Chinese Physical Gold Demand Surges; Americans Pile Into Stock & Crypto Bubbles

Chinese demand for physical gold investment surged in the first three-quarters of 2017 while Americans ditched the shiny yellow metal for increased bets in the crypto mania and stock market bubble market. Even though China’s Hang Seng Stock Market outperformed the Dow Jones Index last year, Chinese citizens purchased the most gold bar and coin products Q1-Q3 2017 since the same period in 2013, when they took advantage of huge gold market price selloff.

According to the World Gold Council, Chinese gold bar and coin demand increased to 233 metric tons (mt) in the first three-quarters of 2017 compared to 162 mt in the same period last year. Furthermore, if we include Indian gold bar and coin demand, China and India consumed nearly half of the world’s total:

Global Gold Bar & Coin Demand Q1 - Q3 2017

As we can see, China and India consumed 338 mt of gold bar and coin products which accounted for 47% of the total 715 mt Q1-Q3 2017. German gold bar and coin demand of 81 mt took the third highest spot followed by Thailand (49 mt), Turkey (47 mt), Switzerland (31 mt) and the United States (30 mt). Chinese gold bar and coin demand of 233 mt nearly equaled the total demand by German, Thailand, Turkey, Switzerland and the United States of 238 mt.

If we compare gold bar and coin demand by these countries in the same period last year, we can see some interesting changes:

Global Gold Bar & Coin Demand Q1 - Q3 2016

While the increase in Chinese gold bar and coin demand was the big winner (162 mt to 233 mt), Turkish demand nearly doubled from 24 mt in 2016 to 47 mt this year. However, the biggest loser in the group was in the United States. U.S. Gold bar and coin demand fell substantially to 30 mt Q1-Q3 2017 from 66 mt during the same period last year.

As I mentioned at the beginning of the article, Americans shunned gold to make it RICH in the rapidly rising Stock and Crypto Markets. We can see this quite clearly as investors choose to bet on the Dow Jones Index as it surged by 30% last year versus a mere 13.5% for gold:

Dow Jones Industrial Average INDX: Jan 12th, 2018

So, as the Dow Jones Index increased nearly 6,000 points, or 30% since the beginning of 2017, U.S. demand for gold bar and coins fell 55% (Q1-Q3 2017). Also, it makes perfect sense that American investors ditched gold for much larger 1,000+% gains in cryptocurrencies.

The stunning performance in the stock and crypto markets has frustrated precious metals investors to no end. Not only do I see this all over the internet, but I also receive a lot of emails and comments on my blog. And, it doesn’t help that some precious metals investors, now turned crypto specialists and aficionados, are only happy discussing assets that make 10-20 baggers. Forget about old fashion work and taking the time and money to build something real, we have now moved into a new investment strategy that to be successful, one must make 6-7 figure returns by clicking on a mouse.

All I can say is this… enjoy the Crypto fun while it lasts, because the forces of Gravity will once again bring us back down to earth where making a real living takes a lot of sweat and labor. While some followers sense that I am negative about the cryptocurrencies, I am. However, it is for a good reason. Even though the Blockchain technology offers interesting solutions, the speculative mania is a different story entirely. And, yes.. let’s not forget the tremendous amount of fraud and corruption in the crypto markets. If you don’t believe me, just wait around a while… LOL.

Regardless, while the Dow Jones Index jumped by 30% last year, the Chinese Hang Seng market did one better by surging 43%:

Hong Kong Hang Seng INDX: Jan 12th, 2018

Even with their Hang Seng Index up higher than the Dow Jones, Chinese gold bar and coin demand increased by 44% while U.S. physical gold investment demand fell by 55%. Now, some may believe that the increase in Chinese gold and bar and coin purchases were partly due to the Chinese government banning the trading on cryptocurrency exchanges in the country. However, the crypto exchange ban did not take place until the last quarter of 2017. So, the 44% increase in Chinese gold bar and coin demand occurred before the banning of their cryptocurrency exchanges. Because of the crypto exchange ban, we may see a spike in Chinese gold bar and coin demand during Q4 2017 when the statistics are released.

For whatever reason, Chinese physical gold investment demand increased significantly Q1-Q3 2017 while U.S. demand dropped like a rock. It will be interesting to see how 2018 unfolds and if the extreme leverage in the stock and crypto markets finally unravels. You see, it’s not a matter of if, it’s only a matter of time. And, while many believe the Dow Jones will continue higher forever, all markets have to correct. However, the next correction may turn out to be one heck of a crash.

Precious Metals News & Analysis – Gold News, Silver News




2018 Stock Market Bubble vs. Gold & Silver

The U.S. Stock Market is reaching its biggest bubble in history. When the price of the Dow Jones Index only moves in one direction… UP, it is setting up for one heck of a crash. While market corrections aren’t fun for investors’ portfolios, they are NECESSARY. However, it seems that corrections are no longer allowed to take place because if they did, then the tremendous leverage in the market might turn a normal correction into panic selling and a meltdown on the exchanges.

So, we continue to see the Dow Jones Index hit new record highs, as it moved up 765 points since the beginning of the year. Now, if we go back to 1981 when the Dow was trading about 800 points, it took five years to double itself by another 800 points. However, the Dow Jones Index just added 765 points in less than two weeks. It doesn’t matter if the (1) point increase in the Dow Jones today is insignificant compared to a (1) point increase in 1981, investors feel rich when the numbers are increasing in a BIG WAY.

This is the same phenomenon taking place in the Bitcoin-Crypto Market. Crypto investors who are used to 10-20 baggers (10-20 times increase) no longer have the patience to invest in a real company that might grow on a 10-25% basis annually. Why the hell put money in a real business that employees a lot of people when you can turn $ 1,000 into $ 50 million in a few weeks?

Unfortunately, the Bitcoin-Crypto Market has destroyed the new Millennials ability even to consider making old fashion sound investments in real capital-intensive companies. Today, the Entrepreneurs rather make money trading Cryptos on their I-Phone, sporting a few thumbs-up Selfies, compared to the previous generation of business people doing deals out of their briefcases.

Regardless, as the stock markets head even higher, it should provide a big RED WARNING LIGHT to investors that all is not well. I put together my first YouTube video titled, THE STOCK MARKET BUBBLE vs. GOLD & SILVER;

In my video, I show how the Dow Jones Index and certain stocks are truly in bubble territory. I also explain why the gold and silver values compared to the Dow Jones and these stocks are tremendously undervalued. Furthermore, I provide an update on the cost to produce Bitcoin versus Gold.

I plan on putting out 1-2 new videos each week on various subjects and believe the video platform will be able to explain some difficult concepts and analysis about how Energy and the Falling EROI will impact precious metals, mining, economy, financial system and our future society.

Precious Metals News & Analysis – Gold News, Silver News




Bitcoin Comedy & Stock Market Melt-Ups

Tyler here with this week’s Macro Musings.


Recent Articles/Videos —

Blockchain — We discuss the real value of cryptocurrencies like Bitcoin — blockchain. We explain how blockchain works and its potential transformative uses.


Articles I’m reading —

A Hedge-Fund Titan Puts Away the Punch Bowl

Our favorite macro investor, Ray Dalio, has some sobering thoughts on how financial assets will perform over the next 10-years.

The problem is that with interest rates and risk premia near all-time lows and debt and asset values near all-time highs, there’s little fuel to repeat the process. Just as the Fed can’t cut rates much, it can’t raise them much either, or debt servicing would swamp cash flow and asset prices would sink. Thus Mr. Dalio sees years of low interest rates, and while he thinks stocks are fairly valued, returns to a typical stock-bond portfolio over the next decade will be around zero after inflation and taxes. Whatever you need to retire, save it now: Don’t count on portfolio returns.

