Putin, gold and silver: What you need to know right now ... - www.moneyandmarkets.com
Larry Edelson | Monday, May 5, 2014 at 7:30 am
In a moment, I'm going to tell you about the recent action in gold and silver, what it means, and some surprising conclusions.
But first, you need to know more about the cycles of war that I've been telling you about, how they are ramping up so quickly, and more specifically, about Putin.
First, let's take a look at the war cycles. In early 2013, over a year ago, I warned everyone that the war cycles were set to explode higher, on the backbone of bankrupt Western economies.
It's a fait accompli. War and bankrupt economies go hand in hand. When desperate, like the governments of the United States and Europe are now, strange things start to happen.
You only need look at the historical record. The collapse of Rome was accompanied by many different civil rebellions and international conflicts.
Ditto for the Ottoman Empire. The British Empire, when it fell on desperate times. For Spain. For Germany.
For every major economic power throughout history, when governments became bankrupt and desperate for cash, they imploded by attacking others and their very own citizens, through sleight-of-hand tax increases, through confiscatory policies that first racked everyone's money, then confiscated it, through loss of civil liberties, through propaganda and more, lots more.
Weakened, they lash out. They prepare to rally the people; they look for distractions, reasons to spend even more money, all with the aim of consolidating the national psyche.
This is what the United States is doing now. Russia is doing the same thing. Putin is rallying the national psyche. The Russian economy, weakened internally by corruption, by alcoholism, by declining revenues from the three-year bear market in commodities, is not in much better shape than Europe or the United States.
So the battlefield is now prepped. Russia versus the West. Russia versus Europe and the United States.
And it is now entering a new, more dangerous phase. Military conflict is almost always preceded by economic warfare. And Putin is about to pull the trigger and respond to sanctions against Russia with his own sanctions against the West.
Billions of dollars in foreign investment in some of the world's biggest untapped oil reserves are at risk. Exxon Mobil Corp. (XOM), for instance, has drilling rights to 11.4 million net acres (46,134 square kilometers) in Russia, the company's biggest single cache of drilling rights outside the United States.
Other major companies with big investments in Russia include Royal Dutch Shell Plc (RDS-A), PepsiCo Inc. (PEP) and Alcoa (AA). Then there are a slew of medium- and large-sized companies from the West that are also at risk of getting hit by Putin.
U.K companies are most worried about their financial services in Russia. France is worried about military sales and luxury goods. Germany has the biggest trade with Russia. And Switzerland and Germany also have the biggest banking and loan exposure to Russia.
At the same time ...
Russia is hemorrhaging from capital outflows, a record $60 billion in Q1 alone.
Savvy Russian investors want out. They're not about to sit around and see their capital get caught up in an economic war, probably followed by military conflict.
So they're moving their money. Europeans are moving money out of Europe as well. Which leads me to my next point ...
During not-so-normal times like we have today, the flow of capital is what determines major market moves.
Not supply/demand fundamentals. Not GDP, inflation, central bank policies.
Not even price-to-earnings ratios, or corporate balance sheets or anything most analysts use to predict market movements.
It's capital flows, from one nation to another, from one stock market to another, from one savvy investor's pockets to any investment that can help that investor get their money to safety, off the grid to a market that is liquid, that offers a decent chance at some type of return, and where preservation of capital is also of utmost importance.
$60 billion coming out of Russia in Q1 may not seem like a lot, but when I look at the war cycles and how they ramp up for six more years ...
When I consider how quickly they are ramping up only two years into the process ...
And I consider the miserable shape that Europe is in ...
I am more confident than ever before that my forecasts are on track and that ...
First, we will soon see gold and silver take off like a bat out of hell.
Second, we will soon see the U.S. equity markets soar to one new record high after another (after a correction is complete).
Third, we will soon see the next wave down in the prices of sovereign bonds in Europe and the Unites States ...
And the next wave higher in interest rates ...
With all of this likely to happen in the face of a rising dollar, falling foreign currencies ...
While the majority of analysts and investors are caught flat-footed, on the wrong side of the markets.
Right now, gold and silver are still on the cusp of a major new bull market, one that could end up even more powerful than even I originally expected.
Chief reason: This past week's market action. Silver made a new low, taking out its December low, while gold remains nearly $100 above its equivalent December low.
This is what is called a "bearish non-confirmation" - a technical term that describes a situation when two related markets behave differently at an important low, where one market makes a new low and the other doesn't.
And typically, it is extremely bullish.
Only time will tell, but right now, the patterns I see emerging in gold and silver tell me that ...
- Gold and silver are about to take off to the upside. Or ...
- We have one more final low coming for both, a short swift downdraft ...
But one that will merely compress the springs all that much tighter and lead to an explosive rally immediately thereafter.
So just like the battlefield has been prepped between Russia and the West, the war cycles are now dominating the action in gold and silver ...
And they will soon create an explosive rally in the precious metals, the likes of which we have not seen in a very, very long time.
It's now not so much a matter of time, but of price level. Will gold take off from here, or slightly lower levels?
