Mike Burnick: Good afternoon, everyone, and welcome again to this online strategy briefing for Gold and Silver Trader. I’m Mike Burnick and let me introduce Mr. Larry Edelson, editor of Gold and Silver Trader. Hey, Larry, it’s good to speak with you again.
Larry Edelson: Hi, Mike, and thanks for hosting again today and thank you, members, for attending today. I see we have a full house. That’s great. It’s always a pleasure to speak with you. One of the highlights of this service for me is the ability to speak with you and to answer your questions. We’re going to be doing a lot of that today but first I do have some charts that I do want to go through with you.
Mike: All right, so let’s dive right in and take a look at your presentation.
Larry: Okay. I want to talk about deflation. It still has the upper hand. Now, I do know that we’ve seen some pops higher in gold that have fizzled out. We’ve seen a rally in oil from the $42 level up to as high as $62 and we’ve seen the bond markets in Europe start to sell off and there’s quite a bit of talk out there about an inflation scare and I want to emphasize to you that we’re not there yet. All we’re seeing is a bounce in certain commodities off of deeply oversold conditions. We are starting to see the beginnings of the sovereign debt crisis which I said all along would start in Europe. But there’s a difference when bond markets fall and interest rates start to rise because of inflation which we don’t have and because investors are losing confidence in government and what we’re seeing is the beginnings of losing confidence in government. You’re going to see more of that unfold over the next several months, the next several years and it doesn’t necessarily mean that we’re going into hyperinflation. Deflation still has the upper hand.
As a matter of fact, it’s getting worse. All the economic statistics seem to support spiraling prices lower. We’re seeing capital controls, heavier capital controls in Greece, France, and Austria. And since our last webinar, Greece has limited cash transactions to 1,000 euros. France is doing the same. Austria is doing the same. Switzerland is doing the same. Germany is considering the same thing. What that means is they know that a bank run is coming and that a run on government is coming so they’re implementing in baby steps, if you will, more and more capital controls.
They’re also experimenting with all electronic currencies. I know this as a fact. I have evidence that I’ll be writing up shortly about that that you’ll see in my MAM column and behind the curtains in Europe they are moving more quickly than I ever expected towards an electronic currency and the elimination of cash. That is deflationary. Believe it or not, that is deflationary because people are running scared. They’re starting to take their cash out of the banks and they’re hoarding it.
We have similar controls underway in Switzerland and Germany as I just mentioned. Denmark is outright experimenting with electronic currency right now and Britain’s Gordon Brown just two weeks ago recommended the same for Britain and the European Union. He came out and said we need to move to electronic currencies and eliminate cash. Why? They want to track it. They want to track everything you do and tax everything you do and negative interest rates in Europe aren’t having the effect that they want because people are pulling their cash out of the banks.
So there’s a lot going on behind the scenes that isn’t being discussed by most analysts and it’s really very, very deflationary. It translates into the hoarding of cash by investors and that’s dollar bullish by default because the dollar is still the world’s reserve currency. It’s bearish on inflation and it’s bullish on deflation. So deflation is not over by any stretch of the imagination. I want to make that perfectly clear. It’s going to get worse before it gets better.
One other very important thing that very few people are talking about is what’s called money velocity. That’s the turnover, if you will, of money. This chart here is from the St. Louis Federal Reserve of money velocity in the United States, a broad definition of money which is M2, and you can see that it’s actually been declining since the stock market tech wreck of 1999. No big deal, in the sense that it’s been declining for that long. But if you look at what I’ve circled in red for you, the velocity or turnover of money through credit mechanisms, through shadow banking, through new loans, repayment of old loans, investment cycles into the markets, out of the markets is slowing dramatically. It’s below, way below the low seen way back in 1965. When velocity collapses like this, it’s deflationary, period. Money’s not turning over, trading hands, if you will, as quickly as it should be. You cannot get high rates of inflation when money turnover is
Let’s go right on to some key charts I have for you. Big picture outlook that I want to reemphasize in your minds because not all that much has changed since we last spoke. The major trends are still very much intact and let’s start with gold.
