Stimulate This: The Next Flash Crash
Posted by Wealth Wire - Monday, June 6th, 2011By Christian DeHaemer
Take a fat red pen and circle June 30, 2011, on your calendar.
That's the day QE2 ends. It's the day the Fed stops creating debt/liquidity by purchasing U.S. Treasuries.
Don't get me wrong; there will be a QE3... but not yet.
First, America needs to feel the pain. Without pain, there is no political will.
The current republican Congress likes to talk about cutting spending. They are even going to the brink with default rather than raise the debt ceiling. This Congress is more fiscally responsible than the 2008 Congress which voted down the bank bailout and caused the Dow Jones Industrial Average fell 900 points in a day.
There is no way they will go along with more bailouts unless their constituents have a change of heart.
And the only way voters will change is if they feel very real pain.
Bad Numbers
The only thing propping up this market for the past three years is the flood of money pumped out by Ben Bernanke.
Six out of ten leading indicators are bad: housing, jobs, manufacturing... and the other four will be getting worse.
In fact the leading indicators fell 0.3% in April and almost assuredly fell again in May. The four indicators that pointed to an expanding economy were the interest rate spread, consumer expectations, stock prices, and the real money supply.
It is true banks can borrow at zero percent and charge 4.5% on loans (or get 3.03% from the ten-year notes). So they will make money. But it should be noted that loan rates are falling. This spread is getting thinner.
Consumer confidence has reversed. It fell 5.2 points in May. Americans are paying off debt and hoarding cash.
The stock market will crash:
And it is true the real money supply has been expanding for several years.
But when QE2 ends in a few weeks, the money supply will tighten. This means the economy will get worse.
End of QEII
Ben Bernanke believes QE2 was a success. During his last trip to Capitol Hill, he said:
The conclusion that the second round was ineffective could be validated only if some thought this was a panacea. Relative to what we expected, and anticipated, the program was successful.
Bernanke has pointed to the rise in the stock market as evidence that the Fed’s bond purchases have been effective in boosting the demand for riskier assets, as it removes risk free assets from the market.
As I write this, the S&P 500 has recently out-performed Europe, most emerging markets, and most of Asia. This is as clear as it gets. Bernanke has pumped up the stock market for two years.
All good things must come to an end. This ends on June 30th. It is logical that the market will go down.
The scenario I see is one in which the market crashes over the next few months. I expect a flash crash of epic proportions as the majority of trades are now made by computers, and nothing was really changed after the last one.
When the S&P500 is down 33%-50%, the politicians and the money class will demand that “something be done” in the reprehensible idea that governments can fix the business cycle.
Then the preternatural Bernanke will wave his scepter and announce QEIII. This will blow out the shorts.
What You Should Buy
The action plan is to wait until there is a lot of blood on the trading screens, the politicians and Wall Street pundits are wailing and gnashing their teeth, and the prophets of doom are leading CNBC.
It is then you should go long in a big way.
So, you are selling stocks right now and building up a large grub stake. The question is, What do you buy when the great flash crash of 2011 happens?
The first thing to buy when everyone is running in panic is gold and gold stocks. In November 2008, I recommended four gold stocks that were sold off to extremes by over-leveraged hedge funds that were hit by margin calls.
Two of them went up 1500%. The other two went up more than 500%.
That's how you beat the market...
You wait, you build cash, and you act with speed and courage when the time is right.
Good hunting,
Christian DeHaemer
Editor, Wealth Daily
Editor, Wealth Daily
P.S. The Russians just added a 44% increase to all oil exports. This has left many Central Asian countries without any gas. There is a very real fuel shortage going on in places like Mongolia. This heavy handed action by the Russians will have consequences... The Mongolians are turning to their own domestic oil producers. One company I'm following is up 33% in the last two weeks — but this ramp-up is just getting started. Find out more about this company that will be on the government fast track.
Gold Aimed at $6,500/oz, Silver... $600/oz
By Greg McCoach
Get ready. We are now entering the final stages in the collapse of the U.S. dollar...
And it's not going to be pretty.
The massive increases in money supplies will tank the value of the dollar and erode the very fabric of America's economic security.
As a result, gold and silver prices are will no doubt skyrocket, despite the short-term major volatility we've recently seen.
Many investors have been rushing to me asking if it's too late to buy precious metals with gold in the $1,500/oz range and recently spiking to nearly $50/oz. I keep telling them the same thing...
Despite whatever the price of gold or silver is today, both metals will be worth more than twice as much within 12 months.
That means $3,000 gold this time next year! After that, I think gold could break $6,500 an ounce.
And as you know, silver's gains will be much greater. When the bull market is all said and done, there's no doubt we could be looking at silver prices exceeding $600 an ounce.
And we can all thank the crooks in D.C. for it...
In his first ever press conference after a policy meeting two weeks ago, Bernanke told us all the ways he has saved our economy.
