Wednesday, 24 May 2017

Martin Armstrong Rages: It’s Time to Take the Gloves Off!

No incoming President in history has ever been so constantly attacked than Donald Trump. Look, he says some stupid things and nobody is perfect. Still, there is a whole different agenda going on here with absolutely every issue being called a constitutional crisis worthy of impeachment.

Quite frankly, it is time to take off the gloves. Schumer demands a Special Prosecutor on this whole Russia nonsense that even Obama already said did not change any vote. What I would simply do is say fine, but also appoint a Special Prosecutor for Hillary Clinton standing trial for Treason selling influence that is obvious to everyone when as soon as she lost the election, he “charity” had to shut down. That was obviously pay-for-let’s make a deal. That was really Treason and let’s just see how many Democrats go down with the ship-Clinton.

This is not about Trump, every source I have is saying the same thing – this is an attempt to stop any reform process because the corruption in Washington runs so deep and they do not want anyone looking too closely.

The strategy is keep Trump occupied with scandal after sandal. The very fact that Trump called the NSA to inform them of his conversation with the Russian ambassador demonstrates that the NSA is out to get rid of Trump as is the CIA for they both ran to the New York Times and Washington Post. That in itself is Treason and putting National Security at risk far more than Trump warning Russia there was a plot to blow up one of their passenger planes again.


It’s time to take the gloves off. This is really war in Washington and it does not matter who is President, anyone trying to turn the money faucet off is not acceptable.

- Source, Martin Armstrong

Monday, 15 May 2017

Silver Demand Shows A Consumer In Trouble


Global demand for silver declined from 2015 to 2016 by 123 million ozs per numbers from the Silver Institute presented in an article on The Daily Coin yesterday. In fact, for the demand categories primarily driven by the consumer, demand plummeted 125 million ozs, or 15.3%. Industrial demand for silver increased slightly but this was because of the global expansion in the solar panel industry, primarily in India and China.

The consumer portion of global silver demand is derived from jewelry, coins and bars (investment), silverware and electronics. The 15.3% plunge in demand reflects the fact that consumer disposable income is drying up. After making required monthly expenditures – food, mortgage/rent, debt service, healthcare – consumers, especially in the United States, are out of money.

Disappearing disposable income explains only part of the equation. The illusion of economic improvement in the U.S. was created by debt issuance. Between Q3 2012 and now, total household debt expanded by $1.38 trillion dollars. In fact, total household debt is now at an all-time high, driven by auto, student, credit card and personal loans. The truth is that “discretionary” consumption was fueled by the Fed enabling the average U.S. household to accumulate a record level of debt.

The economy likely hit a wall in late 2016 and is now contracting. Today’s retail sales report – to the extent that the numbers have any credibility – showed a .4% gain in retail sales for April vs. March. But these are nominal numbers. On an inflation-adjusted basis, retail sales declined.

While demand for silver products reflects the fact that the average consumer is out of money, restaurant sales confirm this. April restaurant sales declined 1% in April and foot traffic into restaurants dropped 3.3%. This was the 12th month out of the last 13 that restaurant sales fell. Restaurant sales have dropped five quarters in a row. The last time a streak like this occurred was 2009-2010. Sound familiar?

Regardless of what the Fed says in public, the U.S. economy is in trouble. The illusion of economic growth post-2009 was a product of debt issuance. Now the consumer – 70% of the economy – has hit a wall with regard to its ability to take on more debt – look out below. In today’s episode of the Shadow of Truth, we review the silver demand numbers and discuss the implications for U.S. and global economy.

- Source, Sprott Money

Friday, 12 May 2017

Ron Paul - More Spending as Expected


Join Ron Paul and Daniel McAdams as they discuss a 'Bipartisan' Budget. Congress has reached agreement on a stop-gap spending bill through September. Why did they all agree? There is lots of money for everyone! What's in the bill? Let's see...


Monday, 8 May 2017

Future World Economic Growth In Big Trouble As Oil Discoveries Fall To Historic Lows

Future global economic growth is in serious trouble as oil discoveries fell to historic lows last year. The International Energy Agency (IEA) reported that the sharp downturn in capital spending by the conventional oil sector was due to extremely low oil prices.

As the oil price fell to $30 in 2016, oil companies cut their exploration and capital expenditures by 25-40%. For example, ExxonMobil, the largest oil company in the United States, cut their capital expenditures by 26% in 2016, from $26 billion in 2015 to $16 billion last year. This had a profound impact on new oil discoveries.

According to the IEA report:

Oil discoveries declined to 2.4 billion barrels in 2016, compared with an average of 9 billion barrels per year over the past 15 years. Meanwhile, the volume of conventional resources sanctioned for development last year fell to 4.7 billion barrels, 30% lower than the previous year as the number of projects that received a final investment decision dropped to the lowest level since the 1940s.

By taking the IEA’s oil discovery data and comparing it to the total amount of conventional oil consumed by the world in 2016, here is the following chart:


The world consumed 69 million barrels per day of conventional oil last year, which equaled a total of 25 billion barrels (source: IEA report above). Which means, conventional global oil discoveries of 2.4 billion barrels were less than 10% of total world conventional oil consumption. This is extremely bad news.

To understand the breakdown in the different oil types, the IEA provided the following data:

Conventional oil production of 69 mb/d represents by far the largest share of global oil output of 85 mb/d. In addition, 6.5 mb/d come from liquids production from the US shale plays, and the rest is made up of other natural gas liquids and unconventional oil sources such as oil sands and heavy oil.

Global Conventional oil production was 69 million barrels per day (mbd) of the total 85 mbd, which included natural gas plant liquids and other unconventional sources such as shale oil (U.S.), heavy oil and tar sands. Typically, conventional oil is the higher quality, cheaper to produce oil.

Now, what is even more alarming, is that global oil discoveries have been much lower than production for quite some time. The IEA also stated that the amount of world conventional oil discoveries averaged about 9 billion barrels for the past 15 years. If we assume that the world was producing 65 mbd of “conventional oil” for the past 15 years (it was likely higher), the world was only replacing about 38% of its annual oil consumption.

Here are the oil figures:

65 mbd X 365 = 24 billion barrels

9 billion average annual barrels oil discovery / 24 billion barrels consumed = 38%

So, not only did the world only discover 10% of the conventional oil it consumed last year, it has only been replacing a little more than a third of what it has been consuming for in the past 15 years. This is extremely bad news and it is starting to catch up to us.

I will be writing more energy articles showing how the situation is becoming more dire for the U.S. and global oil industries. I am waiting for the top U.S. oil companies to release their detailed SEC quarterly results in a week to provide more information, but they have already released some results.

