Gold & Precious Metals

The Big Bullish Sign for Gold Stocks

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Posted by Ian Gordon : Longwave Strategies

on Monday, 25 June 2012 11:24

Trading volumes in Gold Mining stocks have fallen...and that's a good thing for what's coming. 


FOUNDER and chairman of Longwave Analytics and Longwave Strategies, Ian Gordon believes we're on the precipice of very difficult and frightening times and predicts complete financial collapse. 

Those periods of darkness though is when Gold Bullion really shines. Gordon, who recently published a special edition of his Investment Insights entitled "The Gold Rush of the 1930s Will Rise Again," believes that companies with gold in the ground now will be the ones to prosper. In this interview with The Gold Report, Gordon discusses where he thinks the Dow will bottom. 

The Gold Report: In a recent edition of Investment Insights, you charted the NYSE Arca Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI) of senior Gold Mining stocks, gold itself, the TSX Venture Exchange as a proxy for junior mining stocks and one particular gold company from Dec. 29, 2000. All four were equalized to $100 to make the comparison accurate. What did they show? 

Ian Gordon: I wanted to look at relative performance since 2000, when gold bottomed out at around $250/ounce (oz)—that was the beginning of the big bull market. The chart shows that the HUI has outperformed all the other benchmarks since 2000. Since then the value of the HUI has increased about 10 times. The second best performer has been gold itself, which has increased about six times. The Venture Exchange has increased just over two times. 

TGR: You've been monitoring the trading volumes of junior precious metal equities, which are down significantly from levels established in the previous decade. 

Ian Gordon: They're at about 20% of the volumes in 2008 when the Venture Exchange began to perform very well. That performance was enhanced by rising volume. Since its peak, which was in about April 2011 on the Venture Exchange, the volume has been falling quite dramatically, along with price. 

I maintain that is actually bullish rather than bearish because normally volume should follow price. What we have here is volume that is not going anywhere near where price is going. Volume has been decreasing in a downward market. People have been moving their money out because they are scared of the risk associated with investing in the junior stocks, but there has been essentially no buying coming into the Venture Exchange to offset the selling. 

TGR: You believe we're now in the winter of the Kondratieff Cycle and that it started in 2000 (http://www.longwavegroup.com/kondratieff-cycle).

Ian Gordon: It's not that I believe—I'm convinced. We're in the winter, the deflationary depression stage of the cycle when debt is essentially washed out of the economy. That process is always a very difficult period. This is only the fourth winter in the long wave cycle. The same process of debt deleveraging occurred in all of the previous winters. In 1837, the stock market peaked followed by a crash, which ushered in the winter depression. The same happened after 1873 and 1929. We are enduring the same process again, going through debt elimination, concurrent with the winter of the cycle. 

The reason we picked 2000 for the chart is because winters are always signaled by a peak in stock prices concluding the big autumn stock bull market. Some people will say that the Dow Jones Industrial Average actually made a higher high in 2007 and that's true. However, the speculative end of the market never got anywhere near where it had been in 2000. That's what happens in the final stage of the big autumn bull market—there's a massive amount of speculation. In the current cycle, speculation occurred in the NASDAQ. The NASDAQ is absolutely nowhere near where it was at its peak in March 2000. 

TGR: Is it typical for junior stocks to perform as well as they did in the winter of the Kondratieff Cycle?

Ian Gordon: I don't have a record of the actual trading in the junior sector at the beginning of the depression stage following the 1929 stock market peak. All I know is that the money was moving dramatically into the physical metal as well as into the producingGold Mining companies' shares. What we do know is during the 1930s, huge amounts of capital were employed to fund exploration and build gold mines throughout Canada and the United States. There were many mines developed here in Canada at that time and, according to the US Bureau of Mines, there were 9,000 gold mines operating in the United States in 1940.

There is the example of Homestake Mining. Homestake enjoyed very dramatic moves in its share price in the '30s even though the Gold Price was fixed at $20.67/oz until 1934, when it increased to $35/oz. Investors were Buying Gold stocks regardless of a massive decline in the Dow, which dropped 90% between 1929 and 1932. Homestake's share price fell to $65/share during the stock market crash of 1929, but was up to $83/share in 1930 to $138/share in 1931. By 1933, it reached $373/share. During those years the company paid out significant dividends as well. 

TGR: The Dow Jones is around 12,500 now. Are you surprised at all that the Dow continues to do as well as it's doing?

