The Roadmap From A Gold Bottom To A Mania

On the heels of historic movements in key global markets, today 40-year veteran, Robert Fitzwilson, put together another tremendous piece. Fitzwilson, who is founder of The Portola Group, laid out the roadmap from a gold bottom to a coming mania. Below is Fitzwilson’s outstanding and exclusive piece for KWN.

Fitzwilson: On June 27th, in a note to clients and friends of the firm, we suggested that the panic in the metals and mining sectors was so extreme that it had to be a bottom by everything we have experienced and studied in our careers. The chart below suggests that our call was correct, at least based upon what has ensued so far.

The top line is the Amex “Gold Bug’s Index” (HUI) which represents a basket of gold mining companies. The bottom two are for the S&P 500 and gold. The returns in the chart are for the period since our call to the close of trading last week. As you can see the Index nearly tripled the return of gold itself….

“It is also interesting that the Index nearly tripled the return of the S&P 500 Index in that same period. Hardly a trading session goes by without the headline being “The S&P 500 and the Dow Jones Indexes hit new highs”. The reality is that the bulk of the stock market strength that had been so loudly touted occurred during the first quarter of this year.

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/21_The_Roadmap_From_A_Gold_Bottom_To_A_Mania.html

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:

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

 

Financial Meltdown, Back-To-Back “Stick Saves” & Gold

On the heels of more turbulence in key global markets, today 40-year veteran, Robert Fitzwilson, put together another extraordinary piece. Fitzwilson, who is founder of The Portola Group, discussed financial meltdown, back-to-back “stick saves,” and what this all means for battered traders and investors in the gold market. Below is Fitzwilson’s outstanding and exclusive piece for KWN.

Fitzwilson: “There is a term in ice hockey called a stick save. Instead of using the curved end of the hockey stick, the player uses the handle end to move the puck. It has been described as having no points for style, and often fails, but sometimes saves the day for the player and his or her team.

Below is a chart of the Dow Jones Industrial Average from 1970 to the present. You can clearly see two stick saves early last decade and the second during the 2008 meltdown.

The first stick save was engineered largely by the policy of driving rates to zero. While it saved the stock market and thrust the real estate markets to new heights, it sowed the seeds for the horrendous crash in 2008….

“A larger stick save was required in the 2008 debacle, requiring the completion of the zero interest rate objective as well as the creation of massive amounts of money on a global and historic scale.

It is no wonder that many people are terrified of equities when one looks at this chart. The volatility has been incredible. You can barely see the Crash of 1987 on the chart, although that was a stomach churning decline on the order of 23%.

The chart below is for gold during the same period.

While the Dow Jones has increased by roughly 14 times since 1980, the price of gold has merely doubled from the peak. Despite that disparity, most people look favorably at the chart for stocks, and are adamant that gold is overvalued.

For stocks, valuation metrics are used such as price-to-earnings ratios. For gold, there is no attempt to relate the price to the forces that drives the metal’s price. What drives gold is the excessive, massive creation of fiat currency. Since 1980, the amount of debt-based money has exploded. If that simple valuation metric of comparing the price of gold to the amount of money is applied, gold is drastically undervalued.

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/3_Financial_Meltdown,_Back-To-Back_Stick_Saves_%26_Gold.html