Mike Burnick: Good afternoon, everyone, and welcome to this special online Q&A session for Supercycle Trader. We have a very special presentation today. Larry, we’ve had just a blizzard of questions in the mailbag recently as markets are approaching some of the key levels that you’ve been forecasting. So why I don’t go ahead and turn it over to you for your introduction?
Larry Edelson: Sure. Thanks, Mike. Thanks for hosting again today and welcome to all Supercycle members. Today I am going to devote a full hour to answering your most important questions. Obviously I cannot get to all of them and those that I don’t get to during this session I will answer them one by one as I have been doing all along. So do be patient. We’ll get through an hour’s worth of the most important questions today and then over the next few days and into the holiday I’ll answer anything that I have not addressed on this call. So, Mike, take it away.
Mike: Absolutely and we have quite a few questions in the queue already but feel free to keep sending them.
And our first question, Larry, comes from Lawrence who says, “Hi, Larry. Thank you for all you do. I know that you are watching gold like a hawk. Do you think gold has already reached its late November low and is now headed up to the mid December peak?”
Larry: No, not yet. As I noted in today’s issue and last week’s issue, it appears that the gold cycles are stretching out a little bit into the first week of December. My guess is it’s related to the Thanksgiving holiday. It can sometimes have an impact on the cycles and we did not get as low in gold as I would have liked to have seen. So no, I don’t believe we’ve bottomed yet. I think the bottom will come in the first week after the Thanksgiving holiday.
Mike: Okay. A ton of questions here on gold as you could probably imagine, Larry, so here’s another similar one from William who asks, “If on the first few days in December gold reaches 1,035 should we then jump in to purchase 10% of bullion bars or still wait for 950 or lower in gold?”
Larry: Well, the most important thing to do is wait for my recommendations. Now, a couple of quick things here. Supercycle Trader will not be recommending physical bullion. That’s a longer-term core strategy that’s really part of my Real Wealth Report for your core wealth. That said, I’m going to make sure that all Supercycle Trader members get those recommendations and you will start getting information from me including my recommended dealers, storage, etc., how to buy, how to sell early next week, just after the holiday as a complimentary gesture on my part. So bottom line, wait for further instructions from me before buying any physical precious metals.
Mike: Okay, good comment. Here’s another one in a similar line from Kenneth. “Larry, you previously said gold would need to go below $1,000 an ounce before a new bull market would start. Now you say it could be 1,035 could be the low to start a new bull market. What has changed in your analysis?”
Larry: Well, what has changed is the rate of decline has not been as sharp as I originally thought it would be. It’s not that critical how low we go in gold to get a new bull market. The first defining criteria was breaking the July low during the November period and that we did do when we fell below 1,074 just last week.
So that was the first defining criteria. That’s the minimum requirement. That has been satisfied. The second requirement is a little bit with hindsight. We will have to see what buy signals are hit on the way up. We need three successive buy signals confirmed before I can actually say yes, finally the bottom is in. So that one’s a little bit, you know, more proactive in the sense it is forward looking but we have to get confirmation in order to confirm a major low. Ideally it would’ve been much better if gold had fallen below $1,000. The sharper the decline, the more accelerated the turnaround would have been. That’s how markets work. So we didn’t get it. That doesn’t mean gold is not bottoming. It still could be bottoming. That’s very important that you understand that. The first requirement has been met. Now we need to see the second requirement which is what buy signals are hit after we
come out of this cycle low period going into middle and late December.
Mike: Okay. Makes sense. This question comes from Donna. She says, “Larry, I’m completely bumfuzzled by this market.” That’s a new word for me. “How are the U.S., Asian, and European stocks staying so positive with so much negative influence out there? Are we looking at Dow 31,000 with no significant pullback?” What do you think?
Larry: Well, you’re not alone, Donna. I’m bumfuzzled by the Dow and the European equity markets as well. I’m not bumfuzzled, to use your word, over the Asian markets. I’ve said all along Asian economies and markets are fine. They’ve already had their selloff, their correction in the equity markets. Now they’re starting to move back up. What’s happening in Europe and the United States is that you really have hidden stealth bear markets. Most stocks in the United States are falling. Most stocks in Europe are falling. It is a handful of blue chip stocks on the German DAX and the Dow Jones Industrials and the S&P 500, a few big ones like Amazon, Microsoft, Google, Facebook, etc., that are holding the major broad market indices up near their highs. Meanwhile the majority of the stocks are falling over, I think the most recent calculation I did was early last week, close to 60% are down more than 15% year to date. So you have a hidden stealth bear market and that historically always ends up with generals, I like to call them, and many other technicians do as well, the blue chips or the generals retreating along with the soldiers or the rest of the market. So, you know, it’s just a matter of time. There is no way in my opinion that the Dow can go to 31,000 without a significant pullback.
