Red Screen at Morning, Investor Take Warning

Growing up as I did in coastal New England, this old rhyme was drilled into us as children:

Red sky at night, sailor's delight;

Red sky at morning, sailor take warning.

Because many of the people in town still made their living on the sea, the safety of person and property depended on being able to recognize the signs of approaching danger.

A notably red sky at morning is usually due to sunrise reflection off of moisture-bearing clouds, signifying an arriving a storm system bringing rain, wind and rough seas. Those who ignored a red sky warning often did so at their peril.

Red Sky In The Markets

I'm reminded of that childhood rhyme because the markets are giving us a clear "red sky" warning right now. One that comes after (too) many years of uninterrupted fair winds and smooth sailing.

The markets have plunged nearly 8% over just a single week. And the losses are across the board. Nearly every asset class from stocks to bonds to commodities to real estate are participating in the pain. Market displays are a sea of red.

We've written so often and recently of the dangerous level of over-valuation in asset prices (caused by years of central bank intervention) that to re-hash the premise again feels unnecessary.

But the chart below is worth our attention now, as it really drives home just how dangerously over-extended the markets have become. It's a 20-year chart of the S&P 500, showing how it has traded vs its 50-month moving average (the thin green line).

Importantly, the chart also plots the Bollinger bands for this moving average. These are the thin red (upper) and purple (lower) lines above and below the green one.

The simple definition of Bollinger bands is that they are measurements of volatility, and serve as indicators of "highness" or "lowness" of price relative to trading history (a more complex explanation can be found here).

What that means is, when the price of the S&P 500 trades near the upper (red) Bollinger band, that's an indication it's over-priced vs its historic trading behavior. And vice-versa when it trades near the lower (purple) band.

Now, the chart below is important because it shows that over the past 20-years, the S&P 500 has *never* traded above the its 50-month upper Bollinger band -- EXCEPT for the 7 months preceding this one. Simply put, the market had not been more overvalued in (at least) the past 20 years as it was last month:

(click here for an expanded view)

But just as frightening, though, is how the 7% drop the S&P has experienced over the past week has only brought it back to just touch the upper Bollinger band. Despite its recent losses, the S&P is still wildly over-valued.

Said another way: it still has further to fall. A LOT further.

If indeed this is the start of a major correction, one that clears out all  "excessive exuberance" as happened in 2001 and 2008, we could well see a retracement down past the 50-month moving average, all the way to (and possibly, briefly, below) the lower Bollinger band.

That would put the S&P somewhere around 1,500-1,600 -- a drop of around 40% from where it closed today.

And as we made the case earlier this week when looking at classic asset price bubble curves, a return of the S&P to a price level below 1,000 can't be ruled out.

Time To Batten Down The Hatches

When a storm arrives at sea, sailors hunker down. They strip, tie fast, and stow everything they can -- then they ride out the storm and re-emerge once it has passed.

This is an excellent model for today's investor. If this week's plunge indeed accelerates into a bear market, simply surviving the carnage with a substantial percentage of your capital intact will constitute "winning".

So, if you still have long positions in your personal or retirement portfolios, what should you be doing at this point?

1) Move To Cash

Get your money to the sidelines. Remember that everything is relative during periods of extreme volatility like now. When everything around you is dropping in value, the relative value of your cash position rises.

Those who had already moved to cash now find they can buy 7% more of the S&P with it than they could a mere week ago. That relative rise in purchasing power will only increase should the markets fall farther from here.

Cash is also offering an improving absolute return as well these days, as interest rates rise. Not that you'd know it from what your bank is offering you (surprising no one, banks have kept depositor rates near 0% despite receiving higher interest payments themselves from the Federal Reserve).

But holding your cash in short-term T-Bills (durations of less than 1 year) through a program like TreasuryDirect is now returning yields of close to 1.5%. That's 25-50 times(!) more than what the average bank savings account interest rate is right now.

Given this high relative payout and the extreme safety of Treasurys (the last financial instrument in the world likely to default, as the US will simply print the money to repay, if necessary), this strategy is a clear no-brainer for those with a material amount of cash.

Those looking to learn more about the TreasuryDirect program, including how to open an account there, can read this primer we created.

2) Prepare Your Action Plan

We have long been loud advocates of working with a professional financial advisor. Now, more than ever, you want to review your action plan with him/her.

