Legendary Investor Jim Rogers Warns That The Worst Stock Market Crash In Your Lifetime Is Coming ‘This Year Or Next’

If Jim Rogers is right, the worst stock market crash that any of us has ever seen is right around the corner.  For the past 15 years, Rogers has been a frequent guest analyst on CNBC, Fox News and elsewhere, and he is immensely respected for the depth of knowledge and experience that he brings to the table.  So the fact that he is warning that we are about to see the worst stock market crash in any of our lifetimes is making a lot of waves in the financial community.  And of course Rogers is far from alone.  Previously, I have written about several other prominent experts that are warning that a new financial crisis is imminent, and I have also discussed how a number of big investors are quietly positioning themselves to make an enormous amount of money when the markets crash.  Could it be possible that all of these incredibly sharp minds could be wrong?  Yes, but I wouldn’t bet on it.

I was actually quite stunned when I first learned what Jim Rogers had told Henry Blodget of Business Insider during a recent interview.  Rogers has built up a tremendous amount of credibility, but now he is putting that credibility on the line by warning that a great stock market crash will happen by the end of next year.  Here is the key portion of the interview

Blodget: Well, yeah, TV ratings do seem to go up during crashes, but then they completely disappear when everyone is obliterated, so no one is hoping for that. So when is this going to happen?

Rogers: Later this year or next.

Blodget: Later this year or next?

Rogers: Yeah, yeah, yeah. Write it down.

There is no backing out of a statement like that.

If Rogers is wrong, he will never hear the end of it.

Subsequently, Blodget and Rogers also discussed how severe the coming crisis would be…

Blodget: And how big a crash could we be looking at?

Rogers: It’s going to be the worst in your lifetime.

Blodget: I’ve had some pretty big ones in my lifetime.

Rogers: It’s going to be the biggest in my lifetime, and I’m older than you. No, it’s going to be serious stuff.

So that means that Rogers is convinced that the coming crisis is going to be even worse than what we went through in 2008.

Of course this is something that I have been warning about for quite a while, but for Jim Rogers to make a statement like this is a really, really big deal.

Later in the interview, Rogers shared more details about what he believes the coming crisis will look like…

You’re going to see governments fail. You’re going to see countries fail, this time around. Iceland failed last time. Other countries fail. You’re going to see more of that.

You’re going to see parties disappear. You’re going to see institutions that have been around for a long time — Lehman Brothers had been around over 150 years. Gone. Not even a memory for most people. You’re going to see a lot more of that next around, whether it’s museums or hospitals or universities or financial firms.

That definitely sounds like an “economic collapse” to me.  Of course the truth is that the U.S. economy is already in the midst of a slow-motion economic collapse that stretches back for decades, but this coming crisis that Rogers is talking about is going to great accelerate matters.

Let us hope that it is put off for as long as possible, but at some point we are simply going to run out of time.

And when markets do start falling, they can move very, very rapidly.  Just look at what happened on Friday.  Technology sector stocks were down 2.7 percent, and the FAANG stocks were some of the biggest movers

Facebook fell $ 5.11, or 3.3%, to $ 149.60.

Apple fell $ 6.01, or 3.9%, to $ 148.90.

Amazon fell $ 31.96, or 3.2%, to $ 978.31 now demoted from the elect group for 4-digit stocks back to the large group of 3-digit stocks.

Netflix plunged $ 7.85, or 4.7%, to $ 158.20.

Alphabet – the G in FAANG – fell $ 33.58, or 3.4%, to $ 952.23, moving further away from everyone’s dream of closing at $ 1,000.

If we are indeed moving toward a new crisis, one of the things that we will want to watch for is an inverting of the yield curve.

We saw this happen in 2000 and in 2006, and on both occasions it foreshadowed that a huge stock market crash was coming in the not too distant future.

Unfortunately, CNBC says that a new inversion of the yield curve could happen “by the end of this year”…

The bounce in Treasury yields witnessed after the election of Donald Trump is now decaying in the D.C. swamp. If the Federal Reserve continues to ignore this slow growth and deflationary signal from the bond market and continues along its current rate hiking path, the yield curve will invert by the end of this year and an equity market plunge and a recession is sure to follow.

An inverted yield curve, which has correctly predicted the last seven recessions going back to the late 1960’s, occurs when short-term interest rates yield more than longer-term rates. Why is an inverted yield curve so crucial in determining the direction of markets and the economy? Because when bank assets (longer-duration loans) generate less income than bank liabilities (short-term deposits), the incentive to make new loans dries up along with the money supply. And when asset bubbles are starved of that monetary fuel they burst. The severity of the recession depends on the intensity of the asset bubbles in existence prior to the inversion.

Another key indicator is the growth of commercial and industrial loans. According to Zero Hedge, this indicator has correctly foreshadowed every single recession since 1960…

While many “conventional” indicators of US economic vibrancy and strength have lost their informational and predictive value over the past decade (GDP fluctuates erratically especially in Q1, employment is the lowest this century yet real wage growth is non-existent, inflation remains under the Fed’s target despite its $ 4.5 trillion balance sheet and so on), one indicator has remained a stubbornly fail-safe marker of economic contraction: since the 1960, every time Commercial & Industrial loan balances have declined (or simply stopped growing), whether due to tighter loan supply or declining demand, a recession was already either in progress or would start soon.

So considering the fact that this indicator has been so accurate, it is extremely alarming that we could see our “first negative loan growth” since the last financial crisis “in roughly 4 to 6 weeks”

After growing at a 7% Y/Y pace at the start of the year, which declined to 3% at the end of March and 2.6% at the end of April, the latest bank loan update from the Fed showed that the annual rate of increase in C&A loans is now down to just 1.6%, – the lowest since 2011 – after slowing to 2.3% and 1.8% in the previous two weeks.

Should the current rate of loan growth deceleration persist – and there is nothing to suggest otherwise – the US will post its first negative loan growth, or rather loan contraction since the financial crisis, in roughly 4 to 6 weeks.

And when you throw in all of the other signs that the U.S. economy is slowing down, a very clear picture begins to emerge.

It has been said that those that do not learn from history are doomed to repeat it.  As a society, we certainly didn’t learn much from the horrible financial disaster of 2008, and now so many of the exact same patterns are repeating once again.

An unprecedented financial crisis is most definitely heading our way, and the only thing left to be answered is how soon it will get here.

The Economic Collapse




By 2020 Two-Thirds Of Wild Animals Will Have Been Wiped Out Over A 50 Year Period As Mass Die-Offs Accelerate All Over The Planet

It has been called “the long extinction”.  Our planet is in the process of dying, and as you will see below, this process of death and destruction appears to be accelerating.  According to a report that was put out by the World Wildlife Fund and the Zoological Society of London, the number of wild animals around the globe appears to be decreasing at a rate of about 2 percent a year.  2 percent may not sound like a lot to you, but over 10 years that would mean that 20 percent of all wild animals in the world would be gone.  And according to that same report, it is being projected that the total loss of wildlife during the 50 year period from 1970 to 2020 will be a staggering 67 percent

The number of wild animals living on Earth is set to fall by two-thirds by 2020, according to a new report, part of a mass extinction that is destroying the natural world upon which humanity depends.

The analysis, the most comprehensive to date, indicates that animal populations plummeted by 58% between 1970 and 2012, with losses on track to reach 67% by 2020. Researchers from WWF and the Zoological Society of London compiled the report from scientific data and found that the destruction of wild habitats, hunting and pollution were to blame.

In other words, we are watching a global slow-motion extinction event which will ultimately claim hundreds, if not thousands, of species.

And as I mentioned above, this slow-motion extinction event appears to be accelerating.

In recent years, mass die-off events have been popping up in the headlines with startling regularity.  Fish, birds and animals are dying off all over the planet in absolutely frightening numbers.  One website that tracks these things says that there have been 152 mass death events in 48 different countries so far this year.

When something happens on the other side of the world, most Americans don’t seem to care very much, so let me share with you just a couple of examples of this phenomenon from inside the United States.  This first example comes from Atlanta

Someone, or something, is killing thousands of birds in Atlanta. Since spring, the death toll began rising every week.

