The Truth About Gold As an Investment (What Bubblevision “Experts” Conveniently Overlook)

Almost every other day I read an article telling me that owning Gold is dumb or that Gold is doomed as an investment.


These articles would be useful or insightful if they weren’t based on “analysis” that is either misleading or downright wrong.


To whit…


Gold has absolutely CRUSHED stocks since 2000. During this period we’ve had two of the biggest stock market bubbles in history. Yet Gold’s performance has made stocks’ performance look like a flat-line.


H/T Bill King.


Put another way, Gold has demolished stocks during a period in which the Fed was printing money by the trillions of Dollars. The Fed and other Central Banks may want to boost stocks, but Gold is the biggest beneficiary from their insanity.


However, Gold’s long-term outperformance of stocks is even more incredible.


Most “analysis” of Gold as an investment runs back for 100 years or so. However, this analysis is deceptive as Gold was pegged to major currencies up until 1967.


Of course, the geniuses in the media overlook this little tidbit because once major countries began to de-peg their currencies from Gold in 1967, the precious metal has absolutely DEMOLISHED stocks in terms of performance.


H/T Bill King


Since 1967, Gold has risen 33 fold. The S&P 500 is up just 21 Fold.  Had you ignored stocks completely and simply bought Gold you would be significantly RICHER.


Owning Gold is just one of the methods investors can use to generate real wealth in today’s market of financial bubbles. We outline two others in our 21-page investment report titled Stock Market Crash Survival Guide.


To pick up yours, swing by:


Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research




via Zero Hedge Phoenix Capital Research

Greek Tragedy: Pension Pandemonium Sparks Bank Crash, Stocks At 26 Year Lows

And you thought Greece was "fixed"…


The last 3 days have seen Greek bank stocks cut in half…


Which has slammed Greek stocks to their lowest since December 1989…breaking below Draghi's "Whatever it takes" lows…


And Greek bond yields are back above 10% – the highest since last year's crisis…


Greece is no longer "fixed" as it appears the troubled nation is once again facing a funding crisis (looming in June) unable to meet "Europe"'s demands on its pension reform and refugee aceptance. As MNI reports,

Greece's negotiations with international creditors could take months if Athens does not cooperate fully on its fiscal consolidation plan and officials are not expected to return to Athens before they receive concrete and acceptable proposals, Eurozone officials told MNI Monday.


Furthermore, the officials warn that any attempt by the Greek government to politicise the negotiations in order to get relaxation will not be tolerated by the majority of the currency area member states.


One high-ranking official said that "the talks carried out last week were just exploratory" and that the institutions "did not make specific demands" as they lack hard data, despite leaks from the Greek government on potential taxation increases and pension cuts.


"There is still a big gap between what we ask and what the Greek government has submitted so far. We have not defined yet the fiscal gap for this year, which is a crucial component for the evaluation," the source said.


Another source said that despite the goodwill expressed by Greece's European creditors – the European Commission, the European Central Bank and the European Stability Mechanism – to discuss counter-measures to offset certain unpopular ones such as cutting further primary pensions and the minimum wage, "Greece seems unable to deliver such measures."


"There is a lot work to be done. We agreed to disagree. Judging from (last week's) talks, the negotiations could drag for months. Anyway, I don't see any real funding needs for Greece until June," the official claimed.


The comments come amid massive reaction in Greece by farmers protesting potential tax increases and social unrest for the formation of immigration camps in certain islands and the north of Greece.

In other words – prepare for another ATM-halting, crisis-confronting Spring and Summer in Europe as Schaeuble goes to war with Tspiras once again… obver pension reforms and refugee concessions.


via Zero Hedge Tyler Durden

Treasury Yield Collapse Leaves 5Y At Crucial Cliff

US Treasury yields are collapsing across the entire curve, down  9-10bps from their pre-opening highs this morning. While 10Y pushed belwo 1.80% (to one-year lows), it is 5Y yields that have traders the most anxious as they look to break out below three-year channel lows…



What happens next?

