For reasons of time (I’m a little short of it right now), I’m going to attempt to make my comments brief this morning.
I’m sure that at least some of you (probably more like ALL OF YOU) have hoped that once Trump was elected President, my letters would take on a somewhat more positive tone. Honestly, I hope they might as well, but if so, it won’t be because I think we’ve dodged a bullet with a possible upcoming crisis (financial or otherwise).
It’s been my opinion for quite some time that we are (come hell or high water), overdo for a serious crisis. Needless to say, this belief is not unique to my personal genetic code. The following quote came from the mouth of none other than retired Federal Reserve Chairman, Allan Greenspan, during an interview with Bloomberg. “This is the worst period, I recall since I’ve been in public service. There’s nothing like it, including the crisis – remember October 19th, 1987, when the Dow went down by a record amount 23 percent? That I thought was the bottom of all potential problems. This has a corrosive effect that will not go away. I’d love to find something positive to say…..I don’t know how it’s going to resolve, but there’s going to be a crisis.”
Now the big challenge of course is, PREDICTING WHEN ! An anonymous Danish politician was the first known individual to have verbally acknowledged the difficulty of predicting when he said “It’s difficult to make predictions, especially about the future”.
Timing predictions, particularly regarding manners of finance and the markets have taken on significant increased difficulty in the last couple of decades due to “financial innovations” such as: HFT (high frequency trading), algorithms, massive quantities of financial derivatives, insane leveraging, and of course governments manipulating all the markets. It therefore goes without saying that attempting to “couple” a price or event forecast with a specific date has become little more than idle speculation.
That having been said, I think we all know that with each passing day we are one day closer to a major, MAJOR crisis.
Believing that, I will close my thoughts by saying that failing to prepare is a VERY WEAK OPTION.
I’ll close by acknowledging that this email subject title came from the article copied just below the linked articles, titled Sharia Standard May See Gold Surge In Value.
It was a whirlwind weekend that we just had as Donald Trump was officially installed as the 45th. President of the United States. Of course, some of that whirlwind was the aftermath and the destruction of property that came along with it. I saw a post that said “Saying that Trump will destroy America- as they destroy America!”. This post also included photos of broken windows, fires, and tons of debris left behind by these environmentally conscious folks.
I guess the real story here is that there is a lot of work to do to get this country on the same page and moving forward.
There have been a lot of comparisons of Donald Trump to Ronald Reagan. I have mentioned this in the past and have remarked that the economic differences are so stark that any comparison here is meaningless. All of the economic tailwinds that Reagan had (low debt to GDP, etc.) are really the exact opposite of what is being inherited by Mr. Trump.
Years and years of kicking the can down the road by both Republicans and Democrats have led us here to the edge of a cliff. Many hypothesize that our actual debts are north of $250 trillion if unfunded liabilities are added in. Quite a difference from 1980 when there was less than a trillion in government debt and there were no questions about the solvency of Social Security, etc..
The only real comparison that I can make is that both Mr. Reagan and Mr. Trump are making their case directly to the public and are bypassing some of the normal channels that might filter the message. Of course, people seem to only listen if their circumstances are continuing to improve.
Personally, I believe that a better comparison is Herbert Hoover, who is routinely mentioned as one of the worst American Presidents of all time. I don’t believe that this is any fault of his but just that he was the one unlucky enough to be in charge when that bubble burst. In my opinion, he inherited a mess similar to what Mr. Trump is inheriting now. Some of the comparisons are interesting.
Mr. Hoover, before becoming President in 1929, according to Whitehouse.gov “Achieved international success as a mining engineer and worldwide gratitude as “The Great Humanitarian” who fed war-torn Europe during and after WW1″. “After capably serving as Secretary of Commerce under President’s Harding and Coolidge, Hoover became the Republican Presidential nominee in 1928. He said then: “We in America today are nearer to the final triumph over poverty than ever before in the history of any land”. His election seemed to ensure prosperity. Yet, within months the stock market crashed and the nation spiraled downward into depression. After the crash Hoover announced that while he would keep the Federal Budget balanced he would cut taxes and expand public works spending”.
