Entries Tagged as 'Gold Silver'

The Fed’s “Debt Monster” Is Calling the Shots

The Fed’s “Debt Monster”

Bill Bonner calls our attention to the danger:

You know our prediction: The Fed will never willingly lead interest rates to a neutral position.

It can’t. The FED  has created a debt monster. It must feed this Frankenstein with easy credit.

This time last year, the Fed began its “rate-tightening cycle.” That is, it began raising short-term interest rates.

It pledged to continue to do so in 2016. But then it diddled and dawdled, fiddled and fawdled… claiming to be on top of the situation… watching its “data” come in like a fisherman’s wife waiting for the return of the fleet… and not wanting to admit she was already a widow.

What it was really waiting for was a place to hide.

The Fed can raise short-term rates. But it will have to follow, not lead. It will have to hide in the shadow of rising consumer prices, staying “behind the curve” of inflation expectations.

That way, the expected real interest rate – the rate of return on your money above the rate of consumer price inflation – never really returns to neutral.

Already, the price of a barrel of crude oil – a key input into prices across the economy – is twice what it was 10 months ago. Leading business-cycle research firm the Economic Cycle Research Institute says the inflation cycle has turned positive.

And already, foreign nations are talking about retaliating against Team Trump by canceling orders and imposing new tariffs in their own versions of “better trade deals.”

This, too, is bound to raise prices.

Forget speculating on stocks, options, or other risky, low-probability moneymaking schemes. This wealth-building formula is the most reliable way to make seven figures in seven years or less in today’s uncertain economy…

Funny Money Antics

But if consumer price inflation were really a concern, the bond market would race ahead of the Fed, imposing its own regimen of rising yields.

The Fed’s increases would be too little and too late to have any real effect on the outcome.

Bondholders don’t care much about nominal rates. If consumer price inflation were to rise to the Fed’s 2% target, for example, bondholders might clamor for a 4% yield to give them a positive 2%.

That is a big increase over the 52-week low of 1.32% the yield on the 10-year Treasury note hit on July 4.

But you don’t get that kind of seismic shift without cracking some flower pots.

Much of the world’s $225 trillion in debt is calibrated to borrowers who will have a hard time surviving a 3% interest rate world, let alone a 4% one.

This is an economy that can stand a lot of grotesque and absurd “funny money” antics. It can survive a bizarre financial world; it can’t survive a normal one.

As inflation expectations increase, investors do not sit still and watch their retirements, their savings, and their fortunes get broken by inflation.

They don’t wait for the Fed’s policy-setting committee to meet. They don’t reflect calmly as the Fed’s wonks collect their “data” and create their “dot plots.”

Instead, they act out. The monster gets mad and starts throwing things.

First through the window are the bonds. They get chucked out before inflation manifests itself fully… and long before the Fed increases its key short-term rate.

Then, the “boom” turns quickly into stagflation… as higher borrowing costs pinch off growth even as consumer prices continue to rise.

But more likely, inflation is not really surging… Not yet.

And most likely, it will be the painfully apparent when the U.S. economy goes into recession next year.

Then, it will be stocks’ turn to get tossed out, while bonds sneak back in through the side door.

It will also be apparent that the Fed has taken another false step… that the recovery was a sham… and that it’s the debt monster calling the shots, not Janet Yellen.

Regards,

Bill Bonner

Unusual Meeting Today

USD 4-11-16

 

Quite the day so far. Janet Yellen calls a special meeting, the President and Joe Biden will have unusual meeting today, Gold is up fifteen dollars and the dollar is at the bottom of its range. What will happen next?

What does the new frontier of negative interest rates in the global arena mean for investors?

What does the new frontier of negative interest rates in the global arena mean for investors?

What does the new frontier of negative interest rates in the global arena mean for investors?

 

Cindy Yeap / The Edge Malaysia discusses “What does the new frontier of negative interest rates in the global arena mean for investors?”

“For RHB Research Institute executive chairman and chief economist Lim Chee Sing, NIRP “can only be seen as a temporary expedient to hold up financial markets”, albeit one that has little room to push for more economic growth in this relatively mature stage of the growth cycle.

