The month of April brought in more than 1,000 comments, questions, posts, shares, "likes," and emails from you and your fellow readers. That's an Insights & Indictments record. It shows that you're thinking, that you're mad as hell about what you see, and you want to do something about it.
First, please keep helping me get the word out about the crimes and lies being perpetrated by our "leaders." Forward these emails; share my articles online. Spread the word however you can. Together, we can make our voices heard. We can make this country better for our kids and grandkids.
Second, at your request, I'm working on something big. I believe this could be the vehicle for the change you all want to see. We're going after the "permanent political class" getting cozy in Washington in a brand-new way. And don't think Wall Street is safe. We're going after them, too. We're going to shake them both up and demand reform.
I saw some brilliant comments and questions from my last two articles - about Congressional term limits and breaking up the too-big-to-fail banks. For today's Q&A, I purposely didn't include those. I want to address them in a different way. You'll see what I mean.
Lots else to cover this month... so let's get to it.
Q Regarding your article "The Next Bank Meltdown Will Be No Accident": What happened to the Basel III accords, which were supposed to go into effect at the first of the year? ~ Jeffrey B.
A: All things "Basel" are being juggled, delayed, and massaged until tepid tweaks can be made to meet all banks' singular goal... of being able to circumvent them.
Part of the delay is because big banks are facing ongoing litigation expenses (including another mega-scandal... see my article in today's Money Morning), including the potential for hundreds of billions of dollars in fines, restitution and other impactful events on their profitability. Why on earth would central banks' sycophantic cheerleader, the Bank for International Settlements, who pens the Basel babel, impose tougher standards on their wards while they're still covered in warts?
Q: Can you say something about how to protect our assets against this coming meltdown? ~ Marco
A: Yes. Here's what to do... and it's really simple. Don't exit the market; this rally could go on for another year or two, though I don't think it will. The point is, there's money to be made as long as we're in rally mode. You've got to be in it to win it. Just make sure you aren't greedy. Take profits on the way up, because you're going to want to invest them on the way down and at the bottom. Always have stops in place and raise them as prices go higher. If you get stopped out and want to get back in, do it. Just use a tighter stop so you don't give back too much of what you previously made. At some point, a correction may take you out of some of your positions. If you want to get back in because the market starts bouncing again, do it. Just don't forget those stops again. If you get taken out of all of your positions in a big swoon, if you've been raising your stops, you'll be out with profits. Sit tight at that point. If you're on the sidelines now, look at step one. Take some positions and use tight stops. If you are expecting a giant sell-off and it doesn't happen, you may miss a tremendous moneymaking opportunity.
Now, about the coming meltdown.
It is coming. But I don't have any idea of the timing. That's why I'm heavily invested now and keep raising my stops. My two subscriber services (Capital Wave Forecast and DealBook) are pretty fully invested, and we've been taking profits as a few positions have hit stops we've raised many times.
When the flood comes, you won't be able to swim against the deluge. With any luck, there will be warning signs, and I will be shouting from the rooftops to get out and get short. The only time I've EVER made a total "get out" call was in the late summer of 2008, when I was writing my Friday Night Illuminations (the email service that turned into today's Insights & Indictments). I shouted, "SELL EVERYTHING... EVERYTHING and go to cash, not money-market cash, real hard cash." I could see that one coming a mile away. If I see another black hole coming, you'll be the first to hear me.
When it happens, and it could be years away, cash will be okay, hopefully, but gold will be better. It won't hurt to start putting some aside now. And I don't mean gold shares, I mean physical gold in a safe place you can get to... NOT IN A BANK. Speaking of which...
Q: I saw an article last week that I can't find much info about. Seems Congress voted and passed by a wide margin the ability to trade in the markets again. I thought this had been stopped, members of Congress had to put their holdings in a "passive" account, they could not trade with their "inside" knowledge. What have I missed? ~ Jeff H.
A: Jeff, maybe you missed Congress' latest change to the STOCK Act. Are you sitting down? They just, very quietly, gutted the law that was supposed to stop insider trading... seriously.
On April 11, Congress voted to eliminate the transparency provisions that would have made not just their trades, but the trades of everyone close to elected officials (staffers, aides, lobbyists) available to the general public. You know - the part that mattered. It also delayed until next year the requirement to post financial disclosure forms online. The vote was unanimous. It all went down in a matter of seconds. And Obama signed it into law on April 15.
These people are crooks. They write laws to protect their criminal activity. And so far, they are untouchable.
Q [re: "Kickbacks Are Just Distractions at an Acceptable Cost"]: What a terrible burden for the four mortgage insurers having to pay what amounts to a .002566666% fine. And even worse for them it is split about 4 ways, meaning each pays out .0006%. If my math is right. I believe we honest Americans should only pay that rate in Federal taxes. Anybody with me? ~ Rick Y.
