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May 08 2019
May 06 2019
MORE TROUBLE IN MEXICO: Second Largest Silver Mine Suspended Operations
In just a little more than a week after the mighty Newmont-Goldcorp merger was finalized, the company suspended operations of its largest gold-silver mine in Mexico. The Penasquito Mine, which produced more than a 500,000 ounces of gold and 25 million ounces of silver in a single year, has been dealing with a blockade of its operations since March 27th.
The blockade was started due to issues with the local community in regards to water supply concerns and problems with a trucking contractor. However, the protests by the local community over water rights have been going on ever since the Penasquito Mine started operations in 2010.
According to the article, Goldcorp using excessive water at Peñasquito mine – critics, research by McGill Research Group, reported that the Penasquito Mine was using three times the amount of water than it originally agreed upon. Furthermore, the large open-pit gold-silver mine, located in the state of Zacatecas, was also consuming three times the amount of water supplied to the entire City of Zacatecas (population 129,000).
To get an idea the amount of water being consumed by the Penasquito Mine, I looked at the data from Goldcorp’s most recent Sustainability Report. In 2017, the Penasquito Mine withdrew a staggering 7.9 billion gallons of water to supply its operations for the year. Of that total amount, 93% came from groundwater. That is one hell of a lot of water.
It will be interesting to see how long it takes for the suspension to end. However, with the election of the new President AMLO of Mexico, Andrés Manuel López Obrador, large foreign mining companies in Mexico may find it increasingly challenging to GET THEIR WAY as they have in the past with the help of pro-mining leaders.
Regardless, the Penasquito Mine produced the second highest amount of silver in Mexico last year:
While Newmont-Goldcorp owns the second largest silver producer in Mexico, Fresnillo PLC runs the other top three primary silver mines, Saucito, Fresnillo, and San Julian. With the suspension of mining operations at Penasquito, that’s a potential loss of 18-20 million (Moz) of silver a year.
Continue reading: https://bit.ly/2VjV7HG
May 03 2019
Which Metal Has the Most Upside & How to Avoid Costly Mistakes
A few weeks ago we heard the first half of an interview Money Metals president Stefan Gleason did during a recent 360 Gold Summit. Today we’ll hear part two of that interview. Stefan gives some important warnings to precious metals investors, discusses why he favors one of the precious metals over the others and also talks about some really important things to consider when selecting a precious metals dealer. Don’t miss the eye-opening conclusion of Stefan’s interview, coming up after this week’s market update.
Well, the big headline in markets this week – the S&P 500 pushed to a new all-time high in nominal terms.
But is it a new high in real terms? Most in the financial media don’t want to ask that question. They would rather join their Wall Street sponsors in celebrating a new official record.
President Donald Trump certainly didn’t miss the opportunity to boast about the stock market’s strength under his watch.
Donald Trump: The stock market and our country from an economic standpoint is doing the best probably it's ever done. We're hitting new highs again. We've hit new highs, I guess, close to or over 100 times since I'm president from the time of the election.
CNBC Reporter: You heard the President starting off there with the stock market, obviously he sees that as a piece of good news, and an overall barometer for the economy under his leadership. I asked the President how high he thinks the stock market can go, he didn't respond to that one.
The Trump tax cuts for corporations and his administration’s relative business-friendly approach to regulation have certainly given equity markets a boost. But stocks have also benefited from a general rising sea of liquidity thanks to the Federal Reserve.
Investors shouldn’t be fooled by records that get set because of artificial stimulus from central bankers. There has never been a clearer case of the Federal Reserve goosing the stock market than the current rally that began off last year’s pre-Christmas lows.
Under pressure from Wall Street and the White House Plunge Protection Team to back off on rate hikes, Fed Chairman Jerome Powell announced a pause. Earlier this spring he confirmed the pause would continue for the remainder of the year. For Wall Street, it has been perhaps the greatest pause of all time judging by the nominal gains registered over the past four months.
Despite the celebratory mood surrounding stocks, there is a striking number of what market technicians call “non-confirmations.” The transportation index hasn’t hit a new high. The small-cap Russell 2000 index is nowhere near a new high. And the S&P 500 itself is far short of a new high when measured against raw materials including crude oil and gold.
