Today a 40-year market veteran sent King World News an incredibly important piece that alerts people about what they need to know regarding the coming global financial collapse. This piece exclusively for KWN also discusses how the coming collapse will impact major markets as well as gold and silver.
By Robert Fitzwilson of The Portola Group
April 12 (King World News) – We have heard the phrase used by CEOs of public companies describing their stock as currency for acquisition. It is an interesting way to look at things.
Merriam-Webster defines currency as: "something (as coins, treasury notes, and banknotes) that is in circulation as a medium of exchange" as well as: "something that is used as money"
For most of us, “currency” represents cash in our pocket and “money” is an electronic entry at the bank or a brokerage firm. Both are usable as a medium of exchange for goods and services. Both can be lent to others in exchange for consideration, usually interest. Both have been considered stores of value allowing for deferred consumption of some kind and as a store of value (saving up for retirement). Currency and money also can dampen portfolio volatility during turbulent times.
With the exception of the use as a medium of exchange, currency and money no longer guarantee any of the other features above. Interest is now negligible to negative, and the dollar, as an example, has lost virtually all of its real value in the last 100 years. As the depositors in Cyprus found out, cash in the banks can represent serious portfolio volatility, to say the least, when their money was confiscated via the bail-ins….
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The Swiss franc rising almost 30% in an evening and then round-tripping all the way back weeks later is another example.
1987-Style Stock Market Crash
The idea of stock as a currency is intriguing and might go a long way to explaining a stock market levitated on an ocean of fiat currency. Unlike the central bank fiat that is backed by nothing but impossible to perform promises, stocks can represent productive assets. With the popular stock indexes hitting new highs (perhaps more like bumping heads on a ceiling), many analysts are scratching their heads as to why it makes sense. Smart and experienced people are even calling for a 1987-style collapse.
The fact that stocks and bonds are in bubbles has been engineered by the central banks with the various forms of QE. However, all the Fed and their brethren now have to do is be a backstop. They succeeded in forcing large institutions into the position of having to buy stocks and bonds regardless of the macroeconomic conditions or the ability of the borrowers to repay the debt.
It is possible that Gresham’s Law is at work and individuals and companies with excess cash are switching fiat currency, which represents no real asset backing, for stock in companies with sound fundamentals and prospects for growth in dividends and earnings. So-called “watered stock” was a problem in the 1800s, as companies issued unlimited quantities of stock certificates. But those people were amateurs compared to the watering of the currency in our era by the central banks.
We have our concerns about what might go on behind the closed doors of the Depository Trust Corp. that holds street-name stock, but any potential shenanigans there would be trivial compared to the artificial creation of $trillions by the Fed, the ECB and the Japanese central banks. Since widely accepted currency no longer pays interest, it is not a store of value and nor is it guaranteed offset to volatility. It makes sense that savvy people would treat stock as a better alternative, regardless of what might lie ahead.
Commodities in general appear to be basing along with the price of oil. As the Arabian Peninsula lurches forward into the abyss of outright conflict, we expect that the bottoms are in and steady, perhaps violent increases lie ahead.
The First To Collapse In A Stock Market Meltdown
For investors looking to build portfolios, in addition to precious metals and energy, holding stock in companies that are creating long-term value still makes sense. Those that are not, particularly financial institutions, should be avoided. Those companies are parasites doing nothing other than trade for themselves and slice exorbitant fees from unsuspecting customers. Their balance sheets are held together with phony accounting tricks and will be the first to collapse in the event of a stock market meltdown.
Gold And Silver Will Soar As Central Bank Manipulators Are Overrun
The historical money and safe havens for value, gold and silver, continue to bounce along a very long base. It is clear that somebody has deemed $1,200 to be the highest price tolerated for gold, but their pressure to the downside is clearly meeting pressure from the buyers. It is a real slugfest as Andrew Maguire and others have been suggesting.
As the Chinese and Russians build out the infrastructure for a world without the dollar as the reserve currency, the time when the buyers overwhelm the manipulators is close at hand. The latest announcement that the Indians are back buying in huge quantities simply reinforces that view. ***ALSO JUST RELEASED: Third And Most Spectacular Economic Collapse In 15 Years Will Devastate The World CLICK HERE.
If you are interested in purchasing physical gold and silver for delivery you can call Steve Quayle or his staff at (406)586-4842, or you can email them at info@sqmetals.com
The audio interviews with Dr. Paul Craig Roberts, Andrew Maguire, James Turk, Rick Rule, Bill Fleckenstein, Dr. Philippa Malmgren, Egon von Greyerz, Eric Sprott, Robert Arnott, Gerald Celente, Michael Pento, David Stockman, Marc Faber, Felix Zulauf, John Mauldin, John Embry and Rick Santelli are available now. Other recent KWN interviews include Jim Grant — to listen CLICK HERE.
