Gold: Time to Prepare for Big Gains?

By Casey Research

Years of a severe downturn in the gold market have left very few bulls to speak out in favor of the yellow metal. Here are some positive opinions on the future of the precious metal, from the recently concluded Casey Research Fall Summit.

David Tice, founder of the Prudent Bear Fund, believes we are heading for a “global currency reset” that will reduce the role of the dollar in global trade. Central banks, he says, don’t possess all the gold they claim to, and the unwinding of the paper gold market probably isn’t far down the road—it could even ignite the next major crisis.

The paper gold market (for example, exchange-traded funds like GLD) has massive leverage, with a ratio of 90:1 or 100:1 of paper claims on gold bullion. If only a small fraction of owners convert their paper to physical gold, says Tice, it will create a “no bid” price environment and cause the price of gold to explode.

He believes that once the paper gold market collapses, gold will be priced on the basis of supply/demand for the physical metal—which means it could be headed for $3,000 to $8,000 per ounce.

Ed Steer, editor of Casey Research’s popular e-letter Gold and Silver Daily, is equally bullish on gold… in the long term, because right now, he believes the gold market to be rigged: “Central banks intervene; that’s what they do.”

They control not only gold, but also silver, platinum, palladium, copper, and oil. He says there are two possible reasons that Germany hasn’t gotten its gold back that it had stored in the US—either the gold doesn’t exist or there’s so much paper written against it that it can’t be moved for collateral reasons.

While there’s not much an investor can do about gold manipulation, Steer believes that the manipulators’ schemes will blow up in their faces sooner than later.
Summit regular Rick Rule, chairman of Sprott US Holdings, isn’t worried about the bear market in gold.

“What matters is your response to the bear market,” he says. “If you have the wits, courage, knowledge, and cash to take advantage of them, bear markets are great.”
He’s keeping his eyes peeled on junior gold mining stocks, which, he says, are hugely attractive right now.

“Our market has fallen by 75% in three years. That means it’s 75% more attractive than in 2010, when we were all in love with it. Within a few years, we’ll look back on today’s low prices as the good old days.”

Louis James, chief investment strategist of Casey’s Metals & Mining division, also welcomes the opportunities to buy low that the current slump in gold prices provides.

He personally owns stock of three of the junior miners present in the Map Room at the Casey Fall Summit. All three of them have exceptionally high-grade projects that are delivering what they promised.

To get all of Louis James’ stock picks (and those of the other speakers), as well as every single presentation of the Summit, order your 26+-hour Summit Audio Collection now. It’s available in CD and/or MP3 format. 


Learn more here.

The Broken State and How to Fix It

By Casey Research

The United States of America is not what it used to be. Unsustainable mountains of debt, continuous meddling by the government and Fed to “stimulate the economy,” and the US dollar’s dwindling status as the world’s reserve currency are very real threats to Americans’ standard of living. Here are some opinions from the recently concluded Casey Research Fall Summit on the state of the state and how to fix it.

Marc Victor, a criminal defense attorney from Arizona and a staunch liberty advocate, says there’s really no such thing as “the state”—“it’s just some people bossing other people around.”
Not everyone wants to fix things, he says; the bosses like the status quo. For example, aside from drug lords, DEA agents are the ones benefiting most from the “War on Drugs.”

Victor believes that democracy and freedom are incompatible, since “democracy is majority rule, and freedom is self-rule.” If you want to bring true freedom to America, he says, winning hearts and minds is the only way to reboot this country and create a free society.

Paul Rosenberg, adventure capitalist, Casey Research contributor, and editor of “A Free Man’s Take,” views America’s future similarly. He thinks the United States is in a state of entropy.
The bad news, says Rosenberg, is that there will be no revolution. The good news is that the peak of citizens’ obedience to the state is behind us, and people are getting fed up with the government’s shenanigans.

Real change is slow, he says, so we must work persistently to create a better world.

Stephen Moore, chief economist at the Heritage Foundation, says the problem is liberal economic policy: Red states in the US, he says, have blown away blue states in job creation since 1990. Texas alone accounts for the entire net growth of the US economy over the past five years.

As another proof point in favor of a free-market economy, Moore emphasizes that both Obama and Reagan took office during terrible economic times. While Obama has raised taxes and instituted Obamacare, Reagan cut taxes and regulation. As a result, the Reagan economic recovery was almost twice as robust as the Obama “recovery.”

