By: Captain Hook | Mon, Jun 27, 2016
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The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, June 13, 2016.


She's unstoppable that Hillary Clinton - and the American people are going to get what they deserve in allowing 'pure evil' to inhabit the White House - yet again. Because there are other things that are unstoppable as well, like the trend towards accelerating decentralization in the world that unelected central planners (think ECB) and their corporate masters (think Western multinationals) will not be able to thwart forever. We know this to be true due to equally unstoppable trends in now collapsing US sales, ballooning debt, and chronic unemployment that will need to be reconciled after all the hype associated with the election is exhausted, making prospects in the financial markets consistent with historic decennial pattern at extremes.

Of course in the meantime, this leaves prospects for the stock market 'wide open' going into election time, apparently an unstoppable locomotive as well. As warned these past weeks, with the Fed scared silly over the prospect of Hillary not getting into the White House, their determination to engender a 'feel good' effect in stocks to help Hillary's chances should also be considered 'unstoppable', where anybody not heeding such advice is now seriously under water - and it's like to get worse. Again, as discussed last week, one should be watching the 'risk adjusted' S&P 500 (SPX) in measuring such probabilities, where until the S&P 500 (SPX) / CBOE Volatility Index (VIX) Ratio is vexing profound long-term resistance shown here, the bureaucracy's price mangers will most likely remain in charge - making negative bets premature.

Again, next year is likely to be quite a different situation for reasons discussed both above and previously - where if not for 'relief' associated with a cessation to election related hysterics - the manufacture of a second 'cold war' could backfire on US officialdom - especially if Hillary is at the helm. Because the neocons will be both untouchable and unstoppable with the kind of lawless fascism that would grip Washington with this band of moral retards back in the White House, war might not be far off. Push - push - push is the strategy in rebooting the cold war with Russia, China, and their allies - tactics not witnessed since well before the fall of the Berlin Wall. Only thing is this time around both Russia and China are very different foes both militarily and economically.

What Washington group think doesn't realize is China's dependence on exporting is diminishing rapidly as they turn to domestic consumption in feeding the machine, which could (at the right time) cause them to take a real swing back at the US much sooner than Pentagon agencies are presently contemplating. That's why if neocon Hillary wins in November, the US of A could end up in a war they actually don't want, because 'consumerism' depends on continued access to 'cheap goods'. This is why despite what appear to be important factors affecting precious metal prices within the Western sphere may become 'moot' very soon, along with the dollar($), as both hegemonic Globalism and associated trade are profoundly diminished.

And if the unraveling of America accelerates under Clinton and her cronies in coming years don't expect to even have an election in 2020 - not that one can call what's happening now 'a href="http://usuncut.com/politics/sanders-says-dnc-rigging-convention/">an election' - because they will have complete totalitarian control in place by then and will not let go until all is lost. Again, as alluded to last week, no matter who is in the White House next January, because Trump is a fraud too (the American way in politics), America will likely resemble a version of Venezuela at some point given its bankrupt as well, just a little behind on the time scale. This is one way of attempting to stop natural process, which again is a disassembling of Globalism, US colonialism, and US$ hegemony, but it's the messy method - one that could spiral well out of control - unstoppable for all involved.

This is naturally why we like gold so much going into next year and beyond. Because like the dollar's demise, the flow of funds into precious metals will also be unstoppable at some point (next year) as well. The key here, will be when the bond vigilantes return (it's beginning to happen now), when more of the printed fiat currency units around the world start flowing into the comparatively tiny precious metals market. Right now, precious metals comprise approximately 1% of investor assets globally. Back in 1980, at the peak, this figure was closer to 5%. This means trillions, with a 'T', will need to be plowed into precious metals over the coming five-years or so, into a Fibonacci 21-year apex in 2021. (i.e. the assumption being the bull market commenced in the year 2000.) (See Figure 1)

Figure 1
Gold/USB Monthly Chart

Technical Note: Just look at those stochastics above. Prices will follow the trend change higher some time later this year. It's 'slow motion', but it's happening. Once the move gets rolling however, it will be unstoppable as those in the know panic out of fixed income, and into precious metals.