For example, ExxonMobil cut its capital expenditures another 19% during Q1 2017 versus the same period last year. Falling exploration and capital expenditures will grind to a halt future oil discoveries. Investors need to understand that this will impact global economic growth quite negatively in the future.

- Source, SRSRocco

Friday, 5 May 2017

Economic Demise Breeds Public Unrest


The Government reported its “advance” estimate of first quarter 2017 GDP today. The data-monkeys at the Bureau of Economic Analysis (BEA) reported that the economy grew at just 0.7% annualized in Q1. This is down from the alleged 2.1% annualized growth rate in the fourth quarter of 2016. It was also 36% below the 1.1% forecast of the average Wall Street monkey economist.

Next to the monthly employment report, the GDP report is subjected to the highest degree of statistical manipulation in order to make the reported reality look better than reality itself. If the Government was willing to release a report showing a 67% decline in economic growth from Q4 2016 to Q1 2017, imagine how bad the real numbers would show the economy to be.

The report itself, like the employment report, serves no purpose other than as tool for political goal-seeking and propaganda. The consumer spending component of the report fell to a .23% annualized growth rate. It was the worst level of consumer spending since 2009. If the Government were to apply a realistic GDP deflator (price change index) to its numbers, rather than the 2% used to calculate the final number, consumer spending would have been negative.

Worse, the various Government agencies are reporting inconsistent numbers. The Census Bureau’s monthly retail sales report showed a .4% gain in retail sales for January followed by .3% and .2% declines in February and March, respectively. To be sure, retail sales do not encompass the entirety of the “consumer spending” category. But, with average real disposable income declining, it’s difficult to believe that consumers were spending money on anything other than necessities in Q1.

The problem with the phony economic reports is that eventually the public begins to see and feel the truth. Fake economic news does not create real economic activity or real jobs. The economic separation between the “haves” and “have nots” has never been wider, both in the size of each cohort and the degree of separation.

When someone who is working two menial part-time jobs to make ends meet and reads that 200k jobs were allegedly created in a given month, that person knows and feels the truth. That person also begins to get angry. In fact, the general level of anger across the U.S. population is rising at an alarming rate. When 2x part-time jobber is driving in a high-mileage vehicle in need of repairs next to a brand new Ferrari with “FLIPPER” on the license plate, it foments anger. When this occurs daily across the country, it foments civil unrest.

If the economy were producing real growth in employment and wealth, as purported by the Government, not many people would care which person or political party occupies the White House. In fact, the party in power would get credit. But the growing political discord among the population is a reflection of a middle and lower class that is rapidly transitioning to lower and poverty class – and they are getting pissed. The stock market bubble, which is another form of propaganda, is only serving to intensify the anger.

- Source, SD Bullion

Monday, 1 May 2017

Silver Takes the Elevator Down

Last week, we talked about the effect of the French election on the gold and silver markets, and noted:

Of course, traders want to know how this will affect gold and silver. As we write this, we see that silver went down 30 cents before rallying back up to where it closed on Friday. Gold went downabout $20, and then half way back up.

At this point, we are not sure if the metals are supposed to go up because more printing. Or go downbecause the euro constrains France from printing. Or silver at least should go up because the economy is going to be better with France remaining in the Eurozone. Or go down because the ongoing malaise will only progress as it has been. Or some other logic… and the price gyrations this evening show that traders don’t agree either.

It didn’t take too long. Here is what happened to silver this week. The graph below shows the price of silver in real money (i.e. gold).

The Price of Silver in Real Money


Silver has been falling for going on one year, but clearly since March 1. After one last hurrah at the end of March, it has been taking the elevator down. And by its fundamentals it should be quite a bit lower—0.0125.

In any case, we are interested in watching what the fundamentals of the metals are doing. We will take a look at the graphs below, but first, the price and ratio charts.

The Prices of Gold and Silver


Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. It had another major move up this week, after a major move up last week.

Last week, we said:

If prior peaks are an indication, there may be a spot of resistance at 72.5 (+0.8 above Friday’s close) and another at 73.25. If the ratio should go over these levels, then it may go all the way to its fundamental level (discussed below).

Well, it broke those levels and ended the week just under 74.

The Ratio of the Gold Price to the Silver Price


For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

Here is the gold graph.

The Gold Basis and Cobasis and the Dollar Price


The scarcity (i.e. the cobasis, the red line) was on the rise this week. It makes sense, that as the price of gold drops (which is the mirror of what this graph shows, the price of the dollar in gold milligrams) the metal becomes scarcer. This means speculators are selling their paper. If owners of metal were selling, then the metal would not become scarcer and might even become more abundant.

However, it only became a little scarcer while the price dropped almost twenty bucks. So our calculated fundamental price fell $15 to $1,274, a few bucks above the market price.

Now let’s look at silver.

The Silver Basis and Cobasis and the Dollar Price



In silver, the price fell a lot. 72 cents. The cobasis rose (i.e. abundance dropped and scarcity increased).

Last week, we asked:

Some speculators definitely got flushed. However, the question is how many and how much?

Clearly it happened to more of them this week. And, unless the fundamentals get stronger, it is likely to flush even more leveraged futures positions. Our calculated fundamental price fell three cents this week, now a buck thirty under the market.

- Source, Keith Weiner via The Sprott Money Blog

Thursday, 27 April 2017

Do Central Bankers Want War to Hide the next Global Financial Crises?


Rob Kirby former derivatives broker/dealer & institutional trader discusses the ridiculous short positions on silver where there is not enough silver in the world versus the amount of short contracts at the COMEX

Rob also believes that geopolitical rhetoric ratcheting up of possible war by the U.S. and cohorts could be a cover up for the next Global financial crises, which he thinks could happen very soon.


Monday, 24 April 2017

Russia Claims it Could Completely Disable US Navy With Electronic Warfare Tech



There is an old saying in war. “No battle plan ever survives contact with the enemy.” As China, Russia, and the United States beat the war drums and boast about the capabilities of their armies, they should take that saying very seriously. These geopolitical juggernauts may think that they have an ace in the hole for their militaries, but there’s no telling who would win in a war until the shooting starts.

In America’s case, our government puts a lot of faith in its expensive high-tech military. However, for decades countries like Russia and China have been developing cheap countermeasures to our best war machines, and they may be more effective than our politicians and generals would like to admit.

Or at least, that’s the takeaway from a Russian propaganda video that was released by Vesti, a media mouthpiece for the Kremlin. They claim that the Russian military has electronic warfare systems that can severely hinder the US Navy’s assets, including ships, planes and missiles.