One of the US’s biggest problems, says Moore, is that companies can’t reinvest profits because dividend, capital gains, and income taxes all have increased under Obama. Corporate taxes in the rest of the world have dramatically declined in the last 25 years, but in the US, they haven’t budged. The average corporate tax rate around the world is 24%—in the US, it’s 38%.

Overall, though, Moore is bullish on the US economy. American companies, he says, are the best-run in the world, if only the US government would adopt less economically destructive policies.

Doug Casey, chairman of Casey Research, legendary speculator, and best-selling financial author, isn’t so optimistic. First of all, he says, we’re in the Greater Depression right now, which began in 2008. He fears it’s too late to repair America, but says if anyone would attempt to do so, the following seven-step program would help:

• Allow the collapse of “zombie companies” (companies that are only being held up by government handouts and other cash infusions).

• Abolish all regulatory agencies.

• Abolish the Federal Reserve.

• Cut the size of the military by at least 90%.

• Sell all US government assets.

• Eliminate the income tax.

• Default on the national debt.
• 
  

Of course, says Casey, that’s not going to happen, so individual investors shouldn’t hope for a political solution or waste their time and money trying to stop the inevitable collapse of the US economy. The only way to save yourself and your assets is to internationalize.

He recommends owning significant assets outside your home country: for example, by buying foreign real estate. You should also buy and store gold, “the only financial asset that’s not simultaneously someone else’s liability.”

Casey’s suggestions include going short bubbles that are about to burst (like Japanese bonds denominated in yen), selling expensive assets like collectible cars and expensive real estate in major cities, as well as looking toward places like Africa as contrarian investment opportunities.

Nick Giambruno, senior editor of International Man, agrees that internationalizing your wealth—and yourself—is the most prudent way to go for today’s high-net-worth investors. It ensures that “no single government can control your destiny,” and that you put your money, business, and yourself where they are treated best.

You should internationalize each of these six aspects of your life, says Giambruno: our assets; your citizenship; your income/business; your legal residency; your lifestyle residency; and your digital presence.

Regarding your assets, you can find better capitalized, more liquid banks abroad, and using international brokerage accounts can provide you access to new investment markets.
To hear all of Nick Giambruno’s detailed tips on how to go global, as well as every single presentation of the Summit, order your 26+-hour Summit Audio Collection now. It’s available in CD and/or MP3 format.


Learn more here.

Thoughts from the Frontline: Sea Change

By John Mauldin

You don’t need a weatherman
To know which way the wind blows.

– Bob Dylan, “Subterranean Homesick Blues,” 1965

Full fathom five thy father lies.
Of his bones are coral made.
Those are pearls that were his eyes.
Nothing of him that doth fade,
But doth suffer a sea-change
Into something rich and strange.

– William Shakespeare, The Tempest

Did you feel the economic weather change this week? The shift was subtle, like fall tippy-toeing in after a pleasant summer to surprise us, but I think we’ll look back and say this was the moment when that last grain of sand fell onto the sandpile, triggering many profound fingers of instability in a pile that has long been close to collapse. This is the grain of sand that sets off those long chains of volatility that have been gathering for the last five years, waiting to surprise us with the suddenness and violence of the avalanche they unleash.

I suppose the analogy sprang to mind as I stepped out onto my balcony this morning. Texas has been experiencing one of the most pleasant summers and incredibly wonderful falls in my memory. One of the conversations that seem to occur regularly among locals who have a few decades under their belts here, is just how truly remarkable the weather has been. So it was a bit of a surprise to step out and realize the air had turned brisk. In retrospect it shouldn’t have fazed me. The air has been turning brisk in Texas at some point in October for the six decades that my memory covers, and for quite a few additional millennia, I suspect.

But this week, as I worked through my ever-growing mountain of reading, I felt a similar awareness of a change in the economic climate. Like fall, I knew it was coming. In fact, I’ve been writing about it for years! But just as fall tells us that it’s time to get ready for winter, at least in more northerly climes, the portents of the moment suggest to me that it’s time to make sure our portfolios are ready for the change in season.

Sea Change

Shakespeare coined the marvelous term sea change in his play The Tempest. Modern-day pundits are liable to apply the word to the relatively minor ebb and flow of events, but Shakespeare meant sea change as a truly transformative event, a metamorphosis of the very nature and substance of a man, by the sea.
In this week’s letter we’ll talk about the imminent arrival of a true financial sea change, the harbinger of which was some minor commentary this week about the economic climate. This letter is arriving to you a little later this week, as I had quite some difficulty writing it, because, while the signal event is rather easy to discuss, the follow-on consequences are myriad and require more in-depth analysis than I’ve been able to bring to them on short notice. As I wrestled with what to write, I finally came to realize that this sea change is going to take multiple letters to properly describe. In fact, it might eventually take a book.

