Sunday, August 25, 2019

A Bull Market For The History Books — Bear Market To Follow Shortly


by John Rubino, Dollar Collapse:

If you’re getting the sense that stocks always go up, that’s because they’ve been doing so for a really, really long time. From CNBC today:

On the bull market’s ninth birthday, here’s how it stacks up against history


• The Dow has quadrupled during the bull market, which turned 9 on Friday.

• This is the biggest and longest bull market for the Dow post-WWII, according to Leuthold Group.

The bullish run in the Dow Jones industrial average — which celebrates its ninth birthday Friday — is the longest ever and the greatest percentage gain since World War II, according to Leuthold Group.

The corresponding run by the S&P 500, notes LPL Financial, is that benchmark’s second-largest and second-longest bull market ever, with only the 1990s stock market run led by technology stocks in the way.

Despite a more than 10 percent correction in equities last month following a burst of bullish activity, Leuthold’s Doug Ramsey doesn’t think the bull is done yet.

“Assuming the Dow Jones industrial average can exceed its late-January high on March 9th or thereafter, this cyclical bull market will become the first one ever to last nine years,” said Ramsey, his firm’s chief investment officer. “Historically, cycle momentum highs are usually followed by a push to even higher price highs over the next several months.”

The Dow hit an all-time high of 26,616.71 on Jan. 26, the same day the S&P 500 clinched its own record of 2,872.87. The major indexes are off their record highs 6.4 percent and 4.6 percent respectively.

This chart from Leuthold Group shows where the Dow bull market stacks up since 1900. It’s far and away the longest in modern financial times. In terms of percentage gains, it’s third behind two bull markets pre-WWII.

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There is No “Free Trade”–There Is Only the Darwinian Game of Trade

by Charles Hugh Smith, Of Two Minds:

Rising income and wealth inequality is causally linked to globalization and the expansion of Darwinian trade and capital flows.

Stripped of lofty-sounding abstractions such as comparative advantage, trade boils down to four Darwinian goals:

1. Find foreign markets to absorb excess production, i.e. where excess production can be dumped.

2. Extract foreign resources at low prices.

3. Deny geopolitical rivals access to these resources.

4. Open foreign markets to domestic capital and credit so domestic capital can buy up all the productive assets and resources, a dynamic I explained last week in Forget “Free Trade”–It’s All About Capital Flows.

All the blather about “free trade” is window dressing and propaganda. Nobody believes in risking completely free trade; to do so would be to open the doors to foreign domination of key resources, assets and markets.

Trade is all about securing advantages in a Darwinian struggle to achieve or maintain dominance. As I pointed out back in 2005, the savings accrued by consumers due to opening trade with China were estimated at $100 billion over 27 years (1978 to 2005), while corporate profits expanded by trillions of dollars.

In other words, consumers got a nickel of savings while corporations banked a dollar of pure profit as sticker prices barely budged while input costs plummeted. Corporations pocketed the difference, not consumers.

As longtime correspondent Chad D. noted in response to my essay on capital flows, restricting trade may be one of the few ways smaller nations have to avoid their resources and assets being swallowed up by mobile capital flowing out of nations with virtually unlimited credit (the US, the EU, China and Japan).

Protecting fragile domestic industries with tariffs has a long history, including in the US, but the real action isn’t in tariffs: it’s in the bureaucratic tools to limit trade and the soft and hard power plays that secure cheap resources while denying access to those resources to geopolitical rivals.

The bureaucratic means of restricting imports have been raised to an art in Japan and other export-dependent nations: there may not be any visible tariffs, just bureaucratic sinkholes that tie up imports in red tape.

Then there’s currency manipulation, for example, China’s peg to the US dollar.What’s the “free market” price of Chinese goods in the US? Nobody knows because the peg protects China from its own currency being too strong or too weak to benefit its export-dependent economy.

Those bleating about “free trade” are simply pushing a Darwinian strategy that benefits them above everyone else. US corporate profits have quadrupled since China entered the WTO; is this mere coincidence? No: global corporations arbitraged labor, credit, taxes, environmental/regulatory and currency inputs to dramatically lower their costs (and the quality of the goods they sold credit-dependent consumers) and thus boost profits four-fold in a mere 15 years while tossing the hapless consumers a few nickels of “lower prices always” (and lower quality always, too).