For Atlanta office workers, the dead birds are a sad sight at their doorstep. Now, Audubon Society volunteers are tracking and finding the dead or dying birds, many of them in Sandy Springs, Dunwoody and Buckhead.

If the death of thousands of birds in Atlanta does not get your attention, perhaps the death of millions of fish on the west coast will.  The following comes from Natural News

As the salmon are dying by the millions, the government issued an emergency order along the western U.S. coast to cancel the spring king, or Chinook, salmon fishing activities. According to the California Department of Fish and Wildlife, salmon runs have dropped to record levels. Experts predict that the return of spawning Chinook salmon to the Klamath River will hit its lowest point ever this fall. It will be a huge challenge and difficult year for ocean salmon fishermen, especially in Oregon and California, reported the Council Chair Herb Pollard.

“We’ve been in a period of low productivity, not just on the Taku, but on several rivers up and down the coast,” said Juneau Area Management Biologist Daniel Teske, who expects a second-straight year of record-low salmon returning to their birthplace. Teske added that he is almost certain that the increased die-off must be happening in the ocean since all four rivers are being affected by low returns of the Southeast king salmon.

Of course the cold, hard reality of the matter is that everything around us is in the process of dying and deteriorating, and this even includes the human race.

If you don’t believe this, you may want to consider research from Cambridge University that found that human bodies are “significantly smaller” than they were thousands of years ago and that human brains are also smaller than they once were…

An earlier study by Cambridge University found that mankind is shrinking in size significantly.

Experts say humans are past their peak and that modern-day people are 10 percent smaller and shorter than their hunter-gatherer ancestors.

And if that’s not depressing enough, our brains are also smaller.

The findings reverse perceived wisdom that humans have grown taller and larger, a belief which has grown from data on more recent physical development.

On top of all that, scientists have known for a very long time that the human race is heading for an inevitable “mutational meltdown”.  The following is an excerpt from a study that was originally published by Gerald H. McKibben and Everett C. McKibben…

Geneticists have long worried about the impact of mutations on the human population, and that at a rate of one deleterious mutation per person per generation, genetic deterioration would result. Earlier reports were based on estimates of mutation rates considerable lower than what we now know to be the case. Findings going back to 2002 show that the human mutation rate is at least 100 mistakes (misspellings) per person per generation. Some scientists believe the rate is closer to 300.

Even a rate of 100 has profound implications, and the mutation rate is itself increasing. Furthermore, most, if not all, mutations in the human genome must be deleterious.  “And nothing can reverse the damage that has been done during our own generation, even if further mutations could be stopped.”  It would appear that the process is an irreversible downward spiral that will end in “mutational meltdown”.

If you didn’t grasp all of that, let me break it down for you very simply.

The human race is on borrowed time, and at some point our DNA will be so full of harmful mutations that we will no longer be able to continue.

If all of what I have just shared was not enough, scientists have also discovered that the entire universe is actually in the process of dying.  The following comes from CNN

The conclusion of a new astronomical study pulls no punches on this. “The Universe is slowly dying,” it reads.

Astronomers have believed as much for years, but the new findings establish the cosmos’ decline with unprecedented precision.

The experts that conducted this study found that the universe is only producing about half as much energy as it once did.  As the amount of energy continues to decline, all of the lights will slowly go out until none are left.  Or as one scientist put it, the universe “is about to nod off for an eternal doze”

The universe has basically sat down on the sofa, pulled up a blanket and is about to nod off for an eternal doze,” said astronomer Simon Driver, who led the team.

We can certainly do some things to try to prevent the mass animal extinctions that are happening all over the planet, but nothing that we can do can stop the deterioration of human DNA or the slow death of the entire universe.

Hopefully what I have shared here will help many to understand that everything around us is just temporary.  Our world and everything in it will pass away, and perhaps we should spend the little time that we do have on this planet focusing on the things that really matter.

The Economic Collapse




The Record Year for Imported Silver

How many precious metals investors know the year the United States imported a record amount of silver? This figure is so great, there is no other single year in U.S. history that comes anywhere close to this amount. Even more impressive than that, it turns out to be more than double the global annual mine supply that year. It is such an unbelievable amount, its record has never been surpassed to this day.

Actually, I was quite surprised by the data when I was researching through some old official records. Even though the United States currently imports a lot of silver to supply its growing jewelry, industrial and investment demand, it pales in comparison to the nearly half a billion ounces imported this record year.

For example, U.S. silver imports are estimated to reach 6,100 metric tons (mt) in 2016, or 196 million oz (Moz), up from 191 Moz in 2015. Thus, 196 Moz of U.S. silver imports last year accounted for 22% of global mine supply which is estimated to be 887 Moz.

However, if we look at the following chart, we can plainly see, it doesn’t remotely compare to the massive 473 Moz of silver imported by the United States in 1935:

Total U.S. Silver Imports

As we can see, total U.S. silver imports in 1935 stick out like a sore thumb. Even though U.S. silver imports trended higher from 1980 to 2016, there was this huge anomaly in 1935. So, what gives?

Well, due to the U.S. Silver Purchase Act of 1934, the U.S. Treasury went on a massive buying spree by jacking up the price of silver to $ 0.77 in 1935 from $ 0.44 in 1934. There is a lot that can be written about the U.S. 1934 Silver Purchase Act, but the motivation by the U.S. Government was to acquire more silver to back their outstanding currency base.

According to a paper written in 1936 titled, Effect Of The Silver Purchase Act Of 1934 On The United States, China, Mexico and India, it stated the following:

The Silver Purchase Act.

Source: Effect Of The Silver Purchase Act Of 1934 On The United States, China, Mexico and India

In order to increase the proportion of silver monetary stocks to gold, the U.S. had to get its hands on a lot of silver. In this paper, it stated that the U.S. Treasury would have to purchase 1,244,000,000 oz of silver to arrive at this 4:1 Gold-Silver monetary stock ratio.

So, where did the United States import this amazing 473 Moz of silver in one year?? Well, if you guessed China, you are correct. Of course, not all the silver came from China (India as well), but one hell of a lot did. This next bit of text from the same paper quoted above shows just how much silver China imported between 1918 and 1931:

Period from 1929-1934

Source: Effect Of The Silver Purchase Act Of 1934 On The United States, China, Mexico and India

During that time period (1918-1931), the Chinese imported one billion oz of silver, or 30% of total global mine supply during that time. After the signing of the U.S. Silver Purchase Act in June 19, 1934, Shanghai silver stocks plummeted:

Shanghai Silver Stocks

Source: Effect Of The Silver Purchase Act Of 1934 On The United States, China, Mexico and India

Not all Chinese silver was heading to the United States, but a large percentage. Unfortunately, this paper did not list and Chinese silver stock figures for 1935, but I do have one from the U.S. Bureau of Mines Mineral Yearbook:

Silver Imports and Exports

Source: U.S. Bureau of Mines 1937 Mineral Yearbook

In 1935, the United States imported a total of $ 354.5 million worth of silver. It is hard to tell exactly what was the average price the U.S. Treasury paid for all of its silver imports that year, but if we apply the $ 0.77 stated price, the $ 354.5 million worth of silver imports equals approximately 460 Moz… very close to the 473 Moz stated figure in the first chart published by the USGS silver statistics.

In order for the U.S. Treasury to build up its silver stocks, it pushed up the price it would pay for silver to acquire the metal from various countries throughout the world. Because of this large increase in the silver price by the U.S. Treasury, it forced the Chinese to go off their silver standard.

Again, there is a lot that could be written about this historic point in time, but that will be for another time. I just wanted to show just how much silver the U.S. imported in a single year. If we compare the same figures shown in the first chart above to global mine supply, this is the result:

U.S. Silver Imports vs. Global Mine Supply

Thus, U.S. silver imports of 473 Moz in 1935, were more than double the global mine supply of 221 Moz. Which means, the U.S. Treasury realized it would take a great deal of time to purchase the 1.24 billion oz of silver unless it motivated the rest of the world to let go of some of their silver. By pushing the price of silver from $ 0.44 in 1934 to $ 0.77 in 1935, the U.S. was able to import nearly 40% of their 1.24 billion oz target in just one year.