Either way, we are now merely a few yards away from the time when I will scream from the rooftops "Backup the truck now in gold and silver!"
If there is one thing you do the rest of this year to help insure you protect and grow your money, it is this: Stay tuned in, very tuned in, to all of my writings.
If you do not, you may miss the most explosive turnaround to the upside - ever - in gold and silver.
Continue reading on Money and Markets.com.
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Time to Admit that Gold Peaked in 2011? - www.caseyresearch.com
Jeff Clark, Senior Precious Metals Analyst
Have you seen this "real price of gold" chart that's been making waves? Among other things, it purports to show the gold price adjusted for inflation over the past 223 years. Notice the 1980 vs. 2011 levels.
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Casey Research |
The chart makes it seem that on an inflation-adjusted basis, gold has matched its 1980 peak in 2011, or nearly so. A mainstream analyst who still thinks of gold as a "barbarous relic," a government official who doesn't want people to think of gold as money, or an Internet blogger looking for some attention might try to convince you that this proves that the gold bull market is over, arguing that the 2011 peak of $1,921 is the equivalent of the 1970s mania peak of $850 in January of 1980.
The logic is flawed, however; even if it were true that gold has matched its 1980 peak in inflation-adjusted prices, it would not prove that the top is in this time. This is not the 1970s, the global economy is under very different pressures, and there's no rational basis at all for saying the top this time has to be at the same or similar level as last time.
That's even if it were true that gold has matched its 1980 peak-but it hasn't.
Inflation-Adjusted Gold Has NOT Matched Its 1980 Peak
First, if you go by official US Bureau of Labor Statistic numbers (or just use the BLS's inflation calculator), $850 in 1980 is equivalent to $2,320 in 2011, when gold hit its peak thus far in the current cycle. (It's $2,403 in 2013 dollars, as is said to be used in the chart.)
We don't know what data the authors of the chart used, nor their inflation adjustment method, so it's hard to say what the problem is, but at the very least, we can say the chart is very misleading.
But there's more. As you probably know, the government has made numerous changes to the way it calculates inflation-the Consumer Price Index (CPI)-since 1980. So, even the BLS number we've given grossly underestimates the real difference between the 2011 and 1980 peaks.
For a more apples-to-apples comparison, we should adjust for inflation using the government's 1980 formula. And for that, who better to ask than John Williams of Shadow Government Statistics (AKA Shadow Stats), the world's leading expert on phony US government statistics?
I asked John to apply the CPI formula from January 1980 to the $1,921 gold price in 2011, to give us a more accurate inflation-adjusted picture. Here's what his data show.
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Casey Research |
Using the 1980 formula, the monthly average price of gold for January 1980 would be the equivalent of $8,598.80 today. The actual peak-$850 on January 21, 1980-isn't shown in the chart, but it would equate to a whopping $10,823.70 today.
The Shadow Stats chart paints a completely different picture than the first chart. The current CPI formula grossly dilutes just how much inflation has occurred over the past 34 years. It's so misleading that investment decisions based on it-like whether to buy or sell gold-could wreak havoc on a portfolio.
This could easily be the end of the discussion, but there are many more reasons to believe that the gold price has not peaked for the current bull cycle...
Percentage Rise Has Been Much Smaller
Inflation-adjusted numbers are not the only measure that matters. The percentage climb during the 1970s bull market was dramatically greater than what we experienced from 2001 to 2011. Here's a comparison of the percentage gain during both periods.
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Casey Research |
From the 1970 low to the January 1980 peak, gold rose 2,346%. It climbed only 535% from the 2001 low to the September 2011 high-nowhere near mimicking that prior bull market.
Silver Scantly Participated in the 2011 Run-Up
After 31 years of trading, silver has yet to even reach its nominal price from 1980. It surged to $48.70 in 2011-but it hit $50 in January 1980.
On an inflation-adjusted basis, using the same data from John Williams, silver would need to hit $568 to match its 1980 equivalent.
The fact that silver has lagged this much-when its greater volatility would normally move its price by a greater percentage than gold-further shows that 2011 was not the equivalent of 1980.
No Bubble Characteristics in 2011
I'll get some arguments from the mainstream on this one. "Of course gold was in a bubble in 2011-look at the chart!"
Yes, gold had a nice run-up that year. It rose 38.6% from January 1 to the September 6 peak. Anyone holding gold at that time was very happy. But that's not a bubble. One of the major characteristics of a bubble is that prices go parabolic.
And that's exactly what we saw in 1979-1980:
- In the 12 months leading up to its January 21, 1980 peak, gold surged an incredible 270%.
- In contrast, the year leading up to the September 6, 2011 peak, the price climbed 48%-very nice, but hardly parabolic, and less than a fifth of the 1970s runaway move.
No Global Phenomenon in 1980 (Next Time It Will Be)
In the 1970s, the "mania" was mostly a North American phenomenon. China and most of Asia didn't participate. When inflation grips the world from all the money printing governments almost everywhere have engaged in, there will be a much greater demand for gold than in 1980.
When that day comes, there will be severe consequences for those who don't have enough bullion. Not only will the price relentlessly move higher, but finding physical gold to buy may become very difficult.
