Mike Burnick: Hello again, everyone. Good afternoon and welcome to this special online strategy briefing for Supercycle Trader, and joining me as always is Larry Edelson who I’m pleased to say is right here with me in the studio today.
Larry Edelson: Yes.
Mike: Thanks, Larry. Nice to have you visiting the states and be only a few feet away instead of half a world away.
Larry: Yeah, I’m a little bit jet lagged but it’s nice to be here. And thank you for hosting again today, Mike.
Mike: Absolutely. Well, you’ve got a nice presentation put together for us today so we’ll get to that in just a moment. But most importantly, this is a question and answer session about you, our members for Supercycle Trader and we know there are many new members who’ve come in over the last several weeks. So we’re going to do our very best to answer just as many questions as we can during the time we have today. We’re going to devote the bulk of this presentation to that.
So without further ado, we’ll jump right into the presentation. But I’d just like to remind everyone that if you do have a comment for Larry or a question about Supercycle Trader, the markets in general, anything, now is your chance. You can see on the screen that you have right in front of you, there’s a question window just below the viewer screen where you’ll see the slides. Simply put your name into that box, type in your question and hit send, and it’ll come our way and pop up on our screen and we’ll do our very best to tackle as many as we can in the time we have today. So without further ado, Larry, I’ll let you take it away.
Larry: Thank you, Mike. Well welcome, all members, to Supercycle Trader. It’s a pleasure to speak with you again today on our quarterly webinar. Today what I want to do is go through a few major charts that I have for you but then I want to immediately go to a question and answer session. As always, that really addresses your concerns the best way and I learn from you as well what’s on your minds. So let me briefly bring you up to date and review a few things with you.
First of all, I want to emphasize that deflation still has the upper hand, pretty much globally right now. I’ve been saying that all along but the deflation is actually picking up momentum as gold, for instance, has taken another nosedive. Copper is down to about $2.30. It’s tanking. All commodities are tanking and the real reason here is that money or cash is still being hoarded in Europe and other troubled parts of the world, even in China with the latest stock market rout there.
We’re seeing cash being hoarded and this is causing the dollar to strengthen even further. Now that can create a vicious circle in the sense that a stronger dollar causes yet more deflation.
Now, a very important slide that I want to show you is this first slide here which is based on data from the St. Louis Federal Reserve which is a great repository of a lot of terrific long-term economic data. But this chart here shows what is called the velocity of money. Now, the velocity of money is the turnover of money, how often it turns over. The quicker money turns over — in terms of transactions, in terms of securities, in terms of real estate, whatever it is, in terms of consumer demand — the stronger the economy and the stronger the potential for inflation.
But as you can see here, the velocity or turnover of money actually peaked way back in 1997. Now, what that tells you is that our economy has never been the same since 1997 despite where the stock market is today. The velocity of turnover of money and credit has been on a very sharp decline since 1997. More importantly, on the far right of the chart where I’ve drawn the red circle, you can see that we just broke through a cyclical support line… and we’re now — this chart doesn’t go back to the 1930s — but we are now in Great Depression levels in terms of the velocity or turnover of money.
Mike: Or lack of it.
Larry: Or lack of it. Correct, Mike. Good point.
So that shows you we are in deflation. Deflation is not only a decline in general price levels, it’s a contraction in credit and money velocity and that’s… There’s no ifs, ands, or buts about this. This is severe deflationary stuff and as you can tell from this chart on the velocity of money, we’re just collapsing now.
Larry: And it has a long way to go. Now, I want to go through some long-term charts for you on some of the key commodities just to reemphasize how strong deflation is, and also to give you that longer-term reference point so you can see macro economically what’s happening. We all too often tend to get caught up in the day-to-day charts or the day-to-day price action or even five-minute price action and we often can’t see the forest from the trees by doing that. So I intentionally went with the long-term charts here so we could really see how bad the deflation is.
This first chart is a long-term monthly bar chart of gold and you can see we rallied up into the peak in September 2011. We have been declining since then and just the past month, we’ve seen that spike low below that slightly downward sloped red line which is a real breakdown in gold. That’s when we fell down to about 1072. We’ve bounced a little bit since then up to about 1095 I think it was, trying to test the 1100 mark, and we’re still hovering around 1084, just off that new low in the bear market.
Mike: You see more downside ahead here though, don’t you, Larry?
Larry: Yeah. We’re going to see gold fall to that yellow rectangular box there and the second level of cyclical support, that second red line, and that’s the ideal target support level for a final low in the bear market — $931, give or take a few dollars.
Now, if we break that level, we could move lower, down to about 850 but that’s about the worst case scenario I see for gold and timing-wise, we had a chance for a temporary low on August 4, just a couple days ago. The gold market did bounce actually off of the 1072 low but it’s not acting very well at all. So I believe the cycles are stretching out due to the convergence of macro cycles that I see hitting in October. They’re overpowering almost everything right now. So we’re not getting a rally in gold. We may still get a pop higher in gold but the trend is lower into the next target date for gold which is really about the middle of November for, hopefully, the final low in gold’s bear market.
Mike: Now you have a chart… This next chart is long-term silver.
Larry: Yeah. Silver, I just want to… I know a lot of people, myself included, like silver for the long term but silver is in deep doo doo. Excuse my French. But you can see here, we’re now breaking that first horizontal red line there. System support on my models comes in at the 12.50 level, that black dashed short line there. Silver is going to fall to 12.50. There is the potential for it to fall to about $11 in a real panic selloff. So you can clearly see here that deflation is not over. We are coming closer to the bottom in commodities and that’s good. That doesn’t mean we’re going to turn, by the way, into inflation once commodities bottom. Deflation will continue because it’s going on in the credit markets and it’s going on in, most of all, the government debt sector…and that’s going to be with us for some time. But commodities will turn around to the upside and not too far away. It’s important to note that commodities can rally during deflation, Mike.
And I want all members to realize that. Okay, commodity prices don’t need inflation to go up.
Mike: Right.
Larry: The best bull markets in commodities occur when governments are going bankrupt and that’s the cycle that’s hitting us come October.