Mike: Okay. Here’s a question from Albert, actually kind of two questions. He says, “Why is platinum selling at a discount to gold and do you think gold stocks will bottom before gold itself does?”
Larry: You’ve seen a big switch to a lot of new technologies when it comes to catalytic pollution control devices. So we’re seeing some platinum demand subside as a result of that and we’re also seeing a temporary aberration in the market. As the new bull market starts to unfold, you will start to see platinum trade at a premium over gold. That relationship will change and indeed platinum, as I mentioned in one or two webinars ago, has tremendous upside potential going forward. So that’s a market we’re going to be looking at very, very closely as we go into the December period. Palladium as well.
The mining stocks right now are pretty much lining up. They have been synchronized with gold and silver for the past few months. I expect them to continue to be synchronized, probably moving into a low early next week. Now, I’m being a little choosy on calling a low. I’m being careful. I’m not trying to pick an exact price for gold or silver. It may seem like that but I’m more concerned with time and I’m more concerned with time than price in the mining shares at this point as well. So be aware that, you know, we’re going to get as close to the bottom as we can in both. I’m doing my utmost to get you there.
Mike: Specifically I think she was wondering if gold mining stocks may have already bottomed ahead of the price of gold itself.
Larry: No.
Mike: You don’t think so?
Larry: No. Not at all. They’ve gotten whacked hard in the last few weeks again.
Mike: True. Here’s a question from Charles, staying on the gold theme. “Is gold 5,000 still in the cards and what is your timeline for that?”
Larry: Absolutely still in the cards. Late 2017, worst case 2019 but probably 2017.
Mike: Okay. This question comes from Ian. “Larry, I’m still holding UVXY. I assume if the market goes down, this position goes up but this is not necessarily so. I really don’t have any clue how and why it moves. Can you provide some insight on that?”
Larry: Sure. UVXY is a highly leveraged volatility play. So from day to day, hour to hour, minute to minute it is not going to necessarily correlate exactly the way you would expect it to. That’s one of the finicky things about leveraged ETFs. So I encourage you not to look at it so closely. When we’re trading something like UVXY, double and triple leveraged ETFs in general, we’re looking for the big move, not the day-to-day fluctuations. You can pretty much ignore those. Otherwise they’ll drive you crazy.
Mike: Good point. This next question comes to us from Scott. He says, “Hi, Larry. I notice that options seem to provide a larger upside profit potential. While I have traded mutual funds, ETFs, and individual stocks for many years, I have always been wary of options. Can you recommend some resources that might help me become more familiar with options trading, specifically the kind you use in Supercycle Trader? Thanks.”
Larry: Well, any good primer on options that you can find on the web is a great way to start without spending any money.
If you want to spend a little money, I recommend Larry McMillan’s Options as a Strategic Investment. That’s the title, available at your bookstore, Barnes & Noble, Amazon. It is really the bible of options trading. However, the type of options trading we’re doing is very simple options trading. We’re just going to be buying calls or put options. I will not be doing any short selling of options or writing of options or any of that in this service.
Do they give you larger upside opportunity? Yes, they do. The leverage is greater, far greater and you have the benefit of strictly limited risk. You know exactly ahead of time worst case what you’re risking down to the penny including your broker’s commissions and fees. So sometimes they are wonderful. It all has to do with timing because there are several disadvantages like there are advantages to options but the one major tradeoff to options is your timing has to be basically perfect because it’s a wasting asset in the sense that the longer it takes for you to achieve what you set out to achieve with that option, the more money you’re going to lose in terms of depreciation of the premium that you paid for that option.
So that said, we had some wonderful experiences just in the last couple of weeks with options where we grabbed gains of up to 187% on some euro options. So I do encourage everybody even if you’re, you know, wary of options. You know, hone up on them best you can and I’ll try to help you as well because it’s something you want to take advantage of. You don’t need to take advantage of it to make money with this service but it certainly adds a nice element of turbo charged profit potential. So I do encourage it.
