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January
16
2019

Side-Step the Financial and Political Circus
David Schectman

It’s a small sample size, but recently, gold and silver started to move up along with the stock market is. In the big picture, gold and the Dow move in opposite directions. Who are buying stocks now? The hedge funds will buy and sell on a headline, A quote from the Fed or on major moving average changes, but I can’t help but wonder if a nudge or two from the PPT to halt and fall and get it moving up isn’t the real energy behind this? That’s right out of JPMorgan’s playbook. Silver is such a small market that it is easy for JPMorgan to short silver until the price drops sufficiently for the managed money hedge funds to join in on the selling. They are the momentum moving the market, or specifically in this case, capping the rallies. 

There is no “long-term” to this market. It’s a day-traders play pen. Even if stocks move up, in the short-term, if you participate you are playing a form of Russian Roulette. Just hope that you can get out before it’s too late. At some point, a pull back or correction will turn out to be a collapse. Just like silver in 2012

The end game is clear. Debt is being monetized globally and every currency in the world is expanding rapidly. It’s just a matter of time until people realize that their currency is not a store of value, and they rush to the exit. Only the early ones will get out. The surprising thing is how long this has held together. No matter how many trillions are added to the money supply, and how much more debt is created, people still believe in the dollar as a store of value. Outside of our small industry, who is warning them about the impending dangers? John Rubino is. Here are some of the highlights from his interview with Greg Hunter (see below)

“Whether we have three more years of growth or a recession next year, we are going to see massive new deficits and massive increases in government debt all over the world. This is coming at a time when we have already hit record levels of debt and blown right through previous record levels. The last crisis, that almost ended the global financial system, was debt driven. The next one is going to be that much, much more serious because we basically doubled the amount of debt that’s out there since 2005 and 2006.

Rubino says “We are going to see chaos.” And chaos is good for precious metals. He also says people will lose faith in their currencies.

“The pressure is going to be on currencies when the financial system starts to spin out of control next time. In other words, people are going to see the amount of debt we are taking on, see the amount of currency we are creating to service all this debt, and will wonder what that does to the value of the currencies that are being aggressively created. They will lose faith in those currencies. What is unique about this time, countries have screwed up their currencies since the beginning of time…but this time around, they are all doing it.
Greg Hunter

Rubino: “We Are Going To See Chaos”

Financial writer John Rubino says no matter what country, the global debt has exploded to record highs, and it’s going to go even higher in the coming years.

Rubino contends, “Government debt is going to soar going forward no matter what…”

“Whether we have three more years of growth or a recession next year, we are going to see massive new deficits and massive increases in government debt all over the world. This is coming at a time when we have already hit record levels of debt and blown right through previous record levels. The last crisis, that almost ended the global financial system, was debt driven. The next one is going to be that much, much more serious because we basically doubled the amount of debt that’s out there since 2005 and 2006.”

On the political front, Rubino says, “The idea that things get more extreme from here is not that out of the ordinary and not that hard to believe…”

“We are not just going to see gridlock here in the U.S., we are going to see chaos. That means of the things that should be gotten done, very few of them will be..

Political chaos is good for precious metals . . . both metals are way undervalued.”

Few would disagree, that at some point, the financial system is going to explode.

Rubino says, “Let’s look at what happens when this finally blows up…”
“The pressure is going to be on currencies when the financial system starts to spin out of control next time. In other words, people are going to see the amount of debt we are taking on, see the amount of currency we are creating to service all this debt, and will wonder what that does to the value of the currencies that are being aggressively created. They will lose faith in those currencies. What is unique about this time, countries have screwed up their currencies since the beginning of time…but this time around, they are all doing it. Every major country in the world has a printing press, which is to say an unlimited credit card. They are maxing out that credit card…and they are doing it simultaneously.”

In closing Rubino says,

“All we have left is to wipe the slate clean and say, you know what, this thing did not work. It’s a 60-year experiment that turned out to have a fatal flaw, which is you can’t hand a printing press to a government.”

Jerome Powell was given a chance to “normalize” interest rates (increase them) and gently deflate the stock market and bond market bubbles. Alas, it looks like he succumbed to political pressure from The Donald. Let’s keep the party going a bit longer. Who cares what price we pay down the road.

I think it’s kind of scary that these computer-program-driven hedge funds play with huge amounts of investors’ money moving in and out of the market on a vague quote from the Fed. There is no concern for what’s down the road. But “down the road” does not feel far off now. We are a society of instant gratification. But we know how this will end. Rubino hit the nail on the head. 

Since precious metals (physicals) are my chaos “insurance policy” I don’t pay any attention to these short-term fluctuations. The numbers say it all. We will never generate enough growth to defuse the ever-growing debt bomb. 

Check out the following two Zero Hedge articles.