If you have remaining long positions, battle test them. How do you expect them to perform in a bear market? If the market falls another 10% from here, what will be the expected impact to your overall portfolio? What if the market falls 25%?

Does hedging make sense as a risk management strategy for you? How about building up a short position with a minority percentage of your portfolio?

Now is the time to address and answer these questions, because if indeed a major correction is nigh, it very well may happen so fast you don't have time to act. (Just ask those holding Bitcoin in January how quickly 50% of your position can vaporize.)

As always, if you're having difficulty finding a firm willing or able to engage in the above with you, consider scheduling a free consultation with Peak Prosperity's endorsed financial advisor.

Also, folks frequently underestimate the effort and time it takes to set up accounts, get funds transferred, etc. Don't set yourself up for the frustration and disappointment of delays should you wait until the midst of a market melt-down to get all this in place. The market may be moving so fast at that point as to make your efforts moot. (Again, talk to the crypto crowd here about their challenges funding accounts and trading through the exchanges last month.) 

Instead, get everything set up and prepared now. You don't need to necessarily transfer any funds at this point. But do yourself the service of getting all the administrative hurdles behind you today.

3) Track The Risks & Opportunities Closely

As we've warned for years, we've been living through The Mother Of All Financial Bubbles. When it bursts, the damage is going to be truly horrific.

The ride down in the markets is going to be painful and scary. There are going to be many knock-on effects that are impossible to forecast with precision -- or even to identify -- right now. What will happen with housing, jobs, pensions, entitlement programs, social services, the banking system? All could be impacted.

To what degree? We don't know at this point. Which is why tracking developments in real-time and assessing their likely impacts will be critical.

Similarly, in crisis there is opportunity. There will be speculative opportunities that present themselves during a melt-down (e.g., shorting mortgage insurers during the 2008 crash). And one markets find their bottom and stabilize, there will be the chance to invest in quality assets at fire-sale values compare to today's prices.

Know when to deploy your dry powder, and what to deploy it into, will be key.

We'll be doing our best here at PeakProsperity.com every week to offer essential insights to help you stay well-informed and on top of these fast-moving events.

To that mission, we're swiftly assembled a webinar on this coming Tuesday, February 13, 2018 at 8pm EST with Chris Martenson, Lance Roberts, Axel Merk and several other financial experts to provide in-depth context into the recent market plunge and their best assessment of what to expect from here in the near term. (To learn more about the webinar, click here)

Markets are warning us that even stormier seas lie ahead. Heed that warning, sailor, and hold fast!


EXPOSED: Why Eisenhower warned us about endless wars

PAUL J. RICHARDS / Staff | Getty Images

Donald Trump emphasizes peace through strength, reminding the world that the United States is willing to fight to win. That’s beyond ‘defense.’

President Donald Trump made headlines this week by signaling a rebrand of the Defense Department — restoring its original name, the Department of War.

At first, I was skeptical. “Defense” suggests restraint, a principle I consider vital to U.S. foreign policy. “War” suggests aggression. But for the first 158 years of the republic, that was the honest name: the Department of War.

A Department of War recognizes the truth: The military exists to fight and, if necessary, to win decisively.

The founders never intended a permanent standing army. When conflict came — the Revolution, the War of 1812, the trenches of France, the beaches of Normandy — the nation called men to arms, fought, and then sent them home. Each campaign was temporary, targeted, and necessary.

From ‘war’ to ‘military-industrial complex’

Everything changed in 1947. President Harry Truman — facing the new reality of nuclear weapons, global tension, and two world wars within 20 years — established a full-time military and rebranded the Department of War as the Department of Defense. Americans resisted; we had never wanted a permanent army. But Truman convinced the country it was necessary.

Was the name change an early form of political correctness? A way to soften America’s image as a global aggressor? Or was it simply practical? Regardless, the move created a permanent, professional military. But it also set the stage for something Truman’s successor, President Dwight “Ike” Eisenhower, famously warned about: the military-industrial complex.

Ike, the five-star general who commanded Allied forces in World War II and stormed Normandy, delivered a harrowing warning during his farewell address: The military-industrial complex would grow powerful. Left unchecked, it could influence policy and push the nation toward unnecessary wars.

And that’s exactly what happened. The Department of Defense, with its full-time and permanent army, began spending like there was no tomorrow. Weapons were developed, deployed, and sometimes used simply to justify their existence.

