QE3

Major Stock Bear Still Looms

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By Adam Hamilton – Re-Blogged From Zeal

The US stock markets spectacularly defied the odds in 2016, soaring after both the UK’s Brexit vote and US presidential election.  Both actual outcomes were universally feared as very bearish for stocks before the events.  These contrary stock rallies have left traders feeling euphoric, convinced stock markets are impregnable.  But with stock valuations hitting bubble levels in an exceedingly-old bull, a major bear still looms.

Though you wouldn’t know it in recent years, stock markets are forever cyclical.  They rise and fall, flow and ebb, in great valuation-driven cycles.  Bull markets always eventually give way to bears, and vice versa.  Stocks can’t and don’t rise or fall forever, extreme popular greed or fear never last for long.  The history of stock markets looks like a great sine wave, an endlessly-alternating series of bulls and bears.

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Fueling Gold’s 2016 Upleg

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By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

Gold certainly had a rough year in 2015, grinding inexorably lower on Fed-rate-hike fears and investor abandonment.  But gold is poised to rebound dramatically in this new year, mean reverting out of its recent deep secular lows.  The drivers of gold’s weakness have soared to such extremes that they have to reverse hard.  The resulting heavy buying from dominant groups of traders will fuel gold’s mighty 2016 upleg.

Investment demand, or lack thereof, is what overwhelmingly drives the gold price.  Investment certainly isn’t the largest component of gold demand, a crown held by jewelry at roughly 4/7ths of the total.  But that is somewhat misleading, as gold’s investment merits are the primary reason Asians flock to gold jewelry.  But since global jewelry demand is fairly consistent, it’s not what drives the gold price on the margin.

Investment demand is much smaller.  According to the World Gold Council, it only accounted for 17.7% of global gold demand in 2013, 19.4% in 2014, and 22.0% in 2015 as of the end of the third quarter.  So call investment demand something like 1/5th of total world gold demand.  While that isn’t huge, it is a super-volatile demand category.  That’s where gold’s biggest demand swings emerge, driving its price.

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US Stock Bubble Bursting As The US Fed Begins To Shrink Its Balance Sheet

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By IM Vronsky – Re-Blogged From http://www.Gold-Eagle.com

All serious students of economics well know there are several factors that can inflate stock values…and even cause them to soar beyond common sense and corresponding fundamentals. However, there is one factor that dwarfs all others in its disproportionate material effect on pumping up stock prices beyond all historical and reasonable metrics:  AND THAT IS EXCESSIVE GROWTH IN THE FED’S BALANCE SHEET. 

One must recall that the S&P500 Stock Index suffered a bear market loss from 2007-2008…including the first two months of 2009.  During this bear market the S&P500 plunged well more than 55% by the time it finally bottomed in first week of March 2009.  Subsequently, the Fed relentlessly pumped up its Balance Sheet…with a view to stem the horrific two year rout in US stock prices.

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Fed’s Vast Gold/SPX Impact

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By Adam Hamilton – Re-Blogged From Zeal LLC

Yesterday’s Fed decision was one of the most anticipated ever, with much potential to really change the global financial-market dynamics going forward.  But thanks to the Fed’s incredible market distortions of recent years, Fed meetings spawning exceptional volatility is nothing new.  Fed decisions’ impacts on gold and stocks have been vast.  And this next tightening cycle should reverse their Fed-imparted directionality.

Before we get started, a big caveat is necessary.  While this essay was published the morning after that Fed decision, I had no choice but to research and write this draft before yesterday’s momentous 2pm event!  Producing one of these weekly essays takes a lot of time and effort, and even after writing 670 of them there was no possible way to start this process after the Fed and still make the publishing deadline.

That presented a challenging quandary, as the Fed’s decision and surrounding posture is all anyone is interested in this weekend.  I’ll discuss the specifics of everything the Fed did and said in great depth, as well as the resulting market impact and outlook, in Tuesday’s Zeal Speculator weekly newsletter.  But leading into that hyper-anticipated event, I wanted to do some background research on the Fed’s market impact.

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The Danger Of Eliminating Cash

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By Alasdair Macleod – Re-Blogged From http://www.Silver-Phoenix500.com

In the early days of central banking, one primary objective of the new system was to take ownership of the public’s gold, so that in a crisis the public would be unable to withdraw it. Gold was to be replaced by fiat cash which could be issued by the central bank at will. This removed from the public the power to bring a bank down by withdrawing their property. A primary, if unspoken, objective of modern central banking is to do the same with fiat cash itself.

