Author Archives: pmontesdeoca

The US Economy Is Heading Into Another Recession In 2015

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Michael Pento, President of Pento Portfolio Strategies, recently argued that the failure of zero-interest rates and quantitative easing (QE) will lead to economic collapse and a rise in the price of gold.

Pento said, “It should be becoming obvious to everyone that zero interest rate policies and quantitative easing across the globe did not save the world from the great recession that occurred in 2007.” He said such policies accomplished two things:

  • Re-inflated all asset bubbles thus making the rich even richer and destroying the middle class and lower classes
  • Encouraged a massive increase in aggregate debt

Debt

Pento said global debt has increased by $60 trillion in nominal terms since January 1, 2008.

“When you make money free and make the amount available to be borrowed virtually unlimited, what do people do?” he asked. “They take on even more debt.”

Even worse, this $60 trillion debt “is a higher percentage in comparison to the entire economy than it was seven years ago,” he said. We are now close to the point where debt is 290% of global GDP.

Pento argues that all the printing of money and lowering of interest rates has failed to create greater economic activity. He said that Japan’s GDP is lower today than it was in 2012, while US GDP in 2014 was 2.4%, which is lower than it was in 2010. He said, “We have not been able to endanger growth.”

As he has predicted before, he foresees that “Once interest rates…normalize, we will have mass insolvency on a world-wide basis.” Those who are in debt will not be able to continue to pay the interest on their debt once rates rise.

Why does Pento foresee an economic collapse in 2015?

In June the US Federal Reserve said that unless the economy collapses, they plan to initiate the first increase in the Federal Funds rate. This will not be a singular event, but part of a protracted and prolonged increase in interest rates.

Pento said, “If that is the case…if burrowing costs go up,” it will end our “phony and ephemeral GDP growth.”

Even just with rumors of the Fed raising rates, US economic activity, Pento said, is already stalling.

“Virtually every piece of economic data…factory orders, industrial production, is heading directly south.” He said, “The US economy is heading into another recession in 2015.”

Pento sees dramatic repercussions from this coming recession. He sees the public concluding that “Central banks…(are) ineffectual and people will lose faith in their ability to generate growth, and then you are left with a tax base that cannot support the amount of sovereign debt.”

Pento believes that yields will then spike and the Fed be forced to back away from normalizing markets and initiate another round of QE, which will be even bigger than the $1.8 trillion printed for QE3.

Gold on the Rise

Turning to gold, Pento said the precious metal “is being held hostage by the Greek debt negotiations.” Greece owes the EU 320 billion Euro, with “no ability to pay it back.”

Even with all the talk in the media about a deal, he said, “There is no deal.” Any deal, he said, “will unravel.” If Greek government agrees to austerity, he predicted, “there will be riots in Greece.”

The only question, Pento said, is “How will Brussels allow the Greeks to default?” He foresees some sort of relaxed austerity deal with some debt restructuring.

However, if Greece leaves the Euro zone or if the ECB stops funding Greek banks, he predicts a huge capital outflow from Portugal, Ireland, and Spain into Germany. This will be “Devastating for the fiat currency known as the Euro in the short term, and absolutely wonderful for gold.”

In the United States, Pento believes that by June or July, the Federal Reserve will be forced to admit can’t raise interest rates, without causing massive disruption to the dollar. Therefore, if the Fed does not raise rates by June, Pento predicts, “the gold market will take off.”

 

This article was written by Patrick MontesDeOca. For more of his articles, please visit http://ema2trade.com/author/pmontesdeoca/

A Dramatic Year – 2015 Financial Collapse?

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The European Central Bank (ECB) recently announced a trillion- dollar package to fight inflation. Whatever these central banks do will not have any effect on the world, short-term.

The ECB program involves printing 60-billion euros per month, which is nearly three-quarters of a trillion euros per annum, and they will start in March 2015 and end in September 2016. Their goal is an inflation target of two percent. The program involves the buying of euro-denominated assets. A bankrupt Europe does not need another 1.1 trillion of debt. By doing this, the ECB will have even more worthless assets on their balance sheets, debt that will never be repaid.

