Inflation is coming. But when?
Three years ago, nobody cared about gold.
Today, every other email I receive is a request for an article, interview, or webinar panel or presentation about gold. Everyone wants to know what the impact will be of the Federal Reserve injecting $7 Trillion dollars into the economy.
Inflation is the obvious expectation. More dollars chasing a finite number of goods and services should result in a bidding war. Bidding wars lead to higher consumer prices.
But, not so fast…
Keep in mind what’s been going on the past few months. Worldwide, businesses have all but shut down. Social distancing and stay at home orders have brought commerce to a halt.
Only now are some states starting the process of re-opening business.
Outside of toilet paper, meat, Clorox wipes, and hand sanitizer, there has been little to no pressure on prices. And, when businesses open again, many industries will have a tough time attracting consumers back. So, initially at least, I see prices dropping.
That is deflationary. That is recessionary.
Plus, if you remember back to the Financial Crisis of 2008 to 2009, the Federal Reserve injected a mountain of dollars into the economy as well. But it had little impact for quite a while.
The banks took the money from the FED, but they didn’t lend it out. For them, it was less risky and lucrative enough, to hold onto the money and invest it themselves.
Stock valuations soared for years… whether the companies were profitable or not. And, investors were happy to buy-in and watch their portfolios swell… until that nasty little bug popped the “Everything Bubble.”
Adjustment and Reinflation
I expect a couple things to happen once the Nanny State allows us to go back to work. First, I see businesses, workers, and consumers changing. This experience will make all three re-evaluate what they do and how they do it.
So, there will be a period of adjustment. More things that can be done remotely will be done remotely. Travel and events that cause us to congregate will have to change, or anxious people will not participate.
Unfortunately, I see this period of adjustment stretching into next year. Until there is a vaccine and proven, safe protocols, adjustments will continue.
And, in due course, we will find the new normal.
At that point, reinflation will begin in earnest. Consumers will spend. Businesses will feed into those spending patterns. Money will flow. Bidding wars will begin. Prices will rise.
The “Everything Bubble” will reflate to astronomical sizes beyond our current understanding.
Anything real will rise in price exponentially.
Between now and then, buy gold and silver!
Some Helpful Tips and Resources…
To help you Keep What’s Yours, consider the following…
- Buy gold and silver in the form of Perth Mint Certificates now, even if it is your first purchase. Fabricated bar and coins are still hard to come by. Premiums are lofty. Delivery times are lengthy. Save considerable amounts of money at Perth Mint right now. Gold is wealth insurance. Silver is for profit. Both are cheap. The profit potential on silver from here is massive. It may end up dwarfing the 1,000% appreciation from 2001 through 2011.
- Join us for our rescheduled On the Move webinar on Wednesday, May 13th at 7:00PM (EST).
Chris Blasi and I will be welcoming our special guest, Adrian Day of Adrian Day Asset Management. Adrian is uber-knowledgeable and a good personal friend of Michael and me. In a quarter century, I don’t think I have ever had a conversation with him where I didn’t learn something.
If you want to make sense of the current markets, join us on May 13th.
- At the end of this month, look for one of the most widely-anticipated reports of the year – In Gold We Trust.
Ronnie Stoferlie of Incrementum, AG (Liechtenstein), has produced this report for over a decade now. It is a must read for anyone even remotely considering holding gold in their portfolio. And, since everyone should hold gold in their portfolios, it is a must read for you as well.
The moment it is released, we will share the links with you to both the long and short versions.
- Stay safe through common sense! Take care of yourself so you can help others.
- Let us help you. We are just a phone call (800-831-0007) or an email away.
"Michael, Rich and the team are not only my own personal go-to provider for gold and other precious metals, they are wonderful colleagues, friends and experts for discussion and insight into what's happening in the global markets.” Doug Casey // Founder, Casey Research
"Michael, Rich and the team are not only my own personal go-to provider for gold and other precious metals, they are wonderful colleagues, friends and experts for discussion and insight into what's happening in the global markets.”
