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The Importance Of Gold In 2018 And Beyond - Sprott Money (12/02/2018)

If you’ve held physical gold for the past five years, you’ve likely been frustrated by its lack of price appreciation. Of course, physical gold always retains its value as sound money and wealth “insurance,” but while prices of paper assets have flourished since 2013, the dollar price of gold has languished. That, it seems, is about to change.

At long last, gold, silver and all commodities appear poised for a price breakout in 2018 (and beyond) as the lower dollar, price inflation and higher interest rates that so many expected in 2010-2011 finally come to pass. In addition to those factors, several gold-specific positives have recently appeared, and they demand your consideration:

Global gold demand is strong, with the only restraining component being western investment demand. Since western investors are typically trend followers, you’d expect low investment demand to appear at price lows. This is exactly what the recent Gold Demand Trends report from the World Gold Council showed when it was published earlier this month: https://www.gold.org/research/gold-demand-trends/g…

Traditional technical and cycle analysis also augurs for a price bottom and trend change. Respected market analyst Tom McClellan recently declared the current cycle to be upward for gold, with the next three years providing some unusually strong price gains. You can read more of his analysis here: https://www.themaven.net/mishtalk/economics/eight-…

In late 2017, many investors began to think of Bitcoin and other “crypto-currencies” as alternatives to gold. But with the recent sharp price correction and looming legislation to regulate (or even ban) crypto trading, the investment world is realizing that cryptos are not a replacement for a sound money strategy of holding precious metal. Instead, they are at best a supplement to a diverse portfolio.

…click on the above link to read the rest of the article…

-1,175 Points! We Just Witnessed The Largest One Day Stock Market Crash Ever

February 6, 2018

-1,175 Points! We Just Witnessed The Largest One Day Stock Market Crash Ever

The mainstream media seems so surprised that the stock market is crashing, but the truth is that it isn’t a surprise at all. In fact, this crash is way, way overdue. If the Dow Jones industrial average fell another 10,000 points, stock prices would still be overvalued. I have been warning and warning and warning that this would happen, because stock valuations always return to their long-term averages eventually. On Monday, the Dow was down a staggering 1,175 points, which was the largest single day decline that we have ever seen by a very wide margin. In fact, it shattered the old record by nearly 400 points.

Shortly after 3 PM, all hell broke loose on Wall Street. The Dow dropped by more than 800 points in just 10 minutes. At one point on Monday, the Dow was down nearly 1,600 points, but a brief rally cut those losses roughly in half. However, the rally did not last long and stock prices collapsed hard as the market closed. At this moment, the Dow is already down more than 2,200 points from the peak of the market, and we are not too far from officially entering “correction” territory.

Once stocks start falling, it can trigger a massive rush for the exits, and that is what happened on Monday. In particular, investors started to panic once the Dow broke through the 50-day moving average…

“As soon as we broke the 50-day moving average … we saw volatility spike,” said Jeff Kilburg, CEO of KKM Financial. “It’s just been downhill from there.”

Other waves of selling were triggered once the 25,000 and 24,000 barriers on the Dow were breached. In order to protect against losing too much money, many investors have stop losses set at psychologically-important levels. The following comes from MarketWatch…

…click on the above link to read the rest of the article…

-666 Points: We Just Witnessed The 6th Largest Single Day Stock Market Decline In U.S. History

February 5, 2018

-666 Points: We Just Witnessed The 6th Largest Single Day Stock Market Decline In U.S. History

On Friday, the Dow Jones Industrial Average fell 666 points (665.75 points to be precise), and many are pointing out that this was the 6th largest single day crash that we have ever seen. This decline happened on the 33rd day of the year, and it was the worst day for the stock market by far since President Trump entered the White House. I have been repeatedly warning that we are way overdue for a stock market crash, and many are concerned that we may be on the precipice of another great financial crisis. We shall see what happens on Monday, because that will set the tone for the rest of the week. If we see another huge decline early Monday morning, that could easily set off full-blown panic selling on Wall Street.

