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April 09 2018

moneymetals

Silver May Be Getting Ready to Shine Again

The setup for higher silver prices is so good it’s scary. The relative positioning of speculators versus the bullion banks in the futures markets is extraordinarily lopsided.

A bet on silver moving higher from here looks a lot like a no-brainer. So much so that David Morgan, publisher of The Morgan Report and silver guru is advising just a bit of caution, as he told listeners in an exclusive interview on this past Friday’s Money Metals Weekly Market Wrap Podcast.

The bullion banks (Commercials) are almost certainly now betting for higher silver prices and have relinquished their concentrated short position.

Meanwhile, the large speculators are positioned increasingly short. The good news for silver bulls is the bullion banks dominate the futures markets, by hook or by crook, and they generally win versus the speculators.

In the chart below from Zachary Storella (Investing.com), the red line represents the “Commercials” which are the bullion banks and miners. It shows their collective position virtually even, or neutral. It is the first time this has happened since the Commodity Futures Trading Commission began publishing the more detailed Commitments of Traders report in 2009.

Silver: cot futures large trader positions chart

One could argue that if the commercials are neutral, that isn’t exactly the same as the bullion banks being positioned long

​.


Continue to the full article: (source) ​

moneymetals

Two Mines Supply Half Of U.S. Silver Production & The Real Cost To Produce Silver

​Just two mines supply the United States with half of its silver production, and both are located in Alaska. It’s quite amazing that Alaska now produces half of the silver for the U.S. when only 30 years ago total mine supply from the state was less than 50,000 oz per year. The silver produced in Alaska comes from the Greens Creek and Red Dog Mines. One is a primary silver mine and the other a zinc-lead base metal mine.

Even though Hecla’s Greens Creek Mine is labeled as a primary silver mine, 56% of its revenues come from its gold, zinc, and lead metal sales. However, Teck Resources, that runs the Red Dog Mine doesn’t even list its silver production in its financial reports. Because Red Dog produces one heck of a lot of zinc and lead, their silver production doesn’t amount to much in the way of revenues.

For example, the Red Dog Mine produced 542,000 metric tons (1.1 billion pounds) of zinc and 110,000 metric tons (222 million pounds) of lead, while its estimated silver production was 6.6 million oz (Moz). According to Teck’s 2017 Annual Report, total revenues from the Red Dog Mine were $1.75 billion. With the estimated silver price of $17 in 2017, total revenues from 6.6 Moz of silver were $112 million, or just 6% of the total.

In addition, Hecla’s Greens Creek Mine in Alaska produced 8.4 Moz of silver this year, down from 9.2 Moz in 2016. As I mentioned, the Greens Creek Mine also generated a lot of gold, zinc, and lead, equaling $182 million of the total revenues of $326 million (including treatment costs).

The USGS just came out with their final Silver Mineral Industry Survey for 2017, reporting that the U.S. produced 33 million oz (Moz), down from 37 Moz the previous year. U.S. silver production declined due to the union strike and the shut down of Hecla’s Lucky Friday Mine. As we can see, Greens Creek and Red Dog accounted for 15 Moz of the total 33 Moz of U.S. silver production:

Top 2 silver producers vs. u.s. total 2017

While Greens Creek and Red Dog supplied nearly half of U.S. silver production last year, the next two largest mines provided 21% of the total. Coeur’s Rochester Mine in Nevada produced 4.7 Moz of silver while the Bingham Canyon Mine, the country’s largest copper mine, supplied 2.2 Moz. Almost 7 Moz of silver came from these two mines alone.

​Continue to the full article (source) ​

April 06 2018

moneymetals

CHILE, WORLD’S FOURTH LARGEST SILVER PRODUCER: Mine Supply Down 20%

Silver mine supply from the world’s fourth-largest silver producer fell significantly at the beginning of 2018. According to Chile’s Ministry of Mines, domestic silver production in January declined 20% versus the same month last year. Chile’s silver production has been falling considerably since its recent peak in 2014.

In just three years, Chile’s domestic silver mine supply fell 10 million oz (Moz) from 50.1 Moz in 2014 to 40.4 Moz last year. Interestingly, Chile’s silver production is down 20% since 2014 while the country’s copper mine supply is only down 5%. Because most of Chile’s silver supply comes as a by-product of copper mining, it’s surprising to see such a significant decline in their silver production.