We agree with his long-term outlook. The FED has to battle the end of a long-term debt cycle which is incredibly hard to do. This reality is a tough pill to swallow for passive investors — but as macro traders we look forward to the opportunity that a deleveraging cycle will bring.


Video I’m watching —

Bitcoin has officially entered the manic/euphoric phase. It seems like every single article on yahoo finance is about ‘crypto’ instead of stocks.

I’ve been trying to limit my crypto media consumption because it can easily waste your time away, but this comedic video from Seth Myers is well worth the 5 minutes. It’s friggin’ hilarious and perfectly describes the type of mindless buying we are seeing right now in the crypto space.


Podcast I’m Listening To —

If you want a break from the bitcoin bullish chorus take a listen to Patrick O’Shaughnessy newest podcast on crypto — A Sober View on Crypto.

In this episode he interviews Adam Ludwin founder and CEO of Chain, a blockchain technology company targeted at large enterprises. Adam is long the space but with a healthy dose of skepticism and caution. His background is in venture capital so he knows how the game works — it isn’t all about instant riches and 100% wins.

I found it refreshing to hear a balanced take on bitcoin and crypto from a professional investor. His sentiment mostly aligns with ours — the underlying technology in crypto is super exciting but the actual value of the coins/tokens is questionable.


Chart(s) I’m looking at —

Jeremy Grantham’s latest note included the chart below showing a possible blow-off top scenario in the S&P 500.

We agree with Jeremy in that the market is likely to accelerate higher in the short-term. We have synchronized economic strength coupled with easy central bank policy. This sets the stage for financial assets to rally considerably until the Fed and the other CBs get further down their hiking cycle.


Trade I’m looking at —

The Nikkei has started off 2018 with a roar. Price has completed an upside breakout of an ascending triangle pattern.

We’ve been long since before the holidays and have recently added to positions.  

We’re across the board bullish on stocks (in the short-term) but the Nikkei has the most attractive setup from a technical perspective which is why are are putting on exposure here.


Quote I’m pondering —

The central truth of the investment business is that investment behavior is driven by career risk. In the professional investment business we are all agents, managing other peoples’ money. The prime directive, as Keynes knew so well, is first and last to keep your job. To do this, he explained that you must never, ever be wrong on your own. To prevent this calamity, professional investors pay ruthless attention to what other investors in general are doing. The great majority ‘go with the flow,’ either completely or partially. This creates herding, or momentum, which drives prices far above or far below fair price. There are many other inefficiencies in market pricing, but this is by far the largest. It explains the discrepancy between a remarkably volatile stock market and a remarkably stable GDP growth, together with an equally stable growth in ‘fair value’ for the stock market.  ~ Jeremy Grantham

We should see even more investment managers and individuals buy the market out of FOMO during this final ascent. If you’re going along for the ride make sure to keep your stops tight. There’s no long-term value at these levels.

That’s all for this week’s Macro Musings.

If you’re not already, be sure to follow us on Twitter: @MacroOps and on Stocktwits: @MacroOps. Alex posts his mindless drivel there daily.

Here’s a link to our latest global macro research. And here’s another to our updated macro trading strategy and education.

Cheers!

Your Macro Operator,

Tyler

 

 

The post Bitcoin Comedy & Stock Market Melt-Ups appeared first on Macro Ops.

Macro Ops




2017 Has Been The Best Year For The Stock Market EVER

We have never seen a better year for stocks in all of U.S. history.  Just five days after Donald Trump entered the White House, the Dow Jones Industrial Average hit the 20,000 mark for the first time ever.  On Monday, the Dow closed at 24,792.20, and there doesn’t seem to be any end to the rally in sight.  Overall, the Dow Jones Industrial Average is up more than 5,000 points so far in 2017, and that absolutely shatters all of the old records.  Previously, the most that the Dow had risen in a single year was 3,472 points in 2013.

Yes, I know that it may seem odd for a website that continually chronicles our ongoing “economic collapse” to be talking about a boom in stock market prices.  But of course there has not been a corresponding economic boom to match the rise in stock prices.  This artificial stock market bubble has been created by unprecedented central bank intervention, and every previous stock market bubble in our history has ended with a horrible crash.

But for the moment, it is certainly appropriate to be in awe of what has transpired in the financial markets in 2017.  Never before have we seen the Dow close at a record high 70 times in a single year, and we still have almost two weeks to go.

Stocks have risen every single month in 2017, and that is the very first time that has ever happened as well.  No matter how much bad news has come out, stock prices have just kept climbing and climbing and climbing.

Since Donald Trump’s surprise election victory last November, the Dow is up a whopping 34 percent.

34 percent!

Wall Street has never seen better times than this.  Overall, U.S. stockholders have seen more than 5 trillion dollars in paper gains since Trump was elected, and this has created a real estate boom in some of the wealthier areas of the nation.

Of course markets go down a lot faster than they go up, and that 5 trillion dollars in paper gains could be wiped out very rapidly in the event of a major disaster, but for the moment investors are absolutely thrilled with what has been happening.

Of course there are red flags all over the place, but not too many people are even paying attention at this point. Right now the S&P 500 is the most overbought that it has been since 1958, and earlier today a CNBC article declared that U.S. stocks are “very, very overbought”, but this will probably just encourage people to buy even more.

These days, if stocks are up that is a signal to buy, and if stocks are down that is a signal to buy.

Of course we witnessed similar euphoria just before the dotcom bubble burst and just before the financial crisis of 2008, but most Americans have extremely short memories.

For most of us, those crashes might as well be ancient history.

But just like in each of those cases, market euphoria tends to hit a peak before things completely fall apart.  Bill Stone, the chief investment strategist for PNC Asset Management Group, recently made this point very succinctly

“It is going to get to a point where it can’t get any better anymore,” he said. “In the market it’s always brightest before it gets dark.”

Others are being even more blunt.  For example, trends forecaster Gerald Celente is convinced that “equity markets around the world are going to crash” in 2018…

“Yes.  Everyone knows that the markets are overvalued.  The Schiller PE ratios rival those of the pre-1929 stock market crash and the Dot-Com bubble…The Black Swan Event: When war breaks out in the Middle East, the equity markets around the world are going to crash.  The Black Swan that is going to create ‘Market Shock’ is going to be an outbreak of war in the Middle East.  And when that happens, you are going to see gold and silver skyrocket.  That’s our forecast for one of the top 10 trends of 2018.”

Personally, I never believed that the stock market bubble could ever be inflated to such absurd proportions, and so I am just in awe at what is taking place on Wall Street.

Since the last financial crisis our national debt has doubled, corporate debt has doubled, U.S. consumers are now 13 trillion dollars in debt, our economic infrastructure continues to be gutted, more than 40 million Americans are living in poverty and our financial institutions are being more reckless than at any other point in our entire history.

But for the moment, it is working.  We have been on the greatest debt binge in world history since the end of the last recession, and most people seem to believe that the debt-fueled standard of living that we are currently enjoying is somehow going to be sustainable.

Nothing about our long-term economic outlook has fundamentally changed.  Just because the authorities were able to extend this bubble for a little while longer does not mean that we are going to get to escape the consequences of decades of incredibly foolish decisions.

We just keep on mortgaging the future, but the funny thing about the future is that eventually it shows up.

And when our day of reckoning finally does arrive, the pain that it is going to cause is going to be absolutely off the charts.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Economic Collapse




More Investors Sell Bitcoin for Gold/Silver; Michael Pento: Stock Market & Fixed Income Bubble

Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.

