Author: Gold News Club

Gold Price Analysis: Bulls looking for a discount in $1560s  FXStreet

Are drones and Will Smith coming for gold and silver mining?  Kitco NEWS

Gold price drops to session lows following strong rise in U.S. consumer confidence  Kitco NEWS

In late December 2019, a bill from the German finance ministry – which had passed the lower legislative house – proposed lowering the “anonymous purchase limit” for precious metals from €10,000 to €2,000 (about $2,200), a reduction of 80%.

At the current price, one could buy less than one and one-half troy ounces of gold without activating customer ID paperwork, and for businesses – a criminal background check!

This is an additional decline from the €15,000 mandated just two years ago. Set to become law in early 2020, the effect was immediate, as long lines outside a coin shop in Cologne show.

Some of the world’s largest banks – including several in Germany – have long made a habit of laundering literally billions of dollars, euros, and assorted financial instruments from questionable customers.

This all begs the question as to how further squeezing “the little man” by imposing onerous reporting over relatively tiny amounts of gold sales is going to accomplish anything constructive.

It turns out that this legislative effort is directly tied to European Union (EU) guidelines laid out in the anti-money laundering directive (AMLD5), requiring member state compliance. And some people wonder why Britain’s Labour Party – whose platform proposed adding still more regulatory burdens to the population – recently suffered such a devastating defeat.

Bitcoin.com reports the EU’s 5th anti-money laundering directive dictates that “non-transparent assets, accounts, and even private safety deposit boxes will now be subject to state information gathering by law.”

A user on Reddit remarked:

“They don’t want normal people to bank run their scam paper. Gold and hard assets is how you protect yourself from inflation. They (the governments/banks) want to know every single person that tries to get out of their cage…”

“…Gold is thus seen as one of the final hedges against irresponsible government policy, and the proposed new limits on precious metals, will leave residents of Germany with even fewer options.”

A German citizen remarks:

“I live in Germany and the thing is we have had a full-blown shortage going on for weeks now. All these people in the line will go home empty handed. The smart ones have been exchanging paper for gold weeks and months ago… you have these (off-putting) ones who think the supply will wait for them when they lift (themselves up) in the last second. The retailers have been sold out for weeks already. It might clear up in January when the new law is in place, but I am not betting on it. It could also indicate that we are close to something bigger.”

Here’s the rub, and you can take this to the bank…

Authorities in most countries in the world, and sadly becoming more common by the day in that bastion of “democracy” – the U.S., at every level equate the desire for privacy with doing something “nefarious.” Some of Merriam-Webster’s numerous words define the term as “bad, evil, unethical, unlawful, wicked, wrong,” etc. Take your pick.

Ignore the clueless non-observer who reels off the knee-jerk comment that “If I don’t have anything to hide… It’s a very dangerous slide from “Innocent until proven guilty” to just the opposite.

It’s a corrosive trend that has all too-commonly become the operative principle of those whom we’ve elected to serve us, but who have now decided, in their finite wisdom, that we should serve them.

Not just “the man in the street.” Despite the excitement (and profit-building opportunities) offered by gold and silver from 2001-11 affected not just “the man on the street” but CEOs of most mining companies who continue to project the future by looking into the rearview mirror.

The knock-on effect meant that less money was spent on discovery, leading inexorably to lower production.

The overall result is that from the last decade, 2020 Reserves (the highest and most economically recoverable category of known ore deposit) for the world’s largest gold mining companies are down fully 26%.

David Morgan has long counseled newsletter subscribers to The Morgan Report, in addition to the tens of thousands who (weekly) receive The Free Morgan Report to start an accumulation program by acquiring physical gold and silver – viewing its role as insurance first, profit-potential second.

Own precious metals – i.e. honest money – paid for by fiat “paper promises.” On numerable occasions, over the thousands of years in which it has reliably fulfilled these roles, gold (and silver) have turned out to be literal life-savers in their own right.

Richard Davies toured Aceh, Indonesia after the 2004 tsunami that killed 250,000 people. He noted, “I met many survivors who were able to sell jewellery they were wearing… Wearing a gold bangle is like having enough cash on your wrist to employ a builder for a year… This traditional form of finance insulated Aceh and provided its entrepreneurs with rapid access to cash.”