A: Sorry, you can't get away with that, Rick... unless you're a corporation.
Q: If a corporation is a "person" for the purpose of political purchases, excuse me, "donations," then why can't that "person" do time for breaking the law like any other? ~ Lee A.
A: Because Lee, a corporation is a person until it is guilty of doing something only a person is capable of doing. Then it is a corporation, an impenetrable edifice incapable of doing something criminal... because only a person is capable of criminal acts. Corporations are kind of like Congress, only more personable.
Q: I have read several times that the Feds are planning to collect the taxes due within our 401(k)s and IRAs, then confiscate the balance and return it in the form of a new government issued paper note. They would then control the dispensing of these new government notes according to what they believe you should have. Is this true? What can we do? ~ DC
A: I've read stuff like that too. I can't imagine it's true. But, hey, I never thought I'd see banks, with their government's blessing, reach into depositors' accounts and steal their money to give it to a central bank, either. Yet that's exactly what just happened in Cyprus.
So, I take it back... I can imagine it. But if it happens, there will also be revolution in the streets, and that just may work out in the long run.
Q: Thanks for the comprehensive response to my question on stops. What's the best way to determine the support levels that the traders might test? ~ JimAtl
A: I use, because a lot of traders use, Fibonacci numbers, breakdowns through well-defined up channels, whole numbers, and areas of "congestion" where there had been a lot of sideways movement before the stock moved higher... that former area of congestion is a good area to place a stop.
Q: Once you have physical possession of gold or silver and you want to sell it, what's the best way to sell it? Will the source that sold it to you also buy it from you? ~ John
A: There are dealers around the country that buy and sell physical gold. Just make sure you do some homework on their history and credibility. Pricing should be fairly transparent. If they want to charge "fees" beyond a nominal amount, look around for another dealer. There is a bid and offer for gold, just like there is for stocks, so you sell at the bid price and buy at the ask price, which is another way of charging you a small fee for the transaction.
Q: Theoretical question: Many financial advisors have advocated buying gold stocks because the U.S. dollar is going to collapse and when it does, precious metal stocks will soar. Assuming that happens and we sold the stocks, what would we get paid off with? U.S. dollars??? ~ Stephen K.
A: Aye, there's the rub. Yes, Stephen, you'd get paid in dollars (though you can trade gold in other currencies).
Q [re: "Bail-Ins, Magic Wands, and Con Men"]: I've never trusted banks and don't have a dime in them. The same goes for Savings & Loan Associations. All too often they have been bought out and merged with other banks and you can't keep up with the change from one to another and all the different rules and regulations. I have always used Credit Unions as I feel they are much safer. I would like to hear comments from you about them sometime! ~ Phil I.
A: Phil, I have a confession to make. I don't know much about how credit unions operate. But I'm going to look into them and let you exactly what's good about them and what's bad. And you know I won't pull any punches. Stay tuned.
Q: I think the real problem is governments who enable and order banks to do their dirty work. When things get ugly, the government gets a free pass from the media and public, while the banks get all the blame and scorn. But in return for doing the government's dirty work, bankers get extremely rich. It's a symbiotic relationship between banks and governments - like it is between rotting flesh and maggots. ~ Robert in Canada
A: That's a perfect analogy, Robert. Banks couldn't be the maggots they are if stinking, greedy legislators didn't coddle and protect them towards their own ends and give them a safe place to fester.
Q: Place your bets now. Which crooked bank will go bust first? My money is not on JPM, as they may well have stolen their way out of their massive short position in silver during the last week. Also, their close connection to the Fed ensures that their hand remain in the till! I am thinking a major European bank - Soc Gen perhaps. ~ Peter K.
A: Peter, I'm going to run with your idea. I'd like our readers to send in their picks for which domino they think will fall first, and why. There are a lot of you out there who know more about your banks than I might. Let's hear from you.
My wager, which I reserve the right to change, is that the next big failure won't be a giant, but a second-tier super regional. Do I have a name in mind? Yes I do. I'd tell you, but I can't, on account of the fact that I'm short it and I don't want to be accused of calling "fire" in a theater where the lights are still on and people are still in their seats.
But you can tell me. What's your pick for the next bank to go belly up? Leave it in a comment below - or send me an email at firstname.lastname@example.org.
There's a prize in it for the winner.
Related Articles and News:
There is No Such Thing as a "Safe" Big Bank
A Simple, Scary Way to Neuter Goldman Sachs and Friends
Why It's Time to Sell Too-Big-to-Fail Banks
Are "Wall Street Buyers" Like Blackstone Group Creating Another Housing Bubble?
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.