Mike: Okay. This question comes to us from John. He says, “Larry, since you mentioned that you are personally trading futures along the same positions as your recommendations for us in ETFs, stocks, and options, just curious, do you hold the futures for as long as we hold our ETFs, stocks, or options? I’ve heard holding overnight futures can be expensive.”
Larry: Yes, I do. I hold them for as long as recommended in the service for that particular underlying security, yes. Holding futures overnight, no, it’s not expensive. What people are referring to when they say that is there is a little bit of a cost to carry between the futures contracts’ months and like an option, they tend to lose a little bit of value over time. Not as much as options, but no, it’s not expensive. There’s an implied yield. It’s an interest rate. For example, a December futures contract 2015 versus December 2016 has about a 0.5% yield on it which is equal to the current interest rate out there. So in theory, you’d lose 0.5% if you held it for a year. But that’s not anything you need to be concerned with.
Mike: Okay. Here’s a question that comes from Richard. “Larry, we are out of the euro short EPV but what do you see for the euro doing over the next few weeks?”
Larry: Well, I expected a pause and that’s exactly what we got. If the euro can’t get above roughly 108 in the nearby futures contract as my benchmark or in the cash FOREX — you can use pretty much the same number, 108 — then we’re probably going to plunge again down to 104, maybe even 103.
So I am expecting that we might get short the euro again very soon. So stay alert with EUO and possibly a call option on EUO which would be a bearish option play on the currency.
Mike: Okay. Here’s another currency question while we’re on that theme. “Hi, Larry. Could you give us your take on the Canadian/U.S. dollar exchange rate?” That comes from Alex.
Larry: Okay. Well, the Canadian is still weak against the dollar as are almost all currencies and it is due to turn around soon in the next four months I would say as commodities start to bottom.
So we’re probably, you know, getting close to a bottom in the Canadian against the dollar. That doesn’t mean the dollar is going to be getting toppy against all other currencies. Please don’t misconstrue that. The dollar is still in a very, very strong bull market.
Mike: Here’s a question from Bill about position sizing. “You give us a percentage of portfolio as to the number of shares to buy. Is that portfolio based on $50,000? For options, what determines the number of contracts you recommend to buy?”
Larry: It’s based on really a $25,000 theoretical account … not 50,000. As far as options go, you would determine the number of contracts to buy the same way. If I say for example using 5% of your funds, 5% of 25,000 would be $1,250 and if the option cost $200 dollars, then you’d basically buy 6 contracts or $1,200 worth of contracts.
Mike: Okay. So it’s based on a $25,000 model account size, not 50.
Larry: Correct.
Mike: Okay. Here’s a similar question from Gary. He says, “What percentage of one’s whole portfolio should be in Real Wealth versus Supercycle Trader?”
Larry: Well, Supercycle Trader again is for high level, active speculation. I don’t recommend more than 25% of your total liquid assets be in speculation. So let’s say 25%. 75% would be allocated to the conservative Real Wealth strategies for your core wealth protection and core wealth growth.
Mike: This question comes from Brent, something you touched on earlier but, “Larry, you are preparing us to purchase commodities, specifically gold and silver including physical gold and silver bars and ingots. What is the best way to do this or the best place to purchase?”
Larry: I’m going to give you all the nuances early next week, the bible on how to do it and where to go. So do stand by for that. Keep an eye out on your inbox…
Mike: Perfect.
Larry: …and you’ll have all that information complementarily.
Mike: Great. Look forward to that. This question from Janice, “Hi, Larry. Just a couple of questions. Number one, regarding the market, are we ever going to get a dip? It is, you know, the end of November now and as of this morning we are on the way up again. I keep hearing that there is a lot of foreign money that keeps flowing in but when is the market going to go down? And number two, are we still on track for a pullback to a low in gold?” Which you already addressed.
