Half Truths Make A Whole Lie

THE DESPERATE NEED FOR TERM LIMITS

With 98% of the politicians getting re-elected time after time, no matter what they do, including convicted felons, it should be obvious that elections do not act as term limits.  The US debt, not including unfunded liabilities, is over $17 trillion dollars.  The sociopaths who are steering this Ship of Fools, will soon be arguing over raising the debt ceiling again.  If we look back to September 2011, which was the last absurd debt-ceiling argument, Gold rose 21% in a period of three months while politicians caused a major erosion of confidence in our leaders and country, to the point of having the credit score of the USA lowered.  When governments are broke, everything is fair game.

Ten thousand Baby Boomers will turn 65 years-old every day until 2030.  While the government has a debt problem of $17 trillion and climbing rapidly, not so coincidentally, our country's IRAs, 401Ks and retirement accounts amount to that same number:  $17 trillion.  What a convenient resource for the Federal Government to confiscate in the name of preserving the peoples pensions.

The IRS Greases the Wheels of Confiscation

The IRS is refusing to issue tax ID numbers for single-member LLCs that are owned by an IRA, which is the specific structure that US taxpayers create in order to protect their retirement savings (overseas if necessary). Of course, the IRS simply decided using its sole discretion to stop allowing Americans to create this structure and hence force them to keep their retirement savings in the US.  Without getting into too much detail on these structures, the bottom line is that the methods by which you could manage your own IRA and keep it out of the hands of the too-big-to-fail banks and thus away from the grabbing hands of government, are being blocked in an effort to keep all that wealth accessible to the government.

Many People Have HAD THEIR Pensions Stolen Already

Detroit’s bankruptcy destroyed many people’s pensions.  In Cyprus, the government raided people’s savings accounts in an example of outright theft.  And right here at home our too-big-to-fail banks, like B of A, Citigroup, HSBC, Goldman, Wells Fargo, JP Morgan Chase, Goldman Sachs and several others, are right now being investigated for robbing pensions via the rigging of interest rate benchmarks, among other investigations of fraud.  JP Morgan Chase, in the last two years, has paid $7 billion dollars in fines for fraud. Against whom? Yet not one cent of that money was returned to their rightful owners. It was just an excuse for the government to grab shareholders’ money that did not belong to the government or the banks fined.

Yet these parasites, along with our elected representatives, remain in power, have had no further regulation placed upon them and continue the same (or worse) risk tactics that led to the financial implosion of 2008 and subsequent taxpayer-funded bailouts.  These criminal organizations look more like organized crime syndicates than representatives of the people. Yes, these are the same folks who are in charge and in possession of your wealth.  Whether you have your retirement funds in a money market, the stock market or the bond (debt) market, a bank or bank holding company, they control your wealth.  This means that when Wall Street, which relies on an incestuous relationship with the US government, is asked to hand over access to your money, it’ll be as simple as it was in 1966.

GOLD AND ECONOMIC FREEDOM

Before Alan Greenspan became the Federal Reserve Chairman, he wrote an essay called “Gold and Economic Freedom.” In this essay, Greenspan explained that the Gold Standard limited government spending to the amount of Gold held in the Government’s own reserve.  However, the Gold Standard was unprofitable to the international bankers and the crooked government they colluded with.  So the central bankers, in collusion with devious government officials, embarked on the greatest heist in human history, to repeal the Gold Standard.  Stopping at nothing, they attacked and crucified anyone who opposed them.  Eventually, the Gold Standard was repealed, the citizens' Gold was confiscated and a debt-based economy was born.

All the subsequent government deficit-spending and money-printing that followed the abandonment of the Gold Standard led to the great wealth confiscator of all Inflation.  Inflation raises the cost of goods while reducing purchasing power.  And massive money-printing always ends in hyper-inflation, which typically causes the price of Gold and Silver to increase exponentially.

WHEN WILL THE ECONOMY START IMPROVING?

While the media and politicians tell us we’re in an economic recovery, I keep writing about the slowdown we’re heading towards. How can I say that? First, take out the stock buyback programs and you’ll see that US companies are seeing their earnings and revenues grow this year at their slowest pace since 2009 if at all.