Rising interest rates appear to have been the trigger for the enormous market drop on Friday. The following comes from the New York Post…

“We all know that many bull markets have ended by the Federal Reserve as they raise the rates to the point of slowing the economy down perhaps too much,” Quincy Krosby, chief market strategist at Prudential Financial, told The Post.

“It’s come on quickly and it caught the market off guard,”Krosby said.

The Dow sell-off brought it below the 26,000 plateau — to 25,520.96 — the biggest points drop since Dec. 1, 2008.

It is quite rare for the market to drop this much in a single day. The largest single daily decline was a 777 point drop in 2008, and overall the Dow has fallen by more than 600 points less than 10 times throughout history…

The index posted a loss of nearly 666 points, its sixth-worst decline ever on a points basis.

…click on the above link to read the rest of the article…

The world in 2018 – Part Two

January 29, 2018

The world in 2018 – Part Two

‘The World in 2018’ is a world full of concerns about the future, yet a world that seems to be getting slightly more optimistic about its economic prospects. Ten years after the onset of the financial crisis, there are hopes that the global economy may have turned the corner and could finally be starting to pick up after years of slow growth. Are we seeing light at the end of the tunnel – or rather getting deeper into the fog?

To make sense of ‘The World in 2018’, what we need is maybe not so much to try guessing what might be on our way over the next 12 months than to develop a more acute consciousness and comprehension of the road we are travelling, of where it is leading us, and of where we currently stand on that path. This is certainly not an easy task: volatility, uncertainty, complexity and ambiguity (‘VUCA’) reign more supreme than ever, and, together with the ever-accelerating pace of global change, they make it increasingly difficult to understand the world’s trajectory and situation. Some key themes of the ‘global conversation’ can however give us a few clues about how these trajectory and situation tend to be perceived at this particular moment in time.

In early 2018, the ‘global conversation’ seems to denote a growing sense of concern about a whole series of ongoing events or developments and about their possible or likely ramifications into the future. These include America’s descent into a spiral of political insanity and retreat from global leadership, the multiple and often widening cracks in European unity, the erosion of the international liberal order and of liberal democracy in many places, as well as the rising or persisting geopolitical tensions in Asia, the Middle East or Eastern Europe.

…click on the above link to read the rest of the article…

Our Outlook For 2018 Interest Rates to Stay Low. The Consensus View is That Europe’s Banks Are Recovering But We Are Not So Sure.

January 16, 2018

OUR OUTLOOK FOR 2018 INTEREST RATES TO STAY LOW. THE CONSENSUS VIEW IS THAT EUROPE’S BANKS ARE RECOVERING BUT WE ARE NOT SO SURE.

The Interest Rate Outlook

Despite their shortcomings, European banks do not seem on the verge of collapse and few commentators, analysts or policymakers think that there will be any systemic wobbles in 2018. We do not necessarily disagree; with ECB interest rates still zero to negative and a raft of generous credit facilities open to banks on softish terms there is little doubt that monetary policy has helped and will continue to help Europe’s banks. We would venture to say that supporting the banking system has been the main objective of ECB monetary policy for a decade now. Keeping rates at around zero not only ensures that mark-to-market profits are maximised, but also enables banks whose depositors might have lost confidence and withdrawn funds to fill the gap by borrowing from central banks at no cost.

The opposite view is that banks are struggling to make money in this low interest rate environment and that profits will rise when rates increase. There are three difficulties with this counter. Firstly, the market for high quality lending business remains very competitive, not least because low rates have helped many banks stay in business that might otherwise have folded. Secondly a raft of fintech businesses have emerged seeking to pick off this ‘low hanging fruit’. Fintech businesses of course have low overheads. Many are targeting the SME market. Larger corporations with internal treasury functions have always been able to borrow at skinny margins. In the retail market the European Union’s new Payment Services Directive will make it easier for third parties, with the customer’s permission, to access secure information and initiate customer payments. This is expected to put pressure on large banks’ pricing power, pushing them closer to market average pricing.