Larry: Well on the market, as I said before, yes, it’s a fractured market. It will pull back. What’s taking it so long? Why are the cycles a little bit muddy and cloudy there? I suspect that it’s two things and I’ve given this a lot of thought. One, you’re right, there is a lot of foreign money coming in and that’s going to be a major factor going forward. It is the major reason why we’ll see the Dow move to 31,000 over the next few years. Just look what’s happening to Europe and the latest terrorist incidents in Paris unfortunately and ISIS and this morning Turkey shooting down a Russian jet fighter which puts NATO nations in direct conflict with Russia. I mean, there’s a lot going on. All of these things are going to become very bullish for the stock market and very bullish for gold. On the other hand, I suspect since we have an election year coming up and there’s a lot of talk about changing the tax codes and all kinds of uncertainty who’s going to be the next president, I suspect we are going to see a lot of tax selling in the stock market as we get into December.
The uncertainty is just too much to bear. As I mentioned earlier, I think close to 60% of publicly traded U.S. stocks are down more than 15% year to date so you’ve got losses and you have gains on some of the blue chips that have been holding near their highs. What better than for tax planning to net those out before the end of the year?
So it’s possible that what’s holding the market up is the long-term fundamental reason of foreign capital inflows into the market but short term sellers are also waiting just before the end of the year to make their tax maneuvers and that’s what will cause the dip. Now, that’s pure conjecture. I don’t like to plan trades or invest based on conjecture or based even on fundamentals. It may prove out that I’m 100% correct but that’s guesswork. All I can tell you is that internally the market looks like a skeleton with fractured bones all over the place. Not going to be walking too long with a lot of fractured bones.
Mike: A lot of fractured stocks in other words, right?
Larry: Yep.
Mike: Okay. Here’s a question about some of your recent gains and there’s a couple similar. Deanna asked one and here’s another one from Irene. “Larry, where do you get the 187% gains that you mentioned just a moment ago? I follow your advice to a T and got nowhere near that percentage. However, I do not trade options. Is that why?”
Larry: It’s a perfectly legitimate question. I had recommended that option on two different occasions. Those who actually got in on the second occasion actually did better because they were able to get in at a lower price.
Most who acted on the first part of the recommendation, probably about 120% or 121% gains. But there were large numbers of new members that acted on the second part of it. So I’m just quoting it that way.
Mike: Yeah and also I think it’s worth mentioning that that was options on FXE, the euro, correct? That you traded?
Larry: Correct.
Mike: Some of your members, if they don’t trade options, they would have just bought the underlying ETF instead so the gains wouldn’t be quite as much if they choose not to do options. Is that right?
Larry: Of course. That is correct and also everything is laid out with detail in the track record link.
Mike: Exactly. So that would clear it up for them. This question comes from Ed. “Larry, when gold bottoms would I get more leverage in the ETF for NUGT (NUGT) stock or buying the long-term options on NUGT instead? Thanks for all your hard work.”
Larry: You’re welcome, Ed. You’ll get more leverage in the options but it depends on how long term we can get. So I will be looking at that and I will be recommending some short-term and longer-term options as well as the underlying ETF itself at the right time which could be as early as next week.
Mike: This question comes from Steven. “Is there anything we can do to prevent both the New York Stock Exchange and NASDAQ from eliminating stop and good-till-canceled orders? This would certainly work as a disadvantage to those of us that work and aren’t able to monitor their investments on a daily basis.”
Larry: Well, I’m not sure what you mean, Steve. Do you mean we shouldn’t… Is there a way to eliminate getting picked off on our stops?
Mike: No, I think they’re talking about that recent announcement that came out from the NYSE that they would no longer honor stop orders starting next year. You know, there was the rumor that that would happen and they’ve come out and said that they’re considering it.
Larry: Oh, yes. Okay. It’s not going to happen. They’re putting their feelers out there to just get a sense for what’s going on. If they do that, they will lose such an amazing amount of retail investment that it’ll basically put the exchanges out of business.
Mike: So just kind a trial balloon that’ll get shot down in your opinion?
Larry: Yes. They’re always exploring ways to try and save money and make things more efficient. They don’t always understand what they’re doing so, you know, they have to put surveys and feelers out there. But, no, the odds of that happening are probably less than 5%.
Mike: Okay. This question from James turns back to the currency markets. “With the euro tumbling, your terminology, why aren’t we still short?”
Larry: Well, it isn’t tumbling. We got out right at the exact time of a pause and it’s done exactly that, it’s gone sideways since we got out of it. So I would beg to differ with the point being made. We will get short again if the sideways action that’s occurring can’t take out any overhead resistance and I am watching it very closely and so far the euro looks terrible. So we may very soon get back short the euro.
