I always say “Watch what they do- not what they say. I have mentioned numerous times about central banks buying 571 tons of gold last year and that they are buying substantially more this year through June. By doing this, it appears to me to be a capitulation of sorts in that they know some serious trouble is brewing in the economy, and that this time, the “print and buy” scheme likely may not work.
This is the only reason I can come up with that central banks, who can conjure money up out of nowhere, and buy virtually anything without regard to cost, would be buying a hard asset like gold.
My guess is that gold will be a major part of reinstituting confidence in the financial markets if the third bloodbath in the last 20 years takes place. China, Russia and many other countries are actively talking about a gold-backed crypto. Could that be why Russia has been buying gold for years and has bought a million ounces per month in 2019? Could it be why many central banks and countries are buying gold at a record pace and bringing their foreign-held gold back home?
Many will say- you have been saying this for years- get a grip! I agree that I have been warning about this for quite some time and reiterate my statement that this economy could have come unglued at any time since June of 2013. I understand that this has been a long time coming but as I always say- Just because the train is delayed doesn’t mean it’s not coming. If anyone would like to know what happened in June of 2013 please feel free to call and we can discuss it. I have written about it numerous times.
I obviously didn’t even think about a scenario where $17 trillion in global debt- mostly government but also a large amount of corporate debt would trade at negative rates. I underestimated the powers that be and their ability to keep asset prices of stocks, bonds and real estate elevated while suppressing the price of gold and silver at the same time.
So, you may ask, what makes right now any different than the last 10 years as the central banks continue to “print and buy” many assets, suppress others, and generally are manipulating virtually all asset prices?
I will give you my reasons why I believe a major event is near and why I believe that, try as they might to hold this off to after the 2020 election, I do not believe they can get there.
#1 Gold and silver are moving substantially higher. While there is still massive selling from time to time the downturns have been fairly tame and the up-moves are getting more substantial. This may be because a few traders are actually going to be sentenced for admitting to manipulating the price of gold and silver. It also may be that the physical demand from countries, major banks and central banks are starting to overwhelm the paper market where the prices have been set for the longest time. This is the ONLY market that I am aware of where the derivative determines the price rather than the actual asset determining the derivative value. This is totally backwards and allows a lot of action (basically naked shorting) to take place to move the price. (In the last 8 years the desired direction has been down)
It is my opinion that gold and silver were kept down to keep the focus off of the depreciation of currencies. The US dollar has lost 97% of its purchasing power against gold since 1971. ($35.00 divided by $1500.00= 2.3%- that is the purchasing power of a 1971 US dollar vs. gold) In English, compared to gold your dollar from 1971 is worth 2.3 cents today. I also believe China and many others were totally
cool with the Western banks playing their games as they were able to accumulate tons at reduced prices. Many banks have afforded themselves that same luxury.
#2 All economic reports about manufacturing, global trade, shipping, sales, etc. have been dismal since the latter part of 2018. The downturn is steepening and many are starting to notice. The “printing” allows for demand to APPEAR strong as assets get bought up with money from nowhere but this is where the buck stops. In a normal economy that money would be spent numerous times throughout the economy. Today, a few at the top maneuver assets while creating fewer jobs, making fewer sales because of a lack of consumer demand and enriching themselves at the expense of the rest of us. This is why “experts” can look at numbers and at face value and they look ok- maybe even good. As you pull back the curtain you realize that virtually all of the wage growth and rising asset prices have been held by the top 1 to 5%. Almost everybody else has been left behind by stagnating wages and rising prices- even though those at the top want the prices to rise faster!
This is also a reason that the auto industry and many other industries are seeing massive rises in layoffs not only overseas but right here in the USA. I saw that Del Monte is closing a plant near where I grew up in Illinois where they can vegetables. Many stories like that are starting to be told daily.
#3 In the “watch what they do” category again- who would know better than those running companies what the future outlook for business is? According to Trimtabs Investment Research, which tracks stock market liquidity, corporate insiders have sold, on average, $600 million PER DAY shares of their company’s stock in August. The last time this happened, again according to Trimtabs, was in 2007!
This appears to be the 5th. month this year where corporate insiders will be offloading over $10 billion in a month.
This is a sign that all is NOT well. If prospects were bright the insiders would be buying- not selling.
#4 The President and his “advisors” appear to be coming unhinged. It appears that any time the stock market drops there are calls made to the banks that run the Fed, there are always reasons to be upbeat about a China deal and “all is great!” It is unfortunate that China in almost every instance disputes what is being said. It is my opinion that this is about FAR more than trade. It is actually about China challenging US hegemony. More than likely this “trade war” will not get resolved peacefully if history is any guide. Let’s hope that history does NOT repeat this time. The next war is likely one where humanity will lose.
#5 It appears that all central banks are about to unleash “money printing” and asset purchases that may break all records. While this may or may not provide a short “sugar high” the ultimate outcome is likely the ruination of most fiat currencies. (Another reason that major banks, central banks, countries, hedge funds and billionaires are buying gold and silver).
To summarize, corporate insiders are selling stocks at record levels.
Many bonds (over $17 trillion as I write this) make YOU pay the interest to the entity borrowing YOUR money- (I couldn’t make this up!)
The “smart” money- those who SHOULD know what is coming down the pike are buying gold, silver and hard assets in record amounts.
Does this give you any ideas about why I talk about diversifying out of traditional stock and bond portfolios and getting really diversified?
Should you sell all of your stocks and bonds and just buy gold? More than likely not. Everyone has different goals and time horizons but with stocks, bonds and real estate at near all-time highs it may pay to book some gains and reduce your exposure to areas that appear to be overvalued and buy assets that appear to be undervalued. (Buy low- sell high!)
Don’t be the person who may be saying “how did I not see this coming- it was the third time in 20 years”