Mike: Yeah, that’s when real assets are in demand.
Larry: Right.
Mike: Especially gold and silver.
Larry: Right. So commodities will bottom. Deflation will continue to go on. But it will manifest itself largely in the government debt markets.
Mike: Uh-huh. This next chart is a longer-term chart of oil, crude oil.
Larry: Yes.
Mike: Which is plunging now below the lows it set back in February.
Larry: Yes. As a matter of fact today oil is down to about 44.30.We’re approaching that prior low at roughly $42. I am really eager to get on a bearish position in oil. The reason I have not elected to put on a bearish position in oil just yet is because there’s a bounce likely to occur at any moment and it’s that next bounce that I want to buy an inverse ETF on because the next big move in oil after a small bounce from roughly these levels will be a plunge down to system support at roughly the 26.50 level.
Mike: Hmm.
Larry: Believe it or not, oil is going to fall below $30. As to the timing, we have a chance of seeing that in November as well with the slide in gold. But the cycles, the nominal cycles in oil actually show the low coming in January or February of next year. Either way, oil has not bottomed. There’s going to be a lot more blood in the streets in the energy sector in the weeks and months ahead and we will play the next big move down to 26.50 on the next bounce.
Mike: Wow, that’s a substantial drop from here, almost 50%.
Larry: Yep, yep.
Mike: Now let’s take a look at this longer term chart, again, of the entire commodity sector, the CRB Index.
Larry: Yeah. Now, I have this chart here, again, for a macro type of view. This is the CRB Index which gives you a picture of the entire commodity sector basically and you can see here, we’re now breaking the first red line there that is downward, sloped to the downward and over the next few months the commodity sector in general, the CRB Index, is going to fall substantially about another 35%. That will be the result of a further decline in gold and silver and oil but also in the grain markets, in the base metals — iron ore, copper, etc. So we’ve got a long way to go on deflation.
Mike: Yeah, that’s substantial. You can see here from this chart you expect that some commodities could drop another 35% overall. That’s the index. But some like oil…
Larry: Yeah.
Mike: …could be more like a 50% drop from here?
Larry: Yes. Uh-huh.
Mike: Wow. Despite the carnage we’ve already seen.
Larry: Yeah. We’re not there at the pain threshold and for these markets to turn around, we need to see a lot more pain in the market.
Mike: Yeah. We were talking about that the other day. We’re not at that point yet where people are ready to throw in the towel but we need to get there.
Larry: Yeah. Some people are throwing in the towel but others are fighting the trend and as long as you have a lot of investors and traders fighting the trend, then you can pretty much bet that trend is not over yet.
Mike: Gotcha. All right, now let’s jump right into the questions because this is the most important point, I know your favorite part of the presentation, Larry, when we get to hear from our members and their questions and comments.
Here’s a good one from Bob we can kick off with. “Recently there is news the IMF will not consider the Chinese yuan for reserve currency status for at least another six months. Are there any impacts from that on your models and if so, what are they?”
Larry: No, there’s no impact whatsoever on the models regarding the yuan. Now, Mike, we’ve had this question so many times. So many people are worried about the yuan being admitted to the IMF as a possible reserve currency. Well, the IMF just came out the other day and said the yuan is not ready for prime time. So there’s no threat to the dollar from the yuan now or at any point in the future. So don’t worry about that.
Mike: Okay. Here’s another good one going back to gold which is a favorite of yours. Moses would like to know, “What is the worst case scenario for gold for the coming months?”
Larry: Well, worst case according to my work is about 850 on gold. Now interestingly, 850 was the high in January of 1980.
Mike: Hmm.
Larry: That was the high way back then. When we took off in the most recent bull market, we never looked back at 850.
Mike: Right.
Larry: So it would be totally normal for gold to decline to 850. All it would be doing is retesting the prior breakout point.
Mike: Yeah, which makes sense that it would do that.
Larry: That would be a normal healthy move.
Mike: And that’s where people would throw in the towel probably.
Larry: So… Yeah and that would be terrific. I don’t… At this point it looks we’ll bottom around the 923, 25 level, but if we get that 850, don’t be alarmed. That’s music to my ears. Because as you just said, Mike, everybody will be throwing in the towel and I’ll be picking them up left and right.
Mike: Yeah, that’ll be the time.
Here’s a good question from Dave. I’d like to address this because I’m sure it’s on everyone’s mind. You recently did a series of very important briefings here with us at Weiss Research where you laid out this convergence of cycles…
Larry: Uh-huh. Right.
Mike: …that’s going to carry for the next several years. The date you’re looking for obviously is October 7 when the process begins. So Dave wants to know and, as I said, a lot of people do, “What do you specifically see happening on October 7 that will trigger the events you predicted over the next 5 years?”
Larry: Well, I want to be perfectly clear. I am not expecting necessarily one single event to occur out of the blue on October 7 that’s going to trigger all the moves that I’ve talked about and the forecasts that I’ve talked about in that presentation. October 7 is a hard date in science according to the macro economic models and cycles and how they converge. But the way you should look at it is really, we’re going from one phase of the world to another phase in October and it’s going to take time for it to pick up momentum. What’s going to happen is we’re going to go from a phase where governments could rack up debt without abandon, recklessly — nobody would care too much — to a phase where we’re going to pay the price for those debts.
And I’m talking about the governments of Europe, Japan, and the United States. They are bankrupt, period, and we’re going to enter a period where more and more investors, more and more citizens, more and more people are going to recognize that hey, Brussels is bankrupt. Tokyo is bankrupt.
Washington D.C. is bankrupt. In fact, I’m going to go out a little bit out on a limb here right now. You might think I’m crazy but Donald Trump, his popularity in the polls right now… I don’t think he’ll ever make it and I hope he doesn’t become president of the United States. But his popularity in the poll right now is telling you something. It’s telling you we’ve had enough with the politicians with the status quo in Washington. We’ve had enough with Republicans. We’ve had enough with Democrats. We want somebody in there…
Mike: Change. Yeah.