From a boring (but extremely important) economic point of view: When a country experiences economic growth, industrial production of electricity and gas utilities pick up as factories and consumers use more electricity as well other utilities. This is not now happening in the US economy.  As a matter of fact, industrial production is contracting! An index tracking industrial production of electric and gas utilities has declined almost 8% since this past March. It stood at 103.76 then; in August, it stood at 95.62. (Source: Federal Reserve Bank of St. Louis web site, last accessed September 19, 2013.) But it doesn’t end there.

Another key indicator of economic growth known as “capacity utilization” shows companies in the US are operating below their historical norm. In August, the capacity utilization in the US economy was 77.8%, three full percentage points below the historical average from 1972 to 2012. (Source: Federal Reserve, September 16, 2013.)

And we are seeing layoffs and discharges in the manufacturing sector accelerate. In March, there were 83,000 layoffs and discharges in manufacturing. For August, it rose to 91,000—an increase of almost 10%. (Source: Federal Reserve Bank of St. Louis web site, last accessed September 19, 2013.)

When we look at the underemployment rate in the US (that includes people who have given up looking for work and those who have part-time work but want full-time work), it’s been stubbornly around the 14% mark since 2009!

The fact that money printing in the US economy has gone on for so long It is masking the real health of the economy. In reality, it is so weak that the Federal Reserve couldn’t even pull off a minor pullback of $10 or even $5 Billion of its $85 billion a month in new paper money printing!

I stay very pessimistic on the economy. Take the stock market out of the equation (after all, only a very small portion of the US population actually owns stocks) and the economic picture is not pretty! We have the Federal Reserve essentially printing money since 2008 to “help” the economy, but those trillions of dollars in new money have benefited the stock market and the big banks and their senior executives the most. How much did all that money actually help the economy? Not much, if at all.

Key economic indicators are issuing warnings of trouble ahead—warnings prudent investors should NOT discount.

A Dire Warning for Stock Market Investors

A stock market crash, much larger than what happened in 2008 and early 2009 is headed our way. In fact, I predict that this crash will be even more devastating than the 1929 crash; the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen or read about in our history books.

An announcement last Wednesday that the FED changed its mind and was not planning to taper its quantitative easing at this time, resulted in a significant relief rally, but it was only short term and couldn’t last more than 1 day. This highlights the fact that continued QE is not the way to go. Four plus consecutive years of massive money printing could not restart the economy. How much more proof do they need that debasing our currency doesn’t work and never has. They need to examine Einstein’s definition of INSANITY.

This is really troublesome. Key stock indices have become addicted to easy money and any news about more money printing just drives the market higher. This pattern has been going on since the Federal Reserve first promised it would rev up its printing presses back in 2008. Unfortunately, as this continues, the fundamentals that are supposed to actually drive stock indices higher (corporate earnings) are under major pressure. We have been seeing companies in key stock indices playing “tricks” to increase their corporate earnings per share (such as buying back their own stock with 1% borrowed money)), but these antics can’t go on forever.

Software giant Microsoft Corporation (NASDAQ/MSFT) has announced the company’s Board of Directors has approved a share buyback program worth $40.0 billion. (Source: Microsoft Corporation Investor Relations, September 17, 2013.) CBS Corporation (NYSE/CBS) said it has increased the amount of its share buyback program to $6.0 billion. (Source: CBS Corporation Investor Relations, July 25, 2013.) These companies are only two of the many big-name companies in key stock indices that are rigorously buying back their shares. Other names, like Juniper Networks, Inc. (NYSE/JNPR) and Time Warner Cable Inc. (NYSE/TWC), are taking similar Actions. It’s not just corporate earnings growth that’s the problem—revenue growth is also lacking. Companies in key stock indices enjoyed double-digit (or close to it) earnings growth in 2009, 2010, and 2011 as they recovered from the recession and the credit crisis. But today, take away the stock buyback programs and cost-cutting and these companies are barely growing revenues forget about earnings.

As this disparity continues, key stock indices climb higher and corporate earnings growth becomes tricky to achieve and the risk for the stock market rises dramatically. The market knows companies can’t deliver on earnings and revenue growth, hence the dependence on money printing now to drive key stock indices higher.  When the Federal Reserve eventually starts to pull back on the quantitative easing, the results won’t be a pretty sight.