…click on the above link to read the rest of the article…

2018 – Panic Cycle Year

January 15, 2018

2018 – Panic Cycle Year

QUESTION: Mr. Armsyrong; Thank you for an eye-opening conference. Can’t wait for this year. You said 2018 was a Panic Cycle Year and that it would be unlikely to create an outside reversal in the Dow, but we should expect wild times ahead. Is this panic cycle impacting many other markets as well?

ANSWER: Yes. This is the beginning of the Monetary Crisis Cycle that will go into 2021. That is probably where we will see the dollar rally break the world monetary system. This year, we should expect most markets to test BOTH sides of the game so pay attention to the Global Market Watch and the Reversals. This will tell us when the trends shift. There will be the classic fool who thinks that just because the euro finally exceed last year’s high or gold has rallied that this is it and that means the next four years will be the same.

Panic Cycles are notorious for trapping people on either the long or short side. You always have to trap the majority in order to create the slingshot to the upside of the waterfall to the downside. This is why they remain fools for they rush in based upon a few day’s price action. So far, everything is running its course. We are finally getting closer to the 125 threshold of resistance in the euro and the pound sterling has rallied with many starting to bet that BREXIT will not happen. Buying the Euro because interest rates are expected to rise with the ECB backing off of QE is just not being thought through rationally. QE has FAILED to stimulate the economy after nearly 10 years, and all it has done is subsidize EU member states. Rates will rise when they start to have to sell to real buyers. Then the sentiment will shift mid-year and we will test the opposite side.

…click on the above link to read the rest of the article…

2018: The Year of Living Dangerously

January 11, 2018

2018: The Year of Living Dangerously

I’m calling 2018 “The Year of Living Dangerously.”

That description might seem odd to lot of observers. Major U.S. stock indexes keep hitting new all-time highs. 2017 went down as the first calendar year in which the Dow Jones industrial average was up for all 12 months.

Even in strong bull market years there are usually one or two down months as stocks take a breather on the way higher. Not last year. There’s been no rest for the bull; it’s up, up and away.

Inflation is tame, even too tame for the Fed’s liking. The unemployment rate is at a 17-year low. U.S. growth was over 3% in the second and third quarters of 2017, much closer to long-term trend growth than the tepid 2% growth we’ve seen since the end of the last recession in June 2009.

The U.S. is not alone. For the first time since 2007, we’re seeing strong synchronized growth in the U.S., Europe, China, Japan (the “big four”) as well as other developed and emerging markets.

Growth breeds growth as consumers in one country create demand for goods and services provided by another. This is what economists mean by “self-sustaining” growth instead of force-fed growth from easy money and government spending.

Technology rules the day. The pace of innovation is unprecedented in world history. Our daily needs are being fulfilled better, faster and cheaper by the likes of Amazon, Google, Netflix and Apple. We can share the good news on Facebook.

Best of all, the U.S. Congress and White House got around to cutting our taxes in late December!

In short, all’s right with the world.

Or not.

…click on the above link to read the rest of the article…

The 2018 Oil Production Forecast Explained

January 11, 2018

The 2018 Oil Production Forecast Explained

In my recent post, Oil Price Scenario for 2018, my global supply forecast was seriously at odds with those presented by the International Energy Agency (IEA) and Rystad Energy, a respected Norwegian consulting firm. This post puts more flesh on my 2018 oil production view. The post could easily have been called “Oil Production Forecasting for Beginners” and explains things like decline rates and oilfield interventions in addition to presenting an overview of global production and rig count statistics. The second half of the post is effectively Oil Production Vital Statistics for December based on the Energy Matters Global Energy Graphed database.

The Rystad View

The Rystad view on US oil production and future oil price is very different to my own. They see US oil production up 2 Mbpd and a virtually static oil price from 2017 to 2018. Rystad have a vast data base of relevant data and so I would not bet against them being right. Its just that I cannot see any evidence for their forecast in the data I review. Today, Brent was above $69 / bbl and the Rystad view is mean $55 / bbl in 2018. So they are forecasting another oil price crash.

