Wednesday, July 11, 2018
Tuesday, February 16, 2016
However, Central bankers have been able to inject massive sums of money into the system, and the inflationary effects have been greatly minimized because the banks have not lent this money out to the masses. In fact, we have a deflationary situation, and that is why the precious metals sector collapsed, and prices are likely to remain off their highs for some time come. It is hard for Gold and other commodities to rally when inflation as the BLS measures and defines it is non-existent.
We disagree with their fraudulent system which really does not take core factors into consideration, but that is a topic for another day. What matter is that the Masses accept this data without mounting a contest, so as far as the markets are concerned, inflation is well under control. The negative interest wars that Central bankers have gladly embraced will add further pressure on commodities. Imagine having to pay banks interest to keep your money with them. Well, this is what is happening in Japan and Sweden.
Wednesday, May 19, 2010
Watch out for emergencies. They are your big chance.
While everyone is focusing on the so called obvious factors, they have missed the most important factor; the real reason behind the crisis. The crisis started in Greece and the top EU members knew they were going to bail out Greece and potentially any other member that needed help, but they pretended that they would not. One of the obvious reasons for the bailout was not to protect Greece, but to save the bond holders; most of the bond holders are foreigners. That’s the same reason the banks were bailed out in the US, to protect the large shareholders; it’s all a game of smoke and mirrors.
Our hypothesis is that the main reason that the Euro crisis was allowed to evolve was to deflate the Euro. Note that we have stated many times in the past that we have now entered into the competitive currency devaluation era, where the theme is or will soon be “devalue or die”. Or maybe we should add “devalue or die trying to”, for nations are going to do whatever it takes to keep their products competitive in the global market. We recently spoke of this phenomenon in two separate articles Currency-devaluation-a-race-to-the-bottom and the devalue or die era is picking up steam
Germany was knocked out of the top place and replaced by China as the world’s largest exporter and that must have hurt. Thus by allowing the crisis to progress, the EU could, in fact, devalue the Euro without actually issuing new currency. And then when things started to look really bad, they could pretend to help by approving a huge package, but this package would now devalue the euro even more. Thus with one stone they killed two birds in the sense that it produced double the effect. If they had approved a bailout package immediately, the euro would not have shed as much as it did. In a matter of months the Euro dropped almost 24%; in the currency markets, this is considered to be a very large move.
Another factor to consider is that no government wants to pay its debt in a stronger currency; governments borrow money so that they can pay it back with cheaper currency.
Thus while one currency might appear to be appreciating against another; the truth is that they are all falling down, some faster than others. Take a look at some long term commodity charts, and you will notice that most of them are in up trends, regardless of which currency they are priced. For example, a 3 year chart of gold priced in any currency shows that it's in an uptrend. The race to the bottom has picked up in intensity. We would not be surprised now if some sort of crisis hits Asia soon; this would complete the circle perfectly. A position in precious metals is recommended; view this as a hedge/insurance against another potential crisis; if you have no position wait for a pull back before deploying new money.
Crises refine life. In them you discover what you are.
Allan K. Chalmers
Ultimate futures timing system
Tuesday, May 18, 2010
From top to bottom of the ladder, greed is aroused without knowing where to find ultimate foothold. Nothing can calm it, since its goal is far beyond all it can attain. Reality seems valueless by comparison with the dreams of fevered imaginations; reality is therefore abandoned.
Emile Durkheim,1858-1917, French Sociologist
Let’s do some simple math.
There are roughly 910 million shares of apple in existence and the entire company has a valuation of 231 billion dollars.
To put things into perspective let’s examine the valuation of the following companies.
Valuation in billions
The worlds largest Gold company
One of the world’s largest Silver producers. It has over 269 million ounces of silver in reserve.
one of the worlds chemical giants
One of the worlds top copper producers
One of the worlds largest uranium producers
North Americas largest Palladium producer
One of the worlds largest sellers of oil and gas services
Largest producer of Natural gas in the US
One of the largest refiners in the US
The largest tax preparer in the US
A large producer of Iron
One of the worlds largest agricultural conglomerates
All the above companies put together would still have a valuation lower than that of AAPL. Roughly, they would have a combined valued of 214 billion. If one had to choose between buying AAPL and all the above companies, the wise choice would be to dump AAPL and jump into the above companies, especially since we are in the midst of a commodity bull. With left over change, you could purchase HL, KGC, RGLD, and you still would have some money left over.
Some other facts to consider
BHP is the largest mining company in the world and yet its valuation is well below that of AAPL, as of Monday it has a valuation of 182 billion shares.
You would be able to buy all the following Gold mining companies and still have a huge amount of change left.
- Barrick Gold $40 billion
- Goldcorp $29.478 billion
- Kinross Gold $13.50 billion
- Agnico-Eagle Mines Limited 9.84 billion
- Eldorado Gold Corporation $7.95 billion
- Yamana Gold Inc. $8.17 billion
- IAMGOLD Corporation $6.87 billion
- Red Back Mining Inc $5.80 billion
- Osisko Mining Corp. $2.86 billion
- Centerra Gold $3.03 billion
What would you do given the choice; buy apple or purchase a stake in some of the top commodities based companies in the world.
Sunday, May 16, 2010
All pain is either severe or slight, if slight, it is easily endured; if severe, it will without doubt be brief.
Marcus T. Cicero,c. 106-43 BC, Great Roman Orator, Politician
As the saying goes, a picture speaks a thousand words and the charts below quite clearly illustrates that the Dow has not put in a single new high in the past 3 years.
When the Dow is priced in Gold all we get is a long term down trend line. This clearly illustrates how the masses are being fooled into believing that these illusory highs are real highs.
When the Dow is priced in Canadian dollars, we also get a similar picture though not as striking as when it’s priced in Gold.