Peace through strength

When Donald Trump said this week, “I don’t want to be defense only. We want defense, but we want offense too,” some people freaked out. They called him a warmonger. He isn’t. Trump is channeling a principle older than him: peace through strength. Ronald Reagan preached it; Trump is taking it a step further.

Just this week, Trump also suggested limiting nuclear missiles — hardly the considerations of a warmonger — echoing Reagan, who wanted to remove missiles from silos while keeping them deployable on planes.

The seemingly contradictory move of Trump calling for a Department of War sends a clear message: He wants Americans to recognize that our military exists not just for defense, but to project power when necessary.

Trump has pointed to something critically important: The best way to prevent war is to have a leader who knows exactly who he is and what he will do. Trump signals strength, deterrence, and resolve. You want to negotiate? Great. You don’t? Then we’ll finish the fight decisively.

That’s why the world listens to us. That’s why nations come to the table — not because Trump is reckless, but because he means what he says and says what he means. Peace under weakness invites aggression. Peace under strength commands respect.

Trump is the most anti-war president we’ve had since Jimmy Carter. But unlike Carter, Trump isn’t weak. Carter’s indecision emboldened enemies and made the world less safe. Trump’s strength makes the country stronger. He believes in peace as much as any president. But he knows peace requires readiness for war.

Names matter

When we think of “defense,” we imagine cybersecurity, spy programs, and missile shields. But when we think of “war,” we recall its harsh reality: death, destruction, and national survival. Trump is reminding us what the Department of Defense is really for: war. Not nation-building, not diplomacy disguised as military action, not endless training missions. War — full stop.

Chip Somodevilla / Staff | Getty Images

Names matter. Words matter. They shape identity and character. A Department of Defense implies passivity, a posture of reaction. A Department of War recognizes the truth: The military exists to fight and, if necessary, to win decisively.

So yes, I’ve changed my mind. I’m for the rebranding to the Department of War. It shows strength to the world. It reminds Americans, internally and externally, of the reality we face. The Department of Defense can no longer be a euphemism. Our military exists for war — not without deterrence, but not without strength either. And we need to stop deluding ourselves.

This article originally appeared on TheBlaze.com.

Censorship, spying, lies—The Deep State’s web finally unmasked

Chip Somodevilla / Staff | Getty Images

From surveillance abuse to censorship, the deep state used state power and private institutions to suppress dissent and influence two US elections.

The term “deep state” has long been dismissed as the province of cranks and conspiracists. But the recent declassification of two critical documents — the Durham annex, released by Sen. Chuck Grassley (R-Iowa), and a report publicized by Director of National Intelligence Tulsi Gabbard — has rendered further denial untenable.

These documents lay bare the structure and function of a bureaucratic, semi-autonomous network of agencies, contractors, nonprofits, and media entities that together constitute a parallel government operating alongside — and at times in opposition to — the duly elected one.

The ‘deep state’ is a self-reinforcing institutional machine — a decentralized, global bureaucracy whose members share ideological alignment.

The disclosures do not merely recount past abuses; they offer a schematic of how modern influence operations are conceived, coordinated, and deployed across domestic and international domains.

What they reveal is not a rogue element operating in secret, but a systematized apparatus capable of shaping elections, suppressing dissent, and laundering narratives through a transnational network of intelligence, academia, media, and philanthropic institutions.

Narrative engineering from the top

According to Gabbard’s report, a pivotal moment occurred on December 9, 2016, when the Obama White House convened its national security leadership in the Situation Room. Attendees included CIA Director John Brennan, Director of National Intelligence James Clapper, National Security Agency Director Michael Rogers, FBI Deputy Director Andrew McCabe, Attorney General Loretta Lynch, Secretary of State John Kerry, and others.

During this meeting, the consensus view up to that point — that Russia had not manipulated the election outcome — was subordinated to new instructions.

The record states plainly: The intelligence community was directed to prepare an assessment “per the President’s request” that would frame Russia as the aggressor and then-presidential candidate Donald Trump as its preferred candidate. Notably absent was any claim that new intelligence had emerged. The motivation was political, not evidentiary.

This maneuver became the foundation for the now-discredited 2017 intelligence community assessment on Russian election interference. From that point on, U.S. intelligence agencies became not neutral evaluators of fact but active participants in constructing a public narrative designed to delegitimize the incoming administration.