Jerome Powell Caves to the Market — Jim Rickards

Fed Chair Jay Powell just sent the most powerful signal from the Fed since March 2015.
He has pretty much taken a March 2019 rate hike off the table until further notice. At a forum hosted by the American Economic Association in Atlanta last Friday, Powell used the word “patient” to describe the Fed’s approach to the next interest rate hike.

When Powell did this, he was reading from a script of prepared remarks in what was otherwise billed as a “round-table discussion.”

This is a sign that Powell was being extremely careful to get his words exactly right. When Powell said the Fed would be “patient” in reference to the next rate hike, this was not just happy talk. The word “patient” is Fed code for “no rate hikes until we give you a clear signal.”

This was a signal that there would not be a rate hike at the next FOMC meeting. Investors could do carry trades safely. Only when the word “patient” was removed was the Fed signaling that rate hikes were back on the table.

In that event, investors were being given fair warning to move to risk-off positions.

This is another article from Jim that showed up in the public domain on the dailyreckoning.com Internet site yesterday — and it’s worth reading as well. Another link to it is here.
2019 Headwinds Are Getting Stronger — Jim Rickards

Much of the global slowdown has to do with the high degree of interconnectedness of the global economy and the extent of global supply chains. The flip side of synchronized growth is a synchronized slowdown. Just as growth in one economy can lead to increased exports for trading partners, a slowdown leads to reduced exports.

Still, why has growth slowed down at all?

The answer has to do with debt, Fed policy, political developments, as well as trade wars.
Specifically, the U.S. and China, the world’s two largest economies, are discovering the limits of debt-fueled growth.

The U.S. debt-to-GDP ratio is now 106%, the highest since the end of the Second World War. The Chinese debt-to-GDP ratio is a more reasonable 48%, but that figure is misleading because it does not include the debts and guarantees of provinces, state-owned enterprises, banks, wealth management products and numerous other entities that the government in Beijing is directly or indirectly obligated to support.

When that additional debt is taken into account, the real debt-to-GDP ratio is over 250%, about the same as Japan’s.

Debt-to-GDP ratios below 60% are considered sustainable; ratios between 60% and 90% are considered unsustainable and need to be reversed; and ratios in excess of 90% are in the red zone and will produce negative growth along with default through nonpayment, inflation or other forms of debt repudiation. The world’s three largest economies – the U.S., China and Japan – are all now deep in the red zone.

This very worthwhile commentary from Jim put in an appearance on the dailyreckoning.com Internet site on Tuesday — and another link to it is here.

Is This Why Gold Just Had Its Best Month In 2 Years?

by Tyler Durden

Spot Gold prices rallied for three straight months to end 2018, with December seeing the biggest monthly gold gains in around two years (since Jan 2017)…

At the same time, China’s official gold reserves rose for the first time in around two years (since Oct 2016)…READ FULL ARTICLE HERE

Gold is forming a base, below $1,300 now. It will take a while, and a few failed attempts to break through the barrier, but it will happen and then $1,357 is the next target – gold’s high point in 2018.

Todd ‘Bubba’ Horwitz

Gold Hits $1,300 And Falls

Our $1,300 target in gold has been achieved and the metal is now selling off a little, which is no surprise. Gold should now go into a consolidation pattern for some time before making its next move to the upside. At the same time, silver almost reached our target of $16, trading as high as $15.96.

The metals are in a bull market now and we see no reason for this pattern to change anytime soon. The metals should start to churn in congestion as they prepare for the next leg up. This action is very healthy and should lead to another leg up.

Technically speaking, the patterns for gold and silver are very bullish. Now that they have both met our upside targets, a period of congestion should ensue, setting up for another breakout to the upside. The levels we are watching are $1,280 gold and $15.60 silver.

Death by 1,000 cuts. One by one, countries are abandoning the dollar as a means to settle international trade. Russia, China, Venezuela, Turkey and the list keeps growing. As the dollar starts to head down in earnest, gold will rise. The only event I can see that could slow this process down would be for the euro to collapse. The dollar will be the best of a bad lot.

Zero Hedge

India Begins Paying For Iranian Oil In Rupees

Three months ago, in Mid-October, Subhash Chandra Garg, economic affairs secretary at India’s finance ministry, said that India still hasn’t worked out yet a payment system for continued purchases of crude oil from Iran, just before receiving a waiver to continue importing oil from Iran in its capacity as Iran’s second largest oil client after China. READ FULL ARTICLE HERE

Prior to founding Miles Franklin, David was a Senior Broker at a well-known firm where trained the firm’s 60 plus brokers in economic theory and appeared regularly on national radio and at major investment seminars. David continues to educate buyers and provide investment strategies through blog posts and contributions to the Miles Franklin Newsletter.

 

 

 

www.milesfranklin.com