Mike: Okay. Just wait for your signal on that, as always.
Larry: Yes.
Mike: This question is from Bud. He says, “I’ve heard that soon the IMF will announce the Chinese yuan will be added to the currency list of reserve currencies. Further, it will likely take a large percentage of the group of currencies, displacing part of the dollar, maybe even displacing the dollar altogether as number one reserve currency. What are your current feelings about the consequences of this?”
Larry: The IMF has flip flopped on this yuan issue over the past few months. First they said the yuan is not ready for prime time and won’t be ready for prime time until October 2016 and then a couple months later, most recently, they flipped and said, yeah okay, they’ve made some changes and they freed up their capital account and they’ve done what we’ve asked them to do so we’re now likely to admit the yuan as a reserve currency. I don’t think the official decision has come out yet but whether it happens tomorrow or next week or next month or next year, it doesn’t matter. There is no way the yuan will displace — and I’m saying this as clearly as I can — there is no way the Chinese currency will displace the U.S. dollar as the number one world reserve currency. It has a snowball’s chance in hell. I’m going to make that point very strong. There’s a lot of garbage out there about it.
It’s harem-scarem type stuff and it’s just not going to happen. The U.S. dollar is the world’s reserve currency and it will not change until the monetary system crashes and burns because of sovereign debt and at that point the G20 will have to get together and come up with a new reserve and new monetary system. But the yuan accounts for only 2.5% of global transactions. There’s no way even if that quadruples overnight it will displace the dollar, not especially when you consider how sickly the euro is. It’s just not going to happen.
Mike: Here’s a question from Bob. “How come you didn’t recommend buying JDST or DUST,” the two inverse gold mining stock ETFs, I should say, “when the gold price started dropping after mid October and will you be buying JNUG or NUGT when gold finally does bottom and how about AGQ which is the silver ETF?”
Larry: I misestimated the weakness although I did alert everybody that mining shares had not bottomed and that we were seeing just a temporary bounce. In hindsight I should have put out a recommendation to buy DUST and go short those miners because they slid quite dramatically. So, you know, I’m beating myself up a little bit for missing out on that one. That said, the big profits are going to be made on the long side. We are so close to a bottom in the metals and in the mining shares, it’s okay that we missed that trade. Let’s focus now on what could be one of the most powerful rallies in miners and in the metals that we have seen in at least four years. That’s right on our doorstep and that’s what I want to, you know, put squarely in front of all of us because it’s a lot easier to make money in bull markets than it is in bear markets.
Mike: How true. All right, let’s see. This question comes from Edward. “Larry, I know you have extensive knowledge of gold and silver investments. Do you also make recommendations on other precious metals such as platinum? I’ve been reading how cheap platinum is relative to gold. Please advise if you’ll include recommendations for platinum in addition to gold and silver. Thanks.”
Larry: Yes. On the physical side, yes, and perhaps when the time is right on the ETF side. The platinum and palladium ETFs are very thinly traded so they’re not good vehicles. But as the new bull market unfolds we should start to see volume and open interest in those ETFs pick up and we will be able to add them to the portfolio. But right now I wouldn’t recommend buying a platinum ETF. There’s just no volume. We have a lot of members in this service and if I were to put out a recommendation to buy a platinum ETF, we’d push it through the roof and it would be a disaster. So we have to wait until the liquidity picks up there. But the physicals, absolutely.
Mike: Okay. Leonard would like to know, “Are United States I Bonds bought several years ago still a safe investment?”
Larry: Yes, they’re fine.
Mike: There’s another similar question here from a member about municipal bonds. “Are they safe?”
Larry: I Bonds are fine. Municipal bonds I wouldn’t touch with a ten-foot pole. I’m going to be doing a special report on this in my Real Wealth Report over the next couple of months. My latest studies show 30 out of the 50 states are bankrupt mostly because of their pensions and IOUs, same thing as our federal government. The difference is the federal government can keep the juggling act going a lot longer than municipals can because municipalities can’t print any money, whereas the Fed can. But it’s all coming home to roost. That’s what the next five years is all about. The piper’s going to be paid one way or another. We’re just not going to be paying the piper. We’re going to be making money off the piper.
Mike: There you go. Here’s a question from Charles. “Will natural gas prices bottom in January 2016 with oil or has it bottomed already?”
