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New Multi-year Gold Rally Has Emerged

New Multi-year Gold Rally Has Emerged

New Multi-year Gold Rally Has Emerged

The dollar price of gold has been on a roller-coaster ride for the past six years. But the past six weeks have been a turbocharged version of that. Investors should expect more of the same for reasons explained below.

The six-year story is the more important for investors and also the more frustrating. Gold staged an historic bull market rally from 1999 to 2011, going from about $250 per ounce to $1,900 per ounce, a 650% gain.

Then, gold nose-dived into a bear market from 2011 to 2015, falling to $1,050 per ounce in December 2015, a 45% crash from the peak and a 51% retracement of the 1999-2011 bull market. (Renowned investor Jim Rogers once told me that no commodity goes from a base price to the stratosphere without a 50% retracement along the way. Mission accomplished!)

During that precipitous decline after 2011, gold hit a level of $1,417 per ounce in August 2013. It was the last time gold would see a $1,400 per ounce handle until last month when gold briefly hit $1,440 per ounce on an intra-day basis. At last, the six-year trading range was broken. Better yet, gold hit $1,400 on the way up, not on the way down.

The range-bound trading from 2013 to 2019 was long and tiring for long-term gold investors. Gold had rallied to $1,380 per ounce in May 2014, $1,300 per ounce in January 2015, and $1,363 per ounce in July 2016 (a post-Brexit bounce).

But, for every rally there was a trough. Gold fell to $1,087 per ounce in August 2015 and $1,050 per ounce in December 2015. The bigger picture was that gold was trading in a range. The range was approximately $1,365 per ounce at the top and $1,050 per ounce at the bottom, with lots of ups and downs in between. Yet, nothing seemed capable of breaking gold out of that range.

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

Bear Markets, Fed Mistakes, and Quick Shots from John

Bear Markets, Fed Mistakes, and Quick Shots from John

A winters day,
In a deep and dark December…

“Wait, it doesn’t feel like winter. It’s not deep and dark, and it’s actually warm, and the sun is shining. TotoShane, I don’t think we’re in Kansas Texas anymore.”

Yes, we have actually moved from Texas to a new location. I’ll explain why and where below. But first, we really do have to follow up last week’s letter. Today, we’ll address several things, so think of this as my year-end “Quick Shots from the Frontline.” It will be more like a personal, from the heart, fireside chat. (Trigger warning: I will be taking off my politically correct gloves. Naming names and pointing fingers. Just Uncle John telling it like it is.)

This letter may run a little longer, but next week I promise to get back to the typical 3,000 or so words. Today is just you and I having a conversation. Pick up your favorite beverage (for me, it’s a glass of coffee or tea now), sit back, and let’s chew on the world.

Powell Was Right but the Fed Is Wrong

Last week. I argued Jerome Powell did the right thing by raising rates a mere 25 basis points. He forcefully declared the Fed’s independence from the market and politicians for the first time since Volcker. Greenspan, Bernanke, and, in particular, Yellen all gave the markets a “put” option—basically a third unofficial mandate to make sure that asset prices keep rising. Now, of course, that’s not the way they would express it, but that is, in fact, what they did.

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

2019: The Beginning Of The End (Free Premium Report)

2019: The Beginning Of The End (Free Premium Report)

What will happen next & what to do now

Welcome to our new readers and a very Happy New Year to everyone!

Now that it’s 2019, we’re going to start the new year here at Peak Prosperity by responding to the wishes of our premium subscribers and making our most recent premium report free to everyone.

For those unfamiliar with our work, it’s based on the idea that humanity is hurtling towards a disaster of our own making.  Several powerful and unsustainable trends are all converging towards an ever-narrowing gap in the future.

Because of this, the individual and collective choices we make today take on ever-increasing importance.  Our collective choices — around such issues as rampant money-printing by central banks, the failure to wean ourselves off of fossil fuels, and tossing an entire younger generation under the bus because that’s most convenient for an older generation afraid of living within its actual means — are all pointing to a diminshed and disappointing future. We need to make better choices that align ourselves with these (and many other) looming realities.

This is our work here at Peak Prosperity.

