"The budget should be balanced, the Treasury
should be refilled, public debt should be reduced, the arrogance of
officialdom should be tempered and controlled, and the assistance to foreign
lands should be curtailed lest Rome become bankrupt. People must again learn
to work, instead of living on public assistance."
- CICERO - 55 BC
THE
DANGER TO AMERICA
Although
we are in the TOPPING OUT PHASE, we are not likely to see a strong decline
without a series of record breaking sentiment sell signal, trend-revealing
indicators. While a few of the indicators have been giving off sell signals, it is not
enough to overcome the Government, Wall Street and the media’s propaganda
machines and their Plunge Protection Gang. So, most are only giving warning
signals that the markets are pausing, but not necessarily starting a serious
decline just yet. However, that could change soon as Congress goes
after the number ONE player of the stock market manipulator team and against
Obama’s wishes have now started a criminal investigation.
As
usual, Congress knows not what they are doing. Paying a fine no matter how
large sweeps everything under the rug and life goes on as usual. The real
question is, “Who Pays the Fine?” Criminal charges bring out a “fight back
at all costs” to save their own hides. Tell tale deals are made exposing
higher-ups all the way to Congress and the President. We ain’t seen nothin
yet.
According
to investigators, those BANKS involved in the price fixing of Gold are: Bank of Nova Scotia ,
Barclays PLC, Credit Suisse Group AG , Deutsche Bank AG , Goldman Sachs Group
Inc., J.P. Morgan Chase & Co., Society General SA, Standard Bank Group
Ltd. and UBS AG. With the biggest banks in world price fixing Gold, how can
you trade it?
What a market!
What a
rally! Nearly every single day since the February 5th, 2010 pivot low, the
major stock indexes
have rallied. Every intra-day sell-off is bought by the Government’s PLUNGE
PROTECTION TEAM and the stock indexes move right back up. Every time, since
the beginning of the market's existence, it has been easy money and
artificially low rates that have lead to a bubble. Countries
in Europe
such as Greece, Italy, Spain, Portugal, Ireland and even England are facing
huge debt problems, yet the markets do not care and climb higher on any
utterance from DRAGI. In the US, another wave of foreclosed homes is about to
hit the market and yet home builder stocks are trading up substantially.
Despite a sharp drop in demand, Oil and Gasoline were trading at very high
levels and the market views the high prices as a positive, while the talking
heads say that it is due to demand and nothing to do with the shrinking value
of the dollar. That is until the Goldman investigations began.
Is
it not amazing that no one questions where all the toxic assets that the banks are holding
have gone too? Ever since the FASB
"mark to market" accounting rule was suspended (not gone away),
those toxic assets have seemed to simply vanish. This is looking like a
replay of 1929 and 2007 all over again. The markets declined in 2000 only to
find a low in 2002. From that low, it rallied on a surge in liquidity, ultra
low interest rates and massive tax cuts into the 2007/08 top. This time, the
top will not take 5 years to form. There is much more internal damage today
than there was back then and more importantly, there will be tax increases
instead of tax cuts that will be a prime mover this time
around. Unemployment is very high and the housing market is still in huge
trouble. Now we have unheard of $1.5 trillion deficits continuing out as far
as the eye can see. However, until the market bubble (which has not yet been
recognized and won’t be, until after the bubble has burst), the rally rolls
on.
The Stock Markets and Global Real Estate along
with Commodities are now in advanced bubble territory.
From
real estate to technology, the stock market to commodities and back to real
estate and the stock markets, investors have been moving from one bubble to
the next over the last 10 years. Paulson made his fortune betting against the
pack, but that's not how most professionals act. "The incentive is not to
be a contrarian on Wall Street because (if you have not yet made your name)
it won’t be long before you are treated as a pariah. You are tolerated as
long as you are right, but fired on your first mistake. So most professionals
go along to get along, it’s easier and safer. I am proud to tell you that I
have been fired from every major firm that I worked for without a single
blotch or complaint on
my
escutcheon.
This herding mentality created by the speedy dissemination of information,
combined with the ease of trading thanks to computerization and new vehicles
such as ETFs, plus low interest rates explains why we’re living in the “age
of ever quicker successive bubbles.”