If this doesn’t get your attention, then you’re just not paying attention!

Long before the move into gold becomes a full-fledged “rush,” smart money with deep pockets will have been activating their own accumulation plan.

The chart below from Goldman Sachs research indicates what’s been going on under the radar. Gold ETF (visible) accumulation – which by the way has now officially reached record levels – is being substantially eclipsed by the build in non-transparent gold investment, as it is ensconced around the world in private vaults, kept “in hand” near one’s residence, or simply buried in the back yard.

It’s not too late to accumulate! These and other data points, such as the current low level of U.S. Mint American Gold Eagle production – which follows demand – indicate that the majority of potential investors have yet to enter the gold space.

Act to strengthen your financial immune system by accumulating the desired level of metal now, before the ongoing gold-build morphs into a public-mania-infused “gold fever.” And before the concept of financial privacy and flexibility has become a relic of the not-too distant past.

Source: Maurice Jackson for Streetwise Reports   01/27/2020

In part three of the series, “All About Private Placements,” Maurice Jackson of Proven and Probable talks with Tekoa Da Silva, a financial adviser with Sprott USA, about details of private placements, including removing restrictive legends, exercising warrants, timing of private placement tranches, and understanding corporate share structures.

Maurice Jackson: Thank you for joining us for the third part of a special four-part series entitled All About Private Placements. Joining us for conversation is Tekoa Da Silva. He’s an accomplished licensed financial adviser for Sprott USA, the premier name in the natural resource space. Full disclosure, the following is not a Sprott USA endorsed product and it is for educational purposes only.

Tekoa, we concluded the second part of this series with the question regarding legend removals. Now what if I have an online discount broker? Can I go to them and have my legend removed?

Tekoa Da Silva: Looking at it from a North American context, a person may have a brokerage account with Charles Schwab, Fidelity, TD Ameritrade. The best place to get the answer that question is by calling them and asking the adviser that the person works with. And the answer that they get will probably result in you having to speak to three or four people at that firm to get a precise answer and it may be an imprecise answer at that. My impression is that many of the broker dealers, certainly in the U.S., are continuing to cut out the services that they used to offer because they’re no longer considered core products and services, and the cost of offering those services is going through the roof in terms of compliance and legal.

So why deal with it? From their standpoint, I think it makes much better sense to just simply let those services and those people go. But a person can always ask and they can always try. My observation and my discussions with a few people that have tried some of those discount online brokerage firms in the past was that it was a real run around, sort of like spending a week at the DMV.

So if someone has some time to kill and they want to pursue that process, by all means. But my advice would be to vet out a couple firms that claim to be specialist, natural resource and private placement capable firms, and test them out and see how they go. But be careful with trying to do private placement activities with discount brokers.

Maurice Jackson: I’ve gotten the legend removed and I now have the ability to sell my shares, but also the price has increased. Let’s use this scenario that we discussed earlier with Novo Resources Corp. (NVO:TSX.V; NSRPF:OTCQX). I bought it at 66 cents. The warrant, I can exercise it for one year at 90 cents, and the stock price is now at $7. How do I exercise this warrant?

Tekoa Da Silva: Exercising a warrant obtained by private placement. So, the broker that you use, who hopefully shows themselves to be very competent and really knows their stuff, will have a specific procedure laid out to you where they can say, “This is the form that you need to fill out.” Well, I’ll come back to that in just a second, but they’ll say, “This is the form that you need to fill out here saying deliver us the funds and here’s what our process is going to be once we get those two items from you.” And I’ll describe my observation of how that process works, but first I’ll say if we go back to here’s the form that you need to fill out to exercise your warrant, I would say when a person wants to participate in a private placement, they get an agreement called a subscription agreement from the issuer.

It’s a 30 or 40 page document. If you look at the end of that document, there’s usually a page right in there. It’s an appendix page usually and it says exercise warrant or warrant exercise form. They’ll include it right in there sometimes and you look at it and you basically write the certificate number of your warrant certificate in there, you sign it and you deliver that with the funds to the issuer. So you can forward the processing fees to the issuer by bank wire and then send them the warrant exercise form. I believe they have any ability to exercise your warrant without them actually having possession of the original warrant certificate because they’ll just cancel out the number once they exercise it.