If we look at three of the top four silver producers in the world, Mexico’s silver mine supply in January increased 7% while Peru declined 6%:

World top silver producers jan 2018

According to the official data, Mexico’ silver production increased 29 metric tons (mt), Peru fell 20 mt and Chile dropped by nearly 21 mt. Thus, overall silver mine supply from these top three producers fell 13 mt in January versus the same month last year. Even though Mexico will likely experience an increase in silver mine supply in 2018, declining production from other leading countries may curtail overall world supply.

​Continue reading (source) ​

April 05 2018

moneymetals

MARKET MELTDOWN CONTINUES: Gold & Silver Prices Begin To Disconnect

As the BLOOD continues to run on Wall Street, gold and silver were the few assets trading in the green today. As I have mentioned in past articles and interviews, investors need to get used to this sort of trading activity. Even though the Dow Jones Index ended off its lows of the day, it shed another 458 points while the Nasdaq declined 190 points and the S&P fell 60.

As the broader markets sold off, the gold price increased $15 while silver jumped by $0.25. However, if we look at these markets during their peak of trading, the contrast is even more remarkable:

Peak market trading april 2nd 2018

At the lows of the day, the Dow Jones Index fell 730 points or 3%, while the S&P 500 fell 3.2% and the Nasdaq declined by 3.8%. Also, as I expected, the oil price fell along with the broader markets by dropping 2.7%. If individuals believe the oil price will continue towards $100, due to supply and demand fundamentals put forth by some energy analysts, you may want to consider one of the largest Commercial Net Short positions in history. Currently, the Commercial Net Short position is 738,000 contacts. When the oil price was trading at a low of $30 at the beginning of 2016, the Commercial Net Short position was only 180,000 contracts.

Furthermore, if we agree that supply and demand forces are impacting the oil price to a certain degree, does anyone truly believe oil demand won’t fall when the stock market drops by 50+%??? I forecast that as market meltdown continues, the oil price will decline as oil demand falls faster than supply.


​Continue reading (source)​

April 04 2018

moneymetals

China Moves to Neuter King Dollar in International Trade

Last Monday, the Shanghai International Energy Exchange launched the first futures contract for crude oil priced in Chinese yuan. It’s a major step forward in the process of international de-dollarization. Now Chinese and other international traders can buy and sell the world’s most important commodity in a liquid market without using U.S. dollars.

The “petro dollar” now faces the prospect of being rendered unnecessary as China – the world’s biggest oil importer – attempts to establish a “petro yuan.”

China is launching a pilot program to purchase oil from Russia and Angola (two of its top suppliers) using yuan. Russia and China share a common interest in trying to break the dollar's dominance in global commodity trading.

The two powers have been among the world’s top gold accumulators in recent years, with some reports suggesting Russia is now also loading up on silver for the possible launch of a silver ruble. Russia and other emerging commodity supplier markets stand to be among the big beneficiaries of a weaker dollar, as does China.



Continue reading (source

April 02 2018

moneymetals

What The Gold-Silver Ratio Says About The Future Silver Price

While silver investment demand is totally off the radar, certain indicators, including the Gold-Silver ratio, suggest that interest in the poor man’s gold will likely increase significantly over the next few years. The rising interest in silver will also occur as the broader markets continue to meltdown towards more realistic valuations.

In my recent youtube video, Amazing Silver Setup & Stock Market Update, I had a few comments stating the selloff of silver and rise in the stock market suggested that my analysis was incorrect. I find this sort of short-term thinking quite interesting when I noted that the information in the video was presented to occur over the next 1-2 years. Furthermore, in looking at my Youtube analytics of that video, the average watch time was about 10 minutes. The video was 24 minutes long.

Unfortunately, the attention span of individuals today isn’t what it used to be. So, even though the material is presented in detail, many people don’t even take the time to either read or watch it in its entirety. Moreover, when someone replies that the silver price selling off since the video was produced doesn’t understand that markets trade over a LONG PERIOD OF TIME. Anyone who is concerned with the silver or gold price on a daily basis (not including professional traders), needs to realize that TRENDS TAKE TIME.