“That means rising investment premiums and heightened market volatility will likely be the order of the day in the days ahead. Portfolio investors may have no choice but to build some degree of defensiveness into their portfolios to balance out the risks. This implies rising appetite for high-yield stocks,” Lim says.

“Even dividend stocks have caveats in the days ahead, largely due to their rich valuations vis-à-vis tougher conditions to grow at the same rate as before. For example, sin stocks might have to contend with higher taxes; the fees for telecommunications spectrum refarming have yet to be revealed; and consumer stocks have to contend with the possibility of a further tightening of consumer spending. Then, there is the higher labour cost.

“The focus should be on stocks with an improved business model, reasonable earnings visibility, strong cash flow, a dividend policy and, thus, sustainable dividend payments. Of course, one cannot ignore valuations but rich valuation stocks are still susceptible to a selldown should the global economy take a turn for the worse,” Lim adds.

“Gerald Ambrose, CEO of Aberdeen Islamic Asset Management Sdn Bhd, too, noted expensive valuations after a good run in recent years.

“We are keeping a close eye on notable high-yield companies, like the cellular phone companies, the brewers, tobacco companies and the REITs (real estate investment trusts). We’re currently about halfway though the 4Q2015 results season and to be honest, a lot of the better-managed companies have been able to find efficiencies to enable dividend payout to remain high. However, after outperforming for over a year, a lot of the high dividend yield companies are hardly cheap,” he says.”

BOTTOM LINE: Focus your strategy on yield and gold. Gold is an alternative when interest rates are negative adjusted for taxes and inflation.

Are We On the Verge of Another 2008?

That’s the question that Phoenix Capital Research asks.

For six years, the world has operated under a complete delusion that Central Banks somehow fixed the 2008 Crisis.

All of the arguments claiming this defied common sense. A 5th grader would tell you that you cannot solve a debt problem by issuing more debt. Similarly, anyone with a functioning brain could tell you that a bunch of academics with no real-world experience, none of whom have ever started a business or created a single job can’t “save” the economy.

However, there is an AWFUL lot of money at stake in believing these lies. So the media and the banks and the politicians were happy to promote them. Indeed, one could very easily argue that nearly all of the wealth and power held by those at the top of the economy stem from this fiction.

So it’s little surprise that no one would admit the facts: that the Fed and other Central Banks not only don’t have a clue how to fix the problem, but that they actually have almost no incentive to do so.

So here are the facts:

1)   The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion.

2)   The derivatives market that uses this bond bubble as collateral is over $555 trillion in size.

3)   Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.

4)   Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP.

5)   The Central Banks are now all leveraged at levels greater than or equal to where Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.

6)   The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion (back in 2009). Today it’s over $4.5 trillion.

We are heading for a crisis that will be exponentially worse than 2008. The global Central Banks have literally bet the financial system that their theories will work.  They haven’t. All they’ve done is set the stage for an even worse crisis in which entire countries will go bankrupt.

The situation is clear: the 2008 Crisis was the warm up. The next Crisis will be THE REAL Crisis. The Crisis in which Central Banking itself will fail.

If you’re an investor who wants to increase your wealth dramatically, then you NEED to take out a trial subscription to our paid premium investment newsletter Private Wealth Advisory.

NEW: Money Metals Issues 2016 Gold/Silver Forecast

Looking Ahead to 2016

NEW: Money Metals Issues 2016 Gold/Silver Forecast

By Clint Siegner, Money Metals Exchange

Looking Ahead to 2016

Forecasting today’s volatile, high-frequency machine driven and manipulated futures markets using fundamental analysis is futile, as a great many precious metals bulls will attest. To complicate matters, an obsession with Fed policy dominates all markets. Officials at the Federal Reserve are often less than forthcoming and are just as bumbling as the Soviet bureaucrats when it comes to centrally planning our economy.

Nevertheless, beneath all of the artificial influences and all of the leveraged paper, the gears of the physical market for gold and silver still turn. We can be sure prices will reflect actual supply and demand for physical metals at some point, even if we do not know when. With that in mind, here is a look ahead to 2016…

Supply Destruction

Silver production peaked in 2014, while gold production is expected to peak in 2015. Falling prices make an increasing number of mining projects uneconomic. Lower fuel costs are helping, but the average all-in cost of production for silver is estimated at around $17/oz and for gold at around $1,150/oz.

