Stocks will have a ‘Waterfall Decline’ and Silver will ‘Skyrocket’ in August!

In their latest announcement, the FED attempted to prop up the stock market. They attempted to sound hawkish, however, the market paid not any heed to it.  The FED annulment was reflected in a manner that lead the way to the dollar tanking and precious metals rising. Silver has industrial uses as well as monetary ones, which will come to the forefront as the gold bull market progresses.

“The Fed has had numerous opportunities to normalize rates over the past two years and have squandered them all,” said Peter Hug, global trading director at Kitco Metals Inc. in an emailed note after the FED statement, reports Market Watch.

Although a few analysts believe that the FED has kept hopes alive for a September 2016 rate hike, the market does NOT believe so. The FED funds futures points to a status quota the next meeting, as a majority (88%) of traders believe that the FED will NOT move in the next meeting of September 2016.

In my opinion, the judgment of FED members notwithstanding, what choice do they have but to leave the possibility of a rate hike on the table?  They would look like total buffoons, if they reversed course now. This sudden spike in the price of silver has definitely caught a lot of analysts off guard.  I am suggesting that the fact that the FED is now less likely to raise rates after the Brexit and the fact that the dollar has been slipping a bit lately are the primary reasons for silver’s rise…

The dollar bulls, who were optimistic on the FED had pushed prices above the 97 levels, however, after the FED’s decision, prices tanked and rightly so.

Another reason for an increase in silver prices is the surge in demand due its “industrial” application. “Silver has (more room to run) because silver is increasingly used in solar panels now. Something like 10 percent of demand comes from solar panels. Solar panels are a growing source of demand for silver, so you have got an additional attraction for silver as well, as a commodity investment and also industrial usage,” Jeremy Wrathall, mining team leader at Investec, told  CNBC on Monday, July 4th.,2016

The chart of the dollar index shows that for more than a month, it has remained in an uptrending channel. However, recently the dollar broke down the channel, signifying that the traders do not buy the hawkish derrick.

The break of the channel has a target of close to 95.2, which also coincides with the 50% retracement of the total rise from the lows of 93. However, if the dollar continues to tumble, it has a small support at 94.7 levels, post which, it will retrace the complete move.

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The fall in the dollar will reflect in the rise of silver. I believe that silver is on the cusp of a rally and hence, we shall concentrate on the silver charts.

The silver bulls have seen a stupendous run from the lows of around $13.73 during the start of the year to the highs of $21.2 in early July 2016. However, I believe that the bull run in silver will continue after a small consolidation.

The chart of silver shows that it is consolidating in a range of 19.3 on the lower side and 21.2 on the higher side. If silver manages to break above the range, its pattern target is 23. However, I believe that silver will scale the level of 23 and thereafter, reach the levels of 26 by the end of this year.

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Historically, August has been a rough month for stock investors. In the last 20 years, the stock market’s performance has been down -1.3% in August, according too Bespoke.

“I would expect August to be mediocre or weak,” said Don Townswick, director of equities at Conning.

Similarly, David Kostin, Chief equity strategist at Goldman Sachs is bearish on the markets. The current price-to-earnings (P/E) ratio expansion cycle has reached the third largest, ever, in history.

Consider that the current rise in stocks has come on the back of poor earnings, dismal growth and huge financial risks on the horizon. The crash is imminent, and I believe that the fall this August 2016 and September 2016 will sow the seeds for the larger decline, that I have been talking about.

I expect the equity markets to follow their negative record of August and September and I believe that the decline, which will be moderate in the beginning will end with a sharp slide.

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Conclusion

I believe that as “The Global Financial Reset” of the ‘monetary system’ begins, there will be an increase in the demand for silver relative to the increase in the demand for gold. Gold is an ‘Establishment’ metal relative to silver. There are no Central Bank that are ‘hoarders’ of silver, anywhere or anymore. There is no one in the ‘Establishment’ who considers silver, as money, as of yet!

History is going to repeat itself in August and we will see a sharp fall in the months of August 2016 and September 2016. The traders are accepting that the FED will not raise rates anymore this year and they are placing their bets accordingly.

Our short call on the dollar was timed to perfection, and I believe that the short call we give on the stock market will also produce similar results. Get ready for more such profitable trades in the following months.

Get my analysis and trades at: www.TheGoldAndOilGuy.com

Chris Vermeulen

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Does Gold Continue Its Bull Market Towards $1500 or Crash?

Gold has a “clear presence” to play in a world dominated with ‘global economic uncertainty”

My analysis shows that gold will be implemented to protect ‘global purchasing power’ and minimize losses during our upcoming periods of ‘market shock’. It serves as a high-quality, liquid asset to be used when selling other assets would cause losses. Central Banks of the world’s largest long-term investment portfolios use gold to mitigate portfolio risk in this manner and have been net buyers of gold since 2010.

Investors should make use of gold’s lack of ‘correlation’ with other assets which makes it the best hedge against currency risk.  There was a huge trend change in U.S. gold investment last May 2016. Switzerland is now a major source of U.S. gold exports. The tables turned back in May 2016 as the Swiss exported a record amount of gold to the United States. There has been a huge increase in gold flows into the Global Gold ETFs & Funds.  Something seriously changed in May 2016 as the Swiss exported more gold to the U.S. in one month than they have every year for several decades.

