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If You Want To Be Wealthy, Don’t Focus on Owning a House–Build a Business

One truism of investing is to follow the lead of those who are building wealth.This chart reveals the foundation of the wealth of the top 1% and the next 9%; business equity, i.e. ownership of enterprises. Compare the assets boxed in red:

The wealthiest households’ primary wealth is businesses and shares in businesses. The bottom 90% depend on the family residence as a store of wealth, and on debt as a means of funding asset purchases and consumption.

Primary residences were once a reliable store of wealth–a store that was accessible to working families who were willing to pinch pennies and save up a down payment.

But now that housing has been financialized and globalized, it is prone to boom and bust cycles like every other risk-on financialized asset. Unfortunately, recent history shows that many middle-class households bought homes at the top and rode the post-bubble burst down.

Those fortunate enough to own homes in bubble-prone regions may benefit from speculating in housing, but playing this speculative game requires cashing out at the top of the bubble–something few have the knack for.

Building a profitable business isn’t easy. That’s why many of the wealthy let entrepreneurs take the risk of starting businesses and then buy the business for a premium once it has proven to be profitable.

But many entrepreneurs refuse to sell out, preferring to hold their businesses as a family asset that can be passed on to the next generation.

It’s also worth noting that the wealthiest 10% own over 90% of the securities and stocks, 84% of trusts (essentially tax havens) and almost 80% of non-home real estate (i.e. second homes and income-generating properties).

Primary residences represent a mere 10% of the wealthiest 1%’s assets.

The key take-away: focus on owning income-producing assets, not a primary residence. The second key take-away:

Don’t finance your assets with debt; finance your income-producing assets with savings and sweat equity, not borrowed money.

It is not accidental that the wealthiest 1% hold very modest levels of debt.

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America’s Corrupt Media – How Reporters Took Direct Orders from Hillary Clinton’s Staff

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If you really want to know how weak Hillary Clinton is as a candidate, you merely have to appreciate that the U.S. media essentially acts as her own personal PR firm, yet the public still recognizes her as a dishonest crook. Brace yourself for the following story, it’s huge.

Earlier this week, we learned from Gawker that at least one U.S. reporter traded content in his article for information from Hillary Clinton’s staff while she was Secretary of State. In what is an almost hard to believe exchange, Marc Ambinder of The Atlantic,  agreed to insert specific words and imagery into his article in return for a copy of Hillary’s upcoming speech at the Council on Foreign Relations.

Read the rest here.

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“This is a Clusterf*ck! Silver Could Skyrocket Through $2,000+ Within 24 Months!

Gold is undervalued to the point of idiocy.  But silver?  Silver is in another universe. 
This is a clusterf*ck.  All those “crazy” price targets of silver at $1,000 or more?  They’re not crazy. In fact, we have a set-up where we could go to $150 silver over the coming 12 months, and then, we hit a blow-off top that takes less than a year to reach $1,000, $2,000+ an ounce.  (more…)

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[KR874] Keiser Report: Conditions for Anger

We discuss the reason that Americans are so angry and the role played by former President Bill Clinton on creating the conditions for their anger. In the second half, Max talks to Ellen Brown, author of “Web of Debt,” about the populist revolution, from Bernie and beyond, and about the citadel being breached as Congress taps the Fed for infrastructure spend.

Lines Around the Block to Buy Gold in London…Banks Placing “Unusually Large Orders for Physical”

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What a difference a couple of weeks can make. The Telegraph is reporting the following:

BullionByPost, Britain’s biggest online gold dealer, said it has already taken record-day sales of £5.6m as traders pile into gold following fears the world is on the brink of another financial crisis…

Read more here.

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The Increasingly Fragile Upper-Middle Class

Since the top 10% takes home 50% of all household income, it follows that this top slice has most of the discretionary cash, i.e. net income left after taxes, servicing debt and paying for essentials such as food, utilities and housing.

It also follows that the discretionary spending of the top 10% is supporting much of the economy that is dependent on discretionary spending: tourism, eating out, personal trainers, etc.

The top 10% includes the thin slice of Financial Oligarchy (top .01%) and the top 1%. This skews the income and wealth of the top 10%. But if we set aside the top 1%, the next 10% still earns the lion’s share of household income.

The top .1% can prop up Maserati sales and buy $5 million vacation homes, but there simply aren’t enough super-wealthy to support the U.S. economy. As for the top 1%, they can prop up the local Porsche dealership and pay dock fees at the yacht club, but there aren’t enough of them to support the entire economy, either: around 1.5 million qualify as top 1%.

So that leaves the upper-middle class, the roughly 12 million households that earn a disproportionate share of household income, with the task of spending enough discretionary cash to prop up an economy that depends heavily on consumer spending.

Many of these upper-middle class households are far more financially fragile than their substantial incomes suggest. The vast majority of these high-income households depend on two earners, each making substantial salaries, bonuses and benefits such as 401K retirement contributions.