via Zero Hedge Tyler Durden

Three Reasons To Be Worried About The Economy

Submitted by Yonathan Amselem via The Mises Institute,

On January 12, America’s central planner-in-chief gave his State of the Union address. The president promised nothing less than to feed the hungry, create jobs, shape the earth’s climate, and make everyone a college graduate. There’s nothing new here, though. We’ve heard variations of this silly song and dance every year under both Democrats and Republicans. The president lambasted naysayers as fear-mongers that were too partisan to admit we have a booming economy. The fact that the Dow Jones cratered roughly 9 percent in the same thirty-day period President Obama gave his address did nothing to quell Obama's optimism about America’s future. In fact, he labeled the US economy “the strongest and most durable in the world.”

Despite our leader’s unwavering confidence in America’s fortunes, a quick peak under the hood reveals a pretty grim state of American commerce.

1. The Federal Reserve and US Government Have Warped the American Economy

In just the past decade, the Federal Reserve’s balance sheet has grown from roughly $800 billion to over $4 trillion. Our central bankers engaging in massive asset purchases to pummel interest rates downward is not news to anyone. We’ve been living in a world of falling interest rates since the 9/11 terrorist attacks. Yet, few mainstream economists have taken a good look at the destructive effects of this unprecedented monetary expansion. The calamitous distortions Fed policy has created for actors on both Main Street and Wall Street since 2008 have laid the groundwork for yet another crash.

Low interest rates stemming from a growing money supply are the only reason the US government has managed to service its gargantuan debt in recent years. The Congressional Budget Office itself has pointed out that even a slight rise in interest rates could potentially result in anywhere from $700 to $900 billion in annual tax payments just to service the interest on our debt. At this pace, paying the republic’s creditors will become our largest government program in no time. Future Americans might go to work and have 50 percent of their paychecks seized not to pay for government services, but simply to service debt forced on them by central planners.

But public debt is far from the only distortion artificially low rates have wrought. Mortgages, auto loans, credit cards, and student loans have ballooned total consumer debt to $12 trillion, and this number is only trending upward. The easy credit economy manufactured by central bankers has obliterated American savings and replaced them with debt. The average American consumer has less than $1,000 in his bank account. He lives praying for no car trouble or a broken arm. There was a time when Americans were rewarded for saving their earnings with double-digit interest rates but this is a distant memory. If Americans want to earn a return nowadays they must play the central-bank sponsored stock market casino. In fact, calling the stock market a casino is a little insulting to casinos — at least Blackjack has consistent rules.

2. American Corporations Are Debt-ridden and Unproductive

The post-recession bull market inspired a lot of confidence in the American economy and Obama’s recovery, but this is akin to praising great happy hour specials on the Titanic. Soaring stock market prices are not a result of increased productivity or innovation — they are a symptom of central bank fueled asset inflation and corporate debt. In fact, since 2008, corporate debt has doubled. Almost 100 percent of all corporate issued debt has been used to buy back stocks and prop up equity prices. This bears repeating. Almost none of America’s recently issued corporate debt has gone toward investing in plant and equipment, increasing the workforce, research and development, or expanding operations in any meaningful way.

Our central bankers, regulatory agencies, and fiscal policies have created a financial system so distorted and removed from real assets and real cash flow generation that corporate executives can rake in billions in bonuses while producing almost nothing of real value. Investing in the real American economy is just not worth the risk. The massive long-term obligations assumed by American companies high on low interest rates will slowly crush the life out of our economy. The only answer is to start producing real goods and begin generating real cash flow. But this won’t happen in the bubble-finance nightmare cycle we’re now in.

Our current money commissar, Janet Yellen, recently “raised rates” from 0.25 percent to a paltry 0.5 percent. If this rounding error of a rate hike can send the market tumbling off a cliff, what would happen if the fed raised the target rate back up to 6 percent like in 2000?

