"I believe that banking institutions are more
dangerous to our liberties than standing armies. If the American people ever
allow private banks to control the issue of their currency, first by inflation,
then by deflation, the banks and corporations that will grow up around the
banks will deprive the people of all property until their children wake up
homeless on the continent their fathers conquered…" --Thomas Jefferson
I am for doing good to the
poor, but...I think the best way of doing good to the poor is not making them
easy in poverty, but leading or driving them out of it. I observed...that the
more public provisions were made for the poor, the less they provided for
themselves, and of course became poorer. And, on the contrary, the less was
done for them, the more they did for themselves, and became richer." -- Benjamin Franklin
The US Dollar and the Euro seem to be acting
irrationally, trading more on rumors than on any hard news (i.e. The Euro
rallied against the US Dollar on meaningless statements from Draghi and on expectations of Bernanke implementing QE3).
And sure enough, Bernanke announced a new inflation policy of injecting $40
billion per month until 2015 supposedly to help housing, which is exactly the
wrong thing to do for both housing and the economy, but it sure gave the
market a bounce. Next will come what? a release of
oil from the Petroleum Reserve before mid-October. In reality, these are two
meaningless inflationary moves that have been timed to do the most benefit to
Obama's RE-ELECTION aspirations.
The markets have not been resting during the
previous few weeks - the consolidation in gold and silver is now over. Both
precious metals soared and broke through their medium-term resistance levels
just as the US Dollar Index broke below its long-term support line. These are
major events for everyone interested in the most promising markets of our
time. No matter if you're a long-term investor or a short-term trader, these
breakouts and breakdowns mean a lot to you. Here's why:
All in all, the main thing to keep in mind now is
that the short and medium-term stock market and PM trends are now up, just as
I projected they would be. But nothing has been fixed and doing more of the
same while expecting a different outcome is the height of stupidity.
(Long-term subscribers and investors of mine know to keep their Precious
Metals positions intact.)
But now more than ever, you better renew your
subscriptions because although we should be making a new ALL TIME HIGH in the
near future, we are NOT in a new BULL MARKET. Rather, we will soon be
entering the worst BEAR MARKET in history. I am also expecting a Black Swan
event and by definition they are impossible to predict. (but I try anyway)
This is by no means sour grapes on my part as you all well know. It has been
only McHugh and me who have called for what's happening today in the stock
market (looking for NEW ALL TIME HIGHS) and I have been the only one beating
the drum for higher gold and silver for the last 4-5 months or so.
Bill Gross, the co-chief investment officer and
founder of Pacific Investment Management Co., manager of the world's biggest
bond fund, said in a Twitter post, "that all signs are that the European
Central Bank will be taking increasing steps to boost economic growth all of
which are "very inflationary" and an obvious indicator that
investors should "buy gold, and real hard assets. A continuing
succession of higher gold prices to above the inflation adjusted high of
$2,500/oz is likely at least until we see interest
rates return to more normal levels and zero percent interest policies are
supplanted by positive real interest rates."
This is exactly what I have been postulating for going
on two years NOW. Finally, other people are waking up to the Real Laws of
Economics, but the enlightenment has not yet reached the political classes
and especially the MEDIA; therefore all I see is more of the same. The REAL
PROBLEM affecting the USA and the World's economies have not yet even been
discussed, let alone have there been any proposed solutions except for more
of the same.
THE FISCAL CLIFF
The idea of a coming Fiscal Cliff is presently in
vogue among most economists and analysts (unless Obama and the Congress can
come together, which is highly unlikely) and will virtually overnight
erase about $500 billion out of the U.S economy beginning January 1, 2013.
This massive loss is just from deficit cutting alone. Combine this with other
so called deficit reduction actions, such as tax increases, that are already
scheduled to be implemented and you have the largest anti-stimulus package in
American history. Worse yet, this doesn't take into account the burden of
massive tax INCREASES including those associated with OBAMACARE; the end
results of which I don't even want to think about. But even all that is not
as bad as the Government's complete lack of understanding of how economics
really works. I say this because if you have no idea of how economics works,
you have NO idea how to fix the problems, especially when you have NO IDEA as
to what the underlying "seen and unseen" problems are. (The so
called seen problems are not problems at all, but are rather effects or
consequences of the real unseen problems. Unseen problems, which are always
lurking in the shadows have not yet even being recognized, let alone
All told, the financial pendulum will soon be
swinging from stimulus to anti-stimulus, the result of which I will leave to
others to speculate on. Once again, Washington's dysfunctional and unbalanced
approach has little regard for the lives of everyday Americans. Their only
concern is "how do I get re-elected" and how do I take care of
myself #1 and my friends #2.