And so that’s one way to do it. Another way to do it is if the broker says, “Here’s how you exercise it, you can give us these forms. Here’s how you give us the cash and then we’ll take care of it for you.” They would essentially be doing the same thing, using their clearinghouse bank. If their clearinghouse bank has your warrant certificate deposited in a vault, that just means that they’ll have somebody go in there and pull out the certificate, put it with some funds and then send it to the issuer that way. And then the issuer, they get started with their legal process working with the transfer agent and having the stock certificate. If you’re exercising the warrant to buy common shares, they’ll get to work to create the stock certificate at the transfer agent. And then once that stock certificate is produced, you’re back at step number one with regard to depositing traditionally or your regular deposit process with stock certificates have been obtained by private placement and your broker will have that instruction set out for you.

So the transfer agent will exercise for you. They’ll either drop it inside a DRS advice or the Direct Registration System account held at the transfer agent or they can have it, the paper, shipped to you directly in the mail. But either way you want to get that back to the broker so that they can start the process of being able to prepare those common shares, to be sold for you on the open market.

Maurice Jackson: Are there restrictive legends on the warrants?

Tekoa Da Silva: This is where having a competent broker can come in because the broker may say, “Okay, here’s the warrant exercise form, but also here is the legend removal form too. Send to us the legend removal form with the warrant exercise form so that we can have the restrictive legends removed at the same time or build it into our process to save you time.” And they may say save you time and I think in most cases they could really mean it because saving time means saving four to six weeks. A question on time, it takes probably two to three weeks to have a warrant exercised and the process complete and have a common stock issued. And then this whole deposit process, my experience has been in that probably takes between four to six weeks to get a physical certificate deposited into a brokerage account and then it cleared through the legal review process.

Maurice Jackson: Are there any benefits of participating in the first tranche versus a second or third tranche?

Tekoa Da Silva: Well, now do you mean if an issuer publishes a press release about a private placement and they say tranche number one will close on, let’s say, August 1st and then tranche number two will close on August 20th?

Maurice Jackson: Correct. Because that’s a three week window there that the speculator is missing out on should the stock price accelerate and they may risk losing potential gains.

Tekoa Da Silva: That’s a really good observation. I think it depends on the exact handling procedure that’s going to be taken by the issuer. If the issuer is going to issue all of these private placements, the securities, at the end of the completion of both tranches and they’re all going to be issued at the same time, one probably doesn’t need to be too concerned about that. But if they are having multiple issuances along the way, you’re absolutely right. The date that’s printed on the back of your certificate may be the date that it’s issued as well as some of the backups, the certificate, the restrictive legend, the four-month hold restrictive legend.

It may say that you may not be able to sell it until November 20th of, let’s say, 2019. Your date may actually ended up being a couple of weeks earlier than somebody else down the line. And you’re absolutely right that there could be a few weeks of a head start that that person may have on the others. So it really depends on the point on where these date deadlines fall. And then also the handling procedure that the broker that you use, how much time they need to remove the restricted legends. So it depends on the specific circumstances of the deal.

Maurice Jackson: Not to digress, but when you’re looking at capital structures for company, you see outstanding and fully diluted. That’s where this narrative changes. Can you expand on that, how that plays into this discussion?

Tekoa Da Silva: Yeah, that’s a really good question too. Shares outstanding versus fully diluted. A company may have 100 million shares outstanding and if you want to do a calculation of the market capital company or the price for that business, if you and I were to buy that business in full today, if the shares are trading at $1 per share in the open market and there are 100 million shares, we know that the business is priced at $100 million. Now if we run off and start making subsequent calculations using that $100 million as our reference number for the price of the business in terms of what we’re paying for what we get without looking at something like outstanding options, outstanding warrants, we, or one, could run the risk of overpaying without realizing it. Because what if behind that 100 million shares outstanding, there are an additional 100 million or 200 million options or warrants that are in the money or close to being in the money.

Depending on the strike price of the stock options and of the warrants. One needs to make a determination as to what they feel is a fully diluted market cap that’s appropriate to that situation. They could do a straight technical viewpoint of it and say, “Well there’s 200 million warrants outstanding, 100 million common shares. Let’s assume that all the warrants are exercised and we’ll use a $300 million market cap.” A $300 million price for a business obviously is dramatically different than $100 million price. So taking into account stock options, warrants, the exercise price for all the instruments, which are usually published within the annual reports or the minutes, the MD&A, management discussion and analysis documents, is key to coming up with a responsible price for what you’re paying for business.