This chart here is based on what’s called median line and cyclical lines and analysis and you can clearly see, although we’ve had a few bars of rally there at the very end, gold is still in a downtrend. No ifs, ands, or buts about it. The only question now is what path will gold take towards new lows. Will it take path A which means we’re going to maybe stall right around here as we’ve done and head right into the June lows that I’ve been forecasting? Or are we going to get what’s called a cycle inversion, another rally up to as high as 1300 and then collapse from higher levels?
It’s 50/50 right now. I personally, based on all available evidence, am leaning towards path A. Gold in the last two weeks has tried to rally but it’s given up those gains very quickly. It’s acting very heavy in traders’ talk. It just can’t muster enough strength to go up. Today is a pretty critical day. We’ve gotten down to 1202 in gold, 1198. If that gives way, it’ll be another piece of evidence that path A is the path that gold will take. The important point here is regardless of whether we take path A lower or path B lower, gold has not bottomed. That’s the key point here and that’s, again, because deflation still has the upper hand.
Let’s go to the next chart. Silver, same thing here. Clearly in a downtrend, not as downwardly sloped as gold perhaps but still in a downtrend and the only decision here that silver is going to make is whether it’s going to take path A into a late June low or rally one more time a little bit higher and then fall into the next cyclical target which is October. We’re on the cusp right now. We will know within days whether it’s going to be path A or path B. That I can tell you and I will alert you in your issues which path has the upper hand, A or B. We’re very close to gold making a tipping point decision, silver also, whether it’s going to be path A or path B and I will keep you fully informed.
Let’s take a look at the next chart. Here’s the dollar. We’ve seen a selloff, retracement, pullback in the dollar but this is the big picture for the dollar here. You can see here clearly from this chart that the breakout that occurred in gold above the red, top of the red line there, that channel was a huge breakout for the dollar and the only thing that the dollar has done in the last week or so is pull back to test its breakout point. That is a normal pullback. Its next move is going to be substantially higher as deflation enters its next phase in Europe, and I expect the dollar index before this move, this big macro move for the dollar is over to be upwards bases the dollar index to about the 110 level. So the dollar has got quite a bit to go on the upside which is fully consistent with all the other evidence that I’ve been looking at and that I’m telling you about deflation having the upper hand and you’re also seeing it in the U.S.
economy which is starting to show signs of slowing again. That’s due to the stronger dollar.
All right, next slide, Dow Industrials. We all have our eyes glued on this as well. All along I’ve said the line in the sand is 18,500 for the Dow. The Dow is creeping up towards that level. It may touch 18,500 and turn lower. It may turn lower from here. I can tell you this, everything I look at in the Dow tells me the correction is coming. I know I have been wrong. I sound like a stopped clock on this one. I’ve been forecasting it all year long but in reality the Dow hasn’t gone anywhere for a year so we’re okay.
I would rather play it safe here because the Dow can’t move higher to my long-term target of 32,000 without pulling back to get the energy needed to move forward and much higher. That’s normal. Markets get their energy to move higher by first pulling back and you can see from this chart here, we are right up against 18,500. If I’m wrong and we don’t get the pullback, what it will look like is this. The Dow will go through 18,500, say to 18,600 or 18,700, come back and test 18,500, hold it, and then start to rally again. If that were to happen, then we have already entered the next phase of the Dow’s bull market. I rate the odds of that happening without a pullback at really less than 10% and here too, like gold and silver, we’re going to know in my opinion based on everything I’m looking at within a matter of days what the Dow is going to do. Coming very, very close to an extremely important tipping point in the Dow. So we need to keep our eyes focused on that. We have bearish positions on. They’re slightly under water but I’m very, very comfortable with them. If this turns out to be correct and we get the sharp correction in the Dow, those positions, just like the positions we have in gold, could be real home runs for us.
Okay, next chart.
Mike: This is an interesting one, Larry. Requires some explanation I think.
Larry: Yes. I actually didn’t have this chart in there. I put it in there early this morning because I received a lot of emails from members about the June target date and what the cycles look like for gold. This is not an easy chart to understand. Visually it’s pretty easy to understand but at first glance it’s not, so let me walk everyone through it.
