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Hard Assets Alliance
November 13, 2019

 

By Robert Kiyosaki

Hard Assets Alliance was created as a cooperative of investment professionals who believe there's a better way to invest in precious metals. This is a guest perspective on the markets from one of these partners; we hope you enjoy it.
Dear Reader,

Rather than keep their money moving, most people park their money. They park their money in a bank, a retirement plan, or at their broker’s office. Rich dad taught his son and me to keep our money moving. If we were not investing in our business, we were taught to invest in real estate.

If the real estate market was not favorable, we were taught to move it into a hedge fund or fast-moving stock for short-term gains and liquidity. Rich dad did not like his money sitting idle. He wanted his money working hard, moving fast, and with as much safety as possible. He knew that markets moved, so he wanted to keep his money moving. That is why he spent so much time looking for new investments to move his money into, and eventually out of.

The comment I often hear is, “Real estate is not as liquid as stocks and mutual funds.” I reply, “Every month, Kim and I receive tens of thousands of dollars in rental income as well as income from tax advantages. That is the kind of real liquidity we want.”

John Maynard Keynes, the famous economist, once said, “The markets can remain irrational longer than you can remain liquid.” Small real estate properties can provide you liquidity until the market crash is over, regardless of how long the recovery takes.

After August 9, 2007, many homeowners, flippers, and real estate developers with overpriced condos are finding it hard to become liquid again. Instead of selling to get out, all most can do is watch helplessly as the value of their real estate sinks into the sunset. The lesson is the less liquid an investment, the more trend information you need. Many people bought high and now are faced with selling low. An astute investor knows how to follow trends in order to buy low and sell high.

The investment philosophy for Kim and me is the same as it’s always been. We invest in assets that cash flow and hedge against inflation, things like businesses, real estate, oil wells, and more. Additionally, we keep our liquid investments in gold and silver instead of dollars. This is because gold and silver rise when the dollar falls. This has worked well for us over the last decade.

For you, what Kim and I do may not be safe. Our investing takes a high level of financial education. You have to decide for yourself where your safe harbor is.

Below are each asset class and its pros and cons.

Businesses

Advantages:

A business is one of the most powerful assets to own because you can benefit from tax advantages, leverage people to increase your cash flow, and have control of your operations. The richest people in the world build businesses. Examples are Steve Jobs, founder of Apple; Thomas Edison, founder of General Electric; and Sergey Brin, founder of Google.

Disadvantages:

Businesses are “people intense.” By that, I mean that you have to manage employees, clients, and customers. This means it’s illiquid. People skills and leadership skills, as well as talented people who can work as a team, are essential for a business to be a success. In my opinion, of all four asset classes, a business takes the most financial intelligence and experience to be successful.


Real Estate

Advantages:

Real estate can have high returns due to using a bank’s money for leverage via financing and other people’s money (OPM) via investors, capitalizing from tax advantages like depreciation, and collecting steady cash flow if the asset is managed well.

Disadvantages:

Real estate is a management-intensive asset, is illiquid, and if mismanaged can cost you a lot of money. After a business, real estate requires the second-highest level of financial intelligence. Many people lack the proper financial IQ to invest well in real estate. That is why most people who invest in real estate invest in real estate mutual funds called REITs.


Paper Assets: Stocks, Bonds, Savings, and Mutual Funds


Advantages:

The primary reason paper assets are best for the average investor is because paper assets are “liquid” which means you can buy and sell quickly. If you make a mistake, you can sell almost immediately. Paper assets have the advantage of being easy to invest in. Additionally, they are liquidity-scalable, which means investors can start small by buying only a few shares, and thus it takes less money to get into paper investments than some of the other asset types.

Disadvantages:

A major disadvantage of paper assets is that they are very liquid, meaning they are easy to sell. The problem with liquid investments is that once the cash starts flowing out of a market, it is very easy to lose money quickly if you do not sell soon enough. When there is a crash, a panic, mass selling can wipe out an average investor’s portfolio in minutes. Paper assets require continual monitoring.

Since most investors have little financial education, most people invest in paper assets.


Commodities: Gold, Silver, Oil, Etc.


Advantages:

Commodities are a good hedge or protection against inflation—which is important when governments are printing a lot of money, as they are today. The reason they buffer against inflation is that they are tangible assets that are purchased with currency. So when the currency supply increases there are more dollars chasing the same amount of goods. This causes the price of the commodities to rise, or inflate. Good examples of this are oil, gold, and silver, all of which are worth much more than they were a few years ago thanks to the Fed’s printing presses.

Disadvantages:

Because commodities are physical assets, you have to make sure they are stored properly and that they have proper security.

Once you decide which asset class is best for you, and which asset class you are most interested in, then I suggest studying that asset class and investing your time before investing your money. The reason I say this is because it is not the asset itself that makes you rich. You can lose money in any of the asset classes. Rather, it is your knowledge of each asset class that makes you rich. Never forget that your greatest asset is your mind.

No Investment Is Good or Bad

Your investment is only as good as you are.

Business and real estate are the riskiest of all assets because they are the least liquid. If the investor makes a mistake, the asset drags him or her down. That is why businesses and real estate require the most financial education—and the best teams.

Paper assets and commodities such as gold and silver are liquid. If the investor makes a mistake, the investor can cut his or her losses quickly.

Regards,
 
Robert Kiyosaki

Robert Kiyosaki, author of bestseller Rich Dad Poor Dad as well as 25 others financial guide books, has spent his career working as a financial educator, entrepreneur, successful investor, real estate mogul, and motivational speaker, all while running the Rich Dad Company.