Check out the full podcast here: https://bit.ly/2ZQhTpd
May 01 2019
A Look Inside the Scheme to Eliminate Cash, Impose Negative Interest
Central bankers and politicians love inflation, but they need “bag holders” to have faith in the value of the fiat currency IOUs they hold. The trick is to avoid suddenly destroying the ephemeral confidence in currencies by printing too much too fast.
Central bankers may also need to limit the options inflation wary citizens have for escaping.
They are both shifty and innovative when it comes to making sure the ill effects of perpetually devaluing currency are primarily borne by the citizenry.
Lying and trying to hide what they are doing to the currency has been tradition with politicians since Roman times. Nero began quietly reducing the silver content of the Denarius around 60 A.D.
Today central bankers and governments don’t have to bother with altering physical coins. Every currency can be quietly devalued electronically.
The financial central planners try to calm the herd with rigged inflation statistics designed to show the money losing purchasing power far more slowly than it actually is.
They use “hedonic adjustments,” “geometric weighting,” and many other ploys to arrive at a politically palatable inflation rate. Or, even more clever, they convince investors the best way to evaluate the strength of the money is simply to compare it with other fiat currencies.
That is how the U.S. dollar has earned its reputation for “strength” in recent years.
Headlines in the financial press broadcast the DXY index is rising. The dollar buys more euros and yen, which matters to practically no one except tourists. Meanwhile it buys far less of stuff that does matter -- food, housing, and most everything people need to live.
Another trick is for politicians and central bankers to simply print money under the guise of economic imperative.
Full article: https://bit.ly/2ISxi2Q
April 30 2019
Silver Market Alert: Powerful Bullish Setup Takes Shape
The silver market appears to be setting up for a big move.
After spending this spring stair-stepping lower in a narrowing range, silver prices have formed a falling wedge pattern. That pattern usually resolves in a powerful directional breakout. The good news for bulls is that falling wedges usually break out to the upside.
Commercial hedgers and bullion banks (i.e., “smart money”) in the silver futures market have significantly trimmed their short positions over the past couple weeks – a bullish development. While their net positioning isn’t yet at an extreme, it is more favorable than not for a price rally to commence in the near future.
Of course, neither futures traders nor chart patterns are 100% reliable. Nor do they have any particular implications for where prices may be headed years from now.
Long-term investors can benefit from identifying opportune entry points on the charts. But if a big multi-year bull market is to come, it will be driven by fundamentals – supply, demand, relative valuations, inflation rates, and investor sentiment.
Let’s therefore drill down into silver’s fundamentals.
The Silver Institute is widely considered to be an authoritative source. The Institute released its annual World Silver Survey in April, which showed global silver demand rose by 4% in 2018 to more than 1 billion ounces. At the same time, supply from mine production fell 2% last year to 855.7 million ounces.
At first glance, these numbers present a compelling case for higher silver prices. Demand appears to be outstripping supply.
However, there is no actual physical shortage. The mining supply deficit is (for now) being made up by scrap recycling and other secondary above-ground sources of physical silver.
There ultimately will be a physical shortage if demand continues to rise while mining production falls. The market’s way of averting such a shortage is through higher prices to incentivize more output and encourage thrifting by industrial users.
Silver is a difficult market to forecast in part because there are few primary silver miners in existence. Most silver production comes from gold and base metals mining operations.
Continue reading: https://bit.ly/2VCFD0E
March 29 2019
So Why Should You Own Gold?
Maybe you have some gold (and silver) but not enough. Maybe you haven't added to your stash for quite awhile, and you kinda' forgot why you bought it in the first place.
Or perhaps you don't own any precious metals at all!
If one of these circumstances fits you, then it's time to refresh your memory on the multiple reasons why you should own gold, assess your risk profile and unique financial circumstances... then act!
The oft-stated Gresham's Law tells us that when a government dictates the exchange rate between different types of money, the "good," or undervalued method of exchange gets chased out by the "bad," or overvalued version.
Thus the "bad" money stays in circulation and, as debasement (inflation) picks up, is quickly spent.
Unbeknownst to most – for now – U.S. inflation (greatly understated by "official" statistics) is increasing across the board. It doesn't need to hit double digits in order to move the dial on gold and silver prices. Invariably, the "smart money" sniffs out the potential well beforehand – which is what it's been doing for the last 9 months!
The "good" money in the U.S. is in reference to gold after FDR's infamous 1933 edict banning circulation… and later, the removal of silver from our coinage starting in 1965.
