Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Coming up we’ll hear from the one and only Gerald Celente of the Trends Journal. Gerald weighs in on the rise of cypto-currencies, the massive volatility he sees ahead in the crypto world and the key geopolitical ticking time bomb that he sees having a big effect on gold prices. Don’t miss another outstanding interview with Gerald Celente, coming up after this week’s market update.
Gold and silver markets lost ground this week as investors drove the stock market up to new highs – again.
With tax cuts ne aring passage in the U.S. Senate, investors preemptively celebrated. The Dow Jones Industrials surged by more than 700 points through Thursday’s close. It’s the biggest week for the Dow since the Trump bump last November.
Getting the corporate tax rate down to 20% would certainly help boost earnings and could lift economic growth up to 4% per year. That’s the upside. The downside to the GOP tax plan is that the Joint Committee on Taxation estimates it will add $1 trillion to federal deficits.
If growth projections disappoint, that number could be even worse. If the pessimistic scenario plays out, then the U.S. dollar stands to take a big hit.
Right now, most investors are focused on the optimistic scenario. Tax cuts should give at least some kind of boost to the economy in 2018.
The risk for bulls is that the boost has already been priced in to the stock market. They may also have to contend with some negative side effects of deficit-fueled tax stimulus. For one, inflation could come perking back up in the months ahead.
For now, inflation expectations remain relatively muted and inflation hedges are struggling to garner investor interest. This week, gold futures contracts experienced a large net liquidation as speculators unloaded positions.
As of this Friday recording, the yellow metal trades at $1,274 an ounce, posting a weekly loss of 1.2%. Silver is down 4.1% this week to bring spot prices to $16.36. Platinum is off 1.0% to $936 per ounce, while palladium is up 2.0% to trade at $1,025.
With the exception of palladium which touched a multi-year again high earlier this week, precious metals markets are mired in trading ranges. Hard money continues to be overshadowed by crypto-money. The leading crypto-currency Bitcoin spiked to about $11,000 this week before retreating.
Many holders of bitcoins are sitting on some enormous profits. Those gains translate into tax liabilities whenever bitcoins get sold or traded for goods or services. Some Bitcoin aficionados may be under the false impression that Bitcoin transactions are private and untraceable – and therefore outside the reach of the IRS.
Well, on Thursday the IRS won a federal court case that forces the leading crypto-currency exchange Coinbase to hand over information about its customers. More than 14,000 customers who engaged in transactions involving at least $20,000 in Bitcoin will have their records turned over to the IRS. They could face back taxes and penalties which require them to sell more of their Bitcoin in order to pay.
If the IRS expands its probes of cypto-currency transactions next year, a lot more people who may have recently jumped on the crypto-currency bandwagon could be in for an unpleasant reality check courtesy of the tax man.
Taxes also apply to any realized gains on physical precious metals, of course. But unlike digital currencies, tangible currencies don’t automatically generate records that can be obtained by bureaucrats or exploited by data thieves. In an era when your financial privacy is under constant threat, you can rest assured that your gold and silver coins won’t be digitally tracked or hacked into.
You don’t have to worry about losing your digital key as with crypto-currencies. There are lots of sad stories of people who are locked out of their bitcoins, or who died without being able to pass them on to their loved ones. Because they aren’t tangible, there’s no hope of ever recovering lost bitcoins without any digital records of their existence.
It is less likely, but still possible, to lose track of your precious metals holdings. That’s why you need to be careful and deliberate in where you store them. People who take to hiding their gold coins in obscure places – perhaps behind walls or beneath floor boards or in the ground – risk forgetting about them in old age, or dying without loved ones knowing where to look.
One viable alternative to storing your entire metals stash at home is to store at least some of it in a secure storage facility. Money Metals Depository offers segregated storage at the lowest fees in the industry, as low as $96 a year. For more information on our storage programs, just call us at 1-800-800-1865 or visit MoneyMetals.com/depository.
Well now, without further delay, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to welcome Gerald Celente, publisher of the renowned Trends Journal. Mr. Celente is perhaps the most well-known trends forecaster in the world and it’s always great to have him on with us.
Gerald, thanks for taking the time and welcome back.
Gerald Celente: Thanks for having me on.
Mike Gleason: Well, Gerald, to start off here, we still have the equities markets ripping and roaring and there is seemingly no news that can derail the train. So, as we head into the end of the year, what does your forecast show for the crowd on Wall Street? Is the party going to end anytime soon?