Herbert Hoover was NOT a politician but a businessman.
I have said many times that we have been in a Depression since around the year 2000 in my opinion and it is extremely obvious that we have been in this condition at least since 2008. The economy has been on life support throughout this period of time with obscenely low interest rates and money “printing” and asset buying that is creating artificial demand where a deep lack of demand actually exists.
I believe that ALL ASSETS are mispriced and that a day of reckoning is getting nearer by the moment. It is likely, as this avalanche starts, the main information used to gauge if the President is doing a “good job”, namely, stock market indexes and affordability of things will undermine anything that our new President might do.f
As a matter of fact, this fellow may be one of the smartest men that ever held this high office. I’m not saying he is but I do believe he is the only billionaire ever to hold the office- you don’t get to that level without some serious business savvy.
What I am saying, however, is that no matter who is in the White House when this house of cards falls over that person will be blamed for it even if he had nothing to do with it.
It is likely that many things will be tried by both the government and Federal Reserve but the economic headwinds will likely prove to be too much to overcome.
I read a couple of interesting articles today that mentioned the same facts. In one in Barrons, Felix Zulauf of Zulauf Consulting expressed his opinion that the market averages would continue higher short-term and experience a major correction later in the year. Also, Jeffrey Gundlach of Double Line Capital (dubbed the new “bond king”) made mention that he expects the same. In both cases, they thought that if the economy appears to pick up rising interest rates would put the kibosh on the market rally and usher in a major correction.
Of course, no one has a crystal ball but this appears highly likely as the stock markets appear to need one more push higher to get everyone in before the real correction takes place.
My opinion is that anyone buying at these levels of valuation (both stocks and most bonds) could experience trouble unless they are planning to hold short-term and sell. Even then, it appears to me that you are expecting someone to pay an even higher price than you are paying regardless of any traditional valuation methods.
Anyone who might say – it’s different this time- it always is- isn’t it? 1929, 1987, 2000, 2007-2008, now! Too bad the outcomes always seem to rhyme!
There are many great investment ideas out there right now but as good as they may appear because of a good story or a great earnings report it is likely that many of the best companies in the world are wildly overpriced. I get reminded of this all of the time as I am looking for new opportunities and am constantly being thwarted by unrealistically high valuations of almost all traditional assets.
I believe that our time is coming when we will be able to acquire many of these assets at prices that people would not believe possible at this time. We just have to remain patient and have the guts to move when the time is right. My opinion is that time is NOT right now!
Of course, there are a few things that we like right now like cash held outside of the US dollar, metals, and other assets that have already been pretty bloodied.
I believe a major opportunity will present itself in the near future. Be Prepared!
Mike Savage, ChFC Financial Advisor
2642 Route 940 Pocono Summit, Pa 18346
Raymond James Financial Services, Inc. Member FINRA/SIPC
https://www.youtube.com/watch?v=m3yesvvYEvs There seems to be a lot of irritation today caused by President Trump’s stand against illegal immigration and illegal immigrants, mostly amongst the liberal voting sector. I thought this 94 second video clip featuring Bill Clinton’s 1995 State of the Union immigration comments might lend a little perspective for those thinking that President Trump was on a self created witch hunt. Hmmmm, think maybe this really is a problem, or maybe Democratic President Clinton was evil and full of sh-t as well!!!
http://thecrux.com/the-student-loan-crisis-is-even-worse-than-we-knew/ At more than $1.4 trillion in loans outstanding, student loan debt is nearly four times bigger than all the debts of Greece. And it’s still growing at nearly 20% a year… multiple times faster than the official rate of inflation……At more than 1,000 schools – representing about one-quarter of all U.S. colleges and trade schools – more than half of students have already defaulted or failed to pay even one dollar toward these loans within seven years of leaving school…….Across all schools, the data show as many as 40% of borrowers haven’t paid a single dollar toward these loans within seven years. Looking at just the past three years, this number jumps to more than half – 54% – suggesting this problem is only getting worse, not better. In other words, according to the government’s own data, at least 40% of this debt – representing more than $500 BILLION that has been packaged up, “securitized,” and sold to investors as “money good” – will likely never be paid back at all. What could possibly go wrong?