Today, a pre-1965 quarter at $16/ounce silver is worth about $2.75. Why would anyone exchange it for an 8% copper/92% nickel slug? As for a gold coin, don't even bother doing the math!
In Venezuela, according to the IMF, inflation will rocket along this year at 10 million percent! How long do you think the ironically-named Bolivar Fuerte ("strong bolivar") stays in someone's pocket, bank account, backpack... or large cardboard box?
You probably recall the reasons for owning gold. Here’s a timely review...
It's durable. Spanish gold bars and coins have been recovered from shipwrecks submerged for centuries... no worse for the wear!
It's portable. A 25 (troy) ounce tube weighs less than two (avoirdupois) pounds and is worth around $33,000 today.
It's divisible into small portions. 1/10th of an ounce is the size of a thin dime, but you can buy/store it by the gram - or in blocks of grams.
It's difficult to counterfeit. Just about any quality coin shop can spot a "weight problem" in relation to the expected size of a bullion coin or bar that a crook – or a naive buyer – might bring in for fiat trade.
It stores easily. Significant dollar amounts can be squirreled away just about anywhere.
Gold available for purchase is in finite supply. At a fairly consistent production rate of around 2%/year (and falling), gold is unlikely to experience a "production spike" like a base metal might.
It can serve as collateral for loan agreements, and as financial insurance.
Gold (and silver) make great gifts. My daughter still has the 1 troy ounce Krugerrand she received as a high school graduation present. The cost: $275. Her brother has a tube of 25 American Silver Eagles purchased for $7.50 apiece.
It's costly to mine. The industry gauging standard of All-In-Sustaining-Costs (AISC) for even the most efficient miners is still about 80-90% per ounce of what they're paid from the sale of production. What's more, miners have a wasting asset that – unless the deposit can be replaced with additional ore – diminishes the value of their project with every ounce they sell.
Read the full article here: https://goo.gl/B9eKau
March 27 2019
The Staggering Amount Of Gold & Silver Investment Since The 2008 Financial Crisis
While the demand for precious metals is certainly off its highs from prior years, investors would be quite surprised by the astonishing amount of physical gold and silver investment since the 2008 financial crisis. Only by comparing the gold and silver investment demand to the prior decade, can we truly understand how the precious metals market has changed, and probably forever.
Now, before I get into the information, I wanted to say a few things about precious metals sentiment and the disillusionment, and at times, the outright disgust, by a percentage of former gold and silver investors. I am not going to name any names, but rather focus on the inability of these individuals to CONNECT THE DOTS in regards to the disintegrating Global Financial Ponzi Scheme.
And… for those few who still believe in the “Crypto Miracle,” to overtake 2,000+ years of gold and silver as money, you have my sympathies. I am not going to get into any details, but just to say… don’t count on High-Tech to solve our problems in the future. High-tech only creates more problems. So, if you believe high-tech is going to solve problems, then you don’t understand the historical record on the “Collapse of Complex Societies.”
Regardless, I believe part of the reason the “once” precious metals bugs, have now become quite frustrated, is that they have been taken in by the Mainstream Financial Koolaide. And why shouldn’t they? Stocks and real estate prices have been going up and up, until recently, for the past seven years while the metals peaked, declined, and have been virtually flat.
Yes, it’s frustrating to see the value of precious metals underperform the market while everything else seems to be heading toward the moon. But, that in itself should give anyone with a decent amount of intellectual know-how the ability to sniff out that… SOMETHING JUST AIN’T RIGHT. For some odd reason, all the negative aspects of the economy, the massive debt, derivatives, and leverage are all but forgotten when all we do is focus on the highly inflated stock, bond, and real estate asset values.
Unfortunately, the inability to see how the debt, derivatives, and leverage have created the biggest Global Ponzi Scheme in history will create the largest financial collapse ever witnessed, causing most investors to go bankrupt. It’s only a matter of time, and time is running out.
So, when I write about gold and silver, I am not doing so because I want to see a 1,000+% gains in the metals (that wouldn’t bother me either), but because there really isn’t much else worth owning as “Liquid Investments” when the Phat Financial Lady finally sings. Thus, I don’t focus on price targets or timelines, because that’s a fool’s game (one I was guilty of doing several years ago… no longer).
