Where Gerald Celente Puts His Own Money

Trends Research Institute Founder Gerald Celente forecasts a pop in the much-heralded U.S. recovery.  The U.S. consumer cannot continue to borrow and lead the U.S. out of its economic woes, he added.  The consumer bubble, he said, is about to pop, “soon.”  And as protection from the next popped bubble, he favors gold.

“Look what’s going on in the United States.  Interest rates are near zero,” Celente told King World News host Eric King on Monday.   “Does anyone need a calculator to figure this one out?  Go back to [year] 2000; the market crashes, the NASDAQ.  Remember the high-flying NASDAQ market, with all of those high-tech stocks that weren’t worth anything.  What happened?  Well, we went into a recession, but then 9-11 happened.  Then Greenspan began to lower interest rate to 46-year lows.  As a result we had the real estate bubble and that great speculative bubble that burst in 2008.” Sign-up for my 100% FREE Alerts

Agreeing with many economists, Celente stated that due to artificially low interest rates policy by the Federal Reserve under former Chairman Alan Greenspan, starting as far back as 1987 in response to the stock market crash, the Fed has created an illusion of prosperity through easy money and asset price bubbles throughout Greenspan’s tenure as its principal policymaker.

The last bubble before the final meltdown of the financial system was the real estate bubble—which, historically, has been the most dangerous consumer-driven bubble of them all.  Now that bubble has been popped.

Where to now for the Fed?  Celente said the Fed has engineered yet more bubbles, and the next bubble to pop is in consumer spending.

“Look at what they’re doing now?  Interest rate are near-zero,” Celente continued.  “What does it mean?  Hey, you see the economy is picking up. Oh it is?  Oh yeah, retail sales went up.  How come?  Couldn’t be because consumers are now putting more debt on their credit cards.  Could it?  Well, that’s exactly right, because in the last four months consumer debt climbed at the fastest rate in 10 years.  They’ve created another Ponzi scheme by keeping interest rates at all-time lows.  They’re building another bubble.”

While Wall Street points to successively positive retail sales as evidence of a U.S. recovery, Celente doesn’t see it that way.  In reality, he said, consumers are spending money they don’t have, using credit cards for even the most basics of survival.  According to him, the reason that consumer debt has soared at a rate not seen in a decade comes from consumers using plastic to buy many of life’s basic necessities, not because Americans has suddenly become more optimistic.

“So where the loans . . . so why are they borrowing?” asked rhetorically.  “Well they’re borrowing to buy cars; they’re borrowing to go out and eat; they’re borrowing to go to college, to education; they’re borrowing to go shopping; they’re borrowing just to keep their heads above water.  So all they’re doing is creating another bubble.  The first one was the real estate bubble.  This one’s the consumer bubble, and it’s going to burst soon.”

Celente, who always prefaces his discussion about investments with a disclaimer that he is not a registered financial adviser, said he holds a significant amount of his assets in gold, though has has also said in previous interviews that he has included silver among his investment holdings.

“I’m 80 percent invested in gold.  I continue to buy gold.  I believe gold prices are being manipulated downward, so that people will not dump out of these worthless currencies,” he said.  “Look what’s going on.  The European Central Bank dumped in well over a trillion euros to bailout the failing banks throughout Europe.  They don’t have any money, and now they can borrow all they want at very low interest rates, around 1 percent.”

As the financial media paints a picture of economic recovery and a strong dollar, Celente cautions investors to view the relative strength of the U.S. dollar against the euro as nothing more than a deception on the part of the Fed, Treasury and traditional media.  Don’t believe many of the Wall street economists who suggest that the dollar is strong, Celente advised.  Both currencies, he said, are dropping against tangibles, such as commodities and precious metals—and will continue to do so.

“It [easy money from central banks] only works for so long, and that’s why I believe in gold,” he concluded.  “And that’s why I believe they’re driving down the price.  Oh the euro is weakening and the dollar is gaining strength.  Yeah, I just jumped out of the Lusitania and took board on the Titanic.  A weak euro doesn’t make a strong dollar.” Sign-up for my 100% FREE Alerts

Peter Schiff’s Critical Advice to Retirees

Speaking with Yahoo Breakout, Euro Pacific Capital CEO Peter Schiff chastised the Federal Reserve for maintaining ultra-low interest rates at the expense of retirees.  But the outspoken critic of the Fed has a strategy for older Americans to survive the crisis in the U.S. dollar without taking on unnecessary risk.  Sign-up for my 100% FREE Alerts

First, Schiff warns all investors of the trend of the U.S. dollar.  It’s down.  The Fed, in its effort to prevent a sovereign debt and banking collapse, is on course to print the dollar “into oblivion” to replace the financial hole left from bad debt still maintained on the books of the banks and at the Fed, according to him.