Larry: …who’s not beholden to the political framework, dysfunctional political framework, that we have and that is a sign that these cycles are converging. So it’s a sign right there that people are already getting fed up with government. So I think that’s very important to point out and I think that all my members should seriously think about that because it really is a sign of what’s to come.
Mike: Okay, this next question is from Deanna. She asks, “Larry, you said that the euro will be in trouble and that will help the U.S. market. If that happens, when will it be a good time to buy U.S. stocks?”
Larry: Well, the euro has been in trouble for months now and it’s been in a serious bear market. Come October, the euro crisis is going to accelerate. What’s happening there is frightened European capital is leaving Europe. It’s looking for safe haven in our U.S., largely in our U.S. equity markets but also in some prime real estate areas and that’s benefitting the dollar and it’s benefitting our U.S. stock markets. It will continue to do so after we get a pullback which seems to have started in the stock market and it will ultimately be what drives our stock market, let’s take the Dow Industrials, up to 31,000 by 2017.
Mike: Hmm. So short-term correction but long-term…
Larry: Right.
Mike: …lot of potential there.
Mike: Here’s an interesting question from David. It’s basically I think talking about or referring to your Money and Markets article this week. “How do we prepare for a cashless society?”
Larry: That’s a good question. I’m still trying to figure out the answer to that one.
Mike: Yeah. I thought it was an intriguing article though that you had in Money and Markets about how governments everywhere…
Larry: Yes.
Mike: …are trying to basically take your cash away so they could track you.
Larry: Yeah.
Mike: Track every dollar, every dime.
Larry: Well, it’s happening. It’s a fait accompli. It is happening. It’s happening. Europe is way ahead of the curve there. They’re the ones that most aggressively want to eliminate cash. Washington isn’t too far behind it. There are movements in Tokyo behind the curtain to move to an electronic currency as well. Again, the reasons are pretty obvious. They want to track your money and tax it more and they want to eventually have the ability to prevent bank runs by effectively throwing the kill switch on everything. If you shut down an electronic currency, nobody can move their currency.
Mike: Right.
Larry: Okay.
Mike: They have total control then.
Larry: How do you… Most of the world… There are countries in Africa and other parts of emerging markets that will never end up on an electronic currency, not in the foreseeable future. So we’re really talking about the Western governments here. Britain, by the way, the U.K. is also moving in that direction. Most of my transactions and I think most people today are electronic.
Mike: Yeah.
Larry: I haven’t written…
Mike: I don’t even carry cash in my wallet much anymore.
Larry: Yeah, yeah. I mean I don’t… I can’t remember the last time I wrote a check. It’s been at least 15 years since I wrote a check. I don’t think I could even write my signature on a check. So how do you avoid it? I don’t think you can. That is the way the world is going.
Mike: Yeah. Here’s an interesting question from Michael. “Larry, please address the status of gold and silver which you already mentioned in your charts, but particularly the various mining shares, both ETFs and individual mining companies, some of which have really seemed to have taken a beating. One wonders how much lower can they go.”
Larry: Well, if you think the beating they’ve taken has been bad…
Mike: You ain’t seen nothing yet?
Larry: Well, I’m not going to put it that way. I’m just going to say the beating isn’t over. I think mining sector is going to lose another 50% of its value over the next few months. There’s going to be real blood in the streets by November. You’re going to see mining companies actually go belly up and if you think a mining share that’s fallen from $70 to $10 is a bargain, I’m here to tell you that it’s not. It’s going to be a bargain at $5.
Mike: Yeah, that kind of process is probably needed, that kind of watershed decline…
Larry: Right.
Mike: …to ridiculously low levels… to draw on the real bottom, the lasting bottom. Here’s kind of a follow up to that from Donald, a question. “After the precious metals bottom, how quickly would you expect them to rise substantially?”
Larry: Too soon to say. We’ll have to look at the bottom and then I can run projections, what are called cyclical and technical projections from that low that will give us a guide to the future.
Mike: Okay, let’s shift gears to currencies. Art would like to know, “Is there a currency you suggest investing in outside of the U.S. dollar? For instance, Singapore dollar or Swiss franc?
Larry: Well, I like the Singapore dollar but right now, no, I would stay almost exclusively in U.S. dollars. Once commodities bottom, we’ll take a look at the Canadian dollar, the Australian dollar, the New Zealand dollar again. But right now, I wouldn’t even be heavily invested in Asian currencies because they, too, are suffering against the strong U.S. dollar.
Mike: Uh-huh. Okay, staying on the idea of currencies and cycles, Dale has a question. “Thank you for sharing your time and expertise with us, Larry. Could it be possible to give us an update on your gold and silver cycle forecast at least every few weeks? The current data that gets entered affects the forecast moving forward.” And he goes on to say, “The cycle forecast appears to be an amazing piece of work. Thanks.”
Larry: Well thank you, Dale. I can do that but if I were to do that, it would confuse you because every two weeks looks at the various short-term cycles… which are very, very jittery. The longer-term cycles have less noise in them. So I prefer to work with the longer-term cycles for the projections. When there is an important turning point coming up, however, I won’t hesitate to show that cycle chart to you.
Mike: Okay, good. John has a question about Supercycle Trader. “Will that cover the gamut of investment domains covered by your Real Wealth Report? It seems Supercycle Trader is a mix of options and ETF stock based portfolio. Why the mix? Why not all swing for fences or all stay a bit less leveraged?”
Larry: Well, Supercycle Trader is going to cover everything that Real Wealth Report covers and more.
Mike: Hmm.
Larry: Because it’s an actively traded service capitalizing on numerous opportunities. Real Wealth Report is for your core money. Supercycle Trader is for your speculative funds, giving me the opportunity to multiply your money many times over. Now, as far as the mix, in Supercycle Trader itself there’ll be trades that are bunt singles so to speak, using a baseball analogy, and there’ll be a lot of trades that are triples, home runs, grand slams.
Larry: Okay. It will be a mix. If I were to go all swing for the fences, just like a baseball player, if you go for, every time you go to bat you swing for the fences, you’re going to strike out.
Mike: Strike out a lot.