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Though we are in for a period of great financial turmoil, investors can safeguard themselves by investing smartly in gold. Do not be left behind and see your dollar assets lose value. Invest in gold!

It is in these conditions gold is the only investment that will appreciate in time.

The world including Russia, Syria, Libya, North Korea, the South China Sea, Venezuela and social discord from Europe to the U.S., it is difficult to make the case for any good news.  Gold will continue to perform its role as a “safe haven” in these times of crisis which appear to be never ending.   The metals surge of as much as 8.1 percent on the day of the “Brexit” vote last month is an indicator that its’ luster of safety is undimmed in the current market. There’s little to be gained from arguing whether such beliefs are right or wrong: “The market can stay irrational longer than you can stay solvent”.

The list of prominent hedge fund managers backing gold is lengthening.  Paul Singer, of Elliott Management Corporation, is the latest name to lend his support. It is likely that more investment institutions will turn to gold as the logical way to countervail the effects of many years of quantitative easing.

“It’s a glaring warning sign of deflation. We’ve never really had deflationary fears throughout such a widespread part of the world before,” said Phil Camporeale, a multi-asset specialist at JPMorgan Asset Management.

These accommodative Global Central Bank policies has lead to monetary easing policies that have been adopted globally. It is not so much that the U.S. Dollar has become strong the last few weeks. The “systemic” uncertainty of the recent “Brexit” vote in the U.K. resulted in the U.S. Dollar became a “safe haven”.

The FED is doing everything in its power to prevent a rise in the dollar. They are willing to “orchestrate” any scenario where the stock market continues to soar and people will feel a “wealth effect” from new stock market highs and fight the argument that the economy is “contracting”. The FED is getting everything it wants in this regard and will continue to do so.  The number one priority of the FED is “debasing” the U.S. Dollar. Gold can rise even if the dollar continues to rise

Investors of all levels of experience are attracted to gold as a solid, tangible and long-term “store of value” that historically moved independently of other assets classes

Golds’ importance even in today’s environment was clearly visible during the massive rally during the start of the year, when all other asset classes were tanking. Investors piled on gold on a scare of a likely financial crisis in the world.

Investors should make use of Gold’s lack of ‘correlation’ with other assets which makes it the best hedge against currency risk.

Though we are in for a period of great financial turmoil, investors can safeguard themselves by investing smartly in gold. Don’t be left behind and see your dollar assets lose value. Invest in gold.

It is in these conditions that one of the best investments is gold.

Talk of further “unconventional” monetary policies globally has increased. Japan has reached the limit of what negative interest rates and quantitative easing have achieved. The Bank of Japan may adopt a policy of so-called “Helicopter Money”.

Dr Loretta Mester, President of the Federal Reserve Bank of Cleveland and a member of the rate-setting Federal Open Market Committee (FOMC), signalled direct payments to households and businesses to stoke spending was an option Central Banks might look at in addition to interest rate cuts and quantitative easing.

However, back in April 2016, if you have followed my recommendation, you would have maintained that once gold crossed the $1190/oz. levels, it was destined to go higher. Above the downtrend line, which acted as a resistance from 2013 and onwards, the trend altered and it appears to be extremely highly unlikely that it will reverse downwards, at all!

However, the head and shoulder formation tested my resolve to buy into gold, as it is a most reliable bearish pattern, but, once a bearish pattern fails, it becomes very bullish which is what has happened in this case. I was quick to alert my subscribers to buy as soon as the pattern was triggered.

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“We’re always assessing tools that we could use,” Dr Mester said in response to a question about the potential use of “Helicopter Money”. However, Dr Mester signalled that in the event of another shock or economic downturn that most likely option would be more quantitative easing-style money printing.

Global Government Bond rates are negative:

Global rates are at zero too negative, money will continue to chase gold and U.S. Treasuries for the higher yield. This will continue to push yields lower as the global economy continues to slow. What would cause this to reverse? It would require either an “economic rebound” or a complete “loss of faith” in the U.S. to pay its debts such as a collapse of the U.S. Government.

Addicted to debt:

The total amount of government bonds in the world that have negative yields are currently $13 trillion, according to Bank of America Merrill Lynch. Given that there were almost zero negative-yielding bonds just two years ago, the rise is “incredible”. Do not be surprised to see $15 trillion to $20 trillion worth of negative-yielding government debt by the end of this year.  The yield on short-term government include Switzerland,  Belgium, Denmark, France, Germany, Japan, and the Netherlands which are all sub-zero. Even short duration U.S. bond rates are barely above zero.  Bonds are not fixed-income assets anymore now as fixed-outgoings once were ones.  Investors are currently buying them for their ‘capital appreciation’ rather than their ‘coupon payments’.

Gold is currently in a correction. In this upcoming August of 2016, gold is set to surge much higher and surprise ALL.  As you can see from the chart below, I am targeting 135 level on GLD.