Figure 1 The Rystad Sep 2017 view of US production. This non-zero scaled chart should be compared with actual US production (Figure 2).

Natural Oil Field Production Declines

A good way to summarise oil field operating dynamics is to begin with a spanking new oil field, recently discovered with 10 production wells drilled on it. Once the platform is installed, production begins and because of the high reservoir pressure the oil gushes out at an aggregate rate of 100,000 bpd (barrels per day). In fact, it wants to gush so fast that the wells are chocked back to control the flow.

…click on the above link to read the rest of the article…

The world in 2018 – Part One

January 9, 2018

The world in 2018 – Part One

New Year predictions are getting more and more popular. In a world that is growing ever more complex and confusing, we seem to be increasingly eager to get some hints about what lies in the fog just ahead of us. Yet what we need is probably less to get some clues about what might be coming up next than to acquire a more acute consciousness and comprehension of the road we are travelling.

It’s that time of the year again. That time when you wish all the best to those around you. That time when you pick your resolutions and try to convince yourself that this is the year when you will finally keep them. That time also when all types of people tell you what to expect from the next twelve months. Astrologers of course, who have read in the stars when you can expect to get a pay rise, when you are due to meet the love of your life, or when you have the best chances of procreating. But also a growing array of journalists, analysts, futurists, specialists, experts, bloggers, and other luminaries who have figured out what this year has in store for you, your job, your industry, your investments, your country, and your world.

Of course, all New Year predictions are not equal. Some are more worthy of serious consideration than others. Some are based on sound data and thorough research while others are merely exercises in fantasy and imagination. Some claim to be ‘objective’ while others don’t even bother to pretend. More importantly, some carry far more weight than others as they have a much stronger influence on the thinking and actions of those people whose thinking and actions actually contribute to influence the course of events and the shape of reality.

…click on the above link to read the rest of the article…

Economists Think Inflation Will Rise Sharply in 2018: They’re Wrong

January 4, 2018

Economists Think Inflation Will Rise Sharply in 2018: They’re Wrong

Let’s investigate six reasons economists think inflation is about to pick in 2018, and why I think they are dreaming.

Reason Number One – Wage Hikes

Minimum wages rise in 18 states starting in 2018.

Former Fed Vice-Chairman Stanley Fischer told Bloomberg TV on October 4, “I still believe we will have higher inflation. The basic mechanism here is unemployment is declining all the time, wages will start going up at some stage.”

Wage Hike Rebuttal

The National Bureau of Economic Research paper: Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle, 2017 concludes there was a negative benefit to low wage workers as a result of wage hike.

The NBER Two-Page Synopsis finds:

A 9% reduction in hours worked at wages below $19/hour.
A reduction of over $100 million per year in total payroll for low-wage jobs, measured as total sum of increased wages received less wages lost due to employment reductions. Total payroll losses average about $125 per job per month.
The findings that total payroll for low-wage jobs declined rather than rose as a consequence of the 2016 minimum wage increase is at odds with most prior studies of minimum wage laws. These differences likely reflect methodological improvements made possible by Washington State’s exceptional individual-level data. When we replicate methods used in previous studies, we produce the same results as previously found.

This is an issue that’s debated over and over again, mostly with poor methodologies to come to the desired conclusion.

In contrast, the NBER had “exceptional individual-level data”.

Adding support the NBER’s conclusion, the Bank of Canada estimates Minimum Wage Hikes Could Cost Canada’s Economy 60,000 jobs by 2019.

By the way, and as discussed in Staggering Rent Increases in 2017, the median U.S. rental now requires 29% of median monthly income, according to Zillow. Between 1985 and 2000, renters spent about 25.8% of their income on housing.

Next, factor in student debt.

…click on the above link to read the rest of the article…

A Dangerous Year

January 3, 2018

A Dangerous Year

‘Tis the season for making predictions about the events lurking in wait for us all in the upcoming year, and I see no reason to demur from that common if risky habit. Those of my readers who’ve been following my blog since the days of The Archdruid Report know that my method in making these predictions is at once simple, effective, and highly unpopular. Put briefly, I pay attention to what happened when the same conditions occurred in previous historical epochs, and predict that the same consequences are going to follow.

