You have to feel sorry for commodity investors. At least
those who have not listened to me. They’re getting clobbered, not just in gold,
but in just about everything related to commodities.
The Bloomberg Commodities Index — an index comprised of
energy prices, grains, industrial metals, precious metals, soft commodities
like coffee and sugar and meats — has plunged to a 13-year low, shedding more
than 45% since its April 2011 high.
The widely watched Global Commodity Equity ETF (CRBQ) has
plunged 22.3 percent since last June, 11.8 percent just since the middle of
May.
The losses are everywhere. Gold at a five-year low, down
nearly 41% since its September 2011 high. Mining shares at a 14-year low.
Copper, down a whopping 49 percent since its 2011 high. Platinum at a six-year
low, down 59% since March 2008.
Oil prices are down a whopping 66 percent since July 2008
and an incredible 20 percent in just the past four weeks, just as I had
forecast.
I hate to say I told you so, but I did. Way back in
September 2011 when just days after former Fed Chairman Bernanke announced
QEIII and gold nosedived …I told you the party was temporarily over and
commodities (and the world) were headed into deflation.
More damage is coming in commodities. They have not yet
bottomed. But in the not-to-distant future — when they do bottom — you will see
one of the greatest bull markets ever in commodities …
Not because of inflation mind you, but because the world
will finally realize the emperors — western governments — have no clothes, that
they are bankrupt and failing.
Our Readers Speak - We had a flood of responses to my column
yesterday. I enjoyed reading them. Let’s take a look at a few of them.
Reader Bill writes …“Here are some questions on your Convergence report If
conditions get as dire as you predict for 2015-2020 (and I agree they very well
could) …
1. What contingency plans do you have if the following
conditions obtain for a prolonged period? The markets are closed and we can’t
execute your recommended trades.
The banks are closed and we can’t get access to our accounts
to meet investment commitments. The Internet is down and we can’t get timely
updates on trades.
2. If, as you say, we may face a situation where ‘no man’s
life and property are safe,’ who picks up the ball, keeps the charts current
and publishes the buy and sell recommendations if (heaven forbid) something
happens to you?”
My response: Great questions, Bill. However, keep in mind
the next crisis is going to be in the government sector, not the private
sector. In other words, anyone dependent upon government work or benefits will
suffer the most.
Will there be banking problems? Yes, there will be. Which is
precisely why I am keeping most of my money outside the banking system.
As to your second question, again, the private sector will
survive, and in some cases, actually thrive. I will be here throughout, so no
worries! — Larry
Reader Jason writes …“It’s no news that gold is at times an amazing play and
other times a catastrophic play. Fortunes are made or lost on timing. I am
grateful for Larry’s work because, without it, I am certain I would be right
along with all the other emotional buyers and sellers losing as much as I
possibly could and certainly more than I could afford to lose.”
My response: Thanks for the compliment, Jason. And you are
100 percent right: There is a time to be in gold, and a time to be out. Just as
there is in any investment. Getting married to any investment is a sure fire
way of losing money, lots of it. — Larry
Reader Stu writes …“Hi Larry — Cashless, electronic currency still equals fiat
money! Contrary to conventional thinking, gold is the ultimate currency as it
has no debt attached to it.”
My response: Actually, Stu, a gold standard is fiat money.
Why? Because the powers that be can change — and did change — the relationship
between gold and the currency.
Indeed, the word “fiat” is actually misused. “Fiat” means
“an official order given by someone who has power; an order that must be
followed.”
Today we have money that is subject to free market forces,
the waxing and waning of confidence or lack of confidence, in a country, its
leaders, its economy.
That is a far better way to go, and why a gold standard
never worked. A gold standard is like fixing the price of something. Price
fixing never lasts and always blows up, with negative consequences, both for
those who fix the price, and those who invest based on a fixed price.
Free floating currencies are far better than fixed
currencies, no matter what they are fixed to.
Market Roundup Dow-181.19
to 17,919.22 S&P-9.08 to 2,119.20 NASDAQ-10.74 to 5,208.12 10-YR Yield-0.032 to 2.34% Gold-$7.60 to $1,099.20 Oil+$0.38 to $50.83
Source: http://www.moneyandmarkets.com
Money and Markets, A Division of Weiss Research, Inc.
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