While the U.S. Silver Purchase Act of 1934 nationalized silver, the U.S. Treasury only purchased 109 Moz from American citizens during the 90-day time limit (source: 1939 Silver Money book). Which means, the majority of silver the U.S. Treasury needed came from foreign countries like China and India.

There has been articles written by several analysts (Charles Savoie for example) that state the U.S. Silver Purchase Act of 1934 was instrumental in removing the silver standard in several countries like China and Mexico. While this may be true, the United States was becoming the power-house of the world due to its massive oil discoveries. We must remember, the U.S. was the Saudi Arabia of the world during World War II.

Regardless, the 473 Moz of silver the U.S. imported in 1935 was the largest amount ever. Even though U.S. silver imports were quite high in 1936 at 222 Moz, they were less than half of the previous year.

Lastly, many precious metals investors believe the Chinese have a massive hoard of silver. Honestly, I do not belong to that mindset. While the Chinese did have a lot of silver at one time, they sold quite a lot of it during the 1930’s and also more in the 2000’s. Very few Central banks hold any silver. Most of the silver today is held in private hands or by large institutions… not Central Banks.

The advent of modern technology also forced the United States to remove silver from its coinage in 1965. However, times are rapidly a-changing. In the future, the value of silver will not be based on how much is consumed by industry, jewelry or investment demand, but rather how it functions as a HIGH QUALITY STORE of VALUE compared to most other assets that will be disintegrating as the massive amount of debt and derivatives implodes.

Precious Metals News & Analysis – Gold News, Silver News




March 2017: The End Of A 100 Year Global Debt Super Cycle Is Way Overdue

Global Debt Super Cycle - Public DomainFor more than 100 years global debt levels have been rising, and now we are potentially facing the greatest debt crisis in all of human history.  Never before have we seen such a level of debt saturation all over the planet, and pretty much everyone understands that this is going to end very, very badly at some point.  The only real question is when it will happen.  Many believe that the current global debt super cycle began when the Federal Reserve was established in 1913.  Central banks are designed to create debt, and since 1913 the U.S. national debt has gotten more than 6800 times larger.  But of course it is not just the United States that is in this sort of predicament.  At this point more than 99 percent of the population of the entire planet lives in a nation that has a debt-creating central bank, and as a result the whole world is drowning in debt.

When people tell me that things are going to “get better” in 2017 and beyond, I find it difficult not to roll my eyes.  The truth is that the only way we can even continue to maintain our current ridiculously high debt-fueled standard of living is to grow debt at a much faster pace than the economy is growing.  We may be able to do that for a brief period of time, but giant financial bubbles like this always end and we will not be any exception.

Barack Obama and his team understood what was happening, and they were able to keep us out of a horrifying economic depression by stealing more than nine trillion dollars from future generations of Americans and pumping that money into the U.S. economy.  As a result, the federal government is now 20 trillion dollars in debt, and that means that the eventual crash is going to be far, far worse than it would have been if we would have lived within our means all this time.

Corporations and households have been going into absolutely enormous amounts of debt as well.  Corporate debt has approximately doubled since the last financial crisis, and U.S. consumers are now more than 12 trillion dollars in debt.

When you add all forms of debt together, America’s debt to GDP ratio is now about 352 percent.  I think that the following illustration does a pretty good job of showing how absolutely insane that is

If your brother earns $ 100,000 in annual income and borrowed $ 10,000 on his credit card, he could consume $ 110,000 worth of stuff.  In this example, his debt to his personal GDP is just 10%.  But what if he could get more credit year after year and reached a point where his total debt reached $ 352,000 but his income remained the same.  His personal debt-to-GDP ratio would now be 352%.

If he could borrow at super low interest rates, maybe he could sustain the monthly loan payments. Maybe?  But how much more could he possibly borrow?  What lender would lend him more?  And what if those low rates began to rise?  How much debt can his $ 100,000 income cover?  Essentially, he has reached the end of his own debt cycle.

The United States is certainly not alone in this regard.  When you look all over the industrialized world, you see similar triple digit debt to GDP figures.

When this current debt super cycle ultimately ends, it is going to create economic pain on a scale that will be unlike anything that we have ever seen before.  The following comes from King World News

That is the inevitable consequence of 100 years of credit expansion from virtually nothing to $ 250 trillion, plus global unfunded liabilities of roughly $ 500 trillion, plus derivatives of $ 1.5 quadrillion. This is a staggering total of $ 2.25 quadrillion. Therefore, the question is not what could go wrong since it is guaranteed that all these liabilities will implode at some point. And when they do, it will bring misery to the world of a magnitude that no one could ever imagine. It is of course very difficult to forecast the end of a major cycle. As this is unlikely to be a mere 100-year cycle but possibly a 2000-year cycle. It is also impossible to forecast how long the decline will take. Will it be gradual like the Dark Ages, which took 500 years after the fall of the Roman Empire? Or will the fall be much faster this time due to the implosion of the biggest credit bubble in world history? The latter is more likely, especially since the bubble will become a lot bigger before it implodes.

And there are certainly lots of signs that a global slowdown is already beginning.  For example, global trade growth has fallen below 2 percent for only the third time since the year 2000.  On each of the other occasions, we witnessed a horrible recession take place.  For more signs that economic conditions are deteriorating, please see my previous article entitled “Recession 2017? Things Are Happening That Usually Never Happen Unless A New Recession Is Beginning“.

Of course much of the globe is already in the midst of a horrible economic crisis.  Brazil is in the middle of their worst recession ever, and people are literally starving in Venezuela.  A new round of debt problems has erupted in Europe, with Greece, Portugal and Italy being the latest flashpoints.

Just like in 2007, many are mocking the idea that the a major economic downturn is coming to the United States.  They believe that the ridiculously high stock market valuations of today can stick around indefinitely, and they are putting their faith in politicians.

But it won’t be too long before a new economic crisis begins in America and the kind of civil unrest that I portray in “The Beginning Of The End” erupts all across the country.

I just don’t understand why more people cannot see this.  Government debt, corporate debt and consumer debt have all been growing much, much faster than the overall economy.  Can someone please explain to me how that could possibly be sustainable in the long-term?

Someone that I considered to be a mentor but that has since passed away once said that things would seem like they would be getting better for a little while before the next crash comes.

And it turned out that he was precisely correct.  We are in a season of time when economic conditions have appeared to be getting a little bit better in the United States, and this has blinded so many people to the truth of what is about to happen to us.

The Economic Collapse




Silver Prices for the Year 2017

How low and how high will the price of silver range on the PAPER markets during 2017? Knowing the influence central bankers, politicians, HFT algos, bullion banks and JPMorgan exercise over increasingly managed markets … it is impossible to answer the question, and it is probably the wrong question to ask.

Instead, what do we know with a high degree of certainty?

  1. The U.S. national debt will substantially increase as it has almost every year since 1913. We can trust politicians and central bankers to act in their best interests to spend in excess of their revenues and increase total debt. See chart below.
  2. Politicians and central bankers are unlikely to change a century of their spend, borrow, tax and inflate behaviors.
  3. The price of silver on the paper markets will be volatile but, over the long term, will exponentially increase as it has since 1913.
  4. Silver prices relative to their own history and to the S&P 500 Index are low and far more likely to rise than to fall further. See charts below.

CONCLUSIONS:

  • Silver prices will, like the national debt, consumer prices and currency in circulation, increase. The inevitable long-term direction of silver prices is upward.
  • Silver prices are currently low by many measures so the probable move higher should be substantial. Risk of lower prices is small.

What analysis supports these conclusions?

National Debt:

Plot the official national debt on a log scale every four years – presidential election years. The exponential increase (about 9% per year – every year) is unmistakable. Doubling debt approximately every eight years is not a winning strategy for the U.S. economy. Take cover!

Population Adjusted National Debt:

Yes, the official national debt, even adjusted for population growth, has increased exponentially for 100 years. Expect it to rise further and probably more rapidly as baby-boomers retire, uncontrolled Medicare costs skyrocket, and politicians aggressively spend with borrowed currency.

Silver Prices – The Long Term:

Silver prices have risen exponentially for 100 years, along with debt, consumer prices and currency in circulation. Note the log scale.

