Authors Posts by Chris Vermeulen

Chris Vermeulen

21 POSTS 0 COMMENTS
Chris Vermeulen is the CEO of Technical Traders Ltd., a financial education and research firm. Chris is responsible for managing his team of research analysts and the creation of its trade alert newsletter publications. He is an internationally recognized market technical analyst and trader who has been involved in the markets since 1997. Chris’ mission is to help his clients boost their investment performance while reducing market exposure and portfolio volatility. Chris is also and founder of AlgoTrades Systems. He designed an automated algorithmic trading system for the S&P 500 index which solves his client’s biggest problem related to investing in the stock market: the ability to profit during both a rising and falling market. AlgoTrades’ algorithmic trading system allows individuals to invest using either exchange traded funds or the ES mini futures contracts. He is the author of the popular book “Technical Trading Mastery – 7 Steps To Win With Logic”. He has also been featured on the cover of AmalgaTrader Magazine, Futures Magazine, The Street, Trader Interview, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites. 

Federal Reserve

The FED will not be capable of raising interest rates at all this year!

This is exactly what President Obama, Vice President Biden and Dr. Yellen had discussed in their most secretive meeting which occurred on April 11, 2016: (http://www.zerohedge.com/news/2016-04-10/obama-announces-unexpected-meeting-yellen-following-tomorrows-expedited-procedures-f). President Obama wants his legacy, as the president of the U.S., to be a positive one. The FED will not capable of ‘financial engineering’ the economy into explosiveness, that we all desire. This equation would eliminate the ‘Republicans’ greatest campaign pitch which is that the economy is ‘weak’. Take that theory out of the election process and the ‘Republicans’ will lose their best argument that they have against the Democrats.

Given that both the White House and the FED are working overtime in order to attempt to create a ‘booming economy’ while going into the election.

The FED may be incapable of increasing short term interest rates due its’ policy meetings which coincide with key events that they have been planned on their election calendar.

In June 2016, the FED’s hands will continue be tied, for those same reasons. In addition, there is the British referendum decide whether to remain in the E.U., or not ‘Brexit’. A week after the FED meeting on June 23th, 2016, combined with a rate hike, could spike the dollar. I assure you, that the SPX will not continue to be range bound till election time.

Last week, the U.S. dollar fell by 2%, as the FED signaled it would be slow to raise interest rates, this year. “This year quoting the FED, the committee considers it unlikely to begin the normalization process for at least the next couple of meetings.” This statement sent interest rates plummeting while Treasury Bonds and stock prices surged higher!

While a rate hike during the July 26th-27th, 2016 meeting maybe possible, its’ odds are somewhat reduced due to the fact that there will be no press conference occurring after this meeting. This meeting will coincide with the Democratic National Convention on July 25th-28th, 2016, and, in addition, it will occur within only a few days after the Republican National Convention during July 18th-21st, 2016. The September 20th-21st, 2016 FED meeting is relatively close to the Presidential Election on November 8th, 2016, therefore unless there is strong evidence that the US economy is growing, above trend, and that global financial markets are relatively stable, I expect the FED to refrain from hiking interest rates in September 2016. I highly doubt that the FED will raise interest rates during their November 2016 meeting which occurs only six days before the US elections.

Even though investors desire a clear sense of America’s political future, I can assure you that the SPX will not continue to be range bound until election time. By that time, the FED maybe possibility be able to shift their focus, solely on the economy.

If by the December 13th-14th, 2016-time period of the FED meeting, its’ underlying GDP growth were above 2%, then perhaps they could raise interest rates. The futures market essentially is signaling the same scenario. My expectations of any real GDP growth is the risk that the FED does not hike interest rates at all this year:

(http://www.reuters.com/article/us-usa-economy-idUSKCN0XP0BQ)

Chart 1After spiking during the summer of 2015 and again in early January of 2016, the VIX is once again collapsing, however, not for much longer!

It is not a question of if, but when?

Chart 2 Chart 3Concluding Thoughts:

What does this information mean?

In a couple days I will share how you the Financial Stress Index for the United States and what it means.

If You Want to See This Stress Test Join My Free Newsletter Today: www.TheGoldAndOilGuy.com

Chris Vermeulen

Federal Reserve

The BLICS group is made up of … 

Belgium, Luxembourg, Ireland, Carmen Islands, and Switzerland.  

Countries like China and Russia actually have been turning into net “sellers” of US Treasuries since 2011 onwards.  This could have been a huge financial disaster for the Federal Reserve to whom they were selling large amounts of US Government securities to.

Trade smarter and make more money with Tradespoon!

Thanks to these new 5 “BLICS” nations, they are being used to purchase huge amounts of US Treasury Bonds. The US Fed is using derivatives and Dollar Swap and Forward Rate Agreements to integrate this bond monetization scheme.  QE is being exported through a global integration process using several front offices under their control that they construed many years ago.

It involves permanent reciprocal currency arrangements whereby these foreign central banks manipulate lines to invest in US Treasury’s. The emergence of the “BLICS”, not BRICS, nations, has been a new proxy entity designed solely for this purpose.  This undisclosed systemic risk is being spread to secondary nations without the benefit of any investor/trader knowledge through the Financial World.  This back door scheme could be the systemic failure that totally brings down our current existing global financial system. 

Legitimate buyers of US Treasury Bonds have largely vanished. There has been a huge decline in official bond holdings by our typical traditional former allies.

Quantitative Easing was implemented when the US Federal Government and US Federal Reserve stepped in to manipulate the economy to increase asset values. This was to artificially increase asset prices and enhance the wealth effect.  They were trying to postpone the inevitable crash that we are on the cusp of seeing with our own eyes.  There has not been any economic growth since 2007. This purported fraud will bring down the whole western financial system and ensure its coming collapse.