Ian Gordon: I'm pretty sure that the stock market is manipulated by the authorities. I know that people will say that's just conspiracy nonsense. However, Fed Chairman Ben Bernanke and former Chairman Alan Greenspan both have said they feel that stock prices are extremely important to the confidence of the American people. That confidence leads to confidence in the economy. If stock prices can be held at high levels, people feel wealthy when they look at their mutual fund statements and when they spend money. I don't believe that this kind of manipulation is sustainable. I'm a big believer that markets follow natural law. 

TGR: Once the Federal Reserve loses the ability to prop up the stock market, will we see a collapse and a rush into gold, much as we did in the early 1930s?

Ian Gordon: Yes. I believe that the Dow will bottom at around 1,000 points or less, mirroring the economic depression caused by the debt bubble collapse.

TGR: Allow me for a minute to play devil's advocate. The investors of the 1930s didn't have the options that investors now do. There are now currency markets. Investors can put their money in Renminbi, German bonds, Swiss bonds, exchange-traded funds, real estate or other commodities. Why is it going to be gold? 

Ian Gordon: Because gold is money. Unlike paper money, there's no debt attached to gold. The Chinese are Buying Gold. The central banks are Buying Gold. They're Buying Gold because it's the money of last resort. 

TGR: Do you expect interest rates to go up dramatically? 

Ian Gordon: Yes. The big debtor nations are having problems with interest rates. Look at Greece. Go to Spain and then Portugal. Interest rates in Spain are over 6%. Italy is getting up over 6%. Imagine what happens to the US if interest rates go to 6%. It's going to be a massive problem. The whole system is collapsing here. It's going to be very traumatic. The move to gold is going to be very dramatic as a result. The move for anybody who has gold assets in the ground is going to be very big, as it was in the 1930s. 

TGR: You've helped raise hundreds of millions of Dollars in equity financings for juniors that you feel are deserving companies. What are some examples of those?

Ian Gordon: Let me tell you what I think a deserving company is, first of all. Deserving companies are well managed with good assets in areas without major political risk. 

It's been much more difficult lately to find companies that you want to get involved with simply because political risk has increased in many parts of the world, Argentina and El Salvador, for example. 

TGR: Do you do site visits? 

Ian Gordon: I do fewer now than I used to. I'm getting to be 70 years old and I just find that a lot of traveling is a little onerous. I spend a lot of time discussing companies. I often make several calls a week to different companies that I have an interest in. 

TGR: You wrote in your paper, "What we must do is hold shares in companies with already good gold in the ground assets, properly managed, and with sufficient cash to last at least another 18 months, even if that means cutting back on planned exploration expenditures." Does that mean we can expect at least another 18 months of poor performance from junior precious metal equities? 

Ian Gordon: I don't expect that's going to happen, but I want to be prepared because it might be a difficult period for companies to obtain financing. Things in Europe are going to unravel pretty quickly. I don't think it's going to take 18 months for this thing to completely collapse, but it might. 

TGR: Do you have some parting thoughts for our readers, Ian, before I let you go? 

Ian Gordon: What we face here is something that is actually quite frightening: the breakup of the world monetary system, which is a credit-based system. I don't know how the economy functions without credit. It's very difficult and we are facing frightening times. But it's in these periods of darkness that gold really shines. Gold companies are going to come to the fore, just as they did in the 1930s, particularly the ones such as those that we've been discussing today with good gold-in-the-ground assets in politically safe locations. 

TGR: Thank you, Ian.

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The Gold Report25 Jun '12
The Gold Report is a unique, free site featuring summaries of articles from major publications, specific recommendations from top worldwide analysts and portfolio managers covering gold stocks, and a directory, with samples, of precious metals newsletters. To subscribe, simply complete the online form.


Gold & Precious Metals

How Currency Devaluation Destroyed the US Middle Class - 25 June 2012

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Posted by larry Edelson & Martin Weiss Uncommon Wisdom

on Monday, 25 June 2012 07:58

Devaluation hits the employed by effectively cutting their wages...

THE DIFFICULTIES experienced by the US middle classes can be, in my opinion, traced to the delinking of the US Dollar from gold in 1971, writes Nathan Lewis at New World Economics.

Now, I know a lot of people are going to say that is ridiculous. But, one reason I say that is, even by the US government's own statistics, the income of the median full-time male worker begins to stagnate at exactly that point, after rising by huge amounts during the 1950s and 1960s.

The median US full-time male income was $47,715 in 2010. In 1969, it was $44,455. The 1969 numbers are of course "adjusted for inflation," and you know that the government's inflation adjustments are thoroughly low-balled. With slightly more honest statistics, the trend would not be flat, but instead downward over the past forty years.