For ten years now, we’ve been pointing out the many predicaments society faces. And we will continue our vigilance.  No because we enjoy crisis, or that we relish delivering hard messages, but because these are the times in which we live — and those, like you, who are awake to reality, need unvarnished facts and data to make informed decisions.

So we offer to you, today, a peek behind our premium subscription curtain.  The people who subscribe to our work do so to make themselves more resilient, as well as to support Peak Prosperity financially as we carry on our mission of “Creating a world worth inheriting”, which invoves bringing difficult messages to reluctant audiences.

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

Nikkei Tumbles, Sliding Into Bear Market

A few hours after the S&P tumbled over 2.7%, sliding into a bear market for the first time in a decade, Japan’s Nikkei 225 – which had been sliding gradually for the past week – dropped sharply by over 3.2% at the open…

… becoming the latest index to tumble into a bear market, sliding over 20% from its October 2 peak.

Meanwhile, the broader Topix index – which had already entered a bear market from its January 2018 highs – plunged even more, dumping over 4.3% and was trading at levels last seen in November 2016, as more than 2 years of gains have been largely wiped out in just the past 3 months as the Christmas Eve rout launched in the US goes global.

Bear Market Growls As Market Remains Weak 11-16-18

Bear Market Growls As Market Remains Weak 

Several months ago, I penned an article about the problems with “passive indexing” and specifically the problem of the “algorithms” that are driving roughly 80% of the trading in the markets. To wit:

“When the ‘robot trading algorithms’  begin to reverse (selling rallies rather than buying dips), it will not be a slow and methodical process, but rather a stampede with little regard to price, valuation, or fundamental measures as the exit will become very narrow.”

Fortunately, up to this point, there has not been a triggering of margin debt, as of yet, which remains the “gasoline”to fuel a rapid market decline. As we have discussed previously, margin debt (i.e. leverage) is a double-edged sword. It fuels the bull market higher as investors “leverage up” to buy more equities, but it also burns “white hot”on the way down as investors are forced to liquidate to cover margin calls. Despite the two sell-offs this year, leverage has only marginally been reduced.

If you overlay that the S&P 500 index you can see more clearly the magnitude of the reversions caused by a “leverage unwind.”

The reason I bring this up is that, so far, the market has not declined enough to “trigger” margin calls.

At least not yet.

But exactly where is that level? 

There is no set rule, but there is a point at which the broker-dealers become worried about being able to collect on the “margin lines” they have extended. My best guess is that point lies somewhere around a 20% decline from the peak. The correction from intraday peak to trough in 2015-2016 was nearly 20%, but on a closing basis, the draft was about 13.5%. The corrections earlier this year, and currently, have both run close to 10% on a closing basis.

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

To One Bank, This Is The Flashing Red Warning That A Crash Is Dead Ahead

For much of 2018, the prevailing market theme was the one Morgan Stanley dubbed “rolling bear markets” when any time a given asset was hit, whether emerging markets, Italian bonds, or tech stocks, money would simply rotate from one place to another. However, at the end of September, when rates spiked amid concerns the Fed was prepared to push rates beyond neutral, things changed overnight.

Fast forward to now when what appeared to be somewhat orderly sequential blow ups have mutated into wholesale market panics in which everything starts to go wrong at once, or as Bloomberg describes it “everywhere you look, something’s blowing up.”

In commodities, it’s the record plunge in oil. In equities, it’s six weeks of turbulence in the S&P 500. Debt markets have been rattled by the turmoil engulfing General Electric and PG&E. Bitcoin just plunged 13 percent. And Goldman Sachs, the storied investment bank, is having the worst week since 2016.

As Bloomberg correctly notes, by themselves these sudden asset air pockets would be enough to incite panic, “but have them erupt all around and even the most grizzled Wall Street types can start to sound paranoid. Does GE have something to do with Goldman? How does Bitcoin sway the stock market? Wildfires have nothing to do with crude’s convulsions, but both are bad news for banks.”

“The risk of contagion is understood. What’s not understood is where and how connected things are,” Stewart Capital Advisors’ Malcolm Polley said by phone. “Just about anything can create panic, create contagion, and it doesn’t have to be something that makes sense.”

That bad things should congregate isn’t surprising to Donald Selkin, chief market strategist at Newbridge Securities, who sees it as a consequence of having it so good for so long. He’s waking up every night to check the futures.