Also, the naysayers that claim the precious metals analysts have been wrong since 2012 tend to overlook the massive money printing, the enormous increase in debt and the continued disintegration of the global oil industry. If I am not getting my point across, let me provide the following chart that shows just how quickly things can fall apart when investors have been BAMBOOZLED by the Fed and Wall Street:

Continue reading (source) ​

moneymetals

Silver Price Best Setup In Years & Update On Continued Meltdown In Stock Markets


This update is by far one of the most important as the silver price setup is the best I have seen in years. According to the data, the silver price is by far in much better position to outperform gold when the precious metals market takes off. Also, I do an update on the stock market as well as the continued disintegration of the U.S. Shale Oil Industry.

While most investors will be interested in what is taking place in the silver market, it’s very important to understand how much the situation is deteriorating in the U.S. Shale Oil Industry. Without cheap and abundant oil, the value of most stocks, bonds, and real estate would collapse. Unfortunately, falling stock and real estate prices are precisely what is going to happen to 99% of the public’s investments as only 1% hold precious metals.

The reason I believe the gold and silver prices will start to take off when the stock markets begin to really plunge lower is due to the setup of these assets since the Fed’s Q3 policy at the end of 2012. Because the precious metals sold off from 2013 to 2016 and are still close to their lows, they are ripe for much higher prices. However, the real estate and stock markets are near their highs. Thus, we are going to experience one hell of a disconnect between the stock and real estate market and precious metals.. quite the opposite that took place after 2012.

Continue reading (source


March 27 2018

moneymetals

Physical Gold Production May Be Peaking, But There Is No Shortage In Paper Gold

Gold production numbers for 2017 are still being compiled but estimates call for the first annual decline in mine output since 2008.

The gold price fell dramatically in the months following the 2011 peak in prices. It has languished at, or near, the cost of production for years. Low gold prices are having a predictable effect on mine output.

Many projects with marginal ore deposits were rendered uneconomic. High cost operators went out of business. Exploration budgets got slashed dramatically. And all of these factors compound a larger underlying issue. It is increasingly difficult to find gold deposits that make sense to mine. New discoveries are less than a fifth of what they were in 2006.

Exploration fail (chart)

Much higher gold prices will drive more exploration and should boost discoveries. Some projects which have been mothballed due to higher costs will become feasible once again. But the trend seems clear – the drought in discoveries, which began more than a decade ago, looks likely to persist regardless of the gold price. And the struggle to find economic deposits will translate to a serious decline in production in the years ahead.


Continue reading (source) ​

March 19 2018

moneymetals

Larry Kudlow Toes Wall Street’s Anti-Gold Company Line

Gary Cohn resigned as President Donald Trump’s Chief Economic Advisor on March 6th. He and Trump didn’t see eye to eye on the recently imposed tariffs and the President selected CNBC commentator Larry Kudlow to replace him Wednesday. Perhaps it was Kudlow’s experience on television that got him the job.

Larry kudlow

It doesn’t look like he was chosen for his intellectual honesty. Kudlow was quite vocal with his own opposition to tariffs.

He has suddenly done an about face and now says he can “live” with targeted tariffs. However, it gets worse than simply flip-flopping on trade.

In one of his very first interviews after accepting the post, Kudlow offered this bit of advice to investors: “I would buy King Dollar and I would sell gold.”

The dollar went on a dramatic losing streak during Trump’s first year in office – one of its worst annual performances in decades. Of course, that is just a single year.

The fiat dollar has been in almost continual decline versus real assets since the Federal Reserve’s establishment 105 years ago. It has lost 98.5% of its purchasing power relative to gold since then.

Kudlow must have seen the forecasts which show federal deficits spiking higher as the combination of tax cuts and higher spending wreak havoc on the budget. The tariffs should further weigh on the U.S. dollar as higher steel and aluminum prices drive inflation.




Continue reading...(here)
moneymetals

New Sound Money Public Policy Breakthroughs Occur in the States

Well now, without further delay, let’s get to this week’s featured interview between Money Metals president Stefan Gleason and Pete Fetig during a recent summit on all things precious metals.

Stefan gleason

Pete Fetig: Stefan, I would like to start with what are precious metals and why should someone even own something like that?

Stefan Gleason: Thanks Pete. That is obviously the most fundamental question to this entire conversation. Is what are precious metals and why should you care? And this is something that has been driven out of the public consciousness to a great extent over the last 80 or 90 years and especially in the last 40 years. And that is that the role the precious metals play in our society and in our monetary system and as an investment. First and foremost, I would say that people should understand gold and silver is money. It is true money. It is been chosen throughout time as a medium of exchange, a store of value, and has been used in trade ever since several thousand years B.C. So gold and silver is first and foremost money. It has been chosen as money for a lot of reasons and those reasons are still in existence today.

First of all, it is tangible. It’s an actual asset. It cannot be created from nothing. Like paper money today is created from nothing or even electronic equivalent of paper money. It is private. It is something that you can exchange between people and it is not tracked or traced. Like so many things are in our electronic monetary system today. It is highly liquid. It is accepted by all people or governments at least. Certainly, private individuals understand that it has value. Always going to have value. It has always been accepted. Ultimately, even central bankers view it as that. Even though, they have waged a war against gold and silver and gold and silver ownership, particularly in the last several decades, they hold it as a reserve asset. They understand that it is the ultimate form of payment. It’s a form of payment that has no counterparty risk. It is not also someone else's liability at the same time, like the dollar is. And so central banks, while they do not talk about it, are holding gold and silver as reserve assets because they know that it has timeless value.

More immediately gold and silver are precious metals that are really a form of financial insurance. It’s a non-correlating asset. It does not move necessarily with the stock market, the bond market, the real estate market. It’s something that you should have as a part of your asset allocation because when everything else falls apart, gold and silver typically does very well. Just like an insurance policy that you do not necessarily want to have to cash in. You still have it. You have an insurance policy in your house. You probably have one on your car. You should have an insurance policy against your financial asset. Gold and silver is that insurance policy. It is also of an excellent hedge against inflation. It is really the ultimate hedge against inflation.

That is today, in the last 40 years in particular, since the United States and really the whole world, went off the gold standard. You’ve had an explosion in debt. You’ve had an explosion in the creation of fiat money. We now have really a competition going around the world to devalue fiat money. It’s a race to the bottom. That is done with the creation of new debt and the printing of new money to sort of prop up the economy, prop up the bond market, the stock market. And as result of that, as a result of more paper money and electronic money being created, it has caused data reduction in the purchasing power of these other currencies. Gold and silver have maintained and even increased their purchasing power, over time.

Since the Federal Reserve System in the United States was created a little over 100 years ago, the US dollar has lost over 97% of its purchasing power. In the 100 years prior to that, except for a short period of time during the Civil War when they went off the gold standard, the purchasing power of the dollar was relatively the same, but then declined dramatically since the Federal Reserve system was created. So you have this massive devaluation of currencies happening all across the globe, and gold and silver are tangible assets that are a hedge against that, that benefit from really the devaluation as they rise in price. We have seen that, gold and silver, have reached all-time highs in recent years. They got a little overheated and pulled back in dollar terms since 2011, but at the end of the day you want to own a certain amount of gold and silver as a hedge against inflation and financial turmoil.

Read/Listen to the full podcast (here) ​

March 15 2018

moneymetals

BOOM: Wyoming Ends ALL TAXATION of Gold & Silver

Breakthrough Sound Money Bill Becomes Law Today with Wide Support


Cheyenne, Wyoming (March 14, 2018) – Sound money activists rejoiced as the Wyoming Legal Tender Act became law today. The bill restores constitutional, sound money in Wyoming.

Backed by the Sound Money Defense League, Campaign for Liberty, Money Metals Exchange, and in-state grassroots activists, HB 103 removes all forms of state taxation on gold and silver coins and bullion and reaffirms their status as money in Wyoming, in keeping with Article 1, Section 10 of the U.S. Constitution.

Introduced by Representative Roy Edwards (R-Gillette), HB 103 received a 55-5 favorable vote on final passage in the Wyoming House last week following Senate approval by a vote of 25-5. Gov. Matt Mead let HB 103 become law today without his signature.