Another way of looking at it is in terms of ounces of gold. After all, gold was the monetary basis of the United States for 182 years, from 1789 to 1971, so why shouldn't we use that as a measure of how much people are really getting paid?

Our median worker, in 1969, made $8,668 nominal. But, in those days, the Dollar was worth 1/35th of an ounce of gold. It works out to 248 ounces of gold. In 2010, the Dollar's value was, on average, about 1/1224th of an ounce of gold, and the full-time male worker was making only 39 ounces of gold. This figure exaggerates the situation somewhat, due to the rapid decline of the Dollar vs. gold in recent years, but it describes, I would say, the economic reality of the situation.

Think of it like this: what if, in year 1, the average Mexican full-time male worker was making 8,668 Pesos per year, and the Peso's value was one peso per Dollar. The Mexican worker is making the monetary equivalent of $8,448. In year 40, after four decades of "easy money" and currency deterioration, the average Mexican worker is making 47,715 pesos, but the Peso's value has fallen to 35 pesos per Dollar. We can see that the Mexican worker is making only $1,363, and no amount of government statistical tomfoolery or "purchasing power parity" arguments will change that fundamental fact.

The fact that you can buy an iPad in Mexico City today, while forty years ago you would have to make do with a television set based on vacuum tubes, doesn't change the fact that the Mexican worker is making less. For some reason, we are able to see these things easily when I take the hypothetical example of a Mexican worker, but Americans are prone to states of denial when asked to consider that maybe a similar thing has been happening to them.

This is why you "can't devalue yourself to prosperity." "Prosperity" mostly means higher wages. But, each time you devalue the currency, wages tend to go down in real terms, even if they go up in nominal terms.

The Keynesians are quick to argue that their "easy money" policies will lead to a reduction in unemployment. Sometimes, this works (though not always). It often works because, when wages have been lowered via currency devaluation, then there is more demand for labor due to the lower price. Currency devaluation might help the unemployed, but it hurts the employed – always a much larger number – because their wages have been effectively cut.

Not only do things line up perfectly in terms of timing, but it makes sense on a theoretical basis too, because stagnation and indeed a real decline in wages is exactly the outcome you would expect from a funny-money policy.

However, that is not the only thing that happened to the US middle class in those years. In general, we have a slightly better tax system now than then, at least for upper incomes. I would like to see a much better tax system, more like an 18% flat tax of the sort that Steve Forbes and others have long promoted.

Reducing taxes on upper incomes may make the rich richer. However, I don't see how they make the middle class poorer – and that is the problem we are talking about here — unless perhaps the tax cuts reduce funding for government services. That has not been the case at all: tax revenue as a percentage of GDP has been about as pancake flat as anything can be for the last sixty years. The variation which does exist (notably the large decline in the last few years) is mostly related to economic performance, not tax policy changes. Government spending as a percentage of GDP is at historic highs today.

However, one thing that has happened over the past forty or sixty years is that taxes on lower incomes have increased. The payroll tax was 3% in 1960, or 6% if you consider both the employer and employee portions. Today, it is 6.2%, or 15.3% taking both sides and also considering Medicare. That's a big increase.

Sales taxes have risen from an average of 7.0% in 1983 to 9.6% in 2010. Unfortunately, the data becomes murkier going farther back, but it appears that this trend higher in sales taxes has been taking place since the 1950s.

Also, the basic exemption has been driven lower and lower, mostly due to inflationary "bracket creep." In 1950, a married couple was exempt on its first $1,200 of income. That might not sound like much, but in 1950, per-capita income was about $1,510. In 2010, per-capita income was $40,584, and a married couple was exempt on only the first $11,400 of it.

Overall, we've seen a gradual increase in the tax rates on the first $50,0000 of income. Today, for a family of four that makes over $36,900 — not exactly a high hurdle — you'll be paying 15% on marginal income, plus 15.3% in payroll taxes (directly or indirectly), plus about 10% in sales taxes, plus additional state-level and possibly city-level income taxes, plus property taxes (directly or indirectly), plus additional fees and taxes on your phone, gasoline, and whatnot. A single taxpayer hits this level at $14,650. That is, in my opinion, much too heavy a burden at this income level.

Another theme of the past four decades or so has been "outsourcing," first to South Koreans or Mexicans, but especially to Chinese or Indians in the past fifteen years or so. The problem is that a huge new supply of labor has been introduced to the world market economy. This tends to favor capital, i.e. business owners, which is one reason why US corporate profit margins have been recently near their highest in decades.