“I think what retirees need to understand, is that when the dollar is wiped out, all dollar denominated debt instruments are going to go with it,” Schiff stated.  “So what they have to do is get out of the dollar completely.”

That means, though ‘safe’ assets denominated in U.S. dollars, such as U.S. Treasuries, municipal and corporate bonds will most likely return the face amount of the bond to maturity, the value of those bonds will drop rather rapidly over time, according to Schiff.

A return of two percent on a 10-year U.S. Treasury won’t keep up with food and energy costs, if those commodities appreciate at an average rate of, say, 6 to 8 percent per year.  In other words, Schiff believes the U.S. will continue a repeat of the ‘stagflation’ of the 1970s, but during this decade, the rate of inflation could turn out markedly worse.

Moreover, due to the low rates paid on dollar denominated bonds, Schiff sees a troubling trend by some fund managers who offer retirees ‘higher yielding’ U.S. Treasury funds.  These higher yields can only be achieved by ‘leveraging up’ the fund, a risky proposition to retirees, according to him.

“A lot of them [retirees] are buying longer-term U.S. Treasuries, you know, maybe 30 years to get extra yield.  In so doing, they’re taking enormous risk,” Schiff explained.  “In fact, many of the funds that are out there are actually levering up longer-term debt.  That’s incredible risk.  Other people are buying overpriced stocks.”

Schiff outlines the dilemma presently facing retirees (and other investors), that the financial media refers to as ‘financial repression’, a term used to describe Federal Reserve policy of coaxing investors into assets as a potential means of achieving a meaningful yield by taking on more risk.

Schiff thinks Fed policy is wrong, but he also believes there is a way out for retirees.

“So retirees need to buy gold and silver,” he said, a recommendation also made by famed author Richard Russell of Dow Theory Letters.  “If they want more current income, they need to look toward foreign sources.  I particularly like high-dividend paying foreign stocks.

“But if you can’t take that risk, you can still buy bonds denominated in foreign currencies.  But what you don’t want to do is make the mistake of buying long-term U.S. dollar denominated bonds, because I think the biggest losses in this financial collapse are going to be absorbed by ,felt by, the bondholders.  Even those who own U.S. government bonds or municipal bonds, bonds that are thought to be low risk are still going to be wiped out as the dollar collapses.”

As a summation of the Schiff strategy for retirees, he suggests that the techniques of wealth preservation today differs from a more ‘normal’ investing environment in that assets held should be denominated in foreign currencies, not U.S. dollars.

Allocations between stocks and bonds may not necessarily need to vary from a typical retiree portfolio of investments; it’s the currency in which the assets are denominated that matters in a Schiff strategy.

He likes the currencies Swiss franc, Australian dollar, Norwegian krone, Singapore dollar and Canadian dollar.

Additionally, Schiff suggests that gold and silver should be held as a hedge against all currency risks to a portfolio allocation between foreign stocks and bonds.  Sign-up for my 100% FREE Alerts

Source: Yahoo Breakout

Marc Faber on Gold, Stocks & QE3

As the global financial crisis accelerates in the fourth quarter following revised economic data revealing a high probability of another recession in Europe and the United States (see BER article of Nov. 7) on the horizon, the ever-entertaining publisher of the Gloom Boom Doom Report Marc Faber stated Wednesday that he’s convinced that governments across the globe will print money to prevent a collapse of the financial system.

Japan, the UK and EU continue to relentlessly debase their respective currencies in a fight to retain a piece of shrinking global demand, simultaneously reducing crushing debt obligations in real terms priced in their respective currencies—a kill-two-birds-with-one-stone monetary policy salvos fiercely unleashed anew in the recent wake of horrendous drops in global export data for October. Sign-up for my 100% FREE Alerts!

In the case of Europe, imminent debt defaults merely add to the urgency for more money printing by the ECB—whose new U.S.-centric central banker from Italy, Mario Draghi, has taken the helm as the next step toward flushing out the ultimate intentions of Germany regarding the euro.

China apologetically lurches back onto the dollar peg, and it’s now the turn of the U.S. to fight back with its own strategic weapon—the dollar—in the race to devaluations.

