, Gold and Silver News

Thursday, July 18, 2019

Peak Prosperity: Do You Truly Have Free Will?

How we're constantly at war with our biological programming. 

"Until you make the unconscious conscious, it will direct your life and you will call it fate". ~ Carl Jung 

I love that Jung quote. 

I’ve used it generously in conversation, seminars and writings throughout the years. 

Initially, I assumed that the “unconscious” he referred to the place in our brains where our experiences, beliefs and memories are undetectably stored. 

You know, psychology stuff: ego, subconscious, id. Old memories from childhood lurking beneath the conscious frame of reference, directing thoughts and coloring our current experiences."

- Source, Peak Prosperity

Wednesday, July 17, 2019

How to Stay Out of Debt: Warren Buffett, Financial Future of American Youth

Buffett became a billionaire on paper when Berkshire Hathaway began selling class A shares on May 29, 1990, when the market closed at $7,175 a share.

In 1998, in an unusual move, he acquired General Re (Gen Re) for stock. In 2002, Buffett became involved with Maurice R. Greenberg at AIG, with General Re providing reinsurance. 

On March 15, 2005, AIG's board forced Greenberg to resign from his post as Chairman and CEO under the shadow of criticism from Eliot Spitzer, former attorney general of the state of New York. On February 9, 2006, AIG and the New York State Attorney General's office agreed to a settlement in which AIG would pay a fine of $1.6 billion. 

In 2010, the federal government settled with Berkshire Hathaway for $92 million in return for the firm avoiding prosecution in an AIG fraud scheme, and undergoing 'corporate governance concessions'. In 2002, Buffett entered in $11 billion worth of forward contracts to deliver U.S. dollars against other currencies. 

By April 2006, his total gain on these contracts was over $2 billion. In 2006, Buffett announced in June that he gradually would give away 85% of his Berkshire holdings to five foundations in annual gifts of stock, starting in July 2006. 

The largest contribution would go to the Bill and Melinda Gates Foundation. In 2007, in a letter to shareholders, Buffett announced that he was looking for a younger successor, or perhaps successors, to run his investment business. 

Buffett had previously selected Lou Simpson, who runs investments at Geico, to fill that role. 

However, Simpson is only six years younger than Buffett. Buffett ran into criticism during the subprime crisis of 2007--2008, part of the late 2000s recession, that he had allocated capital too early resulting in suboptimal deals. "Buy American. I am." he wrote for an opinion piece published in the New York Times in 2008. 

Buffett has called the 2007--present downturn in the financial sector "poetic justice". Buffett's Berkshire Hathaway suffered a 77% drop in earnings during Q3 2008 and several of his recent deals appear to be running into large mark-to-market losses. Berkshire Hathaway acquired 10% perpetual preferred stock of Goldman Sachs. 

Some of Buffett's Index put options (European exercise at expiry only) that he wrote (sold) are currently running around $6.73 billion mark-to-market losses. 

The scale of the potential loss prompted the SEC to demand that Berkshire produce, "a more robust disclosure" of factors used to value the contracts. Buffett also helped Dow Chemical pay for its $18.8 billion takeover of Rohm & Haas. 

He thus became the single largest shareholder in the enlarged group with his Berkshire Hathaway, which provided $3 billion, underlining his instrumental role during the current crisis in debt and equity markets. 

In 2008, Buffett became the richest man in the world, with a total net worth estimated at $62 billion by Forbes and at $58 billion by Yahoo, dethroning Bill Gates, who had been number one on the Forbes list for 13 consecutive years. 

In 2009, Gates regained the position of number one on the Forbes list, with Buffett second. 

Their values have dropped to $40 billion and $37 billion, respectively, Buffett having lost $25 billion in 12 months during 2008/2009, according to Forbes. 

In October 2008, the media reported that Warren Buffett had agreed to buy General Electric (GE) preferred stock. 

The operation included extra special incentives: he received an option to buy 3 billion GE at $22.25 in the next five years, and also received a 10% dividend (callable within three years).

In February 2009, Buffett sold some of the Procter & Gamble Co, and Johnson & Johnson shares from his portfolio...