The report claims that Russia has had a major breakthrough with this technology, which was demonstrated in an incident that occurred in the Black Sea in 2014. After Russia annexed Crimea the US deployed the USS Donald Cook to the area, and on April 12th, an unarmed Russian Su-24 fighter jet made a dozen very close range flyovers of the ship. Allegedly, the fighter jet was equipped with an electronic jamming device that disabled the ship’s AEGIS missile defense system. Though we know that the jet flew over the ship 12 times in a very provocative manner, the US government has never confirmed that the USS Donald Cook endured an electronic attack.

The report quoted a social media post from an unnamed sailor who was on the ship, which to be honest, sounded awfully fake, and doesn’t translate in a convincing way to English speakers.

“We watched the Russian on our locator until he reached the kill zone, to then ‘shoot him down.’ But when he entered the damned zone, mysticism began. Our locators were the first to go out, and then the whole Aegis went out. The pride of our fleet became our shame!”

The report also claims that Russia has electronic jamming equipment that can conceal their bases from radar, as well as devices that can jam signals to radio controlled landmines

Again, this is a work of propaganda, and shouldn’t be viewed without applying some critical thinking and research. However, to what degree that it is a work of fiction, is not clear. We don’t really know what the Russian military is capable of. Hopefully we’ll never find out.



Thursday, 20 April 2017

Why We’re Ungovernable: Europe Gets Its Doomsday Scenario

The rise of French far-right presidential candidate Marine Le Pen has made a lot of people nervous since, among many other things, she’s in favor of leaving the Eurozone, which would pretty much end the common currency. But since polling has shown her making the two-person run-off round but then losing to a mainstream candidate, the euro-elites haven’t seen any reason to panic.

Here, for instance, is a chart based on February polling that shows Le Pen getting the most votes in the first round, but then – when mainstream voters coalesce around her opponent – losing by around 60% – 40%. The establishment gets a bit of a scare but remains firmly in power, no harm no foul.


Then came the past month’s debates in which a previously-overlooked communist candidate named Jean-Luc Mélenchon shook up the major candidates by pointing out how corrupt they all are. Voters liked what they heard and a significant number of them shifted his way.

Mélenchon: Far-leftist surges in French polls, shocking the frontrunners (France 24) – In a presidential campaign with more twists than a French braid, Jean-Luc Mélenchon’s sudden play to become France’s third man — or better — is shaking up the race. With ten days to go before April 23’s first round vote, the colourful, cultured and cantankerous far-leftist has the frontrunners on the defensive.

Suddenly, the grumpy far-leftist — a showman in a Chairman Mao jacket who openly admired late Venezuelan populist leader Hugo Chavez — holds the mantle of France’s most popular politician. In the course of a whirlwind month, the 65-year-old Mélenchon surged nine spots to number one in weekly glossy Paris Match’s opinion poll. A full 68 percent of those surveyed hold “favourable opinions” of the far-left candidate, the poll by the Ifop-Fiducial firm showed.

On some polls, Mélenchon has now bypassed embattled conservative François Fillon for third place in a presidential race that will see the top two advance to the May 7 run-off.

An Ipsos poll on Tuesday put Mélenchon a half-point ahead of Fillon for third place in the race, behind National Front leader Marine Le Pen and the independent centrist Emmanuel Macron. With 18.5 percent, the far-leftist has gleaned 4.5 percent in just two weeks, with Macron and Le Pen tied on 24 percent.

Mélenchon wants to quit NATO, the World Trade Organization, the International Monetary Fund, the World Bank, and block European trade treaties with the United States and Canada. He promises a French referendum on whether to stick with the reworked EU he is pledging to negotiate or leave the bloc altogether.

Here’s a chart from the Washington Post showing just how tight the race for the run-off spots has become:


It’s still unlikely that both Le Pen and Mélenchon will make the run-off, but based on the above chart it’s suddenly possible. This would be the cultural equivalent of a Trump – Bernie Sanders race in the US, but with – believe it or not — even higher stakes because both Le Pen and Mélenchon would threaten the existence of both the Euro and the European Union, the world’s biggest economic entity.

So it almost doesn’t matter who wins that run-off. Just the prospect of having one or the other in charge would tank the Euro and set off a stampede out of Italian, Spanish and Portuguese bonds, possibly doing irreparable damage to the Eurozone before the eventual winner even takes power.

To repeat the theme of this series, when you screw up a country’s finances you take its politics along for the ride. In France, the right feels betrayed by open borders and excessive regulation, the left by an unaccountable elite that always seems to profit at everyone else’s expense. And both sides suffer from soaring debt at every level of society.

So if a fringe candidate doesn’t win this time around, the mainstream will just make an even bigger mess, raising the odds of a fringe victory next a few years hence.


- Source, John Rubio via the Sprott Money Blog

Friday, 14 April 2017

Rick Rule: Extremely Rare & Bullish Trading Pattern in Gold and Silver


President and CEO of Sprott US Holdings Rick Rule says gold, silver, and the US dollar rarely trade how they are trading right now…

Gold, silver, and the US dollar are all trading higher. This trading pattern is extremely bullish for gold and silver, Rule says.

Rule also notes the current strength in the US dollar is not reflective of economic strength. He explains why the US economy is actually weak. In addition, US dollar strength won’t last. With a national debt nearing $20 trillion and unfunded liabilities above $100 trillion, long term there is no practical option out of this debt besides devaluation.

- Source, Silver Doctors

Monday, 10 April 2017

The Real Reason The Federal Government Have Been Keen to Blame Russia for Everything: Gold





How would you feel if you had planned a gathering of your closest family and friends and your list of invites grows to include some 185 guests. You also invited your known trouble-making cousin. Your cousin shows up drunk, armed and belligerent. He begins harassing a good portion of the guests, smashes some of your prized possessions and then, as an added bonus, he shoots and kills 12 of your guests.

As your cousin is leaving the gathering, he takes your wallet and your wife’s purse. He also goes in your bedroom, opens your safe and removes all your gold and silver. Your cousin now has all your credit and debit cards and all the cash you had on hand. You can not conduct business in any manner. You can’t even pay the caterer for their services.

If this sounds like a horrific story, you’re right - it is. The drunken cousin is a metaphor for how the U.S. has been acting for the past several years and how it has treated countries around the world. Do you suppose some of these nations are more than a little tired of being treated in this manner? Do you suppose that instead of acting as this oppressive “cousin” acts that some of these countries would find it better to simply develop a way to leave the “gathering” in a peaceful manner and get on with their own business?

As we reported on March 30 China and Russia are taking steps to move away from their out of control “cousin”, the Federal Reserve Note, U.S. dollar, world reserve currency.