3. American Entrepreneurship is Dying and American Workers Are Unproductive

Financial chicanery aside, we have to come to terms with the fact that Americans themselves just aren’t built like they used to be. President Obama’s administration constantly cites low unemployment as a sign that our economy is back on track. To say unemployment numbers are massaged is an understatement. Of course unemployment recovered since 2008, President Obama was sworn in at the end of a market crash! But more importantly, the American economy is not producing architects, engineers, machinists, or other high value, goods-producing workers. We are pumping out an army of waiters, social workers, and associate professors with worthless six-figure degrees they have no hope of paying off in this life or the next. American workers are not interested or encouraged to start businesses, learn new skills, or innovate in some way. The typical American graduate firmly believes he can turn a six-year sociology degree into a job that doesn’t involve bringing people mimosas for brunch.

Our unproductive workforce is not all the fault of its members.The disincentives for entrepreneurship and wealth creation are colossal in this country. Dealing with licensing boards, zoning commissions, health inspectors, unions, and other regulatory bodies at the federal, state, and municipal level is extraordinarily burdensome, particularly for the poor and nascent immigrants. Successful entrepreneurs then have taxes levied at the federal, state, and local level across a cavalcade of confusing forms and attachments. The state and its many institutions make it nearly impossible for the average American citizen to just try something. This is the lifeblood of a “durable economy.” Unfortunately, business failures are now outpacing business startups.

The political class has completely disrupted the American structure of production, made American workers uncompetitive, snuffed the life out of entrepreneurs, and burdened the entire nation with a debt obligation the size of Jupiter. The US economy is not the strongest and most durable in the world — it is an unskilled thirty-two-year-old waiter crashing at his parent’s place and trying to pay down an $80,000 international relations degree.

via Zero Hedge Tyler Durden

Key Events In The Coming Week: Janet Yellen Testifies, China Closed

With China celebrating the Lunar New Year and offline until next weekend, and with the US in the usual post-payrolls macro newsflow lull, the markets will have more than enough time to stew in the latest source of contagion fears, namely Europe, the same Europe which until recently was fixed but is broken all over again. The highlight of the week will be Janet Yellen’s semi-annual testimony to Congress where she is expected to confirm she is trapped: either push the market even lower by sounding hawkish, or admit the US is on the verge of a recession and admit policy error.

Here is what else to expect, ironically from DB’s Jim Reid:

It’s a fairly quiet start to proceedings this week with the only data of note in Europe being German industrial production for December and confidence indicators for the Euro area and France. The usual post-payrolls lull in the US means there’s no data due across the pond today.

Tuesday’s highlights include trade reports covering the December month out of both Germany and the UK, while across the pond the January NFIB small business optimism reading is due out, along with the December JOLTS report and wholesale inventories and trade sales data for the same month.

Turning to Wednesday we’re starting in Japan where the latest January PPI numbers are due out. In Europe we’ll get regional industrial production reports for Italy, France and the UK while the sole release in the US in the afternoon is the January Monthly Budget Statement.

It’s a particularly quiet day for data on Thursday with nothing of note in Europe and just initial jobless claims data due in the US.

It looks like we’ll have a busy end to the week on Friday with Euro area Q4 GDP and industrial production, French employment data and German Q4 GDP and CPI all due out. In the US the big focus will be on the January retail sales data along with the first reading for the University of Michigan consumer sentiment print for February and December business inventories data.

Arguably the focus of the week will be away from the data and instead reserved for the aforementioned Fed Chair Yellen’s semi-annual testimony to the House Financial Services on Wednesday and the Senate on Thursday. Also due to speak will be the Fed’s Williams on Wednesday and Dudley on Friday. Meanwhile we’ll also see the attention for the US presidential election move to New Hampshire which is due to hold the first-in-the-nation primary on Tuesday.

Elsewhere, earnings season rumbles on and we’ve got 64 S&P 500 companies set to report including Coca-Cola, Walt Disney and Cisco. In Europe we’ve got 80 Stoxx 600 companies reporting including Total, L’Oreal, Heineken and Nokia.

And the key US events in table format

Source: DB, BofA

via Zero Hedge Tyler Durden


FANG stocks are collapsing in the pre-market as faith in the "growth at any cost" meme crashing on the shores of reality once again. Now down over 16% from their post-Fed-rate-hike highs, the stocks you should never sell are being sold in size as large crowds and small doors press NFLX and AMZN (and TSLA for good measure) down over 30% year-to-date. Even Mark Cuban is hedging

It's carnage in the pre-open…

"For those of following my stock moves, I just bought puts against my entire Netflix position," Cuban posted on the site.

