A New Bull Market & Economic Upturn

Posted by James Dines Interviewed by Michael Campbell

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With some of the “Mind Boggling” numbers coming out of the United States, the mess in Europe and a Sovereign Debt Crisis on the horizon, Michael Campbell decided to ask what the legendary James Dines had to say about current conditions. Ed Note: You can also listen to the 43 minute exclusive interview between James& Mike right below if you prefer:


Mike Campbell: Despite those “mind boggling” financial numbers coming out of the US, falling wages, European debt problems, an economic slowdown in China, the US Stock Market keeps going up. What is your perspective on that?
James Dines: Climbing a wall of worry is a stock market saying that describes a rising market in the teeth of bad news. The current situation is one of ghastly economic news from Europe, especially the financial insolvency of one country after another. You’ve got soaring unemployment anywhere from 25% and a horrifying 50% that’s not only in Europe but also in America amongst African American youths, and the so-called China slowdown certainly describes a wall of worry. Its cause is a function of the stock market being a discounting mechanism, in other words you get no reward and you make no money in capital gains from knowing the past. Far sighted investors spend a great deal of time energy and resources trying to figure out what’s coming next, and then the stock market begins to adjust to that upwards.

Therefore the market is probably telling us an economic upturn is in its purview, believe it or not. However on this show, and every single year this last decade I have predicted the coming great deflation, and what’s going on now has definitely been a deflation. When I first made that prediction nobody was talking about deflation, all were worried about inflation and how to guard against it. But in a deflation wages decline, as do the prices of real estate and commodities. Virtually everything declines, which is why resource stocks were hit so hard early in 2012.
Another one of the long standing predictions on your show has been the coming debt liquidating depression. The function of a deflation is the liquidating of the excessive debt, as for example in Greece they are writing off huge chunks, billions of dollars in unwise loans made during inflationary times.
What I make of it that’s different from the mainstream economic thinking, is this World wide malaise is fundamentally a currency crisis. Which is why I was able to predict this coming second Great Depression would be international in scope. Why? Because every Government on the planet is printing too much paper money and liquidation of that fake paper is being corrected by drops in various currencies. Currencies shouldn’t even fluctuate at all as we need a stable standard of value to measure prices and a store of value for savers. Tthat is why we predicted one year ago in  Sept 2011 a bear market for China. That prediction was a shock given I became the original China Bull after returning from a long visit to China shortly after Mao died. Personally, even though everybody is talking about a slowdown in China I am looking for an economic crash there based on the nations internal debts. Also a real estate crash there due to overprinting of money especially in 2008.
The majority view is China is merely experiencing a slowdown of historic growth and is still a powerhouse. That Germany is the growth engine of Europe.That looks wrong. Both of them are exporting nations whose customers are experiencing economic hardships. Whether either are being forthcoming or are “even lying” about their economic status, either way I expect both to join the international economic decline.
Despite all this, all is not pessimism actually. Indeed I can think of a number of reasons to take a positive view of the world economic situation. For example:
1. The rampant pessimism of many investors. Understandable due to the loss of money in the last year with the plunges in stock values, like in mining for example. The result is unusually low volume on world stock markets, a phenomenon I have noted in previous bottom formations. Its not just investors who are discouraged, hedge funds have been running losses the last two years so even the most professional investors have gotten hurt. But new bull markets are born amidst that kind of pessimism. The key question is whether or not these drops are a sign of a huge market top or merely a group rotation typical of new bull markets. I think the odds favor group rotation, which means mining shares should have more upside soon. Those mining shares could have a short term pullback after the pretty sharp rise they’ve recently had while the former favorites like Facebook and Groupon plunged. In short I think we are getting a Group Rotation instead of a unified top.
2. Another positive sign is that despite the bad news, America’s leading market averages like the S&P 500 and the Dow are actually up 16% and 11% respectively this year.
3. Aside from the classic ingredients of a bull market, the prices of commodities (except for some agriculturals due to weather) have been coming down. Labour has been cowed as they realize that there are no jobs available at all, and far to many applicants for any jobs that do come up. Real estate is cheap, interest rates are low, housing is depressed and even turning up. This is a formula I’ve seen spawning new bull markets in the past.
4. Corporate sales are flat but profits are up. Which suggests to me that costs are under control so in any upturn profits would flower big-time.
5. There is lots of cash available in corporate treasuries. People have been hoarding cash because they are afraid, which is typical of deflations. It drives the Keynesian economist’s crazy that money is not being put to risk, but people are afraid of debt.
6. Finally, stocks are depressed, undervalued, underpriced, oversold, and debts are getting paid. Even paid off and  liquidated.