This has been a problem that we have been trying to deal with for literally the entire history of industrial capitalism. In general, I like to think of the "capital:labor ratio." This is more of an idea than an actual number. All economists agree that rising incomes are basically a reflection of rising productivity. You can't have it until you make it. Think of a person with "little capital." We tend to like hole-digging for these examples, so let's give them a stick. The person can't dig many holes with a stick. Their productivity is low. Now we give them more capital, such as a hand shovel. Their productivity increases. Now we give them still more capital, in the form of a mechanized backhoe. Their hole-digging abilities take a huge leap skyward. Now we give them a huge amount of capital, in the form of a giant excavator found in some mining operations. Their hole-digging abilities increase again. They have become much more productive.

In practice, "capital" usually doesn't take the form of these simplistic examples. It could be education, or investment in software research and development, or investment in a high-end hotel resort, instead of these outdated "man with big machine" notions. But, the basic idea still holds: when there is a lot of capital and relatively little labor, then individual wages tend to rise. The investment of a billion Dollars in a high-end hotel resort allows several hundred people to provide high-end hotel resort services, in a similar fashion that investment in a billion Dollars of digging equipment allows several hundred people to provide excavation services.

Although capital does flow internationally somewhat, I find that, in general, places with high levels of capital creation (i.e. a high savings rate and low taxes upon capital and income) also tend to have high levels of domestic investment. China takes all the awards here, as it has a savings rate of about 50%, which is extraordinary. Chinese people are climbing the ladder from stick to shovel to backhoe to giant excavator very quickly as a result. The US has a very low savings rate, commonly under 5%, which contributes greatly, I think, to the capital-starved character of the US economy today.

In short, "labor" has effectively increased dramatically in the US due to "outsourcing," while "capital" is scarce due to a low savings rate and some of the worst treatment of capital, in terms of taxes, in the developed world.

None of the things that we have enumerated thus far really has much to do with the so-called "1%." However, particularly in the last few years, the character of US policy has become distinctly corporatist, favoring large-scale theft ("bailouts") particularly by the financial sector, although also by the defense, education, and healthcare sectors in my opinion. Many corporations have also used their political influence to allow themselves to engage in behavior that is destructive to the middle class, such as predatory or just plain excessive lending, for homes, autos and education, which might otherwise have been curtailed. The US healthcare system has also become effectively predatory upon the middle class, claiming 17% of GDP to provide what costs 5-8% of GDP in other developed countries.

In short, certain businesses are using their influence of the political system to take the government's money. And, since it is mostly the "99%" who provide this money, via their tax payments, this constitutes theft from the middle class by the oligarchical class. So far, this theft has been financed essentially by debt, so the effect on the middle class has not been felt directly. But, debt will need to be paid, and it is the taxpaying "99%" that will do the paying.

Those four elements – devaluation of wages by currency mismanagement; mediocre tax policy including a gradual increase in tax rates on lower incomes; the deteriorating capital:labor ratio; and crony capitalist theft and predatory activities – constitute the basis for the deterioration of the US middle class today. How could they be resolved?

  1. A policy of stable money, in practice returning to a gold standard system as was used for most of US history until 1971.
  2. Major tax reform, including both a reduction in top rates and a dramatic reduction in taxes on lower incomes
  3. The intent to improve the capital:labor ratio, mostly by way of removing obstacles to capital accumulation, and promoting a much higher savings rate. Note that this is completely contrary to Keynesian notions focusing always on increasing "consumption."
  4. Ending all "crony capitalist" payoffs, and regulating corporate activity that tends to be destructive of middle-class welfare.

Unfortunately, we aren't anywhere near having a rational discussion about any of these topics. Democrats, for the most part, don't even understand them. Republican thinkers often do understand them, but rarely talk about them as it tends only to result in an explosion of Democratic angst.

I think it would be nice if Republicans could focus their attention a little more on the median and less-than-median workers and families in the US Explain how policies such as the ones above will help them more than any tax-and-spend scheme devised by the Democratic party.  Unfortunately, Republicans have made themselves largely unelectable due to the fact that Republican governments tend to forget everything they said in the election, and instead, once in office, embark on an orgy of war, police state expansion, and even bigger payoffs to their crony capitalist buddies.

Perhaps, before this crisis era is through, the US political system will get back on track again. But, in the end, it might be some other country that manages to find the Magic Formula for wealth and prosperity – the kind of wealth and prosperity that "lifts all boats," as it used to be said.