There are of course other reasons for this course of action. Governments insist that they need to be able to trace all private sector transactions to ensure that criminals do not pursue illegal activities outside the banking system, and that tax is not evaded. For the government, knowledge of everything individuals do is necessary control. However, in the monetary sense, anti-money laundering and tax evasion are not the principal concern. Central banks are fully aware that the financial system is fragile and could face a new crisis at any time. That’s why cash in their view must be phased out.

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Stock Market Calls Fed’s Bluff

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By Michael Pento – Re-Blogged From http://www.pentoport.com

As the Fed nears its proposed first rate hike in nine years the stock market is becoming frantic. The Dow Jones Industrial Average is down around 10% on the year, as markets digest the troubling reality that our central bank may be raising interest rates into an emerging worldwide deflationary collapse.

The Fed normally raises rates when inflation is becoming intractable and robust growth is sending long-term rates spiking. However, this proposed rate hike cycle is occurring within the context of anemic growth and deflationary forces that are causing long-term U.S. Treasury rates to fall.

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Fed’s Stock Levitation Failing

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By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

The US stock markets just suffered an extraordinary plunge, shocking traders out of their complacency psychosis.  This cast the foundational premise behind recent years’ incredible stock-market levitation into serious doubt.  Traders are finally starting to question whether central banks can indeed manipulate stock markets higher indefinitely.  Any wavering in this faith has very bearish implications for stock prices.

Less than two weeks ago, the US’s flagship S&P 500 stock index (SPX) was up above 2100.  It finished August’s middle trading day just 1.3% below the latest record highs from late May.  At the time, the Wall Street analysts were overwhelmingly bullish and saw nothing but clear sailing ahead.  Predictions for the SPX ending this year above 2250 were ubiquitous, and retail investors were urged to aggressively buy stocks.

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The Punch Bowl Stays

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By Peter Schiff – Re-Blogged From http://www.Gold-Eagle.com

It is well known that I don’t think much of the ability of government officials to correctly forecast much of anything. Alan Greenspan and Ben Bernanke have made famously clueless predictions with respect to stock and housing bubbles, and rank and file Fed economists have consistently overestimated the strength of the economy ever since their forecasts became public in 2008 (see my previous article on the subject). But there is one former Fed and White House economist who has a slightly better track record…which is really not saying much. Over his public and private career, former Fed Governor and Bush-era White House Chief Economist Larry Lindsey actually got a few things right.

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1 is Too Many And 12 Are Not Enough

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By Gary Christenson – R-Blogged From http://www.Silver-Phoenix500.com

You have probably heard that phrase regarding alcoholics.  It applies elsewhere.

  • One hit of “meth” is too many, but when you NEED it, 12 hits are not enough.
  • One shot of “mainlined” heroin is too many, and you know the rest of that story.
  • One burst of monetary heroin – quantitative easing – is too much if central bankers want a financial system that does not debase their currencies. But central banks around the world are “shooting-up” with increasing amounts of fiat currency created from nothing.
  • A government sale or “lease” of 100 tons of gold is silly, but after years of deficit spending, dumping 1,000 tons on the market is not enough to stabilize fiat currencies.

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It’s Ugly If You Look Under The Hood

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Bill Holter   Bill Holter – Re-Blogged From http://www.Gold-Eagle.com

My plan for today was to write a very basic piece hitched to the one written yesterday “the money has to go somewhere”.  The plan was to point out that gold (and silver) will be the final destination for monies dislodged from crashing markets all over the world.  Along came the Q1 figures for U.S. GDP, a disaster on many levels.  So switching gears, let’s look at the first quarter, how quickly the economy has deteriorated and what it means in the future and in relation to the past.  I do plan to tie this together at the end because no matter how you look at it, gold is a magnet for what will be shaken loose.

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Major Stock Selloff Looms

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By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

The latest record highs in the US stock markets have unleashed astounding complacency.  Traders are utterly convinced that the past couple years’ massive Fed-fueled rally will continue indefinitely.  But with today’s lofty stock markets extremely overvalued, wildly overextended, and rampantly euphoric, a serious selloff is looming.  The prudent contrarians preparing for this inevitable major reversal are going to earn fortunes.

Though you wouldn’t know it from recent history, stock markets rise and fall.  They are forever cyclical, an endless parade of alternating bulls and bears.  Market history simply couldn’t be clearer on this.  Yet ironically after long bull or bear markets, the great majority of traders forget this.  They get caught up in their own emotions, and wrongly assume the long-in-the-tooth trend is the new norm that will endure perpetually.

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