Many of these apparently high incomes are completely absorbed by high-cost upper middle class expenses. $250,000 a year may look like a lot until you throw in a couple of kids attending private prep schools or college, healthcare costs that aren’t covered by insurance, an enormous mortgage and sky-high property taxes.

The upper-middle class includes many people with wealth, but it also includes many people who have saved very little, and what they do have is in IRAs and 401Ks trapped in the stock market. Their slide to insolvency can be very quick once one high-earner loses their job and can’t find another equally lucrative position in a few months.

Many of these people are vulnerable to a downturn because they own/operate small businesses in discretionary spending sectors–the ones that will get creamed as people cut discretionary spending. Others are sandwiched between kids in college and elderly parents, and their seemingly big incomes are fully allotted to essentials and the generations they are sandwiched between.

One job loss will crumble the entire house of cards. As local government revenues start crumbling along with corporate profits, many high-cost jobs in both thr public and private sectors will suddenly be vulnerable as managers are forced to seek the largest possible savings from job cuts.

The upper-middle class that’s supported the “recovery” with massive discretionary spending is far more vulnerable to implosion/insolvency than is generally appreciated.

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The Chart of Doom: When Private Credit Stops Expanding…

Few question the importance of private credit in the global economy. When households and businesses are borrowing to expand production and buy homes, vehicles, etc., the economy expands smartly.

When private credit shrinks–that is, as businesses and households stop borrowing more and start paying down existing debt–the result is at best stagnation and at worst recession or depression.

Courtesy of Market Daily Briefing, here is The Chart of Doom, a chart of private credit in the five primary economies:

Why is this The Chart of Doom? It’s fairly obvious that private credit is contracting in Japan and the Eurozone and stagnant in the U.K.

As for the U.S.: after trillions of dollars in bank bailouts and additional liquidity, and $8 trillion in deficit spending, private credit in the U.S. managed a paltry $1.5 trillion increase in the seven years since the 2008 financial meltdown.

Compare this to the strong growth from the mid-1990s up to 2008.

This chart makes it clear that the sole prop under the global “recovery” since 2008-09 has been private credit growth in China. From $4 trillion to over $21 trillion in seven years–no wonder bubbles have been inflated globally.

Combine this expansion of private credit in China with the expansion of local government and other state-sector debt (state-owned enterprises, SOEs, etc.) and you have the makings of a global bubble machine.

In other words, the faltering global “recovery” and all the tenuous asset bubbles around the world both depend on a continued hyper-velocity rocket rise in China’s private credit. What are the odds of this happening? Aren’t the signs that this rocket ship has burned its available fuel abundant?

Three out of the five major economies are already experiencing stagnant or negative private credit growth. Three down, two to go. Helicopter money–government issued “free money” to households–is no replacement for private credit expansion.

Once private credit rolls over in China and the U.S., the global recession will start its rapid slide down the Seneca Cliff: The Global Economy Could Fall Farther and Faster Than Pundits Expect.

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Bo Polny Warns: NOTHING Can Stop a Financial COLLAPSE in 2016!!

In this MUST WATCH interview, Bo Polny explains why gold and silver are set to SKYROCKET, and warns that a HISTORIC financial collapse is a certainty in 2016:
(more…)

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What Clinton Said in Her Speeches – “She Sounded More Like a Goldman Sachs Managing Director”

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The following revelation is the last thing Hillary Clinton’s team wanted to emerge at a time when her campaign is in the midst of a complete and total meltdown.

“It was pretty glowing about us,” one person who watched the event said. “It’s so far from what she sounds like as a candidate now. It was like a rah-rah speech. She sounded more like a Goldman Sachs managing director.”

Read the rest here.

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US will owe $30 trillion in national debt within a decade

According to a new federal report, US will owe $30 trillion in national debt within a decade if the country’s budget deficit continues to grow at the same rate and current tax laws remain in place. There is no sign that the deficit won’t continues to grow at the same rate… So we will see the $30 trillion soon.

The debt stood at $10.6 trillion when President Barack Obama took office in 2009.

Read more: US will owe $30 trillion in national debt within a decade

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[KR873] Keiser Report: Efficacy of Capitalism

We discuss the efficacy of capitalism as profits remain high and with no competition on the horizon to put a dent in those high profit margins. We also discuss hedge funds and bankers unhappy with the “new Spain” where justice is imposed and also at the “folly for the ages” as a major energy company liquidates itself through financialization gone wrong. In the second half, we look at the peer-to-peer lending Ponzi schemes imploding in China and at #icechallengeputin as Max Keiser takes to ice in a video only available on RT Plugin.

The Return Of Crisis

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Chris Martenson explains why the developing economic crisis is going to be worse than any we’ve experienced before. Why? An unprecedented 1-2 punch from an over-leveraged banking system system collapsing upon itself, concurrent with the world’s net-energy-per-capita ratio grinding downwards, as well.

As this happens, most folks will undergo a “forced simplification” of their lifestyles as well as their financial portfolios, which will be quite disruptive and emotionally difficult. That’s not fear-mongering; it’s just math.

Click here to read the full article