-j-p-shmorgan
New Member
AinslieBullion said:
Not sure which statistics are accurate....but either way, this is extremely frightening stuff.
It would appear banks are indeed, in HUGE trouble.
Ainslie Bullion - Daily news, Weekly Radio and Discussions
- Thread starter AinslieBullion
- Start date
Not sure which statistics are accurate....but either way, this is extremely frightening stuff.
It would appear banks are indeed, in HUGE trouble.
AinslieBullion
Member
Implications of China SDR decision
Everyone was surprised last week by the IMF's announcement that they were not yet ready to include the yuan in its SDR (standard drawing right) global currency this year as was widely expected. China have gone to great lengths of late to internationalise the Renminbi/yuan, had 'played nice' by announcing only 600 tonne of gold more in its reserves, and only gradually reducing its US Treasuries holdings for some time. Speculation is hence rife now as to how China, a very proud culture who would not take such humiliation lightly, will respond. One need only look at their financial 'artillery' to get a sense of the implications. They hold the world's largest (or near equal to Japan) amount of US Treasuries, around $1.3 trillion. They're also most likely the world's largest gold holder as well. At a time when the US Fed is wanting to very gradually raise US rates to prove everything is fine and to slow, not pop, the asset bubbles they've created just imagine the effects of China dumping US Treasuries onto the market. For this market to absorb that many UST's it would see their price crash, yield's rocket and markets around the world implode.or QE4 announced to buy them up. Either scenario would be incredibly bullish for gold. Now who holds the most of that again???
Everyone was surprised last week by the IMF's announcement that they were not yet ready to include the yuan in its SDR (standard drawing right) global currency this year as was widely expected. China have gone to great lengths of late to internationalise the Renminbi/yuan, had 'played nice' by announcing only 600 tonne of gold more in its reserves, and only gradually reducing its US Treasuries holdings for some time. Speculation is hence rife now as to how China, a very proud culture who would not take such humiliation lightly, will respond. One need only look at their financial 'artillery' to get a sense of the implications. They hold the world's largest (or near equal to Japan) amount of US Treasuries, around $1.3 trillion. They're also most likely the world's largest gold holder as well. At a time when the US Fed is wanting to very gradually raise US rates to prove everything is fine and to slow, not pop, the asset bubbles they've created just imagine the effects of China dumping US Treasuries onto the market. For this market to absorb that many UST's it would see their price crash, yield's rocket and markets around the world implode.or QE4 announced to buy them up. Either scenario would be incredibly bullish for gold. Now who holds the most of that again???
AinslieBullion
Member
A Market on the Edge What Happened Last Night
Gold and silver rallied last night as did shares, whilst the USD retreated. It appeared they were celebrating the same news The market seemed to read in a speech by Fed member Lockhart that a September hike is now off the cards, would be data dependent, and that Fed policy will still be stimulative after the first rise. So in essence those in shares bought up thinking the party continues despite ordinary fundamentals whilst the USD and precious metals reflected low interest rates for longer. Shares were buoyed too by a jump in Chinese stocks based on, you guessed it, a promise of more stimulus from the government. One can't discount the very real possibility that gold and silver also rallied on the realisation that it appears they are prepared to keep inflating global asset bubbles perilously towards the pop. For the market to react as it did on some vague comments by a voting member of the Fed also illustrates this is very clearly not a market that has supposedly 'priced in' the rate rise. This is all very dangerous territory over the next few months and is screaming to have a chunk of your wealth in a safe haven such as gold and silver. You might think bonds are a better safe haven but note that hot off the heals of Bill Goss, last night none other than Alan Greenspan is telling us to be very afraid of a pending bubble in the bond market. No surprise we get this quote from Gerald Celente then
"Rarely do I ever put a date on market crashes. I did it in 1987 when I forecast the 1987 stock market crash - in the Wall Street Journal. I also forecast the 'Panic of 2008'; and the 'dot-com bust' in October of 1999, when I said the dot-com mania would fail in the second quarter of 2000. And now, I'm predicting a global stock market crash before the end of this year. And it's not only going to be the Dow, but the DAX, the FTSE, the CAC, Shanghai, and the Nikkei. There's going to be panic on the streets from Wall Street to Shanghai, and from the UK down to Brazil. You are going to see one market after another begin to collapse."
Gold and silver rallied last night as did shares, whilst the USD retreated. It appeared they were celebrating the same news The market seemed to read in a speech by Fed member Lockhart that a September hike is now off the cards, would be data dependent, and that Fed policy will still be stimulative after the first rise. So in essence those in shares bought up thinking the party continues despite ordinary fundamentals whilst the USD and precious metals reflected low interest rates for longer. Shares were buoyed too by a jump in Chinese stocks based on, you guessed it, a promise of more stimulus from the government. One can't discount the very real possibility that gold and silver also rallied on the realisation that it appears they are prepared to keep inflating global asset bubbles perilously towards the pop. For the market to react as it did on some vague comments by a voting member of the Fed also illustrates this is very clearly not a market that has supposedly 'priced in' the rate rise. This is all very dangerous territory over the next few months and is screaming to have a chunk of your wealth in a safe haven such as gold and silver. You might think bonds are a better safe haven but note that hot off the heals of Bill Goss, last night none other than Alan Greenspan is telling us to be very afraid of a pending bubble in the bond market. No surprise we get this quote from Gerald Celente then
"Rarely do I ever put a date on market crashes. I did it in 1987 when I forecast the 1987 stock market crash - in the Wall Street Journal. I also forecast the 'Panic of 2008'; and the 'dot-com bust' in October of 1999, when I said the dot-com mania would fail in the second quarter of 2000. And now, I'm predicting a global stock market crash before the end of this year. And it's not only going to be the Dow, but the DAX, the FTSE, the CAC, Shanghai, and the Nikkei. There's going to be panic on the streets from Wall Street to Shanghai, and from the UK down to Brazil. You are going to see one market after another begin to collapse."