It’s simple because I’ve got five thousand years of history to work with, and since human beings are much less original than they like to think, it’s a safe bet that the events taking place now have occurred many times before, with predictable consequences. It’s effective because, again, human beings are much less original than they like to think, and the more of them get involved in any given event, the more of the Brownian motion brought into being by individual cussedness gets canceled out. Sure, we have lots of shiny new technogimmickry now, but the brains, hearts, and less mentionable organs guiding said technogimmickry haven’t changed noticeably since the end of the last ice age. That’s why the American special forces wasting their time and your money in the northern Euphrates valley right now are enacting a failed strategy that was already old when the legions of the Babylonian Empire were doing the same thing in the same place three thousand-odd years ago.

It’s highly unpopular, finally, because an astonishing number of people in today’s industrial societies labor under the bizarre delusion that when we make the same old mistakes and get the same overfamiliar consequences, we’re actually doing brand new, innovative, unparalleled things that will inevitably succeed in ways nothing has ever succeeded before, and how dare anyone suggest that we might learn something from the lessons of history!

…click on the above link to read the rest of the article…

Forecast 2018 — What Could Go Wrong?

January 2, 2018

Forecast 2018 — What Could Go Wrong?

Markets

If you take your cues from Consensus Trance Central — the cable news networks, The New York Times, WashPost, and HuffPo — Trump is all that ails this foundering empire. Well, Trump andRussia, since the Golden Golem of Greatness is in league with Vladimir Putin to loot the world, or something like that.

Since I believe that the financial system is at the heart of today’s meta-question (What Could Go Wrong?), it would be perhaps more to the point to ask: what has held this matrix of rackets together so long? After all, rackets are characterized by pervasive lying and fraud, meaning their operations don’t add up. Things that don’t comport with reality are generally prone to failure so sooner or later they have to implode.

Financial markets have been surging supernaturally on “liquidity” since 2009 — and by “liquidity” I mean “money” (digital credit from thin air) supplied by the Federal Reserve, in rotation with the other sovereign central banks, BOE, ECB, BOJ, PBOC, from whence it pings ‘round the world, wherever the lure of the main chance sparkles. Trillions wafted into the stock and bond markets, levitating them as a sort of stage-managed misdirection from the sickening spectacle of wobbling real stuff economies. In 2017, The Dow Jones Industrial Average recorded an astounding 5,000 point year-on-year upzoom, with 12 months of gains and no loser months, and a string of 71 record highs.

America’s central bank, the Federal Reserve, acted as if pumping up the stock markets was the only thing that mattered. The result was a Potemkin economy, a glittering Wall Street false-front with a landscape of “flyover” squalor and desolation behind.

…click on the above link to read the rest of the article…

Several Simple Suppositions and Suspicions for 2018

December 31, 2017

Several Simple Suppositions and Suspicions for 2018

A New Year of Symbiotic Disharmony

The New Year is nearly here. The slate’s been wiped clean. New hopes, new dreams, and new fantasies, are all within reach. Today is the day to make a double-fisted grab for them. Without question, 2018 will be the year in which everything happens exactly as it should. Some things you will be able to control, others will be well beyond your control.

How new years generally work… [PT]

Certainly, your ability to stop your neighbor’s cat from relieving itself in your side yard is limited, barring extreme measures. What we mean is each day shall unfold before you – both good and bad – in symbiotic disharmony. You can count on it.

But what are the specifics and particulars for the year ahead? What about stocks, the 10-Year Treasury note, gold, bitcoin, and everything else? Are we fated for World War III? Will this be the year Hillary Clinton finally croaks?

Today we endeavor to answer these questions – and more – with hesitation and humility. Obviously, predicting the future is more art than science. But so is Fed monetary policy, or a charted wave pattern that extends resistance and support lines out into the future.

