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TOM CLOUD UPDATE: Rising Interest Rates To Impact The Metals & Large Investors Make Up 70% Of Gold & Silver Buying

TOM CLOUD UPDATE: Rising Interest Rates To Impact The Metals & Large Investors Make Up 70% Of Gold & Silver Buying

Today, Tom Cloud provided another interesting precious metals update.  He discusses how rising interest rates will impact the precious metals and why the Federal Reserve is forced to continue increasing rates.  Tom also explains what is going on with official gold reserves in China and Russia.

Tom also mentions how his precious metals sales volume has changed since 2007.  I spoke with Tom on the phone this week to get an update as he hears a lot of what is going on in the industry.  I asked him if he could look at his precious metals sales figures and see how the small and larger investor buying volume has changed:

If you look at the chart below, the smaller precious metals investor had, the larger pie in gold and silver volume during the 2007-2009 period.  According to Tom’s sales figures, the small investor, $50,000 or less, accounted for 62% of total volume while the large investor was 38%.  This trend changed in the next period, 2013-2017 as the large investor made up 58% of total volume while the small investor fell to 42%.

Tom said that so far this year, the large investor accounted for 70% (or more) of total precious metals sales as smaller investor buying fell further to only 30%.  So, the little guy is not participating in the precious metals market as they were in 2007-2009 when the stock and economy was disintegrating.

However, the larger gold and silver buyer is usually the wiser investor.  The small investor is more fickle and has to wait until panic comes back into the market before they start buying once again.  Furthermore, the small investor is also the one that loses faith much easier and is known to flip-flop by getting out frustrations by writing negative comments about gold and silver.

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

The Stock Market Falls Another 724 Points! What In The World Is Happening On Wall Street?

The Stock Market Falls Another 724 Points! What In The World Is Happening On Wall Street?

We just witnessed the 5th largest single day stock market crash in U.S. history.  On Thursday the Dow Jones Industrial Average plunged 724 points, and many believe that this is just the beginning of another huge wave down for stock prices.  After this latest dramatic decline, the Dow is now down 3.1 percent so far in 2018, and overall it is down 9.99 percent from the all-time high in January.  A 10 percent decline is officially considered to be “correction” territory, and that means that we are just about there.

So why are stock prices falling so much?  Well, USA Today is blaming the potential for a trade war with China, the latest Facebook scandal and “the impact of rising interest rates on the economy”…

U.S. stocks sold off sharply Thursday, with the Dow tumbling more than 700 points amid growing fears of a trade fight between the U.S. and its trading partners after President Trump said he will impose billions of dollars in tariffs on Chinese imports.

The heavy selling on Wall Street was exacerbated by continued weakness in shares of Facebook as well as concerns about the impact of rising interest rates on the economy.

Of course the possibility of a trade war between the two largest economies on the planet is certainly the greatest concern that the markets are grappling with at the moment.  According to Ian Winer, any sign of retaliation by China “will really spook people”…

“A global trade war, whether it’s real or perceived, is what’s weighing on the market,” said Ian Winer, head of equities at Wedbush Securities. “There’s this huge uncertainty now. If China decides to get tough on agriculture or anything else, that will really spook people.”

Trump announced tariffs on about $50 billion worth of Chinese imports on Thursday afternoon. It’s not clear which products will be hit, but the action is aimed at curbing China’s troubling theft of US intellectual property.

And we can be quite sure that China will retaliate.

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

The Dow Jones Industrial Average Falls Another 420 Points As Investors Panic About A Potential Trade War

The Dow Jones Industrial Average Falls Another 420 Points As Investors Panic About A Potential Trade War

Many had been hoping that the financial shaking on Wall Street that we witnessed in February would subside in March, but so far that is definitely not the case.  On Thursday, the Dow fell another 420 points as investors fretted about the potential for a trade war.  Over the past month, we have seen many days when stock prices have been way down and other days when stock prices have been way up.  This is precisely the sort of wild volatility that we would expect to see if a major financial crisis was brewing, and the truth is that our financial system is far more vulnerable today than it was back in 2008.