This is a chart that is based on about 50 years of daily gold data. It’s crunched by my cycle software which does about 3 billion calculations, statistical calculations to determine the probable path of gold in terms of highs and lows, when those cycle highs and lows are going to come and then it labels those with the dates that you see on the chart and the blue line as the turning points. The black line in the first half or 60% of the chart is the actual closing price of gold. This is not back-fitted. So if you’re thinking that it’s just back-fitted, it’s not. But you can see if you look at the blue line starting at the left and the black line and compare the two, it’s very, very accurate in following and forecasting the cycle highs and lows in gold and the turning points.
On the right side you’ll see that it’s shaded in pink, the background is shaded in pink a little bit. That’s simply to show you the future and as you can see here, on May 15 we had a sell signal on the cycles. They point straight down, almost straight down into June 24 before bottoming. Then they rally into July, come back into late July, rally up into August, pull back sharply into September 15, and then take off to the upside again and going further out into the future, they go off the top of the chart into mid 2016.
So the bottom line here is that the cycles for gold, as I have been saying all along, point down hard. Right now they’re pointing down hard into the end of June. This is path A, if you will, on the earlier charts that I showed you for gold and silver. Silver, this is a chart of gold, silver looks pretty much the same.
Now, is it 100% guaranteed that this is what’s going to happen? No, cycles are based on probabilities, and the probabilities favor gold falling into June 24. Sometimes under rare conditions, cycles can invert and what that means is when there’s a low expected as we have here for June 24, sometimes the market can flip and we get a high around June 24 instead of a low. Why does that happen? It has to do almost always with intervention by the central banks doing something in the currency markets or something like that. Usually some kind of external force that will cause a cycle inversion. They are rare. Possibility exists that we could get a cycle inversion and a high at the end of June instead of a low. That would lead us to path B in the prior chart that I just showed you and this chart would flip and then we would see the decline that you’re seeing now from May 15 to June 24 show up probably from June 24 into October.
It’s a little bit complicated. It may sound like I’m talking out of both sides of my mouth but I’m trying basically to give an education here in how cycles work, and at the same time show you that path A is still the highest probable path for gold and silver right now, down hard into June 24 and indeed, if we look at the price action over the last week or so, we did get up to 1232 which I cited in my issues, 1232 to 1237, as major resistance, sold off immediately. We tried to rally again today up to about 1211, sold off immediately. So it looks like it wants to take path A into June. Let’s keep our fingers crossed. That would be great.. If gold can get below $1,000, minimum below $1,100 by June 24, we may have a very, very solid tradable bottom in place that could last for quite some time because the cycles – you don’t see it here. I’ll try to show it in one of my upcoming issues – going out into 2017 and 2018 are really off the charts for gold. I mean literally, up, up, up, up, up,. So let’s keep our fingers crossed that we get that June 24 low.
Okay, and you’ll get copies of all this in the transcripts, of course, and we’ll shortly go to some questions and answers because I certainly did get quite a few of them.
Short term we could face one more pop up in gold and silver so stay tuned. Since I put this presentation together it seems increasingly unlikely that we’re going to get another popup but it could still happen. Secondly, if that pop comes, it will serve to make the subsequent decline all that more powerful which is okay because if we get that popup, I doubt… I can tell you right now, if it looks like gold and silver’s going to have one more popup I am probably not going to trade it from the long side. I’ll be looking to add to short positions and bearish positions on the rally because the decline from 1300 to below 1100 will be that much more intense.
Later this month we’re coming into many turning points in many markets so I expect a lot of opportunities coming up and heading all the way into the end of the year. This first half of this year has been one of patience. As you all know, there’ve been tight trading ranges in virtually every market with the exception of the dollar. We’ve seen really a tight market in gold, a tight market in silver, a tight market certainly in the Dow and most equity markets and even of course, with the exception of Europe, the bond markets. U.S. bond markets have been pretty tightly wound up. That’s not going to persist.
The second half of this year all my cycle work in all the different sectors are showing me it’s going to be a phenomenal second half of the year in terms of trending moves and those are the moves that you want to capitalize on. I’ve been pretty conservative all along this year because I expected a lot of tight trading ranges and you know, it’s Monday night quarter backing. Hindsight is always easy. Okay, you could have bought this then and sold it then, you could have been up and down five, six times, you got a trading range that made all this kind of money but more often than not when you have tight trading ranges, you end up with what I call chop suey which basically means you get chopped up, okay? Better to be patient and wait for those trending moves because you can make more money with a few trades in a very short period of time once you have trending markets and that’s why I’m really so optimistic for the second half of this
Okay, let’s go right to your questions and everything is wide open.
