Today King World News is featuring another piece by a man whose recently released masterpiece has been praised around the world, and also recognized as some of the most unique work in the gold market. Below is the latest exclusive KWN piece by Ronald-Peter Stoeferle of Incrementum AG out of Liechtenstein.
“Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as ‘safe.’ In truth, they are among the most dangerous of assets. Their beta may be zero, but their risk is huge.” — Warren Buffett
By Ronald-Peter Stoeferle, Incrementum AG Liechtenstein
June 3 (King World News) – Not only the absolute, but also the relative development is important for a comprehensive assessment of the status quo of the gold market. Along with gold, silver, and mining shares, industrial metals such as zinc, nickel, copper and energy commodities (especially coal and oil) marked stellar performances last year. All of this happened in an environment where the US dollar climbed to a 14-year high. We regard this as a remarkable development and as a prime example of a bull market, whose starting gun has not been heard yet by the majority of investors…
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To hear which legend just spoke with KWN about $8,000 gold and the coming mania in the
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We consider a bullish stock market currently as the most significant opportunity cost for gold. Therefore, a clear break-out of the gold price should only be occurring amid a stagnating or weaker equity market. If we now compare the gold price performance with the development of equity prices, we can see that the relative weakness of gold seems to be slowly coming to an end. Last year we had already noticed that the intensity of the upward trend had declined significantly. After almost five years of underperformance relative to the broad equity market, the tables might slowly be turning now in favor of gold.
In a historical context, the relative valuation of commodities to equities seems extremely low. In relation to the S&P500, the GSCI commodity index is currently trading at the lowest level in 50 years. Also, the ratio sits significantly below the long-term median of 4.1. Following the notion of mean reversion, we should be seeing attractive investment opportunities.
In absolute terms, the scene seems set for a new bull market for commodities. According to Ned Davis Research, commodities gained 217% on average over the period of a bull market. This would mean that we are currently only at the beginning of the development, as the Bloomberg Commodity index is only 34% above its low of the beginning of 2016 as we write.
As always, we feel it is important to point out that the rise of already excessive debt levels progresses unnoticed. Let us look at the USA for example. The ratio of total debt to the US GDP has been around 150% in the past 150 years. Historically, there have only been two significant exceptions: the 1920s (“the roaring twenties”), where a strong expansion of credit laid the foundation of the stock market crash and the Great Depression; and the current phase, which originated in the 1970s…
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Unlike October 1929, even more debt was encouraged to build up in the economy after the 1987 stock market crash, driven by Alan Greenspan’s loose interest rate policy. In 2009, the ratio was at 378%, reaching an all-time-high. Since then, gentle efforts have been made to deleverage, but at 365% we are still in unhealthy regions. No trace therefore of deleveraging and austerity.
The Death Of The Current Monetary System
In today’s strongly leveraged fractional reserve banking system, a strong credit deflation would come with shattering consequences for the real economy. In the event of an unhindered reversal of the credit expansion, money supply deflation would have fatal consequences for large parts of the banking system. The permanent expansion of money and credit supply is becoming an end in itself to our monetary system.
This is probably the real reason why deflation is nowadays the nemesis of every central banker. The goal of every organism, every human being, and every bureaucracy is to maximize his chances of survival. To this extent, deflation constitutes an existential threat to the current monetary system that needs to be fought at all costs. To gloss over the inherent instability of the credit system, the existing credit deflation will be compensated by extremely expansive central bank policies. We think this is a tightrope walk.
The fascinating KWN audio interview with James Turk has now been released and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Here Is A Remarkable Roadmap For The Coming Skyrocketing Gold Price CLICK HERE.
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