Ultra
low interest rates always lead to speculation and bubbles.
What’s the current bubble?
China
is always high on everyone's buy list and their Government’s Stimulus Package
of $650 billion is four times larger than the US’s Stimulus Plan given the
size of their economy in relation to the US. But when it comes to real
estate, China, Canada and Australia are in bubble territory, but they still
have strong economies with solid banking systems. In Canada, a 20% down
payment is the barest minimum that must be put up before you could ever dream
of getting a mortgage. China, Canada and Australia have been raising their
interest rates in an attempt to cool down their overheating economies so as
to head off any bubbles forming that they know must eventually burst. It
seems that they have learned from the mistakes of others and the strength of
their currencies show it. China has finally awakened and it too has started
to curtail lending and raised rates, but I think China may have waited too
long and she will be caught up in the same kind of morass as the US and Europe
are in as they end up with massive unemployment. But unlike us, China has
massive reserves without any unfunded liabilities. But massive social unrest
is lurking in their background and their stock market looks like it topped
out back in November 2009 just has I had been warning it would.
Those
listed above are country specific bubbles; the two biggest worldwide bubbles
that are getting ready to implode are the over inflated US Stock Markets and
the US Treasury Bond Market. Except for the US, the world’s stock and bond
markets have already topped out sometime between November 2009 and January
2010, with China leading the way down. So far, the declines have been orderly
and are being labeled as much needed corrections. However, the explosions
will come as the US Stock and Bond Markets implode on top of a mountain of
debt, unfunded liabilities and soon to be sky rocketing Gold prices.
Facts That Investors Need to Know
The steps the Federal Government is taking to reignite the economy
may be good for Wall Street’s big banks and a few big corporations, but
they're not good for your health and your financial well being and even worse
for the overall economy as Obama has lead the country into a hard turn left
on a mountain of ever increasing unsustainable debt.
THE
INDIA LESSON
Behind the wheel of India’s massive,
billion people strong economy, you’ll find the world’s most honest central
bank. The Reserve Bank of India has never
wavered from their responsibility of fighting inflation. So where is
all of India‘s unbridled growth coming from?
It’s real simple, actually. It’s a
process called “Liberalization,” or “Freedom” and yes, Capitalism and we’ve
seen it work everywhere from South America to Eastern Europe to South East Asia. You want proof:
Just compare North and South Korea or East and West Germany or more currently
Brazil and Chavez’s Venezuela. Freedom (Laissez Faire Capitalism) Works,
Central Planning (Socialism) does not. As complicated as it might sound, the
process is actually quite simple…the Government just has to get out of the
way. That’s all.
Sure, the economists and politicians
make it quite complicated in the course of history in order to aggrandize
themselves and their wallets, but that’s all it boils down to; whether it’s
the end of a Communist regime or the collapse of a Socialist Party and their
politics and the rise of Conservative Free Market Economics as is now
happening in India and South East Asia. The Government gets out of the way
and allows individual entrepreneurs, both large and small and everyone in
between, to go about their business. As soon as that happens and exchange
controls are eliminated and once equal protection under the law is offered to
foreigners, foreign investors rush in with their money, latest technology and
most of all, their management skills. Local entrepreneurs realize that they
finally have an opportunity to build something for themselves and money comes
out of its hiding places. What follows is an explosion of wealth like nothing
else you’ll ever see and only FREE MARKET CAPITALISM can produce. Brazil vs.
Venezuela today is another good comparison example.
We saw the same thing happen in England
under Thatcher and here at home under Reagan, but unfortunately Reagan was
followed by Bush who reverted to Keynesian Socialism and promptly raised
taxes and lost his next election. Clinton tried a massive Socialist Health
Care plan that was soundly defeated but he was saved by Newt and a new class
of Conservative Republicans, whose policies Clinton wisely adopted and
claimed as his own. Then along came Bush II, a Socialist in Republican
clothing (a NEOCON), who gave us not only the largest entitlement
(Prescription Drugs) program in history but two unpopular wars to boot. Obama
was then elected on a promise of change, but he never spelled out exactly
what kind of change he was talking about. It was not until he took office
that we discovered that it was only a change for more of the same and at a
lot faster pace as he shifted from creeping Socialism (Progressivism) into
accelerated Marxism. In a little over 5 years of complete Democrat control
of the Government, the US is now in its most dire economic and political
straights in its history.
OVERTING DISASTER
We have one chance to overt disaster.
This coming November, Conservatives must take back the reigns of power
and immediately shift the country back to FREE MARKET CAPITALISM before it’s
too late and the US plunges into a truly Great Depression (much worse than
the 1930’s when our currency and the country’s solvency were never in
jeopardy like they are today). This time, the US will also drag most of the
rest of the western world down with it into Depression (World Wide Depression
usually leads to war).
Just like Bible Prophecy, warnings are
never meant to come true, all that has to be done to overt tragedy is to
change our ways.
Chinese Currency Fall-Out?
Experts
around the world believe a rise in the Chinese Yuan
and a corresponding fall in the U.S. Dollar are all but inevitable and will
be good for both the US and China as well as everyone else. Certainly not if
we start Trade Wars in the process. What they don't seem to realize is that
this could trigger a massive rise in inflation and a plunge into Depression.
OIL
From
running out of oil to a worldwide glut of oil (just as I have been predicting
over the years), there is no such thing as shortage in a FREE MARKET. From a
purely technical perspective, the next leg up could carry the price of crude
back up to the $100 a barrel area but only if the Governments start
manipulating its price. That price level will once again push us into the
Depression danger zone. Also worth watching are changes in industrial
commodity prices, which have climbed to their highest level since the outset
of the financial crisis. Many of these
commodities aren’t traded in the futures pits and therefore aren’t subject to
speculation that could periodically distort their true value. They therefore
offer insights into both economic activity and inflation trends. And the
gains we’ve seen in the last year suggest that should growth continue, the
world could quickly segue into a period of high inflation.
The
US economy is in the midst of, at best, a tepid recovery that could run for
no more than a few months longer. But we could very well slide back into
Recession as early as next month. Key indicators of this happening include:
Increasing unemployment, more weakness in the housing and commercial real
estate sectors and no improvement in bank lending.
It’s
worth noting from an investment perspective, what has happened during
previous anemic expansionary periods. In the five previous brief expansions
in the US during the last 60 years, each of which lasted a mere 12 quarters
or less, in each of those periods, the peak in economic growth occurred in
the first or second quarter of the recovery. While it’s not official yet,
many economists are pointing to the third quarter of last year as marking the
end of the Recession. So it won’t be surprising if we learn, with the benefit
of hindsight, that we’ve already seen the peak rate of growth in economic
activity during this so called expansion.
Stocks
as a whole may not have reached their apex just yet, but we could be close to
that point right now. Remember that the stock market is an excellent
discounting mechanism. It rallied strongly last year when the data rolling in
was abysmal, and it will start to head south again before the economy shows
many signs of contracting. If the current expansion lasts just to the end of
the current quarter, that means the market is likely to start to discount the
next downturn shortly.
THE
GREATER FOOL THEORY
Right
now, the markets seem to be caught in the grip of the “greater fool” theory
– the adage that says you can buy stocks with declining top line
growth and pay 20+ times earnings because there will always be a greater fool
to buy them from you at a higher price. Fortunately, there's a
way you can take advantage of those fools. You can profit from the
current momentum in the market, while making sure you come out ahead when the
music stops.
In
many ways, the current recovery is most akin to the expansion that occurred
from 1971 to 1973: Weak economic growth coupled with rapid monetary stimulus
that threatens to give way to mounting inflationary pressures. The Stock Market rally during that time lasted 17 months.
A similar performance today would mean a Stock Market
peak in August or September. Also using 1971-1973 as a guidepost, the
Stock Market’s upside from the peak in the rate of economic growth was less
than 10%, which would cap the return this time around at less than 5% above
today’s prices.
Pressure
is mounting for China to allow their currency
to rise relative to the dollar. When this happens, an unpleasant consequence
(which US policymakers have given absolutely no thought to) is likely to be
another leg up in the Commodity Bull Market. A stronger Yuan makes
commodities all less expensive to them and it gives the Chinese greater
reason to invest their massive currency reserves in something other than
depreciating US Dollars. This is not mere speculation on my part: Chinese
officials have already signaled their intention to stockpile more commodities
especially Gold and now Silver.
