Citizens of the U.S. and the world are heading into a future that few have prepared for. It will also turn out to be much worse than most realize as it will be unlike anything we have witnessed in the past.
Part of the reason we are in such a bad fix has to do with the compartmentalization and specialization of our modern educational and economic system. There are many intelligent people in the market doing smart things; however, they often have no clue on what the hell is going on in other industries or professions.
For example, there are many precious metals analysts for whom I have much respect, but who fail to understand the energy industry. Now, I imagine there are a few analysts in the precious metals Biz who do understand the ramifications of Peak Oil, but it may be more rewarding for them (financially) to keep their traps shut.
And then we have individuals who specialize in “Technical Analysis.” Many who have read my posts and articles realize that I believe that technical analysis is worthless in a rigged market. I also believe the big price moves in the gold and silver are more fundamental in nature than technical.
I explained this in detail in several recent articles by comparing the price movement of oil to that of gold and silver. I have republished two charts below that show how the price of gold and silver moved in parallel with the price of oil in the 1971-1980 time period:
Here we can see that silver and gold moved in tandem with the price of oil. Many investors still regurgitate the notion that the Hunt Brothers were solely responsible for pushing the price of silver to record highs in 1979.
If that was true, then who was pushing up the price of gold? Or, how about oil… who was responsible for increasing the price of oil by a factor of 10, from $3.29 in 1973 to $36.83 in 1980? If I were to ask these questions of someone who blurted out that the Hunt Brothers cornered the silver market… they would get a blank stare back from me, because they have no clue.
My articles get around the Internet. Someone on another blog made the comment, “comparing the price of silver to oil was silly”. They said it makes just as much sense to compare the price of silver to the price of potatoes.
Everyone is free to have their own opinion, but the fact is that energy is the key that drives the global economy. Energy allows silver to be mined, refined, transported, minted, traded and consumed. I happen to believe the price of energy controls the price of silver, and other commodities as well, for that matter.
Let me see if I can provide another example that may win over the worst skeptics. If we look at the price movement of copper from 1971-1980, we see an interesting correlation to the price of oil:
Well… look at that. It is perhaps just another coincidence, the price of copper had a similar trend to the price of oil. As the price of oil shot up in 1979… so did the price of copper. Hell, the 1979 and 1980 copper-oil price lines are almost identical.
Copper didn’t enjoy the same percentage gains as gold or silver as it isn’t a sought after monetary metal. However, who was trying to corner the copper market in 1979-80 to push it up to new record highs? Do you ever hear anyone asking that question?
I bring up this subject so investors realize that the big price moves of gold and silver parallel the price movement of oil and are not due to technical analysis.
The long-term technical analysis chart of silver below is suggesting that cycles and waves may predict the future price of silver. I say throw-away the damn chart and follow the price of oil… it’s a much better indicator.
Why? Because, if you were to overlay the price of oil on this chart, you would find a similar trend-line. That being said, the price of oil is only a basic guideline to gauge the market price of gold and silver.
Due to the Financialization of the market by manufacturing hundreds of trillions of dollars worth of derivatives, fiat currency has been siphoned away from the physical market and into worthless paper garbage. We have no idea what the prices and costs of goods, services and commodities would be if the majority of fiat currency was invested directly into the physical markets rather than the $trillions in leveraged paper claims.
I would like to touch on one more subject as it pertains to technical analysis before I get into the wonderful subject of economic collapse.
In a recent article, “Silver – The Power of Thought Will Ultimately Prevail” the author Michael Noonan stated the following:
We keep moving away from discussing fundamentals because the fundamentals have not been reliable indicators in the supply/demand equation that normally determines price. Yet, almost every single article focuses on the record sales of numbers of coins offered to the public, charts showing overwhelmingly favorable statistics that favor higher silver prices, cost factors for mine production, decreasing supply relative to increasing demand.
How many times, and in how many ways can the same information be presented over the past year, and yet the price of silver languishes near recent lows? People have an appetite for this kind of information. It serves as a crutch to bolster flagging belief that silver and gold will rally any time soon.
Fundamentals are real. We are not being dismissive of their importance. Instead, we see the perception of their impact as being misplaced, for now. Ultimately, they will prevail, but the greater area of focus of a failed fiat financial system deserves center stage.
I disagree with Mr. Noonan on his current assessment of the fundamentals. While I don’t want to get into a TIT for TAT debate with Mr. Noonan on why I disagree, I believe it’s important to understand the difference between the two ideologies.
Mr. Noonan doesn’t focus on the fundamentals because they are, according to his analysis, “unreliable indicators.” Instead, he seems to suggest or imply that technical charts offer a better indicator. Now, I may be guilty of putting words in his mouth as he did not directly say that, but if you read his articles, you will find technical charts rather than fundamental analysis.
I believe that the fundamentals are everything in a rigged market…. even when the paper price doesn’t reflect it. It is more important to understand the energy fundamentals than it is to focus the on technical charts of silver. As I explained above, oil has been the major indicator in driving the price of gold and silver (and yes… copper).
Also, when investors understand the fundamentals of the energy-cost structure in the precious metal industry, they will be able to see there is a floor for the price of gold and silver. I still get investors emailing me stating that silver can go to $5.00 because it’s so cheap to mine.
In addition, technical analysis in a rigged market cannot grasp the serious problems looming in the energy industry. I just got off the phone with energy analyst Bill Powers of PowerEnergyInvestor.com… and I have to say the information he shared about the U.S. Shale gas industry is alarming. I will publish an article on this subject next week.
Let’s just say the price of natural gas in the United States is heading much higher. This will not be because of technical analysis, but rather in response to important fundamental causes, forces and data.