Central banks, and central bankers, are in uncharted waters. They do not know how to create economic growth, they do not know how to fight the great boogeyman of ‘deflation’, and they do not know how, or, if they will ever be able to return to a time of “normal” monetary policy. Their pretense of knowledge, of being able to effectively control currencies used by billions of people, is coming to an end. 

The US Federal Reserve is using 17 central banks working in concert through currency swaps to maintain the fraudulent monetary system, which are probably tied into Forward Rate Agreements (FRA) and Interest Rate Swap derivatives between central banks and BLICS, which have been quietly bought $818bn in US Treasury’s.

If you have seen the movie “The Big Short”, then think of the FED like the big banks which finally learn/figure out that that house market is about to implode. Even though mortgage defaults are skyrocketing, they hold the market prices steady and even inflate the market more until they can unload their positions and get positioned to prosper from the coming collapse.

Don’t waste your time! Click here to find winning trades in minutes!

Debt and toxic assets are getting offloaded to unsuspecting investors and countries once again and when the music stops there will always be someone left holding the assets that eventually lose all their value.

In a couple days I will be posting a continuation to this article here, stay tuned!

Chris Vermeulen – www.TheGoldAndOilGuy.com

[Image Courtesy of Wikimedia]

China’s stock market ‘bubble’ was fueled by “speculative mania” which has proven to have had grave implications of the global stock markets. The collapse of this “speculative mania” will have far reaching ramifications on our current global stock markets. This indicates that Central Bank interventions cannot alter market cycles. 

Chinese exports have seen their sharpest drop in almost seven years which is adding to concerns of the health of the worlds’ second largest economy.  Exports have dropped sharply, by 25.4%, from the previous year, while imports fell 13.8%.  This weak data comes on the heels of Beijing registering their ‘ slowest economic growth in 25 years’.

The Chinese stock markets have been the most interesting financial news story occurring in 2015. The worlds’ second largest economy and its’ stock markets were soaring in The Shanghai Stock Exchange Composite Index, (SSEC), which is the equivalent of the U.S. SPX.

These gains were the equivalent of trillions of dollars of wealth for Chinese stock investors. China’s markets are dominated by retail investors. Working class Chinese people account for over 5/6ths of all of the national stock market transactions.

The China’s soaring stock market

Chart

Their overwhelming desire and pressure from their peers has led them to aggressively buy stocks. This has gone far beyond normal investing and reached extremes of “herd mentality”. The Chinese people who had never before invested in stocks, scrambled to open brokerage accounts. They were in over their heads seeking to establish upward social mobility and financial success.

This was “dumb money” which fueled the popular ‘speculative mania’ in Chinese stocks. The working class people did not have the proper experience nor education of the workings of their financial markets. This HUGE STOCK MARKET crash happening has wiped many peoples finances out. It lured in many ‘novice traders’ who have since quit their jobs, and put all of their lifesavings into the markets in hopes of making themselves rich. However, matters have gone terribly wrong for these investors recently, as they do not understand what they are doing!

They never understood the stock markets and how risky they are. Many of them opened margin accounts so as to borrow money to make it happen!

The margin debt was astounding. They hit a record high of $322B as compared to a record $507B of NYSE margin debt in US stock markets.

Shocked traders, all over the world, believed that Central Banks control market cycles. All of the global Central Banks, with their extreme ‘easing’, has levitated stocks to even higher levels. The fact is, Central Banks can ‘artificially’ inflate stock market prices for only so long.

The major danger signs were pointing towards the rise in margin debt in which we have not seen in recent years. Investors were borrowing tremendous amounts of money in order to fund purchases of stock. We witnessed this during the ‘dotcom bubble’ and just prior to the financial collapse of 2008. It is again happening, right before our eyes. This margin debt has pushed stocks to ridiculous highs, but it also served to drive stock prices down very rapidly when the market turned south. This is now about to occur in the US Markets.

The Chinese government still continues to depreciate its’ currency. The key factor behind its’ Central Banks’ lowering of the yuan is a sharp decline in the growth momentum of exports, along with the yearly rate of growth declining.

Mr. Donald Trump unleashed this tirade on Wolf Blitzer’s CNN Situation; “China-these-are-not-our-friends-these-are-our-enemies”.

They’re manipulating their currency. Intellectual property rights and everything else are a joke over there. They’re making stuff that you see being sold all the time on Fifth Avenue, copying everything, whether it’s Chanel or whatever it may be, the brands, and selling it. I mean the United States is getting ripping off for everything new or high-end ticket product they produce.

The real economic slowdown in China was set in motion a long time ago, when the yearly rate of growth of the money supply fell from 39.3 percent in January 2010 to 1.8 percent by April 2012. The effect of this massive decline in the growth momentum of money places severe pressure on ‘bubble activities’. Anymore continuing of tampering with the currency rate of exchange can only make things much worse as far as the allocation of scarce resources are concerned.

China’s government has no tools to support the market

The U.S. Economy is ‘coupled’ to the Chinese Economy. In fact, it is ‘inextricably’ bound to the ‘global financial bubble’ and its’ leading edge in the form of ‘red capitalism’.

In the face of an ‘unprecedented’ global collapse of the greatest phony boom, known in economic history, courtesy of China. Last Sunday night, March 20th, 2016, the Chinese stock market hit a two-month high by receiving news that the government will offer cheap short-term loans to stock brokerages. The Shanghai Composite Index rose by over 2% upon this news stating that the government will offer cheap short-term loans to stock brokerages. This additional “stimulus” kill their markets in the long run I feel as more debt is not the solution.

I would like to point out, that corporate debt, as a share of GDP, is already far too high at 160%.

Mr. David Stockman discussed on CNBC: “I think your traders are smoking something stronger than what I can legally buy here in Colorado. Investors have been too optimistic about the U.S. economy because they are not factoring in global risk, everywhere trade is drying up, shipping rates are at all-time lows.”

Source: I don’t know what the bulls are smoking: Stockman – CNBC

Quantitate Easing’ has not been the ‘Savior’ of our global financial problems”. It was advocated by John Maynard Keynes and Milton Friedman.