“A third wave of quantitative easing by the U.S. Federal Reserve is just a matter of time,” Faber said in a speech in Taipei, according to Taiwan’s Taipei Times.

Faber also points out that, while the world’s industrialized countries wage a full-blown global currency war, the victims of said war won’t include the rich; it will be the masses who take on the traditional role of cannon fodder for the bankers and politicians.

“Some people will benefit from money printing that deflates the purchasing power of currency . . . but the middle and lower—income classes are being hurt,” said Faber, who has repeated on many occasions throughout the global financial crisis his disdain for central bankers and the financial pain they inflict on innocent people.

Faber recommends eschewing bonds in favor of stocks, Asia real estate and physical gold—especially gold, an asset he colorfully referred to in an interview with Newsmax in September, “I own my gold and I will never sell it, especially when I see clowns like Ben Bernanke, Larry Summers, Tim Geithner.”

On the growing debate regarding China’s economy, according to Faber, it’s in a bubble; but the Chinese bubble can last longer than many expect; it could pop in three months or three years, he said.

It should be noted that the notion of a potential Japanese-style collapse in China has gathered steam lately—and was first suggested by famed hedge fund manager Hugh Hendry of Eclectica Asset Management, who said at an investment forum in Russia last year regarding China’s successive string of high GDP rates which appeared to him to be driven by too much capital spending, “Confucius say: thou shall not invest in overcapacity.”

Faber also touched upon the escalating geopolitical tensions between the West and the Middle East/Central Asia region.  To contain China’s rise as a bona fide superpower, the West must secure oil supplies for themselves at the expense of China, he said.

But no matter how the struggle for oil supplies between the West and China plays out, or whether China’s economy heads south, or not, Faber wittily said, if need be, “Chinese invented paper. They know how to print money.”

According to Faber, at some point, the global reflation trade is all but certain.

Expect $85 Silver, says Legendary Market Technician

As Asia continues to report soaring CPI statistics, with Vietnam’s 22% inflation rate as the most recent evidence of the Fed’s QE2 “liquidity” rippling through the world’s economies, legendary technician Louis Yamada told King World News (KWN) the precious metals are set to takeoff again as a result of Bernanke’s monetary actions.

Yamada’s fame as the market technician with a track record of “getting it right,” began as director and head of technical research at Smith Barney (now of Citigroup (NYSE: C)).  After being voted as the leading market technician in 2001-2004, she went off to found her own research group, Louis Yamada Technical Research Advisors, in 2005.

“Gold continues to be in an uptrend in our work,” Yamada told KWN.  “You had a little bit of a consolidation, seasonality would suggest a rise into the fall. The primary support level remains at $1,475 … Our next target is $2,000, and we did a gold special in our last piece that suggested from a very long-term perspective … we could see $5,200 on gold.”

Yamada is the latest of a raft of highly credible analysts, money managers and bullion dealers coming out during the past two weeks to tell KWN and other news organizations of the imminent explosion in the price of precious metals.  James Turk, Jim Sinclair, John Taylor, Ben Davies, John Embry, Peter Schiff, and Jim Rogers (who announced he is adding insult to injury to the U.S. dollar fiasco by shorting U.S. Treasuries) have all advised to go long the anti-dollar trade.

The lone hold-out of considerable import to the precious metals market is Marc Faber, the favorite go-to guy for the most steamy of quotes and anti-establishment rhetoric of all hard money advocates.  His forecast for this summer is for the monetary metals to succumb to the 30-year track record of weakness and relatively thin volume.

As gold makes new highs above $1,600 and silver makes its way past $40 amid a fierce “250 million ounces of silver in 1 minute” smack down attempt by the cartel last week, according to Precious Metal Stock Review’s Warren Bevan, the majority of our favorite talking heads, so far, have it right, and Marc Faber has it wrong.  But the summer isn’t over yet, and Faber hasn’t budged from his forecast for the metals.

Yamada, who, incidentally, didn’t offer a time frame for her targets for the gold and silver price, said her next target for silver is for a double “over time” from the $40 print.

“We hit part of our silver targets at $50, (expect) $65, even $80, $85 over time,” speculated Yamada in the KWN interview.  “We had an 88% rally in a very short period of time from January and a one third retracement, 34% down, so that was pretty normal. We saw some support at $33 and would loved to have seen it go sideways a little bit longer to be honest with you,” noting considerable dollar weakness in light of the  sovereign debt crisis with the PIIGS of Europe has revealed the dollar’s diminished status as the world’s safe haven currency.

