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The Experts Have Reached
a Consensus and it's Not Good!
Economists from Goldman
Sachs suggest that the U.S. and global economies are heading for "The
Great Stagnation." It's about time. I have been warning you all for
going on 2 years now. But in my opinion, it will be much worse than that.
Most of Europe and the USA are bankrupt and are only being kept alive by
fraudulent accounting and manipulation of the financial markets. Making it
worse are the politicians who are not only completely incompetent, but cannot
see further than their noses and certainly not further than the next
election; always putting their own personal wallets ahead of their country's
welfare. What that means in plain English is that the next decade is more
likely to be similar to the "1930s" than to anything we have seen
in our lifetime. That's why you need to be ultra careful to avoid the
crippling effects of a devaluation of our currency and a combination of
inflation and deflation, which infers massive volatility in the world's bond
and stock markets. Just look at what has been happening in the last few
months.
Everyone involved with
the European debacle including brokers, bankers, economists and financial
commentators on both sides of the POND seem to all be in agreement that what
is needed in Europe is an American style "TARP". How dumb
and ill informed can they be? Europe's main problem is NOT a liquidity
crisis, it is a spending crisis brought about by out of control
Socialist policies. A onetime injection of funds, no matter how large, will
not solve Europe's or America's problems. Massive cuts in government spending
will just hasten the onset of Recession come Depression. It is just a matter
of time before the markets and the bond vigilantes figure it all out and
then, watch out below. Just because everyone is living in a fool's paradise
doesn't alter the fact that Europe and America are on the verge of
bankruptcy; unless our steady march into Socialism is reversed quickly.
Recently, even the
ultra-conservative major credit rating agencies have started warning America
that all is NOT well and a ratings reduction will be coming shortly, unless
some meaningful changes are made in a hurry and not in 10 years.
THE DEATH OF OUR 65 YEAR BULL MARKET
When does
a bull market end and a DEPRESSION begin and what comes first? It's an important
question and not just a philosophical one. It ends when the unit of measure
(the US Dollar) loses its value and its ability to store wealth and
eventually becoming no longer acceptable to all as a means of payment.
Many asset classes,
especially the US Treasury Bonds are in an historic Bull Market Bubble and
yet still have very little relative buying. How can we be in a Bubble vwith
massive buying? Many governments' debts (bonds and currencies) are currently
running out of buyers. Lots of people want to sell sovereign debt (i.e.
Italy, Greece, Spain, Portugal and especially the United States) but cannot
do so without their Central Banks buying up most of their New Issues as well
as their FEDs being forced into buying in the open market to support their
bond prices. These countries need to sell this debt because it's the only way
they can pay for their deficit spending. This ball game cannot last forever
and will soon be coming to a very sorry end.
We know that some of the
biggest bond funds in the world have eased off buying western sovereign debt.
Even our own Bill Gross, manager of the world's largest bond fund, recently dumped
all of his U.S. Treasury Bond holdings. He bought some Treasury Notes a
month or so later, but I am sure that was under a tremendous amount of
political pressure. But the main point is that these sovereign debt issuances
are running short of buyers. We saw that lack of demand recently when the
German Danske Bank called their most recent bond auction "the worst on
record" and could only sell less than one third of the issue and became
the 1st major bond auction failure.
Who's buying? We know the
buyers can't be insurance companies, pension funds or mutual funds. They
can't buy anything offering such small returns and still stay in business.
What's more, now that interest rates are down to around 0%, there can be no
more capital gains to make up for the lack of any interest payments. There
are no mom and pop savers any more. It is only the other debt-ridden western
governments that are buying, just shuffling paper. They're all buying each
other's junk because no one else will. They don't dare let an auction fail
because that would be an admission that the world's financial system is
broken. So, look for that trend to play out now that the cat is out of the
bag. Eventually, all of the liabilities will be piled up nice and neat onto
the backs of the Dollar and the Euro. That's the bet that the world's central
bankers are making: It's a bet that I will be fading. Start buying
"TBT" the dbl short Treasury ETF.
On one side is the
Keynesian dream, which is that you can manage an economy by socializing
everything. They are not the first to believe that "one can have their
cake and eat it too". That brings me to the asset class that's in a bull
market and still has relatively few buyers, but not for much longer. When the
major currencies begin to collapse, fail and otherwise lose credibility, the
buyers for gold, silver and other "real" assets will come out of
the wood work in droves. They'll have no choice. Holding government debt is a
suicidal position that they will do anything to avoid once they realize the
truth that at zero interest rates there can be no more capital gains, only
losses, realized or not.
