Buying Gold And Silver Now Makes More Sense Than Chasing Stocks

Gold and silver have outperformed stocks so far this year and have a lot further to go as equities hit a wall of fast deteriorating geopolitics and weakening economies as we progress into the autumn.

Do you buy high and sell low? No. So why would you buy stocks close to all-time highs when you can still pick up gold and silver at a respective discount of 30 and 60 per cent off their 2011 highs?

Bargain prices

Would you rather not buy low and then be able to sell high later? It’s a fairly simple logic but then markets are no more than scales weighing supply against demand.

What will encourage demand for gold and silver to pick up again? Real assets like precious metals are a safe haven in times of trouble with no third party involved or the central banks. They are money that central banks cannot print, and what do you think they will do if financial markets tumble?

Why should they fall from current near record heights? Apart from gravitational forces you have something called economic fundamentals, i.e. oil prices. We saw what happened when oil hit $147 a barrel in 2008. It brought the whole house of cards down.

Overvalued financial markets and associated assets are in the same position again today. Don’t believe the nonsense about the Islamic State now growing like a cancer inside Iraq. It is not benign. It’s malignant and Baghdad is the next target and then the southern oil fields are a doozy.

Where we go to then is anybody’s guess. The Islamic State could attack Kuwait like Saddam Hussein as another easy target, or it could become embroiled in a second Iraq-Iran War. Eventually the US and its allies will have to put boots back on the ground.

Trade war

Meanwhile, the trade war developing over the Ukraine and a possible imminent invasion by Russian ‘peacekeepers’ is also bad for energy prices and global business. It’s destabilizing and reminiscent of the breakdown of global trade in the 1930s before the Second World War.

Global financial markets have become excessively complacent after such a long run up without a correction. Things have been going so well that they can’t possibly fail can they? Anybody who knows anything about market cycles must recognize such over-confidence as pride coming before a fall.

Buying gold and silver today makes sense because by prices will soar as this geopolitical conflagration plays out and prices are cheap now. Equities will go in the other direction.

Original Source

Something Seriously Wrong With Financial System

John Embry, Chief Investment Strategist at Sprott Asset Management, thinks gold price suppression is a key factor in global monetary policy. Embry contends, “If the gold price truly reflected what is really going on in monetary policy today, I think real interest rates would rise quite significantly. Given the amount of debt that is polluting the world banking system, to me, this is the end game, and that’s why it’s so vicious in terms of suppression right now. When this turns, it is going to change a lot of things. That’s why they are being so aggressive on maintaining pressure on the gold and silver prices. Silver is especially suppressed. I don’t think you can dig it out of the ground for less than $25 per ounce. It’s not like gold. There is not a huge above ground inventory.” Embry adds, “I have never seen it any more intense in terms of pressure in the paper market, which indicates we are near the end, and there is something seriously wrong with the system.”

Deutsche Bank: The Bubble Must Go On To Sustain The "Current Global Financial System"

"The bubble probably needs to continue in order to sustain the current global financial system and the necessary future deleveraging. However with yields moving ever lower in many parts of the world in recent times, partly due to weak growth, and with debt levels still moving higher, the chances are that most government bondholders are unlikely to achieve a positive real return over the medium to long-term from this starting point. Inflation or even the risk of sovereign restructuring will likely prevent this."

- Source, Zero Hedge

Western Policies Are Doomed, Gold is Going Higher

Right now the West is content in trying to drive up paper stock prices and keeping the price of gold suppressed. But the future for the West will be very bleak if our central planners continue to play games by manipulating major markets. None of this is good for the West. In fact, it is setting the stage for a bad outcome, and the longer this goes on, the worse the outcome will be.

The U.S. should be doing what the Chinese and the Germans are doing. These countries are making long-term plans. This is why you have to be buying gold and silver if you are in the West because once the world does begin to change, that change can come incredibly fast.