Doug Casey // Founder, Casey Research
Editor's Note: This article was originally published in Trade of the Day from our friends at Monument Trader's Alliance. You can join their live chatroom for real-time trading recommendations here.
Swimming in Oil
By Karim Rahemtulla
Oil’s in the news in a big way.
The market was over supplied with oil going into this crisis and now there is a glut like we have never seen before.
The US produces 15 million barrels of oil per day. It consumes 19 million in a booming economy. That number today is probably close to 10 million to 12 million.
Think about it. Who’s traveling?
Airlines have cut capacity by between 50% and 80%. The air over Los Angeles is cleaner and the smog is gone as drivers are staying put. The only people driving normally right now are truckers.
So, we are producing more oil than we need domestically, but we still need to import various grades of oil from places like Canada, Mexico and Saudi Arabia for our refineries. Different end products need different inputs ranging from lighter to heavier grades of oil.
To add to the glut, Russia and Saudi Arabia increased production by another 4 to 5 million barrels per day…before agreeing to cut back from their overproduction at the beginning of this month. The cut by OPEC plus Russia is expected to come in around 10 million barrels per day.
So, let’s do the math. The world is over-supplied by about 30 million barrels per day right now. OPEC plus is cutting back by a net 5 million barrels. That leaves an over-supply of around 25 million barrels a day. Today.
So, assume that the world is probably over supplied by 25 million barrels plus in my opinion. If the US economy is expected to contract by 30% this quarter – that’s a lot of oil filling up swimming pools! You see, oil must go somewhere once it comes out of the ground and there are fewer and fewer places to put it.
Unless we see a cut in oil production globally by a further 20 million barrels per day at a minimum…or demand pick up by that amount, oil prices will stay well below the $40 level where most US producers require it to be to just break even…and that’s the top tier producers!
Lower tier producers are already filing for bankruptcy and you can expect that trend to continue.
Consider that if the US is in trouble, so is the rest of the world. Lufthansa, the German flag carrier has cut capacity by 90%! Singapore Airlines has all but grounded its fleet – the list is endless.
In The War Room – a proprietary chatroom for investors - we trade everything in real time. That includes plays on oil and oil stocks. We recently closed out a nice double-digit gain of 24.55% in less than a week when the oil markets began to gyrate. And, there’s plenty more to come on rallies and pullbacks in the sector.
In fact, if oil rallies on any kind of major news from OPEC+ and Russia - besides what we have already seen - we may consider going short oil because until the global economy opens at more than a 25% or 50% clip, they will soon run out of swimming pools as well!
To get instant alerts when the next oil trade hits a buy signal – in real time – you have to join me in the War Room! Click here to join now.
"Whether you believe international diversification is a necessity because the U.S. dollar is headed for collapse, or you just want the added security of owning physical gold, Asset Strategies has the knowledgeable staff and the resources to meet these needs." R. Hughes // Satisfied ASI Client
"Whether you believe international diversification is a necessity because the U.S. dollar is headed for collapse, or you just want the added security of owning physical gold, Asset Strategies has the knowledgeable staff and the resources to meet these needs."
R. Hughes // Satisfied ASI Client
Global Demand Spikes and Short Supply Lead to Bullion Shortages
By Madeleine Coe
You do not need to wait until gold is $3,000 per ounce to buy.
This isn’t the first time the world has experienced a bullion shortage, and it certainly won’t be the last. That is why it’s so important to take advantage of dips in the market during slower periods in the market when supply is in excess, so that you are prepared for times of volatility.
To be clear, there is not a shortage of precious metals in the world. Precious metals are a finite resource, which is what makes them so valuable, and this currently is, and always will be, the case. When we refer to a shortage in precious metals, what we are actually referring to is a shortage in the amount of fabricated bullion produced by mints that is available to buy… coins and bars.
Over the past two months, the global economic upheaval led to high demand and diminished supply of available bullion, which in turn has led to increases in spot prices and a steep increase in premiums from precious metals dealers. That doesn’t mean it has to be impossible or prohibitively expensive for investors to get their hands on physical bullion in these times; it just means they need to have a trusted source.