During
the last period of Yuan appreciation (that ended with the financial crisis),
industrial commodity prices essentially doubled. I won’t venture a guess as
to how high they’ll rise this time around, but I can say it will add to the
inflationary pressures already building. Fortunately, we’re already holding
what are likely to be the new growth stocks for
this environment: Gold, Silver and their stocks in particular are set to be
the biggest beneficiaries.
GOLD
Technically,
Gold is looking great, after taking out resistance between $1150/oz and
$1160/oz, it looks set to challenge the December 2009 record highs. Gold has
reached multiyear and all time record highs in Euros, Pounds, Yen and other
currencies (check out their charts) and given the strong technicals and
fundamentals, Gold may soon replicate that performance in dollars.
BEAR MARKET TRIGGER
The
majority of the markets fell on the news regarding the SEC's investigation of
fraud by Goldman Sachs. Oil and some other commodities were particularly hard
hit. But Gold has held it’s up trend, moving steadily higher and building a
solid base from which to break out of. Elsewhere in Europe, Gold is at its
all time highs in Euros, Swiss Franks, German Marcs and GBP terms. The
Market subsequently rallied 100 points plus but could not hold and then broke
for 158 points. That could have been the pin that bursts this bubble.
Gold
is trading up as the Goldman news would normally be bullish for Gold (but the
manipulators are hard at work) since it remains a hedge against financial risk. But for a day, it led market participants to sell all assets and pile into
perceived safer assets such as the US Dollar strictly because of Paulson’s potential
involvement in the fraud and the possibility that he may have to liquidate
his huge Gold positions in order to pay off redemptions: Which, by the way,
is patently ridiculous.
Technically,
Gold was already in a consolidation phase prior to the revelations and they
may have exacerbated Gold's $25 one day correction. This short term
correction is due to speculative leveraged trading by investment
banks and hedge funds. However, over the
long term, Gold is not correlated with equities and major indices such as the
benchmark S&P 500. This can clearly be seen
in the performance of Gold versus the S&P 500 over the last 10 years. Any
emotional sell-offs based on fear are perfect buying opportunities.
Gold's Parabolic Move is Coming Soon
You,
as an INDIVIDUAL, CAN CONTROL your future. There are critical forecasts that
every investor needs to know to protect their wealth. Heed these warnings and
you can successfully protect yourself and become wealthier in doing so.
(Continue to subscribe to UNCOMMON COMMON SENSE and keep abreast of what you
must do to stay ahead of the game.)
You
all know by now that I am and have always been a big believer in the absolute
must rise of Gold and Silver: I have been and am still projecting $1,650 to
$2,000 before January 2016 on its way to my final
target for GOLD OF $6,250 by 2017 that I called for way back in both
2003 and 2005.
I
look forward to you all staying with me on this journey. Thus far, it has
been tough as more and more supposedly Gold Bugs keep coming out of the
woodwork along the way warning of a sell-off, the latest ones to $600. But
for this Natural Born Contrarian, it was easy to STAY THE COURSE. All battles are won LONG BEFORE they are ever fought.
Not only is that true in war, but it's especially true when it comes to
trading and investing. STAY WITH AUBIE.
GOOD
LUCK AND GOD BLESS
Market
action from March 2007 to March 2010 highlights quite succinctly why
projecting the consequences of today’s Government actions into the
future is so important for your overall investment success. I apologize for
not seeing the obvious, most recent, new bubble while it was being created
with the trillions of dollars injected into the banks. During the last five
years, I have demonstrated how to incorporate projected consequences of
government actions and contrarianism into your investing by pinpointing the
best contrarian investments that can both protect you and make you money
during times of adversity. If you're serious about investing, you don't want
to miss out on the information revealed by UNCOMMON COMMON SENSE.
Give
yourself the investing advantage by getting a 5 month trial subscription of
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most!
UNCOMMON
COMMON SENSE
Aubie
Baltin CFA, CTA, CFP, PhD. March
1st, 2015
2078
Bonisle Circle
Palm Beach Gardens FL.
33418
uncommon@aubiebaltin.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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