Gerald Celente: Well, as they go through with this tax deal, it’s just going to bring more money to the bigger corporations and you saw what the corporations have done with the profits from the past, what do they do with them? They reinvested them into the stock market rather than building their companies and investing in capital improvements.
So, giving them more money will give them more stock buybacks. The more stock buybacks, the higher the market goes. I mean that’s the reality of it. So, if the tax breaks go through the way they’re being planned, we’re going to see more stock buybacks, more cheap money to reinvest back into the markets.
Again, we’re looking at a very small segment of the population that’s really playing the markets. For example, only 10% of Americans are in the markets at the range that makes any difference, so that 10%, for example, that’s playing, they have about in equity about $350,000 (on average). The rest of society that has money into it, the so called middle class, of those that have any money in it, and again the 10% own over 90%. For the rest of the society, they only have about $15,000 in equity.
So, the markets are just going to keep going up if the cheap money keeps existing. Again, that’s going to also see what happens when they raise interest rates, which are about a 99% sure shot now, later in December. And if the cheap money flows stop, then the markets stop. It’s as simple as that, but we don’t think a 25 basis point increase is going to have much of an impact.
Mike Gleason: Clearly the world has a problem with crooked bankers and corrupt politicians. We talked about this a bit when we had you on back in August. The two aren’t unrelated, of course. Bankers and politicians have a very long and dark history of collusion.
On one hand, if history is a guide, there isn’t much reason to expect anyone will be held to account for their crimes. «They are too big to jail,» as former Attorney General Eric Holder might say. On the other hand, we can’t help but be a little bit hopeful. It looks to us like some of these crimes, such as the Uranium One deal, are getting harder to ignore.
What do you make of the recent news? Are you feeling any more optimistic about some of these crooks actually going to prison?
Gerald Celente: No, quite the opposite. Look at the new Fed chair that’s coming in. He’s already saying that the banking regulations in place now are too tough and tough enough. So, if under the current regulations nobody went to jail and they soften them, they could steal more, and get fined, and also accused of less crimes.
So, no, it’s going in the opposite direction. Under the new administration, they’re not draining the swamp, they’re just filling the swamp with different swamp creatures. I mean look at the Trump White House. Who’s running it? Mnuchin and Cohn on the financial end and those are both Goldman Sachs guys. It’s just more of the same.
Mike Gleason: The rise of cryptocurrencies, Bitcoin in particular, is making waves in the precious metals markets. Some of the demand for gold and silver has been diverted to Bitcoin. People see it as another form of honest money and there is plenty of excitement over the huge price gains. Lots of people are wondering what the rise of Bitcoin might mean for precious metals over the longer term.
Now, our take is that Bitcoin offer hope as honest money and we are certainly fans of anything that can circumvent central bankers. Gold and silver, on the other hand, are proven stores of value with a track record extending back thousands of years and they are totally off the grid. Physical metals work with or without electricity or an internet connection and they can be used without leaving digital tracks behind.
What are your thoughts on the relationship between Bitcoin and bullion?
Gerald Celente: Well, we’ve been writing a lot about it now in our Trends Journal. One of the points that we keep making is that we see this isn’t a fad, it’s a trend in the cryptocurrency world, but the volatility’s going to be enormous.
Again, when you look at volatility in gold … I remember, back in 1980, I bought gold in the highest point of the trading day at $875 an ounce and then it went down from there. It was down for, what, almost 20 years.
So that’s the kind of thing you’re going to see in cryptocurrencies, as well. You’re going to see great volatility. They’re not going to go anywhere, but in looking at it, you see what happens when there’s geopolitical unrest. For example, you saw what happened in Zimbabwe, when they were getting rid of Mugabe, who had been running the joint since 1980. All of a sudden, Bitcoin over there spiked.
So, you’re going to see that kind of thing, but, again, there’s definitely playing a role as another safe haven asset of sorts, relative to gold and silver, but the volatility aspects in the crypto world are far higher and far greater than any of the precious metals. Also, in the cryptocurrencies, or what we call «Millennials’ Gold.»
My generation was gold, this generation, they’re looking more at digital. It’s a digital world. You’re in China, you don’t pay anything with cash or credit cards, it’s an app. So, it’s a different world.
However, saying all that, again, the big point is, you’re going to see a lot of the cryptos come and go. There’ll be some for the long term. The volatility will be enormous, but we don’t see them going away in the long term. And when you look, again, at particularly gold, the central banks around the world are buying it up in much greater proportions now, although the public is buying less physical gold.