What Lead to the Shortage?
In times of economic upheaval, investors turn to precious metals as a safe haven. Gold’s negative correlation to the stock market and paper currency has benefited gold investors for a long time. The spot price of gold has historically risen when the U.S. dollar weakened and when the stock market faltered. Investors have seen gold prices soar and the stock market plunge during periods of high inflation. In addition to financial insecurity, gold is also known as a crisis commodity for its ability to maintain or even grow in value during times of geopolitical uncertainty. We are certainly seeing this now.
When the stock market plummeted in mid-March, investors who owned gold were able to sell off some of their position in gold to meet margin calls. And that’s exactly what it is there for; to provide liquidity in a time of crisis and act as a safe haven for investors. And as central banks print more money as part of attempts to stimulate economies, many fear the resulting inflation that will possibly ensue, which could impact the value of other assets in your portfolio. True to its nature, in an extremely volatile market, gold is one of only a handful of assets that is positive on the year and that’s why it’s known as an “inflation killer”.
So, in addition to there being a strong demand for gold right now because of the pandemic, COVID-19 has also impacted the supply chain for fabricated bullion. Many European refiners are completely shut down, the Royal Canadian Mint has been temporarily closed, and the remaining private and government mints simply cannot keep pace with investors. Even the US Mint halted production in March in two facilities because employees had tested positive for coronavirus. With so many mints and refineries currently out of commission, even high-volume dealers were out of stock.
That didn’t stop many dealers from charging exorbitant premiums on products that they did not have in stock – because no one had them in stock – with promises to ship them 8-12 weeks down the road. Many investors found orders cancelled or delayed because there was no way to guarantee the product.
In short, the surging demand triggered by COVID-19 fears, the grinding halt of business worldwide, and the ensuing sell-off in global equities markets has created a shortage of fabricated gold and silver coins and bars. However, that doesn’t mean investors have to accept delayed delivery times, extremely high premiums, and no guarantee of products in stock.
What About Past Metal Shortages?
The 2008 financial crisis not only impacted financial institutions and real estate, but it also caused shortages in gold and silver bullion market as well. Like today, it was difficult to get immediate delivery on precious metals in the form of coins and bars from dealers between late 2008 and early 2009. Gold and silver products were difficult to obtain immediately, the premiums were exorbitant, and production was even suspended on the American Silver Eagle coin due to silver rationing.
Premiums on junk silver (90% silver US currency minted before 1965) are used as a barometer to gauge the silver bullion market’s tightness. In 2008, the premiums on junk silver coins soared past 40%. That means that investors were paying almost as much as the silver spot price just to own physical silver.
Over the past several weeks, we’ve seen dealers charging as much as 55% over spot for junk silver, and while gold premiums have not reached the overblown levels of silver, they are still quite high.
It’s also worth noting that in 2008, the increase in premiums on precious metals also coincided with the weakening of the U.S. dollar in relation to other world currencies. If this current pandemic weakens the US dollar to a substantial degree, then we may see another transition of wealth moving into gold and silver across the country as well as globally. I’d even venture to say this process has already started as gold moves into its’ next bull market cycle, and silver likely won’t be lagging behind for much longer.
The same scenario could be replayed during any future financial crisis. This isn’t the first time the world has experienced a bullion shortage and it certainly won’t be the last, so it pays to be prepared. That means owning gold and other precious metals, and paying reasonable premiums to own them. But in the midst of a bullion shortage, how do you get your hands on precious metals without paying astronomical premiums or waiting months to take delivery?
How to Shore Up Your Portfolio Today
You can buy gold, silver, and platinum today, pay just a 2.25% premium, and have immediate delivery of 100% backed, fully insured gold, silver, and platinum with a government guarantee, but there’s only one place offering terms like this. Since 1997, ASI and the Perth Mint have brought stability and cost-savings to precious metals owners through the Perth Mint Certificate Program (PMCP)
As long as the Perth Mint Certificate owners are willing to be flexible in terms of what form their unique ounces of precious metals are in from day to day, they receive free storage and insurance, and the Perth Mint saves money while maintaining a store of physical metal because the 0.5% storage cost they eat is much lower than the high commercial leasing rates they would have paid under the old model. Plus, the PMCP has the added bonus of enabling precious metals owners to diversify their portfolio because the metals are stored overseas until they are ready to liquidate their holdings.