If anything, the situation is getting worse for the West and better for the East. Unfortunately that really is the big picture. So for investors, the core of their wealth should be in physical gold and silver because the West’s policies are doomed, and this is how they can protect themselves and their families from the coming financial turmoil the West will have to endure.

- Stephen Leeb via King World News

A Gold Standard Will Emerge in the East

“Clearly the world is a mess right now. We have the chaos in Ukraine and the Middle East. As far as the situation in Ukraine goes, Russia won. They got exactly what they wanted. They have stopped fighting and they are now in a position where eastern Ukraine is not going to be part of Russia but they are going to be more or less independent....

It’s a very big deal that Putin won in Ukraine. You also see Russia moving closer to China, forging a strong alliance. Now we see that China is moving to have closer ties with India. Chinese President Xi is skipping a trip to Pakistan and heading to India instead.

So we are seeing this move to consolidate an alliance in the East. China is going to want to have a lot more control over how much energy it buys and at what price, which also means some sort of gold standard will emerge in the East."

- Stephen Leeb via King World News

Doug Casey - Is Silver Shinier Than Gold?

Is Silver shinier than Gold?
Richard Knowles - Government bank 'bail-ins' in Canada?

Junk Bond Funds Just Experienced A 6-Sigma Event

Junk Bond Funds Just Experienced A 6-Sigma Event

High-yield bond mutual funds saw Outflows Total An Eye-Popping $7.1 Billion last week.

"HY flowmageddon," said Goldman Sachs' Charles Himmelberg in a research note we saw via @Lebullmarche. "This is the largest HY outflow on record – a 6-sigma event when flows are scaled by mutual fund assets under management!"

Sigma is another way of saying standard deviation. And the greater the number of standard deviations, the more unlikely the event.

A 6-sigma event is extremely rare. If you want to put a number to it, think 1 in 500 million. According to Business Insider quant reporter Andy Kiersz, it's like flipping a coin 29 times in a row and getting heads each time. It's like rolling a die 11 times in a row and getting 6 each time.

"High-yield is less overvalued," Said Doubleline Funds' Jeffrey Gundlach in a phone call with Business Insider on Friday.

Gundlach stopped short of saying high-yield looked attractive. Himmelberg didn't.

"Our confidence in the buying opportunity in the face of retail selling stems from our belief that credit fundamentals remain supportive, while valuations are now more attractive," Himmelberg said. "Unlike the muni market (where institutional liquidity providers are few), the corporate market has a deep bench of investors who are responsive to value. This is one reason we have long argued that dislocations caused by retail selling present more opportunity than risk."

"[T]he U.S. high yield house is not burning down," said UBS's Matthew Mish. "The real panic will come with a more severe downturn in credit and economic fundamentals, which will likely trigger an exodus from non-institutional and crossover/tourists from U.S. high yield. That moment is unlikely to be a 2014 event."

This is not to say the outflows and price declines will end anytime soon.

"Given the outstanding concerns around rate, credit, and liquidity risks, some will simply choose to exit early – the tack some investors are clearly embracing," Mish said. "How far it extends is anyone's guess, but the run continues and the negative headlines seem unlikely to abate over the near term." Read »

CHINESE SILVER INVENTORIES NEARLY 90% DEPLETED AT SHANGHAI FUTURES EXCHANGE

Chinese silver inventories are growing increasingly tight as stocks at the SFE continue to fall to record low levels.

After the PAPER SMASH in the price of silver in April 2013, we can see just how fast inventories declined. 

By August, 2013, silver inventories at the Shanghai Futures Exchange fell 610 mt to 533… a staggering 53% decline. Inventories continued to fall, but a slower pace until they reached a low in November at 418 mt.

Then over the next three months, there was a build of silver stocks to a high of 575 mt in February, 2014.

Once the price of silver started correcting lower, inventories declined in March to 417 mt, and then a huge fall to 246 mt by the end of April. In May and June, silver inventories remained relatively flat as spot price bottomed then headed higher in June.