“I think that one of the observations that one has to take into consideration is that with each of the Euro financial crises and our own financial crisis in 2008 to 2009, the dollar has rallied less!” she said.

“In other words you had a rally in 2009 that carried 25%,” Yamada explained.  “Then, in early 2010, the rally was only 19%.  And the second one in 2010 was only 7%.  And this time, you haven’t even seen 7% with the crisis that has evolved.  So that suggests to us that it (the dollar) is becoming less and less considered a really safe haven.”

While the systemic problems with the euro and dollar come fully into focus, we should be mindful of U.S. Treasury Secretary Tim Geithner’s recent comment on Meet the Press of July 10, when he said, for a lot of people, “it’s going to feel very hard, harder than anything they’ve experienced in their lifetimes now, for a long time to come.”  Bloomberg reported that Geithner may step down from the head of the Treasury.

As of 12:36 in New York, gold trades at $1,612.79 and silver at $40.05.

Advice from 60-year Market Veteran Richard Russell

What is the man who publishes the longest running investment newsletter thinking right now?  In his June 30 missive, Richard Russell of Dow Theory Letters offered his overview of the equities markets, and isn’t too sanguine on the idea of jumping aboard.

At this time, the stock market has been giving clues about the dollar’s next move, while the dollar has been giving clues about the next likely move in stocks, recons Russell.

The La Jolla, Calif-based octogenarian is no fan of the U.S. dollar in the long run, and has repeatedly opined of its progressive failure as the world’s reserve currency.

Russell watches stocks for a heads up to any impending doom for the dollar.  We can surmise from Russell’s latest letter that he’s bullish on stocks as the dollar devalues, but is bearish on equities if the dollar is expected to fall too far, too fast.  So far, nothing he sees in stocks has him concerned about the dollar.

“Currently, the Averages had every opportunity to break below their last secondary lows,” wrote Russell.  “The Averages refused to break down — instead both Industrials and Transports rallied above their preceding June highs. I took this action to be bullish, and with a bow to the advertisers of ‘The dollar crash’  I can say that a dollar crash is not going to occur any time in the near future. If the crash was near, the D-J Averages, in their uncanny wisdom, would have sensed it and given us the news by breaking below their June lows.”

According to Dow Theory, Russell believes stocks are in a bull market, but he doesn’t want to buy any for reasons of valuation.  Analysts citing historically cheap stock valuations relative to bond prices (going back to 1958) don’t fool Russell.  He was busy writing his first newsletters in 1958, but doesn’t remember a Fed buying 70% of newly issued Treasuries to artificially lower interest rates during Ike’s second term.

Instead, Russell looks to the dividend yield of the markets 30 bellwethers.  The current dividend rate of under 3% in the Dow “is far away from the bargain counter” in his assessment.

“So is it really a bull market? I think it is,” added Russell.  “Then shouldn’t we be up to our necks in stocks? I choose not to be, mainly because I don’t like the values. Dividend yields are low in my estimate, and I’m in no hurry to rush into the arms of an anxious and waiting Wall Street.”

Like a salesman who senses a deal is closing too easily to be true, Russell smells something foul from Bernanke’s scripted economic outlook for the remainder of the year.  The WWII veteran has seen too much to be lulled into “some believable fairy tale” told by the Fed and the perma-bulls on Wall Street.

“It bothers me that it’s all so pat and so widely accepted. So far, the Treasuries are acting according to script and so is gold,” mused Russell.  “The stock market is acting as if something better is riding on the winds of the future. Could something be amiss with the accepted scenario? Could Bennie Bernanke have it right? And why is Treasury Secretary Geithner ready to say ‘bye’ to the administration? What can he see ahead that he doesn’t like? Geithner’s been Obama’s leading economic confidant. Certainly, an unusual time to exit.”

When Russell is convinced of a low-risk/high return trade, he states it flat out.  But today’s market prevents him from giving the green light on stocks.  Instead, he’s on the sidelines with his gold and cash until the stock market true fundamentals match the technicals.

With debt levels in the West remaining at record levels as percent of GDPs, Europe still in a quandary with the PIIGS, and a deadline for raising of the U.S. debt ceiling still a month away, a game-changing event could be just around the corner.

“June went out like a lion and today another powerful 90% up day,” wrote Russell. “As the old song goes, ‘Who could ask for anything more.’ Hopefully, today’s [June 30] verdict of the Averages are a forecast of better times ahead. But in this business, it’s always wise to stay alert. With the planet staggering under the greatest load of debt ever seen in human history, anything can happen and probably will.”