Honestly, it’s a great way to own precious metals now or at any time. The physical shortage of gold bullion and coin suggests that the worldwide intensive demand for gold won't be disappearing anytime soon and will also likely push gold prices higher in the coming months. Bank of America predicted investors will see $3,000 an ounce for gold by the time this bull market hits its’ peak.
So, although the premiums at Perth will remain a palatable 2.25%, spot prices have a long way to climb to the top. It’s a good time to get into precious metals, and you won’t have to worry about supply shortage when you’re paying Perth to hold your gold from their guaranteed store of precious metals.
Call 1-800-831-0007 to speak to the experts at ASI. They're ready to help you navigate precious metals ownership during these uncertain times.
"Over the course of many years, ASI has developed a reputation as a leader in alternative assets. These include everything from foreign currencies, gold and silver, and platinum as well as rare tangible assets like ancient coins and collectible stamps. These are investment opportunities that fly below the radar of most investors. Yet, as ASI’s rigorous research confirms, they offer the benefits of higher returns and lower risk. The assets the ASI offers belong in every investor’s portfolio." Nicholas Vardy // ETF Strategist, The Oxford Club
"Over the course of many years, ASI has developed a reputation as a leader in alternative assets. These include everything from foreign currencies, gold and silver, and platinum as well as rare tangible assets like ancient coins and collectible stamps. These are investment opportunities that fly below the radar of most investors. Yet, as ASI’s rigorous research confirms, they offer the benefits of higher returns and lower risk. The assets the ASI offers belong in every investor’s portfolio."
Nicholas Vardy // ETF Strategist, The Oxford Club
The Inside Story
Editor's Note: This essay was originally published in Bill Bonner’s Diary. Bill Bonner’s Diary is the only daily newsletter that features the unique ideas of bestselling financial author Bill Bonner. From Wall Street to Washington, Bill leaves no idol un-busted and no stone unturned. You can click here to subscribe.
Vive la Revolution?
By Bill Bonner
"This world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaucrats. Einstein didn’t discover his theory of relativity on an order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way.
In the only cases the masses have escaped the grinding poverty you’re talking about, the only cases in recorded history are where they’ve had capitalism and largely free trade. If you want to know where the masses are worse off, it is exactly the kinds of societies that depart from that.
So the record of history is absolutely crystal clear, there is no alternative way, so far discovered, of improving the lives of ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system."
– Economist Milton Friedman on the Phil Donahue Show, 1979
SAN MARTIN, ARGENTINA – We’re all sitting on the edge of our seats… eagerly awaiting a glorious future led by bureaucrats.
Yes, the apparatchiks and funcionariat are creating a Brave New World… Or so they claim.
They aim to prove Friedman wrong… as almost the entire world tries to replace capitalism and real money with government-managed economies and fake money.
Japan says it will pump in $1 trillion. And it declared a state of emergency.
Nancy Pelosi says she’ll match that with “at least” another $1 million from the U.S.
Germany promised “limitless” support for small businesses.
The European Union is talking about a $540 billion program.
And the Federal Reserve is ready to pitch in $2.3 trillion in new money.
Old-fashioned getting and spending is out of date… démodé… behind the times. Now we can replace real earnings, real wealth and real money with… fake money!
Meanwhile, The Wall Street Journal reports that there are fewer and fewer people making any money at all:
"A second wave of job loss is hitting those who thought they were safe. Businesses that set up employees to work from home are laying them off as sales plummet. Corporate lawyers are seeing jobs dry up. Government workers are being furloughed as state and city budgets are squeezed. And health-care workers not involved in fighting the pandemic are suffering."
Goldman Sachs says the downturn will be “four times worse than 2008.”