http://kingworldnews.com/paul-craig-roberts-terrifying-warning-timely-message/ Whether Trump and his advisors are aware of this or not, Trump has on his third day dealt a lethal blow to a power lusted after by US global corporations……Clearly, the pathetic remnant of the American left has more hate for those who stand up for the working class than they have for those oppressing the working class and those fomenting war. Why did the women so quick to march against Trump not march against the Clinton, Bush/Cheney, and Obama regimes for killing, maiming, orphaning, widowing, and dislocating millions of peoples in Afghanistan, Iraq, Somalia, Pakistan, Yemen, Libya, and Syria? That we see the left aligned with the ruling elites against Trump is proof that the left has abandoned the working class.
http://www.zerohedge.com/news/2017-01-23/congressman-introduces-bill-withdraw-us-united-nations A new bill has been introduced which would allow the United States to withdraw from the United Nations, and is now beginning to turns heads. Representative Mike Rogers from Alabama introduced H.R. 193 American Sovereignty Act of 2017 in early January but is just now getting media exposure.
Regardless of one’s beliefs or opinions on the UN being a front for a new world order, this bill is a direct and bold move against the elite’s plans. For any nation to reclaim true sovereignty from the United Nations is setting a powerful example for the rest of the world. It sends a message that a country does not need a global governing body, but instead can run itself without global oversight. Essentially, if the U.S. reclaimed sovereignty from the United Nations, it would be the equivalent of what Britain did by reclaiming it’s sovereignty from the European Union…times 10.
https://srsroccoreport.com/historical-official-data-reveals-golds-value-should-be-20-times-higher/ According to historical official records, the price of gold should be 20 times higher than the current market price. While many precious metals investors have heard about the revaluation of gold to back the outstanding fiat currency, my analysis focuses on monetary gold stocks versus global GDP (Gross Domestic Product). Which means, the current gold price of $1,200 multiplied by 20 = $24,000 an ounce. Thus, the gold price would be $24,000 an ounce today if it were to equal the same ratio to global GDP in 1929. While it is true that the Western Central Banks publicly regard gold as a “Barbarous Relic”, privately they quite likely believe the opposite.
Sharia Standard May See Gold Surge
By David RussellJanuary 24, 2017
Sharia Standard May See Gold Surge In Value
“The introduction of a Sharia standard for gold will not only be good for investors but also for gold producing countries and even individual mining operations”, according to The National in an article published this morning.
Gold bars in a gold shop in Saudi Arabia. Gold has long played a role in Muslim society as a store of wealth. Fahad Shadeed / Reuters
“The new Sharia gold standard is very important as it allows Islamic investors to access and gain exposure to physical gold in a safer and more efficient manner, “says Mark O’Byrne, the executive director at the bullion trader GoldCore in London.
“It will increase the diversity of available Sharia gold-compliant investment products and spark greater emphasis on the role of physical gold coins and bars.”
GoldCore research shows that if just 1 per cent of Islamic finance goes into gold, demand could increase by up to an enormous 1,000 tonnes a year. Even if demand comes in at half that it means the gold market will undergo a considerable shake-up.
Last month the Sharia Standard was approved as a collaboration between the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the Islamic standard-setting body, and The World Gold Council (WGC) in London.
“We launched the standard to enable greater access to gold for the Islamic investment community,” says Natalie Dempster, the managing director, central banks and public policy at the WGC. Currently, the WGC is talking to Islamic financiers and product developers as well as scholars over how to put the standard into practice.
Much as it is in the rest of the world, gold has long played a role in Muslim society as a store of wealth and as a means to facilitate trade.
Above are excerpts from ‘Gold set to surge on Sharia standard’ which was published in The National today. The National is a government-owned English-language daily newspaper published in Abu Dhabi, United Arab Emirates (UAE). It can be read in full here
There will be a new market that is 1.4 billion people strong. And they have a lust for gold and a long-standing history with gold. Currently, most of the gold the Arabs buy is in the form of jewelry. Dubai is one of the largest gold markets in the world even before this Sharia change takes place.