THE BEGINNING OF THE END
OF THE US DOLLAR BEING THE WORLD'S ONLY RESERVE CURRENCY
Apple just announced that
it will begin accepting payment in Chinese Yuan for iTunes music and
application downloads! If that's not a sign of the growing importance of
China's currency, I don't know what is. The Chinese Yuan now represents the
fastest growing currency market in the world. It is the one other currency
besides the Dollar now being used to pay for goods and services in Hong Kong,
Russia, Brazil, Canada, Malaysia, Thailand, Indonesia and the rest of South
East Asia with more countries to follow.
The beginning of the END
for the US Dollar has started as more and more countries are recognizing that
China's currency is soon going to become as international a currency just
like the Dollar: That Is why, in my opinion, we're headed toward another
Dollar devaluation whether we like it or not. And now the Chicago Mercantile
Exchange (CME), the world's largest trading exchange, just announced that it
will begin accepting margin deposits in Yuan! These are the first signs of
the rapid deterioration of the Dollar; you're bound to see and hear a lot
more about China's currency in the weeks ahead. You see, China's currency is
becoming more and more of an international player in its own right, simply
because of the strength of China's economy.
Meanwhile here in the
United States, nearly every economist, central banker and politician you can
name, lead by President Obama, is virtually working overtime to make China's
currency even stronger! That is the only way they can think of, short of a
TRADE WAR, to increase our exports while decreasing our imports. BUT China
will not just sit back and allow the USA to steal their reserves. Why?
Because the simple truth of the matter is that our leaders in Washington want
the value of China's currency to go UP - and the value of the U.S. Dollar
to go DOWN - because that's how our leaders think they can pay off the
mountain of debts they've created: By depreciating the value of the Dollar.
Unfortunately it's not
just China that loses. The biggest losers will be the largest holders of US
Dollars; the American People. Like the Euro, the U.S. Dollar is fraught with
problems: $15.5 trillion worth of problems to be exact and increasing at a
rate of $2 trillion plus per year. Meanwhile, China is one of the only
countries in the world that has virtually no foreign debt and a piggy-bank
brimming with more than $3.2 trillion in rainy day Dollars. And the Chinese
are not just sitting back and taking it. They are massively increasing the
amount of gold and silver that they are buying with their steadily depreciating
US Dollar holdings and adding the gold and silver to their reserves. To make
matters worse, with Obama's help, Canada is preparing to divert the proposed
pipeline from the Alberta Tar Sands down to Houston to the west instead and
sell all that oil to China. What do you think about that idea?
If you can't beat them,
then join them by increasing your gold holdings while decreasing the amount
of US Dollars you hold as your reserves (cash, bank savings, CDs, money
market holdings and Dollar denominated Bonds.) Gold coins make excellent
substitutes. And the truth be told, that's exactly what Washington wants, a
weaker Dollar. Of course, the powers that be will never admit to it. They
keep talking that they have a strong Dollar policy. But as I've been telling
you all along, Washington Never tells us the truth.
SILVER
The big money is
tiptoeing back into silver. Last month, commodity trading advisors, pool
operators, and hedge funds - the "big money" - weren't interested
in silver at all.. Their short term objective was to
help JPM and the rest of their gang of thieves drive the price of both silver
and gold DOWN so that they can cover some of their shorts and accumulate more
cheap silver, while the regulatory bodies turn a blind eye to their
manipulation: But sooner rather than later, as they move back into the
market, silver prices will soar.
Let me show you what I'm
talking about:
Jason Goepfert created
Sentiment Trader, a service that tracks investor sentiment toward various
asset classes. According to Jason, silver just bounced off its most
pessimistic reading in four years. The so-called "commitment of
non-commercial traders" hit 10,352. That's incredibly low. The last time
sentiment numbers were that low was in August 2007. Six months later, the
price of silver was 59% higher. It rose from $12 per ounce to $19 per ounce.
I went all the way back to 2002 and found that silver sentiment bottomed near
10,000 six times. On average, the price of silver rose 33% in the next six
months and 54% over the next year.
This chart shows the last
four times it bottomed:
Here's how the silver
price performed after each of the last four times silver sentiment bottomed
out…
 
The best return came
after Bottom No. 2, which coincided with the U.S. banking/credit crisis.
Silver soared an eye-popping 405%, including its parabolic rise in 2010. As
those numbers indicate, silver is one of the most volatile assets in the
world. Over the last year, silver has seen massive price swings, including an
81% rally and two 30% drops brought on by 2 successive margin increases: That
forced many traders to liquidate their silver holdings in order to meet
emergency short-term requirements. (Plus, the debacle at commodity broker MF
Global has scared many folks out of the market.) Would you leave your funds
at the COMEX? Here comes China and their new PAGE exchange.