And demand for oil is so weak, the black goo is selling for less than $20 a barrel. There’s so much of it sitting around that oil tankers are now being used for storage, with rental rates as high as $300,000 per day (usually only about $15,000).
But don’t despair. Aux barricades! Ils ne passeront pas! The fake money is on its way.
Heroes of the Revolution
As of yesterday, 1.1 million small business loans had already been approved, totaling $253 billion in bailout money. The feds’ $350 billion small-business relief fund is almost exhausted.
Wow! These Small Business Administration bureaucrats should be designated “first responders”… or “heroes of the revolution.” They’re processing the giveaways at a fantastic rate.
Apparently, they carefully examined 6,547 applications each hour for the last three weeks. That’s 109 every minute.
At the rate of one every half a second, they had to check out the facts… verify the value of collateral… and assure themselves that everything was on the level – after all, they were giving out as much as $2 million per application!
Who gets the money? We don’t know, but like subprime mortgages in 2007, all you need is a pulse. Even hedge funds are eligible.
They may be reckless gamblers and inveterate speculators… run by people making millions of dollars. But they qualify as small businesses!
Many of them must have forgotten to hedge. Now they need a bailout!
Here’s The Intelligencer with details:
"If you are a company, nonprofit, veterans organization, or tribal concern with 500 or fewer employees – or else, a self-employed individual or independent contractor – the government will provide you with a loan equivalent to eight weeks of your prior average payroll (or, for the self-employed, earnings), plus an additional 25 percent of that sum (unless that grand total adds up to more than $10 million, which is the cap for any individual firm).
You do not need to make any payments on that loan for six months. And if you maintain your workforce, then the government will entirely forgive the portion of the loan spent on payroll, benefits, utilities, rent, mortgage payments, or other debts. In other words, it will forgive more or less all of it."
The Feds’ Fatal Flaw
Yes, Dear Reader… The authorities – governments all over the planet – have a fatal flaw. They always want more power… and more control.
They (and their media toads) scare the bejeezus out of the public… and rouse the country to self-mutilation… making war against enemies, real and imaginary.
Drugs, poverty, the Koreans, the Vietnamese, Iraqis, terrorists, a virus… and the market economy itself!
When COVID-19 showed up, the feds got out the bazookas. The president’s chief economic advisor, Larry Kudlow, even proposed selling “war bonds” to pay for it.
The lockdown forced people to stop “pursuing their separate interests,” to borrow Milton Friedman’s words. Instead, Americans join the revolution – sheltering at home as they wait for their bailout checks to arrive in the mail.
And there, leading the charge are the feds – bureaucrats, politicians, cronies, swamp critters and Deep Staters – with trillions in fake new money.
We don’t know whether their approach to fighting the virus saves lives or not. But their revolt against old-fashioned market capitalism is certain to be a failure.
P.S. The next few years should be a rollicking, frolicking, helluva time for investors. Very few people have any idea of what is going on. And fewer still share our own view.
We wrote a letter and put together a series of reports to help you through this crisis. We hope we’re wrong. But we fear we’re not. You should decide for yourself.
“As the Publisher of The Oxford Club financial group for over 28 years, I've learned to be very selective in who I recommend to our Members. When it comes to buying precious metals and offering services for offshore diversification and protection of assets, there's only a few groups I would trust. Asset Strategies International is one of the select firms I recommend without hesitation. I've worked with them for decades. ASI is a family-led business that offers the perfect complement of hard asset services and expertise for our Members, with the utmost professionalism and responsiveness." —Julia Guth // CEO & Executive Publisher, The Oxford Club
“As the Publisher of The Oxford Club financial group for over 28 years, I've learned to be very selective in who I recommend to our Members. When it comes to buying precious metals and offering services for offshore diversification and protection of assets, there's only a few groups I would trust. Asset Strategies International is one of the select firms I recommend without hesitation. I've worked with them for decades. ASI is a family-led business that offers the perfect complement of hard asset services and expertise for our Members, with the utmost professionalism and responsiveness."
—Julia Guth // CEO & Executive Publisher, The Oxford Club