Big Trouble: Markets Are Cheering Christine Lagarde’s Appointment to the ECB

The appointment of Christine Lagarde as president of the ECB has been greeted with euphoria by financial markets. That reaction in itself should be a warning signal. When risky assets soar in the middle of a huge bubble due to a central bank appointment, the supervising entity should be concerned.

Lagarde is a lawyer, not an economist, and a great professional, but the market probably interprets correctly that the European Central Bank will become even more dovish. Lagarde, for example, is a strong advocate of negative rates.

Lagarde and Vice President De Guindos have warned of the need to carry out measures to avoid a possible financial crisis, proposing different mechanisms to mitigate the shocks created by excess risk. Both are right, but that search for mechanisms to work as shock buffers runs the risk of being sterile when it is the monetary policy that encourages excess. When the central bank solves a financial crisis by absorbing the excess risk that the market once took it does not reduce it, it only disguises it.

Supervisors ignore the effect of risk accumulation because they perceive it as necessary collateral damage to the recovery. Risk accumulates precisely because it is encouraged.

Draghi said that monetary policy is not the correct instrument to deal with financial imbalances and macroprudential tools should be used. However, it is the monetary policy which is causing those imbalances when an extraordinary, conditional, and limited measure becomes an eternal and unconditional one.

When monetary policy disguises and encourages risk, macroprudential measures are simply ineffective. There is no macroprudential measure that mitigates the risk created by negative rates and almost three trillion of asset purchases. More than half of European debt has negative returns and the ECB must maintain the repurchase of maturities, injections of liquidity, and even announce a new program of quantitative easing in the face of the lack of sufficient demand in the secondary market for those negative yielding bonds. That is a bubble.

Risk builds up slowly and happens instantaneously. That is what the central planner does not seem to want to understand and the reason why stress tests and macroprudential measures fail in the midst of monetary stimuli. Because they start from a fallacious base: Ceteris paribus and that the already accumulated imbalances are manageable.

When most eurozone countries finance themselves at negative rates for up to seven to ten years, there is no reason to maintain current rates and stimuli.

The central planner can say that bond yields are low due to market demand, but when the Central Bank supplants the market by injecting, repurchasing maturities, and announcing more monetary stimuli, the placebo effect in the real economy is imperceptible and the risk in financial assets is huge. The huge injection of the money supply goes to other risk assets in search of a diminishing yield.

The eurozone has been in stagnation for several months, with many leading indicators worsening, and it is not due to lack of stimulus, but due to excess.
  • 64% of the sovereign debt of the eurozone hs negative yields. Five trillion euros. Completely unjustified looking at solvency, liquidity, or growth ratios.
  • Junk bonds are at the lowest yield in thirty years, while the rating agencies warn that the solvency and liquidity ratios have not improved. The BIS warned of the increase of zombie companies, eternally refinanced at low rates despite not being able to cover their interest expenses with operating profit. Meanwhile, companies on the verge of bankruptcy are financed at rates of 3.5-4%.
  • The multiples paid for infrastructure assets have soared in little more than half a decade and now no one is surprised to see 19 times EBITDA paid for assets driven by low rates and cheap debt.
  • Excess liquidity reached 1.2 trillion euros. It has multiplied sevenfold since the launch of the repurchase program.
  • The debt of non-financial companies in the eurozone remains above 78% of GDP, according to Standard and Poor’s, above the cycle maximum of the fourth quarter of 2008.
Many say that nothing has happened yet, although it is more than debatable, according to bankruptcies of financial entities and increase of zombie companies. However, the fact that there has not been a massive financial crisis yet does not mean that the bubble is not being inflated. And when that bubble is in several assets at once, there are no macroprudential measures to cover the risk.

The problem of central planners is one of diagnosis. They think that if credit does not grow as much as they think it should grow and investment and growth are not what they estimated, it is because more stimulus is needed. Many ignore the effect of overcapacity, excess debt and demographics while carrying out the greatest transfer of wealth from savers and the productive economy to the indebted.

Calls for prudence and risk analysis measures would be much more effective if misallocation of capital was not encouraged by the policy itself. We must be aware that lower rates and more liquidity will not improve the economy, but they may generate a dangerous boomerang effect on risk assets.