Today precious metals sell for well below than their all-in production cost. Primary producers of gold and silver will deliver less to market in 2016 given that a great many miners currently take a loss on every ounce they sell.

But there is another factor likely to decimate supply in 2016. Base metal prices, including for copper, fell dramatically this year, and the outlook is not too bright for the year ahead. The Chinese economy, the world’s largest market for commodities, is slowing. Brazil is in real trouble and economists are worrying more about the possibility of recession around the world.

Looking Ahead to 2016

Slumping demand for base metals will impact supply of gold and silver because huge quantities of these precious metals are produced as a byproduct of mining for base metals such as copper and zinc. The reorganization of Anglo-American PLC, one of the world’s largest mining conglomerates, earlier this month highlights just how difficult the current environment is for producers – regardless of which metal they are mining.

Gold and silver prices have been in decline since 2011, but it is only during the past year that average prices will finish well below even the most conservative estimates of production costs. The recent carnage in base metals will add significantly to constraints on precious metals supply in the months ahead.

Physical Demand Rising

Investment demand for physical bullion is perhaps the biggest story in precious metals for 2015. Mints and refiners spent much of the 2nd half of the year unable to keep up. Investors had to contend with higher premiums and delivery delays, finally getting some relief now as the year draws to a close.

Only time will tell if 2016 can top this year’s record. We look set to enter the New Year in much the same way we entered 2015 – with steady, but far from overwhelming buying activity for fabricated coins, rounds, and bars. Investors loaded up in recent months and now await the next catalyst.

Looking Ahead to 2016

It may be price action. Lower spot prices over the past 4 years have been a big driver of demand. And prices moving consistently higher will also inspire demand from newcomers (as we saw during the last bull cycle between 2009 – 2011). Only flat or range-bound prices typically lead to investor apathy.

As always, geopolitical events will play a big part in whether or not metals benefit from safe-have buying. In 2016, investors will be watching the ongoing saga surrounding Greece and other hopelessly indebted European nations. The U.S. is at odds with Russia in the Middle East and in Ukraine.

And recent tremors in high-yield debt markets may be advance warning that extraordinary leverage is about to rock financial markets once again. These stories, and others no one can predict, have potential to generate a flight to safety in the coming year.

Industrial demand for gold and silver may turn out to be tepid for 2016. This is less of a factor in gold markets than for silver, where manufacturers consume a good portion of what is produced annually. As mentioned above, some economists worry about the possibility of recession in the coming year. Any slump will weigh on demand for items such as jewelry and other goods. However, a lot of industrial demand comes from high-growth sectors which have proven resilient during past recessions. Electronic, solar, and healthcare related applications for silver come to mind.

Some 2016 Wildcards

Delivery defaults are possible in the futures markets. The explosion of leverage in COMEX gold futures bears watching in 2016. The number of registered bars available for delivery in exchange vaults relative to the number of paper ounces being traded shrunk dramatically to record lows in recent weeks. It’s a trend that simply cannot go on very much longer – not at the current pace of decline.

Looking Ahead to 2016

Exchange participants may convert more gold stocks from “eligible” to the “registered” category. That’s possible, though there is good reason to wonder how much physical metal the holders want to part with at current prices. The precipitous drop in registered stocks may well be signaling they are more than a little reluctant to part with it.

If holders of silver and gold futures contracts start standing for actual delivery of more metal than the COMEX has available to deliver, or should traders even begin to seriously entertain that possibility, we’ll see some fireworks.

Leading Republican candidates are making noises about sound money. Donald Trump, Ted Cruz, Rand Paul, and Ben Carson all have questioned the wisdom of Fed policy. Republicans everywhere are critical of federal debt and deficits and have been for decades now. Given the Party’s atrocious record of turning the talk into actual policy, we should remain skeptical that any elected Republican leader will actually achieve reform.

But there can be no doubt that the sound money issue is gaining traction. We can’t rule out someone in the crowded field of candidates tapping into the popular outrage over out-of-control borrowing and spending. Should ideas like reinstituting gold backing for the dollar gain serious momentum in the campaign, the metals markets could perk up.