Silver to S&P 500 Ratio:

Plot monthly prices for the ratio of silver to the S&P 500 Index. In the long term both increase exponentially however the current price of silver is low compared to the price of the S&P 500. Note that silver prices are off two-thirds from their 2011 high while the S&P is at an all-time high. Expect silver prices to move much higher regardless of a potential correction in the S&P.

Silver Prices on a Log Scale:

Silver prices bottomed in 2001 and have risen erratically since then. The log scale trend channel has expanded which indicates wide volatility, because silver prices rise too rapidly and then crash. Prices are currently at the low end of the expanding channel. Expect silver prices to rise substantially from here.

How High?

The center line of the expanding channel reaches approximately $ 50 by the end of 2017. The high end of the channel is about three times higher. This guarantees nothing but it indicates, based on the last 17 years of price history, that a paper silver price of $ 50 should NOT be surprising. Of course it will be a shock according to official pronouncements from “experts” on Wall Street who believe that all savings should be invested (trapped) in their digital accounts, but … consider the source.

From The Burning Platform:

“… there is only one thing more frightening than not knowing what is coming next, and that is living in a world run by ‘experts’ who think they know exactly what is going to happen next. These are the same ‘experts’ who didn’t see the 2005 housing bubble, the 2008 financial collapse, the EU implosion, Brexit, or the Trump presidency.”

RISK and DEBT!

Our financial world sits upon a precarious peak of debt, monetary ignorance, rising interest rates, risky derivatives and flawed economic models, while politicians and central bankers aggressively pursue failed policies, to the detriment of all but the financial and political elite. 2017 will probably be the year of the implosion and that suggests silver prices should easily exceed $ 30. I certainly will not be surprised if the paper silver price reaches and exceeds $ 50 in 2017 – 2018. Based on spending, debt, warfare, welfare, currency devaluations, monetary stupidity, cyber wars, loss or dollar reserve currency status, declining silver ore concentrations, central bank interventions, currency wars, Italian banking problems, and so much more, we should consider prices of $ 50 – $ 100 as not only possible in 2017 but a near certainty by 2019 – 2022.

Silver Cycles:

Cycles are slippery but consider the following chart which shows that silver reached lows in 1994-5, 2001, 2008 and 2017, about every seven years. The vertical lines on the chart below are spaced every 84 months. Note that silver bottomed in December 2015 and the next bottom is not due until about 2022-23.

WHAT ELSE?

Our central bankers and commercial bankers, thanks to fractional reserve banking, excessive debt creation, shadow banking, QE, bailouts and more have created a great many digital dollars. The price of gold (similar for silver) versus the monetary base shows how low the price of gold (silver) is compared to the zillions of digital currency units created by banks. Consider the following chart (unknown source).

WHAT ELSE?

From an interview with Ted Butler:

“The facts surrounding silver have never been more bullish.”

“In only a few years, JPMorgan has accumulated the largest hoard of silver in the history of the world.” [… physical silver, not the paper stuff…]

“A price rise is inevitable.”

“Imagine silver as a poker game. The stakes are in the billions. JPMorgan is holding an ace, king high royal flush. It’s a lock so they can’t lose. Everybody else at the table has four of a kind or a full house. JPMorgan is in no hurry to win the pot.”

CONCLUSIONS – Continued:

  • Politicians and central bankers will promote failed policies while devaluing fiat currencies which will push silver prices much higher. Expect $ 30 in 2017 and $ 50 if one or more implosions occur. Physical prices may be far higher than paper prices.
  • Long term silver cycles indicate the market bottomed in late 2015 and should rise for another three to five years.
  • Assuming Ted Butler is correct JPMorgan will stimulate the coming substantial rise in silver prices, NOT for our benefit, but for the benefit of JPMorgan and their management bonuses.
  • $ 50 silver may not happen in 2017 but it certainly is NOT unlikely.
  • $ 100 silver seems inevitable in a few years unless U. S. politicians reduce spending by at least one third, slowly repay the national debt, abolish the Federal Reserve, reduce military expenses and face the voters during a massive depression. Nope, political change and a return to monetary sanity are not likely, but $ 100 silver – before the next cycle low in 2022 – 23 – is quite likely. Hyperinflation of the U.S. dollar, should bankers and politicians choose that road, will accelerate price increases and push prices to unimaginable levels.

Gary Christenson

Republished with permission by The Deviant Investor.




2017 Outlook: A Volatile Year from All Angles

Where to now… after what 2016 dished out?

First, there was the surprise upset of the presidential election of dear old Donald.

Then came the surprise shift in sentiment about the election. Before, he was a wrecking ball. After, he’s suddenly Jesus walking on water. Never mind that he’s already pissed off China… twice! Or that many are worried about his overly cozy relationship with “Darth” Putin, as with his new Secretary of State, Rex Tillerson, who is also cozy with Putin.

And let’s not forget the markets that were already overvalued suddenly breaking up irrationally on promises that Trump can deliver sustainable growth rates of 3% to 4% again.

So, we’ll just grow our way out of this big fat bubble, shall we? Ha! That has never happened – not once in history – and there’s NO CHANCE this will be the first time… not given our aging populations, low productivity and unprecedented debt burdens!

But the markets will continue up after a near term slump until they start to realize that there is no easy way out of the bubble that Trump himself has declared.

Tax cuts won’t get companies to expand substantially any more than did free money that largely only led to stock buybacks and mergers and acquisitions – financial engineering – not real growth. Besides, infrastructure investments take forever to get drawn up, approved and shovel ready.

While the Trump rally seems to have legs, it’s not based on anything substantial or real, except perhaps some cuts in regulations. I think it’s not likely to make it into the summer of 2017. In fact, it’s just another sign of how much the stock market is in an irrational bubble!

The debt ceiling is on the cards to be raised this March. Do you think the Republicans will back just any tax cut or infrastructure bill without considering how fast that will get us from $ 20 to $ 22 trillion in debt – or by past trends and our estimates of $ 40 trillion by 2024? Yes, the federal debt has been doubling every 8 years.

That’s what I thought.

So, here’s my forecast for this very tricky, new year:

  1. The big divergence: I think stocks will continue to rise after a pullback near term, while bond yields and the dollar also rise to counter that trend… until it breaks. But I think Trump could have as much as a 6-month grace period before reality sets in about his ability to get things passed and to achieve 4% growth rates.
  2. Stocks rise: I see stocks going as high as 22,000 on the Dow and 2,500 on the S&P 500 by mid-July or so… maybe even a bit later. After that, I expect the Russell 2000 (small caps) will lead us into the trenches. A growing divergence between large and small caps will be an important sign of such a top. Small caps have grown the most irrationally since the Trump win after lagging and could disappoint increasingly in the continued rally from here.
  3. 10-Year Treasurys: 10-Year Treasurys could rise to near 3.0% before reversing down on falling inflation and slowing economic trends again. Once they’ve started to fall, they could go as low as 1.0%, or lower, and then stay near there for years, creating the fixed income opportunity of the decade for buying 30-year Treasurys and 20-year AAA corporate bonds. (I detailed this in the January issue of Boom & Bust, so be sure to read it!)
  4. The dollar strengthens: Look for the greenback to rise to 120, likely by late 2017, while the euro falls to 0.85-0.88. In fact, the euro’s very existence could be threatened by default scares in Italy and the failure of Deutsche Bank.
  5. Gold falls: This is the year we’ll see gold sink to $ 650-$ 750 per ounce, likely by late 2017 or shortly there after. I still see it dropping to as low as $ 400 (if not lower) before this down 30-year commodity cycle is over between early 2020 and early 2023.
  6. Oil rises a bit more and then crashes again: Oil will likely rise to as high as $ 60 at first, and then fall back to $ 26 or lower by late 2017. Ultimately, I expect we’ll see oil prices between $ 8 and $ 18 a barrel by early 2020.
  7. Trump trumped:  Lastly, I reckon Trump will quickly discover that it’s not so easy to get most of his agenda passed. Even his Republican party is split on some issues. In fact, I’d go so far as to say he may not last the year… for many reasons.