The Neoliberal Agenda trumpets “free trade” because “free trade” is a cover for “free capital flows.” Once capital is free to flow from central-bank fueled global corporations, no domestic bidder can outbid foreign mobile capital, as those closest to the central bank credit spigots can borrow essentially unlimited sums at near-zero rates–an unmatched advantage when it comes to snapping up resources and assets.

If we ask cui bono, to whose benefit?, we find the consumer has received shoddy goods and paltry discounts from “free trade,” while corporations, banks and financiers have benefited enormously.

Rising income and wealth inequality is causally linked to globalization and the expansion of Darwinian trade and capital flows: the winners are few and the losers are many. Tariffs will not solve the larger problems of reduced employment, stagnant wages and rising income inequality. To make a dent in those issues, we’ll need to tackle central bank and central-state policies that have pushed financial speculation to supremacy over the productive economy.

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‘Chinese Dream,’ or Why Second Biggest Economy Scraps Presidential Term Limit


from Sputnik News:

Chinese lawmakers voted almost unanimously Sunday to endow the country’s leader, Xi Jinping, with the power of life-long rule; Sputnik has attempted to determine how justified the move is. Here is a list of Xi’s accomplishments since 2012 – the year when he officially took office.

Xi’s Purges and Flat No to Corruption

For the communist country, the past five years have been a period of sweeping reforms and multiple challenges. For a start, Xi chose to transform the ruling party and introduce progressive measures for better inter-party discipline.

Having thus secured the country’s political unity, he embarked on an all-embracing anti-corruption campaign, which saw more than a million high- and low-level officials, as well as former officials, punished for their malfeasance.

Under the ideology commonly referred to as the “Chinese Dream,” coined back in 2012-2013, Xi outlined the sweeping reforms that China plans to implement through 2020, many of which are now under way.

Technology Comes First

The technological revolution, namely in the IT domain, is one of the landmarks of Xi’s first term. Now, despite being partly isolated from the global Internet, the Chinese are able to hail a cab, book tickets or even buy groceries via smartphones – which were still relatively unheard of before 2012.

China to Overtake US in Environmental Race?

He has also been praised for his hard line on environmental polluters and his pledge to eliminate extreme poverty in the country by 2020. For instance, back in 2012, the term that garnered special attention was “Ecological Civilization,” (EC)  a phrase literally included in the Chinese Communist Party Constitution.

Under the framework of Ecological Civilization, Xi claims to contribute in tackling climate change issues, as well as push for energy transformation and build up China’s renewable energy sector. Back then, Xi described the EC in the most romantic terms:  “green mountains and waters are golden and silver mountains and waters.”

On top of that, as President Donald Trump pulled the United States out of the Paris Accord last year, President Xi Jinping, by contrast, staked out China’s ambition to be a committed player in tackling climate change. Critics then even started speculating on whether China would outpace the United States as the new world’s environmental leader.

Second Largest Economy

Under Xi Jinping, in 2015, China became the first-ever nation to have a GDP exceeding $20 trillion, having doubled its overall output in just six years.  As China has confidently secured its status as the second largest economy in terms of purchasing power parity according to the IMF, China’s Renminbi also enjoys considerable growth and is undergoing internationalization. Separately, China masterminded the founding of the Asian Infrastructure Investment Bank in 2015, whereas its most promising Shenzhen province has been dubbed  the world’s next Silicon Valley.

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Toxic Debt Still Plagues Spanish Banks (and Taxpayers Will End Up Paying for It)

by Don Quijones, Wolf Street:

Years after Crisis Was “Solved.”

Europe’s banking authorities are finally beginning to pile pressure on poorly performing banks to clean up their books, something that should have happened a long, long time ago. But as is often the case with European banking regulation, there’s an elevated risk of unintended consequences.

If a bank with a deeply compromised balance sheet is forced to report its loans that have gone bad — the hidden piles of toxic “assets” — at prices that reflect their real value (rather than the illusory prices the bank arrived at with its mark-to-model formula), that bank could suddenly find that its capital has gone up in smoke.

