Sunday, August 21, 2016

Will The Bubble Pop Regardless if the Fed Never Raises Rates?

The current overall SPX pattern is a broadening top, which is usually a very reliable pattern. The market continues to look as though it wants to go even lower. The momentum shift, which I have been expecting, has been slow to start, however one should be prepared for this occurrence ahead of time. Nevertheless, the large divergences which I have been viewing, in my proprietary oscillators, are most real, and, once the selling starts, the momentum should quickly move to the downside.

The current market is being supported by a lack of sellers more so than aggressive buying. With investors still thinking that there is no other place to store their money, they appear to be content with leaving their money with risk on assets within a market that is pushing to all time highs. This type of mentality usually leads to large losses rather than big gains. There isn’t any real opportunity for growth in the SPX that I can see right now.

Dow Theory: Market Indexes Must Confirm Each Other
The Dow Theory was formulated from a series of Wall Street Journal editorials which were authored by Charles H. Dow from 1900 until the time of his death in 1902. These editorials reflected Dow’s beliefs regarding how the stock market behaved and how the market could be used to measure the health of the business environment.

Dow first used his theory to create the Dow Jones Industrial Index and the Dow Jones Rail Index (now Transportation Index), which were originally compiled by Dow for TheWall Street Journal. Dow created these indexes because he felt they were an accurate reflection of the business conditions within the economy, seeing as they covered two major economic segments: industrial and rail (transportation). While these indexes have changed, over the last 100 years, the theory still applies to current market indexes.

Market indexes must confirm one another. In other words, a major reversal from a bull or bear market cannot be signaled unless both indexes (generally the Dow Industrial and Transports Averages) are in agreement. Currently, They are DIVERGING, issuing MAJOR NON-CONFIRMATION HIGH the Dow Jones Industrial average. If one couples this with the volatility index, this is a warning sign and a recipe for disaster.

chart 1


The FEDs’ monetary policy over the last eight years has led to unproductive and reckless corporate behavior. The chart below shows U.S. non financials’ year on year change in net debt versus operating cash flow as measured by earnings before interest, tax, depreciation, and amortization (EBITA).

Chart 2
The growth in operating cash flow peaked five years ago and has turned negative year over year. Net debt has continued to rise, which is not good for companies.

This has never before occurred in the post World War II period. In the cycle preceding the Great Recession, the peaks had been pretty much coincidental. Even during that cycle, they only diverged for two years, and by the time EBITA turned negative, year over year, as it has today, growth in net debt had been declining for over two years. Again, the current 5 year divergence is unprecedented in financial history. Today, most of that debt is used for financial engineering, as opposed to productive investments. In 2012, buybacks and M&A were $1.25 trillion, while all R&D and office equipment spending were $1.55 trillion. As valuations rose, since that time, R&D and office equipment grew by only $250 billion, but financial engineering grew by $750 billion, or three times this!

You can only live on your seed corn for so long. Despite there being no increase in their interest costs while growing their net borrowing by $1.7 trillion, the profit shares of the corporate sector peaked in 2012. The corporate sector, today, is stuck in a vicious cycle of earnings manipulation management, questionable allocation of capital, low productivity, declining margins and growing debt levels.

Conclusion:

In short, I continue to pound on the table to help keep you and fellow investors aware that something bad, financially, is going to take place – huge events like the tech bubble, the housing collapse a few years back, and now national financial instability. Experts saw all these events coming months and, in some cases, years in advance. Big things typically don’t happen fast, but once the momentum changes direction you better be ready for some life changing events and a change in the financial market place.

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Thursday, August 18, 2016

The Financial Winter is Nearing

Weathering Out Winter
Nature functions in cycles. Each 24 hour period can be divided into smaller cycles of morning, afternoon, evening, and night. The whole year can be divided into seasonal cycles. Similarly, one’s life can also be divided into cycles. Cycles are abundant in nature – we just have to spot them, understand them, and be prepared for them, because they happen whether we like it or not. Likewise, economic experts have noticed that the world also follows different cycles. An important pioneer in this field was the Russian social economist, Nikolai Kondratiev, also called Nikolai Kondratieff, a relatively unknown genius.

Who Is Kondratiev?
Geniuses have been known to defend their principles and beliefs, even at the cost of losing their lives; they may die but their legacy lives on, as did Kondratiev. He was an economist who laid down his life defending his beliefs. He was the founding director of the Institute of Conjuncture, a famous research institution, which was located in Moscow. He devised a five year plan for the development of agriculture in Russia from 1923-1925.

His book, “The Major Economic Cycles,” was published 1925, in which his policies were in stark contrast to that of Stalin’s. As a result of this, Kondratiev was arrested in 1930 and given a prison sentence. This sentence was reviewed, and, consequently, he was executed in 1938. What a tragic loss of such a genius at only 42 years of age. He was executed because his research proved him right and Stalin wrong! Nonetheless, his legacy lives on and, in 1939 Joseph Schumpeter named the waves Kondratiev Waves, also known as K-Waves.