The most immediate impact of the new law, which formally takes effect on July 1, is to eliminate all Wyoming sales taxes when purchasing gold or silver.

While Wyoming does not currently have an income tax, the bill stipulates “the purchase, sale or exchange of any type or form of specie or specie legal tender shall not give rise to any tax liability of any kind.” That means no income tax, property tax, sales tax or any other Wyoming tax can be assessed against the monetary metals.

Lead sponsor Roy Edwards said, “Imagine going to the grocery store and asking the clerk for change for a $20 bill and being charged $1.00 in tax. That’s what we’re doing in Wyoming by charging sales taxes on precious metals and we’re taking steps to change that.”

With the adoption of HB 103, Wyoming joins all its bordering states (South Dakota, Idaho, Utah, Colorado, Nebraska) and more than 30 other states that do not assess a sales tax against precious metals.

Some states have specifically eliminated income taxation on gold and silver (Arizona and Utah) or have established precious metals depositories to store the state’s own physical gold and help citizens save and transact in gold and silver bullion (Texas).

You can view the full press release here (source

March 12 2018

moneymetals

Trump Says the U.S. Will Win Any Trade War; Our Debt Load Says Otherwise

Donald Trump fired off some major new shots in the global trade wars. With the exception of imports from Canada and Mexico, steel entering the U.S. will be subject to 25% tariff and aluminum will be taxed at 10%.

The president’s trade policy has been applauded by people seeking to protect domestic industry and criticized by free marketeers. There is no shortage of disagreement over the policy, but some of the outcomes seem easier to predict.

Rising prices

Higher price inflation is one probability.

Domestic manufacturers who use steel and aluminum are going to pay more for those metals and will need to raise prices. A wide gamut of goods ranging from airplanes and automobiles to steel building materials will soon cost more.

Unfortunately, the higher costs will put domestic manufacturers who must buy steel and aluminum at a disadvantage.

While they pay more for imports from Europe or Asia, the cars and appliances manufactured elsewhere and shipped into the U.S. aren’t affected.

Goldman Sachs estimates the steel tariffs will cost Ford and General Motors each $1 billion in profits. Imported models suddenly get a major cost advantage in the U.S. marketplace.

There is also the possibility of higher inflation driven directly by the foreign exchange markets.

Disgruntled trading partners may choose currency warfare as their response to tariffs. This would involve liquidating dollars they hold as reserves. In the case of China, Japan, and the EU, those stockpiles are enormous.

​Continue to the full article (source) ​
moneymetals

Gerald Celente Exclusive: "If rates go up too high, the economy goes down, end of story"

Mike Gleason: It is my privilege now to welcome in Gerald Celente, publisher of the renowned Trends Journal. Mr. Celente is perhaps the most well-known trends forecaster in the world and it's always great to have him on with us.

Mr. Celente, thanks again for the time today and welcome back.​

Gerald Celente: Oh, it's always great being on. Thank you.

Mike Gleason: Well, Gerald, it's never a dull moment in Washington, D.C., these days. President Trump always keeps it lively. We have the never-ending Russia controversy, of course, the war of words with North Korea, and the intervention in Syria have both been regulars in the headlines over the past year. Now Trump is talking about tariffs and people are worried about a trade war. Volatility is coming back to the stock markets and some investors are getting nervous about rising interest rates. When it comes to Russia interfering in U.S. elections, it seems more or less like a smoke screen. We have very little doubt there is plenty of collusion and a fair bit of it involved Hillary shepherding the Uranium One deal over the finish line.

So, we're finding it hard to predict which of these stories are worth paying attention to and which are likely to fade away. And there's nobody better who can help us evaluate this than you, so I'm excited to talk today. So, which of the current stories have legs, Gerald? Will there be a trade war, a big correction in stocks, another attempt by Democrats to impeach Trump? What?

