Gold & Silver: Prudent Investing in Times of Change

Gold & Silver: Prudent Investing in Times of Change

Dear Reader

A family friend lives in a beautiful three-sided renovated barn. It sits in an idyllic Devon location, around a small square courtyard, each wall facing the courtyard built with copious glass. In the evening's you can sit in the kitchen with the parents, while catching glimpses of the children playing in their family room the other side of the courtyard, lit by the glow of winter lights.  It's stunning.  
 
But to get to this place, they had the strength of character to weather the unknown. Living in a caravan for 18 months, working hard to save, then building a room at a time.  Freedom from others doesn't come easy. How many times were they told they were mad? I'm not sure.  How many times did they allow doubt at the risk they had undertaken to creep in. I wouldn't dream of supposing.
 
One section of the barn is still to be renovated. They live contained in the other three sections, in one of the most beautiful homes I have had the pleasure of visiting.  But they are a normal hard-working middle class family. Working hard, pulling together, sacrificing certain comforts for a few seasons, seeing the potential in a barn which initially looked like it had the option of either crumbling to the floor or rising from the dust.
 
Great Britain is moving house.  We've moved out (electorally at least) and we are now renting for a while. Things are in boxes. We haven't moved into and started to build our new space yet. 
 
Delay is unnerving, depending on our characters, we may find procrastinating irritating.  No one expects moving house to be smooth sailing. In fact, no one even expects it to be.  That realistic expectation - in itself - makes the move less stressful and more realistic.
 
There has been a high level of "headless chickenism" since June 23rd, led and instigated by the liberal media. 
 
 
What is logically certain is that the global economy has been in serious trouble since the 2008 economic crash. As we now know, none of the core issues were solved. Quantitative easing compounded the height of the next fall.  All these monetary issues pre-date the Brexit, by a number of years.  Yet, Brexit will be blamed. 
 
One cannot complain that the barn renovation is going slowly if one is mocking the builders from the side-lines. That demeaning strategy is as old as Sennacherib and ancient Assyria. Sabotaging the group effort isn't a reflection of the group effort, just a reflection of those doing the sabotaging.  Richard Branson has been a prime culprit of this strategy this week. It's great that we as individuals can choose with whom we fly!
 
I laughed when I read last week that Obama, reported on the BBC, that "the UK vote to leave the EU raises "longer-term concerns about global growth".  I laughed because it's simply not true.  The greatest risk to the global economy is the unprecedented debt of his own country, which he has helped inflict with unprecedented spending. This economic house of cards is only threatened by the instability of the eurozone, or arguably China, to bring down the global economy
 
Obama is categorically the biggest spender in American history, as Forbes and The Wall Street Journal kindly investigated as far back as 2012:
 
"Peggy Noonan aptly summarized in last weekend’s Wall Street Journal the take away by the still holding majority of Americans living in the real world: 

“There is, now, a house-of-cards feel about this administration.  It became apparent some weeks ago when the President talked on the stump – where else? – about an essay by a fellow who said spending growth [under Obama] is actually lower than that of previous Presidents.  This was startling to a lot of people, who looked into it and found the man had left out most spending from 2009, the first year of Mr. Obama’s Presidency.  People sneered: The President was deliberately using a misleading argument to paint a false picture!  But you know, why would he go out there waiving an article that could immediately be debunked?  Maybe because he thought it was true.  That’s more alarming, isn’t it, the idea that he knows so little about the effects of his own economic program that he thinks he really is a low spender.”

What this shows most importantly is that the recognition is starting to break through to the general public regarding the President’s rhetorical strategy that I’ve have been calling Calculated Deception.  The latter is deliberately using a misleading argument to paint a false picture.  That has been a central Obama practice not only throughout his entire presidency, but also as the foundation of his 2008 campaign strategy, and actually throughout his whole career 

Rest assured, Ms. Noonan, that the President is not as nuts as he may seem at times.  He knows very well that he is not a careful spender.  His whole mission is to transform the U.S. not into a Big Government country, but a Huge Government country, because only a country run by a Huge Government can be satisfactorily controlled by superior, all wise and beneficent individuals like himself."