Larry: It has not bottomed. I was very optimistic as many of you know a few months ago in natural gas. It looked it had bottomed but then it just slid right off a shelf and fell to lower lows. It looks like it’s syncing up with oil now. That’s a very good point and oil, we have a bounce, you know, in the last couple days but oil is looking lower into early January, somewhere below 40 and natural gas will probably plunge into January as well. We have one issue with natural gas that we have to be aware of. Natural gas is a political blackmail chip for Mr. Putin. He’s already threatening to cut supplies to Europe again as a result of some of the recent shenanigans: Turkey again this morning, Ukraine, etc., Crimea, and some of the comments coming out of NATO. Putin is saying we’re going to cut off your natural gas and good luck with winter. So there’s some geopolitics coming into play.
It’s interesting, everybody, how I did say, you know, October this stuff was going to ramp up and accelerate and if you think about it now… You know, in the middle of it you can’t really see it but when you look back to the middle of October, look at how much has happened. Europe’s economy has gotten dramatically worse. ISIS has become dramatically more aggressive. Putin has become more aggressive. NATO has become more aggressive and look at the markets. Deflation is getting a tighter grip on Europe and the euro started to plunge anew. You can see these cycles are really converging and this is just the beginning.
Mike: Makes sense. Let’s see, here’s a question that just came in from James. “Please evaluate CEF gold mining ETF. It’s supposed to have tax advantages over GLD from what I’ve read.”
Larry: Yes, because it’s a Canadian fund. But, again, if you’re a Canadian resident, that’s probably the way to go and I will point that out in one of my upcoming recommendations when it comes to physical gold. But GLD for U.S. is fine.
Mike: Okay. Here’s a question from Sam. He says, “Larry, can you comment on when you expect the U.S. markets to begin to absorb all the flight capital from Europe and Japan? Could that be going on already?”
Larry: Yes, definitely. It’s been going on for the last couple of years and it will accelerate. Markets work in strange ways, logical if you understand them and a lot like physics, if you think about even elementary physics. In order for the market to move higher it has to gain the energy to do so and one of the ways it gains the energy to do so is by selling off and flushing out complacent longs, getting everybody bearish, then hitting long-term support levels, bouncing, and everybody jumps back in figuring the market’s either bottomed and they’ve got to cover their shorts or new buyers can come back rushing in and/or a combination. It’s like a ball. You bounce a ball, you know, to get that ball to bounce higher. So, you know, or you swing from one side of the pendulum to the other. This is how markets work.
Mike: Okay. Here’s a question from Brian. “Larry, when will emerging markets take off?”
Larry: Well, we’re starting to see good motion in China which I did recommend to my Real Wealth subscribers just a few months ago and they’re benefitting from it. I believe China bottomed and China is working its way back into a new bull market leg higher. Same for most of Southeast Asia where there are a lot of good things happening including Thailand where I am, where I see a lot of foreign capital coming in to take advantage of the ASEAN economic community which begins basically in a few weeks and there’s a lot of infrastructure investment going on throughout all of Southeast Asia. A lot happening over here, just amazing the contrast to what’s happening in Europe and the United States. So I’m very bullish long term, intermediate and long term on Asia.
Mike: Asia and emerging markets in particular lead by China I would imagine.
Larry: Yes.
Mike: Okay. Bruce asks, “Can you please explain why you do not recommend using futures or options on futures to grow your wealth knowing you’re at a definite bottom where the chances of losing are at a minimum?”
Larry: Futures require a service that has updates at least once a day, sometime two or three times a day and it’s for the very sophisticated investor. So I don’t think we need to go there at this time. I’ll entertain it for a future service possibly but there’s enough money to be made in the leveraged ETFs and options to take advantage of right now. So I’ll entertain it if there’s enough interest down the road for a service. I cut my eyeteeth in futures. I love trading the futures but it requires incredible vigilance.
Mike: Definitely more fast moving than stock markets.
Larry: Yes.
Mike: This question’s from Herb. He says, “My 401(k) only allows me to trade mutual funds. I realize most of our Supercycle Trader trades are in and out. Will there ever be any longer-term positions and if so, could you recommend mutual funds that correspond to them so I can invest using my 401(k) to take advantage?”