"I'm not selling. But I have no idea what this market will do."

Which will drag the broad FANGs to 5-month lows…


As we noted earlier, via JPMorgan's Kolanovic,

For instance, a popular group of stocks held by investors is known by the abbreviation “FANG” (Facebook, Amazon, Netflix, Google). We use these stocks as an illustration for a broader group of similar stocks that have the highest rankings according to momentum and growth metrics (and surprisingly in some cases even low volatility metrics). Given that traditional value metrics look expensive when applied to this group, one can compare these momentum/growth companies on a new set of metrics. For instance, one  can look at the ratio of current price to earnings that the company delivered over all of its lifetime (instead of just the past year). Another metric could be a ratio of CEO or founder’s net worth to total company earnings delivered during its lifetime (see below):


Aggregating all FANG earnings since these companies were listed, one arrives at a ratio of current price to all earnings since inception of ~16x. This can be contrasted to a ratio of price to last years’ earnings for all other S&P 500 companies also at ~16x. We think this is extraordinary given that FANGs are neither small nor new companies. In fact, these are some of the largest companies in the S&P 500 and among the largest holdings of US retirees. Given that the three largest FANG stocks are now twice more valuable than the entire US S&P small-cap universe (600 companies), a legitimate question to ask would be “is such a high allocation by long-term investors to these stocks prudent?” Statistically, over a long period of time smaller companies outperform mega-caps ~75% of times. Note also that the current size ratio of mega-cap stocks to small-cap stocks is at highest level since the tech bubble of 2000.


Furthermore, such allocation is also questionable from a risk angle. For example, the idiosyncratic risk of holding three stocks in one sector is certainly much higher than the risk of owning, e.g., ~1,000 medium- or small-cap companies diversified across all sectors and industries.

Finally we leave with the thoughts of infamous MacroManJust Say No To Equity Market Drugs

The real stock junkies probably go for the really hard stuff: equity market smack. 



Long FANG and short GDX was a prodigious trade over the past several years, with that spread rising  more than 10-fold from Facebook's IPO in May 2012 to Thanksgiving of last year.   The high was great while it lasted, but coming down has proven to be unpleasant to say the least.  If you wanted one chart to illustrate the pain in equity space, this would be the one.   As Macro Man noted last week, GDX looks like breaking out, potentially inflicting more pain.

*  *  *

This won't end well – it never does.

via Zero Hedge Tyler Durden

Chesapeake Plummets Over 20% On Report It Has Hired Bankruptcy Attorneys

The saga of the gas giant Aubrey McClendon’s built, Chesapeake Energy, enters its endgame, when moments ago following a Debtwire report that the company has hired Kirkland and Ellis as its restructuring/bankruptcy attorney – typically a step taken just weeks ahead of a formal Chapter 11 filing – the stock has plunged 22% to $2.40, the lowest price in the 21st century, and for all intents and purposes, ever.

In a few weeks we will see just how many banks were properly “provisioned” for this now imminent bankruptcy that may just unleash the default wave so many have been waiting for.

via Zero Hedge Tyler Durden

After 1,428 years here’s what brought down the world’s oldest business

In 578 AD, a Korean immigrant named Shigemitsu Kongo made his way to Japan at the invitation of the royal family.

Buddhism was on the rise in Japan at the time; though it had only been introduced a few decades prior, the Empress consort had been actively encouraging the adoption of Buddhism across Japan.

But since the Japanese had no experience building Buddhist temples, they looked overseas for help.

That’s where Kongo came in.

Shigemitsu Kongo was a renowned temple builder, and the royal family in Japan commissioned him to build the Shitenno-ji temple, which still stands today in Osaka.

Kongo saw an incredible opportunity. Buddhism was catching on fast, and he knew he could be kept busy for decades building temples.

It turned out to be centuries. Over 14 centuries, in fact.