 

seigner

Clint Siegner is a Director at Money Metals Exchange, the national precious metals company named 2015 “Dealer of the Year” in the United States by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

Top 5 Precious Metals to Invest In

Gold in Bullion and Coins

Gold

Following the recession of 2008, investors have found a better way to protect their investment by pouring their hard earned money into precious metals. Here, we’ll be discussing the Top 5 Precious Metals to Invest In worldwide.
Gold
Over the last decade, we’ve witnessed a descending trend in gold prices. However, the fact that gold outlays better than other types of investment is because of its trustworthiness, as it is not as prone to fluctuating prices. The factors that are responsible for its prices are the US dollar value, supply and demand, and interest rates.
The most common uses of gold are for investment, electronics, dental treatments, and the obvious one, jewelry.
Silver
Investing in silver is a reliable way of making sure that you have a stable capital investment. It’s a much better way of preserving assets regardless of the position the financial system is in and it is particularly well suited for holding in tough economic times.
This passing year, 54% of the total silver demand was for industrial uses, which ranged from automobile industries to electronics. Another factor that affected demand for silver was the solar explosion in Japan. China was reported to have imported most of the world’s silver last year, about 1,154 tons.
The most common uses for silver are electronic devices, water filtration, Silver Oxide Batteries, piping, and solar panels.
Platinum
Platinum is one of the world’s scarcest metals. Platinum provisions are concentrated to the region of South Africa, which results in about 80% of the total provisions. Meanwhile, Russia has about 11%, and North America has about 6%. This metal holds high significance as a manufacturing material; its prices are however, fairly unpredictable due to limited suppliers. For this very reason, investors find it an attention grabbing investment.
The value of platinum is about twice of that of gold, which fluctuates according to the supply and demand. In harsh economic times, the value decreases due to fall in demand, and has been known to decline even below the price of gold. To give you a fair idea, the high and low of platinum prices for the year 2014 were $1,178 and $1,520.
Palladium
Palladium is a metal that is in the same group as platinum. In addition to the supply and demand factors it shares with platinum, palladium is affected by the following three factors; the crises in Ukraine, vigorous venture demand, and the vehicle industry. 40% of the palladium is mined in South Africa, while Russia produces about 44%, and the rest is produced by Canada and US based mines.
Rhodium
Up until a couple of years ago, rhodium was the most posh metal around, with the price of an ounce touching $10,000. Not only is it a 100 times rarer than gold, but apart from that, it is imperative for use in the automotive industry, as its application as a catalytic converter is unparalleled.
Nevertheless, the trio of platinum, palladium, and silver are the most in demand in the current times, with the demand being driven by industrial needs rather than being used as a safety investment. Continued manufacturing in industries will also only improve their appeal in the upcoming years.

How to Play the Situations In China and Greece

The following is an excerpt from Private Wealth Advisory...

Stocks are rallying today because of:

1)   Hype and hope of a Greek deal.

2)   China has stopped trading of 49% of stocks and threatened to arrest anyone who is short-selling the market (talk about a backstop!).

Regarding Greece, no deal has been made. Greek PM Tsipras has submitted a proposal for a new deal… which is almost EXACTLY the same as the deal that 61% of the Greek population rejected via referendum last week.

Tsipras has completely backed himself into a corner. He used up a lot of goodwill with EU officials when he let Greece default by staging a referendum for Greek voters AFTER the due date on Greece’s debt.

The voters obviously voted “No” on the EU’s deal… so Tsipras has had to come up with a new proposal. The only thing he can suggest that would possibly sit well with Greek voters is “debt forgiveness,” which Germany has stated it is absolutely opposed to.

So now Tsipras must decide… does take a bad deal (the same one voters said “no” to last week), which will force a popular revolt in Greece (and likely his expulsion from office) or is he the man who takes Greece out of the Eurozone?

 

His finance minister has already quit his post… and doesn’t seem too upset about it. Perhaps Tsipras will follow suit, Greece will elect another PM and the whole charade can start all over again?

Finance.jpg

The Greek drama has engaged in “extend and pretend” for five years now. It’s highly likely that it will continue this time around with Greece accepting a bad deal and plunging further into economic collapse until the next debt problem emerges.

