Radical Changes Are In Store For The World And Global Markets, Are You Ready?
November 19, 2016
On the heels of continued chaos in key markets, radical changes are in store for the world and global markets.
Radical Changes Are Coming
On the heels of the release of his KWN audio interview covering the gold smash and urging investors to remain strong, KWN did a follow-up interview with Dr. Leeb because of the intensity of the recent takedown in gold, silver, and the mining shares: “If you’re worried that gold’s post-election drop means the bull market in the metal that we’ve been predicting is a mirage, relax. The current dip in gold, while it could last a month or two longer, is merely a slight head fake in a bull market more on course than ever to be of momentous proportions…
If we had to sum it up in a single (albeit long) sentence, here it is: Trump’s victory and the market’s subsequent turbulence signals a seismic shift in market leadership to commodity-led growth; U.S. imports of increasingly scarce and ever more costly commodities will rise drastically and so will inflation that a behind-the-curve Fed will be helpless to curb; the eventual, inevitable upshot will be that commodity producers will become increasingly reluctant to take paper money for their ever scarcer resources and will want some more durable asset like, you guessed it, gold.
That’s the case for gold in broad outline. Now for the supporting evidence.
Let’s start with the reality that the U.S. has been blindly complacent about commodities, which will be required in massive amounts for the big infrastructure push Trump has promised. The U.S. Geological Survey tracks around 65 vital commodities and minerals. For over 40 of them we import more than half our needs; for 25 (about 40 percent), we import at least 90 percent of our needs. We used to be far less dependent on other nations. At the beginning of this century we imported 90 percent or more of our needs for only a quarter of important commodities and imported 50 percent or more for about half.
If you wonder why that’s a big deal, the problem is that those resources will be increasingly difficult and costly to obtain as they become scarcer. And scarcities are inevitable – in fact, they’ve begun. The chart of the index of raw industrials, the prices businesses pay in real time for the commodities they use (as opposed to futures trading) is revealing. Remarkably, it shows that even at the nadir of the Great Recession, when capitalism’s very existence seemed precarious, the index stood 20 percent higher than its average during the 1990s. There is no way to explain this other than by realizing that commodities had become scarcer than in the previous decade.
Since the 2008 crash, global growth has been strong only in 2010 and the first half of 2011. In this period, the index far surpassed its 2008 high. After 2011, world growth retreated to recessionary levels until mid-2016, when just a hint of growth sent commodities almost to their pre-Great Recession peak. Now with commodity-intensive infrastructure a worldwide imperative, they are destined to go well past their all-time highs.
But What About Gold?
So why hasn’t gold gotten the message yet? One reason is that with gold rightfully seen more as a currency than a commodity, and with inflation still low, the market has some illusions that perhaps we’re going back to the 1990s Goldilocks era of strong growth and low inflation. But the emergence of commodity scarcities will nix that possibility.
The only reason the markets haven’t already caught on is one recalcitrant commodity: oil. With oil prices lagging, headline inflation has remained low and the Fed still behaves as if it will remain low forever. But once oil gets into the act, headline inflation will jump and everything that requires oil – including virtually every other commodity – will jump as well.
Here is a look at a few key reasons why oil will rise. Right now, with virtually every producer producing at full throttle, oil is about 750,000 barrels a day in oversupply. That will change either because OPEC at its meeting later this month acts to cut production or because increased demand overtakes the world’s ability to produce.
We think OPEC will act, and it won’t have to cut by much to reverse the current situation of oversupply. OPEC currently produces about 34 million barrels a day, a record amount, and is estimated to have no more than about 1 million barrels of excess supply – and even that could be overstating it. Over the past five years the cartel’s production has averaged about 31 million barrels a day. At its peak in 2015 it was producing less than 33 million barrels. Even returning to that previous peak would easily turn a glut into a deficit.