What a crock!
The Federal Reserve can't prevent the coming financial meltdown.
So far this year, the U.S. Treasury has raised $293 billion in net cash by selling debt securities. And so far this year, the Federal Reserve has purchased a net $330 billion of Treasury notes and bonds.
This translates to the Fed providing 100% of the net new cash the Treasury has raised this year — plus another $37 billion needed to mop up even more mess!
But who will buy Treasuries when the Fed doesn’t? China? Germany? Japan? You? Me?
Going to Hell in a Hand Basket
We are now getting very close and even accelerating toward the end game for the U.S. dollar and the American Empire as we know it. Have your life boats ready.
It won't be much longer before people really start buying both gold and silver to protect themselves from this enviable collapse.
The only way out of our dilemma, absent very large entitlement cuts, is to default in one (or a combination) of four ways:
- Outright via contractual abrogation (surely unthinkable)
- Surreptitiously via accelerating and unexpectedly higher inflation (likely, but not significant in its impact)
- Deceptively via a declining dollar (currently taking place in front of our very eyes)
- Stealthily via policy rates and Treasury yields far below historical levels (paying savers less on their money and hoping they won’t complain)
I would bet on a combination of deception, betrayal, and trickery.
Following the Smart Money
This past month, the University of Texas bought a billion dollars' worth of gold and is having it stored in a private depository. This is huge news.
More and more, the intelligent group of our population is starting to figure things out. Unfortunately, however, the unsuspecting masses are being led perfectly by the well-oiled government/media propaganda machine like sheep to the slaughter.
This is going to be a terrible reality for so many unfortunate Americans who have no idea as to what is coming shortly down the road.
And you can rest assured the politicos in Washington will do what all politicians do when they are trapped in such a manner: lie, cheat, steal, spin the facts, cover their asses at all costs, abuse their power, and misinform on a massive scale.
But even with the help of the government-controlled media, the time of consequences can no longer be held at bay.
Free market forces will win; governments, banksters, and their power structures will come tumbling down just as we have been seeing elsewhere around the world these past six months.
The spoils will go to those who were prepared and understood the debacle years before it hit.
The precious metals and the junior mining shares will reward those who understood, and punish those who didn’t.
Yes, the precious metals market will be extremely volatile in both directions at times, but buy the dips as gold and silver will keep heading to higher and higher ground.
As long as the Fed and U.S. government follow the course of “Quantitative Easing” or anything like it, you can rest assured that gold and silver prices will soar!
If you leave your money in U.S. banks in dollars, you will lose most of the purchasing power of your money.
Use the downside volatility to buy any dips you see in the metals. Whether you bought gold at $600, $1,000, or $1,500 an ounce, it really won’t matter much when gold is trading at $6,500 an ounce or more.
The same thing can be said for silver. Don’t worry so much whether you bought at $25 or $50; silver will be priced in the hundreds of dollars an ounce, possibly $600 or more as the silver to gold ratio descends to 15 to 1, and possibly even 10 to 1.
In fact I believe silver stocks will actually be one of the biggest winners over the next 24 months.
Time is of the essence.
The lies of the Fed and the U.S. gov't are becoming bigger and more complex, their noses growing longer and longer as the fiat currency-economic-insanity comes to a head.
Greg McCoach
Analyst, Wealth Daily
Investment Director, Mining Speculator
Gold and Silver Aren't in a Bubble, The Dollar Is
Posted by Wealth Wire - Friday, May 13th, 2011
By Greg McCoach
The price of silver has really taken a haircut over the past several days.
Silver prices have fallen some 27% since the beginning of the month, and is now leading commodities to the downside.
The sell-off has been dramatic, to say the least. Gold has been hit as well, but not anywhere near as badly as silver has...
Word on the street is that several large hedge funds have been liquidating commodity positions across the board over the past few weeks.
The Wall Street Journal reported last Tuesday:
George Soros's big hedge fund, a firm operated by high-profile investor John Burbank and some other leading firms have been selling gold and silver, according to people close to the matter, after furiously accumulating precious metals for much of the past two years.
I suspect Soros was holding more silver than gold, considering its price volatility...
Last week, silver prices suffered their worst one-day drop in dollar terms in three decades. And with such a stir in the market, the iShares Silver Trust (NYSE: SLV) was one of the most actively traded investments on the U.S. market on several days last week.
This extreme volatility is setting us up for the ever-increasing moves to the upside in precious metals — and in commodities in general.
And this is really a short-term pullback and buying opportunity.
I expect precious metal prices to settle down in the next few days and begin to form a new base. From there, we'll launch to the next set of new highs in gold and silver.
Expect for this to occur. Plan your buys and sells accordingly as we head into the next rally.
The big boys like Soros will continue to sell into the short-term rallies with their paper profits, just as they have this past week or so. But the rallies will continue to higher and higher levels.
