Best of the Week
Most Popular
1. Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - Nadeem_Walayat
2.Gold Price Focusing on May Cycle Bottom - Jim_Curry
3.Silver, silver, and silver! There’s More Than Silver, People! - P_Radomski_CFA
4.Is the Malaysian Economy a Potemkin Village - Sam_Chee_Kong
5.Stock Market Study Shows Why You Shouldn’t “Sell in May and Go Away” - Troy_Bombardia
6.A Big Stock Market Shock is About to Start - Martin C
7.A Long Term Gold Very Unpopular View - Rambus_Chartology
8.Stock Market “Sell in May and go away” Study When Stocks Are Down YTD - Troy_Bombardia
9.Global Currency RESET Challenge: Ultimate Twist - Jim_Willie_CB
10.The Coming Silver Supply Crunch Is Worse Than You Know - Jeff Clark
Last 7 days
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18
More on that Gold and Silver Ratio 'Deviant Conundrum' - 13th Jun 18
Silver Shares? Nobody Cares - 13th Jun 18
What Happens to Stocks, Forex, Commodities, and Bonds When the Fed Hikes Rates - 13th Jun 18
Gold and Silver Price Setting Up for A Sleeper Breakout - 13th Jun 18
Tesla Stock Analysis - 12th Jun 18
What Happens Next to Stocks when Russell Goes up 6 Weeks in a Row - 12th Jun 18
Gold vs. Stocks: Ratios Do Not Imply Correlation - 12th Jun 18
Silver’s Not-so-subtle Outperformance - 12th Jun 18
Why You Should Brace Yourself for Big Financial Changes - 11th Jun 18
Inflation to Skyrocket When Fed Reverts to New QE & Interest Rate Cuts - 11th Jun 18
Stock Market Topping Pattern or Just Consolidation? - 11th Jun 18
Study: What Happens Next to Stocks When the Put/Call Ratio is Very Low - 11th Jun 18
G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - 11th Jun 18
SPX Unshackled - 11th Jun 18
When Trump Met Fibonacci And Won - 11th Jun 18
FREE Theme Park Entry with Cadbury's Choc's! Legoland, Alton Towers, Chessington.... - 11th Jun 18
Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - 10th Jun 18
End of the World Stock Market Chart! - 10th Jun 18
All US Homes Are Overvalued - 10th Jun 18
Thorpe Theme Park London Car Park Exit Nightmare - Drivers Beware! - 10th Jun 18
Gold Price Summer Doldrums - 9th Jun 18
How to Prepare for Economic Uncertainty with Gold and Silver - 9th Jun 18
5 "Tells" that the Stock Markets Are About to Reverse - 9th Jun 18
Billionaire Schools Teacher in NAFTA Trade Talks - 9th Jun 18
Land Rover Discovery Sport ECO Mode Real World Driving MPG Fuel Economy - 9th Jun 18
Crude Oil Bullish Weekly Reversal vs. Bearish Monthly Reversal - 8th Jun 18
Fed’s Interest Rate Hike is Short term Bearish for Stocks - 8th Jun 18
The Deviant Conundrum Called Silver - 8th Jun 18
Pleasure Island Theme Park Cleethorpes, Last Day Trip Before it Closed Down - 8th Jun 18
America’s One-sided Domestic Financial War - 8th Jun 18
Debt Consolidation Advice: When and Why to Consolidate - 8th Jun 18
Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - 8th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

What Billionaire Investors Are Doing with Gold While Your Not Watching

Commodities / Gold and Silver 2016 Jun 23, 2016 - 03:09 PM GMT

By: MoneyMetals

Commodities

With each passing day, systemic risks in the financial system become greater. Smart money insiders and billionaire investors are taking note – and taking defensive actions.

Mega-billionaire Carl Icahn, whose long-term track record is unrivaled, recently warned that “there will be a day of reckoning unless we get fiscal stimulus.” Icahn’s hedge fund is betting on a day of reckoning scenario. He has gone 150% net short the stock market while holding commodity-related positions to the long side.


International currency speculator and leftist financier George Soros has slashed his fund’s overall equity holdings by 25%. Like him or not, Soros is no dummy when it comes to the financial system. He is an establishment insider who apparently sees turbulent times ahead. He owns a not insignificant amount of gold, and his largest single equity holding now is Barrick Gold (NYSE:ABX), a major gold mining company.