Coming up we’ll hear a truly explosive interview with Michael Pento of Pento Portfolio Strategies. Michael describes for us what may be coming in the bond and fixed income markets and the impact on the stock market and on gold prices in 2018. He also shares some of his very strong feelings about Bitcoin and the crypto-currencies. You absolutely must hear my conversation with Michael Pento, coming up after this week’s market update.

On Thursday, Congress hastily passed a short-term funding bill that averts a government shutdown – but only for two weeks. Republicans and Democrats will have to come back to the negotiating table later this month in order to reach a deal on spending and contentious issues such as “deferred action” for illegal immigrants.

There are a handful of Republicans in Congress who oppose these bipartisan budget deals on grounds that they grow government and grow the deficit. But whether fiscal conservatives have enough clout to force any meaningful concessions from leadership is doubtful. The political forces pushing for more spending and more borrowing on Capitol Hill are simply too great.

And while unsustainable spending will have ruinous long-term consequences for the U.S. dollar, those consequences aren’t being felt just yet… at least not the negative ones. The stimulus of debt spending and currency creation is helping corporations boost their profits and their share prices, at least for now.

Meanwhile, precious metals markets are having a rough go of it this week. Gold prices are down 2.5% since last Friday’s close to bring spot prices to $ 1,249 per ounce. Silver is off 63 cents or 3.8% for the week to trade at $ 15.83. Platinum is down 5.5% to $ 889, while palladium shows a weekly loss of 1.4% to come in at $ 1,010 per ounce as of this Friday morning recording.

The U.S. Dollar Index is up over 1% for the week, but that doesn’t fully explain the weakness in gold and silver prices over the past few months. The dollar remains down significantly for the year, yet metals markets haven’t put on much of a counter-dollar move, with gold up only about $ 100 and silver now slightly negative for the year.

The lack of investor interest in gold and silver this year may have more to do with what’s been going up. As long as the stock market keeps plowing ahead, the safe-haven appeal of hard assets will be limited mainly to those who are true contrarians, to those who are willing to go against the direction of the herd.

Even among alternative asset investors and free-market money advocates, gold and silver have been overlooked in favor of newfangled digital currencies such as Bitcoin. This week Bitcoin surged to over $ 18,000 amidst volatile trading and soon to be opened futures contracts for the crypto-currency.

Bob PIsani (CNBC): The first Bitcoin futures market, that’s going to begin Sunday night. Let’s talk to the man in charge of all this. Ed Tilly is the CEO of the CBOE.

And Ed, congratulations, you’ve won this sort of arms race to get to the first Bitcoin futures. CME will be doing it a week later.

You’re familiar with Jamie Dimon’s famous comment. Mr. Dimon had said, “If you’re stupid enough to buy Bitcoin, you’re going to pay the price for it one day.” He called it a fraud. Do you think this is an opportunity for Bitcoin? Do you think this is another great investment, or is it a fraud?

Ed Tilley: There’s a suitability issue with every investment. Bitcoin should be no different. I don’t think we’re setting up Bitcoin and saying that’s for everybody, but we certainly know there’s interest out there on the long and the short side.

Just about all of us can look back with regret for not having bought Bitcoin – or not having bought enough of it – when it was trading below $ 1,000. But there’s no point in dwelling on what you could have done in retrospect. There will always be something – whether it’s a penny stock, or an obscure commodity, or a rare piece of art, or an ideal plot of land – that you could have made a fortune on if only you had known what and when to buy.

By the same token, those who own Bitcoin may one day regret not selling at what in retrospect was the top. Maybe we’re at it now. Maybe it has much further to go. But an asset class as volatile and speculative as crypto-currency won’t simply reach a plateau.

When the upside momentum runs out for whatever reason, a crash of some magnitude will likely follow. Saxo Bank came out with a prediction that Bitcoin will hit $ 60,000 in 2018…only to crash back down to $ 1,000.

If a scenario like that played out for the crypto-coin, the crash phase could be hugely bullish for hard coins – gold and silver. Bitcoin holders tend to value things like privacy, free markets, and being contrarian to what Wall Street and the banking establishment are pushing. If they lose confidence in crypto-currencies, many are likely to come back home to physical precious metals.

In fact, we’ve recently seen a significant uptick in Money Metals customers buying gold and silver using their bitcoin for payment. It’s super easy to do that at Money Metals.com. And over the phone, you can also do larger buy OR sell transactions exchanging gold and silver for crypto currencies — or vice versa. Just call us at 1-800-800-1865 to do so.

Well now for more on the state of the markets, the perilous situation the new head of the Federal Reserve will likely face in 2018, and for much more on the rise and potential fall of Bitcoin, let’s get right to this week’s exclusive interview.

Michael Pento

Mike Gleason: It is my privilege now to welcome in Michael Pento, President and founder of Pento Portfolio Strategies and author of the book, The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market. Michael is a well-known and successful money manager and has been a regular guest on CNBC, Bloomberg, Fox Business News, and also the Money Metals Podcast, and shares is astute insights on markets and geopolitics from the perspective of an Austrian School economist’s viewpoint.

Michael, welcome back. Thanks for joining us again and how are you?

Michael Pento: I’m doing fine. Thanks for having me back on Mike.

Mike Gleason: Well, Michael, you focus a lot on the bond markets. Let’s talk for a minute here as we begin about the bubble that has been created and maintained there, and then we will get into the potential ramifications for precious metals. I was researching this morning and the yield on the 10-year Treasury note was 2.242% on December 20, 2015, just after the Federal Reserve made the first rate hike in the current cycle of raising the Fed funds rate. Today, the 10-year yield is 2.327%, a tiny increase from two years ago, so the yield has barely budged despite the funds rate ratcheting up a full percentage point higher. Now, the funds rate isn’t directly tied to Treasury yields, but shouldn’t this tightening be translating to higher yields? Why is that not happening?

Michael Pento: What a great question to start off the show. So, I’ll just dovetail on what you just said and say that in the beginning of 2017, the yield on the 10-year note was 2.4%, or just around that level. Now, as you said, it’s 2.32%. So, there’s a very good reason for why this is happening because the long end of the bond market is concerned with inflation and if the Fed is hiking rates from pretty much zero to one and a quarter percent as we sit today, the effective Fed funds rate is just a little bit above 1%, that doesn’t mean that the yield should go higher on the long end of the yield curve. Actually, what that does mean, is that the Fed is vigilant, for now at least, on fighting inflation.

They’re reigning inflation out of the economy. That means the long end is going to come down to meet the short end, and I will tell you on that front that in the beginning of 2014, 260 basis points was the spread on the two and 10-year note. And we’ve had five rate hikes since then and guess what the spread is today as we record this interview, 51 basis points. So, you don’t have to have an advanced degree in calculus to figure out that you have two rate hikes left, two, assuming that the two-year note rises commensurately with the Fed funds rate, two rate hikes left before the yield curve is completely flat.

And the problem is that when I’m reading a lot of material in the past few days that the all-knowing pundits on Wall Street from the big brokerage houses, the big wire houses, are claiming that we’re going to have five rate hikes. Mike, five rate hikes between today, December 6th and the end of 2018, five. Not two, five. That means the Fed funds rate is going to be well above where the 10-year note yield is trading today, so you’re going to have a massively inverted yield curve by the end of 2018. Not only that, you pile onto the fact that central banks are going from a $ 120 billion worth of counterfeit confetti each month to zero by October. So, if you’re not worried about a recession, if you’re not worried about an inverted yield curve, if you’re not worried about the central banks moving their massive bid from stocks and bonds and if you’re not worried about the stock market imploding in the next few quarters, if not months, you should be.

Mike Gleason: Interest rates are essentially the price of risk and the market seems to be saying there just isn’t much. However, you and I both know there is plenty, as you just discussed there, but this is bubble has persisted for years now. The truth is we don’t have real properly functioning markets and this extraordinary mispricing of risk will go on until, and probably suddenly, it doesn’t. What signals are you watching for in the bond markets, if you would expand on that, that would indicate the game is about up and are you seeing any of those signs?

Michael Pento: Well, you have to watch high yield spreads and the nominal yield. If you see those yields starting to spike, then you should worry. They were spiking a few weeks ago. They’ve since come down a little bit, but keep an eye on that. There were good break-even spreads, inflation break-even spreads. I watch those very insidiously. Of course, like we just talked about, you watch for the yield curve to invert.

When the yield curve flattens out and inverts, it means this – and it doesn’t really matter why it happens – some people will say, well, I hear this Mike, that you shouldn’t worry about the yield curve inverting this time because it’s inverting because. Because, is the 10-year (German) bund is yielding .29%. Mario Draghi over in Europe is bending the whole yield curve to the south in Europe and that’s putting pressure on our yields here in the United States. Well, that’s true to some extent, but let me ask you a question, if the yield on the 10-year bund was .5% not too long ago, why is it .29% now in light of the fact that everybody knows the ECB is going to taper from 60 billion euros of QE today to 30 billion come January, and eventually stop their QE probably in October around the same time the Fed steps up their monthly sales to 50 billion.

The answer is because the economy is slowing. It’s very clear to me, the economy and inflation is slowing. That it’s putting further pressure down on long-term yields. That means the yield curve is going to invert and it’s not different this time. What that means is that if you’re a depositor at the bank and you’re going to be getting say X% on your money, whatever it is, one, two percent on your money, and then the private banks make the same loans are yielding the same as they’re paying in deposits, it no longer benefits the bank to lend out money. So, money supply growth crashes and that means deflation starts to diffuse across the economy and that means asset bubbles crash.

And I just want to make one thing very clear. What happened this week, this week happened, this data point was breached. The total market capital stocks is now a staggering 140% of GDP. Yes. It did reach 140% of GDP. That ratio has only been higher at one time in history and that was during just a few short months around the very peak of the NASDAQ bubble. Outside of that very short duration, that ratio for decades was 50%. So, we don’t just have a regular stock market bubble, we have an epic Stock Market bubble that is couched within the biggest bubble in fixed income that the world has ever seen and it’s not going to end very well.

Mike Gleason: Now, let’s talk about what a bursting of the debt bubble might mean for precious metals. One could argue that if real interest rates move sharply higher, it will weigh on metals, which don’t offer a yield at all. It’s zero or even negative real interest rates that gold bulls want to see. But that certainly hasn’t been the case in recent years. Maybe gold and silver will respond as safe-haven assets in the turmoil in markets created by a collapse in bonds will drive demand for metals. What would you expect the long overdue reckoning in bonds will mean for gold and silver prices, Michael?

Michael Pento: The last time we had an inverted yield curve in a recession was circa 2006-2009. And gold benefit is very greatly leading up to the Great Recession, but if you look on your data points and see what happened in 2008, gold did not do very well at all. And that was partially because real interest rates rising is not good for gold, but it was also the case that there was a huge dollar short occurring at that time.

So, people were borrowing in dollars and investing in the so-called BRIC countries, Brazil, Russia, India, China. When it became evident that we were having a global recession, the manifestation of the global recession, people had to unwind those carry trades. So, in other words, they sold renminbi and they sold the ruble and they went back into dollars driving the value of the dollar way up. That crushed gold in the short term. But then you remember, from 2009 all the way to really late 2011, early 2012, gold had a huge run and that’s because deficits absolutely soared. We had annual deficits in this country were well over a trillion dollars. We’re going back there again and then the dollar started to again weaken.

This time around there is no massive dollar short. As a matter of fact, it’s quite the opposite. In this next iteration of a recession, there may actually be dollar weakness. Even though you have rising real interest rates, which has always been the death knell for gold, you’re not going to have that rise in the dollar. That will mollify or attenuate the swollen gold prices, if there is any at all, but on the other end of this recession, and once this recession becomes manifested and you see the Fed going from wherever they are at that juncture, maybe 2% back to zero and then QE… and then we have Mr. Marvin Goodfriend on the Board of Governors – he’s been nominated by Donald Trump – he wants negative, nominal interest rates. He wants to ban cash. You’re going to have universal basic income. You’re going to have negative nominal rates. You’re going to have QE. You’re going to have perhaps even helicopter money. You’re going to have some version of that dangerous inflation cocktail and that has to be incredibly bullish for gold.

Mike Gleason: It sounds like a “perfect storm” sort of scenario there for the yellow metal. These days, when you talk about markets, the topic of bitcoin and crypto currencies is almost certain to come up. Bitcoin hit $ 13,000 earlier today as we’re talking here on Wednesday afternoon. It’s epic run higher this year cannot be ignored. Have you taken any interest in this space? We’d like to get your thoughts on where this phenomenon is headed.

Michael Pento: Well, you were you asking me about crypto-currencies. I’ve been on record for well over a year saying that it’s a scam. I’ve been wrong for well over a year. I will never own a crypto-currency in my life. I will never own a bitcoin or Etherium or any of these things. When you think about it Mike, what is a crypto-currency. Well, what you really own … You always see these pictures of people holding a coin with a B on it with a dollar sign through it. That’s not a bitcoin. A bitcoin, and I’m far from a computer programmer, so please understand, but from my knowledge of what a bitcoin is, it’s a private key. So, what you actually own is a private key, which is just a series of letters and numbers. I think it’s about 64 of these. It’s a series of letters and numbers, characters, that exist not even in tangible form, they exist in the Internet, so they exist digitally. So, how could a bunch of numbers be considered money?

The definition of money, it has to be portable, tangible and it has to be transferrable, but the most important factors of money, they have to be extremely rare and virtually indestructible. Now, what the heck is extremely rare or indestructible about numbers and letters? They’re very, very common and they have zero utility. Bitcoins and crypto currencies have zero utility. Let me repeat that. Zero utility outside of that ecosystem. So, you have to agree, in order to believe in Bitcoin, that this chain of numbers and letters can be worth $ 13,000 per unit and that that chain of numbers and letters is money, but outside of that ecosystem, there’s zero utility and you have ask yourself what good is it to be able to move numbers and letters via the Internet. Well, you could move U.S. dollars electronically over the Internet.

What you really should be asking is how can I move gold. Gold, which is all the properties of money, gold has. And most importantly, it’s virtually indestructible and extremely rare. There are over a thousand crypto-currencies, so various versions of those numbers and letters in the private key. There’s an immutable open ledger that is used to transfer bitcoins, but you can use a private blockchain to move gold. There are companies that do that. That’s the value of the blockchain. The blockchain’s value is not to move letters and numbers over the Internet and then somehow think that unit could be anywhere near $ 13,000. It’s a scam. It’s going to come crashing down and I’ll not be a part of it.

Mike Gleason: Well, I don’t think anyone’s going to wonder where you stand on that, thanks for honest assessment on that. Now, what are your thoughts on Jerome Powell taking over for Janet Yellen as the new Fed Chair. He’s a mainstream dovish-minded economist from all indications, so will it be more of the same, or do you have any insights on what a new Powell Fed will look like?