Lagarde faces two difficult options. On one side, continue with negative rates and liquidity injections which perpetuate overcapacity, make governments avoid structural reforms, and stagnate the economy. On the other side, normalizing monetary policy would show the artificially low yields of sovereign debt as unsustainable. She needs to face reality. The eurozone does not need more monetary stimulus or government spending, it needs less interventionism.

- Source, Daniel Lacalle via Mises Wire

Global Stock Market Rally Stalls as Bank Earnings Disappoint

S&P futures pared gains, and traded unchanged as mixed Q2 earnings and disappointing hints by banks on future revenue gave traders concerns about the sustainability of the rally, while European stocks struggled for traction amid fresh trade tensions.

US equity futures gave up some of their earlier (low-volume) gains after Bank of America’s net interest income fell short of analysts’ expectations, though CEO Brian Moynihan said the economy appeared to be improving. The Stoxx Europe 600 index nudged higher amid a mixed bag of reports from companies including Swatch, Ericsson and ASML. In the US, earnings from the big banks JPMorgan, Citigroup and Wells Fargo this week have raised concerns that lower interest rates will pressure profits at a time when revenue growth is already slow.

Adding some nervousness to markets was a threat from U.S. President Donald Trump to tax another $325 billion worth of Chinese goods. And in the latest evidence that trade tensions were hurting businesses, railroad CSX reported a quarterly profit that missed estimates and lowered its full-year revenue forecast, sending its shares 7.2% lower. Also worth noting, on Tuesday more dovish comments from Federal Reserve Chairman Jerome Powell did little to stir markets, suggesting easing may be fully priced in as Bloomberg points out.

Meanwhile, in Europe, strong quarterly profit from Dutch chip equipment maker ASML helped semiconductor makers including Advanced Micro Devices, Micron Technology, Intel and Applied Materials rise between 0.4% and 1.6%. Qualcomm jumped 5.6% after the U.S. Justice Department asked a federal appeals court to pause the enforcement of a sweeping antitrust ruling against the mobile chip supplier.

Earlier in the session, Asian stocks slipped for a second day, with South Korean shares leading declines amid regional and global trade tensions. Technology and energy were among the weakest sectors after U.S. President Donald Trump reiterated that he could impose additional tariffs on Chinese imports if he wants. Most markets in the region dropped, while Australia bucked the trend with the S&P/ASX 200 gauge up 0.5%, supported by BHP Group after the miner forecast iron ore production will rise as much as 6% this fiscal year. China’s Shanghai Composite Index fell as large financial companies led losses. The Kospi retreated 0.9%, dragged by Samsung Electronics and SK Hynix, while the Topix closed 0.1% lower. India’s Sensex added 0.2%, with Kotak Mahindra Bank and Infosys among the biggest boosts, as investors awaited more corporate earnings.

In FX, the dollar halted a two-day rally, held down by gains in commodity currencies, with the Canadian dollar rallying ahead of inflation data. Even so, it held near its strongest level in a week as traders awaited economic data and speeches by Federal Reserve officials in coming days for clues about the size of expected interest-rate cuts this year. The pound traded near the lowest levels since April 2017 as the risk of a no-deal Brexit continued to preoccupy investors.

Elsewhere, Bitcoin extended a slide below $10,000.

In commodities, WTI and Brent futures are nursing some of yesterday’s losses after prices slid around 3% on comments from the US which suggested a tempering of US-Iran tensions, albeit this was later rebutted by Iran. Upside for the complex has been limited by a number of supply-side factors including the narrower-than-expected drawdown in API crude stocks (-1.4mln vs. Exp. -2.7mln). Furthermore, refineries in the Gulf are restarting operations post-storm Barry, with only 59% of production still offline (vs. 69% on Monday).

Elsewhere, gold prices are gravitating closer to the key 1400/oz mark as the Dollar index gains more ground above 97.00. Meanwhile, Dalian iron ore futures have retreated from recent record highs as investors digested news about higher transaction fees in all iron ore futures contracts on the DCE alongside a rise in iron ore shipments to China from Australia.

Expected data include housing starts and building permits. Abbott, Bank of America, IBM, and Netflix are among companies reporting earnings...

- Source, Zero Hedge, Read More Here

Tuesday, July 16, 2019

Documentary: The 1929 Stock Market Crash and Great Depression

On October 29, 1929, Black Tuesday hit Wall Street as investors traded some 16 million shares on the New York Stock Exchange in a single day. 