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

Crude Down Record 11th Day

Crude is down 22% since the early October high. Comments from Trump negated expectations that OPEC would cut production.

  • Oil prices notched their longest losing streak on record Monday, as comments from President Trump negated expectations that the global oil cartel and its allies will cut production.
  • Light, sweet crude for December delivery fell 0.4% to $59.93 a barrel on the New York Mercantile Exchange, marking the 11th consecutive session of losses, the longest in data going back to 1983.
  • Brent crude, the global benchmark, also closed lower, down 0.1% to $70.12 a barrel.
  • Saudi Arabia’s Mr. Falih on Sunday also said his country would unilaterally slash its exports next month by around 500,000 barrels a day, compared with November levels. However, Russia—currently the world’s largest oil producer—sent mixed messages on whether it would pull back on supply.

Trump Calls for Lower Oil Price

Donald J. Trump on Twitter

Sanctions Not Working Out as Expected

OPEC and allied oil-producing countries will likely need to cut crude supplies, perhaps by as much as 1 million barrels of oil a day, to rebalance the market after U.S. sanctions on Iran failed to cut Tehran’s output, Saudi Arabia’s energy minister said Monday.

The comments from the minister, Khalid al-Falih, show the balancing act the U.S. allies face in dealing with President Donald Trump’s actions related to the oil industry.

Trump in recent weeks demanded the oil cartel increase production to drive down U.S. gasoline prices. “Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!” he tweeted Monday.

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

OPEC+ Floats 1 Million Barrel Production Cut After Oil Price Tumbles Into Bear Market

With oil prices entering a bear market last week, tumbling 21% from recent highs as it became clear that Trump will significantly water down Iran oil export sanctions by granting waivers to its 8 largest clients even as US inventory stockpiles are once again rising amid almost weekly records in US oil production, OPEC and its non-OPEC allies – which is pretty much everyone except US shale producers – are starting to sweat, and during today’s meeting in Abu Dhabi they hinted that an oil output cut to limit excess production may be coming.

Speaking to reporters, Oman’s Oil Minister Mohammed Al-Rumhy said that “a number of global producers agree they should pump less oil in 2019, and a reduction of 1 million barrels a day would be a good number” according to Bloomberg. Others echoed his sentiment, floating a range of cutbacks, however the most often cited number was a decrease in output by as much as 1 million barrels a day, roughly the amount of Iranian oil production that is expects to continue flowing thanks to the recent sanction waivers.

“I think probably there is support that right now there is too much oil in the market and stock, inventories are building up,” Al-Rumhy told reporters today in the UAE capital.


Oman min says a 1 million cut would be a good start


Of course, OPEC can not be seen as responding to every political whim in the White House, especially if it will result in higher gasoline prices and an angry Donald Trump, so a technical committee representing the coalition framed the need for a production cut in the context of its projections according to which the global oil surplus – which hit unprecedented levels in 2015 –

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

Weekly Commentary: MBS and the Core

Weekly Commentary: MBS and the Core

The Dow (DJIA) traded as low as 24,122 in late-Monday afternoon trading. By Friday’s open, the Dow had rallied 1,457 points, or 6.0%, to 25,579. Relatively speaking, the Dow was a tame kitten. From Monday’s intraday lows, the Nasdaq100 rallied as much at 7.8%. The Semiconductors won this week’s Wild Animal competition, rallying 12.7% (week’s lows to highs). At 11.9%, the Biotechs were a close second. The Homebuilders (XHB) rallied as much as 11.3% before ending the week with a gain of 7.3%.
A couple obvious questions come to mind: Bear market rally or just another “buy the dip, don’t be one” opportunity for a market again ready to scale new heights? Is President Trump now ready to strike a trade deal with China – or was he just goosing markets ahead of the midterms?

Let’s start with the markets. They certainly had the likeness of a classic “rip your face off” bear market rally. The Goldman Sachs Most Short index surged 9.0% off Monday lows. For the week, this index rose 6.1%, showing off a 2.5 beta versus the S&P500’s return (6.1%/2.4%). In the semiconductor space, heavily shorted On Semiconductor, NXP Semiconductor, AMD and Micron Technology gained 23.9%, 18.5%, 14.8% and 13.9%, respectively. A long list of heavily shorted retail stocks gained double-digits, as the Retail index (XRT) surged 4.3% for the week.