As for China…

Anyone who bothered to look at the actual data coming out of China (the un-massaged data, not the fictitious GDP numbers), knew the China economy was in collapse. It was only a matter of time before its stock bubble joined suit.

Sure enough, the bubble burst, and the Chinese stock market has erased over $3 trillion in wealth in the space of three weeks.

The Chinese Government, which we are told is moving towards free market capitalism, has thus far dealt with the crisis by halting 49% of stocks from trading and threatening to arrest (and likely “disappear”) anyone caught short-selling stocks or somehow promoting market “instability.”

The market is bouncing on this… it’s now coming up against the first line of resistance (blue line) established by the uptrend from late 2014. If we break above that we could even bounce to retest the longer-term bubble bull market trendline (green line).

However, after that we’re heading DOWN in a big way. The bubble has burst. Bubbles NEVER reflate after bursting.

7-10-15-1.png

Crises never unfold in straight lines. Investors forget that when the Tech Bubble burst, stocks were a roller coaster with over EiGHT moves of 16% or greater in the span of six months.

7-10-15-2.jpg

China’s bubble was even larger than the Tech Bubble. The price volatility will be even more severe… but the bubble has definitively burst… and the market will be heading lower in the coming weeks.

In short… the two biggest reasons for the markets to be rallying today (Greece and China) are simply temporary issues. They will resolve, very likely for the worse, in the coming weeks. Smart investors should be using this bounce to prepare for the next wave of the Crisis.

If you’re looking for actionable investment strategies to profit from this trend we highly recommend you take out a trial subscription to our paid premium investment newsletter Private Wealth Advisory.

Mover Mike Hit 2,000,000

After an incredible June, Mover Mike hit 2,000,000 page views. I have been blogging since 2004 and it is nice to see that more people are finding this blog. Sometimes, I have considered quitting, thinking why bother, no one reads me. However, conservative fiscally, Libertarian socially, this blog joins many others who don’t like the path the U.S. is on.

No longer can we discuss things rationally and heatedly.  Now it seems the play book says to ignore the message, savage the messenger. We are seeing that currently with Trump and we read that Hillary hasn’t answered the press questions in two weeks. AND…more and more people are considering leaving the country.

Mexico”sends” their unemployed to the U.S.. How long will 93,000,000 unemployed and under employed wait to move south? How long will the drought stricken  in the south west wait to move? What happens when the U.S. becomes like Greece and can’t feed the 43,000,000 on EBT?

Stay tuned, dear reader. I hope to cover it and provide some answers. Thanks for reading Mover Mike

Apocalypse And Enormous Disorder Coming – Hugo Salinas Price

TND Videocast Spotlight:  Greg Hunter’s USAWatchdog.com

Mexican retail mogul Hugo Salinas-Price is worried about the common man and the upcoming currency calamity that is approaching the globe.  Salinas-Price says, “It certainly isn’t getting better when you have some intellectuals going so crazy as to say they want to ban cash.  We can’t go too much further along this road.  This is utter madness.  We’re not supposed to use cash anymore?  Salinas Price goes on to say, “If we have these lunatics running things, it can’t get any better.  We have people running things that have forgotten about what motivates the common man. . . . I want people to have silver because it is going to protect them.”

Why does the common man need the protection of precious metals?  Salinas-Price says, “I just read today the global debt is $200 trillion, and it’s grown from the last crisis in 2008.  Something has to happen to take care of that debt.  Either it’s going to be repudiated or it’s going to be inflated away, or it’s going to be paid with taxation. . . . We are headed over Niagara Falls.”

Largest Bank In America Joins War On Cash

Largest Bank In America Joins War On Cash

I have cautioned investors for many years not to store gold and silver in safe deposit boxes, now Largest Bank In America Joins War On Cash. I said you may not be able to gain access to your box when you really need it. Now look what the largest bank in the U.S. is doing. Chase even goes as far as to prohibit the storage of cash in its safe deposit boxes. In a letter to its customers dated April 1, 2015 pertaining to its “Updated Safe Deposit Box Lease Agreement,” one of the highlighted items reads: “You agree not to store any cash or coins other than those found to have a collectible value.” Whether or not this pertains to gold and silver coins with no numismatic value is not explained.

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