Michael Pento: Well, everybody says he’s going to be more of the same. He’s another dove like Janet Yellen, but you have to understand – and there’s two things I want to mention about Mr. Jerome Powell. Everybody knows he’s nominated by Donald Trump, but why did Donald Trump make the switch from Janet Yellen to Powell? Well, Mr. Powell is going to assent to two things. Number one, what does Donald Trump love to talk about more than almost anything else? Well, he likes to talk about how great the stock market’s doing, so I can assure you one thing is Jerome Powell will not allow the stock market to go down very much, very quickly. That’s number one.

Number two, Donald Trump is on record now, not Candidate Trump, President Trump is on record saying, he wants a weaker currency and he’s also a lover of debt. So, I expect in the long run, maybe not the short run because you’ve seen this baton has been passed to Mr. Powell, who’s going to carry on with Janet Yellen’s interest rate hikes and the reduction of the balance sheet. But, once the recession hits and the stock market turns south, and I’m talking about the 10% hit that I see happening very, very soon is going to quickly morph into 30%. And once we get 30% plus down in the stock market, you’re going to see Mr. Powell reverse course very quickly, because Mr. Trump can no longer brag about the stock market when it’s down 30%. And you’ll see all those things that I mentioned, some variation of that cocktail and that is negative interest rates, QE, universal basic income and helicopter money.

Mike Gleason: Well Michael, as we approach the end of the year here and start looking forward to 2018, I would like to ask you what you think people might be talking about this time, say a year from now, in the markets? What are a couple of those key events that you see happening in the next 12 months and also, your outlook for gold next year?

Michael Pento: Well, I think you’ll be talking about the epic crash of crypto-currencies a year from now. I think a year from now, you’ll be talking about the inversion of the yield curve. I think you’ll be talking about a crash in inflation and the onslaught of deflation. You’ll be talking about a crash in the major markets and in the capital markets. You’ll be talking about a reversal in the Fed’s monetary policy. You’ll be talking about a falling dollar and you’ll be talking about gold, which will be well over $ 2,000 an ounce by the end of next year, given the fact that construct I just laid out. If half those things that I just mentioned occur, gold will be well on its way to its all-time record nominal high.

Mike Gleason: It should be a very interesting year. I know we have talked a lot with you and you, of course, write a lot about the oscillations between the inflation cycle and the deflation cycle. And it’s always great to get your commentaries here and read them on a regular basis. We always appreciate your time, Michael. Thanks so much for the times you’ve come on this year and I certainly look forward to doing it again. Now, before we let you, please tell people how they can follow you more regularly, get those great commentaries in their email inbox each week, and also other information that they might need to know if they would like to potentially become a client of your firm there Pento Portfolios Strategies.

Michael Pento: Thank you Mike. The office number here is 732-772-9500. You can email me directly at mpento@pentoport.com. And the website is PentoPort.com.

Mike Gleason: Well, thanks again Michael. Enjoy the Christmas season and I look forward to our next conversation in the New Year. Take care and thanks for all you do.

Michael Pento: God bless you. Merry Christmas Mike.

Mike Gleason: Well that will wrap it up for this week. Thanks again to Michael Pento of Pento Portfolio Strategies. For more info just visit PentoPort.com. You can sign up for his email list, listen to the mid-week podcasts and get his fantastic market commentaries on a regular basis. Again, just go to PentoPort.com.

And don’t forget to check back here next Friday for our next Market Wrap Podcast, until then this has been Mike Gleason with Money Metals Exchange. Thanks for listening, and have a great weekend everybody.

Precious Metals News & Analysis – Gold News, Silver News




The Dow Peaked At 14,000 Before The Last Stock Market Crash, And Now Dow 24,000 Is Here

The absurdity that we are witnessing in the financial markets is absolutely breathtaking.  Just recently, a good friend reminded me that the Dow peaked at just above 14,000 before the last stock market crash, and stock prices were definitely over-inflated at that time.  Subsequently the Dow crashed below 7,000 before rebounding, and now thanks to this week’s rally we on the threshold of Dow 24,000.  When you look at a chart of the Dow Jones Industrial Average, you would be tempted to think that we must be in the greatest economic boom in American history, but the truth is that our economy has only grown by an average of just 1.33 percent over the last 10 years.  Every crazy stock market bubble throughout our history has always ended badly, and this one will be no exception.

And even though the Dow showed a nice gain on Wednesday, the Nasdaq got absolutely hammered.  In fact, almost every major tech stock was down big.  The following comes from CNN

Meanwhile, big tech stocks — which have propelled the market higher all year — were tanking. The Nasdaq fell more than 1%, led by big drops in Google (GOOGL, Tech30) owner Alphabet, Amazon (AMZN, Tech30), Apple (AAPL, Tech30), Facebook (FB, Tech30) and Netflix (NFLX, Tech30).

Momentum darlings Nvidia (NVDA, Tech30) and PayPal (PYPL, Tech30) and red hot gaming stocks Electronic Arts (EA, Tech30) and Activision Blizzard (ATVI, Tech30) plunged too. They have been some of the market’s top stocks throughout most of 2017.

Many believe that the markets are about to turn down in a major way.  What goes up must eventually come down, and at this point even Goldman Sachs is warning that a bear market is coming

“It has seldom been the case that equities, bonds and credit have been similarly expensive at the same time, only in the Roaring ’20s and the Golden ’50s,” Goldman Sachs International strategists including Christian Mueller-Glissman wrote in a note this week. “All good things must come to an end” and “there will be a bear market, eventually” they said.

As central banks cut back their quantitative easing, pushing up the premiums investors demand to hold longer-dated bonds, returns are “likely to be lower across assets” over the medium term, the analysts said. A second, less likely, scenario would involve “fast pain.” Stock and bond valuations would both get hit, with the mix depending on whether the trigger involved a negative growth shock, or a growth shock alongside an inflation pick-up.

Nobody believes that this crazy stock market party can go on forever.

These days, the real debate seems to be between those that are convinced that the markets will crash violently and those that believe that a “soft landing” can be achieved.

I would definitely be in favor of a “soft landing”, but those that have followed my work for an extended period of time know that I do not think that this will happen.  And with each passing day, more prominent voices in the financial world are coming to the same conclusion.  Here is one recent example

Vanguard’s chief economist Joe Davis said investors need to be prepared for a significant downturn in the stock market, which is now at a 70 percent chance of crashing.  That chance is significantly higher than it has been over the past 60 years.

The economist added, It’s unreasonable to expect rates of returns, which exceeded our own bullish forecast from 2010, to continue.”

A stock market crash has followed every major stock bubble in our history, and right at this moment we are in the terminal phase of one of the greatest stock market bubbles ever.  There are so many indicators that are screaming that we are in danger, and one of the favorite ones that I like to point to is margin debt.  The following commentary and chart were recently published by Wolf Richter

This chart shows margin debt (red line, left scale) and the S&P 500 (blue line, right scale), both adjusted for inflation to tune out the effects of the dwindling value of the dollar over the decades (chart by Advisor Perspectives):

Stock market leverage is the big accelerator on the way up. Leverage supplies liquidity that has been freshly created by the lender. This isn’t money moving from one asset to another. This is money that is being created to be plowed into stocks. And when stocks sink, leverage becomes the big accelerator on the way down.

Markets tend to go down much faster than they go up, and I have a feeling that when this market crashes it is going to happen very, very rapidly.

The only reason stock prices ever got this high in the first place was due to unprecedented intervention by global central banks.  They created trillions of dollars out of thin air and plowed those funds directly into the financial markets, and of course that was going to inflate asset prices.