When priced in Australian dollars the picture is almost as striking as when it’s priced in Gold. These charts clearly illustrate the sinister nature of inflation; your wealth is literally being stolen right in front of your eyes.
Inflation the silent killer tax is being used to fleece the masses; you work hard for your money, you pay taxes and instead of getting a pat on your back you get a kick in the cahones. Welcome to the real world. The way to protect oneself from this insidious disease is to stay one step ahead of the central bankers. Precious metals are one way to hedge oneself, but they are not the only way and not always the best option. For example, from the mid 1990’s to 1999 the dot.com era was a good way to stay ahead of the inflation game, and then from 1998 to roughly 2006, real estate was a good bet, and so on. Given the rate at which new money is being created and the fact that many nations are reaching the point of no return in terms of paying back their debt, it would be extremely wise to have a position in precious metals (Gold, Silver, etc). In fact, having a position in any commodity is a good idea for the current commodity bull still has a long way to go before a long term top is put in.
You know the world is going crazy when the best rapper is a white guy, the best golfer is a black guy, the tallest guy in the NBA is Chinese, the Swiss hold the Americas Cup, France is accusing the U.S. of arrogance, Germany doesn’t want to go to war, and the three most powerful men in America are named Bush, Dick, and Colon.
Chris Rock Comedian
Observation more than books and experience more than persons, are the prime educators.
Amos Bronson Alcott,1799-1888, American Educator, Social Reformer
There is a need for a quantum leap in the governance of the euro area," European Central Bank (ECB) President Jean-Claude Trichet told Der Spiegel magazine.
Echoing his call, ECB Executive Board member Juergen Stark said turbulence in the euro zone would calm down only if member countries reformed their economies and cut their deficits.
"We have bought time, nothing more," he said in an interview with the Frankfurter Allgemeine Sonntagszeitung.
Euro zone governments agreed a 750 billion euro ($1 trillion) rescue last weekend to end a crisis of confidence in the euro triggered by financial problems in Greece, which had threatened to envelop the region's much bigger economies.
"It is not an attack on the euro," he said. "It is clear that it is the primary responsibility of the Europeans to take the appropriate measures in order to counter the present severe tensions which have erupted in Europe."
Trichet has long urged euro zone governments to cut budget deficits to stop debt piling up. The failure of the Greek government to take this advice led to a debt crisis that risked spreading to other euro zone countries with similar problems.
"There need to be major improvements to prevent bad behaviour, to ensure effective implementation of the recommendations made by 'peers' and to ensure real and effective sanctions in case of breaches."
In Zagreb, EU Economic and Monetary Affairs Commissioner Olli Rehn said bailouts had to be harsh to avoid encouraging reckless behaviour by governments.
Exactly, we could not have said it better; if any help is offered (we are against this, but if the measures implemented are harsh enough it might just work) the restrictions should be so painful that it will make others think twice before breaking the rules. So far, all we have is talk; let’s see if it turns into action.
Now the head of European central bank finally agrees with what we have been saying all along. As we have stated before when bankers make comments that actually make sense one should pay heed to them. We feel that only a severe lesson will be sufficient enough to trigger the other laggards into finally pushing in long term meaningful measures to balance their budgets. Until then they will nod yes but in terms of actions nothing will change; it will be the business as usual.
The Euro has already hit one of our targets; when it was trading at or close to new highs we stated that it would trade down to the 120 ranges before putting in a bottom. However, the picture has changed slightly, and it now appears that the Euro could potentially trade down to the 115 ranges. We recommended shorting the Euro Via Euo several times, but at this point in the game, we think it’s a bit late to open up new positions, unless the Euro mounts a strong rally over the next few weeks.
Saturday, May 15, 2010
Try not to become a man of success but rather to become a man of value.
Higher Gold and Petrol prices are some of the clear signs that inflationary forces are gathering steam. Do not confuse inflationary forces with inflation; inflation is defined as an increase in the supply of money.
There are several reasons why inflation could become a threat in the years to come
1) Government spending is going through the roof; they seem to think that we will never have to pay this money back.
2) Unfunded liabilities for Medicare, social security, etc, add up to over $108 trillion. This is a ticking time bomb for everyone claims that our national debt is high but in comparison to the unfunded liabilities, the national debt is child’s play.
3) As the Fed has dropped interest rates almost to Zero, it has very little firepower left. It could take rates to the negative level and pay people to borrow money; this will really stimulate the economy in the short run before burning it up completely. However, this option is more of a dream than a reality. The truth is that fed is almost out of options. If the economy should slow down and move back into a recessionary phase, then the only option available would be to print boat loads of money. The net result would be stagflation; higher inflation and slow growth and also the odds of entering a hyperinflationary phase would go up significantly.
Look at the price of Petrol; when oil was trading at $140, petrol was selling for 3.30-3.50 a gallon. Oil recently did not even make to $85 but the cost of petrol is already 3 plus dollars a gallon. Based on this it would be fair to state that when oil trades back to the 140 ranges, the price could surge to the $6-$7 ranges.
Many point out that we could face deflationary scenario for years to come. Well, this might be true; there is nothing wrong with hedging yourself, that’s what investing is all about. One should not bet all of one's money on a single strategy.
In an inflationary and hyperinflationary environment, commodities perform very well. Having positions in precious metals, base metals, energy, and select agricultural stocks would be a good way to protect hedge oneself. One should also have some of their assets in pure bullion (Gold, Silver, etc.).
For those who are against precious metals, one other option is to invest in TIPS and one of the ways of doing this is through TIP, iShares Barclays TIPS Bond Fund.
You cannot have what you do not want.
John Acosta, Poet
We have positions in Gold and Silver bullion