Shigemitsu Kongo formed his construction company Kongo Gumi in 578 AD, and it lasted 1,428 years.

It’s extraordinary that any single enterprise could last so long.

Even as late as 2004, temple building accounted for more than 80% of the company’s revenue, which exceeded USD $60 million.

But ten years ago the company finally went under due to the massive debt burden they had accumulated.

It started back in the 1980s. Japan was in the midst of an epic financial bubble thanks to unconstrained credit growth and expansion of the money supply.

Go figure, central bankers artificially suppressed interest rates, keeping them way too low for way too long. And it created a huge asset bubble.

Asset prices in Japan got so out of control that for a short time during the 1980s, it was said that the grounds of the imperial palace in Tokyo were worth more than all of the real estate in the entire state of California.

As part of this bubble, banks had relaxed their lending standards and were handing out loans to just about anyone.

And many Japanese companies took on vast amounts of debt, including Kongo Gumi.

Debt was like a popular drug. Everyone was doing it.

But when the bubble burst in 1989, asset prices collapsed. And companies that had borrowed heavily were left with nothing but debt.

Kongo Gumi didn’t go out of business right away. The company was able to limp along for more than two decades on basic life support.

Soon they were borrowing money just to pay interest on the money they had already borrowed, even though interest rates were at record lows.

But eventually the company’s revenues were no longer sufficient to service the debt.

And in 2006 Kongo Gumi was forced into liquidation.

This company lasted over 1,400 years.

They survived countless political crises, wars, and natural disasters.

They survived the Meiji Restoration in the 1800s, a period in which the government set out to eradicate Buddhism from Japan, and hence, the temple building industry.

They even survived two atomic bombs.

What Kongo Gumi couldn’t survive was debt.

It doesn’t matter if you’re an individual, a company, a government, or even a central bank; if your balance sheet doesn’t add up, sooner or later you’re going under.

It’s concerning to see consumer debt once again on the rise in the Land of the Free, at the fastest pace since the days of the financial bubble.

Perhaps most appropriate was a Superbowl commercial from Quicken Loans advertising how easy they have made it to obtain a loan.

“Push button. Get mortgage.” says the commercial.

More appropriate would be “Push button. Get into debt. Then buy more useless stuff.”

It’s a blatant snapshot of how far along we are in this latest financial bubble.

Of course, most western governments are in this position as well; they can go further into debt with a few strokes of the pen.

No surprise that many governments must borrow money to pay interest on money they’ve already borrowed, even at a time when interest rates are at record lows!

And yet the leading mainstream economic minds claim that debt (and money printing) are actually CURES to economic problems, and not causes of them.

As my colleague Tim Price points out, medieval doctors used to advocate leeches as a way to cure sick people.

Yet this approach turned out be largely ineffective and tended to kill the patient.

Sometimes the final consequences take years. Even decades.

Old, established institutions have the ability to kick the can down the road, just like Kongo Gumi did.

And even in terminal decline they can even give the appearance of strength.

Just a few years before its demise, Kongo Gumi was still a media darling that seemed strong, fit, and likely to last another 1,400 years.

The LA Times, for example, ran a story in 2003 praising the company for its deft ability to outlast Japan’s tough economic conditions.

Kongo Gumi folded less than three years later.

This is an incredibly important lesson: debt is a killer. And no one is immune to this inevitability.

from Sovereign Man

Inside the battle for control of the Federal Reserve

[Editor’s note: This letter was penned by Tim Price, London-based wealth manager and author of Price Value International.]

A Shandong 5000 electroglide flatbed currency printing machine named ‘Ted’ has edged ahead in a fiercely competitive fight for the chairmanship of the US Federal Reserve, narrowly in front of its major rival, the Heidelberger Druckmaschinen high speed sheet fed rotary offset press, christened ‘Heidi’.

In an ominous sign for supporters of the Heidelberger Druckmaschinen candidacy, a number of US Senate Republicans are circulating a letter supporting the Shandong 5000 model in its quest to replace Janet Yellen at the head of the world’s most important central bank.