Predictive Methodology and Disclaimer

“Past performance is no guarantee of future results,” counsels your broker. Thus, we eschew common forecasting techniques for a conjectural approach. We look to connect seemingly unrelated big picture nodes with the illogical grace of an Irish joke.

To be clear, our methodology is as unscientific as your street corner palm reader’s. First, we engage all matters of fact, fiction, fakery, and fraud. Then, through induction, deduction, biased interpolation, and metaphysical reduction, we arrive at precise, unequivocal answers.

But before we get to it, a brief disclaimer’s in order. This proviso from King Solomon should suffice:

…click on the above link to read the rest of the article…

How Much Death and Destruction Awaits Us in 2018?

December 31, 2017

How Much Death and Destruction Awaits Us in 2018?

The New Year is one full of economic, political, and war threats.

Among the economic threats are stock, bond, and real estate markets artificially pumped up by years of central bank money creation and by false reports of full employment. It is an open question whether participants in these markets are aware that underlying reality does not support the asset values. Central banks support stock markets not only with abundant liquidity but also with direct stock purchases. The Japanese central bank is now one of the largest owners of Japanese equities. Central banks, which are supposed to provide economic stability, have created a massive fraud.

Throughout the Western world politics has degenerated into fraud. No government serves the public’s interest. (See: https://www.paulcraigroberts.org/2017/12/29/eric-zuesse-explains-americas-worst-enemy/ ) Except for some former Soviet satellites in Eastern Europe, European governments have defied the will of the people by admitting vast numbers of refugees from Washington’s wars and others pretending to be refugees. The European governments further imperil their citizens with their support for Washington’s rising aggression toward Russia. The universal failure of democratic politics is leading directly to war.

The Saker explains that Americans with intelligence, honor, courage, and integrity have disappeared from the US national security establishment. In their place are arrogant morons high on hubris who believe: (1) We can buy anybody, (2) Those we cannot buy, we bully, (3) Those we cannot bully, we kill, (4) Nothing can happen to us, we live in total impunity no matter what we do. http://www.unz.com/tsaker/2018-war-or-no-war/

Scott Bennett reports that US soldiers are being propagandized that Russia is an enemy with whom we are headed to war. https://www.facebook.com/capsule.ninetynine.7/videos/1992321041038611/
The Anglo-Zionist empire is trying to overturn the Iranian agreement and to restart the attempt to overthrow the government of Syria. Lebanon’s Hezbollah is also in the empire’s sights. Washington is arming Ukraine in order to enable an attack on the breakaway provinces of Novorussia.

…click on the above link to read the rest of the article…

Oil Price Scenario for 2018

December 29, 2017

Oil Price Scenario for 2018

It is that time of year again where we try to forecast what the oil price will do over the coming 12 months. Last year I forecast $60 / bbl for Brent year ending 2017 and with Brent trading on $66.50 as I write I can conclude that I got lucky this year. My friend wagered on $78 and our bet this year was too close to call. My forecasting effort is based on trying to understand the supply, demand, storage, price dynamic and since this seemed to work pretty well this year I will repeat the exercise with some slight modifications.

I have some reservations about the methodology stemming from 1) US LTO production has unpredictable impact on supply elasticity and 2) OPEC + Russia et al are withholding ~ 1.8 M bpd from the market. In effect this group will determine the oil price in 2018. If the price goes too high they may open the taps a little to maintain the price they want, whatever that may be.

[The inset image shows “shale” fracking pads in the USA.]

Disclaimer

No one has ever been able to confidently forecast the oil price that is subject to a vast array of socio-economic, geo-political and technology variables. The best we can do is to assemble some of the key data and to try and use our experience to draw some inferences about what may happen. Readers act upon the information presented here at their own risk.

Oil Price Narrative for 2018

The oil market is now subject to production constraint amounting to ~1.7 Mbpd. This has led to rebalancing of supply and demand by the end of 2017. The Brent oil price has recovered strongly since the summer to close the year at around $66.50. Last year I forecast $60 / bbl for December 2017 and therefore came close.

…click on the above link to read the rest of the article…

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