What Are Kondratiev Waves?
Investopedia defines the Kondratieff Wave as, “A long term cycle present in capitalist economies that represents long term, high growth and low growth economic periods.” The initial study by Kondratiev was based on the European agricultural commodity and copper prices. He noticed this period of evolution and self correction in the economic activity of the capitalist nations and felt it was important to document.
Chart 1 CNA

These waves are long cycles, lasting 50-60 years and consisting of various phases that are repetitive in nature. They are divided into four primary cycles:

Spring Inflationary growth phase: The first wave starts after a depressed economic state. With growth comes inflation. This phase sees stable prices, stable interest rates and a rising stock market, which is led by strong corporate profits and technological innovations. This phase generally lasts for 25 years.

Summer Stagflation (Recession): This phase witnesses wars such as the War of 1812, the Civil War, the World Wars and the Vietnam War. War leads to a shortage of resources, which leads to rising prices, rising interest rates and higher debt, and because of these factors, companies’ profits decline.

Autumn Deflationary Growth (Plateau period): After the end of war, people want economic stability. While the economy sees growth in selective sectors, this period also witnesses social and technological innovations. Prices fall and interest rates are low, which leads to higher debt and consumption. At the same time, companies’ profits rise, resulting in a strong stock market. All of these excesses end with a major speculative bubble.

Winter Depression: This is a period of correcting the excesses of the past and preparing the foundation for future growth. Prices fall, profits decline and stock markets correct to the downside. However, this period also refines the technologies of the past with innovation, making it cheaper and more available for the masses. Accuracy Of The Cycle Over The Last 200 Years

The K-Waves have stood the test of time. They have correctly identified various periods of important economic activity within the past 200 years. The chart below outlines its accuracy.

Very few cycles in history are as accurate as the Kondratiev waves.
Chart 2 CNA

Criticism Of The Kondratiev Waves
No principle in the world is left unchallenged. Similarly, there are a few critics of the K-Waves who consider it useful only for the pre-WWII era. They believe that the current monetary tools, which are at the disposal of the monetary agencies, can alter the performance of these waves. There is also a difference of opinion regarding the timing of the start of the waves.

The Wave is Being Pushed Ahead But the Mood Confirms a Kondratiev Winter
Chart 3 CNA
Chart 4 CNA
A closer study reveals that the cycles are being pushed forward temporarily. Any intervention in the natural cycle unleashes the wrath of nature, and the current phase of economic excess will also end in a similar correction. The K-Wave winter cycle that started in 2000 was aligned with the dot-com bubble.

The current stock market rise is fueled by the easy monetary policy of the global central banks. Barring a small period of time from 2005-2007 when the mood of the public was optimistic, the winter had been spent with people in a depressed social mood. The stock market rally from 2009-2015 will be perceived as the most hated rally and the one most laden with fear.

Every dip of a few hundred points in the stock market starts with a comparison to the Great Recession of 2007-2009. The mood exudes fear and disbelief that the efforts of the central banks have not been successful and are unable to thwart off the winter, as predicted by the K-Waves. The winter is here and is reflected in the depressed social mood.

How To Weather Out Brutal Winter
In the last phase of the winter cycle, from 2016-2020, which is likely to test us, the stock market top is in place. Global economic activity has peaked, terrorism further threatens our lives, geopolitical risks have risen, the current levels of debt across the developed world are unmanageable, and a legitimate threat of a currency war occurring will all end with the “The Great Reset.” Gold will be likely to perform better during this winter cycle. Get in love with the yellow metal; it’s the blanket which will help you withstand the winter.

Conclusion
Cycles are generally repetitive forces that give us an insight into the future so we can be prepared to face it and prosper. Without excessive intervention, nature is very forgiving while correcting the excesses. But if one meddles with nature, it can be merciless during the correction. The current economic condition will end with yet another reset in the financial markets. Prices will not rise forever, and a correction will take hold eventually. Until then, we follow and trade accordingly. I will suggest the necessary steps to avoid losses and prosper from market turmoil when it unfolds.

Follow my analysis at:  The Gold & Oil Guy.com

Chris Vermeulen



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Monday, August 15, 2016

It Can’t Wait Any Longer – It's Deja Vu in the Markets

The stock market tends to repeat itself on a regular basis. Why? Because it moves mainly based on the emotions of market participants, with the exception of extreme times when the masses are moving the market with extreme fear or greed, at which point they are flooding the market with buy or sell orders to create a final pop or drop in the market just before a major market reversal.

As with everything in the universe, everything moves in cycles, periods of expansion and contraction, and there are regular wave like patterns that happen on a regular basis no matter the time frame one is reviewing on a stock chart.

Here are three charts, each showing a similar price pattern of extreme washout lows, followed by roughly a 1 1/2 month rally taking investors on a roller coaster ride from fear and complete panic to greedy "know it alls". In short [no pun intended] U.S. large cap stocks look and feel toppy here. I feel a correction is likely to take place any day now, and the big question is “how much will the stock market pullback? Will it be another 4-5% correction similar to the chart examples above? Or will it be something larger 8-15% correction?

Chris Vermeulen


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Saturday, August 13, 2016

Why Corporate America Can’t Prop Up Stocks Much Longer

By Justin Spittler

Corporate America is bracing for tough times. Since you’re reading an investment newsletter, you likely own stocks. And if you’re like most investors, you keep up with how the companies you own are performing. You might even listen to quarterly “earnings calls,” which are when CEOs present results and give their outlook on the business.

Most of the time, CEOs act as cheerleaders on these calls. If business is bad, they’ll say business is good. If business is good, they’ll say it’s great. And CEOs are notoriously optimistic about the economy. After all, thousands of investors and analysts listen to these calls. CEOs know their stock can crash if they’re pessimistic about the business or economy. Because many CEOs will say anything to make their stock go up, we don’t put much stock in their words. We pay much more attention to their actions. And right now, large U.S. companies are acting like very tough economic times are ahead.

Business investment fell 2.2% last quarter..…
This metric measures how much companies spend on property, plant, and equipment. It was the third straight quarter that business investment fell. That hasn’t happened since the 2008-2009 financial crisis. We wouldn’t see this if the economy was headed in the right direction. Companies would be building more factories. They’d be buying more machinery. They’d be spending more money on research and development.

Instead, companies have cut back on investments. This tell us they don’t see many good opportunities. That’s a bad sign for the economy, yet stocks keep rallying. The S&P 500, Dow, and NASDAQ have all recently hit new record highs. At this point, you’re probably wondering what’s keeping stocks afloat if it’s not the economy.

Companies have spent about $2.5 trillion on “share buybacks” since the financial crisis..…
A buyback is when a company buys its own stock from shareholders. This can lift a company's stock price.
According to investment bank Goldman Sachs (GS), buybacks have been the biggest driver of U.S. stock performance since the financial crisis. Buybacks also reduce the number of shares that trade on the market.

This boosts a company’s earnings per share. But buybacks don’t make a company more profitable. They only make profits look bigger “on paper.” Companies have been buying up their own stock for two reasons: 1) They don’t see many growth opportunities. And 2) it’s incredibly cheap to borrow money.

The Federal Reserve has held its key interest rate near zero since 2008..…
The Fed cut rates to encourage households and businesses to borrow and spend more money. Mainstream economists thought this would “stimulate” the economy. It didn’t work. The U.S. economy has grown at an annualized rate of just 2.1% since 2009. This makes the current “recovery” the slowest by far since World War II.

The Fed did get folks to borrow huge sums of money. U.S. corporations have borrowed more than $10 billion in the bond market since 2007. Last year, they issued a record $1.5 trillion in bonds.
Buybacks are a big reason companies borrowed so much. MarketWatch reported last week:
Companies have been taking on piles of debt to finance buybacks, leading the total debt on the S&P 500 to grow 56% during the past five years.
According to Yahoo! Finance, companies in the S&P 500 funded 22% of last year’s buybacks with debt. This year, debt paid for 39% of share buybacks.

Corporate debt is now dangerously high..… 
According to Barron’s, corporate debt now equals 45.3% of gross domestic product (GDP). The only time this key ratio has ever been higher was in 2009, when it hit 45.4%. If the economy was doing well, this wouldn’t be such a big problem. Companies would be making enough money to pay their debts.

But right now, Corporate America is struggling to make money. Profits for companies in the S&P 500 are on track to fall for the fifth straight quarter. That hasn’t happened since the 2008-2009 financial crisis.
There’s no telling when this earnings drought will end either. According to research firm FactSet, analysts expect third quarter corporate profits to fall 1.7%. The third quarter ends on September 30.

Keep in mind, the U.S. economy is technically in a “recovery” right now. Imagine what will happen to corporate profits during the next recession. The more profits fall, the less money companies will have to prop up their shares with buybacks.
  
Companies have already started to cut back on buybacks..…
According to Business Insider, buybacks fell 18% last quarter. This sharp decline in buyback activity followed a near record breaking first quarter, in which companies in the S&P 500 spent an incredible $166 billion on buybacks. That’s the second most ever, and the most in one quarter since 2007. We don’t know exactly why companies are suddenly spending less on buybacks.

Maybe it’s because corporate profits are drying up. Maybe companies are starting to realize they have too much debt. Or maybe it’s because stocks are expensive. According to the popular CAPE ratio, stocks in the S&P 500 are 62% more expensive than their historic average. Since 1881, U.S. stocks have only been more expensive three times: before the Great Depression, during the dot-com bubble, and leading up to the 2008-2009 financial crisis.

Like any investment, buybacks only make sense when stocks are a good deal. With stocks as expensive as they are today, buybacks are a terrible use of money.

Without buybacks, there won’t be much to keep U.S. stocks from falling..…
If you own stocks, take a good look at your portfolio. We recommend that you get out of any company that needs buybacks to retain shareholders. We also encourage you to put 10% to 15% of your wealth in gold. As we often say, gold is real money. It’s preserved wealth for centuries because gold is unlike any other asset. It’s durable, easy to transport, and easily divisible.

Gold is also the ultimate safe haven asset. It’s survived economic depressions, stock market crashes, and full blown currency crises. When investors are nervous about stocks or the economy, they buy gold.
The price of gold has jumped 27% this year. It’s beat the S&P 500 4-to-1.

If you don’t already own gold for protection, we encourage you to do so immediately..…
According to Casey Research founder Doug Casey, the financial system is held together by “chewing gum and bailing wire” right now. When the public wakes up and realizes this, “they’ll flock to gold… just as they’ve done for centuries.” Doug thinks this could cause the price of gold to easily soar 200% in the coming years.

You could make 2x, 5x, or 10x that much money in gold stocks..…
Yesterday, we showed you how leverage works in the resource market. As we explained, this powerful force is why gold stocks can soar even if the price of gold doesn’t rise by that much. This year, gold’s 27% jump caused the VanEck Vectors Gold Miners ETF (GDX), which tracks large gold miners, to soar 128%.

Some folks might see that and think they missed their chance to buy gold stocks. But regular readers know gold stocks can go many times higher. During the 2000-2003 bull market, the average gold stock rose 602%. The best ones returned more than 1,000%. We expect even bigger gains in the coming years. To learn why, watch this short presentation. In it, Doug explains why we’re headed for “the biggest gold mania” he’s even seen.

By the end of this video, you’ll know why there’s never been a better time to own gold stocks. You’ll also learn how to make the most of this new gold bull market. We’re talking gains of 1,000%...2,000%...even 5,000%. Those kind of returns might sound impossible. But as you’ll see, Doug's hit many “home runs” like this throughout his career. And for the first time ever, he's showing the world exactly how he did this.

To learn Doug’s SECRET to making giant gains in gold stocks, watch this free video.

How Will Negative Interest Rates, the War on Cash, and “Helicopter Money” Affect the Markets?

Today, we have something special to share with you. Instead of the usual “Chart of the Day,” you’ll find a six-minute video presentation put together by our colleagues at Palm Beach Research Group.

In the video below, Palm Beach Research Group co-founder Tom Dyson and Palm Beach Letter editor Teeka Tiwari discuss how radical government policies are affecting global financial markets. As Tom and Teeka explain, these central bank “experiments” will have severe side effects. They could even push the price of gold to $5,000. To learn why, watch the video below.



If you like what you saw from Tom and Teeka, we encourage you to sign up for their “speed round” training series. Click here to get started.


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Friday, July 8, 2016

This 5,000 Year Low Is Ruining Your Retirement

By Justin Spittler

The global banking system, and your financial future, are at serious risk right now. To understand why, just look at what's going on with the government's latest radical policy. Regular Dispatch readers know we're talking about rock bottom interest rates. According to MarketWatch, global interest rates are at the lowest level in 5,000 years. Credit is cheaper right now than at any point since the First Dynasty of ancient Egypt, around the 32nd century BC. Today, we'll explain what this means and how to protect yourself going forward..…

Interest rates didn’t get this low “naturally.” They’re at record lows because central bankers put them there..…
In 2008, the Federal Reserve dropped its key rate to near zero to fight the financial crisis. It’s kept rates there for eight years to encourage borrowing and spending. Other major central banks did the same thing. According to MarketWatch, there have been more than 650 rate cuts since September 2008. Rates in Canada and England are also near zero. In Europe and Japan, rates are below zero.

As we’ve explained before, negative interest rates basically tax your bank account. Instead of earning interest on the money in your bank account, you pay the bank. Not long ago, negative rates were unheard of. Today, more than $12 trillion worth of government bonds pay negative rates, up from $6 trillion in February. 

They’ve even seeped into the corporate debt market. According to Bloomberg Business, more than $300 billion worth of corporate bonds now “tax” bondholders. Central bankers told us low and negative rates would “stimulate” the economy. But, as you’re about to see, they’ve done far more harm than good.

Central bankers made it much harder to retire..…
That’s because rock bottom rates don’t just make it cheap to borrow money. They make it tough to earn a decent return. From 1962 to 2007, a U.S. 10 year Treasury paid an average annual interest rate of 7.0%. Today, a U.S. 10 year Treasury yields just 1.5%, an all time low. It’s the same story around the world. Last week, 10 year bonds in Ireland, England, Germany, France, and Japan all fell to record lows. In Japan, you actually have to pay the government 0.23% every year you own one of its 10 year bonds.

This is a serious problem for hundreds of millions of people. For decades, retirees could earn a safe, decent return owning these bonds. Some folks even lived off the interest they earned from these bonds. These days, you have to own riskier assets like stocks to have any shot at a decent return. Central bankers have effectively forced retirees to gamble with their life savings. Rock bottom rates are a serious threat to major financial institutions too.

According to U.S. banking giant Citigroup (C), low and negative rates are “poison” to the global financial system..…
They could make pension funds, insurance companies, and banks “no longer viable in the long term.” Business Insider reported last week:
As Citi notes: "Viability in its strong sense means profitability (a rate of return on equity at least equal to the cost of capital). In its weak sense, viability means solvency." Basically, Citi is warning that the negative rates may stop institutions being able to make money, which in turn would hit their ability to pay out on things like pensions and insurance policies.
This is a major risk even if you don’t have a pension or life insurance policy. That’s because pension and insurance companies oversee trillions of dollars. They’re pillars of the global financial system…and negative rates are destroying them.

Rock bottom rates could also put some of the world’s biggest banks out of business..…
You see, banks earn most of their money making loans. When rates are high, they make more on each loan. When rates are at record lows, like they are today, banks often lose money. Business Insider explains how today’s record-low rates are starving banks of income:
Citi points out that: "Banks in large part live off the differentials between lending and borrowing rates or between investment returns and funding rates." Persistently low interest rates could hit these differentials, lowering profitability and seriously harming banks in the long run.
Profits at America’s four biggest banks fell by an average of 13% during the first quarter…
This group includes Citigroup, Wells Fargo (WFC), Bank of America (BAC), and JPMorgan Chase & Co. (JPM). European banks are doing even worse. Swiss bank UBS’s (UBS) profits plunged 64% during the first quarter. Profits at Deutsche Bank (DB), Germany’s biggest lender, fell 58%. Spanish banking giant BBVA’s (BBVA) earnings fell 54%. The CEO of Deutsche Bank warned last month:
In the banking world, we are currently struggling with negative interest rates.
We will struggle more as the effect of those negative interest rates plays out into our deposit books.
Dispatch readers know some of Europe’s most important financial institutions are looking for ways to get around negative rates..…
Commerzbank, one of Germany’s largest banks, said last month that it was thinking of pulling money out of Europe’s banking system to avoid paying negative rates. Other banks have started making riskier loans and buying riskier assets to offset rock-bottom rates. The Financial Times reported in March:
Gonzalo Gort├ízar, chief executive at Spain’s Caixabank, expressed concerns about a build up of risk in the banking system as a whole. “In a world of low or negative interest rates, that is a possible consequence; you could see banks taking more risk,” he said.
Longtime readers know excessive risk-taking by banks contributed to the 2008 financial crisis. As a result, the S&P 500 plunged 57% from 2007 to 2009. And the U.S. entered its worst economic downturn since the Great Depression.

Bank stocks are already trading like a financial crisis has begun..…
Swiss bank Credit Suisse (CS) has plummeted 63% over the past year. Deutsche Bank is down 60%. Royal Bank of Scotland (RBS) is down 59%. Mitsubishi UFJ Financial Group (MTU), Japan’s biggest bank, is down 39%. These are huge drops in short periods. Remember, these are some of the most important financial institutions on the planet.

We encourage you to take action now..…
Our first recommendation is to avoid bank stocks. Low and negative rates are eating these companies alive right now. And it could be years before governments abandon these failed policies. According to Fed Chair Janet Yellen, low interest rates are the “new normal.” We also encourage you to own physical gold. As we like to remind readers, gold is real money. It’s preserved wealth for centuries because it has a rare set of characteristics: It’s durable, easy to transport, and easily divisible. A gold coin is valuable anywhere in the world.

This year, gold has jumped 26%. It’s trading at its highest price in two years. But Casey Research founder Doug Casey says this rally is just getting started. According to Doug, gold could soar 500% or more in the coming years. If you’re nervous that central bankers will take this interest rate experiment too far, own gold. It’s the best way to protect yourself from desperate governments.

We also encourage you to watch this short presentation. It explains how these failed monetary policies could spark something much worse than a banking crisis. As you’ll see, this is a threat to you even if you don’t a have a single penny in the stock market. Click here to watch this free video.

Chart of the Day

Deutsche Bank is trading like a financial crisis has begun. Today’s chart shows the performance of the German banking giant. You can see its stock is down more than 50% over the past year. Last Thursday, it hit it a new record low. Like other European lenders, low rates are killing Deutsche Bank. Last year, the company lost $7.5 billion. It was its first annual loss since the 2008 financial crisis. And yet, its plunging stock suggests more bad results are on the way.

According to the International Monetary Fund (IMF), Deutsche Bank is the world’s riskiest financial institution. That’s a problem even if you don’t keep money with Deutsche Bank or own its shares. The Wall Street Journal reported last week:
The IMF also said the German banking system poses a higher degree of possible outward contagion compared with the risks it poses internally. “In particular, Germany, France, the U.K. and the U.S. have the highest degree of outward spillovers as measured by the average percentage of capital loss of other banking systems due to banking sector shock in the source country,” the IMF added.
In other words, problems at Deutsche Bank could spread to other banks around the world. It’s another reason why you should avoid bank stocks and own gold right now.




The article This 5,000-Year Low Is Ruining Your Retirement was originally published at caseyresearch.com.


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Wednesday, July 6, 2016

Warning: This Could Be the Start of a Global Banking Crisis

By Justin Spittler

Europe’s banking system is collapsing. Over the past year, shares of Deutsche Bank (DB), Germany’s biggest bank, have plunged 56%. Swiss banking giant Credit Suisse (CS) is down 62% over the same period. Yesterday, both stocks hit record lows.

Dozens of other European bank stocks have also crashed. The Euro STOXX Banks, which tracks 48 of Europe’s largest banks, is down 48% over the past year. This is a major issue. That's because banks are the cornerstone of the financial system. They keep money flowing through the economy. If they’re struggling, it often means the economy is having major problems. Right now, European banks are flashing bright warning signs. That’s not just bad news for Europe—it’s also a serious threat to the rest of the world.

In today’s Dispatch, we’ll show you why Europe’s banking crisis could turn into a global banking crisis. You’ll also learn how to transform this threat into a chance to make big gains.

European banks are struggling to make money..…
Spanish banking giant BBVA’s (BBVA) profits fell 54% last quarter. First quarter profits at Deutsche Bank were down 58%. Swiss bank UBS’s (UBS) profits plunged 64%. European banks are hurting for a couple reasons. One, Europe is growing at the slowest pace in decades. Banks are making fewer loans as a result.

Two, negative interest rates are eating European banks alive. If you’ve been reading the Dispatch, you know negative rates are the latest radical government policy. They basically flip your bank account upside down. Instead of earning interest for keeping money in the bank, you pay the bank to hold your money.

Negative rates are clearly bad for savers. They’re also hurting Europe's biggest banks. That’s because these huge institutions have to pay their “bank,” the European Central Bank (ECB). Today, European banks pay £4 for every £1,000 they store at the ECB for a year. That might not sound like a lot. But it adds up quick when you manage trillions of euros like these banks do.

Last week, investors got another reason to avoid European banks..…
On Thursday, Great Britain voted to leave the European Union (EU), which it’s been in since 1973.
The “Brexit,” as the media is calling it, blindsided investors. As we explained yesterday, the market was expecting Great Britain to stay in EU. The unexpected outcome triggered a global stock market crash.

U.S. stocks had their worst day since August. Japanese stocks had their worst day in five years. European stocks had their biggest decline since the 2008 financial crisis. Friday’s global selloff erased $2.1 trillion in value from global stocks. It was the global stock market’s worst day in history. The panic didn’t die down much over the weekend. By the end of Monday, another $930 billion had disappeared from the global stock market.

European bank stocks were hit the hardest..…
Deutsche Bank plunged 22% between Friday and Monday. Credit Suisse fell 23%. UBS fell 20%. Barclays (BCS) and Royal Bank of Scotland (RBS) each plunged 37%. Both stocks are down more than 57% over the past year. These are gigantic moves in a matter of days. Remember, we’re not talking about small biotech stocks. These are some of the most important financial institutions on the planet.

Government officials are scrambling to contain the crisis..…
Today, the Bank of England (BoE) injected £3.1 billion into Britain’s banking system. It’s pledged to inject as much as £250 billion to stabilize its financial system. The BoE made its cash injection hours after the Bank of Japan (BOJ) pumped $1.5 billion into its banking system. As we'll show you in a second, we don't believe this will end well. That's because this excessive money printing (sometimes called "quantitative easing") doesn't stimulate the economy like governments intend it to.

Credit Suisse says other central banks could soon print more money too. Bloomberg Business reported on Friday:
“Market liquidity and overall liquidity in the U.K. is drying up as we speak in a very rapid way,” said John Woods, chief investment officer for Asia-Pacific at Credit Suisse Private Banking, told Bloomberg TV in Hong Kong. “It’s highly likely that we see monetary easing in a coordinated response” from central banks across the world, he said.
Great Britain is headed for a recession..…
A recession is when an economy shrinks two quarters in a row. Goldman Sachs (GS) says Britain could be in a recession by early 2017. But here’s the thing. We don’t think the BoE will let this happen. That’s because central bankers will do anything, including using reckless, unproven monetary policies, to avoid a recession these days.

Credit rating agency Standard & Poor’s agrees with us. Reuters reported today:
"Brexit is likely to represent a drag of about 1.2 percent of GDP for the UK in 2017," Jean-Michel Six, S&P's chief economist for Europe, the Middle East and Africa told a conference call for investors on Tuesday. "We have a significant slowdown but growth remains positive although obviously in a much more disappointing way. That is because we anticipate a very strong monetary response on the part of the Bank of England, in the form of additional quantitative easing, in the form of a further cut in interest rates," he added.
Bank of America (BAC) and Deutsche Bank also expect the BoE to fire up the printing press again. Bank of America says it could happen as soon as August.

QE won’t help Great Britain’s economy..…
As we told you above, QE doesn’t work. As regular readers know, the Federal Reserve pumped $3.5 trillion into the U.S financial system after the 2008 financial crisis. This massive money printing effort was supposed to juice the economy. But the U.S. is growing at its slowest pace since World War II. QE also failed to jumpstart Japan’s economy, which hasn’t grown in two decades. There’s no reason to think it will work this time.

If you’re nervous about the global financial system, we encourage you to take action today.…
The first thing you should do is own physical gold. Gold is real money. It’s held its value for thousands of years because it has a unique set of attributes: It’s easy to transport, easily divisible, and durable. You can take a gold coin anywhere in the world and folks will immediately recognize its value.

Unlike paper money, central bankers cannot create gold from nothing. It’s the ultimate antidote to crumbling paper currencies. That’s why the price of gold often soars when governments print money. This year, gold is up 24%. It’s trading at the highest price in two years. But it could go much higher as governments continue to run reckless monetary experiments.

If you want big profits from rising gold prices, own gold stocks..…
Dispatch readers know gold miners are leveraged to the price of gold. A small jump in the price of gold can cause gold stocks to surge. Gold’s 24% jump this year has caused GDX, a fund that tracks large gold stocks, to soar 96%. We believe this gold stock rally is just getting started. During the 2000 and 2003 gold bull market, the average gold stock gained 602%. The best ones soared 1,000% or more.

Nick Giambruno, editor of Crisis Investing, has recommended two gold stocks this year..…
He already closed out one of them for a quick double. It surged 103% in 14 months. Nick’s other gold stock is up 30% since March and is still dirt cheap at today's levels. Nick currently rates this stock a "Buy"…and says it could soon start paying a double digit dividend yield if gold keeps rising.

You can learn more about Nick’s gold stock by taking advantage of our special 60%-off sale for Crisis Investing. If you sign up today, you’ll be enrolled in a trial membership, which gives you 90 days risk-free to decide if the service is for you. But we encourage you to act soon. This special offer ends soon, and we likely won’t open this offer again for a long time.

You can learn more about this incredible offer by watching this video presentation. You’ll also learn about an even bigger threat to your wealth than Europe’s banking crisis. As you’ll see, almost no one is talking about this coming crisis. Yet, it could cause millions of Americans to lose their entire life savings. By the end of this video, you’ll know how to protect yourself. And just as importantly, you’ll know how to profit from this coming crisis. Click here to watch this free video.

Chart of the Day

U.S. bank stocks are also headed lower. Today’s chart shows the performance of the Financial Select Sector SPDR ETF (XLF) over the past year. XLF holds 94 major U.S. financial companies including behemoths JPMorgan Chase (JPM), Wells Fargo (WFC), and Bank of America (BAC). You can see XLF is down 11% since last June. While that's not as severe as the near 50% drop in European banks over the same period, it's still a clear sign to stay away.

U.S. banks have many of the same problems as European banks. Like Europe, the U.S. economy is growing at the slowest pace in decades. And while the U.S. economy doesn’t have negative rates yet, Fed Chair Janet Yellen has said they aren’t “off the table” if the U.S. economy runs into trouble. The arrival of negative rates to the U.S. could tip bank stocks into a crisis, just like they have in Europe.




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Stock & ETF Trading Signals

Monday, June 13, 2016

Precious Metals Take Center Stage....Let's Follow the Yellow Brick Road

By Jeff Thomas

For over a hundred years, it’s been theorised that author L. Frank Baum wrote his 1900 book, “The Wonderful Wizard of Oz”, as a fanciful way to explain the economic situation at the time and that the Yellow Brick Road was a reference to the path created by gold ownership. Whether or not the theory is correct, for many people today, “Follow the Yellow Brick Road” might serve as a mantra for alleviating economic woes.

What will happen is that one day, gold will suddenly be up $100 per ounce, then the next day, $200 per ounce. At first the pundits will be claiming that it’s an anomaly, but as it continues rising, a point will be reached when the average person says to himself, “This seems to be a trend. I’d better buy some gold.” 

Unfortunately, once the trend is underway, the price that day will have no bearing on whether gold is available. Your local coin shop may be sold out. If you go online, the mints may say that demand is exceeding supply. Large entities will be buying all they can get and the smaller buyers will be way down on the order list, unlikely to take delivery of even a single ounce.


These Are the Good Old Days

Gold has experienced a four year bear market and only recently has begun to rise again. But is it in reality a barbarous relic? Not by a long shot. For over 5,000 years, whenever people have experienced erratic economic periods, they’ve bought gold in order to stabilise their economic position. This has particularly been true whenever fiat currencies have been on the rise and were in danger of hyper-inflating, as in recent years. Most currencies are in decline against the U.S. dollar—a currency which, itself, is very much in danger of collapse in the not-too-distant future.

In the ’70s, I was buying gold in London, as it rose from $35. It reached a high of $850 in January, 1980, then crashed. When gold dropped below $400, I began buying Krugerrands. Sounds like a bargain, and yet, word on the street was that gold was headed further south. But I was buying long. I was not playing the market; I was building my economic insurance policy. I wasn’t too fussed over price fluctuations, as my gold holdings were meant to cover me if my other investments proved to be a mistake.

At present, gold is well above the high of 1989, but, if we adjust for inflation, we see that gold is actually a bargain at present. This excellent Casey Research chart from 2014 explains it better than mere words:



This tells us that $8,800 would not be an unreasonable level for gold today, if conditions were as dire as they were in 1980. However, conditions are far more dire—debt levels are far beyond any historical levels and markets are in a bubble, just waiting for the arrival of a pin.

A decade ago, when gold topped $700, I predicted $1,500 at some point and even my closest colleagues wondered what I’d been smoking. But it turned out that my prediction was, if anything, conservative. Over the last four years, some of the world’s most informed prognosticators—Eric Sprott, Peter Schiff, Jim Rickards, and Jim Sinclair—have all predicted gold to rise to between $5,000 and $7,000, and some have suggested numbers as high as $50,000. But this hasn’t happened. Are they wrong? No, it just hasn’t happened as of yet.

Conversely, Harry Dent has predicted a drop to $750. So, who’s right? Well, actually, they may all be right. After a crash in the markets, deflation is a certainty, as brokers and investors dump investments of every type in order to cover margin losses. This panic sell off will most assuredly include gold, even though the holders will not wish to sell their gold. This panic promises to create an immediate and possibly very dramatic downward spike in gold.

However, large numbers of long term investors already have their orders in for any price below $1,000. If the spike drops below that number, it will therefore be brief, as every ounce that hits the market at $999 is scooped up. In addition, the Federal Reserve will make good on its decades-long promise to roll the printing presses to counter any sudden deflation. That very act will light the fuse on the gold rocket and send it skyward.

Will the Sun Rise in the Morning or Set in the Evening?

The argument over whether gold will drop to $750 or rise to $5,000 is a pointless one. Any understanding of basic economics assures us that we shall see both sudden deflation and dramatic inflation. It’s as natural and inevitable as sunrise and sunset. (By the way, several of the above individuals have standing bets with each other as to the $750 number. The prize? An ounce of gold.)

But it matters little who will win the bets. What matters is the overview. Rickety economic times are now upon us and they will soon morph into crisis times. In such times, precious metals always return to centre stage, as paper currencies and electronic currencies return to their intrinsic worth of zero. Gold does not so much rise against fiat currencies, as fiat currencies collapse against gold.