Gerald Celente: Well, the attempt by the Democrats to impeach Trump have never stopped. And, again, Mike, I've been at this a lot of years, and anybody awake and alive that hasn't tuned out knows that every time we've had an election in this country, whether you like the person or not, they always used to say, "Well, whether you like it or not, this is the new person. Let's rally behind him and try to push the country forward." That never happened with Trump. And I want to make this really clear. I'm not a Trump supporter. I didn't vote in this last election. And (people say), "Oh, you didn't vote? Did you get what you deserve?", to which I say, "Grow up. If you voted for any of these people, then you got what you deserve and I don't deserve either of them. My standards are different."

And I look what's going on. It doesn't make the news, all the things that you just mentioned. Hey, how about what just happened in Italy with Cinque Stelle, the Five Star Movement, becoming the major party, a party that just started in 2009 because the people are disgusted with the establishment. How could you be disgusted with the establishment? You should love the establishment. How could you dare be anti-establishment? That's the stupidity of the language that they use.

They call it, for example, what Trump is doing, protectionist movements. Oh, a protectionist? Oh, I'm a close combat practitioner, have been for over a quarter of a century. I'll protect myself. I'll protect myself if I'm being attacked. But yet if you're being attacked trade-wise, economically, and you go to protect yourself, well, you're a protectionist. So, listen to the language, it's very important as a trend forecaster.

You mentioned about the Russian elections. The bar has sunk so low that people are listening to Samantha Power, the former UN Ambassador. And I'm tired of hearing this baloney, "Oh, if only women were in charge." It's not about men, women, race, creed or color. Good and bad comes in all of them. Let's call it equal. This is a woman, along with Hillary Clinton, Samantha Power and Susan Rice that started the Libyan War, that overthrew a sovereign nation, whether you liked the guy or not, that did nothing to us and created the refugee problem that nobody talks about and the migrant crisis. Because when Qaddafi was in there in Libya, they weren't going into Europe. He made a deal with them and warned them that when he went, the migrants would come.



Continue to the article (source

March 06 2018

moneymetals

SILVER INVESTMENT: The Lowest Risk, Highest Return Potential vs. Stocks & Real Estate

While silver is completely off the radar to most investors, it will turn out to be one of the best investments to own as the massive amount of leverage in the stock and real estate market evaporates. Unfortunately, investors, today are no longer capable of recognizing when an asset displays a HIGH or LOW risk. Thus, fundamental indicators are ignored as the investors continue the insane strategy of “Buying the Dip.”

A prudent investor is able to spot when an asset becomes a high risk and then has the sense to move his or her funds into one that is a lower risk. However, the majority of investors do not follow this practice as they are caught by surprise when a Market Crash occurs… again and again and again. Even worse, when investors are shown that the indicators are pointing to assets that are extremely risky, then ignore it and continue business as usual.

Today, complacency has turned investors’ brains into mush. They are no longer able to discern RIGHT from WRONG. So, when the market really starts to correction-crash, they will hold on to their stocks waiting for Wall Street’s next BUY THE DIP call.

Regardless, if we can understand the fundamentals, then we would be foolish to keep most of our investment funds in Stock and Real Estate assets. The following chart follows the KISS Principle – Keep It Simple Stupid:

Comparing high & low risk assets

You don’t need to be a highly-trained financial or technical analyst to spot the HIGH vs. LOW-RISK assets in the chart above. Hell, you don’t even need to see the figures in the chart. If we understand that all markets behave in cycles, then it’s common sense that asset prices will peak and decline. We can plainly see that both Real Estate and Stocks asset values are near their top while the silver price is closer to its bottom.

Thus, assets that are near a top are HIGH RISK, and those near a bottom are LOW RISK. It’s really that simple.

Continue reading... (source)

March 02 2018

moneymetals

Michael Pento: Currencies Will Be ‘Flushed Down the Toilet’ Triggering a ‘Mad Rush into Gold’


Michael Mike Gleason: It is my privilege not to welcome back Michael Pento, president and founder of Pento Portfolio Strategies, and author of the book The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market.

Michael is a well-known money manager and a fantastic market commentator, and over the past few years has been a wonderful guest and one of our favorite interviews here on the Money Metals Podcast and we always enjoy getting his Austrian economist viewpoint.

Michael, welcome back and thanks for joining us again.

Michael Pento: What a great introduction. Thanks for having me back on, Mike.