Have any of you noticed
that even Cramer is now recommending that gold and silver be part of
everyone's portfolio?
But the long-term drivers
of gold and silver's up trends are still in place. Enormous and growing Asian
economies like China and India are getting richer and they have deep cultural
affinities for precious metals. Plus, the Western world has lived way beyond
its means for a long time… the debts and liabilities it has taken on
can only be paid back with devalued, debased money. This is bullish for
"real money" assets like gold and silver.
More and more people have
begun to realize that it is NOT a good idea to keep their excess reserves in
not so safe banks that pay little if any interest, and there is no penalty to
holding your personal excess reserves in the form of gold and silver bullion
since you are not giving up any interest to speak of.
With sentiment so
negative toward silver, it's a great time to take a position in this
long-term bull market. It's about time we caught JPM and that gang of thieves
with their pants down.
·
The Federal Reserve Bank of San Francisco
quietly issued a report this September predicting that this one event could
cause the stock market to crash by 50% and stay at those levels for up to 20
years.
·
·
The National Bureau of Economic Research predicted a
total "Asset Meltdown" in America when it happens.
·
·
Other economists predicted it could cause an economic
collapse with a "total decrease in GDP as high as 25%."
·
·
After 10 years, it's nice that they are finally
catching up to me.
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I'm not in the business
of selling fear.
Seems to me almost everywhere
you turn these days, someone new is trying to scare you. So, you don't need
me to tell you we're about to enter into the worst Recession since the Great
Depression. I have warned you well in advance so that you had time to plan.
And you don't need me to tell you that America is broke and is drowning under
too much debt or that we recently lost our AAA credit rating. You also don't
need me to remind you that Social Security is busted, or that medical costs
are rising at unsustainable rates and Obama Care, which begins in 2013, will
make it all a lot worse.
The last thing you need
is someone else predicting the end of America.
What you do need to
know is the reason why all of this is really happening and what you can
do to protect yourself.
For the new readers just
joining us, welcome. Almost six years ago, I was convinced by my loyal
readers of my submissions to Gold-Eagle.com to come out of retirement and
start a subscription letter; I was too young (70) to waste my time playing
golf all day. I had not realized how many people were looking for somebody
who would tell them the truth all the time. Since my friends in politics
refused to listen, I wrote everyone who had written me to start UNCOMMON
COMMON SENSE, that if I received enough subscribers over the next 2 months, I
would start my letter. I received over 150 checks for $300 each and UNCOMMON
COMMON SENSE was born on December 15th 2007 beginning with "REAL ESTATE
CRASH 2008, RECESSION 2009".
Basically, each report
warned of the same thing: Beginning in 2008, America would be hit by the
financial equivalent of an asteroid.
Due to the gravity of
this problem and the fact that nobody seems to want to talk about it
honestly, each Report begins with an analysis of what is happening in
Washington.
My 8 page reports are an
attempt to take you behind-the-scenes of a problem that no one in America
wants to admit exists, especially the American people and their political
leaders. This way, you can understand what's really happening and take
the necessary steps to protect yourself and your family before it's too late.
Because sooner or later, this is going to come out and when it does, it's
going to "come out" in a big way.
ONE REASON WHY I'M STILL
BEARISH
The five largest, one day
percentage up moves in the history of the Dow Jones Industrial Average all
occurred during a bear market:
If we look at the seven
biggest up moves in terms of Dow points, we can see they also occurred during
a bear market:
How is that possible?
Surely the biggest up moves should happen in bull markets, not bear markets
right?
Always remember that the
market continually tries to fool as many people as it can. In bear markets,
everyone is looking to buy the bottom, whereas in bull markets, everyone is
looking to sell the top. It's all a matter of HUMAN NATURE. Bull and bear
markets can't happen without this phenomenon coming into play. I bring this
up because, even with all of the sound and fury of the last few weeks, the
S&P 500 is still only down 24 points for the year!
So far, the long term
trend indicators that I use continue to suggest this is a bear market rally.
In spite of recent bullishness, the overriding trend is in fact down and not
up. I must admit that even for me this is hard to hold on to, given the
plethora of good news we have seen hit the tape.
We've seen US corporate
earnings hold up very well, unemployment is down and manufacturing is
improving. European debt yields have shrunk recently, especially the all
important 10 Year Italian yield, which has dropped from near 7.50% to 5.85%
in a week! The European bond market appears to be signaling that the Euro
Zone may in fact survive. Surely that has bullish implications for equities?
