Gold about to break up, india continues to lighten resitrctions

Gold is set to break out to the upside finally this week.
I can't tell right now if it has, but as of Sunday night gold is moving up.
Lets take a look at a longer term Gold chart.

This is good for gold bugs, and if I can ignore the global economy, it in itself is not bad.
It is simply one resource going up, about to possibly break up changing a down trend to an up trend.
Nothing spectacular, but a time to be on the right side of a trade, if it can break out upwards.

Lets look at some other assets, like Oil

Oil has outright flatlined, which is fantastic for every american, and the western world.
The vast majority of this is from fracking, which is an environmental disaster, but has catapulted USA production. Unfortunately the half life of fracking is crazy short compared to normal oil wells.  Which means when all the easy fracking is done, the pressure should shoot oil up, sealing the deal on the next leg down.  I cant tell if thats next month, or 5 years from now, but it will happen.  Anyway in near term, nothing to see here.

Lets take a look at overall S&P 500.

Holly heck batman, thats a great run up,  Lets project forward this run, and see where this goes.

Now here is the rub, there is absolutely no reason why we CANT have the nice multi year rally in stocks for next 3 years, resulting in a 35% gain from here, at about 10% per year.

Really, I mean that, there is no reason why this can't happen or do even better!
But here is the rub, we have a few facts that causes concern.

1) USA and global banks are based on a debt based system.  Japan is by far leading in this debt.  Until Japan falls, the thought is America is OK.  Japan  is the canary in the coal mine.  Again, America could run into troubles BEFORE Jaapan, just conventional wisdom says Japan is first on the critical list.

2) USA investors are at a 27 year high for bullish outlook.  Again, there is no reason why we can't get to 100 year bullish outlook among investors. But a 27 year high on bullish outlook is starting to stretch the statistical envelope.
3) Jobs just simply....suck.  This is a strange one. I think in 20 years there will be 50% unemployment.  Sure there maybe many considered employed reducing this number, but many will be jobs the government 'creates' through BS work.  Think of person a digging a ditch, person b filling in a ditch, alternating days.  While this may seem like work, its really just non-vent work.  In immediate future, there is no denying, new jobs blow for average pay and overall full time employment.
4) Federal reserve bank chair has changed to Yeltsin.  Make no mistake, I think the fed will always ease money constraints to promote growth.  But Yeltsin is new, before her decade reign can begin, she may need to 'show toughness'.  The parabolic growth in stocks probably needs a good punch in the gut to show she means business.  Not long after that happens and she is reamed through the press, she will step in line with bernanke and resume the growth.  Bottom line is we have no clue if/how the fed changes, but we do know there is a new sheriff in town.
5) USD may be in trouble...but not yet!
The doom of USD has been in the air since nixon pulled off gold standard.  Its pretty easy to say that doom of USD is over-hyped.  But that's not to say USD can't have trouble ahead.  While ther is no clear direciton, USD is looking like at a cross roads soon.

What I can tell from facts above is gold is POSSIBLY about to break up.  The overall market is looking toppish, both from graph and from a new sheriff in town, yeltsin.

India is lifting restrictions on gold, I think that will pop gold up.
http://www.israelidiamond.co.il/english/News.aspx?boneID=918&objID=13954

Anything in marijuana stocks may explode up as USA starts to legalize drugs.  The stocks rallied and since crashed, may be a good time to buy some lottery tickets.
GRNH
MDBX
MJNA
HEMP
CBIS
TRTC
PHOT

I REALLY Do not like stocks like Priceline, Amazon, and a bunch of other stocks with a 4 year drive straight up here.  Proceed with caution.

this is shaping up to be an interesting week. Good luck to you.

Gold Breakout soon - India is BACK!

My thesis for gold has always been about demand, not currency gold bugs.  Gold as a currency is as insane as it gets, and I am not a supporter.

The thesis was and is, as India and China get richer, the 2.5 billion people there will consume more resources & gold.  In addition, ALL RESOURCES will get constricted as the USA, a vast consumer of resources, gets pinched with inflation on resource prices.  I choose gold simply because it seems like a more direct play, and it does have the 'bonus' of gold bugs behind it.

Well today my friend John sent me an email about how India is moving to lift Gold import restrictions.  India placed these restrictions back in September 2013 in post 'Gold has anything changed'.