This article was originally posted at Forbes.

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Nathan Lewis25 Jun '12
Formerly a chief economist providing advice to institutional investors, Nathan Lewis now runs a private investing partnership in New York state. Published in the Financial Times,Asian Wall Street JournalHuffington Post, Daily YomiuriThe Daily ReckoningPravda and by Dow Jones Newswires, he is also the author – with Addison Wiggin – of Gold: The Once and Future Money (John Wiley & Sons, 2007), as well as the essays and thoughts at New World Economics.


Gold & Precious Metals

How to Profit From Falling Gold, Silver and Commodities A Timely Dialog Between Martin D. Weiss and Larry Edelson

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Posted by Larry Edelson & Martin Weiss Uncommon Wisdom

on Monday, 25 June 2012 06:31



The list of commodities slammed by global selling is growing by the day.

Meanwhile, the list of sovereign countries and giant banks downgraded by major rating agencies is also getting a lot longer — 15 megabanks downgraded by multiple notches in one fell swoop ... Spain downgraded to the brink of junk territory ... India and its banks also risking a downgrade to “junk” ... plus Italy, France, the United States and even Germany on the chopping block for future downgrades!

Most important, the sum total of losses piling up in the portfolios of investors is expanding geometrically.

This is precisely what Weiss Research’s Larry Edelson has been warning you about — repeatedly and consistently. He’s the only gold bug I know who got out in time and has even made money in the decline.

Some of Larry’s subscribers, anxious to pile into gold when it was soaring, were initially unhappy, even angry at Larry’s bearish calls. But now that they see the big losses he helped them avoid, they’re absolutely delighted.

Of course, we don’t know how much money each subscriber makes or loses — we’d need to see their broker statements for that. But Larry has given us copies of his own statements from his personal test trading account.

Result: Even after deducting all commissions and costs, Larry has grown his account from a net investment of $70,000 to $142,879 — more than a double in six months’ time.

So I asked Larry to tell us how he did it, how our readers can do it, and what he thinks will happen next. Here’s a transcript of our dialogue:

Larry Edelson: I made most of the money in precious metals and commodities.

Martin Weiss: But precious metals and commodities have been falling, just like you warned. So how is that possible?

Larry: I never said I was buying. I actually made most of the money playing the downside — using investments that are designed to rise when commodities fall.

Martin: Isn’t that unusual?

Larry: Unusual? Perhaps. Difficult? Absolutely not!

Martin: The obstacle seems to be that most of our readers believe that the big-picture, long-term trend — in gold, silver, oil and other resources — is to another massive move to the upside.

Larry: So do I.

Martin: Well, that sometimes makes it hard for them to get their mind around the idea of profiting from market declines.

Larry: I understand, but once you can overcome that hang-up, trading for large profits on the downside is actually very simple and straightforward.

Martin: How long do you intend to hold your bearish positions?

Larry: I’ve always said: Never fall in love with your bullish positions; when the market gets too frothy, take your profits and run. Well, the same goes for bearish positions.

Precisely when these resource markets look like they’re about to go to hell in a hand basket — that’s when you’ll see them launch the next big leg in their secular bull market.

Martin: How do you know, ahead of time, when and how that big turn is going to happen?

Larry: No one can pinpoint exactly when. But I think I can give you a pretty good idea of how!

Right now, Europe is collapsing before our eyes — banks flooded with withdrawals ... sovereigns paying through the nose for borrowed money ... both getting downgraded left and right.

But we still haven’t seen a Lehman moment — the outright default or failure of a sovereign nation or megabank.

That’s when credit markets will freeze up, threatening a global financial meltdown.

That’s when the big central banks of the world are likely to unleash their next massive round of unadulterated money printing.

And that’s when you’ll see resource markets bottom and start to turn.

But don’t prematurely anticipate that move. Because until the Lehman moment does come, all the central bankers can seem to do is to meet ... debate ... and produce a lot of hot air.

Martin: There’s no consensus, no political will to act.

Larry: And no quick end to the declines in gold, silver, oil or other resources. This is why I think they can be a great, near-term profit opportunity — they’re so predictable. And it’s also why I believe the big turn could be an even GREATER opportunity.

Martin: Why greater?

Larry: For three reasons. Even if I’m just half-way right ...

You should be able to pick up tremendous bargains in resources when they near a bottom.

Then you should see a dramatic bounce that can produce unusually large profits in a relatively short period of time.

And next you should get a bull market in resources that surpasses virtually any other in history.

