CARDINAL SIN: My Most Contrarian Bet – SILVER!

CARDINAL SIN: My Most Contrarian Bet – SILVER!

We Bring You This Critical Alert, Contributed By WealthResearchGroup.com and Their Founder, Lior Gantz, Who Our Staff Looks At For Accurate Economic Forecasting.

When I landed on American soil in June 2009, for the first time after the September 2008 crash, the atmosphere of trauma was palpable. Some were betting heavily on a quick recovery, while others were panicked down to their very core.

No one has ever seen a nationwide meltdown in financial assets and real estate prices the likes of which 2008 brought about. Heck, Warren Buffett, who got a call from top officials and heavy-hitter CEOs, was quoted as saying that mismanaging the crisis could have led to disruptions that would have shaken the very fabric of society.

That was 11 years ago, but many still live in that box today.

It is indeed true that many of the issues that existed back then have not been properly dealt with, but what else is new? The world isn’t perfect, nor are politicians, bankers or the financial system, the national deficit and the list goes on and on.

This isn’t enough to stop the machine of ingenuity called the free enterprise system – certainly not in the U.S., where most of the planet’s top companies toil every day to please customers, over-deliver in products and services and create wealth.

Never, not at any instance, will you find that things are “just perfect” or that “all problems have been solved.” This isn’t the way the world works whatsoever, but central bankers have attached themselves to this notion, underestimating (1) employment participation rates, (2) demographic trends, (3) the rise of China’s middle class, (4) the aging of Millennials, (5) resurgence in real estate demand and many other PRO-GROWTH catalysts which could and, in my opinion, will surprise the general consensus.

You see, right now, conventional wisdom is that (1) millennials are buried under student loan debt, (2) they’re not getting married, forming families or moving outside of the city, (3) China’s growth has capped and (4) aging baby boomers have slowed spending all the way down to the bare essentials.

Take a look at this:

Courtesy: Zerohedge.com

People just don’t BELIEVE that prices could rise!

In 1980, as you can see, they didn’t believe prices could fall either, but that’s exactly what happened.

In 1980, when the baby boomer generation was becoming the wealthiest demographic group in history, and money was flowing like an eternal spring, gold entered a severe bear market – a 20-yr, -70% move, from $850 to $250.

In 2000, one of the last times you see the chart bottoming, silver began to rally from under $5 to $21 by 2008. It then dipped to $9, but immediately popped to $49/ounce in the following two years. In 2016, the last time the graph dips (before THIS MOMENT), both silver and silver miners rocketed in an 8-month rally, which included buyers like the central bank of Switzerland, building a portfolio of miners.

As you can see, NOBODY is left in the camp that feels that prices are going to jump, mostly because the majority is brainwashed to the idea of slow growth, the 2008 music track that keeps playing in people’s minds.

But, smart money is positioning in the growth industries and will soon be rewarded.

Silver, the quasi-industrial/precious metal, is the ultimate marriage of inflation hedge and positive REAL growth play, since demand is higher in rebounds. When inflation is running hotter, silver is an historic commodity to wager bets on.

The S&P 500 index has been in the green for 10 out of the past 11 weeks, ever since the Fed launched its T-Bill POMO. The only down week was the one that saw the Federal Reserve shrink its balance sheet.

Seriously, this has to be John Maynard Keynes’ wet dream.

The government is pushing deficits that 30 years ago would have sounded preposterous; at the same time the Federal Reserve is generating record amounts of liquidity, the private sector is enjoying historically-low unemployment rates and households are experiencing their lowest debt burdens in decades.

If this is all true – as it seems largely to be the case, aside from coercion and messing around with the numbers here and there – why are most people struggling and living paycheck to paycheck?

The answer lies in the following charts:

Courtesy: Zerohedge.com

For one, clear as a pimple on your prom date’s face on the eve of the event, is the correlation between PUMPING currency into the banking system and the valuation of stocks.

Secondly, 2008 caused a MAJOR transfer of wealth from the hands of the naïve and innocent public – especially pensioners and retirees – into the hands of Wall Street.

Dropping rates to zero forced millions into the markets, since their income from bond coupons became irrelevant.

The thing is that while we thought the free markets would chase yield and enter stocks, in 2019 we have witnessed the LARGEST quantity of withdrawals from equities in the market’s history.

People are scared. They’re concerned with Brexit, upset with politicians and dismayed with the trade deal, but most of all, they’re scared that their savings won’t be enough to retire on.

That’s what this low-rates world has created: a generation of soon-to-be retirees, professionals at the age of 45-65, who are calculating that they’ll live until 80 or 85 and REQUIRE safe income every month.

Courtesy: U.S. Global Investors

As you can see, the Yuan, despite the attempts of government to keep it undervalued and support exports, is getting stronger.

Investors around the world understand that if (1) the greatest bull market in U.S. equities, (2) coupled with record unemployment, and (3) according to the president, “the hottest economy ever,” can’t help to shrink the deficit, the dollar is in trouble.

No one really trusts the Bank of China, but in this war, the coming battle might be won by investors, who are shorting the dollar.

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Of all the investment and economic commentators we’re tracking, this one is, by far, part of the top echelon.

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CARDINAL SIN: My Most Contrarian Bet – SILVER!

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