AinslieBullion
Member
Which Golden Horse to Back?
We've written a few times of late about the very interesting, possibly instructive, changes on the COMEX. Below are a couple of graphs that put this into clearer perspective. Understanding that the Managed Money is the speculative hedge funds and Commercials are the big banks and hedgers is important and ties in with yesterday's article. The speculators are so bullish on the free money / anti gold game continuing they have taken up a record first ever net short position on gold. The experienced Commercials on the other hand have a historic knack for being correctly positioned at major turning points in a market. Note below they are at their lowest net short position in gold since the start of the secular bull market in 2001. The choice is yours the fast, speculative money or the experienced money which cue do you take?
We've written a few times of late about the very interesting, possibly instructive, changes on the COMEX. Below are a couple of graphs that put this into clearer perspective. Understanding that the Managed Money is the speculative hedge funds and Commercials are the big banks and hedgers is important and ties in with yesterday's article. The speculators are so bullish on the free money / anti gold game continuing they have taken up a record first ever net short position on gold. The experienced Commercials on the other hand have a historic knack for being correctly positioned at major turning points in a market. Note below they are at their lowest net short position in gold since the start of the secular bull market in 2001. The choice is yours the fast, speculative money or the experienced money which cue do you take?
AinslieBullion
Member
China Devaluing the Yuan Implications
Markets are still reeling from the shock move by China to lower its currency peg to the USD by 1.9%. That might not seem like much but in the context of the biggest deviation from the USD this year being just 0.16% it very much is and the markets certainly reacted that way. Whilst China stated confidently it was a 'one off' few analysts appear to believe that. Why? Because China have now well and truly entered this 'Currency War' that has plagued the world's central banks since the GFC central banks trying to force down their currency through zero or near zero interest rates or rampant money printing to bolster exports. For China too, it is most appealing as it kills 2 birds so to speak. Firstly it addresses their global export competitiveness. They've had to endure a 15% rise in value because of being linked to a USD rising on the much anticipated Fed tightening and at a time when China's economy is showing serious wobbles. Secondly it addresses the IMF's main concern in not including them in the SDR last week, in that it is not yet an internationally freely traded currency. This is a big step in that direction. The danger? Well they are near equal to Japan as the biggest holder of US debt in the world. They have a large number of businesses heavily indebted in USD and have already seen some large defaults this will just exacerbate that.
But why has gold shot up $25 since the announcement? There are likely a number of reasons. Firstly it is yet another very clear sign of a global economy in severe stress. China is, on a like for like basis, the worlds largest economy and not far behind the US in a simple GDP account. It is a clear sign they are in trouble. Secondly, they are the world's biggest consumer of gold (1,464 tonne YTD!!) and when you know your currency is going down one of the best means of protection is gold. We've seen that very clearly in Australia this year where gold and silver are up 5% and 10% respectively in AUD whereas they are down 5% and 0.6% in USD terms and that with the AUD at 73.9c today and most forecasts for high 60's to 70 for year end!
There is a line of thought that since the IMF rejected the Yuan for the SDR the gloves may be off. This currency move could be the first, announcing their REAL gold reserves could be the next. If you want a big jump in the gold price, should they do the latter, you just watch
Markets are still reeling from the shock move by China to lower its currency peg to the USD by 1.9%. That might not seem like much but in the context of the biggest deviation from the USD this year being just 0.16% it very much is and the markets certainly reacted that way. Whilst China stated confidently it was a 'one off' few analysts appear to believe that. Why? Because China have now well and truly entered this 'Currency War' that has plagued the world's central banks since the GFC central banks trying to force down their currency through zero or near zero interest rates or rampant money printing to bolster exports. For China too, it is most appealing as it kills 2 birds so to speak. Firstly it addresses their global export competitiveness. They've had to endure a 15% rise in value because of being linked to a USD rising on the much anticipated Fed tightening and at a time when China's economy is showing serious wobbles. Secondly it addresses the IMF's main concern in not including them in the SDR last week, in that it is not yet an internationally freely traded currency. This is a big step in that direction. The danger? Well they are near equal to Japan as the biggest holder of US debt in the world. They have a large number of businesses heavily indebted in USD and have already seen some large defaults this will just exacerbate that.
But why has gold shot up $25 since the announcement? There are likely a number of reasons. Firstly it is yet another very clear sign of a global economy in severe stress. China is, on a like for like basis, the worlds largest economy and not far behind the US in a simple GDP account. It is a clear sign they are in trouble. Secondly, they are the world's biggest consumer of gold (1,464 tonne YTD!!) and when you know your currency is going down one of the best means of protection is gold. We've seen that very clearly in Australia this year where gold and silver are up 5% and 10% respectively in AUD whereas they are down 5% and 0.6% in USD terms and that with the AUD at 73.9c today and most forecasts for high 60's to 70 for year end!
There is a line of thought that since the IMF rejected the Yuan for the SDR the gloves may be off. This currency move could be the first, announcing their REAL gold reserves could be the next. If you want a big jump in the gold price, should they do the latter, you just watch
AinslieBullion
Member
Sell Rumour / Buy Fact Gold and Tightening
In the context of a gold price struggling in the face of the 'imminent' US rate rise, foreign currency strategist David Bloom recently had this to say:
"History shows that gold prices also fall leading into a rate hike and generally rise, though sometimes with a lag, after the first rate hike. Investors are apt to unload gold in anticipation of tightening monetary policies. This negative pressure is sustained until the Fed announces a rate hike which then eases the negative sentiment towards the yellow-metal. This explains the subsequent rallies in gold that occurred shortly after the Fed announced the first rate hike in the last four tightening cycles." [1986. 1994, 1999 and 2004]
It's a classic case (yet again) of sell the rumour, buy the fact. The continual 'nearly there' rhetoric from the US Fed about raising rates just continues to put pressure on this gold price (until the Chinese helped this week with their shock currency devaluation). Whilst this is a wonderful buying opportunity for many, it's growing old for fully invested gold holders.