This is more or less what happened with Banco Popular, the mid-sized Spanish bank that went under in June last year. No matter how creative the rescue plans its management came up with — including spinning off a bad bank called “Sunrise” — Popular simply couldn’t find a viable way of disposing of its nonperforming loans without crippling its financial health.

A similar thing appears to be happening with Spain’s fifth largest bank, Banco Sabadell, the Spanish bank that has grown the most in relative terms since the crisis. It has more than doubled in size in the last ten years (from €78.7 billion in assets in 2008 to €173.2 billion in 2017), following the acquisitions of Banco Gallego, Banco Guipuzcoano, Caixa Penedès, and the bankrupt savings bank Caja de Ahorros del Mediterráneo (CAM).

Now it has immense difficulty ridding itself of the impaired assets it acquired when it took over CAM in 2012. But unlike Popular, Sabadell is getting a massive helping hand from Spain’s government.

As part of the acquisition of CAM, it was agreed that Spain’s Deposit Guarantee Fund (DGF) — the fund that’s supposed to guarantee all insured bank deposits in Spain — would cover 80% of the losses accrued on CAM’s €24 billion portfolio of real estate loans. Even before CAM became the property of Sabadell, the DGF injected €5.2 billion — all of it public funds — into CAM.

It was hoped that CAM’s own loan provisions of €3.9 billion, would cover the rest of the losses. But they didn’t come close. In 2014 the provisions were completely wiped out.

A year later, Sabadell asked the DGF for €825 million euros to cover 80% of its losses on CAM’s impaired assets for that year. In 2016, the total annual losses surged to €981 million euros. At the beginning of 2018, Sabadell presented its next bill, for the losses incurred in 2017. It amounted to €1.3 billion. It’s not hard to see the trend!

What is perhaps most surprising is that this is all happening at a time when Spain’s real estate sector is recovering from the crisis. Real estate prices are rising, yet so, too, are the annual losses on the sale of CAM’s assets.

Based on calculations the DGF published in 2017 (with data from 2016), the total forecast losses of the still-covered portfolio could amount to as much as €7.3 billion, of which the DGF would have to cover almost €6 billion. The remainder would be borne by Sabadell. That’s on top of the more than €8 billion of losses already accrued over the last five years.

In other words, by the time this is all done and dusted, well over €10 billion of public funds will have been spent to fill the gaping balance sheet holes left behind by Sabadell’s sale of CAM’s toxic assets.

Some of those assets include loans for real estate projects of a highly dubious, if not fraudulent, nature. According to an investigation by the Bank of Spain, large parcels of land in Valencia, Catalonia, Murcia and Andalucia were sold at insanely inflated prices. From an initial investment of €594 million, 11 real estate projects funded by CAM generated losses of €467 million (78%), of which €405.6 million have been deemed unrecoverable.

This week the judge presiding the case, Carmen Lamela, ruled that the statue of limitations has unfortunately elapsed. As tends to happen with cases of white collar crime in Spain, the accused were cleared — not because they’d been found innocent but because the wheels of justice moved too slowly for a judgement to be reached.

Most of the losses those dodgy loans racked up will now be covered by the DGF. It’s not clear exactly how much Spain’s DGF has left in its coffers today. According to El Mundo, at the end of 2016 its total balance was €1.6 billion — far short of the €6.4 billion it’s supposed to have by 2024. But it could be much worse now: Since late 2016, the fund has had to shell out some €2.2 billion in guarantees on Sabadell’s toxic real estate assets.

Meanwhile, Spain’s second biggest bank, BBVA, is contemplating selling its own stash of guaranteed dodgy assets, which it inherited from its acquisition of bankrupt Catalan savings bank Unnim in 2012. That would mean even more money flowing out of Spain’s deposit guarantee fund.

What happens if the DGF itself, whose primary purpose is to cover insured bank deposits, runs out of funds? The answer is  predictable: the government steps in with another taxpayer-funded infusion, which it will try to hide with yet more creative accounting while Europe’s political and monetary authorities steadfastly look the other way.

This is all happening because the ECB is finally prodding banks in the Eurozone to unload their bad loans. But the move comes with big risks attached. It could result in big losses and force banks to raise new capital – no mean feat with bank valuations so low.