The irony is gold was falling, not rising in price when India did this, and China immediately picked up the gold buying slack preventing gold from falling significantly farther.

Once this comes to pass, I have a hard time seeing how gold can go down in price the next 11 months.  Everyone should be well positioned now in ETF's GDX & GDXJ

Global Currency Shakedown, Round 4 about to begin

Back in 2006, with my help of friend John, realized that the US economic structure was based on financial fraud through mortgage securitization.
Bill Clinton signed into law the routing of the glass-stegall act, put into place to separate 'gambling' from bank deposits.  George W routed the FBI department staffing down to a couple of people to investigate the trillion dollar mortgage industry.  In the late years of George W administration the final bubble was being blown, resulting in 2008-2009 financial crash.

In August 2008 I started this blog as an outlet on my rantings to everyone I could meet on the pending economic impact.  Little did I know how close it was.

In the turmoil of then, the natural outcome would have been a deflationary collapse that was stopped by a couple of drastic measures.  First, the government went on a no-holds barred deficit spending campaign to soften the blow to the economy.  Second, mark to market accounting in place since the Great Depression to valuate companies was suspended, as it is to this day.

Some purists would say both of these acts where not appropriate and that capitalist forces should have played out naturally.  I am not one of those people.  Yes, that is an option, and maybe it was the best one that should have been followed.   But I can see why dramatic steps was taken to prevent a global economic collapse, as it was perceived at the time.

What I am against is all of the drastic steps WITHOUT meaningful reform.  That is, 'fixing' of what was broke.  We have chosen to take the worst path, appeasement without follow through on reform.

The market has hit an all time high today.  Did you hear the bell?  My friend John has said there is no bell that goes off warning everyone that the market has hit a multi-year high followed by a market collapse.  Basically, there is no warning.

I am NOT predicting a market collapse per-say.  I am predicting that we are into phase 4 of this mutli-year global economic refactoring.

Phase 1 was the incredible loose regulation and promotion of securitization of trillions of dollars providing the market collapse in 2008-2009.  There are many other factors at work, such as derivatives in the 100's of trillions, but safe to say all the games in phase 1, lead to phase 2, 2008-2009 collapse.

This lead to phase 3, appeasement into 2013.  I realized that appeasement was the route and not cleaning house in 2010, and changed my stance that the market may not collapse per-say, simply be dwarfed by lack of law and raw financial meddling.

We are soon to enter phase 4, appeasement failing.  There is no amount of appeasement that can fix the system, without taking strong steps to fix the heart of the problems.

We have India's Rupee under duress, with India taking draconian steps to curb gold imports.  Mish is calling for a possible Rupee collapse as food inflation hits 18% per year!
We have various countries in Europe, such as Italy, Spain, Greece simply upping the ante on financial gains, buying weeks, months, maybe years, but not decades as they exhaust every  'new legal' option.
We have countries like France, promoting job creation without even bothering to talk to the companies involved in so-called creation plans.  And for what? a few double digit jobs?  That is worth lying about?
Japan is leading the world on the demographic catastrophe that awaits us all in an economic system that at its core foundation is based on ever increasing demand.

We have China continuing to try to transform it's economy into a consumer-global based powerhouse to replace the USA.  In the process, the information about the Chinese economy is safely in the unreliable fantasy zone.  China has HUGE potential, but who can understand their true standings?  At best, it is a hail mary hope that may come to save the world?

Back in march 2011, once I realized the world would NOT fix any core issues, but simply appease, the timeline for 'disaster' shifted from short term (2010-2012) to longer term (2013-2017).

Well, we are here, sad to say.  I don't expect fireworks until 2014, but it could happen next week.
The world dances around the US dollar, and that dance is starting to show it's age.  All is needed is enough people to lose faith in the dance to start the next phase of the crisis, global currency shakedown.

Best I can say is diversify, with a chunk in cash ready to move.  The USD I CANNOT envision any sudden moves down in value for YEARS to come, so it is once again the safest play....until its not! :)

A setback for gold and gold miners

My contention since I liked gold is that it will rise in price due to indian and chinese demand.
I am not one who believes gold is money, and it should NEVER be money again!

The logic being, as the two largest consumers of gold increase in wealth, they would buy more gold!
Well, Indian government is putting a damper on my master plan, but actively fighting Indian purchases of gold.
The government is blaming currency imbalances on Indian high gold purchases.