Many Americans have assumed that the U.S. economy must be in great shape since the stock market has just kept going up for the past several years.  But the reality of the matter is that stock prices are no longer connected to economic reality whatsoever.  The U.S. economy has not grown by 3 percent or more in 12 years, but stock prices have been shooting into the stratosphere thanks to relentless central bank intervention.

But what goes up must eventually come down, and on Thursday we witnessed another stunning decline

The Dow Jones industrial average closed 420.22 points lower at 24,608.98 after rising more than 150 points earlier in the day. The 30-stock index fell as much as 586 points.

The S&P 500 declined 1.4 percent to end at 2,677.67 — erasing its year-to-date gains — with industrials as the worst-performing sector. It also briefly broke below its 100-day moving average, a key technical level. The Nasdaq composite fell 1.3 percent to 7,180.56 and dipped below its 50-day moving average.

So why did this happen?

Well, the mainstream media is placing the blame for Thursday’s decline on Trump’s new tariffs

…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

-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 

-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…

2017 Year In Review

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2017 Year In Review

Markets fiddle while Rome burns

Every year, friend-of-the-site David Collum writes a detailed “Year in Review” synopsis full of keen perspective and plenty of wit. This year’s is no exception. As with past years, he has graciously selected PeakProsperity.com as the site where it will be published in full. It’s quite longer than our usual posts, but worth the time to read in full. A downloadable pdf of the full article is available here, for those who prefer to do their power-reading offline. — cheers, Adam

Introduction

“He is funnier than you are.”

~David Einhorn, Greenlight Capital, on Dave Barry’s Year in Review

Every December, I write a survey trying to capture the year’s prevailing themes. I appear to have stiff competition—the likes of Dave Barry on one extreme1 and on the other, Pornhub’s marvelous annual climax that probes deeply personal preferences in the world’s favorite pastime.2 (I know when I’m licked.) My efforts began as a few paragraphs discussing the markets on Doug Noland’s bear chat board and monotonically expanded to a tome covering the orb we call Earth. It posts at Peak Prosperity, reposts at ZeroHedge, and then fans out from there. Bearishness and right-leaning libertarianism shine through as I spelunk the Internet for human folly to couch in snarky prose while trying to avoid the “expensive laugh” (too much setup).3 I rely on quotes to let others do the intellectual heavy lifting.

“Consider adding more of your own thinking and judgment to the mix . . . most folks are familiar with general facts but are unable to process them into a coherent and actionable framework.”

~Tony Deden, founder of Edelweiss Holdings, on his second read through my 2016 Year in Review

“Just the facts, ma’am.”

~Joe Friday

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

Bank Of America Analyst: A ‘Flash Crash’ In Early 2018 ‘Seems Quite Likely’

Bank Of America Analyst: A ‘Flash Crash’ In Early 2018 ‘Seems Quite Likely’

Is the stock market bubble about to burst?  I know that I have been touching on this theme over and over and over again in recent weeks, but I can’t help it.  Red flags are popping up all over the place, and the last time so many respected experts were warning about an imminent stock market crash was just before the last major financial crisis.  Of course nobody can guarantee that global central banks won’t find a way to prolong this bubble just a little bit longer, but at this point they are all removing the artificial support from the markets in coordinated fashion.  Without that artificial support, it is inevitable that financial markets will experience a correction, and the only real question is what the exact timing will be.

For example, Bank of America’s Michael Hartnett originally thought that the coming correction would come a bit sooner, but now he is warning of a “flash crash” during the first half of 2018

Having predicted back in July that the “most dangerous moment for markets will come in 3 or 4 months“, i.e., now, BofA’s Michael Hartnett was – in retrospect – wrong (unless of course the S&P plunges in the next few days). However, having stuck to his underlying logic – which was as sound then as it is now – Hartnett has not given up on his “bad cop” forecast (not to be mistaken with the S&P target to be unveiled shortly by BofA’s equity team and which will probably be around 2,800), and in a note released overnight, the Chief Investment Strategist not only once again dares to time his market peak forecast, which he now thinks will take place in the first half of 2018, but goes so far as to predict that there will be a flash crash “a la 1987/1994/1998” in just a few months.