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Hard Assets Alliance
November 7, 2019

 

By Brian Maher

 

Hard Assets Alliance was created as a cooperative of investment professionals who believe there's a better way to invest in precious metals. This is a guest perspective on the markets from one of these partners; we hope you enjoy it.

 

Dear Reader,

 

As a bad penny returns to its sender, or a dog returns to its vomit… investors are returning to the stock market.

 

“All in” these gentlemen and ladies are going (or at least the computer algorithms that set market pace).

 

Lance Roberts of Real Investment Advice:

 

With cash levels at the lowest level since 1997 and equity allocations near the highest levels since 1999 and 2007, it suggests investors are now functionally “all in.”

 

You may recall sharply unpleasant events subsequent to 1999 and 2007 — after investors had become “all in.”

 

Now that they are once again marshalling their poker chips… and shoving them out onto table’s center.

 

Will Mr. Market break them once more — or do they possibly play a lucky hand this time?

 

First this question:

 

Why are these gamesters going “all in” now?

 

We believe we have the answer, revealed anon.

 

We first note the stock market has once again scaled the impossible heights…

 

Is a “Melt-up” Back in Play?

 

All three major indexes have recently established fresh records. And so the market has scaled its cliff face of worry.

 

Trade war, impeachment inquiry, a fading global economy, Brexit, the devil and any number of impediments... it has clawed above them all.

 

Affirms analyst Andrew Brenner of National Alliance:

 

Brexit, impeachment, budget deficit, lack of a budget — none of those things are affecting the market at this point.

 

It is — in the parlance of the trade — “risk on.”

 

Our spies even report fresh speculation about a possible “melt-up.”

 

A melt-up is the glorious terminal phase of a bull market, when stocks reach fever heat — before melting down.

 

Melt-ups have preceded some of history's greatest collapses.

 

In the 18 months prior to the Crash of ’29, for example, the stock market nearly doubled.

 

And the Nasdaq rocketed 200% in the 18 months before the dot-com mania peaked in 2000.

 

Why are investors rushing back in now?

 

4 Possible Reasons Stocks Are Rising

 

Several reasons suggest themselves…

 

Reasons 1: The Federal Reserve sliced interest rates last week — the third occasion this year — and for a total of 75 basis points. And as explains Raymond James:

 

Over the last 30 years, when the Fed has implemented an “insurance” rate cut policy of 75 basis points, the equity market has been “lights out” as the S&P 500 has posted a 12-month forward return of about 23%, on average.

 

Reasons 2: Markets are again hopeful the United States and China will come to terms on trade.

 

Commerce Secretary Wilbur Ross announced yesterday the combatants were making excellent progress toward a “phase one” trade accord.

 

A successful resolution would lift tariffs on some $156 billion of Chinese exports, presently scheduled to enter force Dec. 15.

 

Reasons 3: Corporate stock buybacks this year — despite recent slackening — should nonetheless turn in their second-largest year on record.

 

Reasons 4: Stocks as a whole are surpassing earnings estimates.

 

These reasons and more we can cite.

 

But do they haul the full cargo of explanation?

 

We are unconvinced.

 

Look to the Federal Reserve

 

Is the primary reason the stock market once again scales record heights… and that poker chips are piling up on the table’s center…

 

Because the Federal Reserve has been slyly hosing in floods of liquidity?

 

The short-term lending market nearly seized in September as liquidity ran dry.

 

The Federal Reserve’s New York command center therefore grabbed the hoses… and gave the “repo” market a good soaking.

 

A temporary expedient, they labeled it

 

But long experience teaches that nothing can be so permanent as a temporary expedient.

 

Our agents inform us the New York Federal Reserve has emptied in some $250 billion since September.

 

We hazard a healthful portion of that $250 billion has gone to funding speculative activity on Wall Street.

 

And the hoses pump yet.

 

Furthermore, this we have on the Federal Reserve’s own word: these same hoses will pump “at least” through next year’s second quarter.

 

Jerome Powell insists these “open market operations” are not quantitative easing.

 

Apologists claim they are merely plugging a leak within the financial plumbing. And in detail, they may well be correct.

 

But these operations have expanded the Federal Reserve’s balance sheet... precisely as if they were quantitative easing.

 

QE4?

 

The balance sheet expanded over $50 billion last week alone and exceeds $4 trillion.

 

“The Fed can deny that they’re doing quantitative easing,” argues permanent bear Peter Schiff — who styles current operations QE4.

 

He adds: “But they can’t hide the numbers. They can’t hide their balance sheet.”

 

Is QE4, as you style it, even larger than QE3, Mr. Schiff?

 

The Fed is expanding its balance sheet right now at about twice the pace that it was expanding its balance sheet when it was doing QE3. So QE4, whether they admit it or not, is much, much bigger than QE3, and it’s going to continue, and it is going to accelerate.

 

And is QE4 responsible for the latest stock market spree?

 

And that is what is driving the stock market… They’re doing quantitative easing, and they’re going to print as much money as they have to keep the markets going up and to keep the economy propped up.

 

Just so.

 

But stocks are vastly expensive by history’s standards. By some measures today’s valuations rise even above 1929’s and 2008’s.

 

Will today’s lemmings make much money in this stock market — as they go hoofing for the cliff?

 

The odds strike us as… slim.

 

That is because the higher things rise, the further they fall.

 

A Losing Bet

 

Assume today’s obscene valuations. From these heights, history argues the Dow Jones may plunge some 35% next time.

 

Meantime, we understand that options traders are lowering their guard of late.

 

These fine folks take out “call” options in anticipation market gains. They conversely take out “put” options to insure against losses.