Frustration occurs when something doesn’t happen when or how we expect. Which means, it’s best to focus on the critical information, make one’s investment decisions, and let the system unfold in its due time.
The 2008 Financial Crisis Was A Game-Changer For Gold & Silver Investment
Because we focus on day-to-day news, we tend to overlook longer-term trends. While short-term information is important, it doesn’t override longer-term fundamental trends. Well, yes… maybe in some cases, but if we take the collapse of the Ancient Roman as an example, it cannot be attributed to just the events that occurred over the last few years of the empire, but instead, the centuries it took for its Falling EROI – Energy Returned On Investment, to destroy it from within.
Today, we are in the same predicament as the Ancient Roman Empire. However, the overwhelming majority of people don’t see it because they are only focused on short-term results and information. Thus, to truly understand the future, we have to look back in the past. And, if we do this with gold and silver investment, we will see a very interesting trend.
According to some of the best industry sources, the World Gold Council and World Silver Surveys, investors purchased 16,200 metric tons (mt) of gold and 57,800 mt of silver from 2009-2018:
That turns out to be 520 million oz of gold and a nearly 2 billion oz of silver. Now, these figures only represent the physical bar and coin demand, including central bank net purchases. I did not include ETF’s or similar products. First, there is no way of knowing if the gold or silver is over-subscribed in these precious metals ETF’s or secondly, if all the metal that is listed, is contained in the vaults. So, the figures are likely much higher, especially for silver.
Continue reading: https://goo.gl/mpmhTe
March 26 2019
March 25 2019
What Do Airline Crashes and the Precious Metals Markets Have in Common?
Boeing and the Federal Aviation Administration worked closely together to hustle a new passenger jet through the safety certification process. The combined efforts to save time and cost, coupled with little sense of accountability, resulted in a tragic safety flaw.
Now hundreds of passengers are dead, albeit in other countries. The public is finding the enormous trust placed in the manufacturer and the agency tasked with monitoring safety was badly misplaced.
The regulator tasked with safety appeared more interested in protecting Boeing’s monopoly and bottom line.
Here is an excerpt from an article last week in the Seattle Times:
Federal Aviation Administration managers pushed its engineers to delegate wide responsibility for assessing the safety of the 737 MAX to Boeing itself. But safety engineers familiar with the documents shared details that show the analysis included crucial flaws.
The FBI announced it will join a criminal investigation into the process for certifying the 737 MAX.
Precious metals investors will find many elements of the Boeing story familiar.
Gold and silver bugs have already learned just how dangerous it is to trust corrupt and captured federal regulators. Now that lesson is being taught to Americans at large.
By the time all the details of this sordid tale have been published, more Americans will wonder who federal regulators really work for.
Gold and silver investors who have been similarly betrayed by the regulators. Regulatory malfeasance and corruption is a theme the precious metals markets and airline industry have in common.
Concerns over regulatory capture and a track record of failure were largely ignored. Editors at Bloomberg outlined some of the history of the FAA in a March 21st editorial. Suffice it to say the recent crashes aren’t the only examples of the agency putting the needs of airlines and plane manufacturers ahead of public safety.
Continue reading: https://goo.gl/8LMy2W
March 22 2019
Federal Reserve Cries Uncle as Rates Fall, Commodities Strengthen
Well now, without further delay, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to welcome back David Smith, Senior Analyst at The Morgan Report and regular contributor to MoneyMetals.com. David, it's been too long. How are you my friend?
David Smith: It's been a while and I'm happy to be back, Mike.
Mike Gleason: Well, David, for metals investors who got started after the 2008 financial crisis, it has not been an easy ride, as we both know. Prices rose sharply between 2008 and 2011, driven by the crisis and the Fed's response to it, 0% interest rates and massive amounts of money creation. Then the metals markets began to flounder. Some of the safe haven demand for metals dried up as the equity markets recovered and fear dissipated. Price rigging and suppression in the futures markets has progressed from conspiracy theory to conspiracy fact. Metals prices are not being set in free or fair markets, so it is not easy for some investors to hang in there. But the reasons to own metal are still there, bigger than ever.
So, now might be a good time to review some of them. You talk a lot about precious metals role as insurance. Would you mind going over how metals act as a form of insurance for our listeners, David, as we start out today?
