The hardest thing about writing this newsletter is that I KNOW you want to hear good news. I KNOW that if I don’t deliver that (or at least put a shiny spin on anything bad) I may lose subscribers which is a bad thing.
This conflicts with telling it how I see it.
So please tell me, would you like the truth or what you would prefer to hear?
Having said that, let’s start off with a silver lining on all the bad news…
You know all that terrible, nauseating, non-descript ‘music’ you hear in elevators, hotel lobbies, family restaurants and shopping plazas? Well, that drivel is produced by a company called “Musak” and the recession just made them go bust.
That’s the best news I’ve heard all year!
Okay, that was the sweetener for this week’s letter. Let’s move on to the reality of what’s happening out there…
You don’t need me to tell you that there’s a lot of opinions out there. Just switch on the TV or read a paper and almost everyone is now an expert on the recession; who caused it, who will fix it and how and when the nightmare will be over. These are often the same people who said recessions were a thing of the past.
Who should you believe? Does anyone really have all the answers??
Well, no ONE does, but a certain entity DOES have some answers if history is any guide…
That entity is the stock market itself.
What is the stock market? In essence, it is a living, breathing expression of the economic world. I’ve said this many times here, but you do not need to be a direct investor in the stock market to have an interest in it. Your income, retirement plan and property are all tied to the health of the stock market, like it or not. That’s just the way it is in a capitalist system (it’s either that or Communism).
Anyway, because of this, some people let the market itself tell the story and make all the predictions- what better way in such a time of uncertainty? The market is a cold, unemotional weighing machine ultimately.
Those people follow something called ‘Dow Theory’ (pioneered by Charles Dow). Through careful use of stock market charts and rules based on historical precedent, they let the market make predictions for the future.
Though these predictions make it hard to get the exact timing right, the ultimate outcome is often predicted with scary accuracy.
Last week (and before), I gave you an insight into this world by explaining that if the stock market dipped below the November low, it would be a very ominous sign for the future according to Dow theory.
This week, the market gave us its answer by dipping BELOW that level.
Now, maybe this week the market rallies. But, the path is now clear for a further, possibly dramatic drop before this turns around. Subscribers to this letter should have been braced for this and would have profited by selling short US treasuries, buying gold etc.
Remember, there’s always a bull market somewhere. You just need to take off the blinkers!
That’s what The League of Power is all about. To prosper in any situation. And this is totally possible when you realize that making money is not just about buying something and hoping it will go UP. Take currencies for example. You can make money trading currencies no matter what happens in the world because they are always fluctuating. You can make money from a collapsing real estate market. You can have a blooming home business by helping people solve a real problem.
By the way, on the subject of currency trading, Europe is about to implode financially- their banks are in even more trouble than ours. If you traded against the Euro, you could prosper from this.
There’s no getting away from it, the news is bad for the world at large. Things must get worse in order for them to get better. And at The League of Power, we look forward to the conclusion of this mess; that’s when the balance will have been restored and stocks will once again be attractive propositions for income and capital gain. Keep the precious League of Power documents- pass them down for generations.
Some would ask, “Why are we being punished. Why does God let things like this happen?”
One of the most well-known Dow theorists is Richard Russell. Here is his answer to that question:
“The Founding Fathers and creators of the Constitution must be shaking their heads and smiling wryly. The money system that they had so carefully inserted into the Constitution had been thwarted and degraded. Now we must pay.”
What Mr. Russell is saying here is that the Constitution specifically said that a paper (fiat) monetary system should not exist. Money should be, or be backed by, gold and silver.
I perpetually hear Americans talk about their Constitution as they wave flags, but has anybody actually read it?!
The Founding Fathers were wise men. When power-hungry governments of the 20th century decided to violate our Constitution in order to gain votes from an ignorant population set on fast and easy credit, the timer was armed on the monetary bomb.
It began in 1913 with the creation of the Federal Reserve- a PRIVATE organization formed by major banks (led by J.P. Morgan) with no other purpose than to create and control a fiat money supply. Since then, the dollar has lost over 90% of its value.
Only one thing stood in defiance: gold.
This week, gold continued its aggressive rise and finished in triple digits, over $1,000 an ounce. From a technical point of view, just as the stock market cleared a path for an almost unlimited descent ultimately, gold cleared a path for a limitless rise ultimately. Now, in the short term, gold may dip possibly as much as 20%, but this would be just a correction (and a last chance to ride the bull).
This is NOT my opinion, it is what the markets themselves are saying according to Dow theory!
What the markets are saying is that some point soon, the price of gold and the price of the Dow Jones will meet. Nobody can say where, but my guess is both gold and the Dow meet somewhere in the 2,000 to 4,000 mark. When? Sometime within the next few years.
Large funds have now started buying gold and gold mining stocks- the same funds who recently derided gold. The public is largely unwise about gold. They see the headlines, but don’t really know what to make of it. Decades of propaganda and brain-washing about fiat money and the power of the Federal Reserve have made sure of that.
The public sees gold as a bit ‘kooky’. Maybe you do?
If gold truly is a bit ‘kooky’ and pointless though, consider these figures below that show the TONNES of gold each government carries as it’s ‘citadel’ final reserves and the percentage gold makes up of it’s TOTAL reserves:
US — owns 8,135 tonnes of gold…….Gold makes up 64.4% of US reserves.
Germany — 3,412……….64.4%
IMF — 3,217………(1)
France — 2,508………58.7%
Italy — 2,451……….61.9%
Switzerland — 1,040……….23.8%
Japan — 765.2……….1.9%
China — 600.0……….0.9%
Russia — 495. 9……….2.2%
Taiwan — 422.2……….3.6%
India — 357.7%……….3.0%
UK — 310.3……….14.5%
Saudi Arabia — 143.0……….11.4%
South Africa — 124.4……….9.0%
Australia — 79.8……….6.3%
Note: many of the countries at the bottom of that list are now net buyers of gold (while they run their money printing presses around the clock!).
If you want advice, listen to the market.
Until next time,