All of which makes for a volatile, highly charged year. The most likely scenario: another 10%+ rally into the summer, then a dramatic first crash of up to 40% into the fall. I’ve warned many times that the first bubble crash can be as much as 40–45% in the first 2.5–3 months in the most bubbly sectors.

We’re deep into this economic winter season. My hierarchy of cycles remain in negative territory for the next three years with aftershocks for another three to follow. The threat of civil war looms over the Divided States of America, especially in late 2017 forward. Another challenge for the economy and “the Donald.”

Through it all, my team and I will be working with you to find the opportunities and make the most of them.

Happy New Year!

Harry

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Harry Dent – Economy and Markets ()




The Year of Unexpected Shocks

charlesI’ve spent a lot of time staring at my monitors this year and scratching my head, dumbfounded. Harry calls it a “market on crack.” I’m not sure what words I would use to describe it, but 2016 has certainly kept me guessing.

I shouldn’t complain. We made good money in Boom & Bust this year, and most of our major macro trends played out as we expected, even with all of the unexpected shocks. But this is definitely a year that I expect market historians to pick apart for a long time to come.

Let’s take a look at the year that has passed, draw some lessons from it, and put together a game plan for 2017.

2016 started with one of the very worst Januarys in history, driven mostly by the upheaval in the energy market. But the Fed’s rate hike at the end of last year played a part too, particularly in interest-rate-sensitive sectors like REITs. Then, the Fed backed off, energy prices found a bottom, and the stock market recovered… and went on to rise into the summer.

And that’s when it really got weird.

British voters opted to leave the European Union, and we got the dreaded Brexit… which was supposed to be the first domino to fall in the collapse of the EU. Well, the British pound took a hit, but British stocks went on to rally to new highs after taking a brief pause.

And then came Donald Trump. Our soon-to-be president was given virtually no chance of winning the election, even up until election day. And as his victory became more and more apparent, Dow futures collapsed by over 800 points. But the very next day, the market embraced the victory, and stocks have been rallying ever since.

So what conclusions do we draw from this?

To start, the conventional wisdom you read in the news is often wrong. And it’s not that the talking heads are necessarily stupid, mind you, and their reasoning often makes perfect sense. But they’re still often wrong because the world is ridiculously complex. And when you add in the emotional aspects of the market – attempting to predict how people will “feel” and react – it becomes virtually impossible to make sense of it.

Simply put, you can’t make sense out of market emotions any more than you can explain love or romantic attraction.

Media talking heads also often fail to consider how their words and actions affect the world they’re trying to predict. If “everyone” becomes convinced that a certain narrative will play out, then they’ve likely already traded on it, and it’s likely already reflected in market prices.

As Adam wrote recently, many of the greatest investors – think Warren Buffett or Cliff Asness – don’t read the news, or at least they don’t allow it to affect their investment decisions. Instead, they stick to investment strategies that work and tune out distractions.

So, how can we put these ideas to work in 2017?

To start, in Boom & Bust we’re sticking to our demographic macro themes. Yes, politics matter. But assuming nuclear bombs don’t start falling out of the sky, they really don’t matter as much as you might think, or at least in the ways you might think.

For example, the George W. Bush tax cuts were credited with creating newfound interest in dividends, which used to be taxed at higher rates. But was it tax cuts that spurred interest in dividends, or the coming retirement of the baby boomers and their ever-increasing need for income?

By following our macro themes in Boom & Bust, we’re holding our long positions in the dollar and our short positions in gold and the Japanese yen. And while we’re currently making money betting against bonds, we’re a lot more likely to reverse that trade and go long on bonds at some point relatively early in 2017.

Our demographic models suggest that we still have a couple more years of deflation, or at least very low inflation, and nothing coming out of Washington is likely to change that.

I’ll also look to continue grabbing cash-flow opportunities as they become available in my income service, Peak Income. Closed-end funds are trading at some of their deepest discounts since 2008 right now. We saw similar conditions around this time last year, and closed-end funds as an asset class went on to enjoy a spectacular rally from February through late summer.

Might we have a repeat in 2017? We shall see. But while we’re waiting, we can occupy ourselves with the steady stream of monthly dividends.

Best wishes in the New Year,

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Charles
Portfolio Manager, Boom & Bust

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Charles Sizemore – Economy and Markets ()




Merry Christmas… in Likely the Last Good Year for Many to Come

harry-enm-picIt’s the day after Christmas, so I’ll keep this short…

I wish I could say it’s a good thing that central banks have kept this third and final bubble going this long. The truth is it’s about to end. QE is failing and promises for fiscal stimulus are likely to be too late.

This totally irrational “Trump rally” may go on for a few months into 2017, but by early-to mid-2017 we may see the start of the greatest crash of our lifetime.

So, let’s celebrate while things are still good; but, at the same time, start preparing for the inevitable crash and debt/financial asset deleveraging that is way overdue.

My only advice on Christmas gifts is: If you gave a loved one any gold jewelry, take out put options against gold to hedge! Gold stands to devalue 40% or so in the next year!

Thanks for being loyal subscribers in a time when this bubble we are warning about seems to have no end…

Just remember that bubbles always burst… and so will this one. It’s just a matter of time. And time is running short.

You don’t get to spring without going through winter – just ask Japan. And the worst of the economic winter is ahead. Stimulus efforts to prevent this will only make it worse.

So, my advice is to squirrel away your nuts for winter.

If you do that, this Christmas may be your best ever!

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Harry
Follow me on Twitter @HarryDentjr

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Harry Dent – Economy and Markets ()




Fed Is Unchangeable for One Year; A Debt Train Wreck Is Inevitable, Even with Trump

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

Coming up we’ll digest the election results and what it all means for precious metals with Craig Hemke of the TF Metals Report. Craig cautions everyone to not get ahead of themselves when declaring happy days are here again and discusses what he sees as very real market turmoil uncertainties that a Trump presidency is going to have an impossibility in avoiding. Don’t miss an incredibly important interview with Craig Hemke, coming up after this week’s market update.

Well, the strangest and most unpredictable election cycle ever produced a seemingly improbable outcome. The major polling averages showed Hillary Clinton ahead. Political betting markets gave Clinton an 85% chance of defeating Donald Trump. None of the top pundits and forecasters featured on CNN and other establishment media outlets called for a Trump victory.

The elite media has been getting Donald Trump’s campaign wrong since the day he announced his candidacy. Only the alternative media has been getting it right. Independent analysts such as James Rickards, who appeared on this podcast earlier this year, correctly predicted Trump would win. And two weeks ago you heard our guest expert Michael Rivero predict that Trump would ride to victory unless the election was stolen, and last week Gerald Celente told us the same thing.

Fortunately for our republic, both Hillary Clinton and Barack Obama accepted the results of the election. Some of Hillary’s supporters aren’t being quite as magnanimous, though. Disruptive and at times violent anti-Trump protests hit Chicago, Oakland, New Orleans, Austin, and other cities.

Despite some unrest and some uncertainty about what lies ahead for the country, financial markets seem to be coping well with the new reality of President-Elect Trump. After Dow futures plunged more than 800 points on election night, the blue chip average closed up 260 points Wednesday. Stocks extended their gains Thursday to record new all-time highs and put the Dow on track for its biggest weekly gain of the year. What a way to kick off a new era in American politics.

As for the precious metals markets, gold futures surged to $ 1,340 an ounce early Tuesday morning, but gold gave back all of its safe-haven gains as investor fears subsided. And now today, gold prices have continued to sell off and currently come in at $ 1,235, down 5.4% for the week.

Silver was faring better and was actually up slightly through Thursday’s close, but the white metal is getting beat up today and is registering a 3.6% decline now on the week to trade at $ 17.84 per ounce as of this Friday morning recording.

Platinum is down like gold and silver, off 5.0% to trade at $ 953 an ounce, while its sister metal palladium is outshining all the other precious metals and comes in 8.2% higher on the week at $ 683 despite pulling back some here on Friday.

But the biggest mover in the metals space post- election has been copper. Copper prices surged 13% this week to new highs for the year. The economically sensitive base metal is moving on expectations of a Trumpian surge in infrastructure and construction spending.