 

When the number of calls runs too far ahead of puts, it is evidence the guard is down. And a lowered guard invites a blow.

 

That presently appears to be the case.

 

The last occasion the ratio of calls to puts attained current highs was on Jan. 23, 2018 — immediately prior to a market thumping.

 

We must assume investors presently streaming into the stock market will come ultimately to grief… as they did in 2001… and 2008.

 

When precisely, we do not know.

 

But “experience keeps a dear school,” as Benjamin Franklin affirmed two centuries ago — and “fools will learn in no other.”

 

Regards,

 

Brian Maher

 

Managing editor, The Daily Reckoning

We hope you have enjoyed this article by our guest writer.

 

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How Much
November 5, 2019

Stock prices move up and down every day, but the very best companies bring value to their shareholders over the long term. Since 2019 is almost over, we wanted to understand the top 10 stocks so far this century. At least some of the companies making the list might surprise you.

  • Monster’s stock earns the top spot, where an initial investment of $100 would be worth $62,444 today.
  • Netflix ($23,071) and Apple ($7,416), two of the famous FAANG stocks, also make the top ten, but they aren’t nearly as valuable as the energy drink maker.
  • Other notable companies like Walmart and Berkshire Hathaway don’t make the top 10.
  • There’s a significant diversity of industries represented in the top 10, from consumer products and tech companies to retail and financial services.

Business Insider originally created a list of the top 10 best-performing stocks this century. We looked up the stock prices for each one on Yahoo Finance as of December 31, 1999, or the date the company went public, whichever was later. Imagine you invested $100. Our visual shows how much you’d have as of October 22, 2019.

Total Return (%) on $100 Investment

1. Monster Beverage: 62,444%
2. Netflix: 23,071%
3. Equinix: 12,050%
4. Tractor Supply Company: 10,171%
5. Intuitive Surgical: 9,155%
6. Ansys: 7,856%
7. Apple: 7,416%
8. IDEXX Laboratories: 6,822%
9. Mastercard: 6,279%
10. Ross Stores: 6,003%

Monster Beverage, the maker of the famous energy drink, takes the top spot by a landslide. An initial investment of just $100 on 12/31/1999 would be worth an astounding $62,444 today. That is substantially more than any other company in the top 10, including the tech heavyweights of Netflix ($23,071) and Apple ($7,416). Stock in Equinix and the Tractor Supply Company both returned over 10,000% over the last 20 years, quite an impressive accomplishment, but nowhere near Monster’s performance.

It’s also worth mentioning the significant diversity of companies present in the top 10. There’s no single sector that dominates the ranking. Monster is an energy drink company, Netflix is a streaming service, and Equinix provides data services. The other companies on our list are in things like medical supply, financial services and retail. This is more evidence that you shouldn’t invest your entire portfolio in just one industry.

And there are several notable companies missing from our list too. Where are the rest of the FAANG companies, Facebook, Amazon and Google? And what about other famous companies like Walmart, Exxon or Berkshire Hathaway? To be fair, some of these companies didn’t exist at the start of the century, and so perhaps they haven’t had enough time to rack up returns. It’s also worth noting that our methodology favors companies that started out with low share prices that ended very high. A single share of Berkshire Hathaway, for example, is worth well over $300,000. However, it’s still surprising that Walmart and Exxon are nowhere to be found.

And here’s a final question. Imagine you really did invest $100 in a company like Monster or Netflix all those years ago. Would you hold the investment for another 20 years? Or sell the shares immediately? Let us know in the comments.

HowMuch.net is a cost information website 

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Hard Assets Alliance
October 10, 2019

 “There’s a lot of pressure into gold, and we’ve just barely begun this cycle,” says Dan Oliver, founder of Myrmikan Capital. In an interview at Kitco, Mr. Oliver doubled down on his expectations for gold. “Oliver noted that once gold had broken above $1,350 an ounce, institutional investors started to pay more attention, especially once heavyweight fund managers like Ray Dalio of Bridgewater Associates started publicly advocating for gold.”

 

Something The 5 highlighted over a month ago when we picked up on something Dalio said in a rather long-winded essay at LinkedIn: “It would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio.” In the aftermath of Dalio’s pronouncement, gold notched its highest finish since May 14, 2013. (As Dave so elegantly said at the time: “[Dalio’s] reasoning doesn’t matter as much as the fact it’s Ray Freakin’ Dalio who’s saying it.”) “None of these institutional guys want to be heroes,” says Oliver. “Once a guy like [Dalio] says it’s OK, then they can all do it…

 

“What’s interesting is that all the institutional money is trying to squeeze into a market that is very small,” Oliver continues, “and it’s hard to figure out how to do it, and that’s what they’re scrambling to figure out. “So I think there’s a lot of momentum behind this move,” he says. Just how much momentum? Well, gold sits at $1,503.00 at the time of writing… and when we say Oliver doubled down, we mean that literally. He forecasts gold $3,000.

 

Another advocate for owning gold — perhaps before Dalio — is Robert Kiyosaki, best-selling author of Rich Dad Poor Dad. Like it or not, Robert says, “Recession fears are spreading. Meanwhile, gold has risen nearly 20% since… December when Trump warned: ‘I am a Tariff Man.’”

 

According to MarketWatch, “During that time, [gold’s] left a lot of other popular investments trailing in the dust. It’s beaten the S&P 500 stock index by a hefty 15 percentage points… It’s crushed popular investments like Apple, Alphabet and Netflix. It’s beaten Tesla by 53 percentage points.”