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Global Central Banks have yet to ‘manufacture’ inflation!
This trend will continue to grow for now, until, just like in 2008, the bubble bursts in “cataclysmic fashion. ”

The Central Banks are manipulating the fabric of price-time by reversing the flow of time via negative interest rates. Therefore, the global financial system no longer possesses the “productive capacity” to generate any income to sustain current equity asset values.

My own economic outlook is “invaluable” and is a must have if one wishes not only to save their wealth to profit themselves handsomely from this current “gloomy” crisis that is only worsening behind the scenes.  There are many ways to survive, protect, and grow one’s financial position in this prolonged economic downturn.

The end of the Great “Keynesian” Experiment is upon us. Follow my lead as we navigate through the various financial markets using cycle price forecasting, technical analysis, my secret pre-market price spike intraday trend indicator for accurate swing trades and long term ETF investment positions. Copy what I do in both of my portfolios – Active Trading & Long Term Investing at www.TheGoldAndOilGuy.com

Chris Vermeulen

Cold, Hard Cash Will Soon Be A Distant Memory

The ‘blockchain’ technology, the very basis on which the bitcoins were created, is likely to become the backbone of the future digitization of money. The importance of the technology was asserted in the 16th Annual International Conference on Policy Challenges for the Financial Sector; a three-day convention which was held on June 1st through June 3rd in Washington, D.C.

The conference was held under the tutelage of the FED, the World Bank, and the International Monetary Fund.

It was attended by representatives of the major Central Banks, across the world. The subject for this year was ‘fintech’ and the first day was dedicated to studying the ‘blockchain’ technology which is the framework on which the popular digital currency bitcoin has been built.

FED Chairwoman Janet Yellen was the introductory speaker and she said that, “central bankers don’t normally like the word “disruption, but it’s not something to fear.

Technology has played a role in solving problems in the financial system in the past, and she encouraged her fellow bankers to learn everything they can about this new technology”, reports the Wall Street Journal, from comments relayed by Perianne Boring, the president of the Chamber of Digital Commerce.

“This truly shows the technology has reached the highest levels of society and government,” Ms. Boring said.

What is ‘blockchain’?

Simply put, a blockchain is a digital ledger of transactions that have been executed. New data continues to be added in a linear, chronological order through the completed blocks of data which are shared among the computers on the network.

Participants on the network use cryptography to edit the ledger online without the involvement of a central clearing authority. This ledger contains all the data of transactions from the start of the first block to the latest block.

Advantages of the ‘blockchain’:

As there is no necessity of a centralized authority to oversee the transactions, it creates a transparent, simple and fast transaction environment. As the data is available to all of the members, and any modification requires the permission of the majority of the members, it is better equipped to handle the onslaught of cybercrimes.

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As no one can bypass the rules, the members can be assured that no single authority can deviate from the protocols. Due to direct transactions between two parties, transaction costs will be negligible.

The interbank transactions, which currently take days, can now be cleared in a matter of minutes, 24/7 and without the restrictions on working hours.

“Soon, the phrase ‘cross-border payment’ will make about as much sense as ‘cross-border email’,” said Mr. Adam Ludwin, co-founder and Chief Executive of the ‘blockchain’-focused startup Chain, during his keynote address.

Changes are needed to adapt it for the financial system:

The technology which is used in ‘bitcoins’ is unsuitable to be used directly in the various types of transactions like commercial papers, corporate bonds, U.S. Treasuries, etc., as these are issued for various business or policy purposes but there is already a new digital currency working with many of the top banks already which I mention later in this article.

Hence, a new more advanced and complicated system needs to be generated on the same ‘blockchain’ principle which can duplicate the ease of the use of current assets in a newly digitized model.

Challenges to adapting to ‘blockchain’ within the existing financial system:

It is unlikely that any government will be willing to part with their powers of which they control most of the monetary and fiscal decisions either directly or indirectly. Although the technology has enough security measures that are in place, the theft that occurred at Mt. Gox, which handled around 70% of all ‘bitcoin’ transactions, until 2013, reveals its’ vulnerability.

The ‘bitcoin’ is a small asset class with only a small quantity of bitcoins in circulation as compared to the trillions of transactions that take place daily, around the world. The computing power needed to handle such vast transactions is humongous. Such a setup requires billions of dollars, in investments, which may not be feasible to many.

Nonetheless, there are a number of entrepreneurs like Todd McDonald, co-founder and Head of Strategy at R3CEV LLC, a consortium of more than 40 financial institutions that are working towards the application of distributed ledger technologies to global financial markets.

“We can monitor compliance in real-time. We can answer questions about collateral ownership and hypothecation that were at root in the run on the system in 2007,” said Mr. Ludwin.

ARTICLE: The institutional investors are recognizing this outcome,

hence, they are the largest group of Bitcoin buyers.

Conclusion:

The days of cash are numbered and will soon be a mere memory! The revolution in ‘blockchain’ technology has reached the doors of the FED and it is now only a matter of time before the ‘greenback’ is phased out by the general public.

The reason I have started to cover bitcoin and digital currencies (Alt Coins) is because I believe they will become main stream much sooner than you think. In fact, there are already hundreds of new digital currencies available, though many are not and will not become key currencies.

I am watching, tracking and analysing many different digital currencies based on different metrics: how many online communities are focused on various alt coins, which ones have the most search engine searches, growth in market cap, have strong price charts, and which ones are focusing on working with large banks like the one call Ripple.