If you are bullish on the Trump economy, then copper may be the metal to buy ahead of his inauguration. Money Metals Exchange sells 1-ounce pure copper rounds as well as bags of copper pennies. Today’s pennies are made mostly of cheaper zinc, but prior to 1982 they were 95% copper. Having a bag of pre-1982 copper pennies could come in handy for small barter transactions. Your penny stash could also gain considerable value if copper prices continue on an upward trajectory in the Trump administration.

We don’t yet know exactly how Trumponomics will play out. The economy could get a boost from some of the tax cuts and regulatory reforms Trump vows to pursue. With Republicans managing to hold on to majorities in both the House and Senate, President Trump could potentially get a lot of things done. But it won’t be as easy to “drain the swamp” as he vowed to do. Washington is institutionally resistant to change.

And President Trump won’t be able to exert any real influence over the monetary policies of the Federal Reserve during his first year in office. Janet Yellen will presumably continue presiding over the Federal Reserve Board, at least through the rest of her four year term that ends in January 2018. Since the Fed is an “independent” organization, Trump wouldn’t be able to fire her even if he wanted to do so. Yellen could resign before her term ends, but there are no indications she will. Fed chairs typically stay through different administrations.

Trump complained during the campaign that under Janet Yellen’s leadership, the Fed became too political.

Donald Trump: “We have a Fed that’s doing political things… this, Janet Yellen, of the Fed.”

Wall St Journal Reporter: Trump has already said he probably won’t nominate Yellen to continue as Fed Chief after her current term expires in early 2018 and would instead prefer to tap a Republican for the job. Since he’s criticized Yellen for holding rates low, investors might expect his pick to raise rates more aggressively.

Of course, it’s easy for a presidential candidate to call for more restrained monetary policies while campaigning. But it’s harder to resist the power of the printing press once you’re actually in office. So don’t expect Donald Trump to appoint someone who vows not to intervene during recessions and stock market crashes.

But who knows? Trump is open to thinking outside of establishment boxes. He has called out international bankers and spoken favorably about a gold standard. There may be opportunities for sound money advocates to make inroads within his administration. Perhaps he would consider someone like Jim Rickards or Steve Forbes – both gold proponents – for Treasury Secretary. The news that Trump approached Jamie Dimon – head of JP Morgan, who apparently declined the offer – leaves us a bit skeptical that any real change is coming in monetary policy, but time will ultimately tell.

Trump ran as an outsider. He will surely let down his most enthusiastic supporters if he fills his cabinet with the same types of establishment insiders who would have occupied a Jeb Bush administration. GOP primary voters wanted a different kind of Republican. And Americans who went to the polls on Tuesday wanted a different kind of president. Trump now has the opportunity to become what he promised he would be.

Well now for more on what a Trump presidency is likely to mean for metals and markets, let’s get right to this week’s exclusive interview.

Craig Hemke

Mike Gleason: It is my privilege now to welcome in Craig Hemke of the TF Metals Report. Craig runs one of the most highly respected and well-known blogs in the industry and has been covering the precious metals for close to a decade now, and he puts out some of the best analysis on banking schemes, the flaws of Keynesian economics, and evidence of manipulation in the gold and silver markets.

Craig, it’s always great to have you back. Thanks for joining us again today, and welcome.

Craig Hemke: Hey, Mike, thanks, and I appreciate all the kind words.

Mike Gleason: Well, Craig, I’m really glad I was able to get you on here today because I wanted to have you help us digest the election results and what it all means for the markets. Now, I want to ask you about the initial reaction of the economic markets once it became clear Donald Trump was going to win, but before we get into that, first off, what did you make of Trump not only defying the polls and beating Hillary, but beating her rather convincingly? What did that say to you about the state of our country and our economy that an outsider like Trump was able to pull off what he did?

Craig Hemke: Actually, it didn’t come as a surprise for folks on my site. We’ve been speculating, and I guess we’re starting to see this now in the analysis, the same thought. We’ve been speculating that there was a quiet, shy vote, as they call it, for Trump. It wasn’t cool, it wasn’t politically correct to tell a pollster or to tell your co-workers or to tell your neighbors that you were thinking about voting for Trump because you didn’t want anybody to think you were racist or a bigot or a xenophobe or anything like that.

But there was a large group of people out there that any privacy in the voting booth, were going to look at it and go, “I don’t know, this Trump seems like an ogre but man, but man, there’s no way I could vote for Hillary Clinton.” They pulled a lever, they checked the box for Trump. When it shook out that way and that the polls were actually wrong really didn’t come as that big of a surprise, at least not to TFMR. Now, to make forecast now from here I think is a fool’s errand.

I’ve been reading a lot of stuff here on Thursday about now it’s assured that there’s going to be big inflation and higher interest rates and infrastructure spending, and that means the stock market’s going to 20,000. Man, I think, like I said, that’s a fool’s errand. People getting way out over their skis thinking that they know one day after Trump was elected what’s going to happen now, not only in the next four years but even in the next four months. It’s going to be a real interesting period time here, Mike, and we all need to be paying attention.

Mike Gleason: Okay, so for anyone following the markets on Tuesday night as the results were coming in, you saw global equities taking a huge hit. The Dow Futures were down some 700 or 800 points once it became clear that Trump was going to win. Gold was the primary beneficiary. It seemed as the yellow metal was, it seemed as the yellow metal surged and it appeared we were on the way to getting another Brexit like market reaction where metals got a safe haven bid. But then things quickly reversed course and by midday Wednesday the stock markets had not only stabilized, but actually closed the day substantially higher and metals were essentially flat by the time the day was done. So what did you make of all that, Craig?

Craig Hemke: Mike, I think we talked before about how the paper derivative futures market is primarily driven through high frequency trading computers, very little human interaction. You might get some special and volatile days like Tuesday. You might get some actual human beings and hedge fund managers, some traders, actually putting in trades, but most of it is just computer dominated trading. And these computers, as it relates to gold and silver futures, often take their cues from just a couple of inputs, the most important one being the dollar-yen. You can easily now trace what happened on Tuesday to movements in the dollar-yen, and you can actually trace movements in the S&P to movements off the dollar-yen as well. We saw the stock market futures, whether it was the S&P or the Nasdaq, it limit down for a while back on Tuesday evening.

At the same time, the dollar yen was down four points. It’d gone from 105 to just north of 101. Then as we were watching this, again, I was live following this on my site, suddenly dollar yen sprang back to life in chunks, moving in almost seconds 30, 40 basis points. At that point, it looked as if it was your classic Bank of Japan or some other center bank intervention. And lo and behold, here comes the stock market back and of course now anybody can pull up their own charts showing the stock market futures laid on top of the dollar-yen. You can see why it is that the stock market came running back. The dollar-yen now was again 101.20. Tuesday evening, it’s now pushing 107. That is why these machines have been buying stock futures. I would take it one step further, Mike. Zero Hedge wrote about this yesterday.

There have only been three other occurrences in history that have had a turnaround in the Dow Jones, the U.S. stock market, of the magnitude we saw Tuesday and into Wednesday. Those other three occurrences, two of them were in the fall of 2008 when we were deep in the throes of the U.S. financial crisis and people were worried on a daily basis that they had never any idea if the stock market would maybe even open, much less how far down it was going to open. The other occurrence was right after the Black Monday crash of 1987.

Most market historians, even just people that are objective, ascribe those three other turnarounds to the interventions of the president’s working group on capital markets, also known affectionately as the Plunge Protection Team. In those previous three occurrences, if that was all Plunge Protection Team action, I don’t know why anybody would assume anything different for what happened Tuesday into Wednesday. Whatever. That’s all we know. It’s all speculation. What I think people should be worried about now is the actual market action in the 36 hours since. I’m not talking the stock market. I’m talking about the bond market and what the bond market and maybe the strength of the dollar might be warning you about what is to come next.

Mike Gleason: That leads me right into my next question. Another thing we saw after the results came in was the 10-year Treasury yield spiked by 10%, which is a massive one-day move. One could argue that a pickup in bond yields make precious metals, which offer no yield, less attractive, but higher rates definitely do not always correlate with lower metals prices, particularly if the rise in rates is signaling higher inflation or if there’s some sort of turmoil that drives safe haven buying in metals. Any thoughts on why bonds are getting hit hard, and what do you expect these higher yields might mean for gold and silver?