Larry: Well, that would be found more in the Real Wealth Report, those types of recommendations for you to act on. Keep in mind Supercycle Trader is a speculative service. I know many or some of you are doing it in your retirement accounts. That is not the preferred way to go. The preferred way to go is outside of a retirement account because this is a speculative service. You can take advantage of many but not all the recommendations in a retirement program but you will limit your diversification and the instruments that you can invest in.
Mike: Good advice. This question comes to us from Chris. “I realize that if there is a currency collapse, commodities will do extremely well but what are the chances of not being able to collect the profits if the banks and brokerage firms fail and close?” Your comments?
Larry: They’re not going to fail and close. I don’t see that as a problem at this time, maybe post 2017 when it really gets hairy out there. But you know, that didn’t happen in the midst of the Great Depression. It didn’t really happen after 911.
Wall Street shut down for a week but everybody got paid. Winners got their money, and losers had to pay their money. So I really don’t see that as an issue. I think that’s a lot of fear mongering by others.
Mike: Okay, here’s a question from Jim. “Larry, will we be doing any copper plays when the time is right?”
Larry: Absolutely. Copper has wonderful upside potential. Getting very close to a bottom there also. Just dipped below $2 a pound yesterday or the day before which was my longstanding forecast. Copper’s going to fall below $2 a pound. I said that I think a year ago and people thought I was nuts and here we are. So it’s syncing up with gold and silver very nicely.
Mike: Okay. Here’s a question from Kim. “Monday’s Wall Street Journal had an extensive article on declining population growth and shifting demographics. What impact, if any, do these trends have on supercycles and how do you factor them into your models?” Good question.
Larry: It is a very good question. Population demographics are not factored into the models. They are inherent in the models because the models use economic data as their underlying data. So to the extent that population affects the data, the data in turn is fed into the cycles, they are a part of it. But I want to be perfectly clear. I think what you’re getting at is probably some of the theories out there that the global population is rapidly aging and, therefore, we’re going to have deflation for years and years and years, decades. That is certainly true with Japan and, you know, a few other countries. But of the seven billion people in the world, 7.3 billion people in the world, did you realize that half, fully half, are younger than 35?
I just read that today. So you’re talking about 3.6 billion people who are under 35 and most of them, by the way, are in Asia and in other emerging markets so no, I don’t buy that, you know, demographic cliff argument that the world is going to go into deflation because seven billion people are aging and aren’t going to spend as much as before and they’re going to save more. No, it’s an analysis that has blinders on it at best looking at the U.S. and the Japanese and maybe Europe as the global economy when we’re not the global economy anymore. The global economy is seven billion strong.
Mike: Tom has a question. “Several months ago, Larry, you were predicting a European financial collapse based on your cycles and your charts. A number of things were converging at the time. What went wrong?” he asks.
Larry: I’m not sure what you mean what went wrong. I mean, I never said the stock market would crash on October 7. Let’s be perfectly clear about that. I said we would be entering a period when we would start to see a lot of the things that I’ve been talking about over the last several years accelerate and indeed that’s exactly what we’ve seen, an acceleration lower in the euro, an acceleration lower in Europe’s economy, more geopolitical stress, ISIS, Paris bombings, all kinds of stuff happening left and right. You can say I’m reading into it but I don’t think so. There’s a clear demarcation point between let’s say September and October where things have gotten worse all over the world.
Mike: True. In fact, the euro’s gotten hit particularly hard since you started talking about the convergence.
This question comes from Jim. “Larry, what are your thoughts concerning BitGold as a storage and spending facility? It is now partnered with GoldMoney.” Hadn’t heard of that before.
Larry: GoldMoney’s been around for a while. Right now I’m not into any electronic GoldMoney types of things because in my opinion they’re going to get squashed by the powers that be, not in terms of confiscation but in terms of digital currencies. Although GoldMoney is not a digital currency, it’s kind of in the same vein right now and the governments of Europe and the United States are dead set against any form of electronic currency that they do not own. Interestingly, Europe yesterday announced that they’re going to shut down Bitcoin use in all of Europe.
They believe that it’s being used by terrorists. Personally, probably… Whether it is or isn’t doesn’t matter. It’s just another excuse for Europe to move towards its ultimate game plan of a fully electronic currency with capital controls in place.