This new asset class is definitely disruptive, but I believe digital currencies add diversification not found anywhere else in the financial markets. They are a speculative play, safe haven during next financial crisis, and allows many people around the world to transfer money without being tracked and to possibly avoid taxes for those who want to side step government. Either way, more people and companies are accepting digital currencies and the demand and value they offer will eventually be priced into each each currency.

I have learning and slowly identifying some exciting opportunities in this new asset class which I feel everyone should some exposure to in their portfolios. Soon I will unveil some of my top currencies and where to buy and store them – Stay Tuned!

Chris Vermeulen – www.TheGoldAndOilGuy.com

US Dollar Analysis And New Trading Opportunity

Investor optimism in stocks is becoming more widespread. Last week’s NAAIM Exposure Index rose to 101, which is the highest level since December of 2013. The trading sentiment composite has moved to a “Sell Signal” and last week saw an 11 on the VIX.  Excessive optimism is universal.

We are entering an interesting time of the year for investors.  Is this stock market going to break out to the upside and rally to further new highs, or will this latest lull be followed by a painful reversal of fortune?   Historically, the August/September timeframe is the “Danger Zone” for the stock market.

Audio Interview: This pattern suggest markets are getting very close to a significant top, but the momentum has still not shifted to the downside.

Investors are driven by two emotions: FEAR and GREED. Too much fear can sink stocks well below where they should be, whereas when investors become greedy, they can bid up stock prices too high.

“Goldman Turns Outright Bearish: Says to “Sell” Stocks Over Next 3 Months” – source: ZeroHedge.com

Mr. Stan Druckenmiller recommended that investors sell their equity holdings, “The bull market is exhausting itself. A major factor has been the Federal Reserve’s easy money policy which has resulted in reckless corporate behavior.”

“The corporate sector today is stuck in a vicious cycle of earnings management, questionable allocation of capital, low productivity, declining margins and growing indebtedness,” Druckenmiller added.

The US stock market has skyrocketed towards record highs after encountering troubles earlier this year.  Chinese markets have stabilized. I still remain skeptical of the Chinese economy, which has crashed.  The fallout from any unwinding of Chinese investments will most likely have global implications.

Is The Rally In The US Dollar Over?

The release of the weak GDP number last Friday, July 29th, 2016, caused a significant drop in the dollar.  I do not believe investors will look at the dollar as a safe haven any longer. They flocked to the dollar because they thought that the FED would raise interest rates later this year, thus producing a stronger dollar. After seeing Friday’s numbers, the chance of that happening is near zero.

As I had stated last week, the FED would not raise interest rates before the U.S. presidential election.  Instead, the FED would do everything possible to be accommodating so as to make sure that the economy and stock markets exhibit signs of strength while entering into the election. The FED announcement last week reflected precisely that. There would be no change, nor increase, in short-term interest rates.  On that news, the dollar fell hard, and we were short the dollar with an inverse ETF, UDN, and, consequently, made a very quick profit for the sharp drop in the dollar.

My longer-term chart for the dollar is very bearish.  With the dollar near 97 Right now, there is a long-term pattern that projects a move down to the 75 level sometime next year.

A big decline for the dollar does not bode well for interest rates or the economy.  So, with the dollar about to begin a major decline, gold and silver will be a very nice place to be invested.

Friday’s trading action was all about the GDP numbers.  They were horrible!  The data showed that the US economy only grew at a disappointing rate of 1.2% within the second quarter. This combined with a downward revision to the first three months of the year to produce an average growth rate of just 1 percent.

Wall Street expected a 2.6% increase. Therefore, you have to wonder about what the FED was saying earlier in the week when they expressed confidence in the economy. The economy continues to contract and is not growing as the government would have you believe. With interest rates near zero, we should be growing, but we are NOT.  The economic numbers have failed miserably.  While the GDP growth remains “anemic”, there will be no wage increases or many new jobs created.

In Japan, the BOJ added some measures but did not satisfy the markets’ hunger.

Concluding Thoughts

I figure the SPX is due for a retracement/correction to start within the next 10 trading days. Many things like sentiment, put/call ratio, volatility index and recent strength in safe-haven assets like the price of gold, indicate smart money is rotating out of stocks and into defensive positions as of this writing. Meanwhile, the average market participant is becoming overly bullish on stocks and buying at new all-time highs.

We have a couple new ETF trades that should trigger this week, which might post explosive moves that could last five weeks in length.

Follow my analysis and trades at: www.TheGoldAndOilGuy.com

Economic Confidence Index plunges while stock market makes record highs

The Gallup Poll has released an Economic Confidence Index which reflects the sentiment of Americans, as it pertains to the economy.

As the stock market makes new record highs and the housing “bubble” market soars, one would expect that the “average” American would be smiling from ear to ear.   However, the chart below appears to present nothing but gloom and doom.  The Gallup Polls results are dumbfounding the American public as to why this divergence has occurred.  I feel we have touched upon a few points as to why this is occurring.

First off, half of all Americans do not even own one stock.  Secondly, there are many U.S. companies making large profits overseas. That may be positive for the company but that does not necessarily translate into a better financial position for mainstream Americans.