Mike Campbell: I’m glad to get that perspective which is in variance to the news. Bad news that is government dominated bad news. What do you think of the interference by Central Banks and Governments?
James Dines: I have never lived through anything like this, but as a student of history I pulled together all of the details of the last time this happened in the 1920’s. What’s happening right now is just a re-run of that. As George Santayana said, “Those who cannot remember the past are condemned to repeat it.”

Fathers of Keynesian economics would not agree that it was a currency crisis that cause the 1929 crash. But I think that when events like the European money supply being doubled at the Genoa conference in 1922 to pay for WW1, that that bloated currency caused the roaring 20’s, and the deflation that followed in the 1930’s was natural to eliminate all that paper. Its  all happening again only in slow motion and less visible.

This is what is happening. The whole world is suffering because they have printed too much paper money. Their cure for that is to print even more paper money which is nothing more than pouring gasoline on the fire instead of solving it. Typically at this stage of a deflation what’s going to happen when the government continues to add money to the system first there is what looks like a recovery. Then it kicks in to something much worse. When they poured money into the system in 2008 what followed was a couple of years of recovery in 2010- 11, which was just that extra money flushing through the economy. Now what’s happening again is that we are going through another round of money printing so we will have something that looks like growth again as money sluices through the system, but then its going to come down even harder.
Mike Campbell:  On August 22nd/ 2012 with Gold in the low $1,600’s and Silver just over $29 you flashed a signal to your subscribers that you where back on the buy side of Gold & Silver. Now that Gold is $130 higher and silver is $5 higher what do you  think?

James Dines: Q3 and the declaration that they are going to print money without limit primed the pump in my opinion and I’m now looking for a resumption of the Super Major Bull Market that I’ve been looking for since my major buy signal 11 years ago on September 25th, 2001. Gold has been up every single year for the last 11 years and there has been no other investment area that’s done as well. It is important to understand that with all this money being printed,  Gold has no price. Gold is money. In each country it will sell for a different number of pieces of paper based on the amount that they print. In my interim bulletin of August 22nd/ 2012, I said I was looking for Gold and Silver to challenge their all-time highs, which means at least $1,900 for Gold and $50 for Silver. My initial target on Silver is $120 an ounce if they continue to print all that paper.

The problem is that there is no safety in this environment and its Delusionary to think that there is. When the currency itself is corrupt were can you hide. Maybe the only really safe place would be Gold and Silver on pullbacks because a coin of them made back even in Caesars time is still good anywhere in the World today. I think everyone should put a small amount of money into some Gold coins and put them, never on your person or near your residence, but in a bank or safety deposit box and preferably in more than one country. If you have more money than a small amount you can buy stocks also on pullbacks. They’ve had a big jump here and I am looking for a bit of a pullback before the next upwave.

About James Dines:


James Dines has become legendary for having made correct forecasts that were in complete contradiction to the rest of the financial community.

In an industry where it takes courage and conviction to go against the crowd, Mr Dines defiantly warned investors of the “invisible crash” that would bring down stocks in 1966, the unexpected gold boom of 1974, the Internet revolution of 1996, and the market top in 2000, a 2001 call for a Super Major Bull Market in Gold.  Now he warns of “The Coming Uranium Boom” that is steadily approaching.

His subscribers to The Dines Letter have profited so much that subscriptions are handed down to second generations. – read more HERE