If you are an individual who believes the garbage forecasts put out by the Large Bloated Worthless Banks and Brokerage Houses claiming 20 years of growing natural gas production at low prices of $4.00 Mcf here in the U.S., get ready for a rude awakening.
This is the reason Mr. Noonan’s opinion on the fundamentals are wrong. While I agree with Mr. Noonan that the “Failed Fiat System” deserves focus, peak oil is the reason the Fiat Monetary System is headed for certain death.
Again… technical analysis is worthless in understanding the ramifications of peak oil and its impact on the United States and the world going forward.
The Coming Economic Collapse Will Be Much Worse Than Most Realize
From the information and data that I am coming across, the U.S. and World are totally unprepared for severe changes that are drawing near. These changes and disruptions will be much worse than the typical analysts’ concerns of deflation, hyperinflation or currency collapse.
A few days ago I listened to Coast-to-Coast A.m. with George Noory. His guest that night was none other than Harry S. Dent Jr. Harry told George there is going to be a huge stock market crash and the place to put one’s money is not gold or silver… but rather the U.S. Dollar.
Dent believes the dollar will be the safe-haven because we have 20 aircraft carriers roaming the oceans of the world . Dent credits the strength of the Dollar to the strength of our military.
Dent makes his forecasts based on what he calls the “Demographic Cliff”, which, by the way, is the title of another one of his endless supply of books. Dent believes understanding the changing demographics of countries is the key to investing.
While Dent has been a successful financial publisher, many of his forecasts have been complete failures. According to CBS Money Watch article, “Harry Dent and the Chamber of Poor Returns”:
In October 1999, Dent wrote the bestseller “The Roaring 2000s.” The following is from the Library Journal’s review: “Dent’s previous book “The Great Boom Ahead” accurately predicted the stock market boom of the 1990s. In this one, he looks ahead to the new millennium and claims that the Dow may reach as high as 35,000 within the next decade, due in large part to the changing demographics of baby boom investors.”
Dent could not have been more wrong. The next decade saw the S&P lose 1 percent a year, producing a cumulative loss of 9 percent.
Despite this failure, which might have humbled someone else, Dent persisted. In January 2006 he published “The Next Great Bubble Boom: How to Profit from the Greatest Boom in History: 2006-2010.” Again, Dent was wrong. Not long after publication, we experienced the worst bear market since the 1930s. And for the full five-year period the S&P 500 Index returned just 2.3 percent per year, well below the return on safe bonds. This seems like less of a bubble boom, more of a bubble burst.
Dent makes his money on the market realization there will always be a new Group of POOR UNWORTHY SLOBS ripe for the picking. The market has a short attention span — and memory.
I am surprised that George Noory believes that Dent made several good predictions and it was a good idea to follow his forecasts. I don’t know what happened to the Coast-to-Coast A.m. show. Since Art Bell retired years ago…. the show just isn’t the same.
Everything that Art Bell believed about Peak Oil & Climate change seems to be a BIG JOKE to Noory. He continues to bring back guests who provide evidence suggesting the earth has a creamy nougat center of oil (famous peak oil term coined by James Kunstler), and we are also heading into a New Ice Age — pure bollocks.
As I have mentioned, I am working on my first paid report called The U.S. & World Collapse Report. There will be information in the report that you will not find in one place anywhere else on the Internet. I hope to have the new Report Page with free & paid reports out by the first week or two in February.
Dent and many other analysts who focus on “Deflation” will be proved wrong because they fail to incorporate Peak Oil in their forecasts, shown in the chart below:
When the U.S. and the world were suffering from the Great Depression in the 1930’s, global oil production was still in its infancy. Global oil production increased from less than 5 mbd (million barrels a day) in the 1930’s to 45 mbd by 1970.
The reason the United States pulled itself out of its horrible depression had more to do with a growing oil supply than the economic activity gained from World War II.
Then we had the terrible 1980-1982 recession in which Fed Chairman Volcker saved the dollar by raising interest rates while putting the Kibosh on the precious metals. Even though global oil production declined for a short time-period, we still had another 35 years’ worth of growing world oil supplies.
It was the increasing oil supply that enabled the U.S. and world economies to grow out of the severe down-turns. However, we have been in a global oil production plateau for the past decade (as shown in the small insert graph above, highlighted in yellow). We are no longer able to increase world oil production as we did in the 1930’s or 1980’s.
Thus, Dent’s Demographic theory of forecasting is worthless in a peak oil environment. I could not care less whether a truck driver is 21, 41 or 61 years old, if there isn’t an available economic supply of diesel to maintain the transport industry.
The peaking of global oil production is putting severe pressure on the Global Fiat Monetary System. Business as usual will not continue for long, since cracks are beginning to appear in the energy industry. I will be discussing this in future articles and in more detail in The U.S. & World Collapse Report. at the SRSrocco Report.
Gold and Silver will become some of the most important stores of wealth and investments in the future. The U.S. Dollar will not be a safe-haven as Dent and many other analysts believe because a fiat monetary system based on compound interest and fractional reserves need a growing energy supply to survive.
In conclusion, the GREAT U.S. SHALE ENERGY BOOM is heading towards a BUST. There is no PLAN B and few are prepared for what is coming. The debate on Technical Analysis vs. Fundamentals will seem silly when U.S. and the world head into the worst economic collapse in history.
As former Assistant Secretary of the U.S. Treasury, Paul Craig Roberts stated recently, when the price of gold and silver revalue much higher, there won’t be any physical metal to buy. Trying to time the market for the best price may turn out to be a very costly mistake.