Maybe, but I think the next big question looming in investors' minds will be
the impact of all those austerity measures in Europe. Surely we have to see
an economic slowdown over there. Could that cause an accelerating slowdown in
China or, heaven forbid, an increasing slowdown here
in the good old USA?
The bottom line is that
there is still a great amount of uncertainty and we are right up against the
upper trading levels of the S&P 500. When faced with this type of
dilemma, I will typically take a step back and rely on my long-term trend
indicators. As I wrote earlier, those indicators are still bearish and as
such, I must maintain a bearish stance. From a risk reward standpoint, that
is actually easier to do up here against resistance. If I am wrong, I won't
be wrong for big money, since everything is so close to resistance levels
(and as such my stop loss points are relatively tight). If we do get a
breakout here, I'll be stopped out on my shorts. I will then wait for
confirmation from my trend indicators and if they confirm a bull market, I'll
simply wait for the inevitable first wave sell-off after the primary move and
get long. Will I get the very best prices that way? No, I will not. But what
I will do is insulate myself from massive losses if this market decides to do
a sudden about face because if that happens, you may not have the opportunity
to get out.
Long story short: Wait
for the confirmation before going back bullish. Better an ounce of prevention
than a pound of cure.
GOLD
When others are THROWING
IN THE TOWEL,
It is the PERFECT TIME TO start looking to BUY GOLD
Gold bugs over the last
two weeks have become even more discouraged than they were at the end of
November. As a result, contrarians detect a very strong wall of worry forming
in the gold market, which could very well be the springboard for bullion
rallying into new all-time high territory. I never thought that gold holders
would throw in the towel and dump their gold holdings, but low and behold
they finally did, presenting us with the BEST BUYING opportunity since 1973.
I have been reminding you for 10 years to beware of the Golden Bull, it will do everything to scare you off. So take a
deep breath and hold on tight.
Gold futures have fallen
5% this month (as of December 13th) tracking a stock sell-off and losing a
lot of their safe-haven allure. Two weeks ago, the contrarian analysis of
gold sentiment average stood at 13.7%. Today it stands at 0.3%, which means
that the average gold trader (including many gold bugs) is essentially out of
the market. Two weeks ago, on the basis of the HGNSI (Hulbert Financial
Digest as measured by the Hulbert Gold Newsletter Sentiment Index or HGNSI)
being as low as 13.7%, contrarian analysis was already bullish on gold's
prospects and yet GOLD has fallen by more than $150 per ounce. What
assurances do we have that my contrarian analysis will be successful this
time around? We don't, of course. But it's worth stressing that contrarian
analysis is right a lot more often than it is wrong, especially when at
extremes, like we are now. Gold's seasonal tendencies are yet more evidence
pointing in the same direction as contrarian analysis: Gold is due for a very
strong rally perhaps setting up the EXPLOSION to $2500 that I have been
calling for. I have not let you down in 10 years including 2006 and 2008. In
bull riding, you can only hang on with one hand, but when riding the Golden
Bull if you are going to win you must Hang On with both hands.
WHERE TO NOW?
The odds are high that
the HUI Mining Stocks Index, Gold, and Silver are about to rally sharply. My
upside targets for the HUI are 580+/- and for Gold around $2,550+/-, reaching
those levels by late January. To March 2012. Meanwhile, stocks continue in
their downtrend, which is stair stepping lower, the slow rounded top to Wave
3 down will accelerate into a crash in 2012.
GOOD LUCK AND GOD BLESS
All of my long term
readers were not surprised by the shenanigans of the last few weeks. There
are rarely any major surprises once you learn how to analyze political speech
with an open mind and without pre-conceived ideological positions. My most
frequent mistakes are usually ones of timing. I seem to continually
underestimate the stupidity and ignorance of our media, Keynesian economists
and politicians who don't seem to know how to tell the truth. In most cases,
"The Obvious Is Obviously Wrong" is the one thought that has
kept me and will keep you on the right side; that and COMMON SENSE.
We are into the most
trying times in our nation's history. We can either succumb to our
Government's folly and go down with the ship or personally prosper. As
always, the choice is yours.
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UNCOMMON COMMON SENSE
Aubie Baltin CFA, CTA, CFP, PhD.
2078 Bonisle Circle
Palm Beach Gardens FL. 33418
aubiebat@yahoo.com
561-840-9767
Please Note: This article is for
education purposes only and is designed to help you make up your own mind,
not for me to make it up for you. Only you know your own personal circumstances
so only you can decide the best places to invest your money and the degree of
risk that you are prepared to take. All Information and data included here
has been gleaned from sources deemed to be reliable, but is not guaranteed by
me. Nothing stated in here should be taken as a recommendation for you to buy
or sell securities. I am
not a registered investment advisor
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