We learned in March 2016 that Kazakistan had been in formal talks with the Shanghai Gold Exchangeregarding gold as currency along the New Silk Road (One Belt One Road) spearheaded by China. Kazakistan also smelts most of Russia’s gold and mines a small amount gold annually and is a member of both the Shanghai Cooperation Organization (SCO) and Eurasia Economic Union (EEU).

Then, in October of 2016 we continued covering how China had been working directly with the IMF to get the yuan/renminbi currency added to the SDR basket of currencies for global trade. That now appears to be a cover story for what lay ahead. With the renminbi now a global currency that changes how the renminbi functions within the currency markets and in global trade negotiations.

For the better part of the past year it has seemed as if the mainstream media, with talking points from the federal government, had been 100% obsessed with “Russia did it!!” “It” could be anything as the story has morphed so many times it’s hard to keep track. The “it” is not near as important as the cheerleading by the MSM to remind the public Russia is to blame!

The Russian obsession has, for the past several months, been running along side a new “enemy” – China. China and the South China Sea has been another point of beating war drums for the mainstream media. We now have two new enemies outside of Syrian President Assad, Iran, Iraq, Libya and whoever else we feel we need to bully. The whole list of enemies continues to grow even though there are exactly zero threats to the U.S. from any of these countries.

China began working their CIPS system, global trade settlement system, in October 2016, the same time the renminbi joined the SDR basket, allowing China to conduct global trade outside the U.S. owned and operated SWIFT system. Both systems are used to settle global trade transactions and the SWIFT system has been geared to the Federal Reserve Note – U.S. dollar – while the CIPS system is geared to the Chinese renminbi.

- Source, Sprott Money

Wednesday, 5 April 2017

Jim Rickards Warns Financial Calamity is Coming


Financial expert James Rickards is adamant that a financial shutdown and calamity is “Coming Sooner Than Later…”


Friday, 31 March 2017

Alasdair Macleod’s Market Report: Physical Demand Underwriting Prices

Gold and silver continued their rally this week, with Tuesday an especially strong day. Initially, gold was marked down to $1228 before buyers stepped in, and on heavy futures volume the price rose to $1247. Comex open interest that day rose by 16,494 contracts.


On the week, gold is up $14 from last Friday’s close by early European trade this morning, at $1243. Silver rose from $17.40 to $17.59 over the same timescale. Silver’s underlying strength relative to gold has picked up again, with the price tending to rise slightly relative to gold in consolidation periods.

Next week sees options expiry for gold, and a large position in the April futures contract must be liquidated, or rolled over into June. In the absence of good physical demand, one would expect the bullion banks, who are almost always net short, to mark prices down to encourage selling by the hedge funds. So far, this is not happening.

The likely reason is good underlying demand for physical gold. Indian demand is picking up again, following the banning of cash notes, with Switzerland exporting 37 tonnes in February. Chinese demand in February was also good, with Swiss exports at 21.5 tonnes last month. European interest appears to be strengthening as well, and the physical market is reasonably tight. Furthermore, the Russian central bank acquired a further 9.33 tonnes. ETF inflows picked up this week, rising by 9 tonnes in two days, according to Commerzbank.

Central bank demand can be expected to continue. Their tactics are to buy bullion quietly when it’s offered, which could be a good reason why the market appears so firm underneath. So, for the futures market, the physical background suggests that the market is underwritten, and any attempt to mark it down risks backfiring. The hedge funds are generally unconcerned over the physical position, because for them buying gold contracts is the other side of shorting the dollar. And there are signs the dollar rally is over.

Having been gung-ho over interest rate rises, a note of caution has crept into markets, with various indicators suggesting the US economy is slowing. At the same time as the Fed increased in interest rates last Wednesday, the Atlanta Fed downgraded its Q1 growth estimate from 1.2% to 0.8%. Consequently, with growth in the Eurozone showing some signs of life, the dollar’s trade weighted index looks set to ease further, and a lower dollar equates with a higher gold price. Furthermore, US Treasury bond yields have eased, with the 30-year bond falling from 3.2% to 3.0%, a significant correction.

The dollar’s weakness this year is reflected in our last chart, which is of the daily closing gold price in the four major currencies. Prices expressed in euros, sterling and yen have all risen less than in the dollar.


While the outlook for gold seems set fair, there is still the hurdle of next week’s option expiration, and the rolling over of futures contracts. The slightest justification, such as news seen as supportive for the dollar, will encourage the option takers to mark prices down.


- Source, Alasdair Macleod

Monday, 27 March 2017

Gold & Silver Soar After The Fed’s Clown Show


The Federal Reserve’s FOMC predictably nudged the Fed Funds rate up 25 basis points (one quarter of one percent) to set its “target” Fed Funds rate level at .75%-1%. Nine of the faux-economists voted in favor of and one, Minneapolis Fed’s Neil Kashkari, voted against the meaningless rate hike.

Or is it meaningless? Ex-Goldman Sachs banker Neil Kashkari was one of the Treasury’s Assistant Secretaries when the Government made the decision to bail out Wall Street’s biggest banks with nearly $1 trillion in taxpayer money. It was also when the Fed dropped the Fed Funds rate from about 5% to near-zero percent. Despite Yellen’s official stance that the economy is expanding and the labor market is “tight” (with 37% of the working age population not considered part of the Labor Force – a little more than 94 million people) Kashkari voted against the tiny bump in interest rates. This is likely because he is fully aware of risk to the banking system – perched catastrophically on hundreds of trillions in debt and derivatives – of moving interest rates higher.

The Fed’s goal is to “normalize” interest rates. The financial media and Wall Street analysts embrace and discuss this idea of “normalized” interest rates but never define exactly what that means. For the better part of the Fed’s existence, the “rule of thumb” was that long term rates (e.g. the 10-yr Treasury rate) should be about 3% above the rate of inflation. And the Fed Funds rates should be equal to or slightly above the rate of inflation.

Using the Government’s highly rigged CPI index, it implies the Fed Funds rate would be “normalized” at approximately 2.7% and the 10-yr bond around 6% based on Wednesday’s CPI report. Currently the Fed Funds rate is 3/4 – 1% and the 10-yr is 2.5%. Of course, since the early 1970’s, the CPI calculation has been continuously reconstructed in order to hide the true rate of price inflation. For instance, the current CPI index does not properly account for the rising cost of housing, education, healthcare and automobiles.

John Williams’ of Shadowstat.com keeps track of price inflation using the methodology used by the Government to calculate the CPI in 1990 and 1980. Using just the 1990 methodology, the rate of price inflation is 6.3%. This would imply that a “normalized” Fed Funds rate would be around 6.5% and the 10-yr bond yield should be around 9.5%. So much for this idea of “normalizing” interest rates. Using the Government’s 1980 CPI methodology, Williams calculates that the stated CPI would be 10.3%.