So, in a departure from my normal writing style, I am going to offer you a chapter-by-chapter outline for a book. As with all book outlines, it will be simply full of bones but without much meat on them, let alone dressed up with skin and clothing. I will probably even connect the bones in the wrong order and have to go back later and replace a leg bone with a rib, but that is what outlines are for. There is clearly enough content suggested by this outline to carry us through the next several months; and given the importance of the subject, I expect to explore it fully with you. Whether it actually becomes a book, I cannot yet say.

I should note that much of what follows has grown out of in-depth conversations with my associate Worth Wray and our mutual friends. We’ve become convinced that the imbalances in the global economic system are such that the risks are high that another period of economic volatility like the Great Recession is not only likely but is now in the process of developing. While this time will be different in terms of its causes and symptoms (as all such stressful periods differ from each other in many ways), there will be a rhyme and a rhythm that feels all too familiar. That should actually be good news to most readers, as the last 14 years have taught us a little bit about living through periods of economic volatility. You will get to use those skills you learned the hard way.
This will not be the end of the world if you prepare properly. In fact, there will be plenty of opportunities to take advantage of the coming volatility. If the weatherman tells you winter is coming, is he a prophet of doom? Or is it reasonable counsel that maybe we should get our winter clothes out?

Three caveats before we get started. One, I am often wrong but seldom in doubt. And while I will marshal facts and graphs aplenty to reinforce my arguments, I would encourage you to think through the counterfactuals presented by those who will aggressively disagree.
Two, while it goes without saying, you are responsible for your own decisions. It is easy for me to say that I think the bond market is going to go in a particular direction. I can even bet my personal portfolio on my beliefs. I can’t know your circumstances, but if you are similar to most investors, this is the time to make sure you have a truly balanced portfolio with serious risk management in the event of a sudden crisis.

Three, give me (and Worth, whom I am going to draft to write some letters) some time to develop the full range of our ideas. To follow on with my weather analogy, the air is just starting to get crisp, and winter is still a couple months away. Absent something extraordinary, we are not going to get snow and a blizzard in Dallas, Texas, tomorrow. We may still have some time to prepare, but at a minimum it is time to start your preparations. So with those caveats, let’s look at an outline for a potential book called Sea Change.

Prologue

I turned publicly bearish on gold in 1986. At the time (a former life in a galaxy far, far away), I was actually writing a newsletter on gold stocks and came to the conclusion that gold was going nowhere – and sold the letter. I was still bearish some 16 years later. Then, on March 1, 2002, I wrote in Thoughts from the Frontline that it was time to turn bullish on gold. Gold at that time was languishing around $300 an ounce, near its all-time bottom.

What drove that call? I thought that the future directions of gold and the dollar were joined at the hip. A bit over a year later I laid out the case for a much weaker dollar in a letter entitled “King Dollar Meets the Guillotine,” which later became the basis for a chapter in Bull’s Eye Investing. As the chart below shows, the dollar had risen relentlessly through the early Reagan years, doubling in value against the currencies of America’s global neighbors, causing exporters to grumble about US dollar policy. Then the bottom fell out, as the dollar made new lows in 1992. From 1992 through 2002 the dollar recovered about half of its value, getting back to roughly where it was in 1967. Elsewhere about that time, I predicted that the euro, which was then at $0.88, would rise to $1.50 before falling back to parity over a very long period of time. I believe we are still on that journey.



One of the biggest drivers of economic fortunes in the global economy is the currency markets. The value of your trading currency affects every aspect of your business and investments. It is fundamental in nature. While most Americans never even see a piece of foreign currency, every time we walk into Walmart, we are subject to the ebb and flow of global currency valuations, as are Europeans and indeed every person who participates in the movement of goods and services around the globe. In fact, globalization means that currency values are more important than ever. The world is more tightly interconnected now than it has ever been, which means that events which previously had no effect upon global affairs can trigger cascades of events that affect everyone.

I believe we are in the early stages of a profound currency-valuation sea change. I have lived through five major changes in the value of the dollar in the 45 years since Nixon closed the gold window. And while we are used to 40% to 50% moves in the stock market and other commodity prices happening in just a few years (or less), large movements in major trading currencies typically take many years, if not decades, to develop. I believe we are in the opening act of a multi-year US dollar bull market.

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 –


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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