Maurice Jackson: Ladies and gentlemen, this concludes part three on All About Private Placements. If you wish to have a conversation with Mr. Da Silva, email TDASilva@sprottglobal.com. If you want to find out which private placements have our attention at Proven and Probable, simply visit www.provenandprobable.com, place your correspondence in the subscribe box, and let us know that you are accredited. Subscription is free and we do not share your correspondence with third parties.

Part One of All About Private Placements.
Part Two of All About Private Placements.

Maurice Jackson is the founder of Proven and Probable, a site that aims to enrich its subscribers through education in precious metals and junior mining companies that will enrich the world.

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Disclosure:
1) Maurice Jackson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Novo Resources. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: Novo Resources. Proven and Probable disclosures are listed below.
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Source: Michael Ballanger for Streetwise Reports   01/27/2020

Sector expert Michael Ballanger examines the possible effects the emergence of the coronavirus in China may have on markets, and offers his observations on January’s market performances.

There is a local casino just “up the road” from where we reside that we visit (once in a blue moon), small sums of pocketed cash in hand, to play a few favored slot machines to see if we can defy the house odds and come home winners. Called The Great Blue Heron Casino, we have nicknamed it “The Blue Goose,” in reference to how one usually feels upon departure.

On occasion, we drive back “down the road” with smiling faces because we spat in faces of the Gambling Gods and actually came out ahead. However, the majority of the time, we limp home dejectedly, vowing never ever to return. Then, a month later, back “up the road” we go with yet another modest wad of the ultimate in “risk capital” to fire into the vice machines, forgetting all vows of abstinence and reformation.

Now, being that it is the closest casino to the large Asian populations of the Greater Toronto Area, the Goose is frequented by busload after busload of (predominantly) gamblers of Chinese descent or origin, cash literally falling out of pockets, who dash immediately in the direction of the exclusive “high-roller” sections. I have observed from afar elderly Chinese women sitting at a slot machine for hours, reaching into well-guarded handbags for $100 bills, which they deposit with orderly precision and astonishing calm. The robotic nature in which they perform these functions are almost religious in nature but alas, this is not the point of the story.

Last evening, I was about to sneak into the “Goose” for a fast $500 “cleansing” when I looked up to see one of those packed tour buses unloading passengers. What struck me as “odd” was that all of these (predominantly Chinese) people were wearing surgical masks. The last time I saw people wearing surgical masks outside of an operating theater was during the SARS epidemic, circa 2002, and in the category of “How Quickly We Forget,” global markets were roiled by that frightening pandemic. So, with the arrival of a new strain of microbe known as the “coronavirus” now dominating the news cycles, it was as if a large bucket of ice water was dumped down my (and the market’s) back.

I recall reading John Naisbitt’s 1982 bestseller Megatrends: Ten New Directions Transforming Our Lives, in which one of the major new directions was the “mutation of the microbe.” The explosion of world travel, with emphasis on the mass immigration of Asians to every other continent on the planet, has made the transportation and incubation of harmful, if not deadly, strains of bacteria a definite problem. It was identified by Naisbitt forty years ago in his book, as was the ascension of China as a global powerhouse, and it would appear that both premonitions have now been proven correct.

Amazingly, however, the impact of a potential negative impact on retail trade and tourism has been largely brushed aside, as investors seized upon Thursday’s 200-point drop in the Dow as a buying opportunity and moved the tape from red to green in the last hour of trading, before the exchange closed mildly negative.

This brings me to the point of this discussion: Just as the 2008 sub-prime crisis began as a “contained problem” affecting only isolated financial institutions, it was only when it began to spread across all of the banking sector that things went south. Similarly, the outbreak of the Ebola virus in 2014 clipped the markets for nearly 10%, so events such as the coronavirus certainly carry the potential to act as catalysts for profit-taking (at best) and outright panic(at worst).

