Currency War Rages on as China Devalues Yuan

PBOCChina’s central bank has caught the markets off-guard by unexpectedly devaluing the yuan by nearly 2 percent against the U.S. dollar, roiling stocks as a result, especially those that sell to China. The central bank of China has tried to brush aside the magnitude of the move, calling it a ‘one-off depreciation’ and saying the change in policy will help drive the currency toward more market-driven movements. However, this is just another chapter in the worldwide currency war we are experiencing, and it should not come as a surprise at all.

First, it is helpful to examine more closely what China actually changed. The yuan has been pegged to the dollar for many years now, with Chinese officials allowing the yuan to trade 2% above or below a midpoint they set called the daily fixing. Officials can look at the daily trading when setting the midpoint, or they can arbitrarily set it higher or lower as they please.

The central bank has now changed its policy, saying it will base the midpoint off of the previous day’s closing price as well as market-makers’ quotes. As a result, it set the midpoint 2% lower than the previous day’s. This was the biggest devaluation of the yuan since 1994 when they let it fall by one-third as part of a breaking away from Communist state planning.

Because the rules are now more ‘market based’, it will be interesting to see if this really will be a one-off devaluation or if China will let the currency slide further. They could also continue to influence rates by entering the foreign exchange markets themselves with their reserves.

In the end, the mechanism or specifics are minor details compared to the real reason for the devaluation; participation in the global currency war. Almost nobody doubts that China is now fully engaged in the same game that developed countries have been playing for years now. Each one is devaluing their national currency as a last-ditch effort to stimulate more growth. Read More…

The Biggest Advantage You Have Over Wall Street

DollarNews stories of high-frequency trading, market rigging and interest rate manipulations make the average individual investor feel like they have no chance of making any money in the markets. It seems like the guys on the inside track, such as the hedge funds, private equity funds and other “accredited investors,” only have access to all of the great deals. But there is a huge advantage you, as an individual investor, have over Wall Street and the entire investment management industry – independence.

What I mean by this is you as an investor of your own money only have to answer to yourself. Almost every hedge fund or investment manager in the industry is managing money for someone else and therefore have to answer to to their clients every month or quarter and report on their performance. This is of course a good thing in itself, but it can be a hindrance to the manager and something you can use to your advantage.

For example, hedge fund manager David Einhorn has recently been under fire for his bet on gold. His publicly traded reinsurer, Greenlight Capital Re, is down 18% year-to-date partly due to the fund’s gold position as well as other positions that have not been working out. Keep reading…

Myths of Inflation (and Deflation) with Christopher Casey [Interview]

Top highlights from the interview. Five of the ways that inflation is misunderstood in today’s world:

1. “Demand pull” inflation (Keynesian concept) a.k.a. an “overheated economy”

2. “Cost push” inflation (Keynesian concept) e.g., increase in the price of oil can spark inflation.

3. Velocity can exacerbate or mitigate inflation (when it reality it does not exist and is a poor proxy for monetary demand).

4. Demographics directly impacts the price level (e.g., an aging population is “deflationary” per people like Harry Dent), the impact is really indirect and only results from the nature of fractional reserve banking

5. The Federal Reserve can not successfully control inflation, it can only contribute to the price increases with its ability to print money at its leisure.

Thanks, WindRock Wealth.

Major Tax Reform: A Good Idea or Fuel For Cataclysmic Upheaval?

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Tax expert and author of Tax-Free Wealth Tom Wheelwright has never been one to mince words about tax reform. And he certainly didn’t disappoint in a recent radio interview about a spate of ideas being bantered about by some of the 2016 Presidental candidates. So does Tom think that major tax reform, which would involve slicing and dicing through the 74,000 pages of tax code regulations that currently exists, is a good idea? Listen to this five minute video to find out more.

Confessions of a Millionaire Businessman

Author and businessman, Tim Brown, knew what it was like to live The American Dream. But then everything came crashing down. A number of years ago, amidst his struggling marriage, the collapse of his ventures and his declining health, Tim contemplated ending his life while on a business trip. He spotted a location on the roof of the hotel he was staying and pondered his jump. In a fascinating interview I did with him – which captures the essence of his book Jumping Into The Parade: The Leap of Faith that Made My Broken Life Worth Living - Tim discusses how these struggles helped him truly live, take chances and become the person he really wanted to be.

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You talk in your book about becoming a millionaire by age 30 with a beautiful wife, a young son and all the trappings of success. But then things in your life started to head in a less than favorable direction. Talk to us about this

I think there are a lot of messages baked into that question. For starters, I believe the real problems we face can’t be fixed with money. This is something that we all learn at different points in our life. Just looking back at becoming a millionaire at 30, I am often reminded that whenever you connect your worth to a scoreboard, you have fallen into a really dangerous trap.

So where did ‘money’ come into this equation?

Personally, making money was never about me being rich, and it still isn’t. It has always been about not being poor. Those are two very different mindsets.

Can you elaborate on that?

Glad to. As I look back, I can honestly say that money for me was about security and safety. So much of my life was based on choices that my parents made, involving frequent family moves which left me feeling unsafe and disconnected. To me, money represents the type of security and stability that has allowed me not to be at the mercy of another person’s decisions. Moreover, it helped set the course for my own value proposition here on earth in that it kinda proved to the world that I had worth.

And as I recall from the book, you struggled with depression?

I sure did. The depth of this depression hit me hard when I was in my late 30’s. Everything I had worked on in my 20’s was successful. And I also did really well with a lot of what I worked on in my 30’s. But then the demands of my businesses really started to take their toll, and it was only a matter of time before the powder keg went off.

What about self-worth?

It is important for all of us to remember that our self-worth is not necessarily connected to our work life. Your worth is about your character and your capacity for learning, serving, helping others and growing your soul. It can be a real wake-up call when we find that the pot of gold at the end of the rainbow is empty and that we have spent much of our life being on this quest. For me as a kid, I envisioned marrying a beautiful wife, having a family, a great house and security and that all of this would be delivered through money. While money certainly helps for sure, I’ve seen just as many people with a lot of money live unfulfilled lives. It can corrupt people because they let it become their God. And it can become an enabler of ego which can cloud one’s judgement and humility. Keep reading…