Mike: Absolutely and we’ve got a number of questions in the queue already. This is always my favorite part of the presentation, Larry, webinars.
Larry: Mine too.
Q: “Earlier this month you predicted gold would fall to 1,000 or lower in June. Are you still holding to that forecast? Previously you had talked about gold perhaps falling as low as 920 or 750 later in the year or perhaps next year. Is that still possible?” — Ken
Larry: Yes. We’re still on track for path A as I showed in the earlier gold chart and in the cycle chart. June, late June around the 24th of June is the cyclical target where we could and should and hopefully will see a major low in gold. Now, we need to get down to at least 1020, 1020 to confirm a major bottom. Preferably we should see a complete route and get below $1,000 by the end of June. That possibility, believe it or not, even though it’s farfetched right now with gold at 1200, still exists. 1020 might cut it though. I have to see… If it happens we have to see how it holds support but we will definitely get below 1100.
Q: “Could you please email us a picture of your cycle chart pointing to that June low? It’d sure be nice to see that actual cycle chart as an educational tool in one of your issues upcoming.” — Gary
Larry: Sure, absolutely. It’ll be in the transcript and I’ll put more cycle charts in the issues and perhaps, as a matter of fact, Mike, you and I in an earlier conference call were talking about the cycles and we’re going to be planning some more educational events on cycles in the future.
Q: “Larry, with the equity market correction looming as you predicted, how do you think gold will react to a substantial downward move in stocks?” — Richard
Larry: Well, it’s really hard to say. My inclination is since deflation is really the big macro economic theme right now is that it would probably be similar to what we saw in 2008, 2009 where everything goes down at the same time. If you recall back then gold fell from I think it was 1100 down to 680 when the stock market fell during the real estate crisis.
So if you have a panic, everything tends to get hit at the same time. Now, on occasion, you know there have been selloffs in stocks where people jump into gold. So it’s really hard to say what will happen but all the available evidence tells me that they’ll probably go down together.
Mike: “When I first subscribed to Gold and Silver Trader you had provided a list of your favorite gold miners. I assume this has been revised. Will you provide us with an updated list and if so, when?” — Ken
Larry: Yes, I will. Obviously with what’s happening in the mining sector, a lot of miners are under water. The entire sector has to be reevaluated on a company-by-company basis, those left standing when we get to the bottom as we now have an inverse ETF on the miners, DUST, D. U. S. T. I’m expecting another leg down in the miners right now. I’m constantly evaluating them. There aren’t going to be that many good ones left standing. By the time, either June or October, by the time we get the final low in gold, we’re going to have to be very selective and there aren’t going to be that many good ones really left standing. But the ones that are left standing, they’re going to be really gobbled up for pennies on the dollar when it does come.
Mike: Okay, we’ll look forward to that updated list.
Q: “How come you cut FXI so close to the vest? Seems like the May contracts didn’t give us any leeway.” — Donna
Larry: Again, it’s one of those situations where everything pointed towards a sharp pullback in China and it just didn’t come on time. Cycles are great because they give you a road map of what to expect. But they’re not perfectly accurate. Nothing is. But it’s better to have a road map than no road map at all and I’m looking to the same trade soon on Asia because although Asia’s much healthier than Europe or the United States and long-term bull markets there and very strong intermediate-term bull markets, things have gotten a bit ahead of themselves and there’s a pretty sharp pullback coming. So I am looking at that again. The nice thing is that we limited the risk and that’s what’s good about options.
Q: “Larry, when you say buy 100 shares of UltraShort Bears Stock ETF for each 25,000 in equity invested, do you mean for all equity investments in that category of investments or only the category of short ETFs?” — Robert
Larry: No, for the funds you’re allocating towards following this trading service. It’s nothing to do with how much total equity you might have, investable equity that you might have in the market or whatever. Whatever you’ve allocated to follow my recommendations.
Mike: The money you’re using for Gold and Silver Trader in other words.