David Smith: Well, there's several iterations of the insurance piece. As David Morgan of The Morgan Report always talks about, you buy the physical first and you buy that for insurance first and profits second. But if you look back, and a lot of people would not even believe this until they saw the chart. But gold held since 2000, has doubled the appreciation of the stock market, the overall stock market.
So, in spite of the big plans that we've seen, that we saw from $1,900 down to about $1,050 and then the move in 2016, we had, which gave most of it back and gold ended up for the whole process from that point, down about 45%. Silver down about 70% from 2011. In spite of that, the metals are still using their role as insurance of helping you diversify, of helping contradict other price changes in investments you may have and then, providing liquidity for you. So they, historically, have done that very well, that role of insurance and they continue to do so.
Mike Gleason: You talk about metals as a source of liquidity. What do you mean by that?
David Smith: It means that if you need money, if you have some kind of an expense you need to deal with right away, you can sell the gold right now at any gold operation, any salesmanship. Whether it's a jewelry store or an operation like Money Metals and you can get your money for that to pay that expense.
You can't do that with property. You can't do it with real estate, in general and collectibles and things like that. So, it gives you a real good opportunity. I always like to tell people from time to time, when you buy gold and silver, you don't think of it as buying something like a car or a fishing rod or a camera or something like this. You're exchanging one form, of which I would argue is inferior money, fiat money that's not backed by anything… you're exchanging that for a form of historic sound, honest money. You're not making a purchase per se. You're making an acquisition of a greater ability to have a financial element that can do really well for you and offer diversity.
Check out the full podcast/article here: https://goo.gl/p7Srnw
March 21 2019
As The Markets Sell-off The Precious Metals Rebound
To the surprise of many investors, the precious metals have rallied while the broader markets continue to sell-off. Currently, both gold and silver are solidly in the green while the major indexes were all the red following a huge sell-off yesterday. The Dow Jones Index has lost nearly 1,000 points in the past two days while the gold price is up nearly $25.
However, even though we could see a late-day rally in the markets, and even higher stock indexes over the next few months, the bear market for stocks is still coming. The Dow Jones Index has now suffered two large sell-offs in the past ten months:
In January, the Dow Jones Index fell by more 3,000 points, and the current correction is only one-half of that amount. So, I expect to see a continued correction over the next month. Because October is the worst month for market Crashes, this could be one hell of a blow for not only the economy but also, for investor confidence.
For example, according to the Zerohedge article, Used-Car Prices Plunge Most In 15 Years:
Looking deeper at the core inflation print, it reflected a 3% monthly drop in prices for used cars and trucks following increases in each of the last 3 months, and the biggest drop in 15 years…
Continue reading: https://goo.gl/r8VZYJ
March 11 2019
Palladium Blowup Could Expose Scam of Gold & Silver Futures
Craig weighs in again and offers a concise and clear explanation on what’s been happening in the broken and rigged silver futures markets. And also tells us why he sees 2019 being a similar setup to what we saw in gold and silver back in 2010 and 2011 when the metals went on an historic run. Don’t miss a fantastic interview with Craig Hemke, coming up after this week’s market update.
Markets got roiled this week on some downbeat economic reports and a surge in the U.S. dollar.
The Dollar Index broke out to a 21-month high on Thursday after the European Central Bank came out swinging with more stimulus measures. The ECB indicated it intends to leave ultra-low interest rates in place at least through early 2020. That coupled with bleak new forecasts for European economic growth helped drag down the euro and give life to the dollar on foreign exchange markets.
Dollar strength is usually negative for precious metals, and this week was no exception, at least until today. With a bit of a bump here on Friday gold now shows a slight weekly gain of 0.3% to bring spot prices to $1,298 per ounce. Similar story in silver, which seems to have found a temporary bottom perhaps and is now moving off of it. The white metal currently comes in at $15.40 an ounce, up 0.8% now on the week. Platinum is lower since last Friday by 5.2% to trade at $818. And white-hot palladium is succumbing to selling pressure – down 2.2% this week to trade at $1,515 per ounce as of this Friday morning recording.
For the near term, metals markets appear vulnerable to further selling if the dollar breakout holds. So the question is: How high can the Dollar Index go?
The dollar closed Thursday at 97.63 on the Index. If it continues to rally, then the key level to watch would be 100. The dollar rally of 2015 stalled twice right at 100.