But now global central banks are putting on the brakes simultaneously, and this has got to be one of the greatest sell signals that we have ever witnessed in modern financial history.

Even Federal Reserve Chair Janet Yellen says that she is concerned about causing “a boom-bust condition in the economy”, and yet she insists that the Fed is going to continue to gradually raise rates anyway

Federal Reserve Chair Janet Yellen said the central bank is concerned with growth get out of hand and thus is committed to continuing to raise rates in a gradual manner.

“We don’t want to cause a boom-bust condition in the economy,” Yellen told Congress in her semiannual testimony Wednesday.

While Yellen did not specifically commit to a December rate hike, her comments indicated that her views have not changed with her desire for the central bank to continue normalizing policy after years of historically high accommodation.

I never thought that this stock market bubble would get this large.  We are way, way overdue for a financial correction, but right now we are in a party that never seems to end.

But end it will, and when that happens the pain that will be experienced on Wall Street will be unlike anything that we have ever seen before.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Economic Collapse




The Stock Market Has Gone Up More Than 5 Trillion Dollars Since Donald Trump Was Elected

One year ago we witnessed the greatest miracle in political history, and since that time we have also witnessed one of the greatest miracles in financial history.  On November 8th, 2016 the Dow closed at 18,332.74. On Wednesday, it closed at 23,563.36.  U.S. stocks have increased in value by about 5.4 trillion dollars since Donald Trump was elected, and I don’t think that we have seen anything quite like this ever before.  So does Donald Trump deserve the credit for this unprecedented stock market run?  Many experts are at least giving him part of the credit

Greg Valliere, chief global strategist at Horizon Investments, says outgoing Federal Reserve chair Janet Yellen deserves “much of the credit” because the Fed’s policy of low interest rates has helped maintain a good economy and “favors stocks over other investments.”

But Trump, he adds, “gets some credit for establishing a pro-business climate in Washington.” Trump also gets kudos for rolling back business regulations and pushing for a big tax cut for U.S. corporations, which investors say will boost corporate profitability.

Without a doubt, a Trump victory was a good thing for the financial markets, but politicians need to be careful not to take too much credit for soaring stock prices.

Because if they take credit when stocks go up, then they also have to be willing to take the blame when they go down.

The primary reason why stock prices have gone up so much over the past several years is due to unprecedented intervention by global central banks.  They have literally pumped trillions of dollars that they have created out of thin air into the financial markets, and of course that was going to drive up asset prices.

But now global central banks are reversing course in unison, and we will see if financial markets around the world can maintain these dizzying levels without artificial support.

Because the truth is that whenever price/earnings ratios have ever gotten this high throughout history, a horrifying stock market crash has always followed.  There is no way that stock prices can stay at these levels without central bank support, and the trillions of dollars in paper gains that we have seen up to now can potentially be wiped out very rapidly.

Just look at a company like Snapchat.  This is a company that is supposedly worth 15.4 billion dollars at the moment, and yet it is bleeding hundreds of millions of dollars a quarter.  The following numbers come from Wolf Richter

Snap Inc., the parent company of Snapchat, reported late Tuesday that its revenues in the third quarter rose 62% from a year ago, to $ 208 million, while its net loss more than tripled to $ 443 million. How? It wasn’t easy, but here’s how they did it:

  • Cost of revenues, $ 211 million, exceeds revenues, a troublesome indicator. Most of it is what Snap pays Alphabet for hosting its content in the Google Cloud.
  • Research and development expenses, $ 239 million, also exceed revenues.
  • Sales and marketing expenses, $ 102 million, to push those Snapchat Spectacles? More on those in a moment.
  • General and administrative expenses: $ 118 million

Total expenses of $ 670 million, against revenues of $ 208 million. That’s what I call a business model.

I want to be very clear about what I am going to say next.

Snapchat’s business model is terribly broken, and this is a company that is going to zero.

Ultimately, those that hold Snapchat stock to the very end will lose everything.  Instead of 15 billion dollars, this is a company that won’t be worth 15 cents.

Speaking of going to zero, Sears just announced that they are getting rid of up to 140 more stores.  We have already set an all-time record for retail store closings in 2018, and the “retail apocalypse” that we are witnessing is only going to continue to accelerate.

But at least the stock market continues to set new record highs, right?

Don’t be fooled by the headlines.  The artificial stock market bubble is living on borrowed time, and meanwhile the “real economy” continues to struggle.

When the stock market finally crashes, it will not be Donald Trump’s fault.

Let me say that again.

When the stock market finally crashes, it will not be Donald Trump’s fault.

The Federal Reserve and other global central banks created this artificial bubble, and they will be to blame for the carnage that is caused when it bursts.

And as the next great financial crisis unfolds, my hope is that people will finally be sick enough of these “boom and bust cycles” that we will be able to get rid of the Federal Reserve for good.

We need people to understand that the design of our financial system is fundamentally flawed, because if we never treat the root cause of our problems we will always be chasing symptoms.

There is a better way, and my hope is that in the aftermath of the next crisis we can start to get there.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Economic Collapse




THE U.S. STOCK MARKET: Highly Inflated Bubble To Super-Charged Tulip Mania

Investors need to be concerned that the U.S. Stock Market is well beyond bubble territory as it has now entered into the final stage of a Super-Charged Tulip Mania. Not only are stock prices inflated well above anything we have ever seen before, but valuations are also reaching heights that are totally unsustainable. Unfortunately, these highly inflated share prices and insane valuations seem normal to investors who are suffering from brain damage as years of mainstream propaganda have turned the soft tissue in their skulls to mush.

Also, we are way beyond “Boiling Frogs” now. Yes, we passed that stage a while back. Today, the typical U.S. investor has been fried to death. Investors now resemble a super-crisp chicken-wing with very little meat on it but at least will offer, one hell of a crunch. Please realize I don’t mean to be harsh about my fellow investor. However, when I look around and see what 99% of the market is doing, it reminds me of a famous line from the movie Aliens. The star of the movie, after being found lost in deep space for many years, said the following in a meeting, “Did IQ’s drop sharply while I was away?”

We find out in the rest of the movie that the so-called Mainstream experts were totally wrong about their assessment of the situation. However, billions of dollars were still spent and many lives lost because high-level individuals infected with stupidity (in the Aliens Movie) still controlled the shots. No different than today.

Regardless, the U.S. Stock Market has entered into the last stage, which I call the Super-Charged Tulip Mania. In this stage, it wouldn’t matter if the North Koreans launched a nuclear missile and declared war on the rest of the world, the universe and all Aliens floating around in space. By God, the Dow Jones Index would look at these as a catalyst to reach the next important psychological level of 25,000 points. Reaching that new level wouldn’t really be that hard as the Fed would just need to hire a few dozen more trading geeks and provide them with an endless supply of Hot Pockets and Starbucks. Easy-peasy.

Okay… it’s time to get serious. Here are a group of charts that show just how insane the markets and valuations have become today.

JP MORGAN & CATERPILLAR: Exponential Share Price Increase & Insane Valuation

Let’s take a look at two of the companies listed in the Dow Jones Index. JP Morgan Chase has benefited immensely from the U.S. Government bailout of the garbage assets such as Mortgaged Back Securities after the housing and banking collapse in 2008. JP Morgan has seen its share price surge four times from $ 25 in 2012 to over $ 100 currently:

J.P. Morgan Chase Stock

Furthermore, if an investor was lucky enough to buy a bunch of JP Morgan stock back in 1983 at $ 2.50 a share, he or she wouldn’t be complaining a bit today. JP Morgan’s stock price is up a stunning 3,933% over the past 34 years. If we look this chart, we can see that the share price is now moving up in an exponential trend. Sadly for JP, all exponential trends never last. While they may continue higher a bit longer, all will collapse sooner or later.