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One Year Ago Bitcoin Surpassed Gold In Value Per Unit… Look At How Things Have Changed!

by Jeff Berwick, The Dollar Vigilante:

This time last year, we published an article titled “Bitcoin Is Now Good As Gold, Actually It’s Better”.

Now, this was back when a single bitcoin traded around $1,280.

There were quite a few haters back then who commented on the vblog we did for that same article saying these things:

In the last year, bitcoin has since hit $20,000 per coin and corrected back down to around $10,000 as of today.

Around 9 months after the above comments, I put out another video on December 15th suggesting that people begin rotating crypto profits into some of the forgotten gold stocks that have good upside potential.

And just as absurd as the comments from 9 months earlier, people began making statements in the video comments like;

“Gold will never go up, bitcoin will never go down” and this guy:

At the time of the video, bitcoin was trading at $17,700 and has since fallen 45%.

In fact, within two days of the video, bitcoin hit its all-time high near $20,000 and has come down dramatically since.

But, this just goes to show the madness of crowds and how sentiment can change dramatically so quickly.

One year ago, I was virtually assaulted for suggesting bitcoin was “as good as gold” and most of the commenters said bitcoin was in a bubble and “tulip mania” when it was near $1,300 while stating that gold was the best investment.

Nine months later and bitcoin had risen to $17,700 and I was lambasted for even stating that bitcoin could ever go down again… and nearly everyone commented that gold would never rise again.

This is why you shouldn’t be taking your investment advice from Youtube commenters! In fact, I often use it as a gauge of public sentiment and if everyone thinks something is going to go up… then it will almost surely go down. And, vice versa.

Your average person, after all, is an indoctrinated, vaccinated, fluoridated brainwashed slave that has been the target of mind control in the government indoctrination camps and via television programming their entire lives.

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This is one of history’s most accurate indicators of a looming financial crisis


by Simon Black, Sovereign Man:

On April 15, 1185, over eight centuries ago, a powerful earthquake struck the East Midlands region of England near the town of Lincoln.

Modern scientists estimate the magnitude of the earthquake at 5.0 on today’s Richter scale… which was a pretty big deal back then.

Medieval England didn’t have any earthquake-proof construction methods, and much of the region was leveled to the ground.

One of the structures that was destroyed was the Lincoln Cathedral. And the new bishop, Hugh de Burgundy, launched a bold reconstruction project to rebuild an even better cathedral using the latest advances in architectural design and technology.

De Burgundy’s successors kept making improvements to the cathedral, until, in the mid-1300s, the cathedral’s spire was raised to 160 meters (525 feet), making it the tallest structure in the world.

Curiously, a severe economic crisis broke out across Europe soon after as the King of England defaulted on his debts due to military setbacks in the 100 Years’ War.

Fast forward several centuries to the late 1700s, when, in the town of Ditherington, England, the local flax mill took the title as the world’s tallest building in 1797.

That same year, a major economic crisis began raging in Great Britain and the United States after a huge real estate bubble burst. Banks and businesses in both countries suffered major losses.

The completion of the Equitable Life Building in New York City in the early 1870s, which became the tallest building in the world, coincided with the Panic of 1873, and the Long Depression that lasted for more than a decade.

The New York World tower broke the record for tallest building in the world when it was completed in 1890… which also happened to be the same year that the economic panic of 1890 broke out.

Philadelphia’s city hall briefly held the record for world’s tallest building when it was completed just in time for the Panic of 1893– a crisis so severe that the US Treasury Department had to be bailed out.

The Met Life Insurance Tower in New York City shattered the record for the world’s tallest building when it was completed in 1907, just as the Panic of 1907 broke out.

(The Panic of 1907 was so extreme that it led to the creation of the Federal Reserve a few years later.)

Another financial crisis erupted in 1914, just on the heels of New York’s Woolworth Building becoming the tallest in the world.

And on the eve of the Great Depression, multiple projects were all simultaneously competing to become the world’s tallest building, including the Empire State Building, the Chrysler Building, and the Manhattan Bank Trust Building (now known as the Trump Building).