Q: “It was brought to my attention that it is likely the Chinese currency will be made a reserve currency when the IMF meets in late October. Do you agree and if it happens, what would you forecast as the impact on gold, silver, oil, and other commodities?” — Terry
Larry: Yes, it will probably happen. What will the impact be? None. There will be no impact. Look, the yuan is going to become part of the global reserve currency system. But you have to understand that the yuan is only about 2% of the entire monetary base of the world. It’s tiny. It can’t possibly upset the cart, if you will. It’s impossible, okay? The psychological impact, negligible. It’s one of those things that the bark is bigger than the bite. You know what I’m saying? It’s a natural progression for China’s currency to be opened up and to be part of global trade and global reserve currency but it’s not, it’s just not big enough. It’s 2% of the $150 trillion that’s out there. It’s just not going to make a dent whereas the U.S. dollar is really about 70%. Can’t compare… It’s just not going to make a dent.
Q: “What is your latest prediction for gold in terms of the low which you covered and will gold miners hit their lows around the same time do you expect?”
Larry: Yes, they’re synched up pretty nicely now so I do expect them to bottom at the same time. How much lower can mining shares go? Probably another 30% to 40% on a generalized basis.
Q: “Do you see gold and oil beginning a parallel run to the downside or the upside this summer?” — Steve
Larry: Not yet, believe it or not. Gold and oil are trading a little bit differently right now. They’re not always in synch with each other. A lot of people think they are and they look at the gold/oil ratio. But the fact of the matter is that there is really not any consistent relationship between the two. Oil is more of a geopolitical animal than gold is and all I can tell you right now is, oil’s bear market is not over. They could bottom at the same time but I don’t think so. I think from what my work tells me is that oil’s bear market will probably persist into 2016 before it comes to a conclusion.
Q: “Do you think we are headed for a currency crisis in terms of losing our savings?” — Bradley
Larry: Well, it depends on how you define a currency crisis. If you mean a currency crisis through hyperinflation, no. If you mean a currency crisis in terms of currency wars and earthquakes and volcanic eruptions, in terms of geopolitics and the monetary system, absolutely. The monetary system is breaking down and by that I don’t mean that we’re going to see hyperinflation. It’s just that what’s going on today has not been experienced since the 1930s and before that the mid 1800s so very few of us have ever gone through it and you really have to understand history to really know what’s happening.
And what’s happening is this: a sovereign debt crisis. Europe is totally, totally bankrupt. Japan is totally, totally bankrupt. The United States government is totally, totally bankrupt. The handwriting is on the wall. The endgame finally is here for Western socialism. We are not witnessing the death of capitalism as so many people seem to think. We are witnessing the death of Western socialist policies. It’s progressing from the fall of the Berlin Wall and outright extreme forms of communism and in China converting over to capitalism to the milder form of communism and socialism, if you will, the failure of Keynesian economics, the failure of debt-based monetary systems.
We’re seeing a revolution, a major, once every 75 to 150 years this occurs. By the time it reaches a full head of steam around 2020 what you will see is a new Bretton Woods and a new monetary system and no doubts about it. The dollar will have to lose its global reserve standard. The euro won’t be part of it nor will the yuan by the time 2020 rolls around and we’ll have a third currency as a global reserve currency, an electronic form, a country-neutral global reserve currency and the entire architecture of the monetary system will be changed.
Now, does that mean you’re going to lose your savings in terms of hyperinflation? Not necessarily. You’ll see at some point after deflation runs its course, yes, you’ll start to see inflation pick up. I don’t believe you’ll see hyperinflation in the United States. It just doesn’t happen in the core economy. It’s more likely to happen in Europe than in the United States. But there are measures that have to be taken to protect yourselves whether it’s deflation or inflation and understanding it and it will lead you to the answers to how to protect yourself and that’s what I do in Real Wealth Report. It’s what I’ll be doing in Gold and Silver Trader and one of those is clearly gold, but not yet. Everything has its time and its place.
