“This Is A Good Entry Point On Gold” (21 July 2015, Jim Rickards, Author Of “The Death Of Money.”)
The purpose of this week’s blog is to encourage our readers to further explore this question. In the last week, there has been an explosion of online low level commentary, asking the same question and highlighting signs that the period of “Extend and Pretend” is entering a financial end game. Are we staring into the face of one of the largest Stock Market corrections in history?
Please note I am not a Stock Market expert. For the last six years I have researched the geopolitical and financial factors affecting the demand for Physical Gold and Silver, the last four of which I have written for Bleyer. Researching the Physical Gold and Silver market is essentially different from, but connected to, the fixed paper price of Gold and Silver certificates. What is clearly apparent are the number of voices, from within the Stock Market, which are saying, “A crash is coming, maybe as early as September/October 2015.”
The Chinese financial crash of this week itself is a massive symptom of global issues. The words “Chinese” and “Gold” hit the headlines, and so, predictably, the price of Physical Gold fell. But that was a misnomer. China were dumping paper, not Physical. If you are a Central Bank, or large scale investor and you want to hoard Physical Gold (and Silver), you will do two things:
- Lower the price of Physical any way you can – i.e.: dump paper certificates. This lowers the paper price. Then buy physical at that lower sale price. It’s an exchange of expensive paper for cheap physical.
- Keep the extent of your acquisition of Physical Gold quiet. Who wants to spook the market with increased demand? That might raise the price while you are buying it up, ahead of the crowd.
Well, behind the scenes and headlines, that is exactly what has been happening: “Shanghai Gold Exchange volume climbed to a record today as prices declined incentivizing value driven Chinese buyers as Chinese stocks crashed 7.4%. Volumes for bullion (99.99% purity) traded on SGE rise to a record 48.325m grams from 36.356m a day earlier, according to data compiled by Bloomberg. This exceeds the previous record of 45.717m on March 26.” (Gold Core) China are buying Physical Gold, not selling. But if you read the BBC take on this week’s China Stock Market, you’ll be lulled into the mantra that “Physical Gold poor, stocks good.” A BBC report completely ignored the Chinese government controls, which played heavily into this week’s semi-crash.
Please note that the figures from Gold Core preceded last week’s Chinese stock collapse. Yet, it has been known for many years that both China’s stock market and housing market are over-valued and in a bubble. Bubbles burst.
“The People’s Bank of China on Friday published figures on its gold reserves for the first time since 2009. Its official gold reserves stood at 53.3 million ounces, or 1,658 metric tons, in June. However this figure is far lower than many estimates and not everyone believes it. As mentioned above when you want to buy more physical gold, you want to keep the price low – and this announcement did just that.” Market Watch
Ken Ford, president of Warwick Valley Financial Advisors, said China has been pressing to be included in the International Monetary Fund’s Special Drawing Rights, or SDR, currency basket. “So they want to show that the have accumulated enough, but do not want to show their whole hand because it may spook the markets,” he said.
It isn’t hard to see why China would be interested in buying gold. The country has an almost-hard-to-comprehend $4 trillion sitting in its foreign currency reserves. Having all of those assets tied up in paper currencies has to be an uneasy feeling with central banks everywhere doing their very best to devalue those currencies.” (Daily Reckoning)
This is why so many commentators are now saying, a “Stock Market Crash is Coming.” I have been writing for years that all the real problems of the 2008 Financial Crash have not gone away. Quantitative Easing is a white-wash, that has just been painted over the cracks. The Euro is failing (see blogs on Greece for the most up-to-date information.) And the U.S. is bankrupt.