China’s Real Estate Bubble:

The construction boom was financed by artificially cheap credit offered by the Chinese central bank. New apartment buildings, roads, suburbs, irrigation and sewage systems, parks, and commercial centers were built, not by private creditors and entrepreneurs. They were built by a cozy network of Central Bank officials, politicians, and well connected private corporations.

Nearly seventy million luxury apartments currently remain empty. These projects created an epidemic of “ghost cities” in which cities built for millions are now only inhabited by a few thousand. The Chinese economy now has so many ‘ghost cities’ that debt has now grown into an increased unbelievable $25 trillion. What is occurring in the Chinese markets now will be the dissolution of an economy that capital markets have realized is simply not productive enough to enable servicing that amount of debt.

Conclusion to China’s Situation:

Looking at the global markets as a basket using the GWL world stock markets EX-US stocks, the chart paints a clearly picture that stocks around the world in in a full blown bear market. The past two months have been nothing more than a bear market rally, also known as a “Bear Trap” which gets the uneducated investors buying back into the stock market thinking higher prices will continue, through that is not what will happen.

There are some huge opportunities to trade various markets using inverse and leveraged ETFs. This is exactly what I share and will be trading with subscribers of my ETF trade alert newsletter at: www.TheGoldAndOilGuy.com

Chris Vermeulen

[Image Courtesy of Flickr]

Disaster
The ECB President, Mario Draghi, forced interest rates even further into negative territory, last Friday, March 11th, 2016. Nations like Sweden, Switzerland, Denmark and Japan have also initiated negative interest rates. The FED Chairwoman Dr. Yellen, confirmed having considered it, as well, at an earlier time and kept her options open to implement it in the future, if the situation warrants it.

Trade smarter and make more money with Tradespoon!

Lower interest rates were intended to facilitate ‘easy credit’ to corporations, which, in turn, was supposed to create new jobs and increase wages. This money was used by the corporations to repurchase their stocks and implement dividends; thereby, leading to an ‘artificial’ massive stock market rally.

These funds were not allocated properly. They were to provide job security and extra disposable income into the hands of working people, hence, consumption would then increase, resulting in a lower growth environment in the economy. However, since the ‘last financial crisis’, the new jobs that were created, however, lacked in wage increases and are languishing at their slowest pace, since 1997.

chart 1

Despite several rounds of money printing and a zero interest rate policy, the Central Banks have not been able to achieve their objective. Hence, in desperation, they have resorted to negative interest rates, whereas, one will have to pay the banks an interest rate fee just to maintain cash in one’s account. Why would any sane person deposit money into the bank, rather than stuffing in their mattresses or in the wall. With no confidence in the Central Banks, chances are that people will want to save more for a rainy day, rather than spend, as shown in the chart below. People are saving more these days as compared to that of a decade earlier.

Chart 2

With the Central Banks resorting to negative interest rates and pushing it yet further into negative territory, it is possible that we will witness a run on the banks and they will close down indefinitely.

Currently, the banks have not yet passed on the negative rates to the retail customers, as their margins will take a hit. In order to save their reputation, chances are that they will lend recklessly, similar to what occurred in 2006 and the entire world will end up in a much larger disaster causing a crisis which cannot be controlled. Hence, the Central Banks are now out of ‘ammo’ and are the cause of this reoccurring crisis.

Some shocking data, as reported by The Telegraph;

  1. Currently $8 trillion of sovereign debt is trading at a negative yield.
  2. Interest rates have been cut 637 times by the Central Banks, globally, since March of 2008.
  3. The Central Banks have printed a staggering $12.3 trillion of money, since March of 2008.
  4. What have they achieved? Since ‘The Great Recession’, the nominal GDP, of the world, has grown by a paltry 11 percent, according to Bank of America Merrill Lynch.

With all of the resources and the expertise which are available, the only actions that Central Bankers performed, was to come forward on the day of the monetary policy announcement and declare a rate cut and a certain amount of money printing. If this is the only solution they can find to do a better job everyone is in trouble. It seems as though any fifth grader is capable of performing these responsibilities and repeating the same process. After all, the world has survived for thousands of years, without the Central Banks and probably prospered better during the ‘Gold Standard’, at which time, the Central Banks had limited scope to alter monetary policies, as they are now doing.

How can you save yourself and your family from this madness?

Banks will charge you for holding on to your own cash, hence, there is no point in parking your money in such funds. The stock markets are in a ‘Asset Bubble’ and a “Earnings Bubble’ just waiting to’ burst’, I witnessed a precursor to this situation in the first two months of this year. Currency wars are escalating in the world and are moving towards ‘economic self-destruction’.

Gold is the only asset which will increase value:

Gold is the only asset class, which will maintain its value during times of ‘financial crisis’. It has done so previously in the past and I observed its performance during the beginning of the year, in which its status affirms it as the preferred safe haven. There will be times during this ‘crisis’ when different assets classes will be in focus. I will continue to guide you as to the best profit making assets, during these periods of time. If you are holding any stocks, this current rally is the last chance to liquidate your holdings; gold will give one an excellent buying opportunity within a few weeks of time and should be used to purchase this for the long-term period.

Chris Seebert the President and CEO Gold Gate Capital where they specialize in helping clients roll over there  IRAs and 401k into Physical Gold that they can store at their house or in a depository, to help protect their assets from the next crash said this to me.

For Institutional portfolios a typical classic asset mix achieves a higher long term return with a percentage gold component depending on base currency (based on research going back to 1987). With likely further acceleration of money printing by the largest economies in the world, leading to further destruction of paper money, investors will become even more aware of the necessity to owning real money. Gold has been money for 5,000 years and maintained its purchasing power throughout history because it cannot be printed.”

Mr. Seebert also agrees with my forecast of what is to unfold and his free book called “The Looming Financial Crisis” that focuses on how to properly invest in metals and how to do it properly. He also mentioned their key clients who can benefit the most are those between the ages of 65-85.

