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Saut:  “The $10 billion taper was telegraphed.  What was not telegraphed was the statement where Janet Yellen said we are going to keep interest rates low for a considerable period of time.  She then added that to her a considerable period of time was six months....

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“The equity markets and bond markets were looking at this period of time being the back half of 2015.  So we saw the yield on the 10-Year go from about 2.7% to 2.77%, which I think was one of the biggest moves on the upside in terms of interest rates since about mid-2011.

The dollar looked like it staged a one-day intraday reversal, into a stronger position.  The equity markets also declined after the press conference, but have now reversed those losses.  It looked to me like you had the potential there for more of a decline in equities.  Obviously that didn’t happen, Eric, but in secular bull markets all surprises are on the upside.

We are of the opinion that this idea of energy independence here in the U.S. is real.  You can see this idea gaining strength in the fact that you are getting more than a million barrels of oil a day out of the Bakken, and the Eagle Ford in South Texas is actually gaining on the Bakken.  We are up over 600,000 barrels a day out of Eagle Ford.  The Permian in West Texas is also coming on strong, and may be as large as either one of those resources (Bakken & Eagle Ford).

So, unless there is some kind of international incident that causes a spike in crude oil, my guess is that crude oil stays fairly stable for the next few years.  I believe the idea of U.S. energy independence is profoundly bullish.”

Eric King:  What about the gold market?”

Saut:  “I think that longer-term gold is in a secular bull market.  We have put in a low on gold, but it’s going to take some time to work its way higher.  But longer-term gold trades higher.

It’s not just China that’s buying gold -- we also have India as a big buyer.  Those are the two large gorillas in the room.  I think there is an inherent distrust for currencies.  I don’t understand why there is distrust for the Chinese renminbi.  One of the last things John Templeton said to me was to ‘Go long the renminbi and never sell it.’  He was saying just convert your dollars into Chinese renminbi because over the long cycle it was going to continue to strengthen against the U.S. dollar, and I think that’s right.

But I think there is an inherent distrust in paper currencies not just in India and China but in a lot of these emerging and frontier markets because of what historically has happened in terms of devaluations, coup de tats, and other things.  So there has always been a move in those areas to store wealth in precious metals.  In the United States, one of the ways to pass on wealth is through gold coins.”

Saut added:  “I’m one of the people who doesn’t think China implodes.  Overnight China’s State Council said they were going to accelerate their infrastructure spending in order to stabilize growth.  They said they were going to ‘seize’ the moment to roll out these projects, and stabilize domestic demand and growth.

So I just don’t think China is going to implode.  It’s clear that their growth rate is slowing.  A couple of bankruptcies we have seen over in China have raised concerns, but China has massive monetary reserves that will allow them to weather just about anything that happens over there.

China is in the transition of converting from a manufacturing/export driven economy, to a manufacturing and domestic driven economy.  You get that kind of slowing and you get these kinds of bumps and grinds in an economy when you make that kind of transition.  But China will get through this and emerge even stronger.”

© 2014 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

IMPORTANT - KWN has many more interviews being released today.

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Eric King

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