Casey also says there are two other events that will make this a perfect storm. China has taken control of pricing gold.
The Casey folks say, “China is the world’s top importer, producer, and consumer of gold.
Earlier this year, China opened the Shanghai Gold Exchange. It’s a “shot across the bow” to the world that they want to dominate the global gold market.
If estimates are right, China’s gold reserves are almost double that of every other major country combined.
And obviously they think they should set the price. Not banks in the West.
China wants a price set on actual physical gold. Not on paper contracts, like futures.
This is truly game changing. For the last 40 years, the Libor and COMEX exchanges priced gold based on futures contracts.
Right now, there are 252 ounces of gold claims per ounce of deliverable gold.
China will change that when it becomes the center of gold trading.
And every single trade on the Shanghai Exchange will be backed by the equivalent amount of physical gold.
In combination with the new Islamic law, gold has a legitimate shot at rising to levels we haven’t seen in our lifetime. In fact, the Chinese are quietly opening yuan “clearing banks” in Middle Eastern countries…including a new yuan bank in Dubai-the financial hub of the Middle East.
But there’s another catalyst that ties everything together…”
The third event is “Peak Gold” has arrived.
“Right now in the gold sector, the production of gold is rapidly shrinking…just as demand is soaring.
Experts are saying “peak gold” is here. Last year, Goldman Sachs warned that there’s “only 20 years of known mineable gold reserves.”
Blackrock, the world’s largest asset manager, agrees we’ve reached “peak gold.” It predicts gold production will decline by 20% every year moving forward, even with higher prices.”
The folks at Casey Research expect gold to easily hit $5,000.oz and it could happen very quickly.
The Ice-Nine Lockdown
[Ed. Note: Jim Rickards latest New York Times best seller, The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis (claim your free copy here) transcends politics and media to prepare you for the next crisis in the ice-nine lockdown.]
I am often asked, “Does Ice-Nine put gold at risk of lockdown or confiscation?”
First, Ice-Nine is a phrase borrowed from author, Kurt Vonnegut. Vonnegut wrote a book in the early 1960s called Cat’s Cradle, and it’s a doomsday scenario.
In Cat’s Cradle, a doomsday machine is created. Scientists discovered a molecule called Ice-Nine, very similar to water (H₂O) with two differences.
Number one, it has a melting point of 114.4°F. Which means it’s frozen at room temperature. The other characteristic is if a molecule of Ice-Nine comes in contact with a molecule of water, the water turns to Ice-Nine. In other words, it turns to a form of ice.
The plot of the book was that there was only a small amount of this Ice-Nine and the scientist gave it to his three children in vials. As long as the vials were sealed, it was all good. If you open the vial and pour the Ice-Nine into a stream, the stream would freeze, then the lake would freeze, a river would freeze, a ocean would freeze, the entire plant would freeze. We would be in a new ice age and life on Earth would be wiped out.
It’s a doomsday machine.
I took that as a metaphor to explain what’s going to happen in the financial system and the next financial crisis. This is really what my book The Road to Ruin is about.
(I describe all the critical details in The Road to Ruin. Go here now to get your copy for free, instead of paying the full $23).
Physical gold and silver are the answer to Ice-Nine. I don’t think they’re in jeopardy in an Ice-Nine scenario. I think that gold and silver are one of the ways to survive Ice-Nine.
It the crisis of 1998, which I was very involved in negotiating a solution, prior to the crisis of 1998. What we saw in 1998 was Wall Street get together and bail out the hedge fund Long-Term Capital Management. Then in 2008, the central banks got together and bailed out Wall Street. In the next crisis, 2018, maybe sooner, maybe tomorrow, who’s going to bail out the central banks?
Each bailout gets bigger than the one before. Each crisis gets bigger than the one before. We are now at the point where the ability of central banks to reliquify the system is in doubt because they’re heavily stretched. The central bank balance sheets are extremely bloated.