Mike Gleason: Well, we often talk about bond yields with you, Michael, and I think that's a good place to start today. You recently published an article where you made the case that 4% would be the floor when it comes to the 10-year note – not the ceiling, the floor, and you made some observations that now seem striking. The yield on that note averaged 4.6% in 2007, just the year before the 2008 financial crisis.

Today practically nobody remembers yields ever being that high… 10 years is a long time we suppose. Heck, it seems like investors have already forgotten the early February selloff in the equities market, so I guess we can't be surprised that they can't remember the situation a decade ago.

In any event, markets are not prepared, or priced for 4% yields on the 10-year. Talk a bit about why 4% is likely to be a minimum and why yields should probably be much higher than that.

Michael Pento: Let's start with the fact that normally speaking throughout history, the 10-year note seems to run with nominal GDP growth, which is basically your real growth plus inflation. So, if we're running around 2% inflation and we have growth at 2.5% around that, you would assume that the 10-year note should be historically speaking around 4.5% right now. But I can make a very cogent argument, Mike, that rates should be much, much higher because if you look back ... as you mentioned the 2007 when that average interest rate was, again, 4.6% and nominal GDP was sort of around that same ballpark, the annual deficit was 1.1% of GDP.

But going into fiscal 2019... sounds far away, not maybe that far away, but it sounds further away than really what it is. It begins in October of this year. Our annual amount of red ink will be $1.2 trillion. That is the Treasury's annual deficit, but you have to add to that to the fact that the central bank of the United States will be selling... and I say selling, because what they don't buy the Treasury must issue to the public, $600 billion less of Treasury Bonds. So, that's $1.8 trillion deficit. That has never before happened in the history of mankind, a $1.8 trillion deficit, which happens to be 8.6% of our phony GDP if we don't go into a recession.

Read/Listen to the full podcast (here)

moneymetals

Why U.S. GDP Hasn’t Really Increased Since 2000

While official sources forecast U.S. Gross Domestic Product (GDP) to surpass $20 trillion this year, the real figure is probably much less. So how much less is real U.S. GDP? Well, that depends on how it is measured. If we factor in energy consumption and the increase in total public debt, U.S. GDP is likely less than half of the current figure.

Yes, it sounds insane to say that the current U.S. GDP is likely overstated by at least 50%, but if we go by fundamental data, it isn’t that crazy at all. Unfortunately, Americans have been conditioned to believe that money grows on trees and energy comes from the Wizard of Oz. Thus, if we need more money, then the U.S. Treasury can print more Federal Reserve Notes, or we can swipe the credit card. And, if we need electricity, we just switch on the light. Easy… Peasy.

Due to the highly complex nature of the world in which we live in today, the individual is clueless as to the tremendous amount of energy and work that it takes to produce the foods we eat and the goods, energy, and materials we consume. So, it should be no surprise that U.S. GDP can be overstated by 50%+.

If we go by the data that shows the growth of Global GDP is related to the growth of Global Oil Supply, then it is very quite easy to spot inflated GDP figures. However, you have to be able to understand this essential ENERGY=GDP relationship. Of course, this is not taught in business or economic classes in high school or college. Instead, the economic teachers focus on the insane theory of SUPPLY vs. DEMAND. If individuals are taught GARBAGE, then their thinking and reasoning is GARBAGE. So, we really can’t blame them.

In looking at the following chart by Gail Tverberg, the increase in Global GDP corresponds to the rise in Global Oil Supply:

World oil supply growth vs. world gdp growth

As the annual growth percentage of World Oil Supply declined in the periods shown in the chart above, the same trend took place in World GDP. If we can understand the OIL-GDP relationship figures in the chart, then it is impossible for a country to grow its GDP if it does not increase its energy consumption.



Continue reading (source

February 28 2018

moneymetals

February 27 2018

moneymetals

New Warnings on Risky “Self Storage” Gold & Silver IRAs

Bullion investors buy gold and silver as a matter of self-reliance. Physical metals aren’t dependent upon the promises of financial institutions, governments, or other third parties.

This lack of counterparty risk makes precious metals quite different from most conventional assets. There is no possibility of a default or mismanagement which renders them worthless. That is a lot more than can be said of securities such as stocks and bonds.