As you can see above, with gold overlaid (in lime green) over the Gold / USB Ratio, it's all about the sovereign bond market when it comes to the metal of kings (and its underlings), with again, the idea being it doesn't take much of a 'buying power' switch from the huge bond market to the tiny precious metal market in order to have a dramatic effect on prices. What's more, it should be pointed out during the entire bull market in precious metals last decade that public participation rates never exceeded 1%, but still produced approximate 1000% returns in the metals, and 20-fold returns in the shares. So just imagine implications for the sector if participation rates return to peak 1980 levels - some five-times greater than what has already been observed this time around. This is of course why some envision gold well over $10,000, and the shares on Pluto. (i.e. or up at least 20x.) (See Figure 2)

Figure 2
Monthly Gold Chart

The question of the hour, day, year, decade, century, and millennia is then, just what would spook the bond market enough to counter all the official support it gets, where to give you an idea of what we are talking about, Draghi announced the ECB will be buying corporate bonds now - you know - the private sector crap his buddies peddled. The net result of all the quantitative easing (QE) (both announced and not) is sovereign debt yields worldwide are presently at historic (500-year) lows - levels not previously witnessed by 'modern man'. So, it's going to take something very big to shake this situation up, which is where the acceleration of the new 'cold war' discussed above comes into the picture. Maybe the Fed can buy everything China doesn't.

But if a full-fledged trade war erupts, which is the next step, likely to get rolling post election, prices in the states will necessarily need to rise because serious business people will need to raise capital to restart manufacturing State side, which would reveal the lunacy of present Western central bank policy. Again, as discussed previously, and something that is a very big deal not on many radar screens right now, once China gets into the IMF's Special Drawing Rights (SDR) basket in September, they will be in position to broaden policy moves without worrying about US reprisals, which could cause problems for the West in everything from bonds, to stocks, to precious metals. In tandem with all this would be potentially systemic damage to the $ as process unfolds, which would send inflation expectations reeling. (See Figure 3)

Figure 3
SPX/VIX Monthly Chart

Again, in terms of stocks then, while they may catch a bid along with everything else initially as $ troubles accelerate due to corresponding de-dollarization acceleration with everybody the US has screwed over since Bretton Woods finally waking up (what does the US export of any tangible value except war - the answer is 'not much'), once the tension on the tape is lifted post election (and the Fed's prop desks are out on waivers), things could look quite different. What's more, while stocks may not make it all the way to November, still, one must be wary about getting too negative on them until the sinusoidal in the S&P 500 (SPX) / CBOE Volatility Index (VIX) Ratio is vexed (see above), which with any luck will represent a climax associated with all the considerations discussed above.

Right on cue, stocks are correcting into ETF options expiry this coming Friday due to gap extremes between prices and open interest put / call ratios growing to wide, as foreseen last week. So we have the SPX falling back to test the large round number at 2100, and this should also happen to precious metal shares as well for exactly the same reason, possibly causing the GDX, for example, to fall all the way back to the large round number at 20, test this metric as well. It's either that or the large round number at 200 on the HUI will hold again (22 GDX), which is of course where one should buy now given all we know, meaning waiting for a fall to 20 on the GDX could prove to be lost opportunity. Such talk assumes gambler betting practices remain central to price discovery in the coming week, along with the growing risk a Comex default does not become more visible.

And the Brexit vote will likely accelerate all this.

Good investing is possible in precious metals.



Captain Hook

Author: Captain Hook

Captain Hook

Treasure Chests is a market timing service specializing in value-based position trading in the precious metals and equity markets with an orientation geared to identifying intermediate-term swing trading opportunities. Specific opportunities are identified utilizing a combination of fundamental, technical, and inter-market analysis. This style of investing has proven very successful for wealthy and sophisticated investors, as it reduces risk and enhances returns when the methodology is applied effectively. Those interested in discovering more about how the strategies described above can enhance your wealth should visit our web site at Treasure Chests.

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