A survey was recently released showing that 62 percent of Americans do not even have $1000.00 in their savings accounts. Most Americans are only one small emergency expense away from being on the streets.  What this means is that many will simply rely on credit cards, friends and/or family for their funding should a financial emergency arise.  Is this meant to be our economic recovery?

 

How much do Americans save?

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Housing values, which are being “artificially” inflated, only prevent Americans from purchasing their ‘dream homes’, as is reflected in low homeownership rates.

The housing market is once again too expensive for most American families to afford. During the last housing “bubble”, many Americans were able to partake in the mania and enjoy equity gains although they were fleeting.

This time around, most of the gains are going to investors and large institutional buyers that have crowded out mainstream America. This is a first in history to occur, at least on this large of a scale.  The homeownership rate is the lowest in a generation as many young Americans are saddled with unsurmountable student loans and consequently forced to return to living at home.

Inflated home prices coupled with decreasing incomes, provide a recipe for disaster! Total wealth, in the U.S., is at a record high level, once again.  Consequently, most of the gains are in the hands of a very few.

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Americans are angry with the “establishment” and are frustrated with their economic ‘uncertainty’

Americans no longer trust mainstream media.  This is being reflected in the political climate: i.e., non-establishment candidates, Brexit, etc. and even new asset classes like digital currencies like bitcoin.

The stock market is fully “decoupled” as to how good Americans are doing, overall.

The SPX is up a stunning 220% since the lows that were reached in 2009 and US economic confidence index shows more people simply do not trust the economic numbers and media.

 

 

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Concluding Thoughts:

In short, I continue to warn about a down turn in both the economy and stock market. The markets continue to mature and the leading indicators point to a sharp correction in the financial systems I the coming months.

Safe haven investments have rocketed higher like bonds, gold, silver, mining stocks as smart money positioned its self in preparation for a crisis. As I have mentioned many times already, is just going to take one bad event or piece of data to cause the tipping point for the market. The question is when and what will it be?

Just like the 2008 bear market in stocks and financial down turn, this will be no different in terms of what will happen, just like every previous bear market/financial down turn before that. Stock prices will fall, people will lose their jobs, companies go bankrupt, housing defaults increase, personal spending comes to a grinding halt.

When it comes to our investment and trading capital, you can either ride the financial rollercoaster and do nothing, move to cash with some safe haven investments like bonds/precious metals, or bet against the US economy and watch your net worth reach new highs during a time when everyone you know is losing money, jobs and confidence.

Follow my weekly articles, swing trades, and long-term ETF investing positions.

Chris Vermeulen – www.TheGoldAndOilGuy.com

Insiders Are Secretly Selling

A Cycle Top In The Stock Market Next Month

It was “Panic Buying” that pushed the Dow Jones and the SPX Indices to record highs. To be sure there is trouble brewing in this rally.  Smart money has left the stock market, as the charts at the end of this article will display!

While Wall Street insiders appear to know that something is seriously amiss with the economy, no one is warning the retail investor.

The SPX continues to develop and complete its Broadening Topping Pattern. The next trend is downwards!  We are NOT currently in a trending mode…so tread lightly during these choppy times.

What Emotion Is Driving The Market Now?

CNN’s Fear & Greed Index tracks seven indicators of investor sentiment.

It’s displaying that the markets are way too frothy at the’ current reading of 86. It is important to note that this is a contrarian indicator, meaning when everyone is bullish and buying. Consequently, the market should be close to topping out…and falling in value.

As the markets are pushing higher, investors tend to become warier by nature. This often leads to the markets climbing the proverbial “wall of worry”. Are investors missing out on the opportunity of higher prices?

This Is Classic Negative Divergence

I believe the market is topping near these levels, because of the divergence between the Dow Industrials and the Transports.  The Industrials have made a new all-time record high, but the Transports have not.

One of the many near-term indicators I am watching pertains to Dow Theory. It is one of the more visible core tenets of Dow Theory.  Moreover, it’s important to see price confirmation (directionally) from both the Dow Jones Industrial Average (DJIA) and Dow Jones Transportation Average (DJT). The Industrials reached new all-time highs, while the Transports have not.  The Russell 2000 (IWM) have NOT confirmed this high either, confirming there is a broad weakness in stocks. The Russell 2000 typically leads stock market rallies and selloffs.

The market trend is UP when both forge higher highs. The market trend is DOWN when both forge lower lows. A “non-confirmation” is present when only one forges a higher high, but other makes lower lows.

The Volatility Index VIX recently dropped to a multi-year low.  It is now trading at levels where it was last August 2015, before it exploded to 40. In fact, a few days ago, there was a good article talking about the put/call options ratio and VIX and how they are both at extremes – pointing to a significant correction in the next couple weeks.

Another Chart You Need to View

Helicopter Money

During the last couple of weeks, gold prices have been in a corrective wave. However, this pattern calls for a continued uptrend to begin within the next couple of weeks.

Japan has promised to buy One Trillion Yen worth of new government debt…and perhaps even begin the “Helicopter Money” plan of direct government debt monetization going forward.