Another stock that has moved into the exponential territory, is Caterpillar. After years of falling sales, Caterpillar has emerged out from the ashes to increased sales, profits and with it… a skyrocketing share price:

Caterpillar Stock

Not only is Caterpillar’s share price up more than double to $ 137 since the beginning of 2016, but its current PE Ratio (Price to Earnings) is also at a staggering 95. Let me tell you, Caterpillar’s PE Ratio of 95 is nearly six times higher than its median PE Ratio over the past 13 years. Moreover, Caterpillar’s net income Q1-Q3 2007 was higher ($ 2.5 billion) than Q1-Q3 2017 ($ 2 billion), but its stock price was only $ 55 in 2007 versus the $ 137 today. So, what gives?

Again… these stock prices may continue higher for a while, but nothing heads up in a straight line for long.

APPLE STOCK: From Nose-Bleed To Outer-Space Brain Crushing Levels

It’s no surprise that Apple’s share price has reached a level that would make any Las Vegas bookie extremely jealous. And why shouldn’t it? What other company has actually brainwashed people into believing that they need to stand in line overnight to purchase the newest I-phone model at $ 1,000 a pop? Even though Caterpillar’s share price is up almost 3,000 percent over the past 36 years, who stands in line for a new Caterpillar Earth Moving machine? Or how about the latest Nike sneaker?

Amazingly, Apple’s stock price is up an earth-shattering 46,648% since it starting trading at $ 0.40 in 1984:

Apple Stock

It is also quite astonishing to see Apple’s stock up more than 15 times at $ 172 compared to its low set in 2009 at $ 11. We must remember what was going on in the first quarter of 2009. The Dow Jones Index was falling to a gut-wrenching low of $ 6,600 as CNBC’s Mad Money, Jim Cramer was telling everyone that “There’s no end in sight to how far the market would fall.” Ole Jim was finally throwing in the towel. Back then, I also wondered how the hell did the CNBC talking heads could continue to get out of bed, get in front of the camera, and deal with what looked like the end of the world. What a difference in eight years… ah?

Today at CNBC land, there’s nothing but BIG SMILES and BACK SLAPS. Everyone is wondering when the Dow Jones will finally reach the 25,000 level. I gather all it would take to get us there would be the following three incidents; 1) A war with North Korean, 2) A Saudi Arabia Royal Government Coup and, 3) A tidal wave that floods New York City.

THE DOW JONES & EXXONMOBIL: Watch Out Below!!

The Dow Jones and ExxonMobil are two of my favorite indicators which show that something is seriously wrong in the market. First, let’s look at ExxonMobil. While ExxonMobil’s stock isn’t moving up exponentially, as is Caterpillar, JP Morgan, and Apple, its share price is still well above its ratio to the oil price. If we go back to 2005, when the oil price was trading at the same as it is today, ExxonMobil’s share price was only $ 35. However, ExxonMobil’s share price is over $ 83. You can see the oil price (BLACK line) versus ExxonMobil’s share price (PURPLE area):

Exxon Mobil Stock

While it’s true that ExxonMobil’s share price has increased as a result of its massive stock-repurchasing program over the past decade, the company also spent over $ 220 billion in profits to reduce its outstanding shares from 6.3 billion in 2005 to 4.2 billion currently. Thus, company management thought it was a better decision to spend nearly a quarter of a Trillion Dollars to buy back its stock, rather than to use it for exploring, developing and producing more oil.

For ExxonMobil to finally be able to enjoy a tiny bit of free cash flow this year after it paid its shareholder dividends, it had to gut its capital expenditures by nearly two-thirds since 2012. By cutting its capital expenditures by $ 22+ billion, how does it expect to replace its oil reserves going forward? Good question. However, there isn’t a good answer as the low oil price has put the U.S. oil industry into a horrible predicament with no real solution.

If Americans understood how dire the situation has become in the domestic oil industry, they wouldn’t be pushing up the value of the Dow Jones to new record highs. Why? Without energy, there is no economy or financial assets. Sure, if we went back to using human and animal labor, there would still be some small valuations. Maybe the Dow Jones Index would be trading at say 100-200 points, but nowhere near the 23,500 level today.

The Dow Jones Index chart below shows how one index can become a Super-Charged Tulip Mania while the other index can be driven down to bottom-basement cesspool levels:

Dow Jones Stock

First, can you imagine owning the Dow Jones Index trading at a measly 850 points in 1981? It took the Dow nearly a century to reach 850 points in 1981, but it was able to increase 850 points in the past two months. Amazing things can happen to market prices and valuations when we have massive Central Bank money printing, Mainstream propaganda and societal brain damage.

Second, as the Dow Jones Index reached 23,500 points, the VIX Index (volatility) fell to a new record low of 9.14 (shown at the bottom right-hand side of chart). Think of these two indexes as an oversized stretched rubber band. At some point, the rubber band will snap back, and the fun will begin.

THE UNLOVED METALS: No Bubble Here… Just A Lot Of Frustration

While the first group of charts provides clear evidence of bubbles and tulip manias, this last group reveals quite the opposite. And out of the three following metal charts, silver is by far, the most unloved. Yes, that’s correct. A metal that has been money for more than 2,000 years has performed the worst when we compare it to copper and gold. Let’s take a look at copper first.

Even though the copper price fell from its high back in 2011, it has surged over 50% in the past two years. However, if we go back to 1981, the copper price is only up 312% over the 36-year period:

Copper Price

In 1981, the copper price was trading at $ 0.75, but today with all the massive money printing, the king base metal is only trading at $ 3. Now compare the 312% copper price increase versus the Dow Jones Index at 2,548% and Caterpillar at 2,990%. Thus, an investor was paid much more handsomely to invest in industrial stocks than in copper over this 36-year period.

Now, if you think copper under-performed the stock market, wait until you see gold. The gold price today is only up 207% since it was traded for $ 400 in 1981:

Gold Price

I would imagine some precious metals investors would claim that taking the $ 400 figure (1981) as a baseline would be disingenuous as gold was coming off its high in 1980. Okay, I will give you that. But, even if we used the low of $ 275 reached in 2001, the increase would still only be 350% during that 16-year period. Thus, gold’s 350% increase from its low in 2001 is still anemic compared to gains made by the Dow Jones Index or the other stocks mentioned above.

Either way, both copper, and gold have severely underperformed the gains experienced in the broader markets. Sadly, it’s even worse when we look at the last metal in this group. While copper and gold at least enjoyed triple-digit percentage gains over the past 36 years, the current silver price hasn’t even surpassed double-digit gains. As of the end of trading last week, the silver price only gained a paltry 99% from its trading level of $ 8 in 1981:

Silver Price

This chart reveals the frustration felt by many silver investors. However, there is a good side to this story. And that is… BUBBLES POP while DEPRESSED ASSETS SURGE. You have to think about the metals in this fashion. Gold and silver are behaving like the VIX. The more the VIX index goes down, the more the stock market rises. But, when the bubble markets finally pop, then the VIX will shoot back higher (as seen in the RED SPIKES in the DOW chart above), taking the precious metals prices up with it.

This next market crash will not resemble anything similar to what took place during the 2008-2009 U.S. banking and housing market collapse. When the markets cracked in 2008, EVERYTHING went down together. Instead this time around, as the markets tank the precious metals will surge to new highs. We must remember, there really isn’t much in the way of safe assets to move into during the next market crash. So, as investors flee from bloated STOCKS, BONDS, and REAL ESTATE, to the tiny gold and silver market, fundamentals won’t matter either… LOL. Yeah… we could see some ridiculous high gold and silver prices as investors finally receive precious metals religion.