For us, whilst the evidence of the last 4 tightening cycles is clear and comforting, it only tells part of the story this time around. None of those previous cycles had a market strung out on stimulus and debt to the extent this one does and we are talking GLOBALLY. We are quite simply in unprecedented times. If the Fed raise rates in September or December by a paltry 0.25% just to 'rip the bandaid off' despite the economic data not supporting it per se, the effects on markets could be far worse than they are pretending.
With this in mind a September rate rise certainly fits with the many calls of a September/October financial crash if it is indeed the catalyst. And therein lies the Fed's dilemma
In the context of a gold price struggling in the face of the 'imminent' US rate rise, foreign currency strategist David Bloom recently had this to say:
"History shows that gold prices also fall leading into a rate hike and generally rise, though sometimes with a lag, after the first rate hike. Investors are apt to unload gold in anticipation of tightening monetary policies. This negative pressure is sustained until the Fed announces a rate hike which then eases the negative sentiment towards the yellow-metal. This explains the subsequent rallies in gold that occurred shortly after the Fed announced the first rate hike in the last four tightening cycles." [1986. 1994, 1999 and 2004]
It's a classic case (yet again) of sell the rumour, buy the fact. The continual 'nearly there' rhetoric from the US Fed about raising rates just continues to put pressure on this gold price (until the Chinese helped this week with their shock currency devaluation). Whilst this is a wonderful buying opportunity for many, it's growing old for fully invested gold holders.
For us, whilst the evidence of the last 4 tightening cycles is clear and comforting, it only tells part of the story this time around. None of those previous cycles had a market strung out on stimulus and debt to the extent this one does and we are talking GLOBALLY. We are quite simply in unprecedented times. If the Fed raise rates in September or December by a paltry 0.25% just to 'rip the bandaid off' despite the economic data not supporting it per se, the effects on markets could be far worse than they are pretending.
With this in mind a September rate rise certainly fits with the many calls of a September/October financial crash if it is indeed the catalyst. And therein lies the Fed's dilemma
AinslieBullion
Member
Exter's Pyramid & This September
Two widely respected economists talk about periods of 'hot money' fleeing risky assets into safe assets. John Exter is the ex Vice President of the US Federal Reserve in the 1950's, when money was backed by gold but was still an economist commenting on the post gold standard era we find ourselves in now (albeit towards the end according to many). He famously had this to say:
"We are in a world of irredeemable paper money a state of affairs unprecedented in history."
More famously though, John Exter developed what is now commonly referred to as Exter's Pyramid (a modern illustration included below) to illustrate the financial system without that gold standard. In essence it is a layered, inverted pyramid with the riskiest assets at the top reducing down to the least risky at the bottom. When markets start to realise the inherent instability of an inverted pyramid he describes:
"creditors in the debt pyramid will move down the pyramid out of the most illiquid debtors at the top of the pyramidCreditors will try to get out of those weak debtors & go down the debt pyramid, to the very bottom."
We have seen 3 small glimpses of this this year alone. Firstly in January when the Swiss National Bank unpegged the Frank from the Euro, again mid this year over Greece's near default, and last week with China devaluing their yuan peg to the USD. In each event we saw a modest flight to gold. But we must stress these are relatively small events compared to what is coming.
Another famous economist is Martin Armstrong who authored the similarly based but more instructive "Economic Confidence Model" or ECM. It is more instructive as it maps what has been a remarkably accurate cycle of 8.6 years. It predicted the 2007.15 timing of the GFC and adding 8.6 to that gives us 2015.75 which is of course September this year.
When you combine both you see the rush of 'hot money' from the top to the bottom of the pyramid potentially happening next month. But note the small base of an inverted pyramid not only aptly describes instability, it also describes the small 'space' for all that hot money to flow into. When that much money tries to get into that small a space, supply and demand dictates only one price and availability outcome for that asset. You have the opportunity to buy yours now to take the 'availability' part out of the equation and then simply enjoy the 'price' part.
Two widely respected economists talk about periods of 'hot money' fleeing risky assets into safe assets. John Exter is the ex Vice President of the US Federal Reserve in the 1950's, when money was backed by gold but was still an economist commenting on the post gold standard era we find ourselves in now (albeit towards the end according to many). He famously had this to say:
"We are in a world of irredeemable paper money a state of affairs unprecedented in history."
More famously though, John Exter developed what is now commonly referred to as Exter's Pyramid (a modern illustration included below) to illustrate the financial system without that gold standard. In essence it is a layered, inverted pyramid with the riskiest assets at the top reducing down to the least risky at the bottom. When markets start to realise the inherent instability of an inverted pyramid he describes:
"creditors in the debt pyramid will move down the pyramid out of the most illiquid debtors at the top of the pyramidCreditors will try to get out of those weak debtors & go down the debt pyramid, to the very bottom."
We have seen 3 small glimpses of this this year alone. Firstly in January when the Swiss National Bank unpegged the Frank from the Euro, again mid this year over Greece's near default, and last week with China devaluing their yuan peg to the USD. In each event we saw a modest flight to gold. But we must stress these are relatively small events compared to what is coming.
Another famous economist is Martin Armstrong who authored the similarly based but more instructive "Economic Confidence Model" or ECM. It is more instructive as it maps what has been a remarkably accurate cycle of 8.6 years. It predicted the 2007.15 timing of the GFC and adding 8.6 to that gives us 2015.75 which is of course September this year.
When you combine both you see the rush of 'hot money' from the top to the bottom of the pyramid potentially happening next month. But note the small base of an inverted pyramid not only aptly describes instability, it also describes the small 'space' for all that hot money to flow into. When that much money tries to get into that small a space, supply and demand dictates only one price and availability outcome for that asset. You have the opportunity to buy yours now to take the 'availability' part out of the equation and then simply enjoy the 'price' part.