And isn't this the premise of the EU. "We know better than you."

I also don't understand what some of the fuss was about yesterday, after Mark Carney (Governor of the Bank of England) said the words "Don't over borrow; consider where interest rates could go over the lifetime of your mortgage." That sounds like my Dad and my late Grandpa. Isn't that complete common sense? If interest rates are at historic lows, and may even dip slightly lower to 0.25% but the average interest rate is nearer 5%, isn't that just an accurately prudent and normal statement to make?  I was actually quite pleased a public figure in the British economy (he's actually Canadian but none-the-less) is speaking very Britishly; pragmatic, honest, measured. It is far more trustworthy than the delusional reassurances of an over-inflated market, propped up on funny-money. Bubbles always burst.  Monetary fantasies always end. Debt always has to be repaid or paid for in other more painful scenarios.

"Never give the bank your money through interest," Gramps used to say, "save and then buy, not the other way around."  Years ahead of his time. But mortgages are one loan hard to avoid. And so this is what Mark Carney said yesterday:

"Banks will be there if you do want to take out a mortgage; if it is a viable business opportunity the [financial] system should be there,” Mark Carney promised home buyers and business owners yesterday." (The Telegraph, 6th June 2016) Makes complete sense and sounds a lot like how banks worked when I was young. If you had a viable business opportunity, you were lent money. If your plan wasn't viable you weren't. NOT applying this principle to the housing market was what caused the 2008 sub-prime mortgage crash in the States, which then infected the whole global economy.

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And how does Gold (and Silver) fair in all of this uncertainty?  Physical Gold and Silver, as many of your readers know, does exceptionally well in times of economic change and/or uncertainty. We are in one of those periods of change.  Underneath this change there are also economic factors that have weakened the global economy for a number of years, such as quantitative easing, NIRP and ZIRP being implemented within the eurozone and Japan, unprecedented debt to GDP ratios around the globe and the natural 40-45 year cycle of fiat currencies.
 
"Gold prices may hit all-time highs in the next 18 months amid low to negative global bond yields, said a fund manager on Monday, joining a chorus of bullish calls on the safe haven commodity. Despite being a non-interest bearing asset with holding costs, gold was attractive in the current climate where there was little trust in the establishment and its policies as demonstrated by the June 23 referendum in the U.K. when voters chose to leave the European Union, said Swiss Asia Capital's Singapore managing director and chief investment officer, Juerg Kiener. The continued cratering of bond yields has also blunted the advantage fixed income instruments held over their shiny counterpart.

"This fall-off in trust is resulting in people looking at different ways to invest, particularly in an environment when the government controls the whole fixed income market, which is negative. At least (in gold), you don't have negative yields, there is no new supply...and falling production," he told CNBC's "Squawk Box." (CNBC, 3rd July 2016)

For a synopsis of what a "Bond" actually is, click here for a great guide. But, to summarise, a bond is essentially a loan: "Bonds are a form of debt. Bonds are loans, or IOUs, but you serve as the bank. You loan your money to a company, a city, the government – and they promise to pay you back in full, with regular interest payments. A city may sell bonds to raise money to build a bridge, while the federal government issues bonds to finance its spiraling debts."

I have a strong, strong feeling that Brexit will be blamed, maybe for years to come, by a certain few for the recession coming on the global economy. But the U.S. is in deep economic trouble, so are its bonds; so the majority of investors will know better. I would recommend keeping an eye out for bonds and their lack of finanical health over the coming weeks/months. This is because, when the stock market begins to look shaky and word gets out, investors tend to move into government bonds. When bonds then look shaky, investors move into precious metals.  With our domestic media focussing on national issues, I'm finding it refreshing to keep researching news from around the world; if nothing else to keep the "headless chickenism" in perspective: 

"The U.S. economic growth has not exactly been steamrolling the competition. And it’s been consistently underwhelming. Before the Great Recession, in 2006, the U.S. reported GDP growth of 2.7%. Those were the good old days. In 2007, GDP was 1.8%. In 2008 it was -0.3%; and in 2009 it was -2.8%. (Source: worldbank.org, last accessed September 22, 2015.) Fast forward to 2012 and the country’s GDP came in at 2.3%, 2.2% in 2013, and 2.4% in 2014. While second-quarter 2015 GDP expanded at a solid 3.7% annualized rate, the overall GDP of the country has not been stellar. Especially when you consider that we are the world’s largest economy.

