|
|
It’s
no surprise the developed Western economies continue to print money, albeit at increasing slower rates as rising prices are now
becoming problematic. That is to say, the prices for food, energy, and all
those other things are beginning to rise noticeably even for Westerners, with
sirens going off in emerging markets (because food and energy comprise such
large percentages of an average budget), however because the world’s
fiat currency economy(s) continue to need perpetual stimulus, the problem
remains. Along these lines, it should not be surprising then that while the
Chinese ramp up their tightening campaign, and the ECB is preparing
to do the same, Bernanke’s Fed
continues to justify accelerated quantitative easing (QE) and money printing
due the sluggish domestic economy that persists, and is still
exporting inflation where it is most unwelcome, with China at center.
What’s
more, it’s important to note the historical parallels to the 20’s over the
past 10-years are actually quite similar in that basically prices kept on
rising until the stock market just snapped in ‘29 as less and less
money was available for investing (just like today), not to mention stocks had
become expensive themselves. And wouldn’t you know it, because history
at least rhymes at these times, where because of near zero interest rates in
the West we now have confidence in stocks at all time highs along with prices being
perky, to say the least. Again however, with China switching off roles with
the US as world changers this time around (at secular highs), one does need
to wonder just when the disparities of the world will clash sufficiently to
cause a return to a more sane reality in the West, one where participants
acknowledge money supply growth doesn’t cause lasting economic growth,
only rising prices, and that all economic cycles end no matter how much
printed currency is thrown at them.
For
now though, it appears the world is presently going through a period of
bipolar monetary policy much like what happen leading up to the crash in
financial markets and economies during the 1930’s, where roles were
reversed, and the Fed was the culprit doing the tightening like China is today. Why did this occur?
Answer: Because the US was the central growth economy of the world back then
with what had been up to that point a rapidly expanding manufacturing base,
again, just like China today. But again, just like the turn into the
30’s in America, presently China’s manufacturing base growth rate
is slowing, and is in danger of
reversing, making for potential trouble in assets bubbles both at home (think
real estate, commodities, etc.), and abroad; troubles that will one day
undoubtedly involve bubble blowing bombshells that unfortunately could bring
on a global depression the likes of which never witnessed previously in scope. This is of course
why central authorities the world over are attempting to avoid wholesale rational deleveraging at any cost.
As
talked about at length on these pages for some time now however,
unfortunately for the powers that be, unless they can monetize the entire
market(s), once bearish speculators in US stock markets are exhausted, no
matter how much money is printed it won’t be enough to stop asset
bubbles from popping again. The difference this time around however will be
not only will equity bubbles burst, but also the larger bond bubble will go
as well, with rising interest rates mixing a bitter concoction for the our
price managing bureaucracy (with the banking cartel at center) in that the
free money (fiat currency) party would be over. This will of course make
difficult if not impossible to maintain the larger bailout bubble because
people will be paying debt off increasingly to escape higher interest
payments. Like I said, this would be lights out for the banking cartel,
trouble for their politician cronies, and a wake-up call to the larger
(Western) populace in that for all intents and purposes – the party is
over.
This
notion is being fought tooth and nail however, not just by our price managing
bureaucracy, but also by the public at large still. This is because the
public is hooked on the good life (higher standard of living) and will not
give it up until it’s forced on them, which is in fact systematically
occurring. At times it’s through inflation confiscation (of purchasing
power and wealth) and at other times process turns asset bubble(s) deflation
to combine for a lower net worth, lower incomes, and lower standard of living
for the average citizen. And now the effects of this process is even starting
to be felt by the wealthy, where this is especially true if they had a large
percentage of their wealth wiped out by one of the Ponzi scheme’s along
the way (think tech, housing, etc.), with Madoff being small potatoes by any
measure. And it’s this ongoing desire of the American public to ignore
reality that is the reason precious metals prices are not higher in spite of
all this (uncertainty) as well, however at some point they will realize the
foolishness of their ways, and rush into the market.