From Tariff Man to Tariff Heaven

Robert goes on to say the escalating trade war’s played no small role in gold’s recent breakout: “President Donald Trump announced 10% tariffs on the remaining $300 billion of Chinese imports [and] China let the yuan weaken and rise above seven against the U.S. dollar for the first time in more than a decade.

 

“Trump eased tensions… after announcing he’d delay at least some of the tariffs. But the trade war is still very much alive. Now we have the currency wars to deal with too. “Gold is up because no one knows if the U.S. currency is going to follow in the yuan’s footsteps,” says Robert.  “People are concerned,” says RJO Futures senior market strategist Phillip Streible. “If I had money in the bank, I [would] sell the dollars and use that money to buy gold. You are divesting yourself from your currency by selling it and buying a hard asset.”

 

Why divest dollars?

 

“Most people think of dollars as money,” Robert says, “but the reality is that the dollar is not. An amusing way of looking at this is to realize you can buy $10,000 in cash from the U.S. Bureau of Engraving and Printing for only $45. The catch is that they're shredded.” More to the point: “Since Nixon took the dollar off the gold standard in 1971, it is no longer money.  “Before 1971, there was a relationship between a dollar and how much gold was backing that dollar in the U.S. Treasury,” Robert says. “After 1971, that dollar was not backed by anything other than the full faith and credit of the United States government.

 

“[The dollar] can go up and down in value depending on how other currencies are performing and based on many economic conditions. It is tied to nothing and can move in either direction very quickly. “The good news is you can [use] fake money to buy real money and real assets,” says Robert. And here’s the thing: “When I purchase gold,” says Robert, “I do not expect an ROI because I am not taking a risk. “When I purchase real gold… I purchase [it] forever. I never plan on selling. Just as Warren Buffett holds stocks forever, I will purchase gold… forever. “I use [gold] not as an investment but as a hedge,” Robert says, “and [now] you can easily get started building your wealth through gold…”

 

As for oil, it’s up 75 for a barrel of WTI at $54.39. And, well, we already mentioned the price of gold above…

 

“While other parts of the economy may show some weakening, consumers have remained confident and willing to spend,” says Lynn Franco of the Conference Board that surveys 3,000 U.S. families to track the consumer confidence index. While expectations for the next six months cooled marginally from July, the survey’s results show consumers are as optimistic about the overall current economy as they’ve been since 2000.

 

The Case-Shiller home price index stayed static in June, below consensus, making year-over-year growth now the slowest since 2012. A separate home-price measure from the Federal Housing Finance Agency also clocked in below expectations. Perhaps a sharp decline in mortgage interest rates will put a floor under the housing market…

 

“President Trump has repeatedly claimed that the United States does not bear the costs of [trade war] tariffs,” says an article at The Hill. But according to the Congressional Budget Office, trade tariffs enacted by Trump’s administration will cost each U.S. family $580 by 2020. Doesn’t sound like much? (Although we’re pretty definite you could think of other ways to spend $580.)

 

“That figure — which does not include new tariffs scheduled to go into effect in September and December — amounts to a significant chunk of economic growth. It is the equivalent of roughly $60 billion in lost economic activity,” The Hill reports.  Not only that: “Higher trade barriers — in particular, increases in tariffs — implemented by the United States and other countries since January 2018 are expected to make U.S. GDP about 0.3% smaller than it would have been otherwise by 2020,” says CBO Director Phillip Swagel.

 

But hey, look on the bright side — the CBO calculates trade war tariffs will add $33 billion to the U.S. Treasury. But… that’s a net loss of $27 billion, right?

 

Brilliant.

 

Best regards,

 

Emily Clancy

 

Hard Assets Alliance was created as a cooperative of investment professionals who believe there's a better way to invest in precious metals. This is a guest perspective on the markets from one of these partners; we hope you enjoy it.

For more postings by Hard Asset Alliance, click HERE

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WealthCare Connect may receive compensation from Hard Asset Alliance for purchases make through links(s) on this website.

Hard Assets Alliance
October 3, 2019

Wall Street is buying gold again, for the first time in a while. And many analysts, including the author of this piece, believe forces are aligning that could send gold much higher. While momentum is gaining in the gold market, predicting future prices is difficult. So, rather than timing an entry…

After an August rally to multiyear highs above $1,566, gold took a breather. Likewise, silver and mining shares are now in correction territory. But no worries, these pullbacks happen all the time in bull markets — so don’t let this shake your faith. Much higher prices will come. In fact, the case for owning gold has never been stronger!

The $10,000 Case for Gold.

I fully expect gold to reach $5,000 or even $10,000 an ounce over the long run, mainly due to increased global uncertainty, economic slowdown and growing negative interest rates.

Here’s a breakdown of the long-term drivers that will give gold the push it needs to break through this correction to new highs above $2,000 and beyond…

 

The August rally was driven by a surge in demand for gold, triggered by slumping U.S. interest rates — not to mention NEGATIVE interest rates in Europe and Asia. The 10-year U.S. TIPS yield, a measure for long-term rates, turned negative on Aug. 15 for the first time since July 2016 — compared with 0.98% at the start of 2019. Negative interest rates are rocket fuel for precious metals, plain and simple. This shows growing market fears of an economic recession in the U.S., pushing investors toward safer assets like precious metals.