There were a number of heavily shorted biotech stocks that posted 20% plus gains for the week. A bunch of regional banks rose between five and nine percent. And I’d be remiss for not mentioning (everyone’s favorite short) Tesla. In just 10 sessions, Tesla rallied (38%) from a low of $253 to Friday’s $346 close.

It’s certainly worth noting that short squeeze dynamics were not limited to U.S. equities. Let’s start at the epicenter of global crisis dynamics, the big banks. Hong Kong’s Hang Seng (Chinese) Financials index rallied as much as 8.3% off the week’s lows, to end the week up 6.3%.

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

Stock Market Crash! The Dow Has Now Plunged 2,368 Points From The Peak Of The Market

Stock Market Crash! The Dow Has Now Plunged 2,368 Points From The Peak Of The Market

The level of panic that we witnessed on Wall Street on Wednesday was breathtaking.  After a promising start to the day, the Dow Jones Industrial Average started plunging, and at the close it was down another 608 points.  Since peaking at 26,951.81 on October 3rd, the Dow has now fallen 2,368 points, and all of the gains for 2018 have been completely wiped out.  But things are even worse when we look at the Nasdaq.  The percentage decline for the Nasdaq almost doubled the Dow’s stunning plunge on Wednesday, and it has now officially entered correction territory.  To say that it was a “bloodbath” for tech stocks on Wednesday would be a major understatement.  Several big name tech stocks were in free fall mode as panic swept through the marketplace like wildfire.  As I noted the other day, October 2018 looks a whole lot like October 2008, and many believe that the worst is yet to come.

But in the short-term we should see some sort of bounce once the current wave of panic selling is exhausted.  During every major stock market crash in our history there have been days when the stock market has absolutely soared, and this crash will not be any exception.

If we do see a bounce on either Thursday or Friday, please don’t assume that the crash is over.  Most key technical levels have already been breached, and even a small piece of bad news can send stocks plunging once again.

On Wednesday there really wasn’t anything too unusual that happened, but stocks cratered anyway.  Here is a summary of the carnage…

-The Dow Jones Industrial Average plummeted 608 points on Wednesday.

-The Dow is now down 7.1 percent for the month of October.

-The S&P 500 has now fallen for 13 of the last 15 trading days.

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

Teetering On The Brink Of Disaster: 14 Of 19 Bear Market Signals Have Now Been Triggered

Teetering On The Brink Of Disaster: 14 Of 19 Bear Market Signals Have Now Been Triggered

October 2018 is turning out to be a lot like October 2008.  The S&P 500 has now fallen for 12 of the last 14 trading days, and it is on pace for its worst October since the last financial crisis.  But the U.S. is actually in much better shape than the rest of the world at this point.  Even though they have fallen precipitously in recent days, U.S. stocks are still up 3 percent for the year overall.  On the other hand, global stocks (excluding the U.S.) are now down more than 10 percent for the year, and they are down more than 15 percent from the peak of the market in January.  All it is going to take is a couple more really bad trading sessions to push global stocks into bear market territory.

And even though U.S. stocks are still outperforming the rest of the world, many are anticipating that the U.S. is definitely heading for a bear market as well.

According to Bank of America, 14 out of their 19 “bear market indicators” have now been triggered

“Expect a long bout of volatility,” Bank of America strategists led by Savita Subramanian wrote in a report published on Sunday.

Bank of America keeps a running tally of “signposts” that signal looming bear market. The bad news is that 14 of these 19 indicators, or 74%, have been triggered. Two more were toppled earlier this month: the VIX volatility index (VIX) climbed above 20 and a growing number of Americans expect stocks to go up.

Of course not all 19 indicators need to be triggered in order for a bear market to happen.  These indicators are simply signposts, and what they are telling us is that big trouble could be brewing for the financial markets.