Billions of dollars were lost, wiping out thousands of investors. In the aftermath of Black Tuesday, America and the rest of the industrialized world spiraled downward into the Great Depression (1929-39), the deepest and longest-lasting economic downturn in the history of the Western industrialized world up to that time. 

1929 Stock Market Crash During the 1920s, the U.S. stock market underwent rapid expansion, reaching its peak in August 1929, after a period of wild speculation. 

By then, production had already declined and unemployment had risen, leaving stocks in great excess of their real value. 

Among the other causes of the eventual market collapse were low wages, the proliferation of debt, a struggling agricultural sector and an excess of large bank loans that could not be liquidated. Stock prices began to decline in September and early October 1929, and on October 18 the fall began. 

Panic set in, and on October 24, Black Thursday, a record 12,894,650 shares were traded. Investment companies and leading bankers attempted to stabilize the market by buying up great blocks of stock, producing a moderate rally on Friday. 

On Monday, however, the storm broke anew, and the market went into free fall. Black Monday was followed by Black Tuesday (October 29), in which stock prices collapsed completely and 16,410,030 shares were traded on the New York Stock Exchange in a single day. 

Billions of dollars were lost, wiping out thousands of investors, and stock tickers ran hours behind because the machinery could not handle the tremendous volume of trading. 

1929 Stock Market Crash and the Great Depression After October 29, 1929, stock prices had nowhere to go but up, so there was considerable recovery during succeeding weeks. 

Overall, however, prices continued to drop as the United States slumped into the Great Depression, and by 1932 stocks were worth only about 20 percent of their value in the summer of 1929. 

The stock market crash of 1929 was not the sole cause of the Great Depression, but it did act to accelerate the global economic collapse of which it was also a symptom. 

By 1933, nearly half of America’s banks had failed, and unemployment was approaching 15 million people, or 30 percent of the workforce.

Saturday, July 13, 2019

What's Ron's Favorite Part Of The Declaration Of Independence?

With all the white noise on July 4th - tanks and flyovers, speeches - it can be easy to forget exactly what we are celebrating. In this special edition of the Liberty Report, Ron Paul explains his favorite part of the Declaration and why...

- Source, Ron Paul

Friday, July 12, 2019

Silver is the Buy Of the Decade And Golden Asteroid is Hogwash

Silver is a bargain compared to gold, and things look bullish for both metals, this according to Lobo Tiggre, principal analyst of the Independent Speculator. 

“Where gold goes, silver follows, and the fact is it’s still relatively cheap,” Tiggre told Kitco News. “I absolutely have silver plays at the very top of my research list.” 

On the asteroid 16 Psyche, Tiggre said that much of the asteroid is composed of iron, so reports of an asteroid made of gold that could contain enough wealth to make everyone on the planet billionaires is “silly.”

- Source, Kitco News

Thursday, July 11, 2019

David McAlvany: Adjusting Investment Themes to a Weaker Dollar

David McAlvany, President of the McAlvany Financial Companies, explains his view for a weaker dollar and how it affects the markets, gold and commodities.

- Source, Jay Taylor Media

Tuesday, July 9, 2019

Peak Prosperity: Extreme Frugality

A needed mindset for the age we live in. "We didn’t have a lot growing up, as my mom had to single-parent three kids. Most anything I wanted required disciplined frugality. 

I bought my first fly rod from Orvis at the age of 13, which took the better part of a year to save up for. I hand-tied the first flies drifted from its lines from the hackles of roosters I raised expressly for that purpose."

- Source, Peak Prosperity

Thursday, July 4, 2019

Ronni Stoeferle: In Gold We Trust

Why we may soon see prices of $1,500-1,600/oz Fresh from releasing his exhaustive 340-page annual report titled In Gold We Trust, Ronald Stoerferle joins us to summarize his forecast for the yellow metal. 

Stoerferle, an author of several books on Austrian economics and head of strategy and portfolio management at Incrementum AG, concludes that gold is poised to move explosively higher. 

He sees a new bull market beginning for the precious metal — one likely to quickly build momentum as the impending recession arrives and the world’s central banks revert to extreme easing policy measures.