Most of the hyperinflated money supply has been directed into stocks, bonds and real estate. But based on the cost of a basket of groceries, healthcare and housing alone, price inflation is accelerating. If the Fed were to “normalize” interest rates at 6.3%, it would crash the financial and economic system. In other words, the Fed is powerless to use monetary policy in order to promote price stability, which is one of its mandates.


Friday, 24 March 2017

The Demise of the Gold and Silver Bull Run is Greatly Exaggerated

A few analysts are once again beating the drums for much lower gold and silver prices - supposedly just around the corner. They mistake the testing of a recent breakout for a turnaround in the main trend. In the process, they are sowing confusion. Here are some charts that show the main trend, along with reasons why the price of gold and silver is on track for a sharp rise, thanks to bullish fundamentals.


In view of the fact that we expect mining stocks tolead the way, we will start with the HUI index of gold miners. Price has just finished a test of the January 2017 breakout. The green arrow points to confirmation of the uptrend that began at the blue arrow. This is referred to as an ‘ABC bottom”. The target for this breakout is 365. The supporting indicators are positive with room on the upside. 


This chart, courtesy of Goldchartsrus.com, shows the long-term trend in the US rate of inflation, along with the short-term trend in red. Both long-term and short-term rates are rising. This trend provides energy for gold and silver to rise.


Featured is the long-term gold chart in log format. Price has found support at the 150 month moving average. A breakout at the $1300 level will be very bullish and will set up a target at $2100.


Featured is the US dollar index. Price appears to be carving out a 'head and shoulders' pattern. The set-up will be confirmed in the event of a breakdown at the purple arrow. The target for this potential breakdown is at the green arrow. Gold and silver can be expected to benefit in the event. The supporting indicators are negative.

- Source, Sprott Money, Read the Full Article Here

Saturday, 18 March 2017

Canada Flagged For Recession By BIS

As if Canadians needed more proof that the country’s real estate is in a bubble, and that this misallocation has spread to other sectors of the economy, the Bank of International Settlements released its latest quarterly confirming what any critical observer can see: binging on debt is rarely a good idea.

Canada’s debt-to-GDP gap is widening and even the central bank of central banks is concerned.

The BIS uses its credit-to-GDP analysis as an indicator and predictor of troubling economic waters. They claim successes in predicting financial crises in the United States, England and a few other economies. Generally speaking, according to the BIS, when a country’s credit-to-GDP gap is higher than 10% for more than a few years, a banking crisis emerges which is followed by a recession.

Canada entered that territory in 2015, warmly welcomed by the Chinese who’s debt-to-GDP gap has put them in the danger zone for at least the last five years.

In another parallel universe, perhaps Canadian authorities took the correct measures to counteract this high credit-to-GDP gap or to even prevent it from getting this out of control. But in our reality, we kept trudging across the tundra, mile after mile, pushing our credit-to-GDP gap up to 17.4%.

China’s “basic dictatorship” means they can turn their economy around on a dime, or so goes the thinking. Perhaps they will better absorb the economic slap in the face compared to Canada’s relatively freer market and less dictatorial government.

Still, both countries have a massive real estate bubble. In China, entire cities are centrally planned and built by government-connected contractors only to house absolutely nobody.

Wealthy Chinese families, witnessing the crony-capitalist chaos and subsequent malinvestments, have taken their hard-earned cash and moved it overseas. Enter stage-right the true north strong and free enough. Foreign speculation has helped drive up real estate prices in places like Vancouver and Toronto.

Of course, despite the pandering of Vancouver’s local politicians to angry locals that have been priced out of their home markets, foreign buyers are not the sole cause of Canada’s housing bubble and may in fact have little if anything to do with it.

Foreign speculation on Canadian real estate is to Canada’s housing bubble what subprime mortgages was to America’s infamous bubble. It’s more of an effect than a cause.

So what is the cause?

Don’t look to the BIS to own up to the disastrous and downright criminal actions of central banks around the world.

They’ve identified the disease of debt, but they’re mum on the cure as well as where all this speculative credit is coming from.

The Bank of Canada revealed that Canadians have taken on $2 trillion dollars in consumer debt. And while large numbers like these are thrown around a lot in the age of low interest rates, deficit spending and quantitive easing, it helps to have some perspective. It takes 31,709 years to count to one trillion. Now multiply that by two.

71.6% of that $2 trillion consumer debt is in mortgages. The BIS warns that large debt binges like this are almost always followed by a proportional recession. Thus, Canada has been flagged for bad times in 2018.

Of course, one doesn’t need the BIS’ empirical analysis to arrive at these conclusions. Following the sound economic logic of Mises and Rothbard not only reveals exactly what’s going on here but how we got here, what to do about it, and how to avoid it in the future.


Wednesday, 15 March 2017

Here Is What You Need To Know Ahead Of Tomorrow’s Fed Rate Hike

With markets awaiting the interest rate decision, here is what you need to know ahead of tomorrow’s Fed rate hike.

Here is what Peter Boockvar wrote today as the world awaits the next round of monetary madness: The February NFIB small business optimism index moderated a touch to 105.3 from 105.9 in January and vs 105.8 in December. It still though is pretty much holding its gains post election where the October print was 94.9 and November saw 98.4. There is one very important component that has not seen any improvement and that is plans for Increased Capital Spending which stands at 26% vs 27% in January and 27% back in October. This number touched 40 multiple times in the late 1990’s and the mid 30’s in the mid 2000’s. Likely companies are still waiting for what the tax reform will look like or maybe with capacity utilization sitting at 75% vs the historical average of 80% we still have an easy money driven overcapacity overhang…

Looking elsewhere within the report saw Plans to Hire fall 3 pts to 15%, the same level as November but up from 10% in October. Plans to Increase Inventory rose 1 pt to 3% but that’s not much different than the 2% seen in October. Expectations is where the real optimism still is as those that Expect a Better Economy sits at 47%, down 1 pt m/o/m but up from -7% in October. Those that Expect Higher Sales dropped 3 pts to 26% but was at 1% in pre election. Those that said it’s a Good Time to Expand was down by 3 pts to 22% but higher by 13 pts post election. The Positive Earnings Trends component fell 1 pt and still remains negative at -13% but up 8 pts from October.

Inflation

On the inflation front, Higher Selling Prices was up 1 pt to 6% which matches the highest since December 2014 and up from 2 in October. On the wage side, current Compensation Plans fell 4 pts to 26% after rising by 4 pts in January and not much different than the 25% seen in October. Future Compensation Plans also hasn’t changed much as it sits at 17% vs 19% in October and 14% in September. There remains the issue of finding qualified employees as job openings Not Able to Fill is at the highest level since December 2000 which provides hope that wages will improve from here.