Larry: That is not a good strategy.
Mike: Right. That’s a great answer. Here’s a question from Ken, again going back to your cycles and your forecast. “Looking ahead you’re predicting that Japan’s economy will fade. Do have any general timing around when that will occur?”
Larry: We’re looking at the latter part of 2016, next year.
Mike: Okay, Rosemary has a question about China. “What should we do about Chinese stocks?” And she mentions Alibaba. Do you like Chinese stocks in general after the big decline we’ve seen?
Larry: Yes, I do. I do. We’re not at a final bottom there from the recent selloff. A little bit lower and then I’ll be back in there buying. China remains fine long term.
Mike: Okay, Bill would like to know about energy. “What’s your take on the near future and longer-term future of energy stocks?”
Larry: Well, as I just said a few minutes ago, oil is going to head to $26. The energy sector blood bath is not over. It’s going to turn into a blood bath tsunami in the next few months. So I’m looking much lower for energy stocks and then, like the mining sector, you’ll see some actually go out of business and then you want to be scooping up the ones that remain and that are healthy and not too indebted.
Mike: Okay, here’s an interesting question from Lauren. “Considering the financial chaos that will envelope the U.S. as you said at some point, wouldn’t that certainly create bank runs and bank closures? So how will money and stock activity in brokerage accounts be available and accessible, especially if government imposes mandatory closings on institutions?” What type of capital controls in other words might we be looking forward to?
Larry: Well, let’s go back in history to answer that one. During the Great Depression, yes, we had some 5,000 banks fail. The stock markets remained open. Most brokers remained solvent, okay? The banks that were shuttered and closed, many of them were absorbed by larger banks. So I don’t expect that we’re going to go back to the Dark Ages so to speak where everything is shut down and we’re having to barter just to…
Mike: We’re not going to have to trade wheat for cattle are we?
Larry: No, or pistachios for a haircut. I don’t believe it’s going to get that bad. So in that sense I think you’re going to be fine in the sense that you have to make obviously very smart decisions as to what bank you use, what brokerage firm you use. You can’t just complacently think that all banks are okay or all brokers are okay. You do have to be careful and you do have to batten down the hatches. But the entire system is not going to melt down. Will there be capital controls? Yes. At some point after 2017 there will be capital controls. There will be probably nationalization of retirement accounts. There’s going to be some nasty things going on but the good news is we have the foresight to plan.
Mike: Yes. As long as you kind of know the road map, you can navigate a lot easier.
Larry: Yeah and we can plan to protect wealth and plan to grow the wealth.
Mike: Here’s a great question from Paul. “Hi, Larry. When time-wise do you see copper returning to being a valuable commodity in demand again?” He says, he’s bullish on commodities in general but with world demand decreasing over the last few years, he’s looking at reinvesting heavily when the cycle begins to turn again. “Thanks for the great work you do.”
Larry: Well, copper is still in a bear market. We’re down to about 2.30. It’s going to fall below $2 a pound. Probably as low as $1.50, believe it or not. However, the long-term prospects for copper are very bright indeed, largely based on electronic vehicles. Tesla uses alone, model S Tesla uses about a 100 pounds of copper.
Mike: Hmm.
Larry: Your typical gasoline engine car uses only about 40 pounds of copper. So the world is going towards electronic vehicles. There’s no question about that and copper’s next source of large demand is going to come from electronic vehicles. Timing-wise, copper is probably going to bottom in November. If it doesn’t fall to $1.50 by then, then you’re looking at January of next year.
Mike: Hmm. This question is from Larry for you, Larry. “With the imminent failure of the banking system in the U.S., what are some banking alternatives we can use to protect our money that is needed for basic living expenses?”
Larry: Well, for basic living expenses, there’s nothing better than cash, cold, hard, U.S. dollars, cash in a safe in your home. That’s what I recommend. Six months of living expenses in greenbacks and dollars in a safe in your home. I know some investors, very, very wealthy investors who’ve piled up a million dollars worth of cash U.S. dollar notes and are holding them in Swiss banks…
Mike: Hmm.
Larry: …for emergency. That’s my best advice there. As far as banks go, for safety I would definitely look at the Weiss safety rating on banks.
Mike: That’s good advice. Here’s a question from David. “Why do you think Japan does not go down before the euro countries?” About timing there.
Larry: Well, yeah. I mean it’s already… Europe’s already declining. It’s already started in Europe. Japan traditionally because it’s one of the largest economies in the world and because of its historical track record, the Japanese yen is more resilient and the Japanese economy is more resilient than Europe and Europe has got a problem. The euro was an ill-conceived experiment and it’s failing now.
Mike: Uh-huh.
Larry: So it’s Europe, Japan, the United States.
Mike: Okay, here’s a question from Harvey on alternative energy. “Could oil have seen its heyday due to solar or wind taking a hold and expanding exponentially now? Should we be maybe piling into these new paradigm investments?”
Larry: Well, I don’t think oil has seen its heyday. Oil will make new record highs down the road, mostly for geopolitical reasons and many of the same reasons that gold and silver will make new highs. But that said, I do believe solar and wind are taking hold and electronic vehicles are definitely taking hold.So, yes, we have a new energy paradigm going on.
Mike: Here’s an interesting question. “Please explain the types of government and corporate bonds to sell. Thanks.”
Larry: Well, all government bonds you should get rid of, notes and bonds, anything more than really one year maturity. Corporate bonds, it’s okay to hold AAA corporate bonds. That’s okay. Anything less than AAA, I would eliminate as well.
Mike: Here’s a question from Barry. “What would nationalization of retirement accounts look like?”
Larry: Well, in Poland they’ve already nationalized retirement accounts. They just took them over and said we’re going to manage them for you. They belong to us now. We will pay you out on this basis when we have the money, when we think we can do it.
Mike: IOUs.
Larry: And good luck to you.
Mike: Yeah.
Larry: I don’t think it’ll get that severe here in the U.S. What I do think is entirely possible is that the Internal Revenue Service, prodded on by Congress, will require you to hold a certain amount of government Treasury bonds in your retirement program, an indirect way of supporting the U.S. government.