Q: “When will the U.S. dollar again go down big?” — Rex
Q: “And what about a devaluation of the dollar because of all the money we printed? — Bradley
Larry: Well, the money that we printed, you know, did nothing. Didn’t devalue the dollar. The dollar fell for nine straight years. The dollar actually bottomed in 2008, seven years ago. It went sideways for about five years before it started creeping higher. But the dollar bottomed when all the printing was announced. So that whole relationship between printing money meaning a devalued dollar doesn’t hold any water. And there are a lot of reasons for that because most of the money that was printed actually went overseas. But the dollar is likely to head higher into late 2016 and then it will start falling again.
Q: “I’m sure many of your investors have Treasury bonds of some type, 10- or 30-year bonds or perhaps T-bills. Can you give us a short update on your expectations for interest rates trending lower and what would happen with bonds?” — Glenn
Larry: Well, interest rates I think are going to head lower in the short term. We have a position on that will capitalize on that and the reason for that is because the stock market’s about to roll over and we always see a flight of capital into the safe haven of Treasuries when the stock market rolls over. That’s why we have that position on.
Intermediate and longer term there is no question that interest rates are headed much, much higher with or without the Federal Reserve and that Treasury bond prices are heading down the toilet. No question about it. We’ve already started to see it happen in Europe. It’s starting to unfold in Europe. And it’s not because economic growth justifies higher interest rates or inflation justifies higher interest rates. It’s because everybody’s beginning to realize that the emperor has no clothes. Governments are broke.
Before this crisis is over, you’re going to see a bankrupt Federal Reserve – mark my words – and a bankrupt ECB. They’re buying all these bonds and they’re going to take incredible hits on their holdings of Treasuries and European sovereign debt. Central banks in Europe and the United States will probably go bankrupt technically over the next few years. I mean we’re heading into the crisis that is the mother of all crises. This has not been seen since the 1930s and again, before that, the 1850s when Andrew Jackson dissolved what was then the Bank of America which was the central bank because there was a sovereign debt crisis.
This is historic stuff and I’m not a fear monger. I’m not trying to promote anything. I’m telling you this is what’s coming. I can’t predict the exact date but we are getting closer and closer every day and it’s unfolding and you can see it the way governments are reacting, still spying on you, moving to electronic currency to track and tax everything that you do to prevent bank runs. They know it’s coming. That’s why they’re limiting cash withdrawals. The next step is to move to an electronic currency because when push comes to shove and there’s going to be a bank run, we just throw the kill switch on the electronic payment system. Shut it off. You can’t take your money out in cash or electronic form. This is where… And these are, again, dying Western socialist governments who have their backs up against the wall. That’s what it’s all about.
Q: “If the Fed increases interest rates at some point this year, perhaps in June, how would that affect your plan A versus plan B? What action by the Fed, if any, do you believe would perhaps cause that cycle inversion you talked about?”
Larry: As far as the Fed raising interest rates, I don’t think they’re going to act in June. Several economic stats are coming in even today that show a U.S. economy slowing. I think they’d be nuts to raise interest rates with the economy not doing so well. I think they’d be nuts to raise interest rates because they’ve already complained about the higher dollar, the stronger dollar and if they were to raise interest rates, they would literally implode Europe overnight which would send the euro down the toilet and the dollar through the roof. So I just don’t see them raising interest rates until at least late September or October and possibly not even until next year.
That was the first part of the question. The second part of the question is how will gold react when they raise interest rates. Well, if they do it in June, chances are it’ll seal gold’s fate and knock it down into that June 24 low. If they do it in October, probably it would have a bearish impact as well. But it’s important to note that longer term, precious metals will go up with rising interest rates. And not because of inflation but because people are losing confidence in government.
Mike: Right, more of a panic because of a loss of confidence than anything else.
Larry: Yes, disaster. And that’s gold’s true role, not as an inflation hedge, but as a disaster hedge.
Mike: Right, as in the 1930s.
Q: “What are the chances or the odds that if the bottom fails to materialize this year and could get extended into 2016, what will that mean for your strategy?” — Barbara
Larry: Too early to say. I sure hope that’s not the case. We won’t know that until October. Is it possible that the low could be pushed off into 2016? Anything’s possible. It’s too hard to say right now. My crystal ball is not that clear. It’ll be a lot when we get into June and we see whether or not we’re meeting the June low or we’re inverting, getting another rally. Then we’ll have to wait until October to see. You know, I have to take it one step at a time.