To this last point, the NFIB said “Many small business owners are being squeezed by this historically tight labor market. They are not confident enough to raise prices on consumers, which limits how much they can increase compensation and makes them less competitive in attracting qualified applicants.” This also helps to explains the very low level of jobless claims. The NFIB said the 2nd biggest problem of small business is “finding qualified labor”, ahead of regulations, weak sales and insurance costs. Taxes is the top problem.

Reflecting the rise in LIBOR which sits at the highest level in 8 years, “The percent of owners reporting paying higher interest rates on their last loan jumped 7 pts to 11% in January and held at 9% in February, after averaging less than 2% since the recovery started in 2009.”

Hope

Bottom line, hope is what has driven the optimism but actual economic improvement has been more modest. The NFIB CEO made clear that “The sustainability of this surge and whether it will lead to actual economic growth depends on Washington’s ability to deliver on the agenda that small business voted for in November. If the health care and tax policy discussions continue without action, optimism will fade.” We will get this reform in some fashion I’m very hopeful but the market expectations bar is very high.

With the US 10 yr yield sitting at its highest level since September 2014 at 2.62%, Bill Gross we know is of the opinion that this is the breaking point that separates the end of the bond bull market or not (I believe it’s over and my readers know I’ve been saying that since August/September).

Overseas

Sovereigns in Europe and Japan are also testing their recent high yields today. The JGB 40 yr yield is just 1.5 bps from a 13 month high. The German 10 yr yield is 1 bp from a 14 month high and the French 10 yr yield is 2 bps from a 1 ½ yr high. I remain bearish on these bonds.

We saw some mixed data out of China overnight where authorities combined the January and February levels in order to take out the Lunar holiday distortion. Retail sales in February ytd rose 9.5% y/o/y, below the estimate of 10.6%, down from 10.4% seen in December and the slowest pace of gain since December 2003. The blame is being attributed to a drop in auto sales y/o/y because of a new tax on small cars and off a higher base last year. Industrial production grew by 6.3% ytd y/o/y, a hair above the estimate of 6.2% and up from 6% in January. Also out was fixed asset investment ytd y/o/y which grew by 8.9%, a quicker pace than the 8.3% that was forecasted. Bottom line, fixed private investment and property continued to lead the Chinese growth but I’ll say for the umpteenth time, I have no idea what’s temporarily stimulus driven and what is organic. The Shanghai comp was unchanged but the H share index was higher by .6% after jumping by almost 2% yesterday.

Of note in Europe was the German ZEW March economic confidence expectations index rose to 12.8 from 10.4 last month, vs 16.6 in January and about in line with the estimate of 13. It stood at 6.2 in October. Current conditions did match a nearly 6 yr high. The comments from ZEW were somewhat mixed: “The fact that the ZEW Indicator of Economic Sentiment only shows a slight upward movement is a reflection of the current uncertainty surrounding future economic development. With regard to the economic situation in Germany, no clear conclusions can be drawn from the most recent economic signals for January 2017. While industrial production and exports witnessed a positive development, the figures for incoming orders and retail sales were less favourable. The political risks resulting from upcoming elections in a number of EU countries are keeping uncertainty surrounding the German economy at a relatively high level.” We can add the possibility of a BAT tax in the US to the list of uncertainties for German exporters. The euro is down a touch with the DAX flat.

Ahead Of Tomorrow’s Rate Hike

Ahead of the Fed hike tomorrow we see PPI today and CPI tomorrow. The energy driven headline number is expected to result in a 2.7% print tomorrow. I include one more chart before we hear from the FOMC. It is C&I loans and we can see clearly that they’ve plateaued here. Why? I’m not exactly sure yet.

- Source King World News

Thursday, 9 March 2017

White House Daily Briefing, Sean Spicer - Vault7, WikiLeaks, CIA, Budget Blueprint, Border Crossings...


In this daily White House briefing, Sean Spicer discusses recent news affecting the President of the United States and his administration, such as the reduced illegal border crossings, the recent CIA hacks by Wikileaks, Vault7 and Trumpcare.

- Source

Friday, 3 March 2017

GATA Chairman On Silver MASSACRE: We Know Who Did It and Why


Murphy reveals why shares were slaughtered ahead of today’s silver BOMBING, and why this is leading to something spectacular in the silver market…

A big move is coming and almost no one is prepared for it.

- Source, SD Bullion

Monday, 27 February 2017

Jeff Clark - Silver Demand Facing a Seismic Shift


Which precious-metal hungry nation's government has declared a war on cash & gold which is driving a seismic shift into silver, and will this demand overwhelm the world's razor-thin supply to skyrocket the physical silver market? Jeff Clark, Senior Precious Metals Analyst at GoldSilver.com, returns to Reluctant Preppers to weigh in from the Silver Screen to the Silver Skyrocket we can watch for​ going forward!


Friday, 24 February 2017

Einhorn Shorts Sovereigns, Affirms Gold on Trump Uncertainty

Hedge fund manager David Einhorn is betting on declines in government debt and a rebound in gold to guard against the risk of inflation under President Donald Trump.

“We made several changes to the macro portfolio in response to the election,” Einhorn said Thursday in a conference call discussing results for Greenlight Capital Re Ltd., the Cayman Islands-based reinsurer where he is chairman. “It was various long positions in sovereign fixed income that we eliminated. We added some additional shorts in sovereign fixed income, and we added to our long equity exposure.” He didn’t specify which nations’ debt he was betting against.

Einhorn is seeking to extend a rally in the investment portfolio of Greenlight Re, which said late Wednesday that it posted back-to-back quarterly profit for the first time since 2013. The portfolio was helped in the last three months of 2016 by bets on General Motors Co. and Japanese bank Resona Holdings Inc., while gold was a weak spot.

Still, “our long-term outlook remains bullish,” for the metal, Einhorn said. “The new administration comes with a high degree of uncertainty, and its policy initiatives appear to be focused on stimulating growth and, with it, inflation.”

General Motors shares jumped almost 10 percent in the fourth quarter and rallied further this year. He said the stock is still undervalued, citing misplaced concerns about the eventual shift to driverless cars.

The stock will continue to climb, “especially if employment strengthens and translates into higher wages,” he said.

Einhorn said the reinsurer’s investment portfolio slipped by about half a percent in January. Greenlight Re climbed 5 cents to $23.35 at 4 p.m. in New York, extending its advance to 2.4 percent since Dec. 31.

The company is seeking to improve insurance underwriting results and is looking for a new chief executive officer after saying in December that Bart Hedges will step down this year.