So they are actively tyring to slow gold purchases, now with tarriffs.
I am not saying gold will collapse, but if the west hates gold as a threat from guns and gold bugs who think the world would be better if the economy was dictated by mining production, and the Indian government is also fighting gold.  That leaves China to pick up the slack, and I am no fan of China's economy.  China needs to prove they can change their model from exporter to consumer.

I am unsure what to do, time to leave gold?  At very least I am not a buyer of more.

March of the Robots, Deflation for decades

Many economic blogs for years have called for US Dollar inflation.  This has not materialized as a general event.  I have covered this on the blog before.  Credit = Money, and Credit is not expanding like it did into 2007.   High unemployment stagnates wages.   And as I have called for since 2008 natural resources would creep up in cost over time due to global resource competition.  Specifically as India and China grow wealthier, they will consume a larger chunk of the resource pie.

Another deflationary force is Technology.  Every year less people can do more work.  Technology does create new jobs, but typically for higher education at the expense of lower skilled workers.  The wages are higher, but there are net fewer jobs.

I am a techie, I love tech.  I am not suggesting the world follow the Amish.
But I see technology efficiencies now biting into the technology world.  The area of growth for jobs is now also becoming a victim of the success of itself.

Pure capitalists state that if we freed the economy from the shackles of all government intervention, that the market will find optimal balance.     I question if that balance can ever equal full employment again.
People use history to project future events.  The capitalist 1800's and 1900's that yielded the middle class and a booming economy is not the same backdrop we face today.

The Western Baby boomers are aging, the younger generation have endured a decade of stagnant jobs.
And technology marches on.

What I think is happening is a shift in who is employable.   If you look at the industrial revolution, people shifted from agriculture to the urban centers to staff factories.   Those who did not adapt may have had to experience lower wage jobs in the fields relative to the new industry wages.

I think that is what we are starting to see now, the efficiencies of technology reaching deep into the economy to 'raise' the bar.   I have a couple of items for you to consider.

First, there is robotics.  This industrial industry has for the last decade taken a chunk out of the large manufacturing jobs.   Consider this, Apple is moving some manufacturing BACK to the USA from abroad.   Termed reshoring work.  But instead of 1,000s of factory workers, it is expected TOTAL employment, including the receptionist, to be 200.  Why? Automation.

Baxter, a robot targeting SMALL companies to replace 'expensive' workers at 9 bucks an hour is being marketed for a total of 22K per Robot.  In 18 months you can expect this robot to do much more than today, and every 18 months thereafter.  Dare I say the price will also steadily be reduced.
It isn't out of the question in 6 or 8 years that the Robot be under 10K. In a decade every McDonalds will have 2 people and rest robots running the operations.

Combine above trends with IT trends of eliminating IT datacenters and consolidating on the cloud, and we have massive deflationary forces at work.

Now for a quick higher level view of job facts.  Mish posted two images below about the US labor force over the last five years.  Considering the US government is spending 3.4 Trillion of a 15 trillion economy each year, the US is barely treading water.  Dare I say the forces I quote are hard to keep at bay. Simply look at industries hardest hit.  Those that can be automated or outsourced.

What does this amount to?  Well we are in interesting times in the years ahead.   There will be explosive new companies with tremendous growth as new areas continue to unfold.  Society is a bell curve of capability, and the bar for new jobs will continue to be raised.  I expect an ever increasing higher REAL unemployment rate. (if you don't ignore those who give up trying to work)  There will be continued deflationary forces between baby boomers retiring, technology, and overall unemployment.  And I still think natural resource contention as China kick starts their consumer economy along with India.

I do have optimism, to read that post, click here!

Every year for decades will be worse for Americans fiscally

My original post, back in 2008, explained how I believe US standard of living will continue to spiral down, as India and China push up.

Zero Hedge has a great post detailing how the debt saturation of America will mandate US citizens to have a reduction of standard of living. Click here to read.

It's a good post, alerted to me by The Hope of Slope blog.

Well worth the read, and just another fun tidbit to bring up at parties.

My spin is the people who are 5 to 30 year old, will eventually say "no more", and America will default on debt. So there is hope after the people are freed. My guess is 10-20 years from now.

By then, we'll have several lost generations of chronically unemployed.