There are two events that will occur within 36 hours of each other this tomorrow, July 27th, 2016 and Friday, July 29th, 2016:

Wednesday, July 27th, 2016 – FOMC meeting ends with “Fedlines” announced at 2:00 pm EDT. Expect no rate changes!

Friday, July 29th, 2016 – The Bank of Japan meets and releases its latest QE plans. Former Federal Reserve Chairman Ben Bernanke told Prime Minister Shinzo Abe that there were still “various tools available” for monetary policy to spur growth.

A Reuters’ poll showed 85 percent of analysts expect the BOJ to ease on July 29th, 2016, alongside the fiscal spending boost Abe is set to announce this month.

In Japan, where government bond yields have fallen below zero, and faith in “Abenomics” is flagging, gold sales are soaring.

It is not unreasonable to expect the same here in the US between now and November 2016…and beyond.

Tracking Insider Activity Matters

Insider behavior matters because research based on real-time signals has shown that a properly modeled picture of insider actions can provide the most accurate reflection of the prospects for the company, industry, economic sector, or even the stock market in general, going forward.

This makes perfect sense from an intuitive perspective. Corporate insiders possess all the necessary skills and characteristics that one could use to describe the “successful” investor. A couple days ago I did talk in detail about how company executives disguise poor earnings numbers through the share buybacks we have seen the past year.

The chart and tables listed below are tough to read but the heading above each chart explains what each chart is telling us what insiders are doing with their money.

Daily Insider Buying Amount Is Down Sharply for 2016

HUGE Insider SELLING of Oil, Gas And Pipeline Companies

HUGE Insider SELLING of Internet Providers/Services/Technologies

HUGE Insider SELLING of Large Conglomerate Companies

HUGE Insider SELLING of Real Estate Based Companies/Funds

  • REIT Offices
  • REIT Retail
  • REIT Diversified
  • Hospitals

 

Concluding Thoughts

We believe the average market participants who are bullish on the stock market, and feeling really great about their future, will soon be left holding a huge portfolio of stocks trading 30-50% below the value they paid for them.

Wall Street insiders have been, and continue, to sell their shares as they see the music stopping sooner than later — and do not want to be the ones left holding equities when the bottom falls out.

When the equities market does roll over, money will be looking for a safe place to hide, which will be precious metals and US bonds.

Major market tops, like the one that has been forming for many months now, do take time to unfold. Moreover, they tend to take longer than one expects. Based on many different types of market and economic analysis, it’s just a matter of time now before something, or someone, triggers a selloff in stocks.

The exciting side of all this is that the stock market falls 3 to 7 times faster than it rises. And through inverse exchange traded funds and VIX ETF trading strategies one can profit from a collapsing stock market.

Get My ETF Signals And Profit – CLICK HERE

Don’t Buy The SPX Hope Rally!

All bubbles burst; the question is when? Quantitative Easing (QE) is much like an addiction. One needs more and more to get the initial effect, however, this becomes an asymptotic result, whereas, eventually, one needs an infinite amount that will no longer give a positive effect! So, now that QE has failed, I believe there will now be the introduction of “Helicopter Money”.

Global central bankers constantly continue to spend their way out of their contracting economies, which are now resulting in large budget deficits. The deficits that these policies have produced are unsustainableand have now created a new fiscal crisis within their countries. A second response has been to expand the central banks’ balance sheets as a way of providing liquidity to the private sector.  These policies have also sent interest rates into unprecedented historical lows. European countries and Japan have sent their rates into negative territory, thereby reducing returns to fixed-income investors. Low interest rates have encouraged corporations to borrow more money but, in turn, harm the investors savings for their future.

chart 1

Implementation of these monetary policies temporarily assisted the economy so as to reduce the impact of a new economic and financial crisis back in 2008. However, it was not the prudent policy to continue after everything became stabilized. The real solution was for an implementation of a new round of fiscal policies. This would have restructured the debt and allowed the global financial system to reset itself. Unfortunately, we are currently sitting on a ticking time bomb in all of the global financial markets.

True GDP growth comes from increasing productivity and real employment and allocating resources for proper economic activity. Global Central Banks have been applying monetary policies for so long, now, that they have become reckless and never created an exit plan. They never created any real required economic growth. The global central banks’ intervention, over eight years ago now, was to be the initial response in preventing a financial meltdown, however, monetary policy did not generate changes in productivity nor in the amount of economic resources that are required for any economy to expand. It is only the private sector that can generate the economic growth necessary to increase corporate profits and equity prices. As the size of the private sector shrinks, it becomes more difficult to generate growth within that economy.

Earnings Management

“Earnings Management” is the practice of attempting to intentionally bias financial statements in order for them to appear better looking than they actually are! Managers, in fact, make their earnings appear better, as well as their incentives for manipulating earnings, which is calculated and misleading to the shareholders. There are red flags for two different forms of revenue manipulation. One is manipulating earnings through aggressive revenue recognition practices, which is the most common reason that companies get in trouble with government regulators for their accounting practices. The other red flag for manipulating earnings is through aggressive expense recognition practices, which is the second most common reason that companies get in trouble for their accounting practices.