- Source, Bloomberg

Tuesday, 14 February 2017

THIS Is Why The Elite HATE Trump So Much

Have you ever wondered why the elite hate Donald Trump so much?

There have certainly been many politicians throughout the years that have been disliked, but with Trump there is a hatred that is so intense that it almost seems tangible at times. During the campaign, they went to extraordinary lengths to destroy him, but it didn’t work. And now that he is president, the attacks against him have been absolutely relentless. So why is there so much animosity toward Trump? Is it just because he is not a member of their club?

The truth, of course, is that it runs much deeper than that. Ultimately, the elite hate Trump because he is opposed to their demonic one world agenda. Many among the elite are referred to as “globalists” because their eventual goal is to unite the whole world under a single planetary system. These globalists truly believe that they know better than all the rest of us, and they want to impose their way of doing things on every man, woman and child on the entire planet.

So they get really angry when Donald Trump talks of “building a wall” or establishing a travel ban from certain countries because they eventually want a world without any borders at all.

And they get really angry when Donald Trump says that he wants to pull the United States out of international trade deals, because the elite were using those international trade deals to slowly integrate all nations into a single one world economy.

And they really don’t like when Donald Trump criticizes Islam, because Islam is going to be a key component of the one world religion that they plan to establish.

For quite a while the globalists were on a roll, but recently they have experienced some tremendous setbacks. Britain’s vote to leave the EU and the election of Donald Trump were not supposed to happen, and this has left many globalists searching for answers. In fact, just today I came across a New York Times article entitled “Besieged Globalists Ponder What Went Wrong“…

Until recently, you didn’t hear people being referred to as “globalist” very often. But in a time of rising nationalism, those who see the upside of globalism have become a distinct — and often embattled — tribe.

Last week, the globalists had a big family reunion in New York. The gathering was focused on the United Nations General Assembly, but a growing array of side conferences and summits and dinners also attracted concerned internationalists of every stripe: humanitarians, leaders of nongovernmental organizations, donors, investors, app peddlers, celebrities.

As you can see, even the New York Times uses the term “globalists” to describe these elitists.

At one time you would have been considered a “conspiracy theorist” is you spoke of “globalists”, but at this point the elite are not even trying to put up a facade any longer.

And of course Donald Trump made opposition to globalism one of the central themes of his campaign, and it really struck a chord all across America. As Dr. Jim Garlow noted in an article that went viral just before the election, Trump’s opposition to globalism was one of the key things that set him apart from Hillary Clinton…

Trump opposes globalism. Hillary thrives on it. Globalism is far more than “geographical” or “eliminating national borders and boundaries.” It is spiritual and demonic at its core.Few—very few—understand this. This is quite likely one of the main reasons why Trump is hated. Do your homework on this one. Think “principalities and powers.” Serious. Extremely serious.

The reason why the threat of globalism is so serious is because if a single global system is ever established there will be no escape from it.

Just think about it – where could you go to escape a government that literally rules the entire world?

These globalists are completely convinced that if they could just get control of everyone and everything that they could establish some sort of environmentally-friendly socialist utopia where war and poverty are eradicated. But in order to do that, they would need to be in a position to micro-manage the lives of every single person on the planet.

In their minds it would not be tyranny, but for those of us that love freedom that is precisely what it would be.


Friday, 10 February 2017

London Analyst Issues Dire Warning: Trump Could Trigger A Great Depression


In This Exclusive Interview, London Analyst Alasdair Macleod Issues A Dire Warning: If Trump Fails to Learn THIS, He Will Lead America Into A Repeat of the Great Depression…

Since the beginning of the year, gold and silver have been some of the best-performing assets. London Analyst Alasdair MacLeod joins SD to discuss the recent price action in the precious metals markets. MacLeod sees inflation to be the story in 2017, which means higher prices for gold and silver.

MacLeod says Trump is missing the fundamental reason behind trade imbalances. The solution to trade imbalances is sound money.

Macleod Warns If Trump fails to learn this, he will lead America into a repeat of the Great Depression…

- Source, Silver Doctors

Tuesday, 7 February 2017

Shock Poll Shows Merkel Losing Chancellorship If Elections Held Today; JPMorgan Stunned

Overnight we reported that Germany's default swaps spiked to the highest level since Brexit as a recent poll showed that Merkel's lead in the polls had slid to multi-year lows ahead of Germany's elections later in the year, provoking some concerns that a formerly unthinkable "tail risk" outcome was becoming more likely. 

However, according to new data unveiled today, Merkel's headaches are only just starting, because in a brand new poll released this afternoon, the CDU would get 30% of the vote, while the suddenly resurgent SPD would get 31%. This means that the SPD's new head, Martin Schulz, would enter any coalition talks as the leader of the largest party, hence becoming Chancellor, leading to a stunned reaction by JPMorgan.


In a note released this afternoon by JPM's Greg Fuzesi, the strategist writes that following the recent resignation of Sigmar Gabriel as leader and chancellor candidate of the SPD, there has been much attention on how his replacement Martin Schulz would perform. Having spent most of his career in the European Parliament, most recently as its president, and being relatively unknown in Germany, this is not easy to predict. In his first major TV interview, he was recently pressed to explain how exactly he differs from his predecessor Gabriel and also from Chancellor Merkel, and what his focus on fairness would mean in practice. This was not entirely straightforward for him.

Nevertheless, opinion polls were beginning to show a bounce last week and this appears to be continuing.

This afternoon, a new opinion poll from INSA showed the SPD gaining further support and overtaking the CDU/CSU for the first time in many years. If elections were held now, the INSA poll suggests that the CDU would get 30% of the vote, while the SPD would get 31%. This means that Schulz would enter any coalition talks as the leader of the largest party, hence becoming Chancellor.




It also means that a SPD-Green-Left coalition would currently win exactly 50% of seats, so that a government without the CDU/CSU could even be possible. In effect, the SPD has gained 10%-pts of support in past two (weekly) INSA polls, taking votes away from all other parties (see second chart below). Interestingly, the AfD has also suffered a significant decline.




Given that Schulz is relatively new to German politics, a novelty factor may be partly responsible for the jump in the polls. It is far too early to say whether this will endure, given that the election campaign has yet to properly begin. It will also be important to see whether other polls replicate the swing. The SPD has gained support in all recent polls, but these are all a week or more old and do not show the latest jump in the INSA poll. That said, there is no reason to dismiss the INSA poll. It is the newest organization and the only one to be done entirely online, but it (arguably) performed only marginally worse than other polls at the last Bundestag election.