The construction of the World Trade Center and Chicago’s Sears Tower in the early 1970s, both of which became the tallest buildings in the world, immediately preceded the OPEC oil price shock in 1973 and the subsequent banking crisis and economic recession.

The Petronas Towers were completed in 1998 in Malaysia, taking the title as tallest in the world, right before the Asian Financial Crisis broke out.

Construction of the Taipei 101 tower, which became the tallest building in the world, began just months before the Dot-Com bubble burst and the Recession of the early 2000s began

And of course the Burj Khalifa in Dubai became the world’s tallest building when its height reached 688 meters (2,257 feet) on 1 September 2008… literally days before Lehman Brothers went bankrupt and the Global Financial Crisis kicked off.

Is all of this just a crazy coincidence?

Or is there perhaps a link to the world’s tallest buildings and economic crises?

It certainly stands to reason that enormous buildings are extremely expensive and require vast amounts of funding– something that is relatively easy to come by when the economy is near its cyclical peak.

Ego and hubris are also abundant when an economy is near the top, as booms and peaks are often accompanied by ostentatious displays of wealth– including ambitious construction projects.

During the 12th and 13th centuries, for example, when Italian city-states were the dominant powers of Europe, there was practically a competition among the richest citizens of Bologna, who built as many as 180 towers to show off their wealth.

By the mid 1300s, of course, Bologna’s power faded, and the city fell into economic obscurity.

It’s interesting to consider given the flurry of new projects, mostly in Asia, that are feverishly being constructed to rival the tallest building in the world.

From the Goldin Finance tower in Tianjin (to be completed this year), to the Wuhan Greenland Center (also 2018), to the Jeddah Tower in Saudi Arabia (as early as 2019), there is no shortage of hubris, or debt-based funding, to drive these projects to record heights.

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The Monetary Reform of 1857 Ends Legal Tender Foreign Coins

by Martin Armstrong, Armstrong Economics:

QUESTION: Mr. Armstrong, I found in my grandmother’s belongings a penny from 1855 and one from 1857 which was much smaller and silver in appearance. Was there also a monetary reform that changed the coinage during the 1850s?


ANSWER: Oh yes. But it is far more interesting than meets the eye. The government first proposed the penny in the Coinage Act of 1792. Pennies and half-pennies went into production for the first time in 1793 with a composition of 100% copper which weighed 13.48 grams (0.475 ounces). From 1795 to 1857, the government reduced the copper penny in size with a new weight of 10.89 grams (0.384 ounces). It was the Coinage Act of 1857 (Act of Feb. 21, 1857, Chap. 56, 34th Cong., Sess. III, 11 Stat. 163) that the coinage was radically reduced with the composition of the penny being  88% copper and included 12% nickel, which produced a silver-like appearance. The weight was reduced to 4.67 grams (0.164 ounces). By changing the metal content, they justified that this was intrinsically worth more by adding nickel to pure copper.

In 1864, there was another Monetary Reform following the war as inflation set in and drove the value of metals higher. The silver was really removed from the 3 cent coins were now being produced in nickel starting in 1865 and most silver coins were being melted down given the silver was worth more than the face value. It was 1864 that they introduced the two-cent coinage as well reflecting inflation. The design of the penny was the Indian Head until 1909 when they change to the portrait of Abraham Lincoln. From 1864 to 1942, the penny was redesigned penny and it now weighed 3.11 grams (0.109 ounces) and nickel was removed leaving the composition primarily of bronze (95% copper, 5% zinc and tin). In 1943, due to the war, copper rose in value so then struck pennies composed of steel zinc-coated for just one year. The steel penny weighed 2.72 grams (0.095 ounces). From 1944 to 1981, the penny was composed primarily of copper (95%) and zinc (5%), with a weight of 3.11 grams (0.109 ounces). After 1982, copper was eliminated from the penny. The composition was changed because the value of the copper in the coin was greater than one cent. From 1982, the penny became 97.5% zinc composition, which was copper plated. With the commodity boom into 2011, the cost to mint a penny became 2.41 cents. The crash in commodities reduced the cost to 1.83 cents by 2013.