This is how one commentator, Jody Chudley, describes the U.S. Stock Market. (Chudley is a contributor to Real Wealth Trader and Outstanding Investments. Jody is a qualified accountant with a degree in Finance and has written for various websites and financial magazines with a focus on contrarian investment opportunities):
“Tiger Woods in his prime wasn’t close to being invincible. He was invincible. From the time Tiger Woods burst onto the golf scene by dominating the 1997 Masters until he won the 2008 U.S. Open on a broken leg, he played golf at a level that we may never see from anyone again. I had a front-row seat to that 2008 U.S. Open victory. I was underneath the grandstand, peering through legs trying to get a look at Tiger on Sunday as he nailed yet another epic clutch putt to force a playoff that he would ultimately win. The crowd reaction was so loud I thought that the grandstand was coming down on top of me. If you had told me on that Sunday that If you had told me on that Sunday that the 2008 U.S. Open would be the last major Tiger would win, I would have laughed at you. Now, with his game in complete disarray and a body that is constantly broken, I think that it probably was his last hurrah. Tiger Woods in 2008 reminds me of the U.S. dollar today…”
Which is why a Senior Commentator on Fox Business announced yesterday that, “If you don’t have your Gold, this looks like a good entry point.” (Fox Business Video, via GoldSilver.com, Mike Maloney)
More and more voices within the markets are saying, “We see signs and they’re not good.” We at Bleyer have been blogging about the reality vs. the illusion for the last four years, but here Profit Confidential, who have been giving stock market forecasts and financial economic analysis since 1986, summarize the staggering array of factors coming together this year:
“In 2015, investors will pay the price for the euphoria. Businesses and investors will also pay the price for their addiction to artificially low interest rates, especially as the markets transition away from QE. In November 2008, the Federal Reserve stepped in with its generous bond-buying program (QE) to help kick-start the economy after it slipped into a recession. Artificially lowering the short-term lending rate to nearly zero was supposed to make banks lend more money to businesses and people. The ultra-low-interest-rate environment has made it cheaper to borrow money—and is recognized as being the fuel that has propelled the stock market higher. The Federal Reserve has hinted it will start to wean investors off cheap money in 2015, when it begins to raise interest rates. Raising interest rates by just 50 basis points could have a serious, negative impact on the broader economy and, by extension, the U.S. stock market. Continued economic challenges in the Euro Zone and Asia will also have a detrimental affect on the U.S. stock market. Not to mention geopolitical tensions between Russia, Ukraine, and the entire Euro Zone; icy relations between the U.S. and Russia; growing issues between China and the U.S; and concerns arising between China and Japan. All of this, accompanied by high underemployment, stagnant wages, and high debt, will undercut consumer spending, crippling any chance for sustained economic growth.”
Mike Maloney predicts: “Sometime before the end of this decade a huge deflationary crash and then countries will print their way right into hyper-inflation.” So right now, while gold is under-valued, “this is where the opportunity comes. I believe in a currency crisis, there is going to be a wealth transfer.”
Further commentators to read or watch, particularly via YouTube during a lunch break are:
Max Keiser: He came up with the phrase, “Extend and pretend.” This is exactly what is happening in Greece right now, but also in the U.S. economy, Euro Zone and around the world. The shorter version of, “Kicking the can down the road.” At some point, this illusitory pack of financial cards has to collapse (see previous blog entitled “The Greek Default and Stocking up on Gold”, Peter Schiff, Mick Maloney and the financial actions of people like Warren Buffett. Buffett has been dumping U.S. stocks: “Despite the stock market’s record run and Washington’s assurances that the economy is getting better, some of America’s wealthiest billionaires aren’t convinced. In fact, their recent actions suggest some sort of market crash is on its way. Do they know something you don’t? Not really. The data is out there for everyone to see. Unfortunately, Wall Street is too busy ignoring the warning signs. The outlook for the stock market looks bleak. Buffett, Paulson, and Soros understand this. And the reality of the U.S. economy has led them to see there is a real good chance the U.S. markets could experience a crash or serious correction in 2015.” (John Whitefoot, 8th July 2015)
We strongly encourage our readers to look into the information and factors we are highlighting. Even Alan Greespan stated just a few months ago that, “Something Big is Coming.” (see our blog from April 2015)
In conclusion, one commentator notes that, “There have only been 54 weeks in history in which stocks have been more expensive than they are today — the 21 weeks preceding the market top in 2000 and the 33 weeks after that top before stocks continued their crash.” (Business Insider UK, 15 June 2015, from an article entitled “A Crash is Coming and it may be Terrific.“
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