That, to me, is an indirect form of confiscation and I certainly don’t want to be in that position. So I’m looking at the alternatives now because obviously there’s important tax penalties if you withdraw money from a retirement account. So there are limitations on what you can really do now. But I will be looking into it and probably releasing a report on that in the near future.
Mike: Okay. Just kind of a follow up to that, Sandra asks, “How do we protect accounts from being nationalized or being forced to buy bonds? Do we cash out now and move somewhere else?” What would the best strategy be?
Larry: Well, I don’t recommend taking any tax penalties right now. I recommend the same types of strategies that are being utilized in Real Wealth Report for your core money. Retirement accounts you should not be speculating in.
So if you follow the recommendations in the Real Wealth Report for your core wealth, those apply equally well to your retirement accounts.
Mike: Okay, here’s a question from Leo. “I’ve been buying savings bonds for my grandchildren for up to 19 years. Should we liquidate those now and if so, what’s a good alternative?”
Larry: Series E and I savings bonds are okay.
Mike: How about longer term bonds? Robert asks, “What will happen to ETFs like TBT and TLT that track the 30-year Treasury or longer?
Larry: Well, the 30-year Treasury is going to decline by at least 50% so that’s a wipeout.
Mike: Yeah, pretty much. Here’s a question from Wade. “Given that the war cycles are ramping up now and will last until at least 2020, do you have any thoughts as to where in the world one would be safe from those coming conflicts, disasters?”
Larry: Well, the war cycles don’t necessarily mean military conflict, okay. There is going to be some of that ramping up domestically and internationally. I think we’re already in World War III and even Pope Paul acknowledged that shortly after I published my war cycles report. But World War III is really the kitchen sink. It’s governments against governments and governments against its people in terms of financial repression and confiscation. As far as safe places to live, well I like Thailand a lot. Costa Rica looks like a great place to retire. Malaysia has a nice retirement program for U.S. expatriates. A lot of work, a lot of research needs to be done before you pick up your roots and move. It’s a very personal situation.
Mike: Yeah, having been through that yourself…
Larry: Yeah.
Mike: …you can speak with authority. Here’s a question from Ginger about a current position. “Why are we in UNG?”
Larry: Okay. That’s a simple question.
Mike: That’s the U.S. Natural Gas Fund.
Larry: Because natural gas…
Mike: Which has done well actually.
Larry: Yeah, it’s actually doing well. Natural gas is one of the commodities that may have already bottomed. It’s up again today. It’s looking like it can easily go to over $3. So UNG is looking good.
Mike: Okay. Here’s another question about the Chinese currency. “If the renminbi is given reserve currency status at some point, could it divide the euro failure money flow into U.S. equities?”
Larry: No, no. The yuan is not ready for prime time and even if it were forced into prime time, it’s only 4% of global transactions. It’s not deep enough, liquid enough market to make a dent in the euro or a dent in the dollar. If anything at all, when the yuan — and it will happen at some point — is admitted as part of the reserve basket of currencies along with the euro and the U.S. dollar, if anything at all I think it’s going to be bullish for the U.S. dollar…
Mike: Hmm. Interesting.
Larry: …because there’s hundreds of billions of Chinese money looking to leave China and diversify. So you have all these Chinese who are now going to be allowed to convert their yuan to dollars and invest in this country. So I don’t go for all the fear mongering out there…
Mike: Yeah.
Larry: …about the dollar is going to crash if the yuan is admitted to the reserve constituency. I think it’s exactly the opposite.
Mike: Yeah.
Larry: It’s bullish for the dollar.
Mike: Ironically it could be good. It could give the dollar a boost.
Larry: Yeah.
Mike: Okay. Here’s a good question from Cherie. “Can you address how all of your projections will affect domestic real estate, specifically lower income housing?” How about that? What affect do you think all these cycles converging over the next five years will have on real estate here and even internationally?
Larry: Yeah, I think real estate saw its bottom back in the real estate crisis. That said, real estate is a very location centric asset class. So there will be weaker areas of real estate in this country and other parts of the world that, for example, may suffer with the first interest rate hike. Okay. There will be other areas, prime areas, that will continue to benefit from flight capital coming out of Europe, coming out of the Middle East, coming out of other parts of the world that have already boosted places like L.A., Manhattan…
Mike: Even Florida.
Larry: Singapore, even Florida.
Mike: Yeah.
Larry: We’re starting to see… I read an article just the other day in my hotel. 43% of homes sold in Palm Beach County went to Asian buyers.
Mike: Yeah, yeah. Foreign money coming here to the U.S.
Larry: Yes. So that’s going to support the good locations.
Mike: Makes sense. Here’s a question from Ken. “When the debt crisis starts to implode and really takes off, where can we keep our retirement money safe?” Probably, at that point, gold and silver and other hard assets, right?
Larry: Yeah. Again, I’m working on a report there because that’s obviously a very, very important critical aspect to everybody’s wealth preservation. But the basic strategy is to keep it liquid, not in long-term investments that the government can confiscate.
Mike: Right.
Larry: Directly confiscate or indirectly confiscate.
Mike: Keep it liquid so you can take it with you, right?
Larry: That’s right.
Mike: Here’s a question from Chris. “Thanks, Larry, for all your research. What is your feeling on the high tech darlings going forward: Google, Tesla, Amazon?” How about it? Put your tech analyst hat on for a minute.
Larry: Well, I think Tesla’s a fantastic long-term company. It’s on the leading edge of electronic vehicles. I think Amazon is an amazing company. Google is just an absolutely, probably the most amazing of all three of them. Long term I think they’re going to do fine. I do think we have a little bit of a tech bubble right now. Not as big as…
Mike: 2000. No.
Larry: Not as big as 2000 but they’ve gotten a little bit ahead of themselves and I think they too need a pretty sharp correction.
Mike: Okay. Here’s a question from Caroline. “Would you recommend investing in A Shares in China now? If so, which?”