Unfortunately, I foresee very difficult economic times ahead for all. Therefore, it is best to be prepared and take proactive measures, in advance, so as to avoid the pain rather than regret it later!

Follow my lead if you want to safely navigate the financial markets over the next couple year to protect and profit from the coming the bursting of some asset classes and rise of bull markets emerging in others.

Don’t waste your time! Click here to find winning trades in minutes!

Visit: www.TheGoldAndOilGuy.com To Learn More.

Chris Vermeulen

[Image Courtesy of Wikimedia]

On March 4th, 2016, when the employment reports come out expect huge price swings. This might be the most important employment report of the year in terms of stocks and commodity market trends.

I cannot underestimate the importance of this Friday’s, February 4th, 2016, U.S. Labor Department report being released.  At the time of the report’s release, the number of new jobs may fall a little short of estimates again, or if they meet them, investors might focus on the FED staying the course to raise its short-term rates in mid-March 2016. These consequences could last well into the end of the month of March 2016.

Trade smarter and make more money with Tradespoon!

Falling oil prices, careening equity markets, and the economic contractions in China continue to spook investors in recent weeks, leading to fears that the global economy is only steps away from a 2008-style “systemic crisis”. This is a perfect storm for investors to jump into safe havens including U.S.Treasuries, gold, silver and crude oil and to make extremely handsome profits over the next 1 to 3 years.

I still believe that there is virtually no chance the FED will raise interest rates going into March 2016.  I even doubt that the central bank will do so by year end of 2016.

Today’s bottom line is that the FDIC has stated in black and white that they are not equipped to deal with another banking crisis. This is where the U.S. Government should be stepping in, with an explicit guarantee to bail out the banks.  The real irony, of course, is that the government does not have any of its own money.  They only have your money.  Taxpayer money.  So, in essence, the government is guaranteeing your bank deposit with your own money.  It’s mind boggling.

The larger problem is that the government has not done a good job hanging on to any of your money. The Treasury Department’s financial statements are showing the U.S.  Government’s net worth at negative $60 trillion.  Uncle Sam is in no position to bail anyone out including themselves.

ZIRP, making the stock market a casino to borrow low on margin and speculate high on “risk”, or, in the case of corporations to issue tons of new debt and buy back their own stock. Now to NIRP, negative interest rate policy so that all companies would be enticed to borrow “cheap” money to hire workers and grow their businesses with QE, the central bank creating new money for use in an economy.

Only a central bank can do this because its money is accepted as payment by everybody.  Sometimes dubbed incorrectly “printing money” a central bank simply creates new money at the stroke of a computer key, in effect increasing the credit in its own bank account. This has destroyed honest price discovery and the key ingredients of financial market self-discipline and stability. They have created financial bubbles, which sooner or later must deflate leading to a huge collapse.  They have not helped “Main Street” in any way shape or form.  The FED Chairwoman. Janet Yellen, spends her time studying her on “data dependent” charts as if they are really related to FED policy. They are irrelevant!  ZIRP and QE just distorts and degrades” free financial markets”.  The FED has now turned them into casinos of crony capitalist corruption.

The latest crime of negative interest rates (NIRP) exist in the Eurozone, Switzerland, Sweden and Japan.  These central banks are imposing negative rates on the excess cash reserves of commercial banks. This maneuver is only squeezing bank’s interest margins and causing a run on banking sector stocks.

This dangerous experiment is doing nothing for the real economies of a world staggering under huge amount of unplayable and massive excesses of debt. It is just feeding the mother of all asset bubbles.

Ultimately, the FED will go for the next thing with NIRP. For real people, who are trying to save a nest egg, NIRP, will be the “flashing neon light” announcing that the government is confiscating the people’s savings and wealth. When the FED actually tries to impose NIRP on their own people and not just the commercial banks, the central banks will be signing their political death warrants.  That day is coming soon.

Gold is holding near the February 2016 highs, while gold shares continue to rise further.  HUI closed at a nine-month high. The world economy crises is still underway, but it seems to be on borrowed time. A huge decline in global equities is upcoming and it will be important to see how low it goes. Crude Oil is bottoming and looks poised for a rebound.  It’s boosting the stock market for right now. 

For today, keep your cash in U.S. Dollars, but we are moving very soon to take advantage of new investment opportunities.

Until 1933, people carried gold coins in their pockets, and paper bills were exchangeable for gold and silver coins at any bank. Prices were remarkably stable and had been for a hundred years or more. In 1933, US citizen’s gold was confiscated by the government, the dollar was devalued by 41%, and we entered a period in which the treasury attempted to hold the value of the dollar at 1/35 of an ounce of gold.

The Economist” stated that gold has gotten off to its best start to a year in 35 years.  The safety play is up 16% in the year to date as of Friday February 26th, 2016, which are drivers as stocks, crude oil and other assets have been under extreme pressure.

chart 1

Chart 2

Precious metal funds have seen their biggest three-week inflow of investor money since June 2009.

The inflows have coincided with the FED ‘talking down’ the U.S. Dollar and with rising fears that a recession is near and quantitative easing is failing.  A strong dollar often acts as a drag on dollar-denominated commodities by making them more expensive for holders of other currencies.

These actions are signaling signs to me suggesting to stockpiling gold, silver and cash.  The size and scope of the political, economic and financial problems that now challenge the relative stability and tranquility of developed societies are unprecedented.

If the war on cash should prove unsuccessful in its early stages, banks could be closed for long periods.  Investors should be aware of such possibilities and hold on to cash and precious metals prudently outside the banking system.

Chart 3

Don’t waste your time! Click here to find winning trades in minutes!

So far in 2016, the gold has rallied some 16%, making it one of the year’s best-performing assets. In the late 1960s, when so much gold was required to buy up all the dollar’s, foreign countries were saying that the US government simply gave up, and “closed the gold window” in 1971. The value of the dollar collapsed over the next 10 years, hitting bottom in 1980. By paying of interest and reducing taxes, the dollar slowly recovered some of its value over the next 20 years, but expansive money policy in the 1990s eventually caught up with the dollar in 1999.