And with the IEA estimating demand in 2017 will grow by 1.2 million barrels a day – likely an underestimate in light of the push for infrastructure – it’s hard to avoid the conclusion that we’re headed for an oil deficit. That means big-time gains in oil prices and in inflation. If you think fracking will fill the gap, it won’t. Even with three-digit oil, frackers will find it tough to add even half a million barrels of oil to current production. Remember, fracking is resource-intensive, so its costs rise when commodity prices go up – and much of the recent gains in fracking productivity come from vast increases in the amount of sand and water used to frack the wells.
Gold Liftoff!
Once oil joins the party, all the commodity pieces will be in place for gold to take off. Remember, gold was far stronger than industrial commodities during the 2001 to 2008 boom and again during the second commodity upleg between 2009 and 2011.
As for the Fed, we don’t expect it to take a strong stand against inflation, not with a Trump administration that has little fear of debt and that will likely view even high inflation as better for business than slow or even negative growth. Protracted slow growth has fractured America and the world, and the 1970’s high inflation harmed Wall Street. Not much of a choice for a populist administration.
Bottom line: the world has taken another giant leap to a future with little place for paper currencies and in which gold will become the monetary center. So stop worrying about gold’s current weakness and buy gold, which will be by far your best protection in a tumultuous future. While commodities and commodity-levered stocks will lead the market for the foreseeable future, gold (and other precious metals) will end up winning the race…As mentioned in the opener, KWN also released a completely separate audio interview today with Dr. Leeb covering the takedown in the gold and silver markets. To listen to the extraordinarily powerful audio interview where Dr. Leeb urged investors to stay strong ahead of what he predicted “is going to be the greatest bull market of anybody’s lifetime that’s alive today” CLICK HERE OR ON THE IMAGE BELOW.
http://kingworldnews.com/radical-changes-are-in-store-for-the-world-and-global-markets/
November 19, 2016
On the heels of continued chaos in key markets, radical changes are in store for the world and global markets.
Radical Changes Are Coming
On the heels of the release of his KWN audio interview covering the gold smash and urging investors to remain strong, KWN did a follow-up interview with Dr. Leeb because of the intensity of the recent takedown in gold, silver, and the mining shares: “If you’re worried that gold’s post-election drop means the bull market in the metal that we’ve been predicting is a mirage, relax. The current dip in gold, while it could last a month or two longer, is merely a slight head fake in a bull market more on course than ever to be of momentous proportions…
IMPORTANT:
To hear which legend just spoke with KWN about $8,000 gold and the coming mania in the
gold, silver, and mining shares markets CLICK HERE OR ON THE IMAGE BELOW.
To hear which legend just spoke with KWN about $8,000 gold and the coming mania in the
gold, silver, and mining shares markets CLICK HERE OR ON THE IMAGE BELOW.
If we had to sum it up in a single (albeit long) sentence, here it is: Trump’s victory and the market’s subsequent turbulence signals a seismic shift in market leadership to commodity-led growth; U.S. imports of increasingly scarce and ever more costly commodities will rise drastically and so will inflation that a behind-the-curve Fed will be helpless to curb; the eventual, inevitable upshot will be that commodity producers will become increasingly reluctant to take paper money for their ever scarcer resources and will want some more durable asset like, you guessed it, gold.
That’s the case for gold in broad outline. Now for the supporting evidence.
Let’s start with the reality that the U.S. has been blindly complacent about commodities, which will be required in massive amounts for the big infrastructure push Trump has promised. The U.S. Geological Survey tracks around 65 vital commodities and minerals. For over 40 of them we import more than half our needs; for 25 (about 40 percent), we import at least 90 percent of our needs. We used to be far less dependent on other nations. At the beginning of this century we imported 90 percent or more of our needs for only a quarter of important commodities and imported 50 percent or more for about half.