- Source, Reluctant Preppers

Tuesday, July 2, 2019

Gold Catches a Bid Ahead of G-20 Now Here’s What to Watch

The Federal Reserve and markets are intensely focused on discussion among world leaders during the Group of 20 summit in Japan as what unfolds will influence the outcome of the global economy, according to Chris Versace, chief investment officer at Tematica Research. 

“It’s a binary outcome,” he said. “Either trade talks are back on and we’re going to work towards a deal, or things didn’t go well and President Trump is going to go forward with that next round of tariffs.” 

Versace stressed that although expectations are high that the Fed will reduce rates in their meeting next month, what happens in the summit will have an effect on their decision. 

“If we come out of this and trade talks are still in process, that means the existing tariffs are still on,” he said. “I think investors are going to get nervous about the expectations for the back-half of the year.”

- Source, Kitco News

Sunday, June 30, 2019

Lior Gantz: Gold is Breaking Out, Now What Comes Next?

Emerging from a 6-year base, gold shows signs that money is flowing into the precious metal in a big way, vaulting past the $1,350 barrier, and testing higher resistance and support limits. 

What mega-factors are driving this surge in gold, and what further monetary development may be about to become the biggest financial event of the year that could amplify these trends? 

Market analyst and founder of WealthResearchGroup.com, Lior Gantz, returns to ReluctantPreppers to assert that we can layer our financial fortress to protect against risk & loss, provide for real growth, and be aware of many different options for outsized opportunities that are developing now.

Friday, June 28, 2019

Walk the World: Household Debt Both Up and Down, Big Time

We look at the latest ABS stats on household wealth. How do falls in real estate values compare with recent lifts in share prices?

- Source, Walk the World

Thursday, June 27, 2019

BlackRock Sees Gold Ending Year Higher on Fed's Dovish Pivot

Gold’s rally to the highest since 2013 may have room to run further after the Federal Reserve indicated a readiness to cut borrowing costs, which would keep real rates low and weigh on the dollar, according to BlackRock Inc.

“Gold could end the year higher,” Russ Koesterich, portfolio manager at the $27 billion BlackRock Global Allocation Fund, said in an interview. “If we continue to see a pivot toward easier monetary policy from the Fed, then I think gold can go higher from here,” he said, adding that there is likely to be some pullback and consolidation in the near-term.

Gold is back in the limelight as investors seek havens amid slowing global growth due to the fallout from the U.S.-China trade dispute and as central banks globally adopt a more dovish tone. While the Fed left its key rate unchanged on Wednesday, it dropped a reference to being “patient” on borrowing costs and forecast a larger miss of their 2% inflation target this year. The greenback weakened to erase its 2019 gains.

“If easier policy from the Fed contains the dollar, that’s an environment, all else equal, that is supportive of gold,” Koesterich said last week in a phone interview after the central bank’s decision. “What I’d add is if we get a situation where the Fed is easing perhaps more than people thought because trade frictions are rising, that might be a particularly strong period for gold.”

The Fed would be easing at the same time as volatility would be rising and demand from investors for hedges would be going up, he said.

Spot gold rose as much as 0.8% to $1,411.23 an ounce and traded at $1,406.02 at 7:12 a.m. in London. Prices surged to $1,411.63 on Friday, the highest level in more than five years. Citigroup Inc. said Thursday that the enthusiasm is justified, with $1,500 to $1,600 possible in the next 12 months under a bullish-case scenario that includes borrowing costs falling below zero.

The Fed last cut rates in 2008 and began its most recent tightening cycle at the end of 2015, with four hikes last year. The so-called dot plot, which the U.S. central bank uses to signal its outlook for the path of interest rates, shows that policy makers are divided for the remainder of 2019. European Central Bank President Mario Draghi last week paved the way for a rate cut, and counterparts in Australia, India and Russia have lowered borrowing costs.

“In the near term, gold, like bonds, has had a very large move, so it would not be surprising if there was some consolidation,” said Koesterich, adding that BlackRock’s bullion holdings through exchange-traded funds have been “relatively static” over the last month. “But if we are moving into a period where the Fed or other central banks feel the need to ease monetary conditions, gold is probably going to have a better environment than it did earlier this year.”

- Source, Bloomberg