So why does every central bank in the world want to fight inflation?

Because inflation is not good for the consumer – consumers need low prices. Although deflation is good for consumers, it’s not good for governments and it’s not good for central banks because with deflation, none of the hundreds of trillion in debts will ever be repaid and the financial system will collapse.

The central banks believe that printing money will solve the problem; you don’t create wealth by printing worthless pieces of paper.

The worldwide printing of money will lead to hyperinflation of an exponential nature. It will not solve the problem because the debt will also go up exponentially. It will produce hyperinflation spiral followed by a deflationary collapse.

Banks must now be paid to hold money.

Switzerland’s rates just went to minus 0.1 percent. Therefore, you have to pay the Swiss national bank to look after your money. The Swiss Central Bank is the most leveraged central bank in the world with a balance sheet that is 80 percent of GDP, and, like every other central bank, they are sitting on worthless assets.

To buy physical gold is the only safe course with gold rising as paper currencies collapse. Gold is up 150 percent in rubles in the past 12 months and in 2015 gold is up 10 percent in dollars and 150 percent in euros. The dollar strength is not justified, and it is coming to an end soon. The ECB decision is likely to mark the final days of the dollar’s strength, and as the dollar starts falling, we will see price acceleration in gold and silver.

The Dow against gold went down 88 percent between 2009 and 2011. The slight correction in the market is over. Expect another major downturn in stock markets, relative to gold. I can see the Dow falling 50 percent against gold in the next few years. Massive money printing could start by the second quarter of 2015.

Gold has been held back by the central banks, by manipulation, by futures markets, and by the paper market, so I think when gold accelerates, it could go up far more than 50% by  late 2015. It is inevitable that we will have a collapse of the financial system, which could happen very quickly. I think that 2015 will be a dramatic year.

 

SPECIAL GOLD AND SILVER WEEKLY UPDATE 2.19.2015

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IS THE US DOLLAR ABOUT TO CRASH?

US DOLLAR COLLAPSE 2015

Futures Swings, Gold & Silver Report Trading Instructions February 6, 2015

Trading picture

The Weekly VC Price Momentum Indicator

Futures Swings, Gold & Silver Report

Trading Instructions February 6, 2015
Signals are automatically generated by integrating electronic
weekly
 statistics with proprietary algorithms.

 

GOLD

 

WEEKLY MOVING AVERAGES

The April gold futures contract closed at 1223. The market closing below the 9 day MA (1233) is confirmation that the weekly trend momentum is bearish. A close above the 9 day MA would negate the weekly bearish short-term trend to neutral.

 

WEEKLY MOMENTUM INDICATOR

With the market closing below the VC Weekly Price Momentum Indicator of 1246, it confirms that the price momentum is bearish. A close above the VC Weekly, it would negate the bearish signal to neutral.

 

WEEKLY PRICE INDICATOR

Cover short on corrections at the 1205 – 1187 levels and go long on a weekly reversal stop. If long, use the 1187 level as a Stop Close Only and Good Till Cancelled order. Look to take some profits on longs, as we reach the 1264 – 1305 levels during the week.

SILVER

 

WEEKLY MOVING AVERAGES

The March silver futures contract closed at 16.72. The market closing below the 9 day MA (16.84) is confirmation that the weekly trend momentum is bearish. A close above the 9 day MA would negate the weekly bearish short-term trend to neutral.

 

WEEKLY MOMENTUM INDICATOR

With the market closing below the VC Weekly Price Momentum Indicator of 17, it confirms that the price momentum is bearish. A close above the VC Weekly, it would negate the bearish signal to neutral.

 

WEEKLY PRICE INDICATOR

Cover short on corrections at the 16.26 – 15.81 levels and go long on a weekly reversal stop. If long, use the 15.81 level as a Stop Close Only and Good Till Cancelled order. Look to take some profits on longs, as we reach the 17.46 – 18.21 levels during the week.

The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed herein constitutes a solicitation of the purchase or sale of any futures or options contracts.


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