Institutional and media coordination

The ODNI report and the Durham annex jointly describe a feedback loop in which intelligence is laundered through think tanks and nongovernmental organizations, then cited by media outlets as “independent verification.” At the center of this loop are agencies like the CIA, FBI, and ODNI; law firms such as Perkins Coie; and NGOs such as the Open Society Foundations.

According to the Durham annex, think tanks including the Atlantic Council, the Carnegie Endowment, and the Center for a New American Security were allegedly informed of Clinton’s 2016 plan to link Trump to Russia. These institutions, operating under the veneer of academic independence, helped diffuse the narrative into public discourse.

Media coordination was not incidental. On the very day of the aforementioned White House meeting, the Washington Post published a front-page article headlined “Obama Orders Review of Russian Hacking During Presidential Campaign” — a story that mirrored the internal shift in official narrative. The article marked the beginning of a coordinated media campaign that would amplify the Trump-Russia collusion narrative throughout the transition period.

Surveillance and suppression

Surveillance, once limited to foreign intelligence operations, was turned inward through the abuse of FISA warrants. The Steele dossier — funded by the Clinton campaign via Perkins Coie and Fusion GPS — served as the basis for wiretaps on Trump affiliates, despite being unverified and partially discredited. The FBI even altered emails to facilitate the warrants.

ROBYN BECK / Contributor | Getty Images

This capacity for internal subversion reappeared in 2020, when 51 former intelligence officials signed a letter labeling the Hunter Biden laptop story as “Russian disinformation.” According to polling, 79% of Americans believed truthful coverage of the laptop could have altered the election. The suppression of that story — now confirmed as authentic — was election interference, pure and simple.

A machine, not a ‘conspiracy theory’

The deep state is a self-reinforcing institutional machine — a decentralized, global bureaucracy whose members share ideological alignment and strategic goals.

Each node — law firms, think tanks, newsrooms, federal agencies — operates with plausible deniability. But taken together, they form a matrix of influence capable of undermining electoral legitimacy and redirecting national policy without democratic input.

The ODNI report and the Durham annex mark the first crack in the firewall shielding this machine. They expose more than a political scandal buried in the past. They lay bare a living system of elite coordination — one that demands exposure, confrontation, and ultimately dismantling.

This article originally appeared on TheBlaze.com.

Trump's proposal explained: Ukraine's path to peace without NATO expansion

ANDREW CABALLERO-REYNOLDS / Contributor | Getty Images

Strategic compromise, not absolute victory, often ensures lasting stability.

When has any country been asked to give up land it won in a war? Even if a nation is at fault, the punishment must be measured.

After World War I, Germany, the main aggressor, faced harsh penalties under the Treaty of Versailles. Germans resented the restrictions, and that resentment fueled the rise of Adolf Hitler, ultimately leading to World War II. History teaches that justice for transgressions must avoid creating conditions for future conflict.

Ukraine and Russia must choose to either continue the cycle of bloodshed or make difficult compromises in pursuit of survival and stability.

Russia and Ukraine now stand at a similar crossroads. They can cling to disputed land and prolong a devastating war, or they can make concessions that might secure a lasting peace. The stakes could not be higher: Tens of thousands die each month, and the choice between endless bloodshed and negotiated stability hinges on each side’s willingness to yield.

History offers a guide. In 1967, Israel faced annihilation. Surrounded by hostile armies, the nation fought back and seized large swaths of territory from Jordan, Egypt, and Syria. Yet Israel did not seek an empire. It held only the buffer zones needed for survival and returned most of the land. Security and peace, not conquest, drove its decisions.

Peace requires concessions

Secretary of State Marco Rubio says both Russia and Ukraine will need to “get something” from a peace deal. He’s right. Israel proved that survival outweighs pride. By giving up land in exchange for recognition and an end to hostilities, it stopped the cycle of war. Egypt and Israel have not fought in more than 50 years.

Russia and Ukraine now press opposing security demands. Moscow wants a buffer to block NATO. Kyiv, scarred by invasion, seeks NATO membership — a pledge that any attack would trigger collective defense by the United States and Europe.

President Donald Trump and his allies have floated a middle path: an Article 5-style guarantee without full NATO membership. Article 5, the core of NATO’s charter, declares that an attack on one is an attack on all. For Ukraine, such a pledge would act as a powerful deterrent. For Russia, it might be more palatable than NATO expansion to its border

Andrew Harnik / Staff | Getty Images

Peace requires concessions. The human cost is staggering: U.S. estimates indicate 20,000 Russian soldiers died in a single month — nearly half the total U.S. casualties in Vietnam — and the toll on Ukrainians is also severe. To stop this bloodshed, both sides need to recognize reality on the ground, make difficult choices, and anchor negotiations in security and peace rather than pride.