Precious Metals News & Analysis – Gold News, Silver News




As A Dog Returns To Its Vomit, Stock Jockeys Return To The Ponzi Stocks

Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. – Sir John Templeton

I’ve always admired John Templeton. Not as the “father” of the modern mutual fund but because I considered him to have been one of the most intelligent thinkers in at least my lifetime (55 years). In 2003 he gave an interview from his retirement “perch” in the Bahamas to one of the financial media organizations. He stated at the time that he would not invest in the U.S. housing market until “home prices go down to one-tenth of the highest price homeowners paid.” Imagine what he would say today…

“As a dog returneth to his vomit, so a fool returneth to his folly” (Proverbs 26:11). That proverb is particularly applicable to today’s “everything bubble,” especially stocks and housing. The current en vogue is to compare today’s market to 1987, when the Dow crashed 22.5% in one day. Honestly, I don’t think it matters whether you use 1929, 1987,
2000 or 2007. By just about any conceivable financial metric, the current stock market is the most overvalued, and thereby the most dangerous, in U.S. history. The other “vomit” to which analysts “returneth” are the attempts to explain why today’s extreme valuations are “different” from the extreme overvaluations at previous pre-crash market tops. I find the “interest rates are record lows now” to be the most amusing.

On Friday, the momentum-chasing hedge funds and retail daytraders couldn’t get enough of the FAANGs (FB, AMZN, AAPL, NFLX, GOOG) + MSFT. AMZN’s stock ran up $ 128, or 13.2%, which was still less than AMZN’s biggest one-day percentage jump of 26.8% on October 23, 2009.  AMZN’s stock price has been highly correlated with  amount of money printed by the “G3” (U.S./Japan /EU) Central Bank money printing machine.  But since July, AMZN’s stock began to diverge negatively from the growth path of G3 money supply. The FANGs in general had been losing steam starting in June. AMZN was particularly weak after it reported that big loss in July. It took one absurd headline “beat” for AMZN to “catch back up” into correlation with the growth line of G3 money printing (FYI, the Fed’s balance increase slightly in October, despite the announcement that it would be reduced by at least $ 10 billion in October).

The stock market will head south quickly sooner or later. The “curtain” is being “pulled back”on stock Ponzi schemes one by one. The truths about Tesla (TSLA) are beginning to emerge in public finally. Eventually the stock market will take a hard look behind the Amazon (AMZN) curtain. Ponzi schemes can flourish during periods of bubble inflation. But when bubbles deflate, Ponzi schemes fail. It’s no coincidence that Bernie Madoff’s Ponzi scheme fell apart in late 2008 (he admitted guilt in December 2008). It began to become unmanageable during 2007, when the stock market started to head south. Eventually it will become impossible to cover up fundamental facts from the investing public. Fundamental facts about the economy, corporate earnings and the financial system. That’s when the rush toward the exits will commence.

The above commentary/analysis is from the latest issue of the Short Seller’s Journal. In that issue I review AMZN’s Q3 financials in-depth. This includes excerpts from the SEC-filed 10-Q used to demonstrate why Jeff Bezos’ LTM “Free Cash Flow” of $ 8.05 billion is a Ponzi number and the true GAAP Free Cash Flow is -$ 3.9 billion. AMZN is a cash-burning furnace and I prove it. To find out more about this and other ideas for shorting this bloated stock market, click here: Short Seller’s Journal information.

Investment Research Dynamics




Remember This Friday The 13th – Americans Are More Optimistic About The Stock Market Than They Have Ever Been Before

Happy days are here again for the U.S. economy – at least temporarily.  On Friday, U.S. stocks hit another brand new record high.  It seems like we are saying that almost every day lately, and most investors are absolutely thrilled by this seemingly endless surge.  Global stocks are surging too – today world stocks hit a new record high for the 4th consecutive day in a row.  But of course it isn’t just stock prices that are rising.  As the week ended, pretty much everything was up, and we also got some good news about consumer sentiment.  According to the new University of Michigan survey that was just released, U.S. consumers are the most optimistic about the economy that they have been since 2004

The consumer sentiment index, a survey of consumers by The University of Michigan, rose to 101.1 in October, far ahead of the 95 economists polled by Reuters anticipated.

“Consumer sentiment surged in early October, reaching its highest level since the start of 2004,” Richard Curtin, chief economist for the Surveys of Consumers, said in a statement.

And according to that same survey, we have never been more confident that the stock market will continue to go up than we are right now

Americans have never been more confident that that stock market will rally further in the next 12 months…

Of course it kind of makes sense why U.S. consumers would be feeling so good about the markets.  After all, stocks have only seemed to go up and up and up since the end of the last financial crisis.

But as I have written about so frequently in recent months, our financial markets are even more primed for a crash than they were in 2008, and we have received warning after warning that stock valuations are ridiculously inflated and must come crashing down at some point.

Plus, the “real economy” continues to send us some very troubling signals.  The U.S. economy lost jobs last month for the first time in seven years, and we just learned that General Motors is laying off more workers

Starting in mid-November and going through the rest of the year, General Motors will close its Detroit-Hamtramck assembly plant – its only remaining factory in its hometown – and lay off about 1,500 workers, “people familiar with the plan” told the Wall Street Journal. When the plant does resume production, output will be cut by 20%, and 200 people will be out of a job.

Back in 1999, the plant produced over 200,000 Cadillacs and Buicks a year. This year, it might barely produce 80,000 vehicles.

The truth is that we are in the terminal phase of the greatest debt bubble in human history, and all over the planet prominent names in the financial world are warning about what is just around the corner.  For example, German finance minister Wolfgang Schäuble is deeply concerned about what he is seeing

Outgoing German finance minister Wolfgang Schäuble has warned that spiraling levels of global debt and liquidity present a major risk to the world economy.

In an interview with the Financial Times, Schäuble said there was a danger of “new bubbles” forming due to the trillions of dollars that central banks have pumped into markets.

He also warned of risks to stability in the eurozone, particularly those posed by bank balance sheets burdened by the post-crisis legacy of non-performing loans.

And James Rickards is completely convinced “that a financial crisis is certainly coming”…

The bottom line is that a financial crisis is certainly coming. In my latest book, The Road to Ruin, I use 2018 as a target date primarily because the two prior systemic crises, 1998 and 2008, were 10 years apart. I extended the timeline 10 years into the future from the 2008 crisis to maintain the 10-year tempo, and this is how I arrived at 2018.

Yet I make the point in the book that the exact date is unimportant. What is most important is that the crisis is coming and the time to prepare is now. It could happen in 2018, 2019, or it could happen tomorrow. The conditions for collapse are all in place.

It’s simply a matter of the right catalyst and array of factors in the critical state. Likely triggers could include a major bank failure, a failure to deliver physical gold, a war, a natural disaster, a cyber–financial attack, and many other events.

If you look at how stock prices have behaved so far this year, it looks suspiciously just like the bubble that formed in 1987 just before the market crashed.

The conditions for an absolutely historic stock market crash already exist, and they have existed for quite some time.  None of our long-term problems have been solved, and with each passing day this colossal financial bubble just keeps getting bigger and bigger and bigger.

I definitely concur with James Rickards.  A major financial crisis “is certainly coming”, and because of all the irrational optimism that we are witnessing at the moment most Americans will be completely and utterly blindsided by what is ahead.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Economic Collapse