Plus, There’s the Seasonality Factor

Not only has the price of gold been up for five of the past six months, if history is any guide the fall and winter seasonal patterns for gold should help boost prices much higher.  And I expect 2019 to be no different, given the Fed’s plans to lower interest rates even more and rising U.S.-China trade tensions.  Seasonality also shows strong performance from November–February for gold prices.  I fully expect gold to soon resume its rally heading into 2020…

But There’s Another Tail Wind Too

Individual investors aren’t the only ones accumulating gold. The world’s central banks, especially in China and Russia, continue to load up on the yellow metal to diversify away from the U.S. dollar. Russia has actually quadrupled its gold reserves in the past decade, and in the past year alone its gold reserves’ value has jumped 42%, to $109.5 billion.

 

China has also been busy amassing gold stockpiles — the country’s been on a buying spree since the end of 2018, as you can see below:

Bloomberg has been tracking the gold buying, reporting:

China has added almost 100 tons of gold to its reserves since it resumed buying in December, with the consistent run of accumulation coming amid a rally in prices and the drag of the trade war with Washington. The People’s Bank of China (PBOC) upped its bullion holdings by 62.45 million ounces in August, versus 62.26 million the month before, according to the central bank’s data.

After the current pullback, precious metals and mining shares will again surge much higher in the next big upside move, fueled by investors and central banks worldwide wary of negative interest rates.

Here’s to growing your wealth,

Mike Burnick

Mike Burnick is the editor of Wealth Watch, Infinite Income, Amplified Income and Spinoff Millionaires. Mike has been bringing his trading strategies to the masses for over 30 years.

 

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Hard Assets Alliance
October 1, 2019

Possibly the greatest plumbing heist in history.

 

It happened just a couple weeks ago, at a palace in Britain. The thieves snuck into the palace early in the morning. Did their business and made off with the loot. Or should I say loo… Since what they stole was the toilet. Which begs the question. Why would they steal a toilet?

 

Because the toilet is made of … 18-karat gold. And it’s valued at more than 5 million dollars.

 

Before the “golden throne” arrived in Britain, it was on display at the Guggenheim Museum in New York. While there, over 100,000 visitors made functional use of the toilet. The toilet was then sent to Britain’s Blenheim Palace to be part of an art display by Italian artist Maurizio Cattelan. Once the toilet arrived, it was fully installed and plumbed at the Blenheim Palace in Britain which is also the birthplace of the famous leader, Winston Churchill.

 

When reading this story, one couldn’t help but think, if the theives had taken all that effort and energy and just opened a SmartMetals account with Hard Assets Alliance.

 

Because with the Hard Assets Alliance:

 

You don’t have to risk going to jail.

You don’t have to stick your hands in a toilet, even if it is gold.

You don’t even have to leave the house.

 

P.S. As for the thieves, police have reported that one man, 66 years old, has been arrested in connection to the burglary. Unfortunately, they have not recovered the “golden throne” as of this writing.

 

If you want to get gold for yourself, there is a much better way than stealing toilets. Simply click here, open your SmartMetals account and you can buy gold, silver, platinum, and palladium.

 

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Hard Assets Alliance
September 23, 2019

Hard Assets Alliance was created as a cooperative of investment professionals who believe there's a better way to invest in precious metals. This is a guest perspective on the markets from one of these partners; we hope you enjoy it.

 

Last month, as the trade war was stealing the headlines, annual summer camp was in session for international central bankers at Jackson Hole, Wyoming. There, Federal Reserve Chairman Jerome Powell remarked that the Fed is committed to continue to do what’s needed to “sustain the expansion.”

 

He noted that the U.S. economy is in a “favorable place,” although it faces “significant risks.”

 

He said that economic slowdown in Germany and China, the possibility of a hard Brexit and tension with Hong Kong contributed to a “complex, turbulent” picture. And he agreed that markets were volatile.

 

As you recall, the Fed decided to cut rates by 25 basis points on July 31. And many were listening to Powell’s speech trying to decipher whether he truly meant the rate cut was just a “midcycle adjustment” or if he was going to strike a more dovish tone.

 

Powell’s speech confirmed the notion that the rate cut did not necessarily signal strong dovish monetary policy to come. He didn’t give those wanting to hear strong dovish talk much to go on.

 

And no one wanted to hear strong dovish talk more than President Trump. This is what Trump tweeted after Powell’s comments from Jackson Hole:

 

As usual, the Fed did NOTHING! It is incredible that they can “speak” without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work “brilliantly” with both, and the U.S. will do great…

 

Here’s how he capped it off: “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?”

 

Recently, Trump had more to say:

 

The Federal Reserve loves watching our manufacturers struggle with their exports to the benefit of other parts of the world. Has anyone looked at what almost all other countries are doing to take advantage of the good old USA? Our Fed has been calling it wrong for too long!

 

Those are fighting words, calling the chairman of the Fed a downright enemy of the country, maybe worse than the Chinese leader who had just announced anti-U.S. tariffs.

 

Powell’s borne the brunt of President Trump’s repeated accusations that the Fed is what’s holding back the stock market and threatening the economy. Trump has publicly expressed frustration with Powell, believing he has negated the impact of the Trump tax cuts.

 

Presidents have normally refrained from publicly commenting on the Federal Reserve’s policies, allowing it to maintain at least a veneer of independence, as mandated by the Federal Reserve Act of 1913.

 

But whatever you think of him, you have to admit that Trump is no ordinary president. He’s certainly not one to keep his opinions quiet.

 

And that doesn’t mean presidents haven’t privately leaned on the Fed to help their reelection prospects.

 

Just look at another Republican president – Richard Nixon. When the Fed began raising interest rates during Nixon's term, he also raised objections, although not in public like the current president.

 

Back then, the U.S. had been in the throes of a recession in the beginning of the 1970s. The Fed had cut rates by half to stimulate the economy. There was no quantitative easing (QE) program during that period.That's because it wasn't a banking crisis preceding that recession, so the level of Fed support wasn't anywhere near as expansive as it has been this past decade.