Washington wants to go the same way so that it can tax and track you as well, American citizens. So I don’t think, you know, GoldMoney has… It’s survived for a long time. I have a lot of respect for James Turk who got it started but I’m leery because we’re entering a period where governments are going to do whatever they can to gain more and more control over you and its citizens. So, you know, you’ve got to play in their sandbox. That doesn’t mean that you can and shouldn’t take steps to protect and grow your wealth. But you have to be prudent. You can’t just run into an investment like Bitcoin or GoldMoney that sounds good on the surface. You have to understand where we are contextually in the cycles to see whether or not they’re going to last before you invest in them and I say no, they’re not.
Mike: Okay. Here’s a question from Kenneth. “Larry, when and where should we start buying gold and silver coins?”
Larry: You’ll know soon next week and you’ll get all the information that you need to do so.
Mike: Here’s a question from Darold. “Larry, it may be too early; however, would you provide your top five major gold miners and your top five junior miners?”
Larry: Yes, I will at the right time and that could be as soon as next week.
Mike: Okay. This one is from Thomas. “Larry, how will European bank stocks respond to the European problems? Is there an opportunity there to short European banks like Deutsche Bank, Societe Generale?”
Larry: Yes. I think some of the European banks are a disaster waiting to happen so I am looking at some unique strategies to take advantage of that as well.
Mike: Okay. This one comes from Joan. “Is it possible, Larry, that we will not see the big dip in the stock market that you’ve been predicting until the first quarter of 2016 and in the meantime stocks could continue higher?”
Larry: Anything’s possible but I don’t think so. I think that we’re going to see a sharp downdraft before year end. Admittedly it’s been a very hard one to pin down which is a testament to my longer-term forecast that it’s going much, much higher and I don’t want to sound like I’m talking out of both sides of my mouth but that’s what it looks like to me. However, as I said two or three occasions already, there’s no way this thing can take off to the upside without a
Mike: Okay, this question comes from Ian. “If the gains from Supercycle Trader means it becomes more than 25% of your liquid wealth, would you recommend taking some money off the table?”
Larry: Yes. It’s really kind of an unclear question to me but yes, it’s always prudent to take profits off the table at the right time. But you don’t want to cut your profits short. That’s the most common mistake that investors make. If you risk a dollar to make a dollar, you’re never going to make any money in the market. You have to risk a dollar to make $3 or more, $4 or $5.
So it really comes down to money management and that’s what I try to emphasize in every trade that I do. I give you the stop but I know what the target is usually. I don’t divulge it because I don’t want anyone having any notion stuck in their mind. Sometimes I will divulge the target and sometimes I won’t. That has to do totally with my discretion what, you know… I don’t to create any unrealistic expectations. But you have to always go for three plus-to-one profit-to-risk types of trades.
Mike: That’s good advice. This next question comes from Edward. He says, “Good morning, Larry. I love your updates and the way you write your articles, easy to read and understand, especially your explanations and rationale.” His question is, “When you make a recommendation such as the put options on USO and state 128 or better and the option price is well above that price for the $14 strike, is it okay to go to the next lower strike price, for example the $13 strike?”
Larry: Well, that’s a very good question. There are two answers. Both of them are right. First answer is it’s always your discretion to do whatever you want to do, take a trade, act on an alternative to that trade, a different strike price in the case of an option, maybe even a different ETF, a single leveraged ETF instead of a double or triple leveraged ETF that I might be recommending. It is always your discretion. It is your money. I want you to do what’s most comfortable for you. Second, generally I would not do that in the case of an option. Stick with my specific buy limit price. If I need to update it or change to a different strike price, I will let you know. Don’t be impatient. That’s the number one rule. You’re always free to do whatever you want but you should try to follow me as closely as possible.
Mike: Okay, good advice as always and unfortunately that’s about all the time we have for today’s Q&A session but I’d just like to remind all of our members at home if we weren’t able to get to your question, rest assured that Larry does receive each one on our blog and he does a great job of responding individually or perhaps in a future issue of Supercycle Trader. So with that said, be sure to keep sending your questions in using either the editor’s mailbag function or the blog that you’re on right now on our website and Larry will certainly respond. Larry, thanks again for your time, your insights, and your terrific answers today.
Larry: And thanks for helping out again, Mike, and, members, thank you for attending today. We’re going to be getting into a very exciting period and you’re going to be receiving a lot of material from me.
Mike: Thanks, Larry. Look forward to it.