The Coinage Act of 1857 was an act of the United States Congress which ended the status of foreign coins as legal tender, repealing all acts “authorizing the currency of foreign gold or silver coins”.Specific coins would be exchanged at the Treasury and re-coined. Up until 1857, foreign coins circulated as legal tender. The Spanish 8 reals were known as a Pillar Dollar. This was the primary money supply during the Colonial period rather than British coins. In fact, the Spanish dollar was officially declared legal tender (accepted for taxes) by the Act of April 10, 1806.

The United States following the Revolutionary War had no gold reserves. Therefore, in 1792 when the establishment of the US mint came into play, the sole medium of exchange in terms of specie was the foreign coin. Alexander Hamilton proposed that foreign coin should be allowed to circulate freely for a period of three years until the new mint in Philadelphia was running at full capacity. This clause allowing the foreign coin to circulate was renewed several times before it was formally authorized by the Act of April 10, 1806. By 1830, about 25% of all circulating coins were of Spanish origin.

President Andrew Jackson supported foreign coin as legal tender in his famous war with the Bank of the United States in the Gold Bill. Jackson set in motion a major financial crisis as every bank began to issue their own currency. Jackson’s support of foreign coin ended up making it difficult for the US to retain its overvalued worn Spanish silver in the 1840s as they vanished from circulation and private issues appeared known as Hard Times Tokens. It was not until the early 1850s that the US mint had finally been able to match demand for the foreign coin with the production of American issues.

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Guest Post: “Why You Should Store Precious Metal In Multiple International Locations”, by Olivier Garret of Hard Assets Alliance


by Olivier Garret, TF Metals:

We’ve maintained an affiliation with our friends at Hard Assets Alliance since 2012 and I hope they are always on your list of bullion dealers when making a purchase.  They provide a fantastic service and you’ll likely find this new post from Olivier Garret, the Founder and CEO of HAA, to be extremely helpful and interesting.

Why You Should Store Precious Metals in Multiple International Locations

By Olivier Garret, Founder and CEO of Hard Assets Alliance

“Where should I store gold?” and “Should I store in multiple international gold storage facilities?” are some of the most common questions I receive from Hard Assets Alliance customers.

In short, the main reason why investors would consider storing precious metals in more than one international location is risk mitigation.

In addition to being a store of value, precious metals are insurance against a number of potentially disastrous scenarios: financial crashes, civil wars, political unrests, and other crises.

Unfortunately, any form of wealth can become a prime target of theft or government seizure in times of great distress. And diversification between storage locations can help mitigate it.

Here are the four serious risks to your metals holdings that international diversification will help avoid or reduce:

  • Confiscation or outlawing of personal gold ownership.

  • Capital controls—the government limits or denies a citizen’s right to carry or send any form of money abroad.

  • Administrative actions—seizure of property by a government agency without notice or due process; becoming enmeshed in a frivolous civil lawsuit.

  • Currency debasement/inflation will lower one’s standard of living and destroy wealth not adequately protected.

The most likely risk is that someone (including a family member) finds out that you store gold at home and steals it—or worse. For this reason, taking possession of large amounts of precious metals puts your wealth, as well as the lives of your family, at risk.

A better option is to store some of your precious metals in a safe storage location somewhere nearby. This way, you reduce the risk of theft and can quickly take delivery of your holdings.

I do not recommend storing your precious metals with a financial institution, though.

The reason is that the contents of a bank vault is not adequately insured.  In addition, financial institutions would be amongst the first casualties in a financial crisis. Further, your holdings would become an easy target in case of government seizures.

If you have enough precious metals to be concerned about government seizure/confiscation or capital controls, you should consider jurisdictional diversification. Storing precious metals abroad makes it much harder for a desperate government to seize them.

Besides, you could access part of your holdings in case you have to flee from your homeland for any unexpected reason like war.

For real-world examples, look no further than Europe in the 1930s and 1940s. Many Europeans were fortunate enough to have assets in Switzerland or the United States during the 1930s and 1940s. The offshore assets were their escape tickets from fascist regimes and wars.

If you decide to go global, make sure you store metals with the most reputable independent vaults. Look for precious metals storage companies that safeguard assets for large institutional investors and governments, such as Brink’s.

Further, be sure that your precious metals are fully insured and available for immediate delivery at all times.

