Wealth Building Strategies
You’ll care about this one day.
My wife and I welcomed a son into the world on Sunday. It’s the coolest experience anyone could ask for.
His only interest right now is keeping us awake 24/7. But one day — a long time from now — he’ll need to learn something about finance. When he does, here’s my advice.
1. You might think you want an expensive car, a fancy watch, and a huge house.But I’m telling you, you don’t. What you want is respect and admiration from other people, and you think having expensive stuff will bring it. It almost never does — especially from the people you want to respect and admire you.
When you see someone driving a nice car, you probably don’t think, “Wow, that person is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.” Do you see the irony? No one cares about the guy in the car. Have fun; buy some nice stuff. But realize that what people are really after is respect, and humility will ultimately gain you more of it than vanity.
2. It’s normal to assume that all financial success and failure is earned. It mostly is, but only up to a point — and a lower point than many think……read more HERE
The markets have for the most part already priced in a Fed rate hike which is expected next week. Yesterday fed funds futures indicated an 80% chance of a rate hike. It would be the first hike in roughly 9 years. The Fed last began a new hiking cycle in 2004. We consult history to decipher the potential impact (of a rate hike) on the embattled precious metals sector.
The chart below plots the US$ index, the Fed Funds rate and Gold. We marked the points at which the Fed Funds rate began to increase. The red marks show the two points which are most comparable to today with respect to the US$ index. At those points (1983-1984 and 1999) an increase in the Fed Funds rate was preceded by a strong uptrend in the US$ index.
US$, Fed Funds Rate, Gold
The Fed Funds rate increases in 1983-1984 were preceded by US$ strength but also massive rebounds in Gold and gold stocks. From mid 1982 into early 1983 Gold rebounded by 73% and the Barron’s Gold Mining Index rebounded by 210%.
The Fed Funds rate increase in 1999 is most applicable to today because it was preceded by US$ strength and steep declines in Gold, gold stocks and Commodities. (It was also preceded by strength in US equities and major weakness in emerging markets).
The chart below shows how various markets performed before and after the rate hike in summer 1999. The US$ index declined by 7.5% while Gold and gold miners surged higher. The counter-trend move lasted the longest in Commodities. Another similarity to note, albeit small, is the gold miners (HUI) did not make a new low before the hike as Gold did.
Fed Rate Hike in 1999
The gold mining indices (GDX, GDXJ, HUI) have essentially held support and built a base since July. GDXJ (shown below) figures to close the week in the mid $19s. If history repeats itself (with respect to Fed actions) then a rebound should begin after the hike and last for a few months. The initial target would be the 200-day moving average ($22) followed by the October high (mid $23) and the 400-day moving average ($27).
A Fed rate hike could be a catalyst for a decent rebound in hard assets and in gold stocks especially. However, the key word is rebound. History argues for a rebound in the weeks to come but a rebound followed by new highs in the US$ index and new lows in precious metals. This fits with our expectation that the US$ index could surge higher in 2016 and lead to capitulation and the end of the bear market in Gold and Silver.
Jordan Roy-Byrne, CMT
1. Governments Are Flat Broke – Protect Your Money
by Simon Black
One of the major themes of this daily e-letter is that major western governments are flat broke.
This is not the first time that a major world power has gone bankrupt, and we need only to look to history to see the consequences.
Thousands of years ago, as Rome’s bleak financial condition deteriorated, it didn’t create a crisis all at once.
….read it all HERE
2. Why Everyone Has It Wrong About Yellen’s Next Move
by Bill Bonner
(leftists, socialists, Democrats) want lots of little handouts (rightists, Wall Streeters, Republicans) want fewer but bigger ones.
All the loot comes from the voters – who willingly give up both their money and their liberty believing that, somehow, they are better off for it.
But the real winner is the Deep State. It usually controls the candidates… and continues to gain power and resources, no matter which side wins.
….read all HERE
3. Extreme Leverage in a Gold Futures Market Nearing the Breaking Point
by Clint Siegner
Maybe, at last, the gold shorts are getting nervous about the extraordinary leverage in the futures markets. Coverage continues to decline. Recent reports show 325 paper ounces in open interest for each ounce of registered physical stock. HERE
You said the number one problem Europe faced – and the one that would crack Europe open – was immigration. Nationalism was rising, and you said immigration would be the final straw. That was at least five years ago, so it was a remarkably prescient thought. What led you to that insight?
GEORGE: Well, Europe is the second smallest continent in the world, second only to Australia, if you want to call the latter a continent. (My wife will kill me for that, since she’s Australian.) Europe has 51 separate nation states. The European Union’s purpose was to end conflict among these states by binding them together in peace and prosperity.
Unicorns, a moniker applied to private startups valued at over $1 billion or more, are supposed to be mythical in nature.
At best, there are supposed to be so few of them that venture capital firms would be absolutely elated to have a stake in any unicorn out there. (Or even their Canadian narwhal equivalents)
However, the truth is that unicorns are simply not rare or mythical anymore. According to the real-time list that CB Insights hosts, the number is now at 145 unicorns globally. In other words, the once exclusive Unicorn Club is becoming increasingly crowded.
That said, the odd member of the club does find the door.
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