Check out the full podcast here: https://goo.gl/uBmjM2
March 08 2019
Practical Prepping for Financial SHTF Scenarios
Preppers – the sort of people who build bunkers, stockpile supplies, and bear arms – aim to survive “SHTF” scenarios.
When war breaks out, when the power grid goes down, when the banks fail, when the U.S. dollar collapses, when social unrest spreads, when the stuff hits the fan… will you be prepared?
Risks are rising.
The Bulletin of the Atomic Scientists maintains a “Doomsday Clock.” For 2019, it “sets the Doomsday Clock at two minutes to midnight—the closest it has ever been to apocalypse.”
The Atomic Scientists are issuing “a stark warning to leaders and citizens around the world. The current international security situation—what we call the ‘new abnormal’—has extended over two years now.
It’s a state as worrisome as the most dangerous times of the Cold War…”
If you don’t have an underground fallout shelter in your backyard… don’t worry. The likelihood of your neighborhood being the target of a nuclear attack is slim.
However, other SHTF scenarios are far more likely impact you or your finances at some point in the future. It could be something specific like an identity thief draining your investment accounts. Or it could be something systemic like a currency crisis.
Full article: https://goo.gl/yTzojx
March 07 2019
Insane Stock Market Rally Due To Massive Global Monetary Liquidity
If you’re puzzled by the magnitude of the stock market correction since late December, you can thank the central banks for the rally. Yes, that’s correct… after the Dow Jones suffered the worst Christmas Eve trading day ever, the massive central bank monetary liquidity helped push the index up 20% from its low over the next two months.
Of course, the markets were due for a reversal as nothing goes down in a straight line, but to see the sort of buying in the face of negative economic news and lack-luster earnings means that the inevitable CRASH will be even bigger when it finally arrives.
Now, according to the article, Back To Fundamentals, Daniel Lacalle stated the following in regards to the markets:
In 2018 we saw the first drop in global liquidity in more than a decade, and that generated significant losses in financial markets. Since the end of December stock markets have rebounded strongly because the data, although poor, is not as bad as feared, and mainly because the Federal Reserve changed its tone on the number of rate hikes, the ECB announced that it would be much more accommodative and the Central Bank of China introduced the largest injection of liquidity in five years.
In fact, between December 26 and February 15 we have seen the largest injection of liquidity in the markets of the last two years, bringing the global money supply to record levels.
The two key points stated above were that a drop in global liquidity in 2018 generated significant losses in the financial markets and the largest injection of global liquidity from December 26 to February 15th brought the money supply to a record level and pushed global stock markets back higher.
Continue reading: https://goo.gl/oApVJ9
March 06 2019
The OTHER Debt Bubbles: How Private Sector Debt Could Trigger the Next Financial Crisis
The $22 trillion official national debt is a much discussed problem, even as politicians exhibit zero motivation to do anything about it. But as big an economic overhang as it is, government debt isn’t likely to trigger the next financial crisis.
Yes, servicing the growing federal debt bubble will depress GDP growth, cause the value of the dollar to drop, and raise inflation risks. But the bubble itself won’t necessarily burst – not anytime soon.
As long as politicians face no political consequences for deficit spending, and as long as the Federal Reserve keeps the Treasury bond market propped up… then many more trillions can be added to the national debt.
Meanwhile, more fragile debt bubbles exist in the private sector. Unlike government debt – which carries the implicit backing of the Fed’s unlimited printing press – debts incurred by corporations, investors, consumers, and students can default.
Globally, there exists $250 trillion in debt against economic assets of around $100 trillion. The notional value of all derivatives now approaches a quadrillion dollars.
It’s been called the “everything bubble”… and it could soon lead to the “everything bust.”
U.S. household debt rose to a record $13.5 trillion in the fourth quarter of 2018. Mortgages, student loans, car loans, and credit cards represent enormous burdens even during a good economy. These burdens will prove unbearable for millions of Americans in the years ahead.
Check out the full article here: https://goo.gl/y1cDk
March 05 2019
Warren Buffett’s Confusion & Disorientation about Gold
Warren Buffett’s famed annual letter to Berkshire Hathaway shareholders landed in the mail last week. Buffett has built a vast fortune investing in the shares of publicly traded companies. He has long been critical of gold. His most recent letter takes another swipe at the precious metal and implores readers to buy stocks instead.
Before his fans start dumping gold and calling their stock brokers, we thought it would be worth examining Buffett’s argument.