There are FOUR deadly financial time bombs now set
to explode ON NEW YEAR'S DAY 2013...and this crisis will be far worse than
most experts can even have nightmares about.
CHINA AND THE END OF THE COMMODITY BULL MARKET
One main reason is China's recession, because she affects
so much of the world economy, especially as it relates to commodity prices -
and commodity stocks. A friend of mine forwarded me a story where a certain
strategist said it was time to start adding Chinese exposure. He said,
"Where else can you buy an economy with 7%-8% growth prospects at less
than 10 times estimated earnings?" To believe his statement, you have to
take two things at face value:
China's GDP numbers are accurate.
China's earnings are, at least, roughly equivalent
to the way earnings are calculated at other markets.
I don't buy either statement as their GDP numbers
are not any more accurate than ours are and as I have been harping on for the
past 2 years, are most likely a lot less reliable than ours.
China, like the USA, is in the exact same SITUATION
AS JAPAN morphed into and is still mired in after 20 years. I have been
warning all but no one listened ever since Japan instituted their zero
interest rates back in the early 80's that the NATURAL LAWS OF ECONOMICS
apply to Japan and that their economy must go into Recession followed by
Depression if they don't change their policies. Using similar reasoning, in
2006, I started warning that our Real Estate and economy will follow the way
of Japan's with even more dire consequences because they at least have a
surplus in both their Balance of Payments and Balance of Trade. We, on the
other hand, suffer from huge deficits and therefore our consequences will end
up being much worse since we only have a credit card (printing press from being
the only reserve currency) but no reserves. China still has over $3 trillion
in foreign exchange reserves.
THE CHINESE RECOVERY WILL PULL US AND THE REST OF
THE WORLD OUT OF RECESSION: DON'T YOU BELIEVE IT:
Officially, China's government says its economy is
growing 8%. Lots of people don't believe it. Charles Dumas of Lombard Street
Research is one. He says, "We don't believe official data. We think GDP
slowed to a 1% rate in the first quarter." I don't believe official data
either and I certainly would not make investment decisions based on it. Two other quick points
about relying on GDP:
GDP figures are backward looking. They tell you
nothing about the future. Even if you think they do, then you have to say the
trend is not good. China's first quarter GDP was at a three year low.
GDP as a concept is also absurd since Government
spending is counted as being a positive. We have spent $16 trillion over the
last 3 years and where is our GDP GROWTH? It should have at
least doubled. Was it?
Who knows at what rate China's economy is really
growing. A third point that I question is on China's corporate earnings. As
Ivy Pan, an analyst with ABN AMRO said recently, "Forecasts of company
earnings have been continuously revised downward since the beginning of the
year." Besides, there is the issue of earnings quality and
trustworthiness. So there is a lot of guesswork. There are also things we do
know. The Bulls cite healthy increases in imports of coal, iron ore and
copper as a plank to their bullish thesis on China. They say the increase is
consistent with an economy growing 7%-8%. Again, I have to question how the
figures come about. I think it is safe to say that Chinese government
mandated investment drives these figures and I tend to think of that as more
of a bad thing. Will it prop up commodity markets to some extent? Of course,
but it's not a game I care to play. Anyway, it seems a one off thing to cite
these commodities since despite these high Chinese import figures, iron ore
prices recently hit 2 ½ year lows and prices are down 17% since
mid-June. Coking coal is down 23% since the start of July. Copper prices are
down more than 20% from a year ago. Chinese steel mills are hurting. The
China Iron and Steel Association said recently that the Chinese steel
industry's profits fell 96% in the first half of the year compared with last
These anecdotes don't square with the image of a
booming economy. As you all know, I have been bearish on China for the last 2
years and I think some of the air has already come out of China's boom. Take
a look at housing prices for instance. Chinese housing prices registered nine
months of decline. So, they just had an uptick - according to whom?
There are definitely China
themes I would own - those that play on China's need for fresh, clean water
and food for instance. These are very good long term investment themes.
HOW NOW DOW
My short-term indicators have now turned from
sideways to UP. By Friday, we are due to get the latest plan from the ECB to
cure Europe's financial woes. I DOUBT VERY MUCH that they have come up with a
workable solution, however it may give the markets a 1 to 4 day bounce, which
would be a perfect opportunity to short into Euro Stocks and Euro currency.