So the demand for physical gold among the central banks, particularly Russia, China, will continue. And the crypto markets will have their place, but again, the volatility’s real, something we’ve been forecasting for quite some time and you can see it in the numbers.
Mike Gleason: One of the potential drivers for Bitcoin prices moving forward… it looks like the CME Group, the people behind the COMEX Exchange will soon launch a futures contract for Bitcoin. Lots of people in the crypto space are excited that the market will be opened up to «institutional money» and expect additional demand will be good for the Bitcoin price.
That might be true, but we have a dim view of the COMEX and how crooked the markets for gold and silver have become. According to the recent Wikileaks memo, they showed evidence that gold futures were first launched in the early 1970’s to help to rig the gold price, trade volatility, and discourage ownership for physical gold. 40 years later, we can look back and see precious metals futures worked exactly as intended.
In light of that and in light of this news now, what are we going to see a Bitcoin future exchange mean and can you comment about whether this will be good news or bad news for the cryptos?
Gerald Celente: Well, you summed it up. You’re going to see a lot more volatility. Again, I remember, going back to 1980 with the volatility of the gold markets and how also, though, and this is very important. Because of the futures trading, that’s what really drove the prices up.
What we expect to see is that you’re going to see a real surge and a price drive, higher, but you’re also going to see a greater downward collapse of the prices as well. Again, you see it with the futures contracts in many different fields, naked shorts, all of a sudden, the whole market changes in a flash.
So it can be very easily manipulated by bigger players. And again, with cryptos, it’s a bit more difficult considering how difficult it is to buy them, the periods of time you have to wait in order for you to buy them, so it’s going to be a little harder to manipulate, but they’ll figure a way how to do it.
So, expect, when the CME futures happen, and also other futures exchanges opening around the world, much more volatility. So what we see is a real spike up and a real sharper spike down.
Mike Gleason: Getting back to the Fed a little bit here. Jerome Powell was recently tapped to replace Janet Yellen as Fed chair, as you mentioned earlier. Powell looks like another garden variety central planner to us. He’s an attorney with decades of experience spread across Wall Street to Washington D.C. Obama installed him on the Board of Governors at the Fed in 2012.
Give us a little bit more about what your take is on Powell and can we expect any difference happening with the monetary policy?
Gerald Celente: Well, again, Powell has already made clear that the bank regulations are too difficult already for the banksters. So, what that means is that the bigger banks will have less regulation, more trading opportunities.
Again, who made up this thing that banks are supposed to be investment banks. Banks were there just as commercial banks. When I was a kid growing up, banking was boring. Banks used to open up at like 10:00 in the morning and be closed by 3:00. I mean, really. I know it sounds like ancient history, and it is when you get older, but there was no such thing as an investment bank.
So, what he’s going to do is the that the bigs are going to be bigger, more manipulation in the system, and again, he is a proponent, he says, of raising interest rates. However, we don’t see them going up that high. And as long as interest rates remain low, the Ponzi scheme on Wall Street continues.
I mean, there’s only one factor that’s driven the markets. It’s cheap money. Period. Paragraph. The rich have gotten richer and everybody else has gotten poorer. Those are the facts. Median household income in the United States is below 1999 levels.
Do you realize you have five people in the world, five people, that have more money than 3.5 billion people, half the world’s population? Same thing in the United States. Buffett, Gates, and Bezos. Three people have more money than half of the American population combined.
So, Powell is just one of the white shoe boys. He’s going to keep the club going and it’s going to go in the same direction it was going before. Again, the bubble can happen because it is a bubble and it’s only being pumped up by this monetary methadone. That’s all it is. It’s a fix.
There’s wild cards that would change this in a flash. And the wild cards, for example, could be what’s going on in the Middle East, with the new crown prince over there in Saudi Arabia saying that Lebanon and Iran have declared war against Saudi Arabia, which they never have. And you know how he became a crown prince, don’t you, that everybody’s bowing down to? You must remember when you were a kid. A princess kissed a frog and the frog became a prince and then a king.
I mean, who’s making this garbage up? Crown prince. Give me a break, man. They just made the Saudi government up in about 1934. It’s an oligarchy. It’s one of the most repressed nations on earth and they’re starting wars. They’ve slaughtered over 10,000 Yemenis. 50,000 Yemeni children are going to die this year because of the war conditions started by Saudi Arabia, supported by the United States. We just sold them another $7 billion worth of armaments.