Central banks have printed so much money already, it’s not obvious that they can do it again from the current levels without destroying confidence in the dollar, and all major currencies.
The question is, where will the liquidity come from in the next financial crisis if it can’t come from the central banks?
The answer is the IMF. The International Monetary Fund has the only clean balance sheet out of the major financial institutions. It can print money. They call it the SDR, the Special Drawing Rights. I call new world money.
The IMF can flood the market, and the world with trillions of SDRs equivalent to more than trillions of dollars which is exactly how they’ll do it. There is a problem with this model at the IMF though. It’s got a 24-member executive committee representing 24 nations around the world, or groups of nations. Every five years they change the voting rights.
It so happens that 2017 is one of those five-year reviews where they’re going to increase the voting rights of Brazil, Russia, India, China and South Africa (BRICS). The so-called BRICS are going to get more votes and potential veto power within the IMF model.
When it comes time for the IMF to issue world money (SDRs) to reliquify the world, there’s going to be a negotiation period. It will to take months to complete. During the last crisis this took 11 months. That was when the crisis hit in September, 2008 we saw Lehman Brothers hit a crisis, the IMF began to issue SDRs in August 2009.
Even though they react on a case basis, it’s going to take, an estimated 3 or 4 months at least to get SDRs issued. In that interim period between the crisis and the time the IMF can react, central banks will be paralyzed. They’re likely going to lock down the system.
When I say lock down, they’ll start with money market funds. I can’t think of a greater misnomer than the money market funds. People think that money market funds are money. They’re not money; they’re mutual funds regulated by the SEC. People think they can just call up their broker, sell to the money market fund and the money’s in my bank the next day.
That will not be true in this crisis because everyone will be doing the same thing. That is what happened in 2008 when Ben Bernanke and Hank Paulson went to the White House and said to the President that the system’s melting down and he must act.
That was such a shock then, that when it happens again they’re not going to give you your money. They’re going to lock it down. The problem is, and this is where the Ice-Nine metaphor comes in, is that when it is spreading you can’t just lock down part of the system.
If you lock down money market funds, people are just going to take their money out of the banks. Then you’re going to have to close the banks. Then people are going to sell their stocks, then you’re going to have to close the stock market. Every time you shut one path to liquidity, people are going to turn to another path.
The metaphor of Ice-Nine is that it spreads from molecule to molecule, institution to institution, requiring a freeze on the entire system.
It happened in part in 1914, 1931, 1933 and to gold in 1971. There’s no precedent for a total freeze but we’re getting closer to that point.
The question is, how do you protect yourself against that? There’s only so much you can do.
I don’t recommend running down and pulling all your money out of the bank. I would not have more than the insured amount, which in the U.S. is $250,000. You can spread it between your selected banks so that each is backed and insured up to the limit.
The thing about gold and silver is that it needs to be in physical form, in safe storage, and a non-bank. Putting it in a safety deposit box in a bank is troublesome because by the time you want it the most, that will be when the banks are going to be closed.
That’s Ice-Nine. In the world described, the dollar price of gold will be approach the $10,000-level if not much higher. Don’t wait on gold, because when all of this begins to play out, you’re not going to be able to get gold.
Ice-Nine is a freeze of the financial system, it’s something that’s happened before, it’ll happen again in the next crisis. Physical gold and silver is the answer to Ice-Nine, and you should get it while you still can.
for The Daily Reckoning
It may serve as the perfect case study for the rest of the world.
January 30, 2017
Most of the world is in an uproar right now over the travel ban that Donald Trump hastily imposed late last week on citizens of seven predominantly Muslim countries.
But there was another ban that was quietly proposed last week, and this one has far wider implications: a ban on cash.
The European Union’s primary executive authority, known as the European Commission, issued a “Road Map” last week to initiate continent-wide legislation against cash.
There are already a number of anti-cash legislative measures that have been passed in individual European member states.
In France, for example, it’s illegal to make purchases of more than 1,000 euros in cash.
And any cash deposit or withdrawal to/from a French bank account exceeding 10,000 euros within a single month must be reported to the authorities.