That certainly sounds quite ominous.

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

The Last Time These 3 Ominous Signals Appeared Simultaneously Was Just Before The Last Financial Crisis

The Last Time These 3 Ominous Signals Appeared Simultaneously Was Just Before The Last Financial Crisis

We have not seen a “leadership reversal”, a “Hindenburg Omen” and a “Titanic Syndrome signal” all appear simultaneously since just before the last financial crisis.  Does this mean that a stock market crash is imminent?  Not necessarily, but as I have been writing about quite a bit recently, the markets are certainly primed for one.  On Wednesday, the Dow fell another 138 points, and that represented the largest single day decline that we have seen since September.  Much more importantly, the downward trend that has been developing over the past week appears to be accelerating.  Just take a look at this chart.  Could we be right on the precipice of a major move to the downside?

John Hussman certainly seems to think so.  He is the one that pointed out that we have not seen this sort of a threefold sell signal since just before the last financial crisis.  The following comes from Business Insider

On Tuesday, the number of New York Stock Exchange companies setting new 52-week lows climbed above the number hitting new highs, representing a “leadership reversal” that Hussman says highlights the deterioration of market internals. Stocks also received confirmation of two bearish market-breadth readings known as the Hindenburg Omen and the Titanic Syndrome.

Hussman says these three readings haven’t occurred simultaneously since 2007, when the financial crisis was getting underway. It happened before that in 1999, right before the dot-com crash. That’s not very welcome company.

In fact, every time we have seen these three signals appear all at once there has been a market crash.

Will things be different this time?

We shall see.

If you are not familiar with a “Hindenburg Omen” or “the Titanic Syndrome”, here are a couple of pretty good concise definitions

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

This Is What A Pre-Crash Market Looks Like

This Is What A Pre-Crash Market Looks Like

The only other times in our history when stock prices have been this high relative to earnings, a horrifying stock market crash has always followed.  Will things be different for us this time?  We shall see, but without a doubt this is what a pre-crash market looks like.  This current bubble has been based on irrational euphoria that has been fueled by relentless central bank intervention, but now global central banks are removing the artificial life support in unison.  Meanwhile, the real economy continues to stumble along very unevenly.  This is the longest that the U.S. has ever gone without a year in which the economy grew by at least 3 percent, and many believe that the next recession is very close.  Stock prices cannot stay completely disconnected from economic reality forever, and once the bubble bursts the pain is going to be unlike anything that we have ever seen before.

If you think that these ridiculously absurd stock prices are sustainable, there is something that I would like for you to consider.  The only times in our history when the cyclically-adjusted return on stocks has been lower, a nightmarish stock market crash happened soon thereafter

The Nobel-Laureate, Robert Shiller, developed the cyclically-adjusted price/earnings ratio, the so-called CAPE, to assess whether stocks are likely to be over- or under-valued. It is possible to invert this measure to obtain a cyclically-adjusted earnings yield which allows one to measure prospective real returns. If one does this, the answer for the US is that the cyclically-adjusted return is now down to 3.4 percent. The only times it has been still lower were in 1929 and between 1997 and 2001, the two biggest stock market bubbles since 1880. We know now what happened then. Is it going to be different this time?

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

The Federal Reserve Has Just Given Financial Markets The Greatest Sell Signal In Modern American History

The Federal Reserve Has Just Given Financial Markets The Greatest Sell Signal In Modern American History

Why have stock prices risen so dramatically since the last financial crisis?  There are certainly many factors involved, but the primary one is the fact that the Federal Reserve has been creating trillions of dollars out of thin air and has been injecting all of that hot money into the financial markets.  But now the Federal Reserve is starting to reverse course, and this has got to be the greatest sell signal for financial markets in modern American history.  Without the artificial support of the Federal Reserve and other global central banks, there is no possible way that the massively inflated asset prices that we are witnessing right now can continue.