AinslieBullion
Member
'Funny' Markets v Gold
Last night typified the unprecedented financial market environment we find ourselves in. Courtesy of ZeroHedge the following charts tell a worrying story. Firstly the US market fell (and gold rose) on the news of the Empire Fed Manufacturing Survey plummeting to -14.92 (from 3.86 and versus expectations of 4.5). This is the lowest it's been since the GFC and the biggest miss (surprise) since 2010. Critically too, the new orders component was at its second lowest since the GFC important given consumption accounts for 70% of US GDP.
But wait! Soon after the NAHB homebuilder figures were released, showing sentiment rose to 61 from 60. Hardly amazing and completely in line with expectations. So lets look at what the market did immediately after
That surge would be based on lots of people buying the dip on the positive news yeah? Nope the chart below exemplifies the 'unreal' nature of today's markets. That red is relative volume. Lots of red means little volume. The market rallied like that on a complete lack of volume of trades. Curious huh ZeroHedge aptly describe it as LOLume. It would be funny if it weren't so scary.
In an environment such as this, one should always listen to one's 'gut'. How long can markets based on 'make believe' last? Gold's value is intrinsic it is in and of itself courtesy of its rarity and lack of counterparty risk, and has been for thousands of years. Current critics say its days are gone. We have no doubt your 'gut'/reality and history will prove otherwise.
Regular listeners to our Friday Weekly Wrap https://www.ainsliebullion.com.au/g...st-ainslie-radio/tabid/88/a/1015/default.aspx know of the continual data that paints a very different picture to the awesome US recovery rhetoric we hear that will supposedly pull the world out of the coming recession. This ZeroHedge story HERE http://www.zerohedge.com/news/2015-...ltdown-economic-recovery-complete-utter-fraud also gives a real insight into that 'on the ground' so to speak.
Last night typified the unprecedented financial market environment we find ourselves in. Courtesy of ZeroHedge the following charts tell a worrying story. Firstly the US market fell (and gold rose) on the news of the Empire Fed Manufacturing Survey plummeting to -14.92 (from 3.86 and versus expectations of 4.5). This is the lowest it's been since the GFC and the biggest miss (surprise) since 2010. Critically too, the new orders component was at its second lowest since the GFC important given consumption accounts for 70% of US GDP.
But wait! Soon after the NAHB homebuilder figures were released, showing sentiment rose to 61 from 60. Hardly amazing and completely in line with expectations. So lets look at what the market did immediately after
That surge would be based on lots of people buying the dip on the positive news yeah? Nope the chart below exemplifies the 'unreal' nature of today's markets. That red is relative volume. Lots of red means little volume. The market rallied like that on a complete lack of volume of trades. Curious huh ZeroHedge aptly describe it as LOLume. It would be funny if it weren't so scary.
In an environment such as this, one should always listen to one's 'gut'. How long can markets based on 'make believe' last? Gold's value is intrinsic it is in and of itself courtesy of its rarity and lack of counterparty risk, and has been for thousands of years. Current critics say its days are gone. We have no doubt your 'gut'/reality and history will prove otherwise.
Regular listeners to our Friday Weekly Wrap https://www.ainsliebullion.com.au/g...st-ainslie-radio/tabid/88/a/1015/default.aspx know of the continual data that paints a very different picture to the awesome US recovery rhetoric we hear that will supposedly pull the world out of the coming recession. This ZeroHedge story HERE http://www.zerohedge.com/news/2015-...ltdown-economic-recovery-complete-utter-fraud also gives a real insight into that 'on the ground' so to speak.
Charles Thorn
New Member
Looks like Chinese markets are crashing again today... hmmmmm... interesting.
AinslieBullion
Member
300m Reasons to Buy Gold & Silver
We've been known to reproduce famous billionaire fund manager George Soros's quote on how to make 'real' money from time to time. As a reminder:
"Find a widely held precept that is wrong and bet against it".
Many Wall St types are calling gold's days as over. Smart money is capitalising on that precept right now picking up 'pet rocks' (as one Wall St Journalist described gold) at bargain prices.
Topically, Soros's ex right hand man Stan Druckenmiller, arguably one of the world's most respected and successful hedge fund managers in his own right (making his fund an average 30% annual return from 1986 to 2010), is doing just that right now. He just bought no less than $300m of gold! That makes gold 20% of his total fund, its largest single position. Why? He says:
"if you look at the real root cause behind the financial crisis [GFC], we're doubling down. Our monetary policy is so much more reckless and so much more aggressively pushing the people in this room and everybody else out the risk curve that we're doubling down on the same policy that really put us there"
In other words all the central bank stimulus we keep talking about, inflating financial assets around the world beyond their fundamentals, are simply making the core issue of debt even worse than the GFC and setting markets at current heady heights set for an even bigger fall.
The chart below illustrates very clearly the value proposition between silver and US shares. We think it is self explanatory and is a perfect depiction of what attracts smart money like Soros and Druckenmiller.
We've been known to reproduce famous billionaire fund manager George Soros's quote on how to make 'real' money from time to time. As a reminder:
"Find a widely held precept that is wrong and bet against it".
Many Wall St types are calling gold's days as over. Smart money is capitalising on that precept right now picking up 'pet rocks' (as one Wall St Journalist described gold) at bargain prices.
Topically, Soros's ex right hand man Stan Druckenmiller, arguably one of the world's most respected and successful hedge fund managers in his own right (making his fund an average 30% annual return from 1986 to 2010), is doing just that right now. He just bought no less than $300m of gold! That makes gold 20% of his total fund, its largest single position. Why? He says:
"if you look at the real root cause behind the financial crisis [GFC], we're doubling down. Our monetary policy is so much more reckless and so much more aggressively pushing the people in this room and everybody else out the risk curve that we're doubling down on the same policy that really put us there"
In other words all the central bank stimulus we keep talking about, inflating financial assets around the world beyond their fundamentals, are simply making the core issue of debt even worse than the GFC and setting markets at current heady heights set for an even bigger fall.