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

Peter Schiff Explains “What Happens Next” In 47 Words

Outspoken critic of The Fed and one of the few that can see through the endless barrage of bullshit to how this really ends, has laid out in a tweet “what happens next”…

Likely sequence of events:

1. Bear market;

2. Recession;

3. Deficits explode;

4. Return of ZIRP and QE;

5. Dollar tanks;

6. Gold soars;

7. CPI spikes;

8. Long-term rates rise;

9. Fed. forced to hike rates during recession

10. A financial crisis without stimulus or bailouts!

h/t @PeterSchiff

As The Markets Sell-off The Precious Metals Rebound

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…

And then, of course, the continued disintegration of the U.S. Retail Market, Sears Creditors Push For Bankruptcy Liquidation As Vendors No Longer Paid:

Amid recent reports that Sears is set to file for bankruptcy as soon as this weekend ahead of a $134 million debt payment due on Monday, the only question is whether the filing will be a Chapter 11 debt for equity reorganization or a Chapter 7 liquidation. And contrary to the desires of Sears CEO and biggest creditor, Eddie Lampert, who would like to preserve the core business, others are pushing for an outright liquidation.

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

Signs of the Gold Apocalypse: M&A and Fund Extinction

Signs of the Gold Apocalypse: M&A and Fund Extinction

For bear markets to truly end investor sentiment has to get to a point where they would rather walk on broken glass than buy that asset or asset class.  We’re reaching that point in the precious metals market.

In conjunction with that we also have to see arrogance on the part of short-sellers convinced that all rallies will be sold, keeping a lid on prices.  It doesn’t matter if buyers come in at higher prices or above significant technical support levels, they will push because they become convinced this is a one-way trade.

We see this in the government bond markets as well.  In traderspeak it’s called the [Insert Head of Central Bank Here] Put.  The Greenspan Put begat the Bernanke Putwhich morphed into the Yellen Put.

Over the past few months we’ve seen sign after sign that the gold and silver markets are nearing the end of their bear markets.  These are signs of extreme distress.  The first I’ve already mentioned, record speculative short positions among futures traders.

Then there was the re-balancing of Vanguard’s $2.3 billion Gold and Precious Metals fund into the Global Capital Cycles Fund, trimming exposure to precious metals to 25% of AUM — Assets Under Management.

And now we’re seeing the M&A (Mergers and Acquisitions) phase of the bear market.  Where companies begin merging to shave costs after having already cut back on production to preserve cash flow.

It was just announced that American Barrick Corp (NYSE:ABX) and RandGold Corp (NASDAQ:GOLD) are merging into one company.  The largest mining company by market cap in the world at around $18 billion.

Primary silver producers like Endeavor Silver (NYSE:EXK) are shuttering high-cost mines in this pricing environment.  Well run companies with low debt and strong balance sheets don’t do mergers like this, they tough it out or go on a hostile raid of assets under-valued by the market.

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

The 5 Previous Times This Stock Market Indicator Has Reached This Level Stock Prices Have Fallen By At Least 50 Percent

The 5 Previous Times This Stock Market Indicator Has Reached This Level Stock Prices Have Fallen By At Least 50 Percent

Have you ever heard of the “Sound Advice Risk Indicator”?  Every single time in our history when it has gone above 2.0 the stock market has crashed, and now it has just surged above that threshold for the very first time since the late 1990s.  That doesn’t mean that a stock market crash is imminent, but it is definitely yet another indication that this stock market bubble is living on borrowed time.  But for the moment, there is still quite a bit of optimism on Wall Street.  The Dow set another brand new all-time record high earlier this week, and on Wednesday we learned that this bull market is now officially the longest in our history

For context, a bull market is defined as a 20% rally on a closing basis that’s at no point derailed by a subsequent 20% decline. March 9, 2009, has long been the agreed-upon starting point for such calculations because that was the absolute bottom for the prior bear market, which ended that day.

The S&P 500 has surged a whopping 323% over the period, with its roughly 19% annualized return slightly lagging behind the historical bull market average of 22%.

Of course the U.S. economy has not been performing nearly as well.  Even if you accept the highly manipulated numbers that the federal government puts out, we haven’t had a year when GDP grew by at least 3 percent since the middle of the Bush administration.

It simply is not possible for stock prices to continue to soar about 20 percent a year when the U.S. economy is growing less than 3 percent a year.  At some point a major adjustment is coming, and it is going to be exceedingly painful.

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

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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