The chart below comes from Sven Henrich, and it does a great job of demonstrating the relationship between the Fed’s quantitative easing program and the rise in stock prices.  During the last financial crisis the Fed began to dramatically increase the size of our money supply, and they kept on doing it all the way through the end of October 2017…

Unfortunately for stock traders, the Federal Reserve has now decided to change course, and that means that the process that has created these ridiculous stock prices is beginning to go in reverse.  In fact, according to Wolf Richter this reversal just started to go into motion within the past few days…

On October 31, $8.5 billion of Treasuries that the Fed had been holding matured. If the Fed stuck to its announcement, it would have reinvested $2.5 billion and let $6 billion (the cap for the month of October) “roll off.” The amount of Treasuries on the balance sheet should then have decreased by $6 billion.

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

Top Financial Expert Warns Stocks Need To Drop ‘Between 30 And 40 Percent’ As Bankruptcy Looms For Toys R Us

Top Financial Expert Warns Stocks Need To Drop ‘Between 30 And 40 Percent’ As Bankruptcy Looms For Toys R Us

Will there be a major stock market crash before the end of 2017?  To many of us, it seems like we have been waiting for this ridiculous stock market bubble to burst for a very long time.  The experts have been warning us over and over again that stocks cannot keep going up like this indefinitely, and yet this market has seemed absolutely determined to defy the laws of economics.  But most people don’t remember that we went through a similar thing before the financial crisis of 2008 as well.  I recently spoke to an investor that shorted the market three years ahead of that crash.  In the end his long-term analysis was right on the money, but his timing was just a bit off, and the same thing will be true with many of the experts this time around.

On Monday, I was quite stunned to learn what Brad McMillan had just said about the market.  He is considered to be one of the brightest minds in the financial world, and he told CNBC that stocks would need to fall “somewhere between 30 and 40 percent just to get to fair value”…

Brad McMillan — who counsels independent financial advisors representing $114 billion in assets under management — told CNBC on Monday that the stock market is way overvalued.

The market probably would have to drop somewhere between 30 and 40 percent to get to fair value, based on historical standards,” said McMillan, chief investment officer at Massachusetts-based Commonwealth Financial Network.

McMillan’s analysis is very similar to mine.  For a long time I have been warning that valuations would need to decline by at least 40 or 50 percent just to get back to the long-term averages.

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

The Cardinal Sin Of Investing: Permanent Impairment Of Capital

Victor Moussa/Shutterstock

The Cardinal Sin Of Investing: Permanent Impairment Of Capital

How to avoid making it
Last week we presented a parade of indicators published by Grant Williams and Lance Roberts that warned of an approaching market correction as well as a coming economic recession.

The key message was: When smart analysts independently find the same patterns in the data, it’s time to take notice.

Well, many of you did, by participating in this week’s Dangerous Markets webinar, which featured Grant and Lance.

In it, both went much deeper into the structural fragility of today’s financial markets and the many reasons why economic growth will remain constrained for years to come.

The excessive build-up of debt in the system — and the absolute dependence on its continued expansion to keep the economy from imploding — is, of course, seen as the prime risk to future growth.

As Lance demonstrates here with several of his excellent charts, so much leverage has been taken on that its servicing is increasingly stealing capital that would otherwise go to savings, consumption and productive investment. Going forward, the demands of the debt service will simply result in less and less capital available left over to grow the economy:

As financial assets are (supposed to be) valued on future growth prospects, lower forecasted growth demands lower valuations. Grant calculates that, should the US see another decade of 2% average annual GDP growth (and it has averaged less than that over the past decade), stock prices should be roughly half of what they are today to be considered fairly valued:

And Lance builds further on this, explaining how this moribund growth, coupled with America’s aging demographic trend, will simply savage the nation’s (already troublesomely underfunded) pension and entitlement systems:

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

The Price Of Gold Spikes As Investors Get Spooked By Talk Of World War III And Nuclear Conflict

The Price Of Gold Spikes As Investors Get Spooked By Talk Of World War III And Nuclear Conflict

Whenever the world starts going crazy, investors instinctively begin flocking to precious metals.  So it wasn’t exactly a surprise when gold and silver prices started to move upward aggressively as global leaders continued to talk about the possibility of World War III and nuclear conflict.  The price of gold spiked to a five month high on Tuesday, and as I write this article gold is currently sitting at $1277.10 an ounce.  Right now silver is at $18.35 an ounce, and many analysts believe that it is poised for a dramatic jump in the weeks and months to come as global tensions continue to rise.  Google searches for the phrase “going to war” are the highest that they have been at any point in recent years, and many people out there are starting to understand that the U.S. could soon be facing military conflicts in Syria and in North Korea simultaneously.