Gold retirement nest egg

Recently a few firms promoting “self storage” precious metals IRAs have been trying to exploit the self-reliance streak running through bullion investors in a manner that could cause significant harm.

These firms offer a scheme to circumvent IRS rules which require IRA metals be stored by a third party, and some people are biting. The desire to have possession and control of the metals appears to be outweighing good sense.

The warnings are piling up. Last week, the Industry Council on Tangible Assets issued the latest warning about storing IRA metals at home.

The trouble is rooted in the IRS requirement that assets in your retirement account be held by a third party.

Some firms have begun offering a dangerous work-around. They help investors create an LLC company which they claim will fill the role of the third party. The LLC buys and holds the metals, and the IRA holder manages the LLC.

IRS officials have already signaled that they see the formation of the LLC as a simple fiction to grant control over assets which are supposed to kept at arm’s length. ”Self storage” IRA holders seem likely to find their accounts disqualified, with taxes and penalties due immediately (as an early distribution of the full account balance).

As one expert frames it; “you can own a bakery with your IRA, but you cannot be the baker.” Owning a business with your self-directed IRA is okay. Hiring yourself and paying a salary is a definite no-no. Likewise it is perfectly fine to buy investment real estate, but your IRA cannot purchase your personal residence.

IRA promoters are offering LLC or “checkbook” IRAs despite knowing the program has not been defended successfully in court. It certainly does not have the blessing of the IRS.

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February 23 2018

moneymetals

5 Big Drivers of Higher Inflation Rates Ahead

Investors got lulled into a state of inflation complacency. Persistently low official inflation rates in recent years depressed bond yields along with risk premiums on all financial assets.

That’s changing in 2018. Five drivers of higher inflation rates are now starting to kick in.

Inflation Driver #1: Rising CPI

The Consumer Price Index (CPI) is a notoriously flawed measure of inflation. It tends to understate real-world price increases. Nevertheless, CPI is the most widely followed measure of inflation. When it moves up, so do inflation expectations by investors.

On February 13th, the Labor Department released stronger than expected CPI numbers. Prices rose a robust 0.5% in January, with headline CPI coming in at 2.1% annualized (against expectations of 1.9%).

In response to the inflationary tailwinds, precious metals and natural resource stocks rallied strongly, while the struggling U.S. bond market took another hit.

Inflation Driver #2: Rising Interest Rates

interest rates

Since peaking in mid-2016, the bond market has been stair-stepping lower (meaning yields are moving higher). In February, key technical levels were breached as 30-year Treasury yields surged above 3%. Some analysts are now calling a new secular rise in interest rates to be underway after more than three decades of generally falling rates.

The last big surge in interest rates started in the mid 1970s and coincided with relentless “stagflation” and soaring precious metals prices. It wasn’t until interest rates hit double digit levels in the early 1980s that inflation was finally quelled and gold and silver markets tamed.

​Continue to the full article (source)

February 15 2018

moneymetals

U.S. Public Debt Surges By $175 Billion In One Day

After the U.S. Government passed the new budget and debt increase, with the President’s signature and blessing, happy days are here again. Or are they? As long as the U.S. Government can add debt, then the Global Financial and Economic Ponzi Scheme can continue a bit longer. However, the days of adding one Dollar of debt to increase the GDP by two-three Dollars are gone forever. Now, we are adding three-four Dollars of debt to create an additional Dollar in GDP. This monetary hocus-pocus isn’t sustainable.

Well, it didn’t take long for the U.S. Government to increase the total debt once the debt ceiling limit was lifted. As we can see in the table below from the treasurydirect.gov site, the U.S. public debt increased by a whopping $175 billion in just one day:


U.S. debt increased 175 billion feb 2018

I gather it’s true that Americans like to do everything… BIG. In the highlighted yellow part of the table, it shows that the total U.S. public debt outstanding increased from $20.49 trillion on Feb 8th to $20.69 trillion on Feb 9th. Again, that was a cool $175 billion increase in one day. Not bad. If the U.S. Government took that $175 billion and purchased the average median home price of roughly $250,000, they could have purchased nearly three-quarter of a million homes. Yes, in just one day. The actual figure would be 700,000 homes.


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