China expects its GDP to grow at seven percent this year. Relative to the United States, that’s pretty extraordinary. But for China, it represents the worst performance in more than 20 years.

With the two largest economies in the world limping along, the rest of the major global economies cannot be doing any better. And they’re not. The eurozone isn’t out of the water by any stretch. Germany continues to plug ahead. But France, Italy, and Greece are economic millstones. This has left the entire continent on the brink of recession.

Japan’s economy shrank 1.6% in the second quarter and is a mess. It’s hard to decide if the country is in recovery mode or not. Over the last 14 quarters, Japan has posted seven uneven quarters of growth and seven quarters of contraction. (Source:wsj.com, last accessed September 22, 2015.) (All figures are taken from an article entitled "Seven Signs of a U.S. Economic Collapse in 2016", Profit Confidential, June 2016)

In conclusion, I'd quote from a ZeroHedge article I found on Monday, America's Independence Day:

"Last night was something else and a sign of the times for what will be standard fare for the precious metals over the months ahead.

After the briefest of dips, silver popped a dime and then began to steadily move up to take out $20 an ounce. Once that level was breached, all heck broke loose. Silver began a run higher rarely ever seen. Its price moved up and up and then began trading EXACTLY like gold did the evening following the Brexit vote, shooting up ten cents at a click. Just as gold soared to only pennies less than a gain of $100 an ounce at that time, silver rose $1.50 over its prior Comex close and blew through $21 to $21.13 in the process. 

Excitement would be an understatement. Gold was acting sluggish at the time, but then caught some fire, as silver finally did briefly following that gold post Brexit run, by rising to $1356. Both precious metals corrected, giving up most of their gains, but then began to move right back up again as the trading hours in London progressed. In a relative blink silver was back to $20.50 with gold back above $1350.

"Can’t tell the players without a scorecard," is an old sports expression we used as kids.

While watching the action last night in the silver price arena was exhilarating, it probably is no surprise to Café members in that it has all been laid out over the past two weeks. Now that what has been discussed is playing out almost as part of a script, it is time to really pound the table about what the silver price is in the process of doing, and that is a historic move towards $100 an ounce and probably at lightening speed. The lack of comprehension and enthusiasm by the general public of what is occurring is astounding." ("Silver Soars, Gold Roars", 6th June 2016, Zerohedge)

The facts and figures of this last week in Gold and Silver are quite interesting. Gold has risen £76.12 an ounce or 7.76%. But Silver has risen a breathtaking 15.70%. Because this is just £2.13 of its price per ounce this price move isn't quite as eye-catching as Gold's. But if you had put £1000 into Silver last week, it would have been a more profitable investment than putting £1000 into Gold.  Silver has moved up 38% in the last month to Gold's 23%.

Bleyer sell a wide range of beautiful 1oz Silver coins, which offer an affordable way into owning your own Silver, if you've never bought Physical before. Price per gram, our pre-owned silver Canadian Maples offer a stunning investment and we have 250 in stock as at the time of writing. Bleyer can also offer some very cheap Gold Maples on our Special Offers page.

There are about 500 times less Physical Gold ounces on the market than the paper certificates being traded each day. This means that when the prices move upwards as they are currently, getting hold of the coins you would like can become a matter of taking our place in the queue.  We are delighted to also currently have in stock 50 Silver American Eagles as well. 

I'll leave our readers with a thought. If this is how the price of Gold and Silver move upwards at the perception of a failing economic system, what will they do during an ACTUAL failing economic system?

Call one of the Bleyer Team now on 01769 618618 or browse and buy online at bleyer.co.uk.

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