Buffett got started investing in 1942. He bought $114.75 worth of shares and says had that amount been invested in a no-fee S&P 500 Index Fund, the current value would be $606,811.
He compares that to making a different choice and buying gold:
To “protect” yourself, you might have eschewed stocks and opted instead to buy 3 1⁄4 ounces of gold with your $114.75.
And what would that supposed protection have delivered? You would now have an asset worth about $4,200, less than 1% of what would have been realized from a simple unmanaged investment in American business.
It sure looks like a no-brainer. Only suckers would buy gold when they can buy stocks instead, right?
Hold on a second...
The comparison leaves out some critical facts. For starters, there was no such thing as an S&P 500 index fund in 1942. The notion of investors buying a “no-fee” variety of an asset type that didn’t exist is even more unfair.
The S&P 500 index as we know it began in 1957 and the first index fund representing a basket of those shares launched in 1976. Prior to that, investors would have been forced to pick stocks and take even more risk.
Most would not have had the fortitude and discipline to manage a portfolio of stocks and get the sort of returns Buffett is implying. Of the 500 companies initially included in the 1957 index, only 60 remain. Plenty of those firms failed, and their share prices went to $0.
Shares of any stock can become worthless while physical gold cannot. Buffett neatly sidesteps the concept of risk with his comparison.
Buffett also fails to mention the gold price was tightly controlled for the first 30 years of his comparison period. While shares of public companies were free to appreciate as America clawed its way out of Depression and war in what was perhaps the greatest economic boom of all time, gold was officially suppressed. The U.S. government fixed the price at $35/oz and then $42/oz from 1934 to 1971.
In truth, Buffet could not have bought gold in 1942 had he wanted to do so. Franklin Roosevelt had long since outlawed private ownership of gold via Executive Order 6102.
Continue reading: https://goo.gl/SiF9F6
March 04 2019
Central Banks Now Buying Gold Like Crazy
Well now, for more on how the mainstream media is seldom giving you the full story, plus much more, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to welcome in Gerald Celente, publisher of the renowned Trends Journal. Mr. Celente is perhaps most well-known trends forecaster in the world and it's always a joy to speak with him.
Mr. Celente, thanks for the time again today and welcome back.
Gerald Celente: Oh, thanks for having me on, Mike.
Mike Gleason: Well, Gerald, the Trends Journal is forecasting Economic 9/11 as one of the big trends for 2019. There are plenty of indicators which just support your thesis for a major slowdown. Debt levels – both public and private – have exploded, China is slowing down and all the stimulus in Europe has failed to generate results there. Higher interest rates are hurting, everything from real estate to auto sales, et cetera. But none of this is reflected in the stock markets, which are roaring higher. Once again, it looks like the Fed is up to its old tricks, promising to stop the rate hikes they had planned and end the program for selling bonds. The constant intervention of the Fed has always been one of the major wildcards when trying to predict where things are headed in recent years. What do you think? Can the central bankers kick the can one more time to avoid a recession, or are they finally going to lose control in the months ahead?
Gerald Celente: Well, I think you've summed everything up pretty well in analyzing it, and the general situation. When we made that forecast of an Economic 9/11, remember how trends for the new year go out in December. In December, we just saw the Dow have its worst month since the Great Depression, and all of a sudden on January 4th, 2019 it all turned around. What happened was the Federal Reserve Chairman bent over to Trump, and he backtracked on his aggressive stance of 2018, where they raised interest rates four times and they were scheduled to raise them three to four more times in 2019. He said he would be patient. In late January, they said it again that they would be patient. They were in no hurry raising interest rates. That changed our forecast, because what they've done is they've injected more monetary methadone into the bull to keep it running. You can see what was happening when they were going to pull the needle out.
The bull was dying, it was OD’ing already, and now they just got it going once again. And you mentioned wildcard, and that's exactly why nobody could predict the future. There are too many wildcards, whether they're man made, or made by Mother Nature. Well, of course now I have to be proper and politically correct, whether women-made or made by father nature. What happened was they played the wildcard, and the fact is whether it was fear of a fed audit, or just pressure from Trump, we listed all the times he called the Fed loco and crazy, and how disgusted he was with them throughout 2018, beginning in July, until they did a backtrack. So, now what we're looking at, Mike, it's the presidential reality show’s already heating up and Trump is going to do everything he can to keep the economy pumping along, or I should say Trumping along.
