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Having
moved to the sidelines due to the uncertainty of the US Presidential election
and the Fiscal Cliff negotiations (as well as the holidays), investors are
beginning to creep back in the marketplace.
And
they’re in for a surprise.
First
and foremost, the commitment of traders report indicates that investors are
more bullish now than at any point since 2007. This is truly extraordinary
given the sheer magnitude of the issues the global economy is facing. The
only clear reason for being that
bullish at this point is belief that the Central Banks will continue to flood
the system with liquidity pushing stocks to new all time
highs.
The
problem with this belief is that the Central Banks have reached the limits of
their policies. The ECB promised unlimited bond buying under the conditions
of a country formally requesting a bailout.
No
country in Europe wants to do this because it would mean A) opening their
books to EU officials (along with the realization that said books are cooked
B) any formal EU bailout requires austerity measures which Greece has proven
are a disaster for politicians.
On
the other side of the pond, the US Fed publicly announced QE 3 and QE 4,
giving the bulls the belief that the markets are primed to soar to new highs.
However, privately, the Fed balance sheet is virtually unchanged year over
year. And the latest Fed minutes reveal that dissent is growing at the Fed
regarding the efficacy of QE. This, combined with discussions of spending
cuts in the US, has kicked Gold and Silver down in the last few months.
So,
we have rampant bullishness in the markets at the same time that Central Banks
are finding political and professional limitations to their monetary tools.
Moreover, globally the economy is contracting again. It never really
recovered all that much, but when Central Banks pump $10 trillion into the
system that money has to go somewhere.
Indeed,
inflationary pressures are on the rise globally. We can see this with wage
protests and civil unrest in the emerging market space, higher costs and
lower profit margins at multi-national corporations, and consumers paying
higher prices or equal prices for less product
at the supermarket.
How
many times have you opened a new canister of coffee, a box of cereal, or some
other item of produce to see that it’s only 75% full? That’s not
chance. Inflation doesn’t just explode into a system… it creeps
in at first. And corporations are already implementing strategies (small
packages, higher prices, etc.) to deal with it.
One of the key items to remember as
investors is that the market doesn’t always reflect reality. Oftentimes
it reflects belief. And belief can prove to be delusion. Which is why
investors today are super-bullish on stocks (which will suffer from
inflation) and less enthusiastic about Gold and Silver (which inflation
benefits far more).
As medical costs, food, energy, and
other staples show, the inflation genie is already out of the bottle. And it
will only be getting worse going forward. What Gold and Silver do in the
short-term can have nothing to do
with what’s coming down the pike in the intermediate and long-term.
With that in mind, the global markets
have handed everyone a tremendous opportunity to begin positioning their
portfolios now while things are
still relatively calm. We’ve just had about two months of the world
essentially being put on “hold” due to the US Presidential election,
the elections in China, and the holidays.
That period is now ending and the issues
that had already begun to unfold in 2012, namely, inflation worldwide, a debt
crisis in Europe, and ongoing economic pain in much of the developed world,
are already beginning to rear their heads again.
Smart
investors are taking advantage of the lull in action to position themselves accordingly. On that note, if you’ve yet
to prepare for Europe’s BIG collapse…we’ve recently
published a report showing investors how to prepare for this. It’s
called What Europe’s Collapse Means For You and it explains
exactly how the coming Crisis will unfold as well as which investment (both
direct and backdoor) you can make to profit from it.
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