Comparable Price Moves? So What?
The argument we started with is really the clincher. It doesn't matter how today's gold prices compare to those from prior bull markets; what matters are the factors likely to impact the price today. Are there reasons to own gold in the current environment-or not?
First, a comparison: Apple shares surged 112% in 2007. After such a run-up, surely investors should've dumped it, right? Well, those who did likely regretted it, since it ended that year at $180 and trades over $590 today. In fact, even though it had already risen dramatically and in spite of it crashing with the market in 2008, there were plenty of solid reasons to buy the stock then, not the least of which was the introduction of the iPhone that year.
So should we sell gold because it rose 535% in a decade? As with the Apple example above, that's not the right question.
There are, in fact, several more relevant questions for gold today:
- What will happen with the unprecedented amount of money that's been printed around the world since 2008?
- Why are economies still sluggish after the biggest monetary experiment in history?
- Global debt and "unfunded mandates" are at never-before-seen levels; how can this conceivably be paid off?
- Interest rates are at historically low levels-what happens when they start to rise?
- Regardless of your political affiliation, do you trust that government leaders have the ability and willingness to do what's necessary to restore the economy to health?
If these issues were absent, maybe we'd change our position on precious metals. But until the word "healthy" can honestly be used to describe the fiscal, monetary, and economic state of our global civilization, gold should be held as an essential wealth-protection asset.
Continue reading on Casey Research.com.
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Richard's Remarks - www.dowtheoryletters.com
May 5, 2014
I felt something changing last Friday. Was the truth breaking out? Lies, untruths and lies, propaganda, lies and damn lies. What are the lies? Lies that the Fed and the government are telling us -- Federal Reserve Notes ("dollars") are money and silver and gold are outdated relics of another age. What I sensed on Friday (with gold up 17 dollars and silver up 50 cents) was that the basket of lies was beginning to fall apart.
The US public will swallow lies for just so long, and then the truth breaks through the barriers. The public knows that "their" inflation is more like 12% than the 1.2% that the Labor Department says it is. The public is beginning to wake up to the fact that silver and gold are real money -- pure wealth that has been respected for thousands of years.
Meanwhile the Fed is pumping trillions of dollars into the banking system in an attempt to push core inflation up to 2 percent. The system absorbs all this liquidity, and actual "poor man's inflation" gradually increases. But somewhere ahead (I think it will be this year) inflation will break out of its current bounds, and today's "mild inflation" will turn into hyperinflation. That's when interest rates will break out and head violently higher. At that point the Fed will administer the only medicine it knows -- more QE, more liquidity.
Judging by past history, there are only two certain events -- wars and currency depreciation. This is the concept that scares me (I have a 35 year old son). Can it happen? As a World War II veteran, I've seen the horror of combat and what it does to people -- both mentally and physically. But look at all the possible spots where war might break out -- Israel, Iran, Japan-China, Ukraine, Syria, Egypt. Anywhere and everywhere.
What I'm afraid of is that somewhere somebody is going to make a mistake -- and then -- war. Of course, this may be a reason why gold and silver have been spurting higher. Wars are incredibly expensive and warring parties tend to go heavily into debt.
Below -- an important bull signal if gold hits the 1340 box. Note that gold is trading above its red declining trendline and above its blue ascending trendline.
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Dow Theory Letters |
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Western Propaganda & The Road To A Catastrophic End - www.kingworldnews.com
May 2, 2014
Today a 42-year market veteran warned King World News about Western mainstream media propaganda and the road the West is headed down which will lead to a catastrophic end game. Below is what Egon von Greyerz, who is founder of Matterhorn Asset Management out of Switzerland, had to say.
Greyerz: "Eric, it's hard to understand how the world economy can function at all. We have near zero interest rates in many countries, massive debts, and we print to borrow more money than ever. Despite all of this, GDP is not growing....
Continue reading on King World News.
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Gold Jumps Back Above 200DMA As USDJPY & Stocks Continue Slide - www.zerohedge.com
Submitted by Tyler Durden on 05/04/2014 22:29 -0400
The weekend's re-escalation in Ukraine has sent gold popping $10 (and back above its 200DMA) and FX carry (and thus US equities) sliding in the early overnight trading. With Japan out (and Europe set for another holiday) volume are, and will likely remain, low. Critically, USDJPY is back under 102, even as Japan's central bank governor proclaims:
Continue reading on Zero Hedge.com.
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The Good, And Bad News About US Jobs In One Chart- www.zerohedge.com
Submitted by Tyler Durden on 05/05/2014 10:58 -0400
While we are tired of seeing various numbers and charts "explaining" the US employment situation as much as the next guy, here is just one final, and decidedly simple chart, summarizing precisely where the US job market stands.
- The good news: in April, 118.4 million Americans had a full-time job, the most since November 2008.
- The bad news: in April 9.8 million Americans were unemployed, 92 million people were out of the labor force, and 27.3 million people had part-time jobs. A total of 129.1 million, the most since ever.
Continue reading on Zero Hedge.com.