“The system itself is at risk,” warns bond market wizard Bill Gross. In his latest market commentary, Gross cites “artificially high asset prices and a distortion of future risk relative to potential return.”

Prices for financial assets such as stocks, bonds, and real estate investment trusts are artificially high because interest rates are artificially low. Thanks, of course, to the Federal Reserve. Markets are floating on a sea of leverage made possible by eight years of ultra-accommodative monetary policy and the widespread belief that the Fed will step in as a buyer of last resort to support asset prices.

Former Fed chairman Alan Greenspan helped fuel a stock market bubble in the late 1990s and handed off a burgeoning housing bubble to his successor Ben Bernanke. Ironically, Greenspan has since sought to position himself as something of an elder statesman for fiscal responsibility. To his credit, he now recognizes that the biggest, most dangerous bubble today is that of runaway government debt ahead of a looming Baby Boomer retirement/entitlement crisis, and he has turned quite bullish on gold.

“We should be running federal surpluses right now not deficits. This is something we could have anticipated twenty-five years ago and in fact we did, but nobody's done anything about it. This is the crisis which has come upon us,” Greenspan said in a recent interview. “We're running to a state of disaster unless we turn this around."

With some $200 trillion in projected unfunded liabilities, the federal government will have to default on some of its promises directly or by inflating away the value of those promises. That’s the big picture. The next cyclical downturn and potential crash could be triggered by a more immediate event in the economy or in the over-leveraged financial markets.

Triggering Event: Economic Recession

The front page of the May 30th Barron’s features the headline, “The Stock Market Won’t Crash – Yet.” Author Gene Epstein argues that stocks won’t crash in the near future, because “the odds of a recession are now quite low.” Not just “low,” mind you, but “quite low”!

Gold never tarnishes, and its price has advanced nearly 20% since Barron’s scared investors out of precious metals with facile predictions of Fed rate hikes.

Tweet This

If the real-world economic data could respond, it would beg to differ. Manufacturing activity recently suffered its biggest drop since 2009. The New York Purchasing Managers Index swooned in May to suffer its biggest monthly drop in nine years.

And the Labor Department’s most recent jobs report, released on June 3rd, revealed that employers hired the fewest new workers in nearly six years. Corporate profit margins peaked several months ago and are turning down.

These are exactly the types of conditions that presage a recession. That, in turn, could trigger massive new fiscal and monetary stimulus measures that weaken the dollar and drive safety-minded investors into precious metals.

But the same Wall Street establishment publication that tells investors recession risk is “quite low” also ran a gold-bearish headline in its January 4, 2016 issue. “Gold Likely to Stay Tarnished,” Barron’s proclaimed.

To that, I respond: Get real! Gold never tarnishes, and its price has advanced nearly 20% since Barron’s scared investors out of precious metals with facile predictions of Fed rate hikes.

Triggering Event: Rising Interest Rates

Interest rates will at some point have to go up. Escalating credit concerns and inflation fears could cause markets to drive up bond yields, regardless of whether the Fed hikes its benchmark rate.

Even just a 1 percentage point rise in bond yields from their current low levels would cause $1 trillion in capital losses, according to a Goldman Sachs analysis. Rising interest rates are disastrous for bondholders and hazardous to all financial assets.

To the extent that they are associated with rising inflation expectations, however, rising interest are bullish for hard assets. This has been proven during past rising rates cycles, the last major one being during the late 1970s.

Triggering Event: Derivatives Blow up

By one estimate, the derivatives market has exploded to a mind-boggling $1.5 quadrillion, more than double the dizzying heights of 2007.

Of course, these aren’t actual assets. Total world GDP is a mere $78 trillion; $1.5 quadrillion in wealth does not exist. Derivatives represent layers of speculative bets and hedges on actual assets.

The size of the derivatives market shows just how ridiculously leveraged the system has become. The gold market is a case in point. Physical gold now represents just a tiny fraction of the “gold” that gets traded in futures markets. Earlier this year, leverage exploded to more than 500 to 1.

A blow up in the futures market or other derivative markets could cause a “run on the bank” and the financial system to be thrown into chaos. The U.S. dollar could either crash or surge in a financial panic, depending on how it unfolds. But the official response to a financial crisis will be – as it always has been – to flood the system with more liquidity; i.e., inflation.

Among the assets that will be left standing are physical precious metals held outside the banking and brokerage systems.

Check back next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening and have a great weekend everybody.

By Mike Gleason

MoneyMetals.com

Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2016 Mike Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules