Greece is a microcosm of what the U.S. could look like when the world economy comes tumbling down. Look at the Greek people lined up at ATM’s trying to get a measly 60 Euros (The ATM Limit) just to have enough money to buy some food for the week. Store shelves are empty, banks are closed, and the threat of a ‘bail in’ is eminent. A bail in is the opposite of a bail-out. It’s when the creditors, in this case the EU, comes and takes your money out of banks to pay the sovereign debt. The Greek people are being wiped out.
My question is why have these people not prepared for this eventuality? This threat has been manifesting for several years now and over the past few months, the negotiations by the Greek government and the EU have been a huge warning sign to get out while you can, but yet the apathetic ones are left behind with nothing.
The people here in the U.S. are also apathetic and woefully misinformed. The signs of the coming collapse have been here for years, yet nobody is paying attention. Now is the time to prepare, the credit markets (bond markets) are drying up.
The Bond market or credit market is the base for any economic system. It’s the support system for the values in the stock market and currencies. When the bond market fails, so does the rest of the economy. Folks we are in for a monumental collapse of our economic system. The bond markets are drying up because there are no buyers and a ton of sellers. According to insiders, a collapse could happen within the next 60-90 days. This information comes from an insider in the global bond markets.
The question many people in the US ask today is; will we have deflation like we had during the Great Depression or will we have hyper-inflation like Germany experienced before World War II?
In my opinion, I think we are going to have both, but deflation will be first. The real estate bubble is going to pop and values are going to plunge again. Banks will be closed or bankrupt and those that are open will not be lending. People will be losing their jobs causing massive unemployment. The credit markets will be non-existent. The only way to purchase goods and services will be with cash or gold and silver coinage.
The Fed is going to print money like crazy because that’s all they can do at this point. It used to be that the Fed could lower rates to spur the economy, but they are already at zero percent interest rates, so the only option they have at this point is to print more money to try and add liquidity to the markets. But they’ve been doing that for the past 7 years and look at where that’s gotten us?
The U.S. Dollar is losing world reserve currency status at an exponential rate, soon, foreign countries will no longer accept the dollar for international transactions and most have already stopped buying U.S. Treasuries. In fact, the BRICS nations are selling them as fast as they can and buying gold bullion with those dollars. When the global economies stop using the dollar, all of those printed dollars are going to come flooding back into the U.S. So eventually we will have inflation and probably hyper-inflation.
How do you protect yourself, or better yet, how do you profit when the global economy crashes?
Obviously, owning precious metals is one way to hedge against the losses one would take in a stock market or currency crash. But is there another way?
According to many well respected financial analysts and economists, you should allocate your net worth across a diversified cross section of hard assets that do well in inflationary times. For example, hard assets like gold, silver, raw land, real estate, and certain gold backed foreign currencies should do well during inflationary times. Their values will rise with the decline of the dollar.
Holding a hoard of cash is good for deflationary times. This would be a temporary situation before inflation begins to erode the value of the dollar, but you should have cash available to take advantage of the deflationary effects on real estate and other hard assets before inflation kicks in. Buy hard assets at low deflationary prices and ride the wave of hyperinflation as the value of your assets increase. Timing is critical.
When it comes to an investment portfolio, some stocks and ETF’s will do well during those times. One such ETF is the Schwab U.S. Dividend Equity ETF (SCHD). It will provide hyperinflation insurance while paying you a dividend at the same time.
Additionally, (PHYS) and (PSLV), which are physical gold and silver funds managed by Sprott Asset Management in Canada are good choices for hedging an economic crash.
The precious metal mining royalty companies are an excellent hedge against a crash. As the value of precious metals increases, the value of the royalty companies that invest in the mining companies will grow exponentially. Companies like Royal Gold (RGLD); Silver Wheaton (SLW) and Franco Nevada (FNV).
Hope this helps. Good luck.
Until next week,
Physical Gold And Silver Markets Are On Fire As People Around The World Begin To Lose Confidence In Central Planners
A real crisis is developing far faster than what I envisioned that is impacting the 75 Trillion Shadow Banking sector which is on the verge of implosion. Credit markets are almost closed, I am being told! I REPEAT again the CREDIT markets are almost closed!
Precious Metal Stocks: (RGLD) (SLW) (GDX) (SIL) (GLD) (PHYS) (PSLV)
Silver Wheaton (SLW) was targeted by the CRA (Canada Revenue Agency) recently for back taxes owed on revenue streams from mining royalties. As a result, there was a drop in share price on the news. (See below.)