Martin: Still, gold and silver are plunging right now. Doesn’t that bother you?

Larry: I’m actually delighted. Remember: The more they fall the more money we stand to make with bearish investments.

Just last week, for example, I saw the European Central Bank huddling in its corner and the Fed unwilling to take any additional steps to help out.

I saw the European economies sinking and the U.S. economies slowing — not good for gold and even worse for silver, which is largely an industrial metal.

So I bought an inverse ETF on silver with 2x leverage — an investment that’s designed to give you 20% gains for every 10% decline in the price of silver.

Just 48 hours later, that position was up about 12%. And that’s just one of SEVERAL ways to profit from declines in precious metals and other commodities. I also use other instruments that can give 10x leverage and 16x leverage — all with strict risk control.

Martin: Please tell us more about these today. But right now, let’s zero in on what’s happening and give our readers critical information they need to help safeguard their assets.

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Worldwide Liquidation of Assets 
Driven by Fear and Panic

Larry: Here’s the scoop ...

Spanish bond markets are still crashing, and Spain has just been forced to pay the highest interest rates in euro history — more than DOUBLE its 2-year rate of just three months ago!First, the recent Greek elections have done nothing to stem the euro-zone crisis.

Its 10-year bonds (see chart) have also collapsed in price, driving yields past the red-light-danger level of 7%.

Martin: When this happened to Greece, it was dangerous. But Spain’s economy is FIVE times larger than Greece’s and five times more dangerous.

Larry: Yes, but if you think the fall of Greece and Spain are a threat, brace yourself for Italy’s demise. Italy’s economy is nearly FOURTEEN times larger than Greece’s — bigger than Russia’s, Canada’s or India’s.

Or, just add up the GDPs of Switzerland with all its banking, machinery and precision instruments ... Sweden with all its telecom and autos ... and also Saudi Arabia with its huge oil exports ... and you STILL would have an economy that’s a lot smaller than Italy’s.

Martin: But when we say Italy is heading down the same path as Spain and Greece, how many people believe that?

Larry: Not too many, but more than before! Three years ago, when we said Greece was going to default, nearly everyone thought we were nuts. Then, last year, when we predicted a Spanish meltdown, maybe a handful of people took us seriously. And now, our forecast that Italy will be the next domino doesn’t sound nearly as extreme as it might have in the past.

Martin: All this is coming to a head. But tell us what you think the trigger mechanism might be for a financial meltdown the likes of which we saw in 2008.

Larry: As you explained in Money and Markets recently, there are two possible triggers:

Trigger #1 is mass withdrawals from banks. And right now, despite the supposedly positive results in the Greek elections, the withdrawals are continuing to spread — not only in Greece, but also in Spain, Italy and Cyprus.

Trigger #2 is a collapse of sovereign bonds. That can make it impossible for governments to borrow the money they desperately need.

Martin: Explain why they’re so desperate.

Larry: Say you’re the finance minister of Greece or Spain, for example.

For years, you’ve been borrowing from Peter to pay Paul — to roll over your country’s debts that are continually coming due.

And when you can’t borrow in the open markets, you figure you can get the European authorities to bail you out.

But that comes at an extremely high cost: You have to give up a piece of your sovereignty, the very essence of your country’s existence as an independent state.

And now, you’re down to just two choices. Either you ...


  • Default and shut yourself out of the financial markets for years to come — a sure-fire ticket to depression. Or you ...
  • Accept more bailouts from Europe, give up your sovereignty and slap your people with austerity measures, driving millions to riot on the streets.


This is the Catch-22 Greece is already in. And it’s the same Catch-22 that will soon envelop Spain and Italy.

Martin: Are the central banks going to jump to the rescue before it goes that far?

Larry: Yes, but not decisively!

As I’ve warned, the European Central Bank (ECB) has so far decided it will NOT yet print more money to bail out Europe’s wobbly financial institutions — or even busted countries like Spain and Italy.

Meanwhile, our own Federal Reserve stood pat last week, taking virtually no action to help the U.S. economy and explicitly ruling out any direct help for Europe.

That’s a big blow to Europe that will be felt this week, as countries like Spain and Italy have even more trouble auctioning their bonds to raise cash.

Martin: Is this why gold is falling?

Larry: Yes. Gold IS signaling a massive crisis ahead — but not the kind of crisis that you normally associate with gold. Instead, it’s signaling the kind of rampant FEAR and PANIC that causes worldwide liquidation of assets and a stampede into cash.