When June rolled into July 2014, once gain, the price of silver headed lower right along with the decline in silver warehouse stocks.. Another 86 mt were withdrawn in July as inventories are now the lowest level (148 mt) they have ever been.

In a nutshell, silver inventories declined nearly 90% from their record peak set in March, 2013. 

The Shanghai Futures Exchanged experienced a net decline of 995 mt from March, 2013 to the end of July this year

- Source, The Silver Doctors

Argentinian Bitcoin Exchange Loses its Bank Accounts

Argentina-based bitcoin exchange Unisend stopped customer deposits and bank transfers on Monday after Banco Santander Río and Banco Gailicia suddenly closed its company accounts.

Santander and Gailicia sent Unisend written notification on 28th and 31st July, respectively. Each cited Article 792 of Argentina’s code of commerce, which says that a banking relationship can be terminated at the request of a bank or its client provided 10 days notice is given.

Unisend partner José Rodriguez told CoinDesk that the exchange does not expect its services to be affected in the long term, stating:

“We have other banking relations and are working to open new ones in case any other contingency arises. Operations are continuing as usual.”

About 90% of users transfer money to Unisend from their bank accounts. The other 10% deposit cash through payment processors like RapiPago ARS, PagoFacil,CobroExpress and BaproPagos, among others.

For the time being, customers can still use their bank accounts to transact with the exchange as the Unisend accounts aren’t set to close until later this week. The company aims to have its other accounts ready for user trading before then.

- Source, CoinDesk

Costs? US Exports To Russia Collapse 34%

While Jack lew promised the economic impact on the US economy of Russian sanctions would be minimal, the facts suggest the opposite. Admittedly, Russia is not the US' largest trade partner but escalating sanctions have resulted in a 34% collapse in US exports to Russia - the largest absolute drop since 2010. Imports (from Russia) also fell (for the 3rd month in a row) but while the US is suffering 'costs' it is clear Russia is hurting more (for now - as Putin is set to unleash his countermeasures). Since sanctions began Russian stocks are up 9.5% and the S&P up 4.5% but the spread has collapsed in recent weeks.

Costs?




Costs? 3rd time the charm?

-  Source, Zero Hedge

Incompetence Is No Excuse

Dollar Dumps, Gold Jumps As Trannies Tumble Most In 6 Months

Stocks dumped (EU weakness)-and-pumped today with the majors ending marginally higher (except the Trannies down 7 of last 9 days). The Dow Transports are down over 6% from record highs - the worst slide since Feb 2014. The Russell is down over 7.5% from its peak (and the rest of the majors are playing catch-down from that turning point). The S&P bounced perfectly off its 100-day moving-average. Gold and silver jumped notably higher (gold +1% on the week) after more invasion headlines early on. Oil slipped. Treasury yields mimicked stocks, falling early to 13 month low yields and rising (selling TSYs) after Europe closed to end modestly lower ion yields on the day. The headlines though were focused on the plunge in the US Dollar (driven by a surge of JPY buying around lunchtime). Credit markets tracked stocks moestly but we note one pulled high-yield deal today (unusual). When AUDJPY quit on stocks, VIX took over, rammed back under 15.8 to ignite stocks but pushed higher after Europe closed.

- Source, Zero Hedge, read more here:

http://www.zerohedge.com/news/2014-08-06/dollar-dumps-gold-jumps-trannies-tumble-most-6-months

Why Seattle’s Minimum Wage Hike Matters to Seniors

By Dennis Miller

The US is gearing up for mid-term elections this November 4—so much so that Rolling Stone announced the relaunch of the “Rock the Vote” campaign last month (according to one of the younger members of my team). And just like clockwork, minimum wage is making headlines again too. It’s déjà vu all over again.

