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Gold — the Hedge Against Government

February 19, 2016

Gold — the Hedge Against Government 

gaudens1

While government may see gold as a barbaric relic of monetary history, it still will serve as a hedge against them from the private individual side. Our biggest problem is the hunt for money. They are of the opinion that it is not their fiscal mismanagement that is causing the instability, but rather it is that we have money that they see as theirs. This is the classic battle between public and private that I have warned about. You may not be able to travel with gold anymore as they close the corral and try to slaughter us for money. History still demonstrates that they will collapse, and that is when gold will provide its historically based purpose as the hedge against government. It is not a hedge against inflation nor will it track with the increase in money supply. It is driven by confidence and the lack thereof. When the latter raises it head, then it is time for gold to rise. Keep in mind I would recommend real gold coins of bullion value common dates compared to bullion. At least then you can claim you are a coin collector. That worked before, at least in the 1930s.

US Bank Counterparty Risk Soars After Energy MTM Debacle

January 17, 2016

US Bank Counterparty Risk Soars After Energy MTM Debacle

A few dots are starting to be connected now that we have exposed the debacle of The Fed’s decision to allow banks to mark-to-unicorn their energy loans. “Something” was wrong in recent weeks as the TED-Spread surged (implying rising counterparty uncertainty among banks) and then the last week – since The Fed’s alleged meeting with banks – has seen financial credit and stocks crash.

Coincidence? We don’t think so. In the week since The Fed gave the nod to banks to hide losses on energy loans, credit risk has spiked and stocks tumbled…

It is clear banks are hedging against one another’s systemic risk.

Simply put, it’s 2008 all-over-again as “when in doubt, sell ’em all” is back for the US financial system. When you know/question one bank (or some banks) is not transparent in their loan losses (and implicitly their capital ratios) then contagion (and collateral chains) tells any good fiduciary to sell them all – and the banks themselves will enable a vicious circle as they hedge.

And of course, the unintended consequence of The Fed’s decision to enable cheating in the banks’ energy loans is a surge in financial system instability as banks and the price of oil now become systemically more coupled.

2016 – the BIG SHIFT

January 1, 2016

2016 – the BIG SHIFT

2016-1

As we close 2015 and begin a new year, the markets generally closed flat to neutral with a warning that as we approach the political year from hell being 2017, this is by no means going to be a walk through the park. We are more likely than not going to see some trends conclude in 2016 and others perform a false move the scare the hell out of everyone. Nevertheless, the stars may not be aligning, but the markets appear to be setting the stage to align for the BIG SHIFT.

Money-Assets

What does the BIG SHIFT mean? It means that as we face a meltdown in Socialism which has taken hold of Western Governments destroying our underlying democratic foundations, ALL assets must prepare for the HEDGE against government.

Big Shift 1975-1982

 

Relationships are NEVER constant, yet the TV analysis touts fixed concepts that people then believe. At first, many will buy or sell based upon such unfounded beliefs and assumptions. When we examine them in detail, they fall to the ground into dust.

Troika-Unelected

Europe is operating under a dictatorship and has lost any possible right to exercise a democratic process to remove the three members of the Troika since not a single one stands for any election. Lagarde is of the IMF and is not even appointed the head of the IMF exclusively by Europeans. She was a personal friend of Obama. Draghi is ex-Goldman Sachs. Once a member of Goldman, you never leave. The EU Parliament has no validity since the Commission is not bound by their vote. The people of European nations have absolutely no means to reclaim their sovereignty by any method other than force. And to prevent that, the EU Commission wants to create its own army.

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

Technically Speaking: The Real Value Of Cash

November 24, 2015

Technically Speaking: The Real Value Of Cash

With the “inmates running the asylum” during a holiday-shortened trading week, the upward bias to the market is set to continue. However, as I addressed last week:

“As we progress through the last two months of the year, historical tendencies suggest a bias to the upside. This is particularly the case given the weakness this past summer which has left many mutual and hedge funds trailing their benchmarks. The need to play ‘catch-up’ will likely create a push into larger capitalization stocks as portfolios are ‘window dressed’ for year end reporting.

This traditional ‘Santa Claus’ rally, however, does not guarantee the resumption of the ongoing ‘bull market’ into 2016. The chart below lays out my expectation for the market through the end of the year.”