This is why gold is breaking down through important support levels. Investors are scared out of their wits and they’re even liquidating gold. Ditto for silver and crude oil.

Martin: Earlier, you said you’re making money from these declines? Can you give us some specific examples?

Larry: Sure. I started trading a test account on November 7 of last year with a net investment of $70,000.

I made $7,815 in platinum in just 40 days, a 102.9% return.

I made $5,770 in gains in another key commodity in just two months, a 104% return.

I had open gains of $9,072 in an investment designed to profit from movements in the U.S. dollar (in 24 days), $3,414 in heating oil (1 day), $4,610 in crude oil (2 days), $8,115 in cotton (24 days), plus some additional gains and some losers as well.

All told, including both winning and losing trades, the ending balance on May 31 of this year, after deducting commissions, was $142,879.39.

Of course, there have been — and always will be — losing trades. And past performance should never be considered an assurance of future results.

But what this experience underscores is that these are some of the most exciting times ever to be investing in these markets.

Martin: And most of this was in falling resource markets.

Larry: Yes. I achieved these results when central banks were not coming out swinging, when they were not yet pumping up the market with a whole new round of printed money.

But there’s no question in my mind that they will ultimately print trillions more in fiat money when a major failure strikes. And when they do, I have every reason to believe the profit potential in these markets will be even greater.

Martin: Tell our readers more about the instruments they can use — whether they follow your signals or not.

Four Instruments for 
Trading Natural Resources

Larry: You can start with physical gold and silver coins and ingots.

If you had bought gold when I first recommended it at $255 per ounce in 1999, you’d be sitting on a 550% gain. That’s enough to turn every $25,000 invested into more than $137,000. And I think we will see a similar opportunity in gold’s next leg up.

But instead of merely buying and holding, I’m trading at key turning points. For example, I reduced and fully hedged my bullion positions before this decline began. Plus, I intend to load back up — and unwind my hedges — as gold hits a major bottom.

Martin: All without any leverage!

Larry: Right. For some leverage, I use natural resource exchange-traded funds (ETFs). They can give you double or triple leverage. In other words, they can generate 20% or even 30% profits for every 10% change in resources prices.

Of course, leverage is a double-edged sword: It can also multiply your losses. That’s one reason I don’t recommend them for buy-and-hold investors. But they ARE great medium-term trading vehicles.

All told, I count more than 251 ETFs you can use to grab huge profit potential — and the profits can be impressive, to say the least!

Martin: Give us some examples.

Larry: When the grain markets were staging some of their smaller, initial rallies, the PowerShares DB Agriculture ETF surged by 24.3%.

And with a recent move in gold using my favorite leveraged gold ETF, you could have recently walked away with gains of up to 63% in just 90 days. At that rate you could multiply your money more than three times over in a single year!

It gets even better: A leveraged silver ETF recently surged by a whopping 227% in just three months — more than a TRIPLE in a mere 90 days!

Picking the right instruments at the right time is never an easy task. And I could also give you examples of big losers. But you should know that the examples I just gave you were in choppy markets without massive new money printing driving prices sky-high.

My third strategy is to go for up to 10x leverage by trading warrants on natural resource stocks.

Martin: Similar to options?

Larry: In some ways, yes. But warrants offer some major advantages that options do not.

Unlike options, they represent actual equity investments in the underlying company. So you can buy and sell them just like you do stocks — in an ordinary stock brokerage account, usually without additional approvals from your broker.

And warrants are often available for far longer time periods than options — sometimes as much as five years. As a result, they’re generally not as sensitive to the passage of time as options are.

Even better, because warrants are so little understood, special opportunities can sometimes arise to buy them at substantial discounts, giving you the chance to make a much larger profit than you would otherwise.

Martin: Bullion, ETFs and warrants. That’s three different instruments you can use.

Larry: Yes, and I believe that if you use only those three, your profit potential can be enormous! Plus, as an extra bonus, I’m also using disciplined futures trading!

Martin: Why futures?

Larry: First, because of liquidity! This is the oldest, most liquid, widely traded investment market on the planet. It is far more liquid than equities or equity index ETFs.

As a rule, this liquidity makes it possible for me to get into AND out of the market more easily — and with fewer price distortions — than with any other instruments.

And that advantage, in itself, gives me more freedom to apply tactics that are designed to reduce my risk and maximize my profit potential.

Second, futures offer unbeatable leverage. For example, for as little as $10,125, you can control a contract of gold, currently worth about $163,000 — giving you more than 16-to-1 leverage. For every $1 the price of gold rises, you stand to make up to $16!