The Shandong 5000 is a six colour high speed flexo letterpress printing machine which can churn out up to $200 trillion in high denomination bills in less than 60 seconds.

In a subtle technical innovation, these bills can then be immediately declared illegal and holders of them instantaneously vaporized.

The only other serious contender, a 70 ton Komori Super Orlof Intaglio based in Tokyo, melted after recent deployment by the Bank of Japan.

Senate Democrats rounded on the nomination of a Chinese printing machine in what critics interpreted as a thinly veiled racial slur that ran the risk of igniting an international trade war.

Supporters of the Shandong 5000 electroglide pointed out that the only domestic US manufacturer of high speed, sheet fed rotary 1-10 Intaglio currency printing machines filed for insolvency 60 years ago after using Alan Greenspan for consulting services.

Some Wall Street analysts were skeptical that a flatbed currency printing machine was really the best fit for the task at hand.

Marti Venal at SalesWeasel GoldFelon pointed out that in the 21st century, digital central bank reserves could be created effortlessly electronically without any resort to the printing press whatever.

His colleague Dwight Craven added that three staffers at the Federal Reserve had recently been crushed to death by the accidental toppling of a two mile high mountain of hundred dollar bills following the January 14th 11:02 a.m. Part 57 iteration of the Fed’s latest 8,000-stage quantitative easing programme.

“The Heidelberger Druckmaschinen boomlet is now looking like a Heidelberger Druckmaschinen backlash,” added Venal.

Republicans seem more welcoming of the Shandong 5000 candidacy, despite some disagreements over the machine’s reliability.

The Shandong 4000 series was prone to overheating, occasional power outages, and sometimes exploding spectacularly showering shards of molten steel at supersonic speed over its support workforce.

This made the Shandong 4000 only slightly less dangerous than a full service investment bank.

The Heidelberger printer has long been a bogeyman for some liberals.

They regard the machine as a close colleague of former Treasury Secretary Robert Rubin whose backing for the financial sector and appetite for unrestrained deregulation has been widely blamed for the banking crisis.

There has also been criticism as to the robustness of the Heidelberger currency printer in light of the near-constant requirement to print money 24/7, 365 days a year, and concern as to whether components of the printer have been ethically sourced.

“It used to take 5,000 Chinese workers to make the cylinder of one of our machines,” said a company spokesman.

“We have since found out that titanium is more hard-wearing.”

Over in Europe, monetary authorities have commissioned 14,000 Wolf-Krugman ultra-speed printing machines in order to prepare for March’s looming currency offensive.

The Bank of England, meanwhile, is preparing to unveil its new currency bazooka, a QE-969 Howitzer railgun capable of shooting money at 5,800 MPH into the economy, rendering it instantly inert.

In other news: The last remaining skeptic of the effectiveness of money printing was fired from the ECB. By a giant cannon. Into Switzerland.

from Sovereign Man

European Bank Bloodbath Crashes Bond, Stock Markets

Just as we warned, not only is it time to panic but the panic is 'contagion'-ing over into the sovereign risk market. European banks are in freefall, down over 4.3% broadly, crashing to 2012's "whatever it takes" lows.

European bank risk has gone vertical… Today's spike is the largest since April 2010


TBTF banks are all seeing credit risk explode – to 52-week highs and beyond…


Slamming European bank stocks back to near "whatever it takes" lows…


Dragging the entire European stock market down 24% from its highs to 16-month lows…


And that risk is syetmically crushing peripheral sovereign bond markets…


Time to panic? You betcha! All eyes are focused on the synthetic run on Deutsche Bank…


So since Europe unleashed their "Bail-In" regulations, European banks have utterly imploded with Deustche most systemically affected as it seems more than one person is betting that Deutsche will be unable to raise enough capital and will be forced to haircut depositors on up in the capital structure.

Finally – for those desperate dip-buyers hoping for another move from Draghi – don't hold your breath… As Deutsche Bank itself warned, any more easing by The ECB or BOJ will only hurt banks (and certainly Deutsche). In other words, they are all officially trapped now.

via Zero Hedge Tyler Durden