 

Fed Chairman Arthur Burns believed that "awful problems" could occur if the Fed didn't raise rates in tandem with the growing economy. On a somewhat lesser scale, that was the position of Jerome Powell before he backed off the rate hikes at the beginning of the year.

 

But here’s how Trump’s comments can affect Fed policy…

 

Trump is almost forcing Powell to cut rates by carrying on the trade war, which is taking a toll on the stock market and the overall economy. But Powell does not want it to appear like he’s caving into Trump’s demands.

 

The Fed is supposed to be independent of politics, even though it really isn’t. But it at least has to give the appearance that it’s independent of politics. If Powell starts cutting rates aggressively, it would make him look like a puppet.

 

But if he doesn’t cut rates, the economy and the stock market could suffer at a time when they’re most needed. As geopolitical tensions rise, trade wars mount, currency wars spawn and volatility continues to build, it's clear the economy faces increasing pressure that could spiral into recession or worse.

 

The Fed can tolerate weakness in the stock market, but it fears a complete collapse, which is a very real possibility. So Powell’s in a catch-22, damned if he does and damned if he doesn’t.

 

Powell can look like he’s giving into Trump and keep the bubble going, which will only prolong the ultimate day of reckoning and make it worse, or he can withdraw support and risk a crash.

 

Ironically for President Trump, such friction could incite greater economic uncertainty, which could prove detrimental to the economic strength he desperately wants to maintain heading into the 2020 election.

 

Interestingly, former New York Fed President Bill Dudley is actually calling on Powell not to lower rates. Why not? Because it would help Trump win the election next year. To prove that the Fed isn’t independent of politics at all, Dudley said:

 

Central bank officials face a choice: enable the Trump administration to continue down a disastrous path of trade war escalation, or send a clear signal that if the administration does so, the president, not the Fed, will bear the risks — including the risk of losing the next election.

 

He continued:

 

After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.

 

It doesn’t get much more direct than that for a former Federal Reserve official. So the next time someone tries to say the Fed is independent of politics, don’t listen to a word of it.

 

Ultimately, I believe Jerome Powell will be forced to cut rates because of slowing economic conditions.

 

 It might look like he’s caving to Trump, but that’s just something he’ll have to live with. That also means more dark money will be coming to support markets.

 

Regards,

 

Nomi Prins

 

Nomi Prins is a renowned journalist, author and speaker. Her latest book, Collusion: How Central Banks Rigged the World is an expose into the 2007-2008 financial crisis and how the influence of central bankers triggered a massive shift in the world order.

 

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Hard Assets Alliance
September 18, 2019

I recently completed a visit to Australia where I was invited as the keynote speaker at the 2019 National Conference sponsored by ABC Bullion, one of the two largest gold refiners and gold dealers in Australia along with the Perth Mint.

ABC Bullion also kindly invited me to tour their facilities in Sydney. I visited five separate locations (out of a total of 15 in Sydney alone), which included refineries, gold bar casting facilities, jewelry design, trophy fabrication and secure storage. It was an intensive one-day crash course in all things gold outside of actual gold mines.
 
During these tours, I was able to observe state-of-the-art technology for the separation of gold from silver and other metals without the use of chemicals. These processes were invented by Russians, but are obtained under license from third-party intermediaries. Precise melting-point temperatures are combined with high-pressure gas to achieve the separation without the use of cyanide, chlorine or other chemicals.
 
It was also fascinating to observe the final stages of gold and silver bullion bar casting. These were entirely handled by robots without human intervention. Gold or silver beads of pure metal were poured into graphite molds and a top was placed on the mold. The molds were heated to high temperatures, which melted the bullion into the exact shape and size desired. The bars were then cooled and measured by weight before being etched with a unique serial number and the ABC Bullion logo.

I was not surprised to learn that much of the refinery output is sold to China. But, I was surprised to learn that many of the bars make a “round-trip” and end up back in Australia for secure storage. This can be verified by referring to the serial numbers on the bars.
 
In effect, the Chinese are converting dollars to gold and then diverting the gold out of China through various channels. This is easier than sending dollars directly out of China due to Chinese capital controls. The gold leaving China can go to many destinations including Singapore, Canada and Switzerland, but Australia is popular for this purpose.

This round-tripping of gold is one of the reasons China recently imposed a ban on private gold imports (although the ban was eased somewhat for those with special licenses granted by the government).

China’s voracious appetite for gold (despite recent restrictions) is one of many gold market developments I was able to learn more about first-hand during my visit Down Under. The local Australian demand for gold bullion is also at an all-time high, as is true elsewhere in the world.

With a bull market in gold firmly underway, what are the prospects for gold prices in the months and years ahead?

At Project Prophesy, we use third-wave artificial intelligence (AI) to offer readers the most accurate and powerful predictive analytics for capital, commodities and foreign exchange markets available anywhere.

First wave AI involved rules-based processing. Second wave AI involved deep learning as the iteration of rules produced new data that could be incorporated into the original rules. Third wave AI combines deep learning with big data as machines read billions of pages of information in plain language, interpret what they read, and add that to the big data input.

With Project Prophesy, machines are never on their own. Human analysts oversee the output and update algorithms as needed to steer the system on a smart path. Human+Machine processing is at the heart of Project Prophesy predictive analytics.

Project Prophesy relies on four scientific disciplines: complexity theory, Bayes’ Rule (a statistical method from applied mathematics), behavioral psychology, and history. A network of nodes and links is created with specific nodes conveying information from each of those disciplines.