Since 1999, the dollar has experienced a drop of more than 80%. Penny candy now costs 50 cents. The “Five and Dime” is now the Dollar Store.

The future for you is very bright as we are awaiting a strong retracement in gold to enter a solid long term entry location. And if you are a long term investor looking for financial stability through precious metals, then you should be accumulating physical metals now for the long run. Figure out how much money you want to convert to gold, silver and other metals then divided that by say 5 and ever couple weeks buy that portion of metals until you have your financial hedge on corruption/financial crash.

If you want to know exactly what I am buying and selling and receive my alerts join me at www.TheGoldAndOilGuy.com

Chris Vermeulen

[Image Courtesy of Flickr]

Global Economy

With the entire world struggling to ward off global deflation, it is prudent to understand why the current actions by the Central Banks are not heading in the correct direction. The massive amount of Quantitative Easing by the Central Banks, globally, have not been converted into inflation as was earlier anticipated. This article will shed light on various aspects leading to deflation.

Trade smarter and make more money with Tradespoon!

Investopedia defines ‘deflation’ as “Deflation is a general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Central banks attempt to stop severe deflation, along with severe inflation, in an attempt to keep the excessive drop in prices to a minimum.”

Japan in the grips of ‘deflation’ with zero interest rates in effect for 20 years:

The chart below displays the interest rate of Japan, which is closer to zero percent, since 1995. Economic principles suggest that Japan should have witnessed high inflation during these past twenty years. After all, with interest rates at zero percent, borrowers should have taken the opportunity to spend more. However, the chart below depicts the reality.

chart 1

Japan Inflation Rate

The chart of inflation below paints a clear picture. Barring three spikes in inflation, Japanese inflation has been close to zero and has entered periods of ‘deflation’. After a brief enthusiastic period of time, Japan remains in the ‘deflation zone’, although the Bank of Japan has announced negative interest rates.

Chart 2

A few experts believe that Japan did not inject sufficient Quantitative Easing and did not maintain it long enough in order for results to come to fruition. Let’s study what the remaining Central Banks have done since the financial crisis in 2007. They continue to inject monetary stimulus in hopes of stoking inflation, but have they been successful?

Most central banks have recently cut rates to negative territory

Chart 3

The European Central Bank President Mario Draghi maintains that his “Big Bazooka” has not been able to keep the European Union out of ‘deflation’. He stated “We will do whatever it takes to save the ‘Euro’.” has not been effective. Let’s compare this with what the FED has been able to achieve.

The situation in the US is somewhat better compared to that of the EU. However, even in the US, the FED has not been able to consistently keep inflation anywhere close to its target rate of 2%.

Chart 4

Have the Central Banks not injected sufficient liquidity into the economy?

From the below chart, it is clear to see that the Central Banks have resorted to massive Quantitative Easing programs, with little to if any results. Why has it not led to inflation?

Chart 5

Why is there no inflation in the economy?

Since the end of the financial crisis, despite the FED and the other Central Banks having released massive amounts of QE, corporations and the public are not experiencing any economic recovery. The failure of the FED to induce growth and induce inflation, to desired levels, has further dented sentiment.

Companies have used the “easy lending” opportunity to clean up their books and have resorted to massive “buyback” programs rather than using the monies for infrastructure, R&D and upgrading their existing technologies.

According to a Reuters research report, since 2010, there have been 1900 companies that have resorted to ‘buybacks’ and ‘dividend’ payouts which have amounted to 113 percent of their capital spending. The proportion of net income spent on innovation has dropped from 60 percent in the 1990s to less than 50 percent since 2009 and consequently has risen only in 2014, because net incomes dropped, according to the analysis of some 1000 odd firms, which buy back shares and report Research & Development spending costs.

Reuters reports that almost 60 percent of 3,297 publicly traded non-financial companies have bought back ‘shares’ since 2010. In 2014, companies spent a staggering $520 billion in ‘buybacks’ and paid out $365 billion in ‘dividends’, for a total of $885 billion more than the combined net income of $847 billion. This has led to the benefits of an artificial ‘roaring stock market’.

Without any economic recovery, how has wage growth performed?

It is clear from the below chart that the wage growth has been far from satisfactory. It continues to languish, at dismal levels, compared to the desired wage target of 3.5 to 4.00 percent. Alhough the unemployment rate is down, employers continue to refrain from raising wages, seeing as they are able to keep their employees’ wages low.

The below chart indicates the ‘depressed’ levels of wages received by employees as compared to the corporate income. The post crisis period continues to be among the worst period in the last 35 years. With no wage growth, employees continue to save rather than spend, as indicated in the chart below.

Will negative interest rates help?

The ECB was the first major Central Bank to resort to negative interest rates, then followed by Japan and meanwhile, experts believe that the U.S. will also soon follow. However, this extreme measure has not provided any relief to the ailing European Union. The Central Banks, in spite of their implemented measures, have encouraged businesses and people to hold on to their cash. Lower spending will lead to less demand, which will, in turn, lead to increased job losses and lower profits, which will encourage people to hoard their money. As prices fall, due to lower demand, people continue to postpone their purchases while waiting for prices to fall further.

Conclusion:

The Central Banks are reinforcing the fear that they are not in control of this situation, which has led to the ‘global current deflationary pressure’. When the firms and people look at the desperate attempts made by the Central Banks failures, they resort to saving their money so as to shield themselves during this current ‘financial crisis’.

Don’t waste your time! Click here to find winning trades in minutes!

The ‘deflationary pressures’ will continue to increase as various Central Banks resort to further QE, by different means. The world will have to incur a period of pain and the ‘The Global Reset’ will allow the market forces to return to normal. The harsh economic winter will continue for a period of 4-5 years. Continue following my reports for more insight of how to trade and safeguard your financial future through trading ETFs, during the forthcoming crisis.