Peace or bloodshed?

Both Russia and Ukraine claim deep historical grievances. Ukraine arguably has a stronger claim of injustice. But the question is not whose parchment is older or whose deed is more valid. The question is whether either side is willing to trade some land for the lives of thousands of innocent people. True security, not historical vindication, must guide the path forward.

History shows that punitive measures or rigid insistence on territorial claims can perpetuate cycles of war. Germany’s punishment after World War I contributed directly to World War II. By contrast, Israel’s willingness to cede land for security and recognition created enduring peace. Ukraine and Russia now face the same choice: Continue the cycle of bloodshed or make difficult compromises in pursuit of survival and stability.

This article originally appeared on TheBlaze.com.

The loneliness epidemic: Are machines replacing human connection?

NurPhoto / Contributor | Getty Images

Seniors, children, and the isolated increasingly rely on machines for conversation, risking real relationships and the emotional depth that only humans provide.

Jill Smola is 75 years old. She’s a retiree from Orlando, Florida, and she spent her life caring for the elderly. She played games, assembled puzzles, and offered company to those who otherwise would have sat alone.

Now, she sits alone herself. Her husband has died. She has a lung condition. She can’t drive. She can’t leave her home. Weeks can pass without human interaction.

Loneliness is an epidemic. And AI will not fix it. It will only dull the edges and make a diminished life tolerable.

But CBS News reports that she has a new companion. And she likes this companion more than her own daughter.

The companion? Artificial intelligence.

She spends five hours a day talking to her AI friend. They play games, do trivia, and just talk. She says she even prefers it to real people.

My first thought was simple: Stop this. We are losing our humanity.

But as I sat with the story, I realized something uncomfortable. Maybe we’ve already lost some of our humanity — not to AI, but to ourselves.

Outsourcing presence

How often do we know the right thing to do yet fail to act? We know we should visit the lonely. We know we should sit with someone in pain. We know what Jesus would do: Notice the forgotten, touch the untouchable, offer time and attention without outsourcing compassion.

Yet how often do we just … talk about it? On the radio, online, in lectures, in posts. We pontificate, and then we retreat.

I asked myself: What am I actually doing to close the distance between knowing and doing?

Human connection is messy. It’s inconvenient. It takes patience, humility, and endurance. AI doesn’t challenge you. It doesn’t interrupt your day. It doesn’t ask anything of you. Real people do. Real people make us confront our pride, our discomfort, our loneliness.

We’ve built an economy of convenience. We can have groceries delivered, movies streamed, answers instantly. But friendships — real relationships — are slow, inefficient, unpredictable. They happen in the blank spaces of life that we’ve been trained to ignore.

And now we’re replacing that inefficiency with machines.

AI provides comfort without challenge. It eliminates the risk of real intimacy. It’s an elegant coping mechanism for loneliness, but a poor substitute for life. If we’re not careful, the lonely won’t just be alone — they’ll be alone with an anesthetic, a shadow that never asks for anything, never interrupts, never makes them grow.

Reclaiming our humanity

We need to reclaim our humanity. Presence matters. Not theory. Not outrage. Action.

It starts small. Pull up a chair for someone who eats alone. Call a neighbor you haven’t spoken to in months. Visit a nursing home once a month — then once a week. Ask their names, hear their stories. Teach your children how to be present, to sit with someone in grief, without rushing to fix it.

Turn phones off at dinner. Make Sunday afternoons human time. Listen. Ask questions. Don’t post about it afterward. Make the act itself sacred.

Humility is central. We prefer machines because we can control them. Real people are inconvenient. They interrupt our narratives. They demand patience, forgiveness, and endurance. They make us confront ourselves.

A friend will challenge your self-image. A chatbot won’t.

Our homes are quieter. Our streets are emptier. Loneliness is an epidemic. And AI will not fix it. It will only dull the edges and make a diminished life tolerable.

Before we worry about how AI will reshape humanity, we must first practice humanity. It can start with 15 minutes a day of undivided attention, presence, and listening.

Change usually comes when pain finally wins. Let’s not wait for that. Let’s start now. Because real connection restores faster than any machine ever will.

This article originally appeared on TheBlaze.com.