Currency wars driving new gold rush

We are in the midst of an all-out World Currency War. The gold and silver crash in the last few quarters gave investors a great buying opportunity as many long term trends in the current market favor a gold and silver rally. Major headlines reveal that printing more money will continue in economies all over the world.

By Cody Willard
August 12, 2013, 3:36 PM
Market Watch

Everywhere in the developed world, we are in the midst of an all-out World Currency War. To really drive the point home, let’s call it by something a little more striking: World (Currency) War I, or WCW1.

That means we need to be watching the generals in this war (read: the leaders in our government, Central Banks and finance ministries around the world) to help guide us in our own personal mission to make it safely with our wealth intact. You can see the next set of moves that are evolving in the market place, much of which is very bullish for gold and silver. Especially the bullion and physical coins themselves.

Silver and gold are ripping higher this morning, continuing a big move from late last week. Even the paper-promised exchange-traded funds are on fire. Let’s take a look at today’s headlines and connect some dots, shall we?

1. Japan’s Below-Forecast Growth Fuels Sales-Tax Debate

2. Japan Inc. Profit Doubles to Add Support to Economic Rebound

3. Dollar gains, Japan GDP disappoints

4. Stock Indicator Update: Time to ring the cash register?

Now then, here’s what all these headlines mean.

1. There will be no meaningful new taxes in Japan until the next major market reset. The approach of the generals (read: the leaders in our government, Central Banks and finance ministries around the world) in WCW1 is to run huge deficits propped up by Central Bank debt buying. Which is another way of saying these generals are using the age-old tactic of printing new currency with no underlying value to run their countries.

2. As I’ve been pointing out since 2009, there’s an all out push by every national, state, county, local and any other governmental body to subsidize, expand and bring in new corporate earnings. Targeted tax tricks and welfare for giant corporations and ever-higher stock prices is the obsession of our leaders the world over. That’s had profound results for corporate earnings and stock markets around the world, exactly as I’d expected. This won’t end well. The question is, as it’s been for the last year or so, how long do we stay at the poker table with our bubbled winnings?

3. See, Japan GDP disappoints, but Japan corporate earnings are on fire. What to do? The currency war generals in Japan will use a “weaker than expected GDP” to do what they always do — create new targeted tax tricks and subsidies for giant corporations. See point #2 above. Meanwhile … dollar gains? Oh no! Our currency war generals can’t have that. Stronger dollar might mean good things for the consumer and saver at home, but it would also be a drag on corporate exports, margins and therefore, earnings. The response from our nation’s currency war generals will be to print more money and create new targeted tax tricks and subsidies for giant corporations.

4. A lot of smart, responsible investors and money managers who’ve got huge profits in their Tesla, Priceline, LinkedIn, Facebook, Google, Sandisk, Yelp, Zillow, (*put your bubbled stock here), etc., who are feeling queasy about the gains. Meanwhile, gold and silver are down huge from their highs last year and a rotation into something less parabolic than the stock markets is probably a possible trend for a while here. Where else are they gonna’ go? Bonds? Treasurys? Join the Fed in their debt buying? Probably not a good idea amongst those same smart, responsible investors and money managers.

I’m on the record and well established in my own personal portfolios as jumping back on the physical silver and gold train — after having jumped off that train before the crash. The gold and silver crash of the last few quarters gives us a great opportunity to get in front of these same long-term trends that you’re seeing drive the prices of gold and silver higher today.

Finishing up by returning to our poker table analogy, I suggest taking some more of your chips off the table, buying your wife some gold and silver jewlery, having a great steak dinner and taking in a show — all on the house. We worked very hard and overcame a lot of adversity, doubts and drama to get to this point, and if you’ve been following our playbook, you’re well on your way to overcoming the damage to civilization that comes with every war, even currency wars.

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