Spain is in serious trouble...

The famous EBSI Quadrant...

Although this shows that working in a job isn't the most effective use of ones time, having a job in the first place can help your progression into the B/I sectors a lot easier. I feel a job is just a cushy stepping stone before you make the plunge...but boy is it nice in the B & I sectors...However, starting your own business is rather risky, 9 out of 10 collapse in the first year...

QE = Delayed fuse Dynamite...

So what exactly has been happening over the last month?

In a nutshell, the US has pretty much signed a death warrant for the Dollar. The only reason why the markets have been up over the last few months is because the Federal Reserve is artificially propping up the system in the aim of avoiding deflation. They've done this by injecting colossal sums of currency into the banking system (QE1,2,3 and Operation Twist). Now these measures temporarily help stocks and bonds, but they absolutely ravage the economy. They don't even print the full amount of money these days, they just type zeros into a computer and POOF, fake Dollars spring into existence and every new Dollar they create, immediately DEVALUES every other Dollar in the world. So in essence, by doing so, the US is secretly taxing the world through inflation. As a result, we shall soon see prices for pretty much everything we buy increasing. Food inflation will be a big issue in 2013…so watch this space.

I hate to be the bearer of bad news, but the world is crumbling and if you think the status quo will be maintained, you'll be sorely shocked in the next couple of years. After the US and German elections are out of the way, it's end game for the Euro. If you're heavily reliant upon stocks and shares, I seriously hope you know what you're doing and know every detail about the company you've invested in. Again, when war in the Middle East erupts within the next 6 months or so, oil prices will be affected in a big way. So filling your car up will will only become more expensive. But it's not all doom and gloom. Did you know that in 2006, £6 would buy you 6 litres of petrol or 1 ounce of Silver. But right now, £6 will buy you 4.6 litres of petrol, whereas that same 1 ounce of Silver will now buy you 23 litres of petrol! Silver is literally the silver lining. Not only is it a great investment in my opinion, it's a great way to protect your wealth and purchasing power. An insurance policy if you may.

Well, I hope this helps in some way. I've also included a very basic picture of what QE is below.

If you ever have any questions, please send me an email or pick up the phone!

Silver Update - 09 Oct 12

Been asked by a follower to do a quick Silver update. Much has changed since I last did one, but the fundamentals still remain even stronger than ever before.

The next few months are going to be extremely interesting.

Hyperinflation in the US in less than 900 days?

Gold Silver Worlds | September 30, 2012

John Williams, who is the founder of ShadowStats.com, stated during a recent interview that the US is on track to become victim of hyperinflation the latest in 2014. He believes that “open ended QE” (which is nothing more than monetizing debt) is the key problem. He explains there is an annual deficit of 5 trillion dollar per year in the US, which includes the unfunded liabilities.  He declares the situation “beyond containment”. Central planners are responding to the current economic problems by simply increasing the amount of printed money. John Williams his expectations are that  we’ll soon see a heavy sell off in the dollar, quickly followed by a significant first spike in inflation. That will ultimately lead to  hyperinflation the latest somewhere in 2014. We are just before the kick off of inflation.

We recently mentioned in our article “Money printing and inflation” that in fact inflation IS the expansion of the money supply. Inflation results in price inflation (the phenomenon of rising prices). Usually there is a time period between those two events, which makes it hard for most people to relate them to each other. Inflation and price inflation are often confused in spoken language  but it’s mandatory to understand this fundamental difference.

Hyperinflation is a situation that most people can’t imagine they could go through in their lives. Among economic and financial experts and commentators, it’s a subject that triggers a lot of debate. The least you can say is that there is a consensus on when and how hyperinflation hits. If you think about it, it’s very strange as the world has experienced so many periods of (hyper)inflation. Even in the 20th century, the number of countries that were hit by severe hyperinflations  exceeds what most of us expect (see table below; courtesy of Miles Franklin). Honestly, it’s beyond us that even in the scientific world there is no consensus. The funny result is that most people belong to one of the two camps: either they think that inflation and possibly hyperinflation will hit, either they expect a deflationary situation. 