Another important decision is picking the destination countries to store some of your safety nest. 

I suggest looking for the most stable countries with a long history of depositor protection.  Don’t forget the destination country will have its own set of regulations controlling the import of precious metals, too.

But in the end, you have to choose a location that makes sense to you.

I would personally more likely choose Switzerland or Australia than Singapore. That’s because I would be more likely to relocate near one of these two countries than to Asia. 

But this is a personal preference, and your criteria may be different.

For non-US investors, the United States may be a great place to store metals.  Switzerland is also attractive because it has the longest track record of political stability and neutrality. Singapore’s financial history is much shorter, but the country appears to be very stable.

England, Australia, New Zealand, and Canada are also great alternatives. 

The key is to diversify across jurisdictions as much as it makes sense based on the size of your precious metals holdings. I personally hold precious metals in four different jurisdictions, including the United States.

The only drawback of storing assets abroad is that foreign-held assets require greater awareness and planning:

  • Access to your metals may not be as quick and easy. Foreign-held bullion is for those with sufficient gold and silver already stored at or near home. Storing all your precious metals overseas defeats one of its purposes—to have it handy for an emergency.

  • The receipt of proceeds after a sale could take time. The delay between selling your foreign-held gold and receiving the funds can be days. Offshore precious metals should not be considered ready cash.

  • While the US may pose the greatest threat to a US investor, a foreign government could move to control certain assets as well. The risk varies by country and is generally greater within the banking system than with a private vaulting facility. Be sure to perform your due diligence before selecting a country. Choose a location with a history of strong depositor protection, governed by the rule of law, and solid property rights—and select bullion storage facilities with the highest reputation.

  • Understanding and complying with reporting requirements is essential.

The bottom line: Gold stored abroad is all about minimizing risks and maximizing options. As your metals holdings grow and governments become increasingly desperate, diversification becomes increasingly important.

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The Dumb Money is Helping the Smart Money Exit the Stock Market


by David Haggith, The Great Recession Blog:

Bloomberg this week ran a story telling us how the smart money gets out of the stock market when it hits its all-time peak and how the dumb money helps the smart money out. Only they didn’t know that was what they were writing. It typically happens this way:

At the end of a deliriously euphoric market rally when the market is preparing to crash, all the Joe Sixpacks, mom and pop and the family dog open trading accounts and try to chase the tail of market action. Many throw in their entire retirement funds, pawn the dog’s collar and take out loans on credit cards to buy in as much as they can. By buying in late, they help provide a smooth exit for the smart money. At least for some of it. It is the little guys, tough from hard labor, whose muscles are employed to push the money bags of the rich to the top of the mountain from which the little guys are allowed to jump off.

That appears to be happening right now. While retail investment (at the mom-and-pop level) in stocks mushroomed last quarter, household debt also mushroomed, jumping at an annual rate of 5.2%, which is the fastest pace since …. 2007. (There is that comparison we keep finding in data everywhere.) Consumer credit rose at an annualized rate of 7.8%. Consumer credit-card debt just topped out at over a trillion dollars, and savings at the same time bottomed out to one of the lowest rates in history.

It’s hard to say with certainty what all that debt all those savings were used for, but the change in both certainly matches the pace of growth in retail stock investments. (The S&P 500 rose 6.1% last quarter, with much of the new money pouring in from retail investors.) With no hard connection in those numbers at my immediate disposal, it would be a fallacy to claim them as proof that people are taking out credit card debt and depleting their savings to buy stocks, but that correlation certainly matches up with anecdotal accounts that many stock brokers are reporting at the street level.

All Trumped up and nowhere to go

Certainly the roar of mom and pop into retail stock investing is happening now …. big time, big league, in a hyuuuge way with the Donald’s supporters being the ones who are rushing headlong in to provide the gold-bricked exit path for the 1%:

As 2017’s roaring bull market gives way to a markedly choppier 2018, the buzz among Wall Street stock touts is that the best of the Trump Trade has passed…. Don’t try to tell that to the true believers in San Angelo, Texas. Or Covington, Louisiana. Or Sioux Falls, South Dakota. They’re sure this rally has just begun, and they’re sure they know why. “I hear it every day,” said Jimmy Freeman, a financial adviser at Edward Jones … east of the booming Permian Basin shale oil fields. “The market’s going up because of Trump….”