Chris Vermeulen – www.TheGoldAndOilGuy.com

[Image Courtesy of Flickr]

The majority of the world’s stock indices topped out this month on Monday, February 1st, 2016 after a strong oversold technical bounce in price. Several indexes are now in the process of their first re-test of those multi-month lows which should act as support.

Trade smarter and make more money with Tradespoon!

My belief is that the FED will abandon its plan to raise short-term rates in March 2016, given the “economic global contraction” in economic data including the Baltic Dry Index and troubled banking systems in the European Union.

The Baltic Dry Index below displays the major global contraction is now in process, it has now broken support at the 300 level and heading much lower. The Baltic Dry Index tracks the price of shipping raw materials across trade routes which makes it a good indicator of global economic activity. It is the pulse of World trade. The demand for goods is currently collapsing.

The BDI is one of the key indicators that experts look at when they are trying to determine where the global economy is heading.  And right now, it is telling us that we are heading into a major worldwide economic downturn. In fact this trader warned of this happening on Nov 2015 in his report: The Collapsing Global Trade

Chart 1

European banks have been absolutely hammered, and Germany is massively exposed because it does huge business with China.  Deutsche Bank, Credit Suisse, Santander, Barclays and RBS are among the stocks that are falling sharply sending shockwaves through the financial world.

Deutsche Bank is the biggest bank in Germany and it has more exposure to derivatives than any other bank in the world.  Deutsche Bank credit default swaps reflect that there are in deep financial problems and that a complete implosion is imminent.

In 2015, Deutsche Bank had lost a staggering 6.8 Billion Euros.  The most important bank in Germany is exceedingly troubled and it could bring down the Europe Union. Credit Suisse announced that it will be eliminating 4,000 jobs. Most U.S. consumer banks are cutting jobs and trimming branches. Bank of America and Citibank eliminated 20,000 staffers between them and JP Morgan Chase eliminated 6,700 positions.

The world is currently threatened by the $200 trillion “credit bubble” that is currently deflating.  It was created by the FED and global central banks. Despite so many trillions of dollars in QE, we never experienced the full recovery that we were told would happen!

China’s banking system is just months away from its day of reckoning. Its $5 Trillion of unstable debt will bring down the whole global financial system. China’s debt binge is beginning to unwind.

Chart 2

Chart 3

This is just more evidence that global trade is grinding to a halt and that 2016 is going to be a “cataclysmic year” for the global economy.

As these fears become reality expect the FED to reverse course and perhaps even impose ‘negative nominal interest rates.’ here in the US. In a speech, on February 22th, 2010, to the University of San Diego’s business school, Chairperson Janet Yellen was quoted “If it were positive to take interest rates into negative territory I would be voting for that”.

Report explain why lower rates are coming: XLU and TLT suggest that interest rates are going down

The FED is fearful of making another mistake and they are finding it hard to do anything correct. They are paralyzed. It is my belief they will hold off, thus causing the dollar to fall, while other currencies and precious metals rise.

Chart 4

The US Dollar has lost over 95% of its purchasing power in the first 100 years of the FED existence.

Chart 5

Interest-rate jitters going forward are what brought gold up, and with stock markets crashing all over the world and the U.S. “economic contraction” nothing is pointing to more rate hikes, that’s why gold is golden AGAIN!

New central bank policies of “negative yield returns” provides a fundamental reason to own gold today going forward. The Bank of Japan has cut interest rates to negative 0.1 percent which follows similar moves by ECB, Denmark, Sweden, Switzerland and very soon South Korea.

Chart 6
The basic idea is that gold will be the new currency to evolve.

The bigger story was in precious metals. Gold continued to soar reaching a new cycle high of $1175.00/ounce and Silver also rallied to a new cycle high of $15.06/ounce on February 5th, 2016, its highest mark in three months. The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust rose to 22.3 million ounces on Thursday February 4th, 2016, the highest since late October 2015.

Who would have guessed that gold would be one of the best assets to own in 2016?  So far, that has been the case. While the U.S. stock market has rung up its worst start to a year and a cloud of economic doom and gloom continues to roll across much of the world.

Gold is on a hot streak, up 10% this year alone, after shrugging off the Federal Reserve’s interest-rate increase back in December 2015. It should have spelled doom for prices, instead, it’s on track to gain 10% and more so far in 2016.  True, it’s still early in the year, but if gold were to just tread water for the next 11 months, it would mark the best annual gain in four years.

Don’t waste your time! Click here to find winning trades in minutes!

Typically, a rise in gold and a fall in equites sends the US Dollar lower. From there, other commodities will begin to rise including agricultural, oil and softs such as coffee. But we do not just make money from rising prices. See how traders profited handsomely from the collapse of sugar in January.

2016 is and will continue to be an incredible year for traders and investors. Volatility will remain high, price swings will be large and new big trends are emerging.

If you are an active trader or passive long term investor looking for simple, logical trades to profit from the next major trends in stocks, bonds, and commodities then follow me at: www.TheGoldAndOilGuy.com

Chris Vermeulen

[Image Courtesy of Pixabay.com]

Nature functions in cycles, each 24-hour period can be divided into smaller cycles of morning, afternoon, evening and night. The whole year can be divided into seasonal cycles. Similarly, one’s life can also be divided into cycles. Cycles are abundant in nature, we just have to spot them, understand them and be prepared for them. Likewise, economic experts have noticed that the world also follows different cycles. An important pioneer in this field was the Russian social economist, Nikolai Kondratiev, also called Nikolai Kondratieff, a relatively unknown genius.

Who is Kondratiev?

Geniuses have been known to defend their principles and beliefs, even at the cost of losing their lives; they may die but their legacy lives on as did Kondratiev. He was an economist, who laid down his life defending his beliefs. He was the founding director of the “Institute of Conjuncture”, a famous research institution, which was located in Moscow. He devised a five-year plan for the development of agriculture in Russia from 1923-1925.