I remain skeptical of the stock market rally we’ve been experiencing this year and its determination has surprised me. Irrationality takes over sometimes in the stock market and this may just be one of those BIGGEST moments. What I do know is that when reality finally does kick in, and it will, the risk to be in the market will be tremendous. I have and am still looking for a blow off to complete the “JAWS OF DEATH TOP” But that will lead to the biggest crash in stock market history. And that is the simple reason why I have  been only been buying Gold and Silver into all sharp SELLOFFS as well as scaling in too my buying of TBT, JNK, BGZ, XLF, EWI, & NKY  as well as selling out of producers of nonessential goods.

AUSTRIAN FREE MARKET CAPITAL

There is no shortage of market bears who take a grim view of the stock market. Mark Spitznagel, a well known Hedge Fund Owner, has gained credibility in the investment world by predicting two market collapses in the past decade, first in 2000 and then in 2008. Still, Mr. Spitznagel’s approach is unusual for a money manager. To invest with him, you have to believe in a philosophy that is grounded in the Austrian School of Economics, which as you all know, I am a solid supporter of (it originated in the late 19th century in Vienna). The Austrian School (of Free Markets Capitalism) does not like government to meddle with any part of the economy; when it does, adherents argue, market distortions abound, creating opportunities for investors who can see them. When those distortions are present, Austrian-school investors will position themselves to wait out any artificial effect on the market, ready to take advantage when prices re-adjust.

Mr. Spitznagel began his career buying and selling bonds in the trading pit at the Chicago Board of Trade in the 1980s. Everett Klipp, his boss and mentor at the time, encouraged him to take a “one-tick” loss to step out of a trade, rather than risking a 10-tick loss in hopes of turning a loss into a profit. In Mr. Spitznagel’s recently published book, “The Dao of Capital,” he applies this approach and his Austrian grounding to Chinese Daoist thought — the art of taking a circuitous path to an end point. Or, as Mr. Spitznagel says, “Learn to invest in a loss.”

It’s a tough sell, considering his hedge fund performance has routinely underperformed the Standard & Poor’s 500-stock index in recent years. So far this month, for example, hedge funds are up 1.4%, trailing the 5.7% gain on the S&P 500, according to Bank of America Merrill Lynch’s Hedge Fund Monitor.

“The only time it’s not a niche product is during or after a crash, but those are very brief moments,” Mr. Spitznagel said. Those moments, which in many people’s memories appear as financial Armageddon’s, are what he and his 15 or so investors, including institutional and sovereign wealth funds, patiently await. In the 2008 financial crisis, universal funds rose by as much as 115% as the S&P 500 plummeted. But that crisis is not over, Mr. Spitznagel said, and when the Federal Reserve stops its quantitative easing program of buying Treasuries, the market will have to readjust.

He is not alone in this view. Stanley Druckenmiller, a former strategist for George Soros and founder of Duquesne Capital Management, recently told Bloomberg TV that when the Fed begins to taper back its quantitative easing program, he expects the market will go down. But Mr. Spitznagel goes further. “There needs to be a purge,” he said. “If there isn’t a purge, you don’t get the healthy growth. Capitalism is about loss and it’s about growth and it is especially about “CREATIVE DESTRUCTION” (J. Schumpeter)

It could be a long and career-testing wait for Mr. Spitznagel. Many of his theories come back to how the Fed acts. Since the financial crisis, the Fed has spent more than $2 trillion trying to stimulate the economy to no avail. The Fed can keep spending as long as it wants, but it can’t change the natural laws of economics which teaches that reckless spending always leads to Bubbles which eventually must blow-up and result in Stock Market Crashes as per the sound economic (Austrian Economic) theory. However knowing all that, I also know the Cardinal Rule of Don’t Fight the FED. In the end there can be no lasting profits without Patience.

REAL ESTATE

The 3 - 4 month rally we have had thus far has been brought about predominately by CASH buyers looking for a safe place to put their money: Paying cash and renting out the single homes that they have been buying. There have been some big money people doing this simply because there is no better place where they can invest and make a reasonable return. There is no mixed signal about this: Foreclosures in the US will continue to rise, the real estate market will get weaker and the US economy will get weaker. THERE CAN BE NO BOOMING REAL ESTATE MARKET WITHOUT REAL JOB CREATION.