We should just start factoring this type of market behavior into our thinking from here on out. It's going to get extremely volatile, which will push our markets into parabolic levels. I suspect money flow to pour back in at some point.
But the question now becomes How long does the exodus last, and how long will the big boys who have left the trade sit on the sidelines?
Jim Sinclair said the other day, “The drop at this time will in retrospect be seen as the foundation for gold trading not at $1,650, but rather at $5,000 an ounce.”
Central banks around the world have become net buyers of gold after two decades of heavy selling pressure. There is not a week that goes by anymore without news of major physical buying of gold or silver by "this country" or "that group".
These are the signs that gold is once again considered the ultimate form of money.
The physical silver market is still extremely tight despite the heavy selling on the paper side, which has severely impacted our market in the short term. But I don’t think this will last long...
Gold and silver are not in a bubble; the U.S. dollar and United States bonds are in a bubble!
For now, precious metal prices have taken it on the chin. But the fight is far from over...
In the end, it will be gold and silver as the last men standing.
So watch carefully as things once again go our way. I don’t think we will have to wait too long.
Good Investing,
China May Buy $1 TRILLION of Gold: Bloomberg
Posted by Adam Sharp - Friday, April 29th, 2011
In an otherwise quiet article about central banks today, Bloomberg quoted an analyst who says China may use up to a third of their $3 trillion in foreign reserves to purchase gold.
China has been moving away from the dollar, and into alternative stores of wealth for years now.
But $1 trillion into gold? If it happens, such a large move would further threaten the dollar's status as reserve currency. It would also provide further buying pressure in gold for years to come (as the dollar crumples into a pitiful heap on the floor).
China’s Gold Reserves
China, which has just 1.6 percent of its reserves in gold, may invest more than $1 trillion in bullion, [Michael Pento of Euro Pacific Capital] said. “China wants to be an international player, and they need to own more gold than they currently have.”
China, which has just 1.6 percent of its reserves in gold, may invest more than $1 trillion in bullion, [Michael Pento of Euro Pacific Capital] said. “China wants to be an international player, and they need to own more gold than they currently have.”
...“China is out to have more gold than America, and Russia is aspiring to the same,” [Robert] McEwen, [the chief executive officer of producer U.S. Gold Corp] said yesterday in an interview in New York. “When you have debt, you don’t have a lot of flexibility. China wants to show its currency has more backing than the U.S.”
...China, with more than $3 trillion in foreign-currency reserves, plans to set up new funds to invest in precious metals, Century Weekly reported this week. Russia purchased 8 tons of gold in the first quarter.
...China, with more than $3 trillion in foreign-currency reserves, plans to set up new funds to invest in precious metals, Century Weekly reported this week. Russia purchased 8 tons of gold in the first quarter.
This is a big reason gold and silver are headed higher. Occasional dips are inevitable, of course. When they happen bears will declare the bubble popped (after a one-week correction).
Then the uptrend will continue, intact. And they'll say, "bubble! bubble bubble bubble bubble,bubble!", again.
And gold bugs will be laughing all the way to the vault.
That's how I see it, anyway. Could be wrong, it's happened before. But, I did say the same thing when gold was $1140 in Why I'm Buying the Gold Dips in December 2009:
"The bottom line is that Bernanke and crew actually want inflation. It's easier than the alternatives: raising taxes or slashing spending. And it will help erase debts. It will also wipe out the savers and reward the borrowers — but that seems to be the path we're on, like it or not.
Besides, do you really think they will allow America's debt to be paid off with dollars worth more rather than less?
Of course not. Devaluing our currency and printing money are part of a strategy. A reckless and morally hazardous one, but still a strategy.
So that's why I still am bullish on precious metals. I'm hoping for a nice pullback in gold and silver. It'll be a great buying opportunity. Once everyone realizes that the Fed's printing presses are just getting warmed up, it'll be off to the races again."
Besides, do you really think they will allow America's debt to be paid off with dollars worth more rather than less?
Of course not. Devaluing our currency and printing money are part of a strategy. A reckless and morally hazardous one, but still a strategy.
So that's why I still am bullish on precious metals. I'm hoping for a nice pullback in gold and silver. It'll be a great buying opportunity. Once everyone realizes that the Fed's printing presses are just getting warmed up, it'll be off to the races again."
The time will eventually (and sadly) come to sell significant amounts of precious metals, but I just don't see us being close to that point yet. Inning 4 or 5, if this were a ballgame, perhaps? "
Lots more printing ahead, though it's hard to say how much. My view has been that we see at least QE5 (possibly under a different name) and $3,500 gold and $150 silver before things top out.
It all depends on how much inflation the public will take before it declares shenanigans; forcing spending cuts and a tightening of monetary policy.
Then - after a (hopefully brief) adjustment period - America and the world will be on a path to sustainable growth. A time to move from being overweight in metals, and shift into stocks and real estate.
Updated 4/30/2011 for clari
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