His book, “The Major Economic Cycles” was published 1925, in which his policies were in stark contrast to that of Stalin’s. As a result of this, Kondratiev was arrested in 1930, and given a prison sentence. This sentence was reviewed and consequently, he was executed in 1938. What a tragic loss of such a genius, who was only 42 years of age He was executed because his research proved him right and Stalin wrong! Nonetheless, his legacy lives on and in 1939, Joseph Schumpeter, named the waves as “Kondratiev Waves”; also known as “K-Waves”.

What are Kondratiev Waves:

The Investopedia defines the” Kondratieff Wave” as: “A long-term cycle present in capitalist economies that represents long-term, high-growth and low-growth economic periods”. The initial study by Kondratiev, was based on the European agricultural commodity and copper prices. He noticed this period of evolution and self-correction in the economic activity of the capitalist nations and felt it was important to document.

Chart 1

These waves are long cycles lasting 50-60 years and consisting of various phases, which are repetitive in nature. They are divided into four primary cycles:

  1. Spring- Inflationary growth phase: The first wave starts after a depressed economic state. With growth comes inflation. This phase sees stable prices, stable interest rates and a rising stock market which is led by strong corporate profits and technological innovations. This phase generally lasts for 25 years.
  1. Summer-Stagflation (Recession): This phase witness’s wars such as the War of 1812, the Civil War, World Wars and Vietnam. War leads to a shortage of resources, which leads to rising prices, rising interest rates and higher debt, and because of these factors, companies’ profits decline.
  1. Autumn-Deflationary Growth (Plateau period): After the end war, people want economic stability. While the economy sees growth in selective sectors this period also witnesses social and technological innovations. Prices fall and interest rates are low which leads to higher debt and consumption, while company’s profits rise, resulting in a strong stock market. All of these “excesses” end with a major speculative bubble.
  1. Winter-Depression: This is a period of correcting the “excesses” of the past and preparing the foundation for future growth. Prices fall, profits decline and stock markets correct to the downside. However, this period also refines the technologies of the past, with innovation, making it cheaper and more available for the masses.

Accuracy of the cycle in the last 200 years:

The “K-Waves” have stood the test of time, they have correctly identified various periods of important economic activity within the past 200 years. The chart below outlined its accuracy.

Very few cycles in history are as accurate as the Kondratiev waves.

Chart 2

Criticism of the Kondratiev Waves:

No principle in the world is left unchallenged, similarly, there are a few critics of the “K-Waves” who consider it useful only for the pre-WWII era. They believe that the current monetary tools, which are at the disposal of the monetary agencies, can alter the performance of “These Waves”. There is also a difference of opinion regarding the timing of the waves.

The wave is being pushed ahead but the mood confirms a “Kondratiev Winter”:

Chart 3

A closer study reveals that the cycles are being pushed forward temporarily. Any intervention in the natural cycle unleashes the wrath of nature while the current phase of economic “excess” will also end in a similar correction. The “K-Wave” winter cycle which started in 2000, was aligned with the “dot-com bubble”.

Chart 4

The current stock market rise is fueled by the easy monetary policy, of the global central banks. Barring a small period of time, from 2005-2007, when the mood of the public was optimistic, the winter had been spent with people in a depressed social mood. The stock market rally, from 2009-2015, will be perceived as the most hated despised rally, and the one most laden with fear.

Every dip of a few hundred points, in the stock market, starts with a comparison to the “Recession of 2007-2009”. The mood exudes fear and disbelief that the efforts of the central banks have not been successful and are unable to thwart off the winter as predicted correctly by the” K-Waves”. The winter is here and is reflected in the depressed social mood.

How to “weather” out this brutal winter:

In the last phase of the winter cycle, from 2016-2020, (which is likely to test us), the stock market “top” is in place. Economic activity globally has peaked, terrorism further threatens our lives, geopolitical risks have risen, the current levels of debt, across the developed world, are unmanageable, and a legitimate threat of a “currency war” occurring will all end with the “The Great Reset”. Gold will be likely to perform better during this winter cycle. Get in love with the yellow metal, it’s the blanket which will help you withstand the winter.

Conclusion:

Cycles are generally repetitive forces, which give us an insight into the future so as we can be prepared to face it and prosper. Without excessive intervention, nature is very forgiving, while correcting the “excesses”, but if one meddles with nature, it can be merciless, during the correction. The current economic condition will also end with The Great Financial Reset.

I will suggest the necessary steps to not only avoid the “Global Reset” but several ways you can prosper.

I share my analysis, market forecasts at www.TheGoldAndOilGuy.com

Chris Vermeulen

Federal Reserve

With the fall in crude oil prices, the average American’s gas expense is now more affordable. Similarly, the transportation sector should normally benefit from lower crude oil prices. Most of the companies in the transportation sector should post strong results, as crude oil prices are expected to remain low for most of 2016 (according to the EIA).

As the stock markets reward clarity in earnings, the participants are known to reward high valuations to such companies. Under normal conditions, prices of such stocks should rise. However, the chart below shows a different story. The Dow Transportation Index, which was regularly making new highs, made a dash to the upside when crude oil started falling (as indicated in the chart).

Whenever, we have such “disconnects”, it leads to a larger fall (similar to the one we had in 2008). During that crash, the Dow Transportations Index followed the drop in crude oil prices. Are we going to see a repeat of 2008? Yes, all signs are pointing in that direction.

Chart 1

Dow Transports vs Crude Oil price

Why are we referring back to the 2008?

After any crisis, the economy goes through a corrective phase during which time the excesses of the crisis are washed away. This is generally a painful period, but it is the only solution. The excesses before the beginning of “The Great Depression”, took many years to correct. It was followed by a long-term growth throughout the world, which was followed by a very strong bull market.

The US had similar excesses in the 2007-2008 period, during “The Great Recession”, but the FED panicked and did not allow the excesses to be washed away.