A Schulz-led SPD-Green-Left coalition or a Schulz-led grand coalition would certainly be a huge event in German politics. Such possibilities no longer look like tail risks. A SPD-Green-Left coalition would bias German policymaking towards greater fiscal expenditure and investment, and center-left policies. But, even such a coalition would not mark a dramatic break with the past in many areas and would, we expect, continue Germany’s strong support of the EU and single currency.

In short, "Chancellor Schulz" may be just what Brussels, and to a lesser extent President Trump, ordered.

- Source, Zero Hedge

Friday, 3 February 2017

How Will Trump’s Border Tax Affect the Price of Silver?



You know, I don’t think it really would have much impact on very much. I mean, look, Mexico is having some challenges right now for sure, you know, with energy prices so low. The revenue is going into…the government Treasuries are lower than it is or it has been historically. So, you know, they have gone after the mining sector, you know, we know that. I think everyone listening to this knows that the tax was brought into place back in 2014. 


We’re paying that tax. It’s just basically normal course. If you compare it to other countries around the world, Mexico is about in the middle when it comes to taxation industry. 

So it’s a relatively low-cost country to be active in as a company. You know, with the peso the way it is, labor is extremely cheap. The peso is around 23 to 1, which is, you know, pretty good for us as our revenue is in U.S. dollars and 75% of our costs are in pesos. And the peso was about 12 to 1 just two years ago. 

It’s now 24 to 1 or 23 to 1. So it’s made a huge difference for us. So, you know, I’m not expecting much change in Mexico as a result of Trump coming in at all.

- Source

Tuesday, 31 January 2017

If Trump Orders Gold Audit: Gold Explodes


Which way will President Trump take the US economy and what will the Trump effect be on gold? Proprietary analyst and founder of Kirby Analytics, Rob Kirby, predicts the most likely and most dramatic actions we should watch for from Trump, and how to position your family to weather the road ahead!


Thursday, 26 January 2017

Gold Needs To Be In Pension Funds Before They Implode

Tens of millions of Americans and their employers pour money into pension plans each month, counting on those funds to grow and to be there when needed at retirement.

But a time bomb awaits. The bulk of U.S. pension funds are dangerously underfunded, and the assets are often invested in securities that have bleak prospects for providing income that keeps up with a general decline in purchasing power.

A pension plan requires an employer to make contributions into a pool of funds set aside for a worker’s future benefit. In 1875, when the American Express Company established the first private pension plan in the United States, the face of retirement was fundamentally changed. Before that time, private-sector pension plans did not exist, as most employers were small “mom-and-pop” businesses.

The innovation at American Express caught on. By 1929, 397 private sector pension funds were in operation throughout the United States and Canada. As of 2011, according to the Bureau of Labor Statistics, 18% of private sector workers are covered by pension plans. At the end of 2015, the value of U.S. pension funds was $21.7 trillion.

Millions of Americans will rely on pensions once they’ve reached the age of retirement. Pension fund managers have a fiduciary duty to safeguard funds against foreseeable risk. With the practices of today’s Federal Reserve, there is no risk more foreseeable than inflation, but these fiduciaries are not fulfilling their duty to protect against this significant risk by investing in assets which are specifically suited to defend against the perpetual loss of the dollar’s purchasing power.


Chief among these assets are physical gold and silver, the most reliable inflation hedges from time immemorial.
Nothing Is Certain Except Death, Taxes, and Dollar Devaluation

In today’s uncertain times, few things are as certain as the devaluation of the dollar. Having lost more than 95% of its valuesince the creation of the Federal Reserve in 1913, America’s unbacked fiat currency has a 100-year track record of declining value year after year. There is no reason to expect this trend to reverse, and the possibility of a total collapse of the dollar at some point cannot be ruled out. This is important because of the dollar’s inverse relationship to the price of gold.

As the unbacked Federal Reserve Note continues to be abused and devalued, it becomes clearer every day that pension funds should increase their precious metals holdings.

According to the Asset Allocation Survey by the U.S. Council of Institutional Investors, only 1.8% of pension fund investments are in the broad commodities category, which includes monetary metals. That means only a fraction of 1% in pension assets are held in gold and silver.


Instead, pension funds today focus their investments in U.S. Treasury securities, investment-grade bonds, stocks, real estate, and other interest-rate sensitive assets.
Gold Counter-Balances Other Investments

Whether it is an individual investing $1,000 or a fund manager in charge of investing millions of dollars, risk management is crucial.

Fund managers typically will not invest in extremely risky investments for fear of losing their investment, and potentially, their jobs. Conventional wisdom is that government bonds are paramount in safety and security.

But these bonds, as well as the Federal Reserve Note “dollar” itself, are backed by nothing more than the full faith and credit of an insolvent U.S. government. Washington D.C. has accumulated astronomical debts of more than $20 trillion and total long-term entitlement obligations now top $100 trillion. Officials will only be able to “meet” these long-term commitments by inflating them away. That is why money creation at the Federal Reserve has become standard operating procedure. Gold, on the other hand, appreciates as the dollar’s value falls, not to mention offering resilience to financial and political crises.

The financial establishment remains hostile to gold, but influential people are making the case for larger gold holdings. Alistair Hewitt, head of market intelligence at the World Gold Council, said, “Unless investors are willing to accept a loss-making investment strategy, they may need to consider increasing their holdings of gold. We believe this should resonate especially well with pension funds and foreign managers whose investment guidelines are typically stricter and who hold a large portion of bonds in their portfolios.”

Getting fund managers to include physical gold in pensions is a difficult challenge. While they have a fiduciary responsibility to protect and grow their clients’ investment, most prefer to stick with the conventional wisdom and avoid bucking the system – but there are other pressures as well. Guy Christopher writes, “Precious metals in your possession have no counterparties and no continuing fees and commissions, unlike the thousands of investments brokers sell. Once you own gold, that part of your wealth and your future is out of Wall Street’s hands.”
Look to Texas for the Blueprint on Gold-Invested Pension Funds

The Texas Teacher Retirement Fund and the University of Texas own nearly $1 billion in physical gold, which will soon be transferred from Wall Street vaults to a brand-new depository in the Lone Star State thanks to the recently passed Texas Bullion Depository legislation.

Shayne McGuire, portfolio manager of the Gold Fund for the Teacher Retirement Fund of Texas said that “one of the main reasons we considered gold was the diversification benefits it provides to portfolios dominated by equities, as most pension funds are.”

While most pension fund managers shy away from gold, they do so at their own risk and the risk of their pensioners. As a non-correlated asset to bonds, stocks, and other paper-based investments, precious metals are key to true diversification. It’s time for pension fund managers to break out of their Wall Street groupthink and include a meaningful allocation to physical gold and silver bullion for protection against inflation and financial turmoil.


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