HOW NOW DOW

Stocks fell mildly Friday, September 27th as short-term stocks are working through a correction inside large degree wave c-up. There are two possible patterns from here. One is a Rising Bearish Wedge, which would mean a lower upside or an impulsive five wave rally, implying a much higher upside.  On the other hand, if large degree wave c-up is forming a Rising Bearish Wedge, it means stocks are presently half way through wave d-down of this five sub-wave pattern, with a downside price target of maybe 1,650ish for the S&P 500. If so, this bottom could arrive around the October 8th phi mate turn date and be followed by a final strong rally leg, wave e-up to complete the pattern and complete large degree c-up into year end. The other possibility is wave 3-up of c-up is underway and that the present decline is sub wave {2} down of a five wave rally for 3-up. In this instance, the S&P 500 could fall below 1,660 before bottoming. 

There is an interesting confluence due on October 8th, 2013, where we have both a phi mate turn date scheduled as well as there is a major Bradley model turn date. That would suggest a significant turn will come then. The October turn points to a nice coming tradable trend. But I would not recommend trying to catch the last rally before we enter the biggest crash in recorded history. It’s just not worth the risk. I feel it would be much (safer) to begin “Scaling” into your favorite shorts. Begin by buying 6 month calls on TBT (you can use JNK or HYG into any short term Interest drops and/or FAZ and QID.

GOLD

A possible Bullish Head & Shoulders bottom may be forming in Gold, a large pattern that started in early 2013. If Gold rises above 1,450, that would confirm this pattern and give a minimum upside price target of 1,650ish.  Once a final bottom arrives, signified by a few months of backing and filling, then a significant rally (wave 5-up), will begin. Once Gold has bottomed, it should streak to $3,000 an ounce or more because it will be entering its large degree wave 5-up. Wave fives are typically the largest of the 5 waves for precious metals.

Gold and Silver, like everything else in this world, must follow God’s Natural Laws of Economics!   These laws can be manipulated for awhile in the short run, but in the end the longer it takes to fall into place the greater the accentuated  reflexive movements. They will severely punish all those central bankers, politicians and their lackey manipulators and remind them that they are NOT God no matter how much money they accumulated before giving it all back and then some. When the carnage starts, make sure that you are on the lookout for falling bodies when walking down Wall Street, Broad Street and other such streets around the world.                 

How to Free Yourself from Monetary Corruption

Our economy has been unstable for going on 13 years and our erstwhile leaders can’t seem to balance a simple checkbook, let alone be fiscally responsible for our retirement funds.   Our monetary policy creates inflation continuously while telling us that there is no inflation (does any one of them ever go to the supermarket?) And yet after 5 years of massive money printing they cannot create jobs or economic growth. 

Meanwhile, the banks, who receive all this freshly printed money, pay interest rates so low that  it’s only natural to worry about outliving your wealth when you can’t find yield in a “safe” place, to invest your money. They have killed both the CD and Money markets not to mention Government Bonds. And the lies are getting bigger along with the increases in our debt, which is why most major analysts are finally catching up to my 2005 $6,250 (by 2017) Gold projection and see Gold going much higher for the foreseeable future.

Create a Gold Standard for your own money and take a portion of your wealth out of the system.  One self-directed IRA option that is still within your total control is the physically-backed Gold and Silver IRA.  Physical Gold and Silver in your IRA is held by a private custodian who is insured by a private insurer and is not controlled by the government.  A Gold or Silver IRA protects your wealth from being confiscated and also adds a strong measure of inflation protection.  With a Gold or Silver IRA, you convert your wealth to the one asset that does not exist in the computer of an insolvent bank or technically bankrupt Government.

As far as I am concerned concentrate your visible money in Silver for two reasons. Not only is Silver not someone else’s obligation, but the US government has already seized the peoples Gold once before and Silver is nowhere near as large as Gold. If they do it again, they will grab the Gold first and leave Silver alone as it is too small to make a huge difference.

GOOD LUCK AND GOD BLESS

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UNCOMMON COMMON SENSE                                                                October 1, 2013

Aubie Baltin CFA, CTA, CFP, PhD.

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This letter/article, like all my others, is for education purposes only and is designed to help you make up your own mind; not for me to make it up for you. Although I include recommendations from time to time, being a bi-monthly publication, it is not meant to be a trading letter. Only you know your own personal circumstances, so only you can decide the best places to invest your money and the degree of risk that you are prepared to take.