Larry: Not yet. We need to see the Shanghai A Share Index make one more new low around 3200. We’re at about 3600 now… so we’re only about 400 points away, 10% or so. The efforts that the Chinese government are taking, I don’t agree with them, banning short selling, etc., interfering with the market. It’s not going to turn the market around. It’s going to cause actually the opposite and probably one more crash low in the Shanghai A Share market. But from there China is going to quadruple.
Mike: Hmm. Here’s a question again kind of on currencies or crypto currencies. “What do you see for the future of crypto currencies such as Bitcoin? Is it a viable alternative?” That’s two questions from Steven.
Larry: No, it’s not for the simple reason that the powers that be have only allowed them to survive this long because they are studying them.. to adopt electronic currencies of their own. They will be just killed and put out of business by government powers.
Mike: So you wouldn’t invest in those at all.
Larry: I wouldn’t touch them.
Mike: It’s the newest pet rock.
Larry: I wouldn’t touch them with a 10-foot pole.
Mike: It’s a pet rock is all…
Larry: Yeah.
Mike: Okay. Here’s a question from Melody. “I enjoyed reading your insightful Convergence report recently which makes a lot of sense to me. Thank you. A couple of questions: Number one, I live in California and I’m not always able to read your issues immediately when they go out early in the morning. Is it okay to make an entry a couple of hours later?”
Larry: Yeah. No problem at all.
Mike: That’s why you always give usually limits…
Larry: Yeah and if you ever feel…
Mike: …limit prices, right?
Larry: That’s right. I give certain limit prices and if they’re not hit, then you shouldn’t be acting anyway. But if they were hit and you feel like you have a question, you can always contact customer service and they’ll have the latest input from me on what you should be doing.
Mike: That’s a great point and the second part of Melody’s question, “When you recommend buying certain stocks, do we have to buy the stocks or could we also buy call options?”
Larry: Well, the final decision is always yours so if you want to take one of my recommendations and ramp it up with a call option on your own, you’re free to do so. But I do recommend you follow my recommendations as closely as possible.
Mike: Because you do have specific option-only trades that you present as well.
Larry: Yes, and we have… We will have specific option-only trades.
Mike: Okay. Going back to energy, Howard would like to know, “Do you anticipate the energy pipeline stocks to move down in price along with the price of crude oil?”
Larry: Yes, absolutely.
Mike: Okay. From Bill, he asks, “Between now and October,” kind of a limited timeframe, “what do you expect in the small cap part of the U.S. stock market?”
Larry: Well, the small cap market is already down substantially. One thing everybody should know is… We talked about this earlier this week, Mike.
Mike: Uh-huh.
Larry: 67% of all publicly traded U.S. stocks are down 10% or more for the year.
Mike: That’s right and a lot of small caps have been hit harder than the big ones.
Larry: And that’s a lot of small caps in there too. So you’re already seeing a bear market. You’re not seeing it in the major averages yet, the Dow, the S&P 500, the NASDAQ, but it’s already there. It’s internal. It’s a stealth bear market. The next thing to happen will be the major indexes will stage a sudden, sharp correction that’ll scare the underwear off of everybody but that’s good news. That’ll prepare the way for the next leg up.
Mike: Yeah, a lasting and tradable bottom, right?
Larry: Yeah. Yep.
Mike: Here’s a question from Tom and I know you addressed this early on but for those that came late, “What’s the timing on your forecast for gold reaching 850?”
Larry: Well…
Mike: Or 900 as you said.
Larry: The ideal period is in the middle of November. And so far — knock on wood — it looks like we’re on target.
Mike: Okay, here’s a question from Knole. Knole says, “Larry, congratulations on an excellent Supercycle Trader service. Your friend Martin Armstrong believes that property, real estate may be decimated during this deflationary crisis. What are your views specifically for European residents?”
Larry: Yeah, I know Marty well. We’ve known each other for almost 40 years. That’s not really correct. His view is that prime areas, as I mentioned earlier, will continue to thrive… because of the flight capital coming out of various unsafe, unstable parts of the world. So he and I are in agreement.
Larry: Prime areas will do well. Less than prime areas will suffer setbacks.
Mike: Okay. A question from Joe, “What’s the lowest projection you have in mind for silver prices?”
Larry: $11.
Mike: From William, he wants to know, “We dabbled in the grains earlier. When will it be time to get back into the grains?”
Larry: Well, the ETFs in the grain markets are fairly illiquid so I’m not inclined to take out any inverse positions or short positions on the grains at this time. I’m waiting for them to bottom because once they bottom, we’ll get a new rip roaring market, bull market, in the grain markets and then the liquidity in those ETFs will pick up dramatically.
Mike: Okay, a question from Christine, “Where do you expect the U.S. dollar to be in comparison to the gold charts you showed earlier?” How high can the dollar go as gold plunges lower, in other words.
Larry: Okay. All right. That’s a very good question. The U.S. dollar is very strong, very strong. It’s taken a pause over the last couple of months but that pause has been sideways which gives you an idea of how strong it is longer term. The dollar is going to head higher into about 2017…
Mike: Long-term bull market, yeah.
Larry: …and it’s probably going to reach its prior highs just before a token 11-year bear market starting back in 2000. Now, importantly, the dollar and gold can go up together. Okay, at some point you’re going to see a flip where the dollar and gold both go up together.
Mike: That’ll catch a lot of people by surprise.
Larry: That’s going to catch a lot of people, a lot of analysts by surprise…
because they’re going to say oh, it’s an inverse relationship. How can that be? How can gold go up and the dollar… Well, it happened earlier this year and it happened historically many times.
And that’s because when you have a crisis manifesting itself in government and that’s what we’re talking about with these cycles converging in October, it’s government that is collapsing, okay, and the flight of capital and deflation scares people into hoarding cash which means a stronger dollar and hoarding gold. So they go up together.
Mike: Interesting. Here’s a question from John. “Larry, I just don’t get it. You’ve mentioned several times that the U.S. cannot print enough money to stop the credit crisis. Can you explain why not? It seems the easy way out is just to print itself silly. I’m confused but I’m confident you can straighten me out. Love your analysis.”