The chart below illustrates very clearly the value proposition between silver and US shares. We think it is self explanatory and is a perfect depiction of what attracts smart money like Soros and Druckenmiller.
AinslieBullion
Member
Warning Signs of a Crash
There are so many warning signs of a financial crash being close it would be foolish to ignore even one of them. They are many and varied but let's just look at a few
Yields on junk bonds are soaring. They did this just before the GFC as well. But this time it is far far worse. US corporations have issued an incredible $9.3 trillion (well over 50% of US GDP) in bonds since the GFC. For what? Not investing in P&E or improvements, but buying their own stock or issuing dividends, and of course lifting share prices to record levels. Junk grade bonds have risen to an eye watering $2.2 trillion and yields have more than doubled in a year to over 16% - spurred along by the yuan devaluation last week. For the Fed to raise rates now with this happening would be financial market suicide. In broader bond market terms we have seen bonds (remember bonds are just issued debt) markets grow from $80 trillion to over $100 trillion since the GFC. The derivatives market that uses this bond bubble as collateral is over $555 trillion in size. Game over if that collapses.
Copper (often referred to as Dr Copper in reference to its defacto economist role on the health of global markets) is at a post GFC low. As the graph below clearly depicts the price is equal to that just before the GFC. Despite the Fed printing $3.6 trillion, and likewise Japan, plus China, and plus the ECB, it is falling again.
If you think Copper is too narrow a metric, more broadly the Shanghai Containerised Freight Index to Europe crashed by 23% in just 5 days.
And if we just look at cycles - one person who has called markets pretty well over time using cycle analysis is Larry Edelson, editor ofReal Wealth ReportandSupercycle Trader. Here's what he had to say this week:
"On October 7, 2015, the first economic super cycle since 1929 will trigger a global financial crisis of epic proportions. It will bring Europe, Japan and the United States to their knees, sending nearly one billion human beings on a roller-coaster ride through hell for the next five years. A ride like no generation has ever seen. I am 100 percent confident it will hit within the next few months."
As a reminder if you look at the 5 worst years on the Australian stock market in about the last 50 years they fell on average 24.5%. In those very same years gold averaged a RISE of 38.5%.- i.e. gold saved 63% of your money. More simply in the GFC, shares halved and gold doubled. Are you ready for what is coming?
There are so many warning signs of a financial crash being close it would be foolish to ignore even one of them. They are many and varied but let's just look at a few
Yields on junk bonds are soaring. They did this just before the GFC as well. But this time it is far far worse. US corporations have issued an incredible $9.3 trillion (well over 50% of US GDP) in bonds since the GFC. For what? Not investing in P&E or improvements, but buying their own stock or issuing dividends, and of course lifting share prices to record levels. Junk grade bonds have risen to an eye watering $2.2 trillion and yields have more than doubled in a year to over 16% - spurred along by the yuan devaluation last week. For the Fed to raise rates now with this happening would be financial market suicide. In broader bond market terms we have seen bonds (remember bonds are just issued debt) markets grow from $80 trillion to over $100 trillion since the GFC. The derivatives market that uses this bond bubble as collateral is over $555 trillion in size. Game over if that collapses.
Copper (often referred to as Dr Copper in reference to its defacto economist role on the health of global markets) is at a post GFC low. As the graph below clearly depicts the price is equal to that just before the GFC. Despite the Fed printing $3.6 trillion, and likewise Japan, plus China, and plus the ECB, it is falling again.
If you think Copper is too narrow a metric, more broadly the Shanghai Containerised Freight Index to Europe crashed by 23% in just 5 days.
And if we just look at cycles - one person who has called markets pretty well over time using cycle analysis is Larry Edelson, editor ofReal Wealth ReportandSupercycle Trader. Here's what he had to say this week:
"On October 7, 2015, the first economic super cycle since 1929 will trigger a global financial crisis of epic proportions. It will bring Europe, Japan and the United States to their knees, sending nearly one billion human beings on a roller-coaster ride through hell for the next five years. A ride like no generation has ever seen. I am 100 percent confident it will hit within the next few months."
As a reminder if you look at the 5 worst years on the Australian stock market in about the last 50 years they fell on average 24.5%. In those very same years gold averaged a RISE of 38.5%.- i.e. gold saved 63% of your money. More simply in the GFC, shares halved and gold doubled. Are you ready for what is coming?
AinslieBullion
Member
Post QE Reality
Wall Street had a shocker this week down another 1.6% last night, Euro shares were down 2.2% last night and China's down 3.4%. Gold and silver continued to rise. It's like reality is hitting.
The artificial nature of the post GFC US sharemarket is best expressed in the charts below.
Firstly let's look at the S&P500 since the GFC. Note each previous time QE (money printing) stopped, down came shares. They were a bit more careful after QE3 in their continuation of zero interest rates and 'nearly there' speak as exemplified by the FOMC minutes this week.
Fig 1. (https://www.ainsliebullion.com.au/Portals/0/sp500 qe long.png)
In a slightly different way relook at it in terms of the correlation with the US Fed's balance sheet (illustrating the debt it has taken on to print the money through its QE program that bought the shares). Note the S&P500 is starting to head down as reality hits.
Fig 2. (https://www.ainsliebullion.com.au/Portals/0/SP500 qe.jpg)
Now look at the Dow Jones and it's already there.
Fig 3. (https://www.ainsliebullion.com.au/Portals/0/dj qe.jpg)
As we reported earlier on the trade volume (LOLume) one could get the sense that reality is starting to hit home
Wall Street had a shocker this week down another 1.6% last night, Euro shares were down 2.2% last night and China's down 3.4%. Gold and silver continued to rise. It's like reality is hitting.
