|
To the surprise of many investors, the precious metals have rallied while
the broader markets continue to sell-off. Currently, both gold and
silver are solidly in the green while the major indexes were all the red
following a huge sell-off yesterday. The Dow Jones Index has lost
nearly 1,000 points in the past two days while the gold price is up nearly
$25.
However, even though we could see a late-day rally in the markets, and
even higher stock indexes over the next few months, the bear market for
stocks is still coming. The Dow Jones Index has now suffered two large
sell-offs in the past ten months:
In January, the Dow Jones Index fell by more 3,000 points, and the current
correction is only one-half of that amount. So, I expect to see a
continued correction over the next month. Because October is
the worst month for market Crashes, this could be one hell of a blow for not
only the economy but also, for investor confidence.
For example, according to the Zerohedge article, Used-Car
Prices Plunge Most In 15 Years:
Looking deeper at the core inflation print, it reflected a 3% monthly drop
in prices for used cars and trucks following increases in each of the last 3
months, and the biggest drop in 15 years…
And then, of course, the continued disintegration of the U.S. Retail
Market, Sears
Creditors Push For Bankruptcy Liquidation As Vendors No Longer Paid:
Amid recent reports that Sears is set to file for bankruptcy as soon as
this weekend ahead of a $134 million debt payment due on Monday, the only
question is whether the filing will be a Chapter 11 debt for equity
reorganization or a Chapter 7 liquidation. And contrary to the desires of Sears
CEO and biggest creditor, Eddie Lampert, who would like to preserve the core
business, others are pushing for an outright liquidation.
According to the WSJ, a group of Sears’ biggest lenders, including Bank of
America Corp., Wells Fargo & Co. and Citigroup Inc., are pushing for the
company to liquidate its assets under a chapter 7 bankruptcy filing, as
opposed to reorganizing the business under chapter 11, this person said.
Interestingly, Sear’s major lending institutions (Blank of American, Wells
Far-gone & CitiCorpse) are pushing for a complete bankruptcy liquidation
rather than a reorganization. I gather they believe the
“brick and mortar” retail industry is likely heading for the dustbin as the
Amazon’s of the world takeover. I can assure you that “Amazon Economy”
won’t last for much longer especially when the U.S. economy and
shale oil industry collapse.
Don’t Expect The Precious Metals To Sell-off With The Markets
As I mentioned in several articles and videos, the precious metals will
likely RALLY during the major market correction. And we are seeing
evidence of that today. Gold is up over $20 and Silver, $0.23:
When I did this chart, the Dow Jones Index was only down 100 points but is
now down more than 200. So, why aren’t the precious metals selling off
with the broader markets as they did in 2008? The reason for
the rally in gold and silver is because the precious metals have continued to
trend lower over the past six years while the broader markets climbed
higher. Thus, they have already “SOLD-OFF.”
Now, I am not saying that gold and silver can’t spike lower, but according
to market sentiment and the COT Report, the precious metals are closer to a
LOW while the broader markets are still trader near their HIGHS… even with
the last two-day correction.
Once the major stock indexes head into a sustained bear market, you can
count on investors “ROTATING” out of stocks and real estate and into the
precious metals and the gold and silver miners. I expect the precious
metals and miners to be one of the HOTTEST in the entire market during this
time.
The U.S. 10 Year Treasury Hitting Major Resistance Level
Due to the fact that investors trade based on technical analysis, the
10-year U.S. Treasury just hit a KEY LEVEL:
As we can see, the 10-Year U.S. Treasury rate has hit up against its 200
Month Moving Average (MMA, in RED). Typically, it will bounce off this
and head lower, but if it doesn’t, then it could spike even higher. We
must remember, higher interest rates aren’t good for the U.S. Government’s ability
to service its debt.
In my previous article I posted the 2018 fiscal interest expense for the
U.S. Government debt:
The U.S. Treasury had to fork out an additional $65 billion of
interest in 2018 versus 2017. The annual interest expense
jumped from $458 billion in 2017 to $523 billion in 2018. That’s nearly
a 15% interest expense increase in just one year. If the average
interest rate for U.S. debt only increased to 3%, up from the 2.3% currently,
its interest expense would balloon to $648 billion, based on $21.6 trillion
of debt.
So, as we can see, the fundamentals for the U.S. economy and market are in
serious trouble. I imagine President Trump, the Fed Chairman, and U.S.
Treasury Secretary will do all in their power to keep the markets from imploding,
but eventually, the fundamentals kick in. And when they do… they will
do so in a BIG WAY.
Lastly, while the gold and silver miners are still wholly out-of-favor
with most investors, don’t be surprised to see serious gains over the next
several years as the broader markets head into the toilet. I know this
sounds counter-intuitive, but there just won’t be much for investors to
protect wealth during the next major downturn.
For example, First Majestic Silver is now coming off its lows of $5.00:
While First Majestic reached a high of $25 in 2011, I wouldn’t be
surprised to see it at least five times higher during the next bull
market.
IMPORTANT NOTE: I just picked First Majestic as an
example of the primary silver miners market. So, do not trade or make
any investment decision based on this information. Do you own due
diligence before making and investment decisions.
However, common sense tells us that the past ten years of propping up the
markets with more paper money and debt will not bode well for most stocks,
bonds, and real estate. Gold and silver have been stores of wealth for
thousands of years even though the typical investor has been hoodwinked by
Wall Street and the Central Bankers.
|
|