In early Friday morning trading, markets appeared to have made their judgment; this was an isolated event and certainly nowhere as severe as either SARS or Ebola, so line up your favorite cash-burning electric car company trading at all-time nosebleed levels and margin the living s—t out of it. That was before a case of coronavirus was confirmed in Chicago, and then the s—t hit the proverbial fan. As I tweeted out on Thursday afternoon, “Is this the catalyst for the next market correction/crash?” along with a picture of a microbe. It was exactly that, which set up Friday’s reversal, and despite a valiant effort to save the weekly charts from an ugly red candle, the S&P closed down 30.07 points or 0.9%.

I remain cautious on the near-term outlook for stocks and have made a small bet on a decline, which I’ll cover in the “Positions” part of the subscriber section. In the interim, precious metals prices are mixed, with gold and silver trying to maintain their uptrends. I remain a buyer of physical metal ahead of the miners because I am fearful that an overall market correction has the potential to cause a divergence between the two.

We love the Gold Miners (GDX and GDXJ) for their leverage to the upside, so powerfully evident during the Q3/2019 advance, but the Gold Miners are not exactly on fire right now and the underperformance of the HUI, plus the dismal performance of silver (and the GSR) this month gives me pause. I await a more optimal entry level for the initiation of unleveraged positions. But as far as options, futures and the leveraged Gold Miner exchange-traded funds (NUGT and JNUG) are concerned, I need a much better entry level before taking on risk. In two or three months I may look back with regret, but for now, my January strategy of caution has been working.

Gold prices are hugging the uptrend line drawn off the December lows, and in fact have finally, here on Friday, moved away from actually straddling that line earlier in the week. A move in February gold above US$1,580/ounce would suggest a test of the US$1,613 top, while a series of closes below US$1,560 would send it to US$1,525. Mind you, if the U.S. markets buckle under the coronavirus catalyst, gold will move sharply higher, and embolden me to action and away from caution.

You all know how much I adore silver. Most of the jewelry I buy as gifts and for personal use have always been silver. I actually have a sterling silver bathroom tissue dispenser in the master bedroom. Despite that last admission probably falling into the “too much information” category, I wince every time I look at Tesla in the mid $500s/share and silver sub-$20/ounce. I throw quote monitors from office windows in absolute outrage at the incessant illegality of the Crimex paper shenanigans that blackwash the silver “market.”

However, even as a steroid-filled silver bull, only through advancing senility have I been able to harness this inherent optimism and see the tree-diffused forest; my beloved silver is failing to hold up “her end.” Silver prices are not acting as the precious metals leader they became last July. And that is bad.

Before you throw this tardy missive into the bin, recall that in the very early stages of the gold breakout (June 2019), silver also acted in a “canine sort of way.” Then, when gold gurus were calling for a 100 GSR (gold-to-silver ratio), I put out the now-famous “Short the GSR!” invective at 92.40 (within literally hours of the top)—but not before taking huge flak and derision from not only the anti-precious metals battalions of Tesla-wielding, wild-eyed stockroaches but also (and with considerably more vitriol) from the gold bulls!

We may be in a stage of the Great Bull Market in gold that began on Dec. 4, 2015, at US$1,045, where gold leads and silver follow—hence the deteriorating GSR. What I am looking out for is a “slingshot trade,” where the rampaging leader of a stock sector breaks out to new highs without any other sector members participating. People start to shout “Divergence!!!!” and sell both the leader and the other same-sector names, only to watch in horror as the leader rests and the followers suddenly explode higher. This is exactly what the silver metal and associated stocks did in the days and weeks after gold broke out above US$1,375.

To be sure, these are not easy markets to navigate and I, for one, am keeping my powder very dry, as my fear of a massive equity-market drawdown mitigates my precious metals ebullience. You will all recall, back in November, when I wrote that being “out” of my beloved Gold Miner ETFs (GDX and GDXJ) was actually more agonizing than back in March (2019) when they were down 12% and looking dreadful. Well, here we are in late January and I can tell you with total gums-exposed honesty that I am in the exact same state.

Bragging about an exit in the GDXJ at US$43 with it closing Friday at USD $41.79, is somewhat disingenuous, because we are a chip shot away from multiyear highs. That said, neither GDX or GDXJ has been able to take out the August 2016 highs at US$31.05 and US$49.37, which happened with gold trading at US$1,375.

