If Fed raises interest rates, it will still be less than cost of living…

….also:

China Has Credit Bubble of Epic Proportions. Faber examines China’s economic slowdown 

Dr. Marc Faber author of the Gloom, Boom and Doom report is a world class Investor, Doctor Faber ‘s typically controversial and contrarian views have earned him the label of Dr. Doom. Doctor Doom also trades currencies and commodity futures like Gold Natural Gas and Crude Oil.Even his harshest critics must admit that he’s been unerringly correct in his market forecasts over the past three decades . Marc Faber is a Swiss investor.He was born in Zurich, Switzerland. He went to school in Geneva and Zurich and finished high school with the Matura. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics magna cum laude. Between 1970 and 1978, Dr Faber worked for White Weld & Company Limited in New York, Zurich and Hong Kong. Since 1973, he has lived in Hong Kong. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, which acts as an investment advisor and fund manager. Faber is publisher of the Gloom Boom & Doom Report newsletter and is the director of Marc Faber Ltd which acts as an investment advisor and fund manager.

1970s:  Gold rallied from about $35 in 1970 to nearly $200 in December 1974, and then fell to about $100 in August 1976.

So what?

Examine the graph of average monthly gold prices Jan. 1970 – Sept. 1976.  Compare it to the graph of gold prices from April 2002 – October 2015.  Note that the second graph was prepared with the same number of data points, but the time scale was doubled – each point is a two month average price.  Note the similarity in form.  The first is scaled $0 to $200 and the second $0 to $2,000.

What we see 

• Gold prices increased by a factor of almost six from 1970 to 1974, and then fell by about 45%.
• Gold prices increased by a factor of about six from April 2002 to August 2011, and then fell by about 45% from the peak.
• Both the rally and correction in 2002 – 2015 took about twice as long as in the 1970s.
• Subsequent to the 1976 bottom, gold prices increased by a factor of about eight in a massive bubble inspired by, among others, inflation worries, fear, and loss-of-confidence in government and central banks.

What does this prove?  Well … it proves nothing.  But it suggests a few observations.

1. Gold prices can be amazingly volatile, especially when fear increases and a majority of people lose confidence in debt based fiat currencies, central banks, and politicians.
2. If the analogue continues for several more years, we might see gold prices increase by a factor of five to ten into the $5,000 to $10,000 range in five to seven years (double the 3.5 year rally in the 1970s).
3. We should not expect this analogue to predict gold prices, but we should NOT discount the possibility of a similar pattern unfolding.

Why?

• In the late 1970s the US had lost international prestige due to a weak President (Carter), massive inflation and excessive debt.
• Today the US has lost considerable prestige in the Middle-East, Europe and Asia, has excessive debt, no capacity to balance the budget, and has twice elected a President who is …. (your choice of complaint).
• The late 1970s inflation was partially a consequence of massive spending on the Vietnam War – which benefitted few besides military contractors and bankers.
• Today the US has yet to experience and pay for the consequences of wars in Afghanistan, Iraq, Libya, Syria, and Ukraine, but unpleasant consequences will occur. Those wars primarily benefitted military contractors and bankers.
• Central bankers and politicians lost considerable respect in the late 1970s.
• Central bankers and politicians have lost considerable respect in the past several years.
• Debt based fiat currency, backed by nothing but faith, hope, delusions, and taxing authority was deeply devalued in the late 1970s.
• Debt based fiat currency, backed by nothing but faith, hope, delusions, and taxing authority will be deeply devalued in the coming years.

CONCLUSIONS:

There are similarities between the late 1970s and present day.  Gold rose substantially for 3.5 years in the late 1970s and increased in price by a factor of about eight.  Something similar could (probably will) happen again.

NONSENSE – such as deficit spending, massive debt, excessive leverage, unindicted fraud, pervasive corruption, derivative contracts with minimal margin, hope and delusions, bond monetization, suppressed interest rates, levitated stock markets, forever wars, and so much more – encourages people to think:

1. People want to be prepared with the 4 G’s:  God, gold, guns, and grub.
2. The politicians and central bankers created most of the problems so it is foolish to believe they will solve current problems. Expect more fiscal and monetary nonsense, devaluation of currencies, inflation, and higher gold and silver prices.
3. War pays extremely well – if you are a military contractor, banker, or politician – so expect more war. More war creates much more debt, inflation, and fiscal and monetary nonsense.
4. The US Congress has a low approval rating – for good reason.
5. Debt cannot grow to infinity nor can interest rates remain near zero forever.
6. The “silly season” when the US elects a new president is not a time to expect serious and intelligent discourse or change toward fiscal and monetary sanity.
7. Time to prepare may be quite short.
8. Paper dies, gold thrives.
9. Paper dies, silver thrives.