Share buybacks allow companies to repurchase their own shares on the market. Why do those companies want to do this? The number of shares held by the public will be reduced, which will increase the earnings per share, even if the total earnings are the same. The value of shares being traded will increase. It is valuable for a firm’s manager to buy back shares when it believes that the firm’s stock is currently trading below its intrinsic value. Executive compensation is often tied to executives’ ability to meet earnings-per-share targets. When it is difficult to meet the targets, the executives may repurchase shares in order to receive their executive or managerial bonuses.

Buybacks are not all created equal. The skills of the management in capital allocation and the culture of the company can make a difference in the outcome of the buybacks. Although buybacks are viewed as positive for stock prices, a lot of them happen at exactly the wrong time and destroy value for shareholders. I did talk with HoweStreet radio about how these high stock prices are deceiving.

Take a look at the chart below. This is a real eye opener for most, as it clearly shows how aggressively publicly-traded company executives are buying back shares to keep the earnings-per-share number high and cover up their lack of sales and growth. Eventually, this will come to an end, as does everything.

Currently, buybacks are at the same level reached before the last stock market top. I expect buybacks will end sooner than later, but the cover-ups will continue as long as executives have capital to spend.

chart 2

You should know how to spot and recognize earnings management and get a more accurate picture of earnings so you will be able to spot the bad person(s) in finance reporting!

A variety of assumptions and accounting estimates are used in arriving at the final earnings figures. In assessing the health of a company, both lenders and investors alike almost always look at the quality of it’s earnings first. However, it is nearly impossible for a company to consistently report stellar periodical earnings over a lengthy period of time. This is because a company’s business activities are affected by changes in economic cycles, seasonal changes, new legislation, and other extraordinary events that occur.

In order to normalize the continuous succession of ebbs and flows in financial results that are characteristic of any typical business, company managers, more often than not, resort to a practice known as earnings management. Earnings management occurs when managers use judgment in financial reporting and in structuring transactions in order to alter financial reports so as to either mislead some stakeholders in regards to the underlying economic performance of a company or to influence contractual outcomes that depend on reported accounting numbers. In other words, earnings numbers are deliberately manipulated by management for the purpose of meeting their company’s objectives, whatever they might be!

The Death of Investing!

Why is it that banks are holding so many excess reserves? What does the data tell us about current economic conditions and about bank lending behavior and practices? Some observers claim that the large increase in excess reserves implies that many of the policies introduced by the Federal Reserve in response to the financial crisis have been ineffective. Rather than promoting the flow of credit to firms and households, the data, as shown in the chart below, indicates that the money lent to banks and other intermediaries by the Federal Reserve since September of 2008 is simply sitting idle in banks’ reserve accounts. The FED has been intentionally discouraging banks from lending to Main Street, which has increased unemployment and stalled out the economy.

There is a new crisis just around the corner known as The Long Wave Winter Of Discontent.

Chart 3

Global governments have built up large debts that far exceed their GDP. They have even larger future liabilities in terms of pension and health care for retired workers. So how is it that investors can anticipate an increase in profits, which is necessary to generate and maintain higher stock prices?

Chart 4

It is quite evident to me that it is because of these conditions that expectations of future corporate profitability will fall and that equities will experience a substantial decline very shortly. This also means that unless the conditions, as cited above, change, equity prices could be the same as they were in the early 1980’s or lower.

Bill Gross, noted bond investor of Janus Capital Group Inc., stated that “investors should worry, for now, about the return of one’s money, not the return on it. Our credit-based financial system is sputtering, and risk assets are reflecting that reality even if most players (including central banks) have little clue as to how the game is played.” Global central banks have gone way too far!

Recently I have share some insight on a new and fast-growing type of money or asset class, which removes the central banks from the entire equation. It’s just a matter of time before these assets explode in value and the FED/central banks are scrambling to gain control again.

Concluding Thoughts

In short, I have been talking/warning about the US stock market topping out for about a year now. This lengthy process is taking a long time to play out, as most major market tops do, but each month we move closer to another life-changing financial event for the global economy.

While I am not yet short the US stock market so that I can profit from falling prices, subscribers and myself have been long bonds and precious metals for a while and enjoying the ride up.

Various markets are starting to become VERY interesting, and huge opportunities are just around the corner!

Follow My Analysis & ETF Trades at: www.TheGoldAndOilGuy.com

Chris Vermeulen

Large investors become major buyers of Bitcoin

The world has woken up to the fact that the Central Banks are a curse, rather than a boom to the global economies, and their time left is slowly coming to an end because of new technologies and currencies I talked about last week.

People are starting to park their money in digital currencies, like Bitcoin and Ethereum, rather than parking them in fiat currencies – I buy and hold my currencies in this crypto wallet CoinBase. This is primarily due to the Negative Interest Rate Policy as well as Zero Interest Rate Policy of the Central Banks, which explains the sharp rise in the price of Bitcoin, this year as seen in the chart below.

bitcoin

Billionaire resource investor, Carlo Civelli, believes that the Central Banks cannot get away with all the monetary printing. And I believe that the more they print, the more they push investors away from wanting their fiat currency.

“If we all talk about the end game and a scenario of total collapse, I can see the governments telling everybody that your money is now worthless and the bonds you own are now worthless. You all have to take a haircut”, said Civelli.