Italy banned cash payments above 1,000 euros back in 2011; Spain has banned cash payments in excess of 2,500 euros.
And the European Central Bank announced last year that it would stop production of 500-euro notes, which will eventually phase them out altogether.
But apparently these disparate rules don’t go far enough.
According to the Commission, the presence of cash controls in some EU countries, coupled with the lack of cash controls in other EU countries, creates loopholes for criminals and terrorists.
So that’s why the European Commission is now working to standardize a ban on cash, or at least implement severe restrictions and reporting, across the entire EU.
The Commission’s roadmap indicates that forthcoming legislation, likely to be enacted next year.
This is happening. And it may serve as the perfect case study for the rest of the world.
A growing bandwagon of academics and policy makers in other countries, including the United States, UK, Australia, etc. has been calling for prohibitions against cash.
It’s always the same song: cash is a tool for criminals and terrorists.
Harvard economist Ken Rogoff is a leading voice in the War on Cash; his new book The Curse of Cash claims that physical currency makes the world less safe.
Rogoff further states “all that cash” is being used for “tax evasion, corruption, terrorism, the drug trade, human trafficking. . .”
Wow. Sounds pretty grim.
Apparently pulling out a $5 bill to tip your valet makes you a member of ISIS now.
Of course, this is total nonsense.
A recent Gallup poll from last year shows that a healthy 24% of Americans still use cash to make all or most of their purchases, compared to the other options like debit cards, credit cards, checks, bank transfers, PayPal, etc.
And the Federal Reserve Bank of San Francisco released a ton of data late last year showing that:
– 52% of grocery purchases, along with personal care products, are made in cash
– 62% of purchases up to $10 are made in cash
– But even at much higher amounts over $100, nearly 1 in 5 purchases are still made using physical cash
This doesn’t sound life nefarious criminal activity to me.
It seems that perfectly normal, law-abiding citizens still use cash on a regular basis.
But that doesn’t seem to matter.
A bunch of university professors who have probably never been within 1,000 miles of ISIS think that a ban on cash would make us all safer from terrorists.
You probably recall the horrible Christmas attack in Berlin last month in which a Tunisian man drove a truck through a crowded pedestrian mall, killing 12 people.
Well, the attacker was found with 1,000 euros in cash.
The logic, therefore, is to ban cash.
I’m sure he was also found wearing pants. Perhaps we should ban those too.
This idea that criminals and terrorists only deal in bricks of cash is a pathetic fantasy regurgitated by the serially uninformed.
I learned this first hand, years ago, when I was an intelligence officer in the Middle East: criminals and terrorists don’t need to rely on cash.
The 9/11 attackers spent months living in the United States, and they routinely used bank accounts, credit cards, and traveler’s checks to finance themselves.
And both criminal organizations and terrorist networks have access to a multitude of funding options from legitimate businesses and charities, along with access to a highly developed internal system of credit.
A cash ban wouldn’t have prevented 9/11, nor would it have prevented the Berlin Christmas attack.
What cash controls do affect, however, are the financial options of law-abiding people.
These policymakers and academics acknowledge that banning cash would reduce consumers’ financial privacy. And that’s true.
But they’re totally missing the point. Cash isn’t about privacy.
It’s one of the only remaining options in a financial system that has gone totally crazy.
Especially in Europe, where interest rates are negative and many banks are on the verge of collapse, cash is a protective shelter in a storm of chaos.
Think about it: every time you make a deposit at your bank, that savings no longer belongs to you. It’s now the bank’s money. It’s their asset, not yours.
You become an unsecured creditor of the bank with nothing more than a claim on their balance sheet, beholden to all the stupidity and shenanigans that they have a history of perpetrating.
Banks never miss an opportunity to prove to the rest of the world that they do not deserve the trust that we place in them.
And for now, anyone who wishes to divorce themselves from these consequences can simply withdraw a portion of their savings and hold cash.
Cash means there is no middleman standing between you and your savings.
Banning it, for any reason, destroys this option and subjects every consumer to the whims of a financial system that is stacked against us.