So, with the metal now US$200 higher than the peak in 2016, either the miners are cheap, or the metal is rich, and therein lies my conundrum. I was trained many years ago by a brilliant futures trader that “lost opportunity is distinctly better than lost capital,” which is closely mirrored by “when in doubt, stay out!” To be clear, I am 70% invested in physical gold and silver and a handful of juniors; I am flat the miner ETFs because holding stocks terrifies me. I am trying to position myself before the end of the month in more physical metal and/or the jettisoned Gold Miner ETFs. If a gun is placed “upside my head” forcing me to action, I’ll opt for more silver first.

As we head into the last week of January, it is interesting to do the “January Barometer” (JB) analysis for stocks and for gold. Statistics show that as January goes, so goes the market for the rest of the calendar year. It is actually a tad more detailed than simply looking at the start and end levels for the S&P. The periods to be monitored are the Santa Claus rally (SCR) period (Dec. 24–Dec. 31), the First Five Days (FFD; Dec. 31 closing price–Jan. 8), First Half (FH; Dec. 31 closing price–Jan. 15) and the Full Month (FM; Dec. 31 closing price–Jan. 31 closing price). I like to do the same analysis for gold as an exercise only because gold is such a different beast so here we go:

As for the S&P, the JB for 2020 was in full “bull mode” with the SCR, FFD and FH readings all solidly positive, but with the late-week reversal, the S&P went out only 6 points above the FH close. Under the JB rules, stocks have to close out the month higher than the FH, FFD and 2019 closing prices, so if the big reversal on Friday sends the monthly close to under the FH close, then the JB is sending a mixed signal and the 2020 Trump Reelection Year may not go as swimmingly as one might have thought a week ago.

As for the JB for gold, with the close at US$1,571.90, things look decidedly better, as while the FFD close at US$1,560 was higher than the FH close at US$1,553, gold stands a very good chance of closing the month higher than the FH close, and that would be a huge positive for near-term performance.

The definition of the term “mixed emotions” is that it is the feeling one gets when that particularly hateful bullion bank trader drives your new Ferrari off a cliff. I have mixed emotions concerning gold because I have yet to buy the 2020 GGMA portfolio. As stated earlier, I am 70% long from purchases made in January 2019, but only 25% invested for new cash available for investment in 2020. Not to worry though, because I have a feeling that things will get resolved this week, for the better or for the worse.

With the coronavirus death toll having just jumped to 60% and now confirmed in Europe, traders in all markets are advised to beware the malevolent microbe.

Originally trained during the inflationary 1970s, Michael Ballanger is a graduate of Saint Louis University where he earned a Bachelor of Science in finance and a Bachelor of Art in marketing before completing post-graduate work at the Wharton School of Finance. With more than 30 years of experience as a junior mining and exploration specialist, as well as a solid background in corporate finance, Ballanger’s adherence to the concept of “Hard Assets” allows him to focus the practice on selecting opportunities in the global resource sector with emphasis on the precious metals exploration and development sector. Ballanger takes great pleasure in visiting mineral properties around the globe in the never-ending hunt for early-stage opportunities.

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Disclosure:
1) Statements and opinions expressed are the opinions of Michael Ballanger and not of Streetwise Reports or its officers. Michael Ballanger is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation. Michael Ballanger was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

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Source: Bob Moriarty for Streetwise Reports   01/26/2020

Bob Moriarty of 321gold reflects on how government actions in the financial and public health spheres will pop market bubbles.

The “Everything Bubble” just burst. Here’s why.

I was in Vietnam from July 1968 until March 1970. From November 1968 until July 1969 I was flying the O-1 Birddog as a forward air controller (FAC). Back then I used to believe all the bull our government puts out. Now, when Trump says the Iranians fired missiles at a US base in Iraq and none of our troops were injured, I know at once he was lying. And sure enough, two weeks later we find that 34 soldiers were injured.

Governments lie about everything and as a result we are about to pay a terrible price. All of them lie.

As a FAC I controlled hundreds of air strikes and artillery missions in the belief I was helping protect the lives of the Marines and soldiers below. Compared with weapons systems of today what we did was primitive. We had to have the fixed-wing ordinance-carrying aircraft find us. We had to identify them and they had to identify us. Then we had to talk them into where they were to attack. It was vital to use exactly the correct terminology. It was easy to confuse the high-speed fixed-wing aircraft if you didn’t use words as they should be used.