Remember, the cat’s in the real estate business. To his son in law, the family, the Cushners. It's real estate. You mentioned about real estate prices going down. I mean what happened in December, we saw southern California home sales plunge 20% in December to the lowest pace in 11 years. So, when those interest rates got around 5% for a 30-year mortgage, you could see the big reversal. Not only do we see the Fed not raising interest rates in 2019, we could see them aggressively bringing them down, if the economy starts to slow down. They raised them nine times since 2015, they could lower them nine times.
Full podcast: https://goo.gl/6usfQV
February 27 2019
Fed Must Face Reality: No Return to Normalcy for Monetary Policy
More than a decade after the 2008 financial crisis, U.S. monetary policy continues to operate in crisis management mode.
Despite a long, drawn out rate-hiking campaign – now paused – the Federal Reserve has yet to bring its benchmark interest rate up to normal levels historically.
It has yet to unwind the vast majority of the nearly $4 trillion in emergency asset purchases added to its balance sheet.
The Fed outlined its “normalization” policies back in September 2014.
The two main components of normalization are gradual increases in the federal funds rate toward neutral and gradual reductions in securities held on the central bank’s balance sheet.
Even with the benefit of an unusually prolonged period of favorable economic conditions, progress toward normalization has been slow and fleeting.
Expect Continually Low Interest Rates, Ongoing Stimulus
Full normalization – a return to pre-2008 monetary conditions as is the Fed’s stated goal, may never come.
It may not be possible to withdraw much more stimulus from mortgage and equity markets without collapsing them. It may not be possible to unload U.S. Treasury securities without causing a funding crisis for the government.
The governmental, corporate, and consumer sectors of the economy are ALL addicted to debt growth fostered by artificially low interest rates.
The Fed wants to wean everyone off easy money. The problem is, everyone is behaving as if easy money will never end.
Central bankers can’t act normally when private and public debt levels are abnormally high and projected to go much higher. The Fed wants to keep hiking rates to discourage, in former Fed chairman Alan Greenspan’s words, “irrational exuberance.”
But going one hike too far or too fast risks triggering a deleveraging event that brings about another financial crisis.
At its most recent policy meeting, the Federal Open Market Committee (FOMC) vowed to be “patient.” Minutes released last Wednesday show the Fed citing “a variety of considerations that supported a patient approach to monetary policy at this juncture as an appropriate step in managing various risks and uncertainties in the outlook.”
Cutting through the dense Fedspeak, policymakers essentially said they put their rate hiking campaign on hold due to risks in the economy.
Left unstated were possible policy concessions made to Wall Street and Washington.
Perhaps Fed officials got spooked by the sharp stock market correction in late December. Perhaps they succumbed to political pressure from the Trump administration’s “Plunge Protection Team.”
Continue reading: https://goo.gl/7JaqAY
February 26 2019
Supply Problems Worsen in Minted Silver
Sales of the Silver American Eagles are off to stronger start this year, and the U.S. Mint has once again been caught flat-footed. Dealers received the following statement from the Mint last Thursday:
This is to inform you that we have temporarily sold out of our inventories of 2019-dated American Eagle Silver Bullion Coins. In addition, all remaining 2018-dated inventories have been sold too.
The West Point Mint is busy producing additional 2019-dated American Eagle Silver Bullion Coins. We hope to be able to re-launch the 2019-dated coins in a few weeks.
Premiums for the coins moved higher immediately following the announcement, and they could move higher still if demand remains strong.
Total 2018 sales of silver Eagles slowed to the lowest level since 2007. The Mint wound up with some excess of 2018 dated coins and actually required dealers to take a chunk of ‘18s with each new order placed for 2019 coins.
More than six million 2019 coins have been sold so far, two million more than in the same period last year. This is in addition to excess 2018 coins having been cleaned out since January 1st.
The demand was not fully anticipated, and sales are now suspended for a few weeks while the poorly managed U.S. Mint plays catch up. When sales resume, dealers are expected to be on “allocation” – or limited as to the quantity of coins they may purchase.
This leaves the silver bullion market a bit vulnerable to a supply shock right now. The U.S. Mint suspension is not the only bottleneck currently.
Check out the full article here: https://goo.gl/2NxrYp
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