Hyperinflation vs inflation

First off, what exactly is hyperinflation? We think that the blog post from FOFOA “Just Another Hyperinflation” is excellent and that it provides an in-depth answer to our question. We consider it a must read for anyone trying to understand the concept of hyperinflation. It also puts the notion of deflation into perspective.

I would like to clear up probably the most common misconception about hyperinflation. What most people believe is that massive printing of base money leads to hyperinflation. No, it’s the other way around. Hyperinflation leads to the massive printing of base money.

Hyperinflation, in most people minds, conjures images of trillion dollar Zimbabwe notes. But this image is simply the government’s reflexive response to the onset of hyperinflation, which is actually the loss of confidence in the currency. First comes the loss of confidence (hyperinflation), then, and only then, comes the massive printing to keep the government and its obligations afloat.

You see, hyperinflation is exactly like deflation. The only thing hyperinflation has in common with inflation is part of its name. It looks just like a deflationary depression. In fact, it IS a deflationary depression, with a different numéraire, being GOLD.

The key in this view is to understand that debt (owned by banks & Central Banks) and credit (in the form of paper money) are not balanced anymore, although they were in the past. A desperate move to rebalance that situation is what (Cental) Banks are aiming to do with their actions. That’s why you see today for example tightened conditions of commercial banks in providing credit or the massive buying of mortgage backed securities and bonds by Centrals Banks. These actions result in a widening gap between debt and credit. It’s against that background that you should interpret FOFOA’s fundamental statement: “Hyperinflation is the process of saving debt-backed assets (MBS’s etc.) at all costs, even buying them outright for cash.”

The point here is that this tactic only works as long as all circumstances remain unchanged. As soon as the awareness on a larger scale kicks in and a tipping point is reached, it will be the market that pushes interest rates higher. Several other types of events could cause the situation to spiral out of control as well. It seems like it’s just a matter of time till one of those things happen! When we reach that point, (Central) Banks will not be able to justify money printing anymore … but the damage will be done, sadly enough.

Mind also the unit of measurement that can make a huge difference in understanding a situation, for example expressing an economic situation in terms of fiat currency or in terms of gold. Measuring a situation in gold for example could show a deflationary view, while in nominal US dollar terms it can look totally different.

The bottom line is what Andy Hoffman wrote: “EVERY fiat currency regime throughout history has COLLAPSED, and EVERY new attempt will do the same.”

Grant Williams about (hyper)inflation

We asked Grant Williams if he thinks hyperinflation will hit in 2014. He is the author of the respected newsletter Things That Make You Go Hmm and is very well positioned to have a clear and neutral view on the economy. He told us that the sharp sell-off in the dollar may not happen for a while as just about every other currency is being overtly weakened simultaneously. However, he believes there is a very real risk of extreme inflation and he doesn’t rule out hyperinflation can kick in.

Grant Williams closely monitors the velocity of money which has been falling since 2008 as well as the excess reserves parked at the Federal reserve which have been rising during the same period. 

Right now, the Fed is “confident” that once they get the velocity of money rising, they can simply and effectively stop those excess reserves from pouring into the economy in search of a productive home. Of course, they were also ‘confident’ that subprime was ‘contained’ and that there would never be a national decline in house prices.

If they fail to successfully extricate themselves from the corner they have backed themselves into, then there is a very real possibility of hyperinflation but for it to happen by 2014 is, perhaps, a bit of a stretch.

Protect yourself with gold & silver

So in the light of all of this to come, whether it is inflation or hyperinflation, the most logic way for you to protect yourself is by preserving purchasing power in the form of Gold & Silver. Since 1913, which is the year where the Central Bank was founded,  the US dollar has lost 98% of its value. By contrast, Gold has preserved its purchasing power since then. During a hyperinflationary period, Gold prices surge dramatically. It doesn’t mean though you are making profits when, say, the gold price doubles. You are simply preserving your purchasing power in an environment where the value of the currency has declined by 50%.

Article by Gold Silver Worlds

Billionaire Frank Giustra tells it straight...

A great interview with someone who really does know how the world works. Some great questions and answers.

Get your head around QE3

Fabian4Liberty on How To Buy Gold and Silver

Big moves to come!

If anyone has been around me recently, I've been rather excited as something big is happening in the Gold and Silver world. Check out why...