Craig Hemke: Biggest one-day move in history, Mike, in the 10-year Treasury. Largest in history. And this happens the day after Trump is elected, so now we got to begin to try to connect the dots and try to figure out why. I don’t know anybody that would think that all of a sudden this means there’s some big change in monetary policy or some sudden spike in inflation. I don’t know about that. I would instead, as I was searching for reasons yesterday I was looking for a large state actor that might be bumping their treasury positions in anticipation of this change in geopolitics, change in U.S. policy.

Then I found some charts, again, from our friends at Zero Hedge that showed the 10-year Treasury selling off at the same rate as a Chinese yuan. Offshore yuan was devaluing. Remember, now, the People’s Bank of China pegs the yuan to the dollar, right? That is something they can manipulate a little bit that pegs some, but again, it moves with the dollar and so a stronger dollar means a stronger yuan. And that’s not what the Chinese. We went through this now, and this is the history lesson. This is what people need to be aware of.

We just went through this 11 months ago. When the Fed raised rates December of last year, the dollar index spiked all the way up to 100. And that was putting extreme pressure, not only on the Chinese, but on every emerging market currency that is linked to the dollar. All of those currencies were strengthening with the dollar and putting extreme pressure on, again, not only China but every other emerging market. I will pause at this point and ask everybody, if they’re listening, to watch what’s going on in the emerging markets, not only today, Thursday, we’ll see what happens tomorrow and into next week because we’re already starting to see this trend.

What happened back in December of last year, and especially January of this year, the Chinese, trying to ease that pressure started selling dollars. Well what happened yesterday? The Chinese were selling bonds. What are they getting in return? Dollars. Now, what are they going to do with those dollars? Back in January, they sold those dollars and bought things like the yen instead. This rising yen, remember, the yen rallied 10% in 10 days in early February. This was putting extreme pressure on the U.S. stock market, again, because of those high frequency trading linkages that we talked about earlier.

This all could come to pass again. If the Chinese are, in fact, liquidating bonds. That is why we had the biggest move in the bond market, like I said, ever. Biggest one-day percentage move ever yesterday. Again, why would they do this yesterday? Perhaps they see a trade war coming. Perhaps they believe Trump and all his rhetoric about China. Okay, so maybe they’re taking preemptive action. They’re selling treasuries. They’re going to take the dollars that they get from those treasuries and they’re going to put it, again, somewhere like the yen as a way to weaken the dollar and ease that pressure on their own currency.

And again, we could get this cascade effect just like we saw in early January, all through January, and early February where the U.S. stock market actually fell over 10%. So again, this is all speculation, but that’s all anybody else can do at this point. And I’m just astonished here, two days after the election, at the level of people that are utterly confident now that they can see the future. The dominoes, as they fall, and the unknown unknowns should prohibit anyone from making guesses when they really don’t know what’s going to happen.

Mike Gleason: Certainly one of the big things about a Trump campaign was that he was a real wild card and nobody really knew what to expect. I guess furthering the speculation here, what are we to make of a Fed and monetary policy under a Trump presidency? If we can make a guess, is there any chance we could see some fiscal restraint in Washington all of a sudden, or do we see inflation really take hold if Trump does deliver on all these plans to borrow money to rebuild our nation’s infrastructure… basically, what are you expecting when it comes to monetary and economic policy under Trump?

Craig Hemke: Exactly. Everybody’s talking about fiscal stimulus and debt packages and the Fed was actually even talking about that. If you read some of the minutes of the last couple of meetings, that they want some fiscal policy to come out of Washington that’s going to drive more debt because that gives them another reason to print more money and fight deflation. There’s a lot going on there, and to think that, again, we know what Trump will do I think is a fool’s errand for anybody that’s going to say right here, two days after the election, that they’re going to do this and which is going to mean that.

I don’t know what Trump’s policy will be, but I do know that specific to interest rates, it is almost impossible, and I’ve claimed for years that it’s almost impossible for rates to go back up and normalize. If anything, because of what it will do to the U.S. budget deficit, which is already being vastly under-reported. It’s reported to be $ 600 billion, but the total amount of debt last year went up by $ 1.4 trillion. Never did see anybody try to figure that one out. Nonetheless, if interest rates go up and the interest that is paid on the accumulated debt then is forced to rise, the whole debt spiral begins to spin that much faster.

If you look at the line item on the U.S. budget for interest on the national debt, it’s held pretty steady, under $ 400 billion for the last five or six years, even though the debt has risen. Well, why is that? Because the Treasury Department has shortened the average maturity of this debt as far as they can down to something like four years. And why do they do that? Because interest rates on the short end of the curve is where they’re the lowest, and so they keep shortening maturities to get lower and lower rates so they can keep that line item on the budget under control. But the problem is, those short maturities come due sooner and have to be rolled and refunded, right?

Well, now what if all of that accumulated $ 19, almost $ 20 trillion in debt suddenly starts to roll over, instead of at 3%, starts to roll over at six? Well, then now all of a sudden, instead of $ 400 billion in interest on that line item expense in the budget, it’s $ 800 billion or $ 1.2 trillion. And the budget begins to move that much out of control that much faster. This idea that some of the rates are going back up …

And I’ll take it one step further, Mike. How about all the folks out there, and again, derivatives aren’t necessarily my area of expertise, but how about all the folks out there that discuss, and I think rightly so, the idea of all the banks and the hedge funds and everybody else… insurance companies, pension funds, that have been buying up all of this global debt, even junk bonds, down here just desperately searching for yield? Well, now with rates rising the value of those bonds as they’re marked to market every day is plunging dramatically. What if you’ve taken those bonds and you’ve levered them up 10, 20 times? We’re going to start seeing some dramatic headlines of hedge funds that are suddenly under stress.

Again, you just don’t know how these dominoes are going to tumble into each other. The term I’ll use again is unknown unknowns. So all these folks are out there trying to make a buck now, trying to assure their clients or assure their newsletter readers that they know exactly what’s going to happen now that Trump’s been elected. Well, they didn’t even know Trump was going to be elected. I would advise everybody to be extremely cautious here and just to watch and let’s just see if we can make some sense of things over the next few months before they take any dramatic action.

Mike Gleason: Now, Trump has planned to “drain the swamp”. Do you think he’ll actually do anything meaningful on that front, including when it comes to Wall Street? Because there seems to be a culture of cheating, fraud, and market rigging, something you cover often there at the TF Metals Report.

Craig Hemke: I wouldn’t expect anything in terms of a change of the culture of Wall Street. Remember, Trump’s kind of a creature of that. He’s a banker in his own right. He’s worked with the banks his whole life. I don’t think he’s ever really promised anything about finally going after the bankers and doing a perp walk and all that kind of stuff. I wouldn’t expect Trump’s justice department to be any different from the (Eric) Holder, Loretta Lynch scam that we’ve seen for the last eight years.

Now, I do think, though, the promises he’s made regarding changing in Washington, maybe we’ll get something there. Number one on his contract with America that he put out a couple weeks ago was the institution of term limits. If he can get something like that done, oh boy. I’d be all for it. Obviously, no president or politician’s ever going to get everything done that they say they’re going to do. But if he can even just drain the swamp in that regard, make some changes as to how the political structure of the U.S. operates, well then that would really be a significant improvement and I’d be all for it. But these folks that think that suddenly he’s going to really upset the apple cart and change the system, boy, count me as shocked if he actually does go off in that direction.

Mike Gleason: Yeah, we definitely tend to agree on that front. Well, as we begin to wrap up here, Craig, what are you looking for over the remainder of the year in the metals and, more importantly, into next year as Trump finally takes over the White House? Is this going to be a good environment for precious metals prices, and are the reasons we all wanted to own this stuff under an Obama presidency still going to be relevant in the years to come?