 

The institutional investors are recognizing this outcome,

hence, they are the largest group of Bitcoin buyers.

Jeremy Millar, Founder and Managing Partner at Ledger Partners in London, believes that people at hedge funds and family offices contribute 50% to 90% of the Bitcoin’s current $6.4 billion market cap.

“What is clear though is that over the last two years, bitcoin has emerged from its ‘hacktivist’ origins to a more institutionalized ecosystem which includes the participation of hedge funds, traders, and professional investors,” said Millar, reports Reuters.

Lack of regulation was scaring a few customers; not that regulation helped in any way during the 2007 crash, and neither will it help in the next crash. Nonetheless, the entry of the Winklevoss twins has given the whole industry an entrepreneurial boost. The twin brothers have co-founded the Bitcoin exchange Gemini.  

“With Gemini, we’re a regulated trust company in the state of New York; we’re regulated under banking law, so we operate and have the same controls and procedures that you would expect of any financial institution (like your bank). That didn’t exist in the early days of Bitcoin. Quite frankly, it didn’t exist a year ago . . . It was a Wild West in the early days,” said Tyler Winklevoss.

It is not only the U.S. and the European investors who are worried about their currencies but the Chinese investors are worried, as well, about the decreasing value of the yuan.

Zennon Kapron, founder of Financial Technology Consultancy Kapronasia and author of a book on Bitcoin said, “it seems that China is leading a lot of the movement. People are protecting their investments [by converting yuan into bitcoin],” reports the Wall Street Journal.

The chart below shows the Chinese appetite for Bitcoin. The two Chinese exchanges, Huobi and OKCoin, both witness approximately 92% of the global trade in Bitcoin.

“There’s a lot of hot money in China that has to go somewhere,” says Du Jin, Chief Marketing Officer at Huobi, reports The WSJ.

Austrian economist and investor Tuur Demeester believes that “it is important to use Bitcoin as part of a diversified portfolio.” He adds that bitcoin “offers a counterbalance to a series of growing risks that are associated with traditional investment practices,” reports the Brave New Coin.

“We think a well-rounded portfolio includes investments in a basket of block chain technologies (altcoins), with an emphasis on Bitcoin. This portfolio can play a part in three distinct strategies: as an insurance policy, as a hedge in a broad speculative portfolio and as a calculated bet on an early retirement,” wrote Mr. Demeester, in his report.

He goes on to add that “we believe returns of 100x over 10 years are possible, though obviously not guaranteed.”

 

Conclusion:

My readers know that I do not big believer in owning fiat currencies for the long-term. My main emphasis is to find ‘alternative’ asset classes, which are mature enough, but not saturated. The risk-reward in such classes should be high. I buy and hold my currencies in this crypto wallet CoinBase

Gold and silver are a great investments but are still controlled and manipulated by the banks and crooks of wall st.

Stay Tuned For More Updates and New Trade/Investment Ideas at www.TheGoldAndOilGuy.com

Chris Vermeulen

Insight from Greed, Volatility, and Put/Call Ratio

I was recently looking at the CNN money website where they post this fear & green index. I caught my attention because many other aspects of the market are now also showing signs an imminent correction in the stock market.

This analysis is a contrarians play, meaning you believe that when mass majority of market participants are thinking and doing the same thing, you believe the market is about to change direction.

Let me share with you a few data points that are screaming that the masses are overly bullish and on stocks, buying shares like they know what they are doing, and have no fear of stocks dropping in value.

Take a look at the fear & green index below from CNN money.

Notice the current level “Extreme Greed”, and also the chart below showing the historical data. Its trading up near record levels and there is only one way to go from here – down!

What will change these participant’s minds? Well, they need to see stock prices fall fast and hard and for the crap to get scared out of them before they change their line of thinking.

greedybuggers

The total put/call ratio is something you may follow. I used to follow it, but now just focus on during what I feel is a critical turning point in the stock market, like right now.

This is a messy/noisy chart but the important thing to get out of this is that the black line that is down at extreme lows tells us everyone is betting and leveraging their money in anticipation of higher stock prices. There is a delay from when we see low reads like this till the market tops and that time looks to be any day now.

The red line on this chart is of the SP500 index, which will fall in value once this last bit of upward momentum stalls out.

cpcratio

The volatility index is trading near long-term lows and “when the vix is low, its time to go”, as the old saying says.

Below is not a chart of the vix but rather of a VIX ETF symbol VXX. I talked about this recently in a trading analysis video for subscribers of my ETF newsletter.

Long story short, you will see the repeating price pattern that takes place. Because of the way VIX ETFs are built they naturally lose value over time, but that is not the point here. In fact, because of the natural price decay of this ETF it clearly exaggerates this repeating price pattern in the VIX would is very difficult to see without the exaggeration of price decay.

 pop

Conclusion to Greed, Volatility, and the Put/Call Ratio:

What does this chart point to? Well, keep in mind this is the WEEKLY chart. But in short, we should expect a BIG spike up in the VIX shortly and a sharp decline in stock prices.

There are many different ways one can play this next move. In one of my next article I will share with you a couple very interesting VIX ETF trading strategies for this next move.

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Chris Vermeulen