Again, now that the Arab League, minus Syria, Qatar, and Iran, and Iraq, are declaring a new Arab NATO and a war against terrorism. A war against terrorism? Hey, it’s the Saudis that gave the money to Al Qaeda and ISIS to overthrown Qaddafi in Libya and Assad in Syria.
But, again, the presstitute news doesn’t bring these facts out. Going back to gold, gold is the ultimate safe haven in times of geopolitical economic instability. And geopolitical and economic instability in the Middle East could bring down the markets and drive up gold prices.
Remember, Saudi Arabia needs oil at $100 a barrel for its economy to break even, to balance its budget. We were playing with $40, $50, now $60 oil since 2014. They’re in great financial straits. You look at the numbers, man. Anybody. All they have to do is look at them. Look at the oil revenue coming in from 2006 to Saudi Arabia to 2017 and it’s lower now in 2017 than it was even back in 2006.
Going back to gold. Our forecast of gold has been steady since 2013. November 2013, we said, «Gold prices have to stabilize over the mid $1,400’s.» $1,450, $1,480, $1,460, $1,470. Then it would spike to $2,000. Absent that, we saw a downside risk of gold at around $1,150. Saying this constantly. We maintained that forecast.
We see gold coming under more pressure even though we see interest rates coming up and most people are expecting it. There’s an opportunity cost for holding gold. Bond yields go higher, become more attractive, gold less attractive.
However, in this time of economic and geopolitical uncertainty, we still maintain that gold is the ultimate safe-haven asset in this geopolitical and economic climate.
Mike Gleason: Well, finally, as we begin to close here, Gerald, anything else that you’re focusing on as we head towards the final month of 2017 and start looking at 2018? What’s on the horizon and what are you watching most closely?
Gerald Celente: What we’re watching most closely, really, is the events in the Middle East. People are talking a lot about North Korea. We’re not so concerned about that, because if the United States does anything to North Korea, in terms of war – and by the way, again, we’re getting a one-sided story. The United States keeps launching these massive military maneuvers. Matter of fact, there’s going to be a new one in December with about 16,000 U.S. troops, hundreds of aircraft, and also naval forces on their shores.
So the United States is provoking North Korea and North Korea’s made it very clear they’re not going to give up a nuclear weapon because they saw what the United States did to Qaddafi and Hussein when they gave up their nuclear capability.
What we’re saying is that North Korea’s not on our radar as being the hot spot that could explode, because if the United States launches war against North Korea, say goodbye to South Korea. What do you got? 24 million people living in Seoul, Korea, about 35 miles away from the North Korean border? Say goodbye to Japan. It’s not going to happen.
Again, (North Korea) that’s a country, by the way, with a GDP smaller than West Virginia’s and a population the size of Texas. They don’t have the wherewithal to withstand the long war, so what they’ll do is, they’ll go all out and destroy anything anywhere near them.
Again, while the focus is on North Korea and everybody’s pumping up this king over there, or the crown prince, excuse me, who’s really the de facto leader at 32 years old, in Saudi Arabia, as the new enlightened guy over in the region, we see just the opposite. So that’s where our focus is really on, very heavily now.
And looking at the real news and really reading through and sifting through the propaganda that’s being sold by their government, our government, and other governments, and repeated by the presstitute media, those reporters that cut paid to put out by their corporate Johns and their Washington whoremasters.
Mike Gleason: Well, thanks so much for your time again today and we appreciate it, as always, and love getting your candid and unfiltered comments on the state of things. Now, before we let you go, please tell listeners how they can get their hands on the Trends Journal and the other great information that you put out there on a regular basis at the Trend Research Institute.
Gerald Celente: Well, the new Trends Journal will be out this week. You could got to TrendsResearch.com or TrendsJournal.com . And not only do we put out the Trends Journal, we do Trends in the News Broadcast, we have Trends Monthly, Trend Alerts each week. Money back guarantee, the only place you’ll read history before it happens. TrendsResearch.com or TrendsJournal.com .
Mike Gleason: Well, thanks again, Mr. Celente, for being so generous with your time, as always. Have a great weekend and we’ll look forward to our next conversation. Take care.
Gerald Celente: Thank you for having me on and thank you for all that you do.
Mike Gleason: Well, that will do it for this week. Our sincere thanks, again, to Gerald Celente, publisher of the renowned Trends Journal. For more information, the website again is TrendsResearch.com . Be sure to check that out.