Nodal input comes from data feeds, news services, exchange prices, and machine reading using systems such as IBM’s Watson supercomputer. Nodal input also comes from other nodes in a densely configured neural-type network.

Certain nodes are highlighted as containing actionable price information on stock sectors, fixed income instruments, commodities, currencies, and macroeconomic indicators generally.

Right now, the action nodes are telling us that the new gold bull market is intact and has far to run. To support this estimate, it’s important to take a longer historical perspective than the short-term rallies and dips that most analysts discuss. This longer perspective is illustrated in the chart below.
 

This chart graphs the U.S. dollar price of gold from 1970 until today. It illustrates two major bull markets, 1971-1980 and 1999-2011. It also illustrates two major bear markets, 1980-1999 and 2011-2015. Finally, the chart highlights a new bull market that began in 2015 and should continue for years.
 
It does not make sense to discuss bull and bear markets prior to 1970 because the world was on a gold standard for a century from 1870 to 1971. Prior to 1870, gold was simply money measured by weight and was not typically thought of in terms of currency equivalents. This pre-1971 gold standard went through many variations including the “classic gold standard” (1870-1914), the “gold exchange standard” (1922-1939) and the “Bretton Woods system” (1944-1971).

There were also periods when gold trading and gold shipments were suspended due to war and its aftermath including World War I (1914-1922) and World War II (1939-1944). Gold was occasionally revalued, for example, by France in 1925, the UK in 1931, the U.S. in 1933 and on a global basis in 1944.

However, all of these standards, suspensions and price resets were dictated by governments for policy reasons and were not the direct result of market forces. A true market for gold (albeit with government manipulation) did not emerge until 1971, so that is the appropriate starting point for considering bull and bear dynamics measured in dollars.

The first great bull market lasted from 1971 to 1980 and saw the price of gold go from $35.00 per ounce (the original Bretton Woods price) to $800 per ounce; a 2,100% gain in less than nine years. This rise was fueled by near-hyperinflation in the U.S. as the dollar lost half its purchasing power in a mere five-year period from 1977 to 1981.

The bull market was followed by a slow but persistent bear market that lasted from 1980 to 1999 and saw the price of gold fall 68% from $800 per ounce to $250 per ounce. This bear market was fed by extensive central bank sales including the infamous “Brown’s Bottom” where Gordon Brown, the UK Chancellor of the Exchequer (later Prime Minister), sold 395 tons of gold (more than half the UK’s gold reserves) in 17 auctions from July 1999 to March 2002 at an average price of $275 per ounce, near the lowest price for gold in the past forty years. Compared to today’s prices, this sale cost the UK over $17 billion in lost profits on gold.

The second great bull market lasted from 1999 to 2011 and saw the price of gold go from $250 per ounce to $1,900 per ounce; a 670% increase. This bull market was fueled by a combination of low interest rates (2001-2005) under Fed Chair Alan Greenspan and flight-to-quality dynamics during the mortgage crisis (2007), global liquidity crisis (2008), zero interest rate policy (2008-2015), and a new currency war, which produced a record low value for the U.S. dollar (2011).

Another bear market arrived in August 2011 just as dollar weakness turned to dollar strength. A persistently stronger dollar starting in 2011 and the promise of monetary tightening by the Fed starting with the “taper tantrum” in May 2013 were among the forces driving the decline.

As prices declined, gold miners struggled, mines were closed and gold mining rights and equipment were sold for cents-on-the-dollar, especially after the gold price crash in April 2013. The IMF added to the selling pressure by dumping 400 tons of gold on the market in 2010; another example of official manipulation of gold prices.

The turning point came on December 15, 2015 when gold bottomed at $1,050 per ounce, a dramatic 45% drop from the all-time high of $1,900. At that point, the third great bull market began. Almost no one saw this at the time because sentiment was completely depressed and many past rallies had been followed by new declines and new lows. Top gold analysts were still calling for $800 per ounce gold prices as late as 2017.

The point is, bull and bear market turning points are usually only seen in hindsight and rarely understood in real time. To our credit, we urged readers to buy gold at the $1,050 per ounce level and have been urging allocations to gold ever since. Gold has rallied almost 50% in less than four years as part of this new bull market.

The purpose of this long-term perspective is to illustrate the huge upside potential still remaining in this new gold bull market. The first bull market rallied over 2,100% in nine years. The second bull market rallied over 670% in twelve years. In both cases, the majority of the gains came toward the end of the bull market in a super-spike blow-off.

The current bull market is still in its early stage. A 50% gain in four years is impressive, but that’s just a down payment on what’s to come. If we simply average the performance of the past two bull markets and extend the new bull market on that basis, we would expect to see prices peak at $14,000 per ounce by 2026. Of course, even greater gains and a longer bull market are possible.

Jim Rickards

James G. Rickards is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He was the principal negotiator of the rescue of Long-Term Capital Management L.P. (LTCM) by the U.S Federal Reserve in 1998. His clients include institutional investors and government directorates.

His work is regularly featured in the Financial Times, Evening Standard, New York Times, The Telegraph, and the Washington Post, and he is frequently a guest on BBC, RTE Irish National Radio, CNN, NPR, CSPAN, CNBC, Bloomberg, Fox, and The Wall Street Journal. He has contributed as an advisor on capital markets to the U.S. intelligence community, and at the Office of the Secretary of Defense in the Pentagon.Rickards is the author of The New Case for Gold (April 2016), and three New York Times best sellers, The Death of Money (2014), Currency Wars (2011), The Road to Ruin (2016) from Penguin Random House.
 