Across middle America, in the towns big and small that voted overwhelmingly for Donald Trump, his most ardent, and financially comfortable, backers are opening stock-market accounts or beefing up existing ones, according to interviews with more than a dozen advisers and brokers. They were spurred on by a stream of presidential tweets crowing about, and taking credit for, the gains throughout 2017 and they remain undaunted now as the rally sputters and the tweeting dissipates. (Bloomberg)

Yes, the Trumpettes — by which I mean the little guys who supported the Donald because they were stomped all over by Bush and Obama — are now flooding into the market to provide the essential other side of the trade needed in every market sell-off — buyers. It’s a market maxim that you cannot have a market sell-off without a lot of buyers willing to leap for falling prices.

…From what financial advisers in conservative areas are seeing, there is a Trump-minted rush. Clients … at Concho Investment Advisors in San Angelo “are now more inclined to invest into riskier assets like the stock market” … and many cite the president. Todd Neff, for one, has put $400,000 into stocks since Trump’s election. Before, he wasn’t much of an investor, basically topping out his out his 401(k) and dabbling in shares here and there. A sheep breeder and small-business owner in San Angelo, he said he would have “dropped back big time” if Hillary Clinton had won. Consumers’ confidence in the stock market soared to a record high in January before fading in February…. Among Trump’s fans, though, trust in the firebrand politician as a stock-market bulwark easily endured the selloff

Share buybacks surging

That’s one side of how the smart money gets out at the last minute and winds up richer than ever: they are helped by the good-meaning people who hope to get a last piece of the action — this time from the champion they elected and believe in. The other side is orchestrated by the executive rats who flee their own sinking, stinking corporate stocks by using the company money to buy back their own shares. That’s the bigger action. And that appears to be happening on steroids right now, too.

As the stock market roars toward its triumphant collapse, you hear the big-name analysts talking about how stocks are not overvalued because “earnings are doing great. They’ve never been better.” What they usually mean is earnings per share, and what is really doing better in that fraction is the denominator. The number of shares is shrinking as corporate boards make decisions to drain the company coffers in order to buy back shares … often from themselves … sometimes even in special deals offered only to themselves off the general market (as I’ve reported in the past).

Buybacks have a double edge of cutting power. First, they cut the number of shares over which earnings are divided, making “earnings” look stronger; but secondly, they create their own market demand. Increasing demand = increasing price:

Over the past decade, there has been no corporate instrument of mistruth more powerful than buybacks, an issue we have dissected in these pages for years. U.S. firms have spent roughly $4 trillion on buybacks since 2009, making corporations the biggest single source of demand for U.S. shares…. Buybacks have “accounted for +40% of the total earnings-per-share growth since 2009, and an astounding +72% of the earnings growth since 2012. (13D Research)

What better plan could there be for the smart money, which owns the major shares, to exit the market without crashing the value of their own shares than by creating demand from within the company that the smart money governs? Just vote to use company money to buy shares in numbers equal to or greater than all those the major investors wish to sell (major investors being the ones who sit on the board or hold executive positions).

Thanks to Trump’s new tax law encouraging repatriation of cash that has been stored overseas, companies are doing exactly what I and many others warned they would do with their one-time tax savings on this mother load. No, they are not using it to invest in their own companies as proponents of the plan promised, and as I predicted they would NOT do. They are using their overseas cash stockpiles to buy back stocks.

Buybacks are already on record pace — $171 billion worth have been announced so far in 2018, more than double the amount disclosed by mid-February 2017. If a tax-bill-fueled buyback bonanza can effectively “buy the dips”, market tranquility can be protected, preventing a large-scale unwinding.

In fact, the first six weeks of announced buybacks this year already were higher than the entirety of 2009. JP Morgan projects that, at this rate, S&P 500 companies will by back a record $800 billion in stocks in 2018. JP noted that large accelerations in buybacks like this tend to happen during market selloffs and for that reason says that buybacks could go higher than $800 billion this year if they rise to the level seen right at the end of the last business cycle where companies returned more than 100% of profits to shareholders.

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