If you wonder why that’s a big deal, the problem is that those resources will be increasingly difficult and costly to obtain as they become scarcer. And scarcities are inevitable – in fact, they’ve begun. The chart of the index of raw industrials, the prices businesses pay in real time for the commodities they use (as opposed to futures trading) is revealing. Remarkably, it shows that even at the nadir of the Great Recession, when capitalism’s very existence seemed precarious, the index stood 20 percent higher than its average during the 1990s. There is no way to explain this other than by realizing that commodities had become scarcer than in the previous decade.
Since the 2008 crash, global growth has been strong only in 2010 and the first half of 2011. In this period, the index far surpassed its 2008 high. After 2011, world growth retreated to recessionary levels until mid-2016, when just a hint of growth sent commodities almost to their pre-Great Recession peak. Now with commodity-intensive infrastructure a worldwide imperative, they are destined to go well past their all-time highs.
But What About Gold?
So why hasn’t gold gotten the message yet? One reason is that with gold rightfully seen more as a currency than a commodity, and with inflation still low, the market has some illusions that perhaps we’re going back to the 1990s Goldilocks era of strong growth and low inflation. But the emergence of commodity scarcities will nix that possibility.
The only reason the markets haven’t already caught on is one recalcitrant commodity: oil. With oil prices lagging, headline inflation has remained low and the Fed still behaves as if it will remain low forever. But once oil gets into the act, headline inflation will jump and everything that requires oil – including virtually every other commodity – will jump as well.
Here is a look at a few key reasons why oil will rise. Right now, with virtually every producer producing at full throttle, oil is about 750,000 barrels a day in oversupply. That will change either because OPEC at its meeting later this month acts to cut production or because increased demand overtakes the world’s ability to produce.
Above is a sign from the 1970s warning consumers about gas shortages
OPEC Will Move To Raise Oil PricesWe think OPEC will act, and it won’t have to cut by much to reverse the current situation of oversupply. OPEC currently produces about 34 million barrels a day, a record amount, and is estimated to have no more than about 1 million barrels of excess supply – and even that could be overstating it. Over the past five years the cartel’s production has averaged about 31 million barrels a day. At its peak in 2015 it was producing less than 33 million barrels. Even returning to that previous peak would easily turn a glut into a deficit.
And with the IEA estimating demand in 2017 will grow by 1.2 million barrels a day – likely an underestimate in light of the push for infrastructure – it’s hard to avoid the conclusion that we’re headed for an oil deficit. That means big-time gains in oil prices and in inflation. If you think fracking will fill the gap, it won’t. Even with three-digit oil, frackers will find it tough to add even half a million barrels of oil to current production. Remember, fracking is resource-intensive, so its costs rise when commodity prices go up – and much of the recent gains in fracking productivity come from vast increases in the amount of sand and water used to frack the wells.
Gold Liftoff!
Once oil joins the party, all the commodity pieces will be in place for gold to take off. Remember, gold was far stronger than industrial commodities during the 2001 to 2008 boom and again during the second commodity upleg between 2009 and 2011.
As for the Fed, we don’t expect it to take a strong stand against inflation, not with a Trump administration that has little fear of debt and that will likely view even high inflation as better for business than slow or even negative growth. Protracted slow growth has fractured America and the world, and the 1970’s high inflation harmed Wall Street. Not much of a choice for a populist administration.
Bottom line: the world has taken another giant leap to a future with little place for paper currencies and in which gold will become the monetary center. So stop worrying about gold’s current weakness and buy gold, which will be by far your best protection in a tumultuous future. While commodities and commodity-levered stocks will lead the market for the foreseeable future, gold (and other precious metals) will end up winning the race…As mentioned in the opener, KWN also released a completely separate audio interview today with Dr. Leeb covering the takedown in the gold and silver markets. To listen to the extraordinarily powerful audio interview where Dr. Leeb urged investors to stay strong ahead of what he predicted “is going to be the greatest bull market of anybody’s lifetime that’s alive today” CLICK HERE OR ON THE IMAGE BELOW.
http://kingworldnews.com/radical-changes-are-in-store-for-the-world-and-global-markets/
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