In response to persistent threats from the Trump administration, the North Koreans are promising that they will not hesitate to use nuclear weapons if they are attacked by the U.S. military.

In particular, an article that was just published in North Korea’s official state newspaper says that U.S bases in South Korea and the Pacific operation theater but also in the U.S. mainland would be targeted.

Most analysts do not believe that North Korea has any missiles that can reach the U.S. mainland, so that is probably an empty threat, but they can definitely hit Seoul, Tokyo and all U.S. military bases in South Korea and Japan.

And even if the U.S. was able to locate and take out all North Korean nukes in an overwhelming first strike, the North Koreans would still have thousands of artillery guns and rockets aimed at Seoul.

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

The Price Of Silver Explodes Past 20 Dollars An Ounce As The European Banking Crisis Deepens

The Price Of Silver Explodes Past 20 Dollars An Ounce As The European Banking Crisis Deepens

Silver Coins 2 - Public DomainHave you seen what the price of silver has been doing?  On Monday, it exploded past 20 dollars an ounce, and as I write this article it is sitting at $20.48.  Earlier today it actually surged above 21 dollars an ounce for a short time before moving back just a bit.  In late March, I told my readers that silver was “ridiculously undervalued” when it was sitting at $15.81 an ounce, and that call has turned out to be quite prescient.  The Friday before last, silver started the day at $17.25 an ounce, and it is up more than 18 percent since that time.  Overall, silver is up more than 30 percent for the year, and that makes it one of the best performing investments of 2016.  So what is causing this sudden surge in the price of silver?  This is something that we will discuss below…

This sudden spike in the price of silver has definitely caught a lot of analysts off guard.  Some are suggesting that the fact that the Fed is now less likely to raise rates after the Brexit and the fact that the dollar has been slipping a bit lately are the primary reasons for silver’s rise

This isn’t a gradual increase either. It’s an explosive growth spurt. Just three months ago silver had reached an 11 month high. Now silver prices have reached a 23 month high. Several factors appear to be influencing these gains, including a weakening dollar, and the fact that the Fed may cut interest rates in light of the Brexit vote.

Personally, I don’t buy those explanations.

To me, the continuing implosion of major banks over in Europe is the main factor that is driving investors to safe haven assets such as silver.

 

 

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

The Stock Market Crash Of 2016: Stocks Have Already Crashed In 6 Of The World’s 8 Largest Economies

The Stock Market Crash Of 2016: Stocks Have Already Crashed In 6 Of The World’s 8 Largest Economies

Network Earth Continents - Public DomainOver the past 12 months, stock market investors around the planet have lost trillions of dollars.  Since this time last June, stocks have crashed in 6 of the world’s 8 largest economies, and stocks in the other two are down as well.  The charts that you are about to see are absolutely stunning, and they are clear evidence that a new global financial crisis has already begun.  Of course it is true that we are still in the early chapters of this new crisis and that there is much, much more damage to be done, but let us not minimize the carnage that we have already witnessed.

In general, there have been three major waves of financial panic over the past 12 months.  Late last August we saw the biggest financial shaking since the financial crisis of 2008, then in January and February there was an even bigger shaking, and now a third “wave” has begun in June.  Not all areas around the globe have been affected equally by each wave, but without a doubt this new financial crisis is a global phenomenon.

The charts that I am about to show you come from Trading Economics.  It is an absolutely indispensable website that is packed full of useful data, and I encourage everyone to check it out.

Let’s talk about China first.  The Chinese economy is the second largest on the entire planet, and since this time last year Chinese stocks are down an astounding 40 percent

Chinese Stocks

As things have started to unravel in China, the Chinese have been selling off U.S. debt and U.S. stocks like crazy.  The following comes from Bloomberg

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

Olduvai IV: Courage
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Olduvai II: Exodus
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