The artificial nature of the post GFC US sharemarket is best expressed in the charts below.
Firstly let's look at the S&P500 since the GFC. Note each previous time QE (money printing) stopped, down came shares. They were a bit more careful after QE3 in their continuation of zero interest rates and 'nearly there' speak as exemplified by the FOMC minutes this week.
Fig 1. (https://www.ainsliebullion.com.au/Portals/0/sp500 qe long.png)
In a slightly different way relook at it in terms of the correlation with the US Fed's balance sheet (illustrating the debt it has taken on to print the money through its QE program that bought the shares). Note the S&P500 is starting to head down as reality hits.
Fig 2. (https://www.ainsliebullion.com.au/Portals/0/SP500 qe.jpg)
Now look at the Dow Jones and it's already there.
Fig 3. (https://www.ainsliebullion.com.au/Portals/0/dj qe.jpg)
As we reported earlier on the trade volume (LOLume) one could get the sense that reality is starting to hit home
Charles Thorn
New Member
AinslieBullion said:
Ainslie, Looks like your posted links are broken... click them to see.
AinslieBullion said:Post QE Reality
Wall Street had a shocker this week down another 1.6% last night, Euro shares were down 2.2% last night and China's down 3.4%. Gold and silver continued to rise. It's like reality is hitting.
The artificial nature of the post GFC US sharemarket is best expressed in the charts below.
Firstly let's look at the S&P500 since the GFC. Note each previous time QE (money printing) stopped, down came shares. They were a bit more careful after QE3 in their continuation of zero interest rates and 'nearly there' speak as exemplified by the FOMC minutes this week.
Fig 1.
In a slightly different way relook at it in terms of the correlation with the US Fed's balance sheet (illustrating the debt it has taken on to print the money through its QE program that bought the shares). Note the S&P500 is starting to head down as reality hits.
Fig 2.
Now look at the Dow Jones and it's already there.
Fig 3.
As we reported earlier on the trade volume (LOLume) one could get the sense that reality is starting to hit home
fixed
AinslieBullion
Member
When the US AND China Sneeze
On Friday we touched on the effect of Quantitative Easing (money printing) on US shares. Last week Vern Gowdie of The Daily Reckoning wrote a great article on the effect of all this central bank stimulus around the world as they desperately try to prop up financial markets. We've posted Vern's article on our website for you to read but in essence what he is saying is that markets, natural markets, always win. The unprecedented central bank/government stimulus and intervention we have seen, particularly since the GFC is just potentially temporarily skewed 'nature' and is setting us up for a far bigger fall.
Consider the graph below that illustrates over the last century or so the market phenomenon of secular bull and bear markets. Bull markets take Price/Earnings ratios of shares up to unrealistic heights. Bear markets bring them back down to good value levels, and so repeats. They are secular as they are long term and include ups and downs along the way. But notice this current one. Look what the various programs of QE and zero interest rates did post GFC. But what we are potentially seeing this last week is this starting to unwind. The US is part of the global system (espec China) and their practices may be coming home to roost. The problem is the fall is from still heady P/E heights.
And for those who think 'it's different here in Australia' the adage "The US sneezes and we catch a cold" is based on pretty clear evidence depicted in the table below.
We relatively cruised through the GFC courtesy of China and a solid domestic balance sheet. This time around China's slowdown may well be the catalyst, won't have the same appetite for our resources and we are (like everyone else) well and truly in the red with our country's debt.
This is far beyond a Wall Street crash, this is a global crash. The graph below depict the global basket of sharemarkets and they have well and truly smashed through the 200 day moving average (red line).
On Friday we touched on the effect of Quantitative Easing (money printing) on US shares. Last week Vern Gowdie of The Daily Reckoning wrote a great article on the effect of all this central bank stimulus around the world as they desperately try to prop up financial markets. We've posted Vern's article on our website for you to read but in essence what he is saying is that markets, natural markets, always win. The unprecedented central bank/government stimulus and intervention we have seen, particularly since the GFC is just potentially temporarily skewed 'nature' and is setting us up for a far bigger fall.
Consider the graph below that illustrates over the last century or so the market phenomenon of secular bull and bear markets. Bull markets take Price/Earnings ratios of shares up to unrealistic heights. Bear markets bring them back down to good value levels, and so repeats. They are secular as they are long term and include ups and downs along the way. But notice this current one. Look what the various programs of QE and zero interest rates did post GFC. But what we are potentially seeing this last week is this starting to unwind. The US is part of the global system (espec China) and their practices may be coming home to roost. The problem is the fall is from still heady P/E heights.
And for those who think 'it's different here in Australia' the adage "The US sneezes and we catch a cold" is based on pretty clear evidence depicted in the table below.
We relatively cruised through the GFC courtesy of China and a solid domestic balance sheet. This time around China's slowdown may well be the catalyst, won't have the same appetite for our resources and we are (like everyone else) well and truly in the red with our country's debt.
This is far beyond a Wall Street crash, this is a global crash. The graph below depict the global basket of sharemarkets and they have well and truly smashed through the 200 day moving average (red line).
AinslieBullion
Member
Just the Beginning?
Last week we wrote https://www.ainsliebullion.com.au/g...-buy-gold-silver/tabid/88/a/1019/default.aspx of investment legend Stand Druckenmiller's $300m bet on gold. Stan is famous for making aggressive "home run" bets on one class. He famously made $1b on his shorting of the British pound in 1992. His call looks to be playing out right now. It's way too early for "I told you so's" but it is timely to reflect on exactly why he made this investment and what that might mean for "where to from here". Economic commentator Andrew Hecht summarised a recent interview with Druckenmiller well as follows:
"If Stan Druckenmiller is right and gold becomes a home run trade for him, it will provide a scary commentary for fiat currencies around the world. Since the global financial crisis in 2008, central banks have used a number of tools to stimulate the economies of nations around the world. The United States had a policy of quantitative easing that ended just last year. Europe introduced that same policy this year. In China, the government cut interest rates four times thus far in 2015; they introduced new rules to inhibit selling on their equity market, floated an infrastructure bond and devalued their currency all in an attempt to jump-start their economy. For years, central banks and governments around the world have held interest rates down in an attempt to stimulate economic activity. Perhaps all of these cheap money policies are finally catching up and this is not good news for fiat currencies such as the dollar, euro, yen, Swiss franc, yuan as well as others.