Read:

Graham Summers         The Greatest Central Banking Con Job

Steve St. Angelo            Collapse of the Western Financial System

Bill Holter                        Harry Dent is Delusional

Gary Christenson

The Deviant Investor

Over the past couple of weeks, gold has managed a meager rally. Yet, despite the rally — and all the whoopla about it from the public and talking heads — gold has not given me any buy signals. 

And it won’t until it closes at least above $1,188.10. Even if that were to happen, gold would still face formidable resistance stretching from the $1,200 level to $1,235.

I doubt that gold can get that high. But even if it were to do so, it would not indicate that a new bull market had begun. Rather, it just might be the final fake-out before gold heads back down, to new lows below $1,000.

Ditto for silver. Its recent rally is also weak at the knees. No buy signals hit. Massive resistance at $16.28 all the way up to $17.  

It concerns me. Why? Because I know there are scores and scores of investors who are now buying gold and silver (and mining shares) — which will result in terrible losses.

Look, I agree that long-term gold can be an excellent store of value. And someday, gold will head north of $5,000 an ounce. Silver north of $150.

But if you want to avoid losing money in the precious metals market and instead make the most amount of money you can, you simply must get your timing right. 

And just as important, you must have an open mind when investing in gold and silver. You can’t get married to your metal (or any investment for that matter) — as if investing in precious metals was some sort of religion.

For instance, you have to realize that sometimes, gold is money … and sometimes it simply isn’t money. Or even a store of value.

Right now, gold is not money. Just consider what’s happening in Europe. The wicked and aggressive devaluation of the euro is actually starting to set off a massive stampede OUT of gold and into cash and other assets.

Why would Europeans dump gold, especially when their currency is being devalued?

It’s simple. The recent sharp decline in the euro caused the price of gold in euros to spike higher, while the dollar price of gold essentially went nowhere. So savvy European investors are cashing in their profits. 

Moreover, European investors want liquidity, with a capital “L” — and holding on to gold is not a liquid situation.

Moving physical gold around isn’t so easy. It takes time and money to move your gold. And even then, you won’t know how safe your gold is, because in the back of your mind there’s always that fear that it could be lost or stolen. 

There’s more: Think of all the government debt in the world that’s going bad. We’ve already seen Cyprus sell part of its gold reserves to liquidate debt. Now, Venezuela is rumored to be looking to sell as much as 80 tons of gold to meet debt payments due of $5 billion.

The bottom line: While gold will indeed soar again at some point, there are times when forces that are seemingly bullish for gold are actually bearish. Like unpayable government debt. Like a declining currency, like the euro, which forces the euro price of gold higher, allowing European investors to sell gold and get liquid. 

I call it the yin and yang of gold, and for that matter, all markets. There are always two sides to a coin, two sides to a market, two sides to every piece of fundamental news out there. 

Knowing which side is prevailing, why and when — are the keys to successful investing. That requires an open mind, no biases, and lots of experience with technical and cyclical analysis.

If this sounds a bit too theoretical or complex in any way, I assure you it’s not.

Mostly, all you have to do is put yourself in the shoes of a European investor right now who owns gold. 

You’re seeing your currency be devalued. You’re seeing rising taxes. You’re seeing deflation all around you. You’re seeing European economies teeter on the edge of an abyss. You’re seeing still high unemployment. Civil unrest. And more. 

You also know that your European leaders may confiscate money from your bank account, just like they did in Cyprus a couple of years ago. 

You’re also frightened that Putin may soon make another aggressive move toward Ukraine, or worse, toward Estonia, Lithuania or even Poland.

And that the Syrian and Middle East refuge crisis is tearing the European continent apart. 

So you conclude you need cash, lots of it. Your decision is simple:  Dump your gold, get liquid and get out of Dodge.

Then, either pay off some bills that need to be paid (before the euro becomes worth even less) … or get it out of the euro and into another country with a currency that’s at least losing value less quickly. 

Or even better, into an investment that has a decent return, decent profit potential, and in a country and a currency in better shape than Europe’s.

Pretty simple to understand, no?

Later, in the not-too-distant future, the same fears of confiscation of wealth, rising taxes, bank failures and more will hit the United States and the dollar. At that time you’ll need to move your money yet again.

There won’t be many safe-havens left at that point. So you’ll probably want to go back into gold. The new bull market in gold will then begin. 

So you see, none of this is all that hard to understand provided you keep an open mind, question the conventional, and do your own independent thinking.

Timing everything, is of course the key. And while no one has a crystal ball …

There are methods I use that often get me very close to ideal turning points in key markets.

All I can tell you right now is that there are several key turning points arriving between now and the end of the year. Turning points that — if you act quickly and without bias — can help you get set up to make a fortune in the months and years ahead.

One of those turning points includes gold and silver. 

So stay tuned and best wishes, as always …

Larry