Q: When I joined Gold and Silver Trader, you had a company that you liked and trusted for physical gold deposits. I believe that was the Hard Assets Alliance. Do you still recommend them and how can I get information?”
Larry: Yes, absolutely. Hard Assets Alliance, you can just look them up on the Internet and just avail yourself of their services. They are a great company. They respect your privacy. Secure storage in Singapore and in Shanghai. Wonderful company.
Q: “How low do you see natural gas, corn, and soybeans trading and when should we expect perhaps the bottom to come in those markets?” — Kenneth
Larry: Well, natural gas I believe is the one commodity that has bottomed and I’m getting ready to recommend a long ETF on natural gas in the next few days, very, very close. Had a nice run up recently. It needs to pull back and then we’re going to enter it. So I believe natural gas has bottomed and it’s on its way to at least $4, heading into the autumn, October, November period. Currently trading just under 3 so there are some nice gains to be had there.
As far as the grain markets go, they’re falling as we speak. The grain markets are suffering under pretty severe deflation. Wheat’s had a little pop higher but corn looks pretty pathetic. Soybeans are trading lower. We’re about to break the next levels of support in those two markets and bean oil looks like it’s going to be next. Coffee’s not looking too good either, by the way, and sugar’s about to tank again. So the soft commodity markets and the grain markets are still headed much lower probably into October.
Q: “Can you give us an update on the war cycles? Where do we stand now and how do you see things playing out in the years ahead?” — Tom
Larry: Great question. The war cycles ramp ever higher and they’re stair stepping higher all the way into 2020. ISIS has literally taken over virtually all of Syria. That’s continuing. Ukraine’s president just announced late last week that he’s preparing his troops for possible war with Russia. It’s faded into the background of the news in our media, our U.S. media, because there’s so much news about Hillary right now. It seems to have taken the limelight but it’s still there and it’s continuing to increase in intensity.
We’re having massive civil protests in Macedonia and it’s going to get worse in Europe, the civil strife and protests, because they’re enacting these new measures that I just spoke of. You cannot transact any cash business in most countries in Europe right now for more than 1,000 euros. They’re introducing laws that anything over 1,000 euros must be transacted in electronic terms with a credit card, a debit card, or by wire transfers or what have you. This is serious stuff. It’s not being widely reported because there’s so much going on in the world and it’s not being widely reported by the U.S. media who is so domestically centered. But there is some heavy duty stuff going on.
Q: “Our gold put options in Real Wealth Report are for June but if you’re expecting a bottom may not come until June 24, will you be changing that recommendation?” — Chris
Larry: Yes. We’re going to roll them forward probably early next week to get more time to cover ourselves for June 24 and possibly even later into October.
Q: “Can you comment a bit on the municipal bond market plays? When the U.S. government bonds begin to show problems, do you think that will spill over into the municipal market plays?” Greg
Larry: I’m not a municipal bond expert but I would suspect so. I can tell you that since we’re looking historically at what happened in the 1930s – ironically this is another part of the 1930s that very few people tell you – the bonds that did best in the 1930s were corporates, triple A and double A corporates, right along with a stock market rally that occurred between 1932 and 1937. So what happens when there’s a sovereign debt crisis is investors get out of sovereign debt and they switch to corporates and if you think about it, it’s logical. I’ve said this many times before, but Apple has more cash in the bank than the U.S. Treasury. And there are many more companies that have more cash in the bank – I’m just citing Apple – than the U.S. Treasury. I’d rather own corporate debt of Apple or General Electric or, name any blue chip, than U.S. Treasuries. I would not own junk, corporate junk, but I would own double and triple A
Q: “So what can we do to save our retirement funds and savings if the Fed were to go bankrupt, and what would happen in the event of a Fed bankruptcy on Social Security?”
Larry: Well, this is all part of the big crisis that’s unfolding. I can’t tell you exactly what will happen with Social Security. I suspect that they will at some point be forced to privatize it and that’s been the third rail in politics for 30 years now. Nobody ever wanted to go near it. But in the end, they’re probably going to have no choice but to privatize Social Security. Had they done it 20 years ago or back in the mid 1980s when it was a hot topic and privatized it and put all that money in the stock market when the Dow was 1000 (It’s 18,000), Social Security would have had enough money to go around for all of us. So they’ll probably be forced to privatize it.