Hard Assets Alliance was created as a cooperative of investment professionals who believe there's a better way to invest in precious metals. This is a guest perspective on the markets from one of these partners; we hope you enjoy it.

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Hard Assets Alliance
September 16, 2019

 

Hard Assets Alliance was created as a cooperative of investment professionals who believe there's a better way to invest in precious metals. This is a guest perspective on the markets from one of these partners; we hope you enjoy it.

China and the United States are meeting for trade talks, sparking a major market rally that finally broke the averages out of their collective funk.

 
Will the two countries kiss and make up? It’s unlikely. But one thing’s for sure: we are all sick and tired of this trade war.

“Escalating U.S.-China trade tensions have been the biggest equity headwind for months, so a relief rally on news high-level trade talks are planned for early October is no surprise,” said Alec Young, managing director of global markets research at FTSE Russell, via Bloomberg. “The bottom line is that stocks need earnings growth to move forward, and you can’t get that without progress on U.S.-China trade.”

The Chinese Ministry of Commerce confirmed the talks will happen sometime in October. Chinese media sources are generally optimistic about the outcome of the talks, according to CNBC. The Dow Jones Industrial Averages was equally enthused, jumping more than 370 points Thursday. A rally of less than 2.5% will place the Dow back at all-time highs.

How badly did the recent volatility spook traders? For an answer, we turn to

precious metals…

As stocks ricocheted in a violent range last month, investors turned to precious metals and other safety trades.

I noted in late August how gold and precious metals investments were taking charge as wider price swings afflicted the stock market. In fact, gold flipped the script and began outperforming the S&P 500 on the year as of Aug. 1.

     
But silver was the real tell.

 
The poor man’s precious metal finally caught a bid this summer and started to outpace gold — a surefire sign that speculators are finally finding their way back into the precious metals trade.


“Silver is also gaining 4.0% today which is more than twice as much as gold's 1.3%.” John Murphy noted on his Stockcharts.com blog earlier this week. “That isn't something new. Although gold led the rush into precious metals during May and June, silver took the lead during July and August.”


Murphy’s chart shows the shift perfectly as silver began to catch a bid back in July:

 

 

As you’ve probably guessed, the metals trade became a little frothy as trade-war gloom clouded market outlooks. Now that stocks are settling back into a bullish groove, the safety-seekers and metals speculators are taking profits.  

 

We’ll have to watch to see where buyers step back. Remember, major comeback rallies are typically fraught with violent reversals and shakeouts. Judging by the incredible run we’ve witnessed in the precious metals space this year, the current pullback could continue before finding support.


Sincerely,

 

Greg Guenthner


Greg Guenthner is the editor of Rude Awakening Pro and Seven Figure Signals.

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Hard Assets Alliance
September 13, 2019

The Gold Sellers’ Cartel Is Dead and Now Everyone’s Buying

Not many have ever heard of the Central Bank Gold Agreement, CBGA, also called the Washington Agreement on Gold, but it’s an interesting side note to the history of government manipulation of gold markets.

The agreement was first signed in 1999 and was renewed for five-year terms in 2004, 2009 and 2014. The signatories included central banks in France, Germany, Italy, Netherlands and Belgium and the European Central Bank as well as non-eurozone central banks in Switzerland and Sweden.

The U.S. was never a member of the agreement, but it did supervise the implementation of the agreement closely as did the Bank for International Settlements (BIS). The CBGA is a gold seller’s cartel similar to the notorious “London Gold Pool” of the late 1960s.

During the long gold bear market (1980–1999), central banks were active sellers of gold. There was some fear that the selling would spin out of control and hurt the value of remaining reserves more than was already the case.

 
The CBGA set limits on total sales and individual sales by member countries as a way to allow some ongoing sales without sinking the entire market. There was only one problem. The sales had largely dried up by the time the agreement was put in place.


After “Brown’s Bottom,” named after U.K. Chancellor of the Exchequer Gordon Brown, who sold about half the U.K.’s gold reserves at an average price of $275 per ounce between 1999 and 2002, there were few significant sales of gold by the CBGA signatories except for 1,000 tons by Switzerland in the early 2000s and 400 tons by the IMF in 2010.


There have been no sales by any signatories since 2010. The agreement is up for renewal in 2019, but it has long been a dead letter. As of now it’s being reported that the agreement is being allowed to lapse.

 
Of course, other central banks, including Russia, China, Vietnam, Turkey and more, have been voracious buyers of gold since 2009. As of now, the age of central bank gold sales is officially dead and the age of central banks as gold buyers has returned. This is just one more reason why gold prices have been on a tear.

Regards,

Jim Rickards

James G. Rickards is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He was the principal negotiator of the rescue of Long-Term Capital Management L.P. (LTCM) by the U.S Federal Reserve in 1998. His clients include institutional investors and government directorates.

His work is regularly featured in the Financial Times, Evening Standard, New York Times, The Telegraph, and the Washington Post, and he is frequently a guest on BBC, RTE Irish National Radio, CNN, NPR, CSPAN, CNBC, Bloomberg, Fox, and The Wall Street Journal. He has contributed as an advisor on capital markets to the U.S. intelligence community, and at the Office of the Secretary of Defense in the Pentagon.Rickards is the author of The New Case for Gold (April 2016), and three New York Times best sellers, The Death of Money (2014), Currency Wars (2011), The Road to Ruin (2016) from Penguin Random House.

For information on Hard Asset Alliance, click HERE

Website:  https://www.hardassetsalliance.com/?aff=TWC

WealthCare Connect may receive compensation from Hard Asset Alliance for purchases make through links(s) on this website.