAPAN

Most of my writings thus far have been focused on the US and EU. But something dangerous is also manifesting beneath the calm surface in China and Japan.
Look at the for mortgage loan (orange) and and net profits (grey) for commercial banks in China. What does it tell you? A falling net profit in the loans could very well mean surging NPLs and this could have dire consequences for the banks which have over extended the loans to a staggering level.

Next is the chart form Japan. Despite the suport from the BOJ in buying up bonds and ETFs, the Japanese population is just not spending. Meanwhile the BOJ has over extended the balance sheet by more than 250% of GDP. If the Japanese are not spending, the economy will continually be in the doldrums, not to mention the BOJ missing its inflation target.

Added together we have the US, EU, China and Japan all tethering on the edge of a precipice with their enormous debt.

PRECIOUS METAL TAKEDOWN AND ATLANTA GDP NOW FORECAST AT 1.8%, THAT'S A TECHNICAL RECESSION

Both gold and silver hav ebeen repeatedly hit over the the last week. Gold amnaged to hold above US$1,230 per oz but silver got hit badly when someone dumped US$2B in paper silver to caus ea massive drop in the price of silver on Thursday.
Who is the someone? Silverdoctors said it could be a major silver player coming to rescue the commercial shorts. 
This resulted int he miners being ht as well. Meanwhile, we have a parade of Fed speakers, including Yellen saying now's the time to raise interest rate because the economy is getting stronger. Stronger? Is that a joke? The Atlanta Fed GDP Now is forecasting Q1 2017 GDP at 1.8%. That vs 1.9% in Q4 2016 and 3.5% in Q3 2016. That's a 2 month consecutive drop in GDP! And in my dictionary, that signals a technical recession!
Once the reality sinks in, we could see a stock market sell off and a move into safe haven assets like precious metals.