Most assuredly, we shall see a dramatic rise in gold, but, just as in the ‘70s, the average person will fail to understand why and will simply chase the upward trend. When gold hits $2,000, but no one is willing to sell for under, say, $2,500, those who are chasing the trend will pay the $2,500 and that will become the new price across the board. Then it will leap higher—again and again, as monetary panic grips the investment world. The inflation-adjusted 1980 price of $8,800 should not be a surprise at all—in fact it would be low, as, in the coming years, conditions will be far more dire than in 1980. Gold may well blow through $10,000. Even the $50,000 figure is not impossible, as we shall be seeing a runaway bull market where those chasing the trend carry gold beyond any rational value.

But gold has an intrinsic value. 2,000 years ago, an ounce of gold could buy you a good suit of clothes. That’s still true today. A gold mania will fuel the gold price beyond anything logical, but a correction will be equally inevitable, dropping it to its intrinsic value. We shall see a gold rise for the record books. The wise investor should already have stocked up his supply of physical gold and gotten rid of gold ETFs. He should already have his seat belt fastened and ready for take off. We’re off to see the wizard.

Editor’s Note: Owning gold is the first step to protecting your wealth from stock market crashes, currency collapses or destructive government policies. But there are many other steps you can take to protect yourself during an economic collapse. We put together a free video to show you exactly how. 

Click here to watch this video now.


The article Follow the Yellow Brick Road was originally published at caseyresearch.com.


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Stock & ETF Trading Signals

Wednesday, June 8, 2016

The 83 Best Stocks to Trade Weekly Options

Why download the 83 best stocks for weekly options? Our trading partner Don Kaufman will tell us why and he is sharing with us the 877 stocks and ETFs that offer weekly options, and the 83 that are the only ones you should trade.

Your Portfolio Deserves More Than a 50/50 Chance
It has been shown statistically, over the long run, that most traders lose money when only buying monthly options. Today there is more volume on weekly options than on the monthly options. Never before has there been a way to generate positive returns in the market using weekly options. Why flip a coin when you can use the 50 best stocks to trade weekly options on?

Diversification is Dead
As a Wall Street saying goes, "When they raid the house they take everyone." Professionals consider diversification as a hedge for people who don’t know how to hedge. Think about it - would you protect the value of your own home against a potential fire by diversifying, that is, buying two houses so if one burns down, the appreciation in the other offsets your loss? Of course not! You insure your home so if it burns down, the insurance covers most of the loss. Welcome to using weekly options. Real professionals know how to use weekly options to protect their portfolio from weekly news events, earnings reports, or surprise upgrades and downgrades.

Be The House
Today, investing in the stock market is a big gamble, almost like going to Vegas and playing the slots. And we all know what happens with slot machines. The House always wins. It may take a loss occasionally, but the overall strategy assures that the House will always come out on top. Weekly options let's you turn the tide and be the house every single week! Download the 50 best stocks to trade weekly options on so you can put the odds in your favor.

Just click here to to get the 83 BEST stocks for weekly options and the bonus free TheoVideo daily video newsletter will be included.....Download Now


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Wednesday, June 1, 2016

Why the Current Volatile Conditions are a Trader’s Paradise


Our trading partners at Simpler Options are back with another free webinar. This time it's "Precise Short Term Options Setups for Low Risk Profits in Volatile Markets" hosted by John Carter and Chris Belcher.

As always John and Chris have provided a free video to give you some hints as to what we will be covering....Watch that video now!

It all starts this Tuesday June 7th at 7:00 pm central.

Just visit this link to reserve your seat for this game changing webinar right now since all of these webinars get over subscribed.

Watch Todays Video and Sign Up for the Webinar Right Here

These two highly respected traders (with more than 50 years of combined experience) reveal low risk option strategies designed to catch quick explosive moves in volatile stocks. Get ready to take notes because we’re going to review results from actual live trades executed in real time during current market conditions.

Red Thumb Trades: Stop wasting time (and precious capital) on dud stocks. Discover how to find the right options to trade on the right stocks today.

Precision Exit Strategies: Finally know when to take fast profits intraday and when to let your position turn into a swing trade so you can get maximum gains.

Simple Option Setups: Cut through all the jargon and ‘Greek’ mumbo jumbo and learn how to follow a step by step process to create consistent income trading stock options.

The Ultimate Timing Secret: How to know in advance which stocks are likely to explode (in any time frame) and when to jump in with confidence

Miracle Grow Positions: Simple rapid growth strategies for small accounts. Discover why it’s possible to make a whole lot more money with options than you can with trading stocks. The key is to follow a few precise option setups.

Massive Mistakes Exposed: Learn why most traders will never be consistently profitable and discover how to actually profit from the most common (and costly) mistakes.

The Perfect Storm: Why the current volatile conditions are a trader’s paradise, and key catalysts to watch for in the coming months.

Case Study: Review one of John's live trades on TSLA that brought in $17k in 1 day (along with several other recent real money examples so you can see these setups in action).

As always, make sure you get your reserved seat now while you and make sure you log in early on Tuesday so you don't lose your spot.

Reserve Seat Right Here and Now

See you Tuesday evening,
The Stock Market Club


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