As far as protecting your savings goes and building wealth, you have to think differently. You have to realize that in a sovereign debt crisis, bond markets go down, stock markets go up. You have to realize that gold becomes a great investment, not because of inflation but because governments are collapsing. You have to educate yourself about what really happened during the Great Depression because what really happened during the Great Depression is entirely different from the stories that you’ve heard, entirely different. The U.S. economy continued to weaken, unemployment continued to go up, gold went through the roof, the dollar went through the roof, and the stock market went through the roof. All you ever hear about or most people talk about is the stock market crash in 1929.
Okay, great story, but that didn’t cause the depression. What caused the depression was Europe went bankrupt because it couldn’t make its war reparations and when that occurred, all the money came to the United States stock market and the stock market went up 380% in five years and gold went through the roof, so much so that Roosevelt had to first confiscate it and then devalue the dollar because it was linked to the dollar. So, you know, there’s a whole side of the depression that nine out of ten analysts and nine out of ten investors don’t really understand and it’s important for me to impart my knowledge of the Great Depression to you because we are going through the same thing only worse because back then the U.S. was a creditor. This time the U.S. is a debtor and China is the creditor. So this time it’s going to be a whole new set of circumstances … and the magnitude is going to be that much worse because it’s going to be Europe, Japan, and the United States that’s going bankrupt, not just Europe.
Mike: So that might suggest, Larry, that instead of money flowing from Europe into the U.S. as in the ’30s, perhaps this time around money will flow from Europe and the U.S. into Asia.
Larry: Yes, good portions of that are. Very good point, Mike. We’re already seeing that. You know, I’ve said for a year or a year and a half now I’ve been, you know, attacking all those negative statements about Asia, that Asia’s going to implode. Wrong, wrong, wrong and what’s one of the best if not the best performing stock markets this year and last year? Shanghai.
Q: “What is your view about Greece leaving the euro zone and how do you expect it to impact the euro currency?”– Doug
Larry: Well, there are some crucial negotiations going on right now as we speak. Greece did get 200 million euros from the ECB last night. They need a billion to get past the current crisis. Merkel and the ECB seem very, very reluctant to give them anything more than what they’ve given them – I think it was last night – 200 million euros. It is reaching critical mass right now. Maybe they’ll get a billion, another 800 million euros from the ECB but guess what? There’s 14 billion in euro-denominated debt that Greece has coming due into the middle of July. They’re not going to make it. They’re just not going to make it and if I were Cyprus or the finance minister, I wouldn’t even try to negotiate it. It’s high time that Greece left the euro. Their people are suffering dramatically and, you know, enough is enough.
You know, this whole system has to change. Common people are being sacrificed, their lives, their children’s futures, grandchildren’s futures to pay bond holders, to pay creditors. It’s like debtors prison for the common people. It’s got to change and, you know, this is why it’s a sovereign debt crisis. Greece is the tipping point. Greece will have – I’ve said this, you know, all along – Greece is going to leave the euro. It has to. It may be this week, it may be next month but it’s going to happen.
What will it do for the rest of Europe? Again, you know, the European Union is going to be torn apart. The euro will fail as a currency. Germany will probably take it over and the other countries will go back to their domestic currencies, devaluate, and get out of the economic mess that they’re in.
Q: “Regarding storage of physical gold and silver with Hard Assets, would you suggest overseas storage versus U.S.? What’s your preference?” — Susan
Larry: Overseas, Singapore.
Mike: Okay, well that’s about all the time we have for today because we’re right at 1 o’clock, a little over that as a matter of fact. But if we weren’t able to get to any of your questions or if you have additional comments or questions for Larry, please remember you can always submit them directly to the Gold and Silver Trader‘s editor mailbag which you’ll find right on our members website and Larry can either address them in an upcoming issue or perhaps in our next online strategy briefing. So with that said, thank you again for joining us today, one and all, and, Larry, of course thank you for your time as well.
Larry: Well thank you, Mike, for hosting and, members, thank you very much for attending today. We had it looks like a standing room only crowd. So thank you for your loyalty and I’ll keep working at it for you.