Craig Hemke: I’ll take the back half of your question first. Absolutely. Trump has even had his advisors talk about gold exchange notes and stuff like that in the past. Again, you have no idea how the Chinese are going to react to all of this. I’m no fan of the Chinese, believe me, but they’ve got their own interests to tend to. They’ve been making progress over the last eight years to set up all these direct swaps to the yuan with all these other currencies around the world. They’ve been accumulating gold like mad, as have the Russians. Who knows how they’re going to play their hand in the months and years ahead?

I have no doubt, nothing is changing my view about the physical metal that I hold and continue to stack. Now, in the short term, however, we talked again earlier about the control that these high frequency trading machines play in setting the gold price, as it were. Which, again, is not a physical price. That’s the price of the paper derivative that gets traded back and forth. Yesterday, the COMEX set a new record in volume for COMEX trading. For just the front month December contract, they traded something like 800,000 contracts.

Do the math on that. It’s like 2,500 metric tons of paper gold in just the front month contract for swaps yesterday. That’s 80% of global mine supply. It was traded in derivative form on the COMEX. There’s no actual gold trading hands. The only value of this discovery, the only price of discovery is the price of this derivative that nobody ever exchanges into physical metal. But yet, that’s the price we quote. Okay, well whatever. In the short term, with the dominance of these high frequency trading machines that take their cues from the dollar-yen and from changes in interest rates, I think people need to be very alert and very wary of a short term drop in price.

Gold has held in there while we’ve seen this interest rate spike. We were 210 in the long bond in July. We’re now 290. Yet, gold is only down about 10% in that time frame, giving back gains from earlier this year. I think we have to be very alert to a sharp drop, maybe closer to $ 1,210, $ 1,220 in the days ahead. Hopefully it won’t happen. It’s the last thing I want to have happen, but if interest rates keep moving higher these machines at some point are going to dump a bunch of their spec trading positions in gold and re-balance and re-calibrate versus a relative valuation of bonds.

You have to be alert for that. Silver has hung in there these last few days and it’s still in there $ 18.50, if only because copper is up almost for every day for the last three weeks in an extraordinary, almost parabolic, move. If suddenly gold starts to correct down in reaction to falling bond prices and higher interest rates, and if suddenly copper hits an air pocket back down, man, they’re going to beat the living daylights out of silver as well. So in the short term, people need to be very cautious and aware of the risks that paper prices might fall and with it share prices as well.

In the long term, man, nothing has changed. Nothing. Man, it’s the old Charlton Heston line, they’re going to have to come pry my gold and silver out of my cold, dead hands, Mike. Nothing has changed, and people should be contacting your firm and using any drop in price to continue to accumulate the real thing because the price that you’re seeing is just a price that’s determined by derivative trading. The real metal is what you want, and it continues to be your only protection from all of these unforeseen events that are coming. And boy, nothing that has happened in the last couple days should change that.

Mike Gleason: Well, very well put. We’ll leave it there. Wonderful insights as usual, Craig. We always enjoy hearing from you, and absolutely look forward to doing this again before long. Thanks for the time today. Now, before we let you go, please tell everyone more about the TF Metals Report and what they’ll find if they visit your site.

Craig Hemke: It’s a great community. It’s folks who are all trying to get through this madness together. Like you said, we’ve been around now for, coming up, almost six years since the site went live. And we’ve seen a lot of stuff, obviously, in the last six years, but what we recommend is we’re all in this together. We’re all here to help each other through this madness. What I do, the commentary I give on a daily basis, the podcasts we do, the webinars we do, works out to about 40 cents a day, so it’s not some exorbitant cost, 12 bucks a month. I think it’s a pretty good value.

As we wrap up, I would just again really caution everybody. There’s all this euphoria out there today that now the Dow, which is at an all-time high, is going to 20,000. I would offer a contrarian view. If the Chinese are, in fact, dumping treasuries, raising dollars, and they’re now going to take those dollars and put them someplace else. The stress that’s on all emerging market currencies could very well lead to a repeat of January. Just pull up a chart if anybody’s forgotten. I realize we were talking 10 months ago and people have short attention spans, but go back and look at what was happening in January. We may very well be seeing that happen again, either later this month or next. People need to be alert to the risks, even just in the stock market, and not get complacent. Anyway, we talk about all that at TF Metals Report on a daily basis and I invite everybody to check us out.

Mike Gleason: Yeah, certainly interesting times ahead for sure. Going back to January and February there, those were, of course, very good months for precious metals, as they were the beneficiary of a lot of that trade that you’re talking about there with the Chinese. So perhaps that repeats itself, we’ll have to see. Well, excellent stuff. Once again, thanks so much, Craig, and I hope you enjoy your weekend. We’ll talk to you again soon.

Craig Hemke: Mike, it was a pleasure. All the best.

Mike Gleason: Well, that will do for this week. Thanks again to Craig Hemke. The site is TFMetalsReport.com. Definitely a fantastic source for all things precious metals and a whole lot more. We urge everyone to check that out, and you’ll want to check it out regularly for some of the best commentary on the metals market that you will find anywhere.

And be sure to check back here next Friday for our next Weekly 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




Silver, Debt, and Deficits – From an Election Year Perspective

It is an election year. We should anticipate 8 years of upcoming trauma, following nearly 8 years of “hope and change,” after 8 years of “no nation building,” after 8 years of “I did not have sexual relations with that woman.”

Examine the official US national debt in 8 fiscal year increments (10/1/84 – 9/30/92 etc.) using linear and log scales.

You can see that official national debt has been rising exponentially. At the current rate of increase it should approach $ 40 trillion in 8 years. Given the likelihood of more wars, recessions, more social spending, and accelerating Medicare and Social Security expenses the total debt might be considerably higher than $ 40 trillion in 8 years, regardless of who is elected.

Examine the accumulated increase in national debt (the total of 8 years of deficits) over each group of 8 fiscal years. Deficits are increasing rapidly.

Examine the average annual price of silver every 8 years.

The price of silver is more erratic than the official national debt, which increases consistently, regardless of which group of borrow and spend politicians is supposedly in charge.

But it is clear that silver prices are increasing exponentially, similarly to the increase in national debt, increase in currency in circulation, and probably (not shown) the increase in Wall Street bonuses, food stamp (SNAP) payouts, Federal Reserve salaries, and the prices of cigarettes, postage, beer, food, tuition, health insurance, and prescription drugs.

It is an exponential world … until it stops. The Keynesian PhD economic policies that we have been “blessed” with assure us that exponential increases are necessary to keep the bubble in fiat currencies, debt, bonds, and stocks inflated.

Given the exponential increases in debt and prices, what exponential projections can be made for PEAK prices for silver in the next five years?

Note that this graph includes a purple line that suggests possible peak prices in silver during the next few years based upon:

Exponential increases in debt and currency in circulation, thanks to Keynesian PhD economics, central banks, and excessive spending by politicians.

If we anticipated possible price increases in silver due to declining silver ore quality, possibly huge increases in investment demand for silver, increased silver mining costs, increasing industrial demand for silver, deteriorating faith in central banks, hyperinflation of various fiat currencies, JPM forcing prices higher to overvalue their physical silver hoard, a global bond market crash, and escalating wars in the Middle-East, the price of silver could spike unbelievable higher than shown above.

CONCLUSIONS:

  • Politicians will borrow and spend until they no longer can borrow. Hence national debt will exponentially increase until the system resets.
  • Exponential increases in debt parallel increases in the prices of many goods, services, and commodities, including silver.
  • Silver is likely to peak in excess of $ 100 during the next multi-year rally, based on nothing more than Keynesian PhD economics, spending by politicians, central banks “printing” and more of the usual nonsense.
  • But if other factors, such as hyperinflation, massive investor demand and others listed above manifest, the price of silver could jump far higher.
  • Alternatively, it is possibly true that “I did not have sexual relations with that woman,” there will be “no nation building,” we will all benefit from “hope and change,” we are “stronger together,” the Easter Bunny is coming, world peace is imminent, Obamacare costs will come down, the NSA will stop spying on everyone, TSA is the most loved federal agency, politicians will balance the budget, and central bankers truly exist to help ordinary citizens in their everyday lives.
  • If those ideas ring false, then you may wish to hedge against the collapse of some of your paper assets with physical silver and gold.

Gary Christenson

Republished with permission by The Deviant Investor.