SP500-MarketUpdate-112315-2

“With the markets currently oversold on a very short-term basis, the current probability is a rally into the ‘Thanksgiving’ holiday next week and potentially into the first week of December. As opposed to my rudimentary projections, the push higher will likely be a ‘choppy’ advance rather than a straight line.”

So far, the analysis over the last several weeks has continued to play out as expected. However, and this is crucially important, a near-term expectation of a bullish advancedue to the recent correction and seasonal tendencies is not the same as long-term bullish outlook. 

As stated above, while seasonality likely holds the cards through the end of this year, projecting much beyond that window is foolishness. 

The Real Value Of Cash

This brings to mind a call I had on the radio show recently discussing his advisor’s reluctance to hold cash. 

The argument against holding cash goes this way:

“If you hold cash you lose value over time to inflation.”

This is a true statement if you hold cash for an EXTREMELY long period. However, holding cash as a “hedge” against market volatility during periods of elevated uncertainty is a different matter entirely. 

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

Gold Prices Disprove Krugman

August 7, 2015

Gold Prices Disprove Krugman

Recently Krugman wrote an op ed ridiculing Ron Paul titled, “The Old Man and the CPI.”(In case you don’t get the reference, he’s alluding to Hemingway.) Ron Paul has responded in this video, but I want to focus on Krugman’s complains about gold bugs:

Ron Paul has been making the same prediction year after year — in fact, he’s been making this prediction at least since 1981!— and has been wrong year after year. It’s hard to think of a doctrine that has been as thoroughly refuted by events as goldbug economics. For a while gold prices did go up, although not for the reasons the goldbugs thought, but now even that has gone into reverse. So why would anyone pay money for this guy’s analysis?

This has been quite the cause for celebration among progressive economists. (I won’t link to some of the lesser lights and reward them for their smugness.) And it’s true that a simple story relating the Fed’s balance sheet to the price of gold doesn’t work out very well:

Gold vs Fed

In the chart above, total Fed assets (red line, left axis) are plotted against the price of gold (blue line, right axis). People who thought the price of gold would move in lockstep with the Fed’s QE programs were sitting pretty during QE and QE2, but then things turned around with QE3. It almost looks as if the commencement of QE3 (when the red line started stairclimbing up) was the catalyst for making gold plunge about $600 an ounce.

Nonetheless, suppose someone bought into the warnings of Ron Paul (and guys like me) when Bernanke began his unprecedented monetary inflation, back in late 2008 / early 2009, and began buying gold as a hedge. Depending on when exactly you got in, gold was selling for anywhere from $700 – $900 an ounce.

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

 

 

 

For Heaven’s Sake: Hedge!

May 1, 2015

For Heaven’s Sake: Hedge!

If you’re not positioned defensively by now, you’re nuts

Q: How do you make a small fortune on Wall Street?

A: Start with a large fortune.

~ old investing adage

Last fall, I wrote an article titled Defying Gravity that warned of the absurd price levels that stocks and bonds had risen to.

The piece first looked at the unbroken multi-year march upward in prices through the myriad money-printing cycles of the world’s central banks, as well as the near-extinction of bearish investors on Wall Street — which it then contrasted with the vast gap between valuations and the underlying weak economic data, deteriorating chart technicals, and evidence that the “smart money” was exiting the market. The takeaway? Prudence strongly recommended moving to cash and hedging one’s open market positions.

Less than a month later, the stock market abruptly dropped by 7%. Those who didn’t seek safety in advance were left licking their wounds, panicked not knowing if the painful down-draft was over.

Fortunately for them, the Federal Reserve jawboned it’s willingness to step in further if needed, the ECB announced a trillion-Euro stimulus program, the Bank of Japan waded into domestic and foreign markets as a buyer of last resort, and China’s central bank continued its staggering balance sheet expansion. Collectively, this put a floor on the markets, which soon climbed back to record highs.

Where We Are Now

So here we are roughly six months later, and the same warning bells are ringing — just louder this time.

Yes, stocks recovered from their brief October swoon, and yes, they are at — or very close to — their all-time highs. Indeed, everything is so awesome that investor sentiment has never been more positive. If you worry that having too many people on the same side of the boat is a sign of complacency and over-confidence, the following chart should frighten you:

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

 

 

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