‘Silver Wheaton (SLW )fell 12% yesterdayon news that the Canada Revenue Agency was set to target it for back taxes, and the proberaises concernsabout the entire precious metals streaming model.’
I believe this is a temporary setback and will not affect streaming (royalty) companies in the long run. Their income stream will be incredibly strong once the price of gold and silver change direction and you will see investors lining up to take advantage of it.
The powers holding Gold and Silver down in desperation of the collapsing markets around the globe are losing control and the precious metals are going to rocket higher once people realize what’s happening to the global economy. That’s why I recommend buying Calls well into 2016.
The psychology and emotion for the precious metal markets is getting close to changing. The emotions that have been driving all other markets higher are now unraveling. When precious metals move, they will move fast and furious to the upside. If you’re not in them now, you may end up chasing them up as the price goes higher.
Stock Market Indices: (SPY) (QQQ)
China is collapsing, Greece has collapsed, Puerto Rico is collapsing, the Euro is collapsing and soon the bond markets will be collapsing. The NYSE was halted on Wednesday for 4 hours due to a ‘software glitch’. The official story is that no cyber-attack took place; however, the market was plunging at the time. It’s believed by the people in the know, that the exchange was turned off right before a major crash was determined to be imminent.
In the chart above, it’s clear to see that the stock market has topped and started to curve back down from the red dashed resistance line. If you are not short the S&P now, you might want to place a short position ASAP. Buy 2016 PUTS in (SPY) and enjoy the ride. It’s going to get dicey. Things are coming unglued much faster than I expected.
Energy Stocks: (XLE) (UNG) (USO) (LNG)
Crude oil is crashing with the rest of the commodities sector. We need to wait for a bottom before making any moves in this sector. (See commodities comments below.)
Financial Stocks: (XLF) (IYF)
I’m staying away from financial stocks at this time, until after the S&P correction. Once this economy implodes, financial stocks are going to lead the way. I will place short positions at that time.
Biotech: (BIB) (KITE) (IBB)
Biotech’s have been in an uptrend along with the stock market, however, just as a rising tide raises all ships, a receding tide will lower them as well. I think we will see a correction in the biotech sector along with the impending stock market correction.
Commodities: (FCX) (JJG) (DBA)
Commodities are taking a hit this week in a final capitulation phase before a big change to the upside when the dollar begins to fall. I will just watch these until I see a signal of a move up in price and a break of the downtrend line.
Weekly Trading Lesson
Simple Moving Averages
Simple Moving Averages (SMA) measure the average closing price of a security during a specified time period. The most common moving averages are 10 day, 20 day, 50 day, and 200 day moving averages.
Shorter term averages tend to respond quickly to changes in price versus longer term averages which are slower to react. Short term moving averages are used to gauge shorter term trades. Thus the 10 day and 20 day averages measure the short term trends in the underlying securities price.
These averages act as support and resistance zones on a chart and can also signal trend changes when certain averages cross each other or when the price of the underlying security crosses above or below a moving average.
If the price of the security crosses above the moving average, that is considered a bullish pattern and you can often expect a rise in price from that crossover. Conversely, if the price of the security crosses below the moving average, then you should expect the price to decline.
The 50 day moving average is used for mid-term trends in price movement and the 200 day moving average is used for longer term trends.
As a swing trader, I like to use the 50 and 200 day moving averages in my charts. The 200 day moving average is considered to be the ‘mean’ of the securities price movement and the farther price gets from the mean, the more chance there is for a snap back or ‘reversion to the mean’.
The Golden Cross
This is a bullish signal indicated when the 50 day moving average crosses above the 200 day moving average. The stock price is expected to trend higher after the Golden Cross. (See chart below.)
The Death Cross
Conversely, the Death Cross occurs when the 50 day moving average crosses below the 200 day moving average and creates a bearish pattern. The stock price is expected to trend down when this happens. (See chart below.)
Exponential Moving Average
The Exponential Moving Average (EMA) reacts faster to recent price changes than a simple moving average. The 12- and 26-day EMAs are the most popular short-term averages, and they are used to create indicators like the Moving Average Convergence Divergence (MACD) oscillator. (Check back to the trading lesson for oscillators.)
One other EMA that I like to use is the 9 day EMA which can signal a short term trend change when the 9 day EMA crosses above or below the 50 day SMA. Like a golden cross or a death cross, the 9 day EMA signals a move up or down once it crosses over the 50 day SMA.
You will get a better feel for this when you look at charts and try to pick out these patterns.