The FED has been wrong all along in its perceived solution of the financial crisis:

Many experts have criticized the FED for the 2007- 2008 financial crisis, and rightly so. The crisis was due to the easy monetary policy of the FED and the need to earn quick profits by the large financial institutions in order to support the “lofty valuations”.

With all of these resources, at hand, it is surprising how the FED wanted to solve the problem with the very same instruments, which, in fact, caused the crisis. Since 2008, they maintained an “easy monetary policy”. All of the financial institutions have used the “easy money” in order to strengthen their balance sheet and earn returns by pumping money into the stock markets. The famous Albert Einstein once stated “Insanity: doing the same thing over and over again and expecting different results”, is very reflective of the FED actions.

The FED has blown the problem into an unmanageable proportion:

In 2008, the problem was manageable, with only a few large financial institutions having balance sheets full of bad debts. Rather than solving the problem, the FED has blown it into such large proportions that now it needs insolvency of the nation in order to sort out the “excesses”. Who has been the beneficiary of all of this excess liquidity? The Stock Markets….

Chart 2

Looking at the chart above, it seems that the FED was working as a personal banker to the stock markets and supporting it each time the markets went down. The market participants brought the SPX down by 5%-7%, causing the FED to “panic” and announce another QE as well as a rate cut. After the recent drop, there are whispers of a likely QE4. by the FED, and reflecting on their history, it does seem like a possibility.

This will end with ‘The Great Reset’:

If you thought that ‘The Great Recession’ was bad, wait for ‘The Great Reset’. The Chinese stock market is a good example of how QE might work in the short-term, but in the long-term, it is not the solution. The US markets are nearing the same period within the stock market. The QE4 and other announcements by the FED, will not be able to stem the forthcoming slide with in the stock market thought it may provide a temporary lift last a few months, but the downside pressure and weight the market is carriing I think will overpower QE4 eventually. The world will have to go through ‘The Global Reset’ in order to wash away the excesses.

Conclusion:

If the stock markets are going to tank and the commodity markets are already scraping the bottom (led by crude oil) where does one invest? Over the next five years, the best investment in terms of currency is likely to be ‘Gold and Silver’, which are currently out of favor.

Watch My Video About What Is About To Happen Next: www.TheGoldAndOilGuy.com

Chris Vermeulen

[Image Courtesy of Flickr]

Market Crash

The whole world is in disbelief that the stock markets are not collapsing, right now. It is going to be a slow bear market decline. I had written an article called “The Power Of Seven”; many were skeptical of my suggestion warning investors for move to cash. I was right on target. Now, the markets are tanking and experts are calling for all sorts of levels, I believe I am correct again, by calling for an intermediate bottom in the markets that may last much longer than traders expect.

Many believe that catching the top and bottom, is not only difficult, but impossible. With my predictive trend analytics models, I constantly identify both bottoms and tops on varous timeframes rom intraday to monthly charts, which if you have been following me for some time very well know.

Why Am I Confident Of A Bottom Right Now?

Along with my models, which suggest a bottom, the following charts will also explain why we believe the an intermediate bottom is in place and that it is the wrong time to short the market, or sell your holdings. Its much like the August crash, if you paniced out at the bottom like 95% of traders and investors did, then you know exactly what time talking about.

RSI suggests a pullback is coming:

Chart 1

During the last 15 years, everytime the RSI on the weekly chart, came close to the oversold levels, I had seen a bounce; I do not believe this time it is going to be any different. I expect to see a strong sharp rally from the current levels, which will catch all the shorts off guard. The time to enter a short, has currently passed and it is now time to be positioned for a bear market bounce.

Respect the age old pattern ‘The Doji’

Chart 2

The Japanese candlestick style of trading has been in use for centuries. One of the most important and reliable patterns, is the “Doji”, which is a candlestick representing indecision. I have noted that going back to 2006, whenever the market made a doji pattern, at major support levels, it was consequently followed by a considerable bounce. The pattern displayed on January 20th, 2016, is one such pattern, which will take US Equities higher.

A Few Examples From 2006 – 2010

It is important to note that all Doji’s are not to be considered 100% valid. I consider only the Dojis, which are formed at an important support level,to be valid and RSI to be oversold and in the lower reversal zone.

Chart 3

Chart 4

Leading indicator ‘Bond Market’ suggests there is still time before crash occurs

Every crash was preceded with the 10 year minus the 3 month Bond Yields by dropping towards the zero line. Although the equity markets have crashed, the bond markets are still not displaying any signs of panic. The indications from the bond markets should be respected, as they are a leading indicator.

This chart is upto date as of Jan 19th 2016, and its clear that the masses (investors) have not yet moved their capital into bonds which drives the percent down.

Chart 5

Conclusion:

During stage 3 market tops (final stage of a bull market) market participants are in “denial mode” while only the experts are liquidating their assets. The rest of the market participants realize too late that the market has turned bearish. By that time, they panic and start selling positions, whereas the experts realize that it is not time to buy yet and the average market participant forces the market down month after month with a steady stream of selling pressure. A bottom will not be found until the masses are finished selling their shares.

The volumes on January 20th, 2016, were on the higher side which indicated “panic selling”. Although, the markets are free to do what they like, my assumption and forecast is that around these levels, the markets are “bottoming out”. The markets are due for a rally, which will provide some positive returns, in the short-term.

Does this mean that the market decline is over and done with? Certainly not! The markets will once again turn, most likely, when all of the so called experts are calling for a “buy”. I will keep you informed, however, make sure you optin to my free email list so you don’t miss any further updates, videos and trading signals!

Chris Vermeulen – www.TheGoldAndOilGuy.com

[Image Courtesy of Wikipedia]

Thought Leader Discussions

Gevo, Inc. GEVO Stock News

0 6539
Gevo, Inc. (NASDAQ: GEVO) Before we get into this interview, I'd like to extend a special thanks to my friend Joey who both set up the...