Why Do We Take Financial Advice From Poor People?

(This is an article from my friend Graham Rowan who's a profound financial speaker/investor. With his permission I thought this is an article worth reading).

One of my favourite mentors was the late, great Jim Rohn. When it came to incomprehensible behaviour, he would refer to ‘the great mysteries of life’. For example, with all the wisdom of the world available free of charge in the local library, only 3% of the population has a library ticket. Why? One of the great mysteries of life.

 Here’s another. When it comes to choosing what to invest in, who do we turn to for advice? That nice young man at Barclays who sits at a desk with a ‘personal banker’ sign? He’s probably on about £17K a year with a bonus for any investment products that he manages to sell. As well as loans, mortgages and every type of insurance. Oh, and he can only sell Barclays’ investment products. He’s probably got spiky hair, the remnants of acne and a negative net worth when his credit cards, store cards and I-phone contract are taken into account. How much will you trust his advice on where to invest your hard-earned life savings?

Or maybe you use the services of an Independent Financial Adviser. He (the vast majority are men with an average age of 58) is regulated by the Financial Services Authority, and thanks to some new rules he will have taken some fresh exams recently to remain kosher. But check out what is covered in those exams. It has nothing to do with finding better performing investments that can be life changing for you and your family. It has everything to do with additional layers of bureaucracy and helping them to cover themselves if anything goes wrong. Interestingly, perhaps because of their average age, many are choosing to leave the profession rather than spend two years studying just to remain in business.

Usually, IFAs receive commission from the investments that they recommend. Occasionally, they charge a fee for their services. Few of them seem to be particularly wealthy. My observation from dealing with a number of IFAs over the years is that they rarely invest in the products they recommend, they often propose products with high charges such as multi-manager funds and their mantra is diversification to reduce risk. Robert Kiyosaki called this ‘di-worsification’.

Think about it. The more you diversify and ‘follow the herd’, the more likely you are to achieve average performance. You can’t follow the crowd and expect better than average results. The biggest fortunes are usually made through focus and concentration. If you own your own business, it may be your most valuable asset. You might find that investing in growing your business gives you the best return of all.

What matters most is that you take personal ownership of your financial future, have a strategy that drives your approach and do your own research into each type of investment.

If you do take advice from anyone, make sure that person ticks these boxes:
· He has already invested in the asset class he is recommending to you
· He is credible in terms of the overall success he has achieved in life
· You have done your own research and are comfortable that, given all the information available to you at this time, this investment makes sense for you.

A simple rule of thumb is – don’t take investment advice from a poor person! Until next week Best wishes Graham Graham Rowan Speaker, Author, Investor This article first appeared in the Wealth Watch newsletter in March 2012. If you'd like to receive Wealth Watch to your UK address each month please register at www.WealthWatch.tv

Gold to $6000?

Evidence that UK house prices have another 3-5 years of falling...

One of the consistent questions I get at my seminars is, 'Why do you think house prices are going to keep falling? What evidence or proof do you have?' Normally these questions come loaded with a lot of passion and cynicism and I can completely understand why. For the majority of people, real estate is a very emotional issue as it's normally the biggest, boldest and most expensive thing one tends to buy in their lifetime. Plus it's an 'investment' which you can live, sleep and eat in. People spend their blood, sweat, tears and talent saving up for a ridiculous 30% deposit these days, then go through the nervous process of handing that chunk of money over to someone they don't know. Then their financial life completely revolves around paying off their mortgage.* So on the whole, your house is the closest thing to your heart next to your pet dog. (On a side note, a couple of times, some individuals have said that real estate is always better than Gold & Silver because you can't eat Gold or Silver! Well, you can't eat your house or stock market shares either, but hey, it's a statement that always makes me chuckle inside).

Now I've always said that I'm not a Gold or Silver bug. I really don't want to own these metals as they have no dividends or cashflow and they're just shiny inert lumps of metal which you have to store and protect. My true aim in the next decade is to acquire as much real estate as I possibly can and I won't stop until I have enough cashflowing properties which will generate at least 3 times my expenses/liabilities per month. So that could be 3 houses or it could be 30 houses. But knowing my penchant for cars, planes, helicopters and extreme sports, I think it's probably going to be nearer the latter.