At a breakfast some 20 years ago, I sat next to a prominent, high-ranking US senator now long retired. He showed us data from the Bureau of Labor Statistics indicating that every time the minimum wage went up, more unemployment followed. Businesses were forced to ship jobs offshore—whether they wanted to or not—and started looking for ways to automate low- or unskilled jobs.

This senator and I talked one-on-one later in the day. Annoyed that politicians continued to do something that flat out doesn’t work, I asked him the rhetorical “Why?” He grinned and responded that politicians from all parties pander to the voters—and are more than willing to hurt Americans to get elected. Of course, I already knew that.

Swiss voters made the sane choice recently when they voted down a 22-franc (nearly $25) minimum wage. 76% voted to reject what would have been the world’s highest minimum wage. If only Seattle’s city council were as clearheaded as the Swiss! That city’s new $15 per hour minimum wage—the highest in the nation—will be phased in beginning next April.

The current federal minimum wage is $7.25 per hour. 22 states currently have higher minimum wage rates, and Washington’s wage floor (no surprise here) is the current high at $9.32 per hour. Not for long, though: Vermont just passed legislation that will raise its minimum wage to $10.50 per hour by 2018; Massachusetts is closing in on an $11 per hour rate. And earlier this year Connecticut, Hawaii, and Maryland passed $10.10 per hour minimum wage legislation.

More Jobs for Seniors That Still Don’t Pay That Much

Chances are you don’t live in any of those states. Maybe you even live in a place like Louisiana or South Carolina with no state minimum wage to speak of. Still, these increases affect us all by way of increased production costs and the like, which businesses ultimately pass on to consumers.

Minimum wage increases and the accompanying price hikes disproportionately affect seniors as a group. If you’re still working, your wages should increase with prices. But if you’re not, your income might not keep up, particularly if you depend on Social Security. Simply put, Social Security’s cost of living increases do not keep up with, well, the cost of living. Each time minimum wages go up, they push the buying power of a fixed income down.

Does raising the minimum wage force seniors out of jobs? No, actually. The percentage of seniors in the workforce is rapidly increasing as they look for post-retirement jobs, often in the only place they can find them: low on the totem pole.

The chart below shows the marked increase in the percentage of employed seniors compared to other age groups.

Walk into any Walmart, McDonald’s, Home Depot, or other big-box store and you’ll see a lot of seniors waiting on you with a smile… albeit sometimes forced. Businesses can move manufacturing jobs offshore, but they have to staff in-person retail jobs with live bodies right where their stores are.

Still, retailers have to cut back to cover minimum wage increases as best they can. My wife and I recently went into a fast-food restaurant and stood in line for 10 minutes. Talk about a redefinition of fast food: McDonald’s reported in April that their same-store sales rose 1.2%, and yet their lines and wait times have increased a lot more than that.

And it’s not just fast food. We just went to two different Home Depots to buy an inexpensive area rug and struggled to find a clerk in both. When we finally did, there were lines of antsy customers in front of us three people deep. We stood in line and waited our turn.

Of course, a senior earning minimum wage has a different perspective. Any 70-year-old in Seattle earning $10 per hour must be awfully excited about a 50% pay bump. As the saying goes, though, there is good news and bad news.

At one time, the minimum wage was meant to be “apprentice” pay for young people entering the work force. Young people, however, have the highest rate of unemployment: 15% for workers age 16-24. While this is an ongoing trend—before the 2008 recession, one in eight young workers was unemployed, according to a 2010 joint congressional report—higher minimum wages aren’t helping.

Ask any owner or manager of a retail store whom he or she would rather hire: a young person with no job experience or a senior? The senior wins out almost every time. Employers consider them to be more diligent, harder workers and more likely to show up consistently and on time. With fewer and fewer unskilled jobs out there and a larger labor force to choose from, seniors have a real advantage.

Higher Mandatory Wages Spur Automation

The other side of the coin is that higher minimum wages give retailers a greater incentive to automate unskilled tasks. How many of us now find the self-checkout at Home Depot or the grocery store faster and easier? One retail clerk can look over five to six customers checking out and assist them as needed.

Would you rather folks have jobs paying $10 per hour or this?

I have great empathy for a friend who, at 80 years old, went back to work in a retail store earning minimum wage. He had to in order to make ends meet. He worked 20-25 hours a week and came home exhausted. Certainly another $5 per hour would have helped; it might add $100-125 per week to his take-home pay. From his perspective, the push for a higher minimum wage is certainly understandable.

But consider this: He and his wife live in a small condo in a modest 55-plus community. Once a week, an army of workers descends on the condominium complex to mow the grass and perform the maintenance for the entire community. Those workers would also have to be paid more, and those costs would be passed on to my friend and his neighbors via their association dues.

No matter where they go to spend money—the grocery store, the occasional restaurant, or the gas pump—prices will reflect the minimum wages of others, and the cycle will continue. Soon, $15 per hour will mean the folks in Seattle are no better off than they were before. And what’s worse, young people who need job experience are not going to get it.

Sad to say, the few seniors I know who must work were never poor during their first careers. Many enjoyed excellent salaries, but they never learned to live within their means. Now that lifestyle has caught up with them.

Moreover, nearly every politician running during the upcoming mid-term elections (and every other election) seems to have a plan to “fix” Social Security. That’s a code for reducing benefits, making the minimum wage and subsequent price increases all the more relevant to seniors living on fixed incomes.

Meanwhile, the minimum wage will continue to rise. Some may benefit in the short term, but working seniors and retirees alike will all watch their cost of living rise. My team of Miller’s Money Forever analysts and I have a solution, though: a singular investing approach specifically curated for seniors and savers who want a higher monthly income stream without taking on post-retirement jobs or undue financial risks.
Click here to learn more about my favorite money-making strategy now and start down your path to a rich retirement today.


The article Why Seattle’s Minimum Wage Hike Matters to Seniors was originally published at millersmoney.com.

Central Bank Smackdown

By John Mauldin

Smackdown: smack·down, ˈsmakˌdoun/, noun, US informal
1. a bitter contest or confrontation.
"the age-old man versus Nature smackdown"
2. a decisive or humiliating defeat or setback.

The term “smackdown” was first used by professional wrestler Dwayne Johnson (AKA The Rock) in 1997. Ten years later its use had become so ubiquitous that Merriam-Webster felt compelled to add it to their lexicon. It may be Dwayne Johnson’s enduring contribution to Western civilization, notwithstanding and apart from his roles in The Fast and The Furious movie series. All that said, it is quite the useful word for talking about confrontations that are more for show than actual physical altercations.

And so it is that on a beautiful July 4 weekend we will amuse ourselves by contemplating the serious smackdown that central bankers are visiting upon each other. If the ramifications of their antics were not so serious, they would actually be quite amusing. This week’s shorter than usual letter will explore the implications of the contretemps among the world’s central bankers and take a little dive into yesterday’s generally positive employment report.

BIS: The Opening Riposte

The opening riposte came from the Bank for International Settlements, the “bank for central banks.” In their annual report, released this week, they talked about “euphoric” financial markets that have become detached from reality. They clearly – clearly in central banker-speak, that is – fingered the culprit as the ultralow monetary policies being pursued around the world. These are creating capital markets that are “extraordinarily buoyant.”

The report opens with this line: “A new policy compass is needed to help the global economy step out of the shadow of the Great Financial Crisis. This will involve adjustments to the current policy mix and to policy frameworks with the aim of restoring sustainable and balanced economic growth.”

The Financial Times weighed in with this summary: “Leading central banks should not fall into the trap of raising rates ‘too slowly and too late,’ the BIS said, calling for policy makers to halt the steady rise in debt burdens around the world and embark on reforms to boost productivity. In its annual report, the BIS also warned of the risks brewing in emerging markets, setting out early warning indicators of possible banking crises in a number of jurisdictions, including most notably China.”

“The risk of normalizing too late and too gradually should not be underestimated,” the BIS said in a follow-up statement on Sunday. “Particularly for countries in the late stages of financial booms, the trade-off is now between the risk of bringing forward the downward leg of the cycle and that of suffering a bigger bust later on,” the BIS report said.

The Financial Times noted that the BIS “has been a longstanding sceptic about the benefits of ultra-stimulative monetary and fiscal policies, and its latest intervention reflects mounting concern that the rebound in capital markets and real estate is built on fragile foundations.”

The New York Times delved further into the story:

There is a disappointing element of déjà vu in all this,” Claudio Borio, head of the monetary and economic department at the BIS, said in an interview ahead of Sunday’s release of the report. He described the report “as a call to action.”

The organization said governments should do more to improve the performance of their economies, such as reducing restrictions on hiring and firing. The report also urged banks to raise more capital as a cushion against risk and to speed efforts to deal with past problems. Countries that are growing quickly, like some emerging markets, must be alert to the danger of overheating, the group said.

The signs of financial imbalances are there,” Mr. Borio said. “That’s why we are emphasizing it is important to take further action while the time is still there.”

The B.I.S. report said debt levels in many emerging markets, as well as Switzerland, “are well above the threshold that indicates potential trouble.” (Source: New York Times)

Casual observers will be forgiven if they come away with the impression that the BIS document was seriously influenced by supply-siders and Austrian economists. Someone at the Bank for International Settlements seems to have channeled their inner Hayek. They pointed out that despite the easy monetary policies around the world, investment has remained weak and productivity growth has stagnated. There is even talk of secular (that is, chronic) stagnation. They talk about the need for further capitalization of many banks (which can be read, of European banks). They decry the rise of public and private debt.

Read this from their webpage introduction to the report:

To return to sustainable and balanced growth, policies need to go beyond their traditional focus on the business cycle and take a longer-term perspective – one in which the financial cycle takes centre stage. They need to address head-on the structural deficiencies and resource misallocations masked by strong financial booms and revealed only in the subsequent busts. The only source of lasting prosperity is a stronger supply side. It is essential to move away from debt as the main engine of growth.

“Good policy is less a question of seeking to pump up growth at all costs than of removing the obstacles that hold it back,” the BIS argued in the report, saying the recent upturn in the global economy offers a precious opportunity for reform and that policy needs to become more symmetrical in responding to both booms and busts.

Does “responding to both booms and busts” sound like any central bank in a country near you? No, I thought not. I will admit to being something of a hometown boy. I pull for the local teams and cheered on the US soccer team. But given the chance, based on this BIS document, I would replace my hometown team – the US Federal Reserve High Flyers – with the team from the Bank for International Settlements in Basel in a heartbeat. These guys (almost) restore my faith in the economics profession. It seems there is a bastion of understanding out there, beyond the halls of American academia. Just saying…

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.


The article Thoughts from the Frontline: Central Bank Smackdown was originally published at mauldineconomics.com.

Doug Casey: “America Has Ceased to Exist”

By Doug Casey, Chairman

“America is a marvelous idea, a unique idea, fantastic idea. I’m extremely pro-American. But America has ceased to exist,” says Doug Casey. Watch him in this fascinating interview with Reason TV’s Nick Gillespie discuss the political, social, and economic challenges the US must conquer as well as lessons we can learn from failed states.

A severe economic and/or political crisis can sneak up on you before you know it. Learn from the three harrowing stories of international crisis survivors—and the insightful comments of experts like Doug—how to recognize a crisis in the making. You may need those skills soon because it can, and will, happen here… Watch Meltdown America, a 30-minute free documentary that predicts the economic and political unraveling of the US.

The article Doug Casey: “America Has Ceased to Exist” was originally published at caseyresearch.com.