Maybe even take some profits in the US.
On the Other Hand: We are sitting on a VIX Buy
signal that I pointed out in my last missive, which suggests markets should
rally over the coming few weeks. But it may be that the rally was triggered
by anticipation of the widely expected Federal Reserve QE3 announcement
and/or the ECB announcement.
The U.S. August Jobs report came and even though the
numbers were far from good, there was only a mild selloff before bottoming
and rallying. Even after being massaged, they still looked terrible and
looked more like a resumption of the Recession. But remember that is all
Moreover, the declines from the Augusts highs were
not impulsive, which suggest prices should be higher over the next few weeks.
The question is: Do markets have another drop left in them before resuming
their rally to complete THE JAWS OF DEATH BULL TRAP RALLY?
CNBC reported that the S&P 500 until last Friday
has not moved more than 1% in any day for 22 straight days. This sideways
lethargic price action has only occurred 10 times in the last 15 years.
Sideways moves are typically corrective, suggesting once complete, prices
should continue in the same direction as they were headed into before the
sideways pattern. In this case, that would be up. Such a rally could take
prices close to the top boundary of the Jaws of Death pattern but that rally,
should it materialize, will lead to a top that is followed by the most
powerful decline in history.
Most Elliott Wavers are speculating that the coming
top will mark the end of a Millennium Third Wave TOP. I, on the other hand,
expect it to be a FIFTH WAVE TOP. Most will say that is a meaningless
difference, since either labeling calls for a severe drop. The difference
being if it is a Fifth Wave, then we are looking for a 68 to 100+ year BEAR
MARKET. Put that into your pipe and smoke it and tell me that the difference
GOLD & SILVER
Gold and silver broke decisively above the year-long
descending triangle's upper boundary Friday, suggesting gold is headed for
new all-time highs over the coming months, with silver headed sharply higher
as well. Precious metals sense that the World Central Banks concerted efforts
to debase all fiat currencies will drive the Precious Metals to unimagined
highs before their Bull Market is over.
Short Term gold and silver have
just breached the upper boundary of a declining triangle pattern. If gold
rises above 1,725, the odds are that this sideways corrective pattern has
been completed and a powerful rally has started to reach new all-time highs.
If silver breaks above 35, the same thing will happen. It is still possible
that gold could have one more down move toward 1,625ish and silver could move
down toward 26ish due to the continuing manipulation of the PM markets by
JPM. However, I believe that is highly unlikely as the fundamentals are too
strong. Should these downside levels be reached, precious metals would then
very rapidly reverse and head to new all-time highs. Even JPM cannot take on
the World's Central Banks desires to accumulate more reserves of Gold and
Silver. It would be your last chance to buy cheap. The only doubt is being
caused by the fact that we are in the most important political season of our
nation's history. If for some unexpected reason there is one more selloff in
Precious Metals, we would then be in a 2006 and 2008 situation all over
again. The only thing to do then would be to hold on for dear life and buy
more if you can. What will then follow will be something to behold as the
JPMs of this world and the gold exchanges will be forced to close their doors
as they will not be able to cover their shorts or deliver all the gold and
silver that they owe. The chickens will be finally coming home to roost.
We have only scratched the surface of the banking
SILVER IS SET TO TRIPLE
Eric Sprott says silver
prices are going to $100 (I say $250 by 2017). Sprott
is a legend in the resource industry. Many of his clients have become wealthy
listening to his advice. He, like me, made a similar "bold"
forecast on gold about 10 years ago - when the price was $250 an ounce.
Today, gold trades near $1,700 an ounce or 580% higher.
Today, Sprott believes
silver prices can follow a similar path and even if he is only half right. If
silver hits $50 an ounce, silver companies would see their revenues jump much
more than 50% from today's levels.
It is now most likely too late to wait to buy on
weakness and the time has come to BUY on Break Outs to new highs. Use
selections from the last 2 lists I sent out during the last 6 to 8 weeks or
so. For those of you that have not received these lists, email me and they
will be sent out to you post haste.
LUCK AND GOD BLESS
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Please Note: This article is for
education purposes only and is designed to help you make up your own mind,
not for me to make it up for you. Only you know your own personal
circumstances so only you can decide the best places to invest your money and
the degree of risk that you are prepared to take. The Information and data
included here has been gleaned from sources deemed to be reliable, but is not
guaranteed by me. Nothing stated in here should be taken as a recommendation
for you to buy or sell securities.