Larry: Well, it’s a very simple one. Globally there’s about $500 trillion of government debt. A little over $200 trillion of that is the United States. They can’t print $500 trillion.
Mike: Yeah. There’s just not enough presses in the world or ink in the world for that.
Larry: Yeah, yeah, and if they were to do so, it’s unlikely that it would cure the debt problem because most of that money, the unintended consequences of printing money, the money would end up elsewhere. It wouldn’t go to paying off the debt. So it’s just impossible. There has never been a civilization that has paid off its debts. Governments don’t pay off their debts. That’s it.
Mike: It’s just easier to inflate their way out of it.
Larry: Yeah and the thing is, they have been lucky for a long period of time in the sense that they’ve been able to at times inflate it away and at other times have the luck of all the wind in their sails with a strong economy but the convergence of these cycles they’re not going to be able to withstand.
Mike: Yeah, we’ve never seen anything like what’s coming… Here’s a question from Wayne. “I read a lot of other people’s opinion that attempts are made by various high ups to influence the price of gold market up or down, mostly down lately. Do you agree that it’s manipulated? It seems like this could influence your normal cycle patterns if true.”
Larry: No. The gold market is not manipulated. I will say this until I’m blue in the face, okay? The reason gold is down is we are in deflation. If gold were being manipulated, why is every other commodity on the board also down?
And why do you always hear about manipulation when a market goes down and you never hear about it when a market goes up? It’s all B. S. conspiracy theory. The market is in deflation, period.
Mike: Okay, here’s a question from Steve. “With the oil prices down, how come we’ve not tried to trade oil on the short side with an inverse ETF like SCO?”
Larry: Well, I mentioned earlier, I’m waiting for the right opportunity there. Yes, we’re down over the past couple of months but a rally could occur at any moment. I’m looking for the bounce that should come soon from the $42, $43 level back up to 46, 48. We will have created a double bottom at that point at $42. Double bottoms never hold. The third time through is a charm. That’s where you slice through to $30…and that’s the big move that I want to be on board.
Mike: Makes sense. This question is from Neal. Neal says, “Hello, Mr. Edelson. The best thing about your service is the education I’m receiving and the money is nice too,” he goes on to say. “I’m about halfway through the trilogy, the Memoirs of Herbert Hoover that you recommended reading.It’s fascinating. When can I get a hard copy of your report, Convergence? As you know, we can’t print it yet so when will we be able to buy it as a book?”
Larry: That’s a good question. I’ll have to check with publishing to see when the hard copy will be ready.
Mike: Okay. Question from Carl, “Larry, I’m confused. You’ve been recommending shorting the market in Supercycle Trader. Yet in your report Convergence, you are recommending to buy the market via SPY, QQQ, Diamonds. What gives?”
Larry: It’s just a time frame difference.
Mike: Timing.
Larry: Yeah.
Mike: Yeah, timing.
Larry: Yeah. I don’t want anyone buying those until we get the correction.
Mike: Okay. Chris would like to know, “During your webinar,” which we’re on right now, “please provide us with your analysis of oil,” which you’ve already touched on but specifically Chris would like to know, “If the sanctions are lifted on Iranian oil, how will that affect the price?”
Larry: It’s bearish because you have a whole new supply factor and Iran has a lot of oil. So, now a lot of that is already discounted by the market. The market is expecting that supply of oil from Iran but it doesn’t change the trend. The trend is down. It is what it is.
Mike: Okay. Question from Chris, “What is your forecast for long-term interest rates in the near term?” The near term for long-term rates.
Larry: I think they’re going to be fairly stable at these levels until October and then they’re going to start accelerating higher…
Mike: Hmm.
Larry: …as bond prices fall and it becomes more and more, investors around the world become more and more aware that we’re dealing not just with a sovereign debt crisis in Greece or Puerto Rico… but in Europe, Tokyo, and Washington, D.C.
Mike: That’s small potatoes compared to what’s coming, right?
Larry: That’s small potatoes. It’s a canary in the coal mine… but it’s much bigger than that.
Mike: Okay, question from Steve, “Is there an ETF to recommend for the drop in commodity prices in general?”
Larry: There’s an ETF on the CRB Index. It’s highly illiquid so I don’t recommend any of the commodity index ETFs.
Mike: Okay, Judy would like to know your forecast for uranium. Let uranium prices drop as well?
Larry: Yep, yep. Unfortunately just… With the exception of natural gas, about every commodity under the sun is going lower.
Mike: And natural gas you think may have already bottomed though, ahead of the rest.
Larry: Yep, yep.
Mike: Interesting.
Larry: I’m not sure of the fundamental reasons why. I can just tell you the charts look like it’s bottomed.
Mike: And sure enough, it’s holding up a lot better than crude oil the last few weeks.
Larry: Yeah. Yes, absolutely.
Mike: Ron would like to know, “How will the Fed’s first rate hike in many years affect the market?”
Larry: Well, if it comes in September, now apparently, or October, the sentiment seems that the Fed is going to raise the short-term rate come September, October. I don’t think it’s going to do anything. It will coincide with the correction that’s already starting in the stock market. But rising interest rates — let me make this perfectly clear — rising interest rates are not bad for the stock market. They are not bad for the commodities market. They are not bad for gold. If you go back through history the greatest bull markets in stocks and commodities have occurred with rising interest rates. Most people will say, okay, that’s because inflation was rising. Not true. There were periods when inflation was rising, interest rates were rising, and commodities and stocks went up, yes. But there have also been periods when commodities and stocks went up and interest rates were flat and stable. Or interest rates were rising because governments were in trouble and that’s the one we’re facing now.
Mike: Interesting. Here’s a good question from Rob and I was wondering about this myself. Rob asks, “Your long-term gold chart that you showed earlier shows a bottom red line going to around the 500 level. What does that line show? Could it go down that low?” And let’s actually pull that back up because I was wondering the same thing. This is your long-term gold chart. I think he’s talking about this lower line.