Gold bulls rejoiced recently when the news that Stan the Man had joined their ranks. They had been emboldened by the rally in gold, which took it over the $1135 resistance level last week. However, if Druckenmiller is correct and hits yet another home run, this time in the gold market, it will be very bad news for almost every other asset class in the world.Stanley'sbet is that there may be nowhere to run and nowhere to hide except gold as the chickens come home to roost in terms of the backlash from cheap money policies over the past seven years."
Last week we wrote https://www.ainsliebullion.com.au/g...-buy-gold-silver/tabid/88/a/1019/default.aspx of investment legend Stand Druckenmiller's $300m bet on gold. Stan is famous for making aggressive "home run" bets on one class. He famously made $1b on his shorting of the British pound in 1992. His call looks to be playing out right now. It's way too early for "I told you so's" but it is timely to reflect on exactly why he made this investment and what that might mean for "where to from here". Economic commentator Andrew Hecht summarised a recent interview with Druckenmiller well as follows:
"If Stan Druckenmiller is right and gold becomes a home run trade for him, it will provide a scary commentary for fiat currencies around the world. Since the global financial crisis in 2008, central banks have used a number of tools to stimulate the economies of nations around the world. The United States had a policy of quantitative easing that ended just last year. Europe introduced that same policy this year. In China, the government cut interest rates four times thus far in 2015; they introduced new rules to inhibit selling on their equity market, floated an infrastructure bond and devalued their currency all in an attempt to jump-start their economy. For years, central banks and governments around the world have held interest rates down in an attempt to stimulate economic activity. Perhaps all of these cheap money policies are finally catching up and this is not good news for fiat currencies such as the dollar, euro, yen, Swiss franc, yuan as well as others.
Gold bulls rejoiced recently when the news that Stan the Man had joined their ranks. They had been emboldened by the rally in gold, which took it over the $1135 resistance level last week. However, if Druckenmiller is correct and hits yet another home run, this time in the gold market, it will be very bad news for almost every other asset class in the world.Stanley'sbet is that there may be nowhere to run and nowhere to hide except gold as the chickens come home to roost in terms of the backlash from cheap money policies over the past seven years."
AinslieBullion
Member
Is QE4 All That's Left?
There have been a couple of core themes of our daily writings with regard to investment and protection of wealth. Firstly is that since the GFC we have seen global central banks artificially stimulating financial markets and property with printed money and near zero interest rates creating asset bubbles beyond fundamentals on an unprecedented scale. Secondly, that all comes via debt, the very catalyst of the GFC, and not just a little, but up 40% and on any measure at all-time record highs. Not convinced?....
Deutsche Bank Germany's largest bank and one of the largest in the world had this to say on the weekend:
"The fragility of this artificially manipulated financial system was exposed over the last couple of days of last week. It all ended with the S&P 500 falling -3.19% on Friday its worst day since November 9th 2011."
Sound familiar?
Or from Bridgewater the world's largest hedge fund in a note to clients:
"That's where we find ourselves nowi.e., interest rates around the world are at or near 0%, spreads are relatively narrow (because asset prices have been pushed up) and debt levels are high. As a result, the ability of central banks to ease is limited, at a time when the risks are more on the downside than the upside and most people have a dangerous long bias.Said differently, the risks of the world being at or near the end of its long-term debt cycle are significant."
You see Bridgewater, headed by legendary Ray Dalio, are seeing through the Fed's tightening talk as either ill-conceived (based on short term cycles not long term) or verbal massaging. Indeed they see things going so badly soon that the Fed will need to ease not tighten. With rates at zero already that leaves only one tool more Quantitative Easing. For newcomers, that is printing money by buying your own Treasury bonds (Gov debt). They already have over $4t on their balance sheet and it clearly isn't working. Bridgewater finished their above advice to clients with this:
"We Believe That the Next Big Fed Move Will Be to Ease (Via QE) Rather Than to Tighten"
Should QE4 really happen many believe that is when all faith will be lost and you will see gold truly take-off. China eased further yesterday and that stimulus didn't even last a full day on Wall Street, ending back in the red after the initial big rally. Not coincidentally then Ray Dalio had this to say earlier this year:
"If you don't own gold there is no sensible reason other than you don't know history or you don't know the economics of it"
There have been a couple of core themes of our daily writings with regard to investment and protection of wealth. Firstly is that since the GFC we have seen global central banks artificially stimulating financial markets and property with printed money and near zero interest rates creating asset bubbles beyond fundamentals on an unprecedented scale. Secondly, that all comes via debt, the very catalyst of the GFC, and not just a little, but up 40% and on any measure at all-time record highs. Not convinced?....
Deutsche Bank Germany's largest bank and one of the largest in the world had this to say on the weekend:
"The fragility of this artificially manipulated financial system was exposed over the last couple of days of last week. It all ended with the S&P 500 falling -3.19% on Friday its worst day since November 9th 2011."
Sound familiar?
Or from Bridgewater the world's largest hedge fund in a note to clients:
"That's where we find ourselves nowi.e., interest rates around the world are at or near 0%, spreads are relatively narrow (because asset prices have been pushed up) and debt levels are high. As a result, the ability of central banks to ease is limited, at a time when the risks are more on the downside than the upside and most people have a dangerous long bias.Said differently, the risks of the world being at or near the end of its long-term debt cycle are significant."