But
this time is not likely now in my opinion, because equity cycles continue to point lower, and this should have at
least a tempering effect on precious metals, if not wholesale liquidity /
deleveraging concerns for a period of time. (i.e. like 2008 but hopefully not
as bad.) So, this is not a time to be bold in the markets unless you are a
short seller, where based on the apparent reversals lower in gold and silver overnight in spite of crude exploding
higher, we could get asset deflation signals this week. Such an outcome would
reinforce and intensify any selling in the larger equity complex, and at a
minimum set the stage for a topping process, if not something more dramatic
considering complacency levels right now. (i.e. a fractal crash could occur
if volume were to pick-up with selling.) What’s more, we will know this
risk is prime if silver fails at Fibonacci resonance related resistance at
$33, which is pictured below, however it should be pointed out that this
should be viewed as a correction (intermediate degree) and not long-term
reversal, where once equities stabilize in summer, its advance to $50 (all
time highs and the next Fibonacci resonance related resistance) should
continue. (See Figure 1)
Figure 1
 
Just
how much will silver correct if this is indeed an intermediate degree turn
point? If I had to guess, and this is of course all educated guessing, since
Fibonacci resonance related targeting appears to be defining the move higher,
logic would dictate it might also define the parameters of corrections as
well, where the big picture snapshot shown below on the monthly plot would
suggest a move all the way back down to $22 potentially. And of course if
Harry Dent and Robert Prechter are finally correct, both being hard-core deflationists,
then $22 might not stop the decline, however their views paint gold and
silver as equities and not currencies, so such an outcome is definitely not
necessarily in the cards. What’s more, this is especially true
considering participation rates in precious metals remain so low, as alluded
to above, leaving lots of room for growth later on as increasing numbers seek
stable stores of wealth. (i.e. well grounded currencies.) This we know to be
true from historical precedent. (See Figure 2)
Figure 2
And
of course such a move lower would be good news for those looking to take on
or increase physical precious metals positions, where as long-time
subscribers know, such a strategy should form the base (core positions never
traded) of any portfolio for numerous reasons today, not the least of which
being the risk of sudden and unannounced currency depreciations on the part
of desperate politicians. As you may know, this risk increases the more
stressed the economy gets, meaning the more a currency needs to be debased.
What happens is you wake up one morning to hear on the news our masters have decided it would be better for
the economy to recalibrate fiat currencies to promote price stability and
growth (the same BS the Fed [their puppets] spews out), and that your old
dollars are to be turned in for new currency units (of a larger dimension) at
a predetermined ratio. But if you are a retailer don’t fret because
re-pricing your stock won’t be necessary. People would simply have far
less currency to pay for purchases in such an instance. (See Figure 3)
Figure 3
This
risk is why precious metals will eventually make a meaningful breakout
against the primary form of savings people have today, which is in stocks,
where as you can see above, pressure is building at sinusoidal resistance for
silver to breakout against the S&P 500 (SPX). And this breakout will
happen at some point, likely this year, which will send silver materially
higher. (i.e. into three digit territory.) So again, if it pulls back into
the $22 area, this would make for an ideal accumulation target, where the
likely timing for this pricing should fall in the May / June timeframe.
Unfortunately
we cannot carry on past this point, as the remainder of this analysis is
reserved for our subscribers. Of course if the above is the kind of analysis
you are looking for this is easily remedied by visiting our web site to discover more about how our service
can help you in not only this regard, but also in achieving your financial
goals. Along these lines, you should know your subscription to Treasure
Chests would include daily commentary from either the myself or Dave Petch.
As you may know, I cover macro-conditions, sector timing, and value oriented
stock selection, while Dave covers the HUI, XOI, USD, SPX, and TNX
technically each week. Mr. Petch is a world class Elliott Wave Theory technician.
In addition to this, you would have
access to all archived commentaries, the Chart Room, exhibiting 100 annotated
charts of the precious metals and stock markets, along with stock selection
and sector outlook pages. Here, in addition to improving our advisory
service, our aim is to also provide a resource center, one where you have
access to well presented 'key' information concerning the markets we cover.
And if you are interested in finding
out more about how our advisory service would have kept you on the right side
of the equity and precious metals markets these past years, please take some
time to review a publicly available and extensive archive, where you will
find our track record speaks for itself.
Naturally if you have any questions,
comments, or criticisms regarding the above, please feel free to drop us a line. We very much enjoy hearing
from you on these matters.
Good investing and best of the season
all.
Captain Hook
Treasure
Chests.com
Treasure
Chests is a market timing service specializing in value-based position
trading in the precious metals and equity markets with an orientation geared
to identifying intermediate-term swing trading opportunities. Specific
opportunities are identified utilizing a combination of fundamental,
technical, and inter-market analysis. This style of investing has proven very
successful for wealthy and sophisticated investors, as it reduces risk and
enhances returns when the methodology is applied effectively. Those
interested in discovering more about how the strategies described above can
enhance your wealth should visit their web site at Treasure
Chests
|
|