Third, futures don’t lose value in sideways markets the way options do. So if, for some unexpected reason, it takes longer for our forecast to come true, it’s a lot easier to wait — to give the market some more time to respond to the powerful fundamental forces we see driving it up or down.

Fourth, futures are all-weather investments. Because of the way futures markets are set up, and because they are so liquid, you can bet on market declines just as easily as you can bet on a market rise.

Fifth — and most important — I find it far easier to manage risk in futures than in virtually any other market.

Martin: Why is that?

Larry: One reason is that futures markets trade virtually 24/7 and almost exclusively on an electronic basis. This means that you no longer have to rely on a floor broker to hold your order and execute it. It’s all done automatically and computerized.

It also means that when you place what are called “good-till-canceled” stops, your position is automatically monitored and protected virtually around the clock. That doesn’t guarantee against losses. But it does let me manage risk very efficiently.

Thanks to these improvements, I can place a stop order and sleep nights in the knowledge that, barring some extremely rare event, my stop order will almost certainly lock in my profit — or limit my losses.

Martin: How can our readers do this?

Larry: No matter what, you should learn more — not only about the profit potential but also about the risks and how to manage them.

For now, play mostly the downside moves until we get a Lehman-type event and an aggressive central bank response. Then, get ready to play the upside.

Martin: Thanks, Larry! We look forward to your continued success!

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Gold & Precious Metals

Gold Daily and Silver Weekly Charts - Goldman Says 'Sell' And So They Do

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on Friday, 22 June 2012 07:18

June 21/12 Stocks were shaky but unchanged this morning, when Goldman came out and issued a 'sell' on the SP 500.

This shook the markets, but what really started them sliding were rumours that spread across the financial news channels and trading desks that Moodys would downgrade 17 global banks tonight, with a three level downgrade on Morgan Stanley.

Now whether this was true or not, the selling increased, and stocks and commodities went out on the lows in a steady trade. 

I suspect quite a bit of this was engineered by some clever boys with an eye to the Russell index rebalancing tomorrow, and the end of month tape painting next week. They were playing games with the financials trying to suck in the bulls before the Goldman announcement for example.

But let's see what happens.

I took out the triple ETFs I owned today, including TZA and FAZ, since they had nice gains and I don't like to hold them except for brief trades.

I won't call bottom here for sure, but I did add a silver position for the first time in a while at this price below 27.




Gold & Precious Metals

Gold & Silver on the Verge of Something Huge!

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Posted by Chris Vermulen - GoldandOilGuy.com

on Thursday, 21 June 2012 08:48

Gold and silver have taken more of a back seat over the past 12 months because of their lack of performance after topping out in 2011. Since then prices have been trading sideways/lower with declining volume. The price action is actually very bullish from a technical standpoint. My chart analysis and forward looking forecasts show $3,000ish for gold and $90ish for silver in the next 18-24 months.

Now don’t get too excited yet as there is another point of view to ponder…

My non-technical outlook is more of a contrarian thought and worth thinking about as it may unfold and catch many gold bugs and investors off guard costing them a good chunk of their life savings. While I could write a detailed report with my thinking, analysis and possible outcomes I decided to keep it simple and to the point for you.

Bullish Case: Euro-land starts to crumble, stocks fall sharply sending money into gold and silver which are trading at these major support levels which in the past triggered multi month rallies.

Bearish Case: Greece, Spain and Italy worth through their issues over the next few months while metals bounce around or drift higher because of uncertainty. But once things have been sorted out and financial stability (of some sort) has been created and the END OF THE FINANCIAL COLLAPSE has been avoided money will no longer want to be in precious metals but rather move into risk-on.

Take a look at the gold and silver charts below for an idea of what may happen and where support levels are if we do see money start to rotate out of metals in the next 3-6 months.



Over the next few months things will slowly start to unfold and shed some light on what the next big move is likely going to happen to gold and silver.

The price movements we have seen for both gold and silver indicate were are just warming up for something really big to happen. It could be a massive parabolic rally to ridiculous new highs in 2012/2013 or it could be a huge  unwinding of the safe havens as countries sort out their issues and the big money starts moving out of metals and into currencies and stocks.

Only time will tell and that is why I analyze the market multiple times per week to stay on top of both long term and short term trends. So if you want to keep up with current trends and trades for gold, silver, oil, bonds and the stocks market checkout TGAOG at:http://www.thegoldandoilguy.com/free-preview.php

Chris Vermeulen



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