You see Bridgewater, headed by legendary Ray Dalio, are seeing through the Fed's tightening talk as either ill-conceived (based on short term cycles not long term) or verbal massaging. Indeed they see things going so badly soon that the Fed will need to ease not tighten. With rates at zero already that leaves only one tool more Quantitative Easing. For newcomers, that is printing money by buying your own Treasury bonds (Gov debt). They already have over $4t on their balance sheet and it clearly isn't working. Bridgewater finished their above advice to clients with this:
"We Believe That the Next Big Fed Move Will Be to Ease (Via QE) Rather Than to Tighten"
Should QE4 really happen many believe that is when all faith will be lost and you will see gold truly take-off. China eased further yesterday and that stimulus didn't even last a full day on Wall Street, ending back in the red after the initial big rally. Not coincidentally then Ray Dalio had this to say earlier this year:
"If you don't own gold there is no sensible reason other than you don't know history or you don't know the economics of it"
AinslieBullion
Member
Radio released today - https://www.ainsliebullion.com.au/g...st-ainslie-radio/tabid/88/a/1028/default.aspx
The GSR, choice, and balance..
Silver had a decent gain last night taking the Gold Silver Ratio back down to 77:1. But this week we saw the GSR hit 80. That is the highest it's been when it peaked just before shares took their final GFC plunge at the beginning of 2009. We've written before about what a screaming buy signal this is for silver so we won't go over it again (but you should read if you haven't!). We were however reminded again this morning with Bix Weir's email to subscribers simply stating:
"I've said it a million times and now is one of the best times in history to actually DO IT!
SWAP ALL YOUR PHYSICAL GOLD FOR PHYSICAL SILVER!!!
The Silver-Gold Ratio is close to 80-1...when it should be 5-1 or lower!!!"
We believe you should have a mix, to be honest, there are no certainties in life and that is probably a core reason you are buying gold and silver in the first place to balance your wealth. A balance within the precious metals sector may be wise too.
Whilst gold and silver generally follow a similar pattern, that wildly (over many years) oscillating GSR means at any time one will be better 'value' than the other. We've had a number of clients being forced to sell some of their gold and silver this week due to margin calls on their shares. This highlights you don't always get to 'choose' when you sell so you don't know which metal will be 'up' at that time. Those selling their gold were much happier than those selling their silver, and those who had the choice were happier again. SMSF purchasers too need to consider the pension phase and needing to sell down their holdings in the market that coincides with. We all remember visions of weeping pensioners (well those without gold and silver) after the GFC seeing their wealth smashed by the shares crashing.
So yes the case for going "all in" as Bix Weir would recommend looks compelling just consider the above before you swap ALL your gold for silver...
The GSR, choice, and balance..
Silver had a decent gain last night taking the Gold Silver Ratio back down to 77:1. But this week we saw the GSR hit 80. That is the highest it's been when it peaked just before shares took their final GFC plunge at the beginning of 2009. We've written before about what a screaming buy signal this is for silver so we won't go over it again (but you should read if you haven't!). We were however reminded again this morning with Bix Weir's email to subscribers simply stating:
"I've said it a million times and now is one of the best times in history to actually DO IT!
SWAP ALL YOUR PHYSICAL GOLD FOR PHYSICAL SILVER!!!
The Silver-Gold Ratio is close to 80-1...when it should be 5-1 or lower!!!"
We believe you should have a mix, to be honest, there are no certainties in life and that is probably a core reason you are buying gold and silver in the first place to balance your wealth. A balance within the precious metals sector may be wise too.
Whilst gold and silver generally follow a similar pattern, that wildly (over many years) oscillating GSR means at any time one will be better 'value' than the other. We've had a number of clients being forced to sell some of their gold and silver this week due to margin calls on their shares. This highlights you don't always get to 'choose' when you sell so you don't know which metal will be 'up' at that time. Those selling their gold were much happier than those selling their silver, and those who had the choice were happier again. SMSF purchasers too need to consider the pension phase and needing to sell down their holdings in the market that coincides with. We all remember visions of weeping pensioners (well those without gold and silver) after the GFC seeing their wealth smashed by the shares crashing.
So yes the case for going "all in" as Bix Weir would recommend looks compelling just consider the above before you swap ALL your gold for silver...
AinslieBullion
Member
Getting Out of Dodge
People are nervous. They are looking for signs everywhere. At the end of last week US markets rallied on one Fed member talking down a September rate rise. Over the weekend another talked it up so who knows what happens next.
Credit Suisse noted late last week the phenomenon shown in the chart below. For the first time since Q4 in 2008 (ala GFC precipice) we've just had back to back months (July and August) of retail investors getting out of both shares and bonds. As they said:
"Anytime you see something that hasn't happened since the last quarter of 2008, it's worth noting..It may be that this is an interesting oddity but if we continue to see this it could reflect a more broad-based nervousness on the part of household investors."
Whilst this is another red flag for the bond market, it pails to what we reported last week with China dumping over $100b in US Treasuries in just 2 weeks on top of what they've been unloading through Belgium and Switzerland this year.
People are nervous. They are looking for signs everywhere. At the end of last week US markets rallied on one Fed member talking down a September rate rise. Over the weekend another talked it up so who knows what happens next.
Credit Suisse noted late last week the phenomenon shown in the chart below. For the first time since Q4 in 2008 (ala GFC precipice) we've just had back to back months (July and August) of retail investors getting out of both shares and bonds. As they said:
"Anytime you see something that hasn't happened since the last quarter of 2008, it's worth noting..It may be that this is an interesting oddity but if we continue to see this it could reflect a more broad-based nervousness on the part of household investors."
Whilst this is another red flag for the bond market, it pails to what we reported last week with China dumping over $100b in US Treasuries in just 2 weeks on top of what they've been unloading through Belgium and Switzerland this year.
It'll never happen. We couldn't have 2 cataclysmic financial market meltdowns less than 7 yrs apart
...could we?
...could we?