Does the word “right” mean direction or does it mean “correct?” In the fog of battle you might tell an aircraft to attack on a heading of 355 and to pull off left to avoid high terrain covered in cloud.

If he responded, “Pull off left?” because he didn’t fully understand your instructions, and you respond, “Right,” don’t be real surprised if he makes a right hand pullout and hits the mountain because you used the wrong word. If you had said “correct,” he would not have been confused.

All of last year I was calling for a major correction. My belief that the bubble would burst in October was based on everything I saw. October came and went without a correction and certainly not a crash. I may have been “left,” but for certain I wasn’t “wrong.” Wrong and left both being the opposite of right.

I’ve called market turns in the past correctly. In January of 2008 I forecast a market crash in the fall. It happened just as I forecast. I called the top in silver to the day in 2011 and just a year ago called a stock market rally to the day at Christmas. Lots of other writers would love to throw rocks at me who have never managed to call anything correctly. I’ve made a lot of accurate calls. But actions of the Fed postponed the October crash.

On the 17th of September the Fed panicked and began Not-QE, pumping billions of dollars into the Repo market. Clearly the money had to go somewhere. It found a home in the major markets just as the Fed wanted. If you look at the chart above, the market started a massive climb without a correction about the first of October, continuing until a few days ago.

That pile of cash postponed the “Everything Bubble Crash,” but for certain did not eliminate it.

The Fed began its journey down the rabbit hole in 2008. That was the last opportunity to allow the system to heal itself. Banks that caused the problem should have been allowed to die a merciful death, as they so justly deserved. But due to political pressures, losses were socialized and profits privatized. We have been in something right out of Kafka and Lewis Carroll ever since.

You see, the world has over $12 trillion in negative interest rate bonds. Should short-term interest rates rise as they began to in September, the bond market would collapse as trillions of dollars of price disappeared into bond heaven.

A simple concept exists in physics that everyone who wants to understand how the world works needs to understand. That concept is of entropy. Everything in the universe moves from order to disorder. Including financial systems.

Since 2008 the world’s financial system has been pushed, prodded and manipulated by all of the central banks to the point it is simply out of control. The system is so unstable that even a tiny straw would be sufficient to break the back of the system. That’s what I saw a year ago and predicted would burst the “Everything Bubble” at last. I may have been left but I wasn’t wrong. The Fed managed to push the system into even more disorder, which is now visible to everyone and anyone with a room temperature IQ or a lick of financial sense.

The coronavirus coming out of Wuhan is going to pop the “Everything Bubble.” It would be wrong to think of it as a minor pinprick. With somewhere between 35 and 50 million people in China already under quarantine in a dozen cities, it would be a lot more like a thermonuclear blast that will flatten every bubble in sight. In all of recorded history no nation has ever managed an effective quarantine on so many people. With transportation screeching to a halt, the lives of millions of those people are at risk due to a simple lack of food or warm shelter.

Every form of sickness that can be passed on has a reproductive number. If a cold or flu in one person is passed on to only one other person, it has an R0 of 1. Below 1 the flu or cold will eventually disappear. Above 1 the sickness will be passed on to more and more people. A typical seasonal flu comes in at an R0 of 1.28; the 2009 flu pandemic came in at 1.48 and the deadly Spanish flu of 1918 measured 1.80. Lancet believes this coronavirus is between 3.6 and 4.0. And it’s deadly.

This has the potential for being the biggest mass casualty event in world history. At the very least it will take down the financial system as the world economy grinds to a halt with efforts to contain the virus.

Now would be a great time to be prepared for a disaster bigger than any in history. On Jan. 1, 2020, I posted a piece warning of a stock market crash. It’s here and it’s now.

Bob Moriarty founded 321gold.com, with his late wife, Barbara Moriarty, more than 16 years ago. They later added 321energy.com to cover oil, natural gas, gasoline, coal, solar, wind and nuclear energy. Both sites feature articles, editorial opinions, pricing figures and updates on current events affecting both sectors. Previously, Moriarty was a Marine F-4B and O-1 pilot with more than 832 missions in Vietnam. He holds 14 international aviation records.

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