This Market Collapse Will Shake The World Financial System

On the heels of another wild week of trading in global markets, today one of the top economists in the world sent King World News an exclusive piece warning that a key market collapse will shake the world financial system. Michael Pento, founder of Pento Portfolio Strategies, wrote this piece for KWN.

Pento: “The U.S. Ten-Year Note yield has been surging of late. Absent another recession, or renewed European debt crisis that threatens the existence of the Euro currency, or the Fed launching QEV; the yield should approach 4% by the end of this year. How much should we be concerned about yields rising to that level?….

“Well, the surge in yields from 1.6%, to 2.6% since the beginning of May has already caused purchase applications for new homes to plunge 28% month over month. Mr. Bernanke predicated the economy’s healing on saving the real estate market. Since the Fed is now threatening to begin removing its stimulus programs, that primary support column for the economy is being eliminated.

One has to question what rising rates will do for this so-called recovery. The U.S. economy (and indeed the rest of the globe as well) is already suffering from anemic growth. Now we are told by the puppet masters of the economy that the manipulation is going to end. But can we really believe them?

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/13_This_Market_Collapse_Will_Shake_The_World_Financial_System.html

Here Is The Investment Opportunity Of A Lifetime

Rule: “The thing that is most interesting to me right now is the turbulence in energy markets. The energy markets are so large and there has been such incredible turbulence in them that it has definitely caught my attention. The focus of my financial attention has been attempting to get either debt or equity deals done among the micro-cap issuer community in junior mineral or exploration companies. In that I have been unsuccessful….

Eric King: “The sentiment on gold and silver is at the dead lows even though the metals have bounced here.”

Rule: “I think that’s a continuation of an earlier theme, and I don’t think people are paying attention. In the gold and silver markets you have been seeing the futures market for a substantial period of time setting price, as opposed to the physical market.

At the same time you are seeing the selling pressures that drove the physical market lower begin to abate. Those selling pressures were the unwinding of leveraged, momentum-driven carry trades. These involved either gold futures or the gold ETFs.

All of this has resulted in a massive accumulation of physical gold and silver into very strong hands. This involves players in the Eastern hemisphere, as well as retail investors who are unleveraged, that are buying physical gold and silver.

We are also beginning to see the futures markets bottom out at the same time the physical market is incredibly strong. We have also seen the gold lease rates have gone up fairly substantially. This strongly suggests that a lot of the physical gold, which was in bank hands and available for leasing, has been disposed of into the physical markets.

These are fairly bullish signs. I can’t tell you exactly how it’s going to play out, but I do believe that at the very least, in the near-term, the gold and silver markets will stabilize.”

Eric King: “With things as decimated as they have been in the gold and silver space, many times you see markets come out of the hole and it doesn’t really take news to drive it. The markets just start going higher.”

Rule: “You are exactly right. What happens is that you exhaust the sellers. The interesting thing is that the buyers are somewhat exhausted too. It’s sort of like two ‘world class’ fighters who have been battling for 13 rounds and only have 2 more rounds to go, but neither have much energy left to hit each other.

But what you just said is exactly what I’ve experienced in past market cycles like these. The stocks start to move up because they stop moving down. Again, you exhaust the sellers. Everybody is looking at tax loss selling this year, but people forget that you have to have some gains to shelter with the losses. And U.S. speculators haven’t done that.

Furthermore, in Canada where you can take losses this year against gains that you acquired in the three prior years, what you are finding is that the people usually were able to use up those prior gains with last year’s losses. So I suspect that tax-loss selling this year will be much less pronounced than it has been in earlier seasons.

I strongly believe that the highest quality mining shares will move higher the rest of the year, and I certainly believe that the worst of the pressure is off of the junior stocks. There has just been a lack of buyers to meet the lack of sellers.”

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/12_Rick_Rule_-_Here_Is_The_Investment_Opportunity_Of_A_Lifetime.html

Get ready for turbulent gold earnings season

The second quarter of 2013 is one that gold miners and their investors would love to forget. Unfortunately, they will have to relive the horrors when the companies start reporting earnings later this month.

The results will be ugly. Analysts at Stifel Nicolaus estimated that the gold miners under their coverage (which includes the senior producers and a smattering of others) will report an average 20% drop in EBITDA from the first quarter. Lower metal prices are obviously a key factor, but so is an anticipated decline in production (down 1%) and an increase in cash costs (up 8%).

With squeezing margins and potential mine closures on investors’ minds, the Stifel analysts ran their models at a gold price of US$1,000 an ounce to see how many operations would have to shut down if the price stayed at that level for an extended period. They found that Kinross Gold Corp., Barrick Gold Corp. and Newmont Mining Corp. would lose well over 30% of their production from closures. But Goldcorp Inc. would only lose 7% because of its low-cost asset base.

“With a management response on costs, probably half of the production loss could be saved for a year or two. However, the simple study shows that there would be strong supply side support at US$1,000 [an ounce],” they said in a note.

The only gold miner under Stifel Nicolaus coverage to be downgraded is Barrick Gold Corp., which was cut to hold from buy by analyst George Topping. He noted the company needs higher gold prices to pay off its debt, and the stock is likely to drift lower if prices remain flat. He also anticipates a dividend cut in the second quarter, along with US$7-billion to US$8-billion of writedowns. Neither of those moves would come as a surprise to investors.

Source: http://business.financialpost.com/2013/07/09/get-ready-for-turbulent-gold-earnings-season/