A Financial Hurricane & Cracks In The Global Financial System

On the heels of continued turbulence in key global markets, today 40-year veteran, Robert Fitzwilson, put together another tremendous piece.  Fitzwilson, who is founder of The Portola Group, discussed a financial hurricane, cracks in the global monetary system, and what this all means for investors.  Below is Fitzwilson’s outstanding and exclusive piece for KWN.

Fitzwilson:  “This is from ‘Rhyme Of the Ancient Mariner’ by Samuel Taylor Coleridge:

  • Dow Jones 30,000 Trigger Leaked by 27-Year-Old Stock Research Firm CLICK HERE
  • The Inevitable: Dow Jones 30,000 CLICK HERE

All in a hot and copper sky,

The bloody Sun, at noon,

‘Right up above the mast did stand,

No bigger than the Moon.

Day after day, day after day,

We stuck, no breath no motion;

As idle as a painted ship

Upon a painted ocean.

This literary piece is describing the ordeal of a ship and it’s crew trapped in a part of the ocean called the Doldrums.  The area is a low-pressure zone in the vicinity of the Equator where sailors experienced squalls, thunderstorms and even hurricanes….

“As Coleridge’s words describe, however, it is more commonly known for trapping sail-powered boats in windless seas for days and weeks at a time.  As defined by Merriam-Webster, the term doldrums can indicate despondency, listlessness, as well as stagnation, inactivity or slump.

We must say that the word doldrums has come to mind in recent months.  While there have been dramatic and historic movements in just about every asset class, there have been no resolutions to the innumerable economic, financial and political problems we face.  Europe, China, Japan and the United States have all made attempts to break out of their doldrums, only to encounter a lack of effect (no velocity of money, no inflation) or hurricanes (worst bond market in 50 years, historic decline in the Dollar, and tumbling equity markets).  It is easy in this type of environment for investors to become confused and even despondent.

We wrote some time ago about a type of volcanic eruption described as “Plinian”.  A Plinian eruption shoots gas and particulates high into the atmosphere in the form of a column.  At some altitude, the weight of the column is too much, and it collapses.  As the material reaches ground level, it spreads at tremendous speed.  This was the eruption of Mt. Vesuvius in 79 A.D.  While the column was rising, the initial terror wore off for the observers as they watched it climb higher and higher.  Most did not flee and paid for their complacency with their lives.

As we watch the spasms in the various markets, we know it represents that something is terribly amiss.  The geopolitical, economic and financial complexities comprise a chaotic system.  By definition, it is impossible to predict the events that will lead to resolution.  History is our best guide, but even that cannot help us with the timing of those events.  The Romans could not time the collapse of the volcanic column, and nobody can predict the timing of the collapse of our current financial eruptions.

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/14_A_Financial_Hurricane_%26_Cracks_In_The_Global_Financial_System.html

 

Here Is The Summer Catalyst Which Will Launch Gold Higher

On the heels of the release of the Fed minutes, and with crude oil trading above $105, today a legend in the business spoke with King World News about what is taking place in the gold, silver and bond markets, as well as what is taking place in Europe. Keith Barron, who consults with major companies around the world and is responsible for one of the largest gold discoveries in the last quarter century, also cautioned that we should expect to see more fireworks coming out of Europe this summer which will impact the gold market.

Barron: “Today the FOMC minutes came out for June. The gold price bounced briefly before retreating. Clearly it scares all market participants if the word ‘tapering’ gets mentioned. The bottom line is that most Fed members were still in favor of continuing with QE because the job market continues to be weak.

  • Dow Jones 30,000 Trigger Leaked by 27-Year-Old Stock Research Firm CLICK HERE
  • The Inevitable: Dow Jones 30,000 CLICK HERE

When Bernanke was interviewed about the effects of QE, he was asked why interest rates were going higher? He responded by saying he ‘was puzzled.’….

“Well, to anyone who understands economics, when you print massive amounts of money it always results in higher interest rates over time. It’s only because of government interference that bonds held up as long as they did. The bond market had also been resilient for a longer period of time because of the fact that the economy is not really in stagflation or deflation, it’s really in a depression.

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/10_Here_Is_The_Summer_Catalyst_Which_Will_Launch_Gold_Higher.html

Sell Equities And Buy Physical Gold Now While Prices Are Low

Faber said it’s a good idea to take money out of the stock market.

“I don’t think there is a lot of upside potential, but I think there is considerable downside,” he said.

Marc Faber, managing director of Marc Faber Limited and the author of the widely read monthly investment newsletter “Gloom, Boom & Doom” report, said weakness in China’s economy could spell big trouble global markets.

  • Dow Jones 30,000 Trigger Leaked by 27-Year-Old Stock Research Firm CLICK HERE
  • The Inevitable: Dow Jones 30,000 CLICK HERE

Faber said that if the Chinese economy grows at 3 or 4 percent—or even not at all, which he sees as a possibility—it will have a huge, negative affect on industrial commodities and the incomes of countries that produce them. In turn, he said, if countries such as Russia, Brazil or nations in Africa, Central Asia or the Middle East have less income, they’ll buy less from China, Western Europe and America, leading to very little earnings growth or an earnings contraction for those more prosperous economies.

China preferably would show trend line growth of 10 percent, as it has done for the past 20 years, Faber said.

Faber said it’s a good idea to take money out of the stock market.

“I don’t think there is a lot of upside potential, but I think there is considerable downside,” he said.

However, he said that markets are now seeing emerging markets and their currencies go lower, and “It could be that all the money in the world flows in to U.S. stocks and avoids emerging markets.”

Gold can eventually be a source of profit, according to Faber. He said it’s possible the price of gold can go somewhat lower, even though he thinks it’s now at a reasonable level. “I keep on buying gold and I have faith that gold prices will eventually be higher,” Faber said.

Faber said that, in general, corporate earnings will disappoint.

“They may not collapse, but I don’t think they will be as a good as expected,” Faber said. He said cyclical stocks, such as semiconductors and materials companies, will have tough time matching earnings expectations.

U.S. aluminum giant Alcoa kicks off the unofficial start to quarterly earnings season after the closing bell on Monday.

Source: http://finance.yahoo.com/blogs/big-data-download/mark-faber-china-puts-global-markets-risk-164954983.html