Larry: Yeah. No, I don’t think gold’s going down there at all, okay? That is actually the original cyclical line if you can see how it was generated on the left side of that chart. It’s capturing the last major cycle in gold which was the crash in gold in 2008, 2009 really before it took off to 1900.
Mike: Right.
Larry: That was… 2008 was a cyclical point for gold so I’m capturing that and projecting it forward. But no…
Mike: So that lower level is probably off the table…
Larry: But yeah, I don’t see gold falling below 850.
Mike: Okay, here’s a question from John. “Back when your service was called Gold and Silver Trader, you told us to expect to “back up the truck” regarding buying mining stocks and reaping profits. Do you expect that to happen this cycle and if so, when?”
Larry: Yes.
Mike: How about timing-wise?
Larry: Timing-wise it should coincide with the final low in gold and silver which, right now we’re looking at November.
Mike: Okay. Let’s see. “Will you also be giving us some specific recommendations for the Hard Assets Alliance accounts?” That question’s from Anthony.
Larry: Yes. Hard Assets Alliance is still my favorite way to buy gold and silver and platinum bullion.
Mike: And store it.
Larry: And to store it.
Mike: Okay. Let’s see… Al would like to know, “With your forecast on oil down to $30 a barrel, will this impact the tanker business as well as MLP stocks?”
Larry: Of course it will.
Mike: The higher dividend yielding MLP…
Larry: Absolutely.
Mike: …will they be safe or not?
Larry: No. Well, they’ve already gotten clocked. Any yield and royalties you would have gotten in MLP stocks has been wiped out by the loss of principal in the MLPs…
Mike: True.
Larry: …and it’s going to fall further.
Mike: Wade would like to know, “What are your predictions for the Russian stock market?”
Larry: Russia’s stock market will actually inflate higher because of the depreciation in the ruble. But that’s simply a currency thing. Russia is… I’m contemplating some speculative trades in the ruble and in the Russian stock market but Russia is a lawless society. It’s headed by an oligarch and a dictator and it’s not an area that I think anybody should invest any serious money in.
Mike: Here’s a question from Art. “Larry, how low do you expect the Dow to go in correction near term before resuming its bigger uptrend you talked about?”
Larry: Worst case around 14,800. Probably stop much higher than that around 15,600, 15,800, possibly even stop at 16,000. There’s a strong underlying bid for U.S. securities.
Mike: Because of the money flow.
Larry: Because of the money flow. So that’s going to mitigate any correction.
Mike: Okay. Let’s see… Here’s a question from an investor apparently that holds some Puerto Rican bonds. “What are your thoughts on Puerto Rican bonds? Should I take the loss and just get out now?”
Larry: Well, I can’t give personal advice.
Mike: How about in general?
Larry: But in general I would avoid all municipal bonds at this point. Some people would say I’m crazy because of their tax benefits but a sovereign debt crisis affects municipalities as well and municipalities can’t be bailed out by the federal government.
Mike: That’s true. Let’s see, here’s a question from Chet. “What’s your feeling on Roth IRAs? Should we close them out and put the money in a regular account because of possible confiscation?”
Larry: No. You’ve got a few years before you have to worry about that.
Mike: Okay. Another question from Larry for you, Larry. “How will you be able to cash out your physical gold holdings down the road when the value per ounce reaches such a high level? Will the government allow this to happen?”
Larry: Of course. There’ll always be a market.
Mike: For gold, of course.
Larry: Yeah, there will always…
Mike: Thousands of years.
Larry: Yeah and when we get to $5,000 an ounce, you’ll be selling to everybody who’s late, who thinks it’s going to $10,000 an ounce. So there’ll be plenty of buyers for your gold.
Mike: At a premium price. Daniel has a question about international markets. “What do you think of Panama as a safe haven? If positive, what are some of the better banks there?”
Larry: I don’t… I can’t answer that. I don’t know enough about Panama or its banks.
Mike: Okay. Here’s a question from Harvey. We don’t have much time left but maybe time for a few more. One from Harvey says, “How are the mining stocks vetted for entry in an ETF like NUGT? Are all the majors included or is there a filtering process?”
Larry: There’s a filtering process. I’d have to double check it but yes, there’s a filtering process that it goes through by the issuer of that ETF.
Mike: Steve would like to know how the volatility index, the VIX, may be affected by what you see coming over the next several months.
Larry: Well, we’ve seen some of the tightest trading ranges, as you know, Mike, especially in the stock market in decades. So volatility should start increasing dramatically as we get closer to that October date.
Mike: Okay and here’s a good one from Mark. We’ll end on this one. “Are diamonds better than gold? Are they still a girl’s best friend?” How about an investor’s?
Larry: I’m very bullish on the diamond market and I’ll tell you why. It’s another one of those off the grid types of investments.
Mike: Right. Easy to carry too.
Larry: Right.
Mike: Portable.
Larry: The diamond market, the rare quality diamond market is doing very well and this may sound funny but it’s true, gold you can’t take through a security screen at the airport. Okay, it’ll set the alarms off. Diamonds won’t.
Mike: Not diamonds though.
Larry: Diamonds won’t.
Mike: Interesting. Okay. Well, unfortunately that’s all the time we have for today. We’ve reached our limit. We’ve had thousands of questions come in and some really great thought provoking ones too. I appreciate it, one and all in our audience and, Larry, you always do a great job of responding to some of these questions individually on the blog.
Larry: Well thank you.
Mike: So feel free to keep sending them in to the Supercycle Trader blog right on our website and Larry will either answer some of them more individually or perhaps we can gather them for our next online briefing…
Larry: Yep.
Mike: …which you’re going to start doing monthly now because of this incredible convergence that’s going on. We’re going to kind of step up the process.
Larry: That’s correct. As we enter into this period I’m going to ramp up the communication. Everybody needs to know exactly what’s happening and what strategies we’ll be using.
Mike: That’s great. We appreciate it, Larry. Thanks for your time and it’s great to see you here in person.
Larry: Thanks for hosting and, members, thank you for joining today. I really appreciate your loyalty and I love talking to you so have a great day, great week and I’ll be in touch with you soon.
Mike: Thanks for joining, everyone.