So going back to the main question of why I think we've got a few more years until real estate bottoms, I'd like to draw your attention to one of the key indicators (in my opinion) which illustrates that we haven't seen the bottom of this real estate plummet. And that is the Silver to House Price Ratio and the Gold to house Price ratio. I believe this ratio is pivotal in decifering when is the optimum time to jump ship from precious metals to real estate and it's vastly overlooked by mainstream economists/analysts/City-hotshots who are (in my opinion) normally incorrect with their economic projections. E.g. Bernanke, Merv King and mortgage advisors with the 2008 real estate bubble and stockbrokers/mutual funds with the 2001 tech bubble!

So below is a chart of this key indicator. In layman's terms, this chart shows you how many ounces of Silver it would take for you to buy an average priced house in the UK completely outright with no mortgage.

As you know, house prices are still falling whilst Silver is starting to really surge in price and as you can see on this graph, the House Price/Silver ratio is plummeting, and has been doing so since 2003.

Also, you can see that back in 1980, you could buy an average priced house in the UK for just 813 ounces of Silver.

So if you were a wealth cycle investor and was simply flipping between houses and Silver, the perfect play here would be to sell your Silver in 1980 and invest heavily into real estate. Then sell your real estate in 2003 for a great profit and invest it into Silver, then wait until this cycle repeated itself again. So by looking at this chart, at current rates, this ratio should hit rock bottom (house price bottom) anywhere between 2013-2015. (I can hear some of you screaming that house prices reached a peak in 2007, not 2003. Well if you are thinking that, you're absolutely correct and you would have realised your peak profit from selling your real estate in that year, but relative to the House/Silver cycle, you'd acquire a lot more Silver by selling your real estate in 2003 as opposed to 2007, thus getting more potential future profits).

Now obviously you shouldn't base your whole investment strategy on just one indicator, but just take a step back for a moment and see what this chart is really telling you. It shows that this ratio is returning back to it's all time low of 813oz, which means that in the very near future, we are quite likely going to see and live in a period of time where you can go out and buy a whole average priced house for just 813 ounces of Silver. So right now, if you were to go out and buy 813 ounces of investment grade Silver (Canadian Maple Leafs/American Eagles) in today's money that would cost you roughly £23 100. Then if you sat on that and waited till the ratio got back down to 813 oz like it did in 1980, (which may happen again in a few years) you would have bought a house for just £23 100. Sounds like a pretty good plan to me. But when you really start digging around in the Gold and Silver world, it doesn't stop there. Due to a myriad of factors, (which you can discover at (www.HedgingAgainstUncertainty.com), I believe that this ratio won't just stop at 813oz. In a nutshell, Silver reserves around the world are depleted, it's the 2nd most used commodity on the planet, the currency supply has increased by a factor of at least 10 since 1980 and in investment form, there is more Gold than Silver on the planet, and in trading there is a thing called overcompensation of the reversion to the mean. This basically says that things go from over valued to undervalued and so on as it always tries to revert to the mean, but just shoots way past it. So with all of these attributing factors and more, my research leads me to personally believe that this ratio will go down to at least 400 ounces. Which means that within 2-5 years, we could buy an average priced house in the UK for just 400 ounces of Silver which is just £11 400 in today's money (23 Sep 2012). And that is why I am building my Gold and Silver ark. So that when this moment arises and I can buy a house outright for roughly 400-500oz of Silver. Well, you could do that, but I'm personally going to convert half of my Silver holdings into 10-20 house deposits and start building my real estate portfolio. I'll then sell another 25% of my Silver when Gold and Silver prices reach parity and then keep the remaining 25% to lend and borrow against. Some may say this is a risky plan, but I've spent a good 2 years thinking this plan through and believe it's airtight. You simply can't go wrong with owning physical Gold and Silver as it has no counter-party risk and they are money so it cannot crash in price/value in a big way. Whereas your bank can easily go bankrupt taking your cash and savings away, stocks can crash and country's can pilfer your pension pot like we've shockingly seen in Greece recently.

This is the House price to Gold ratio chart. As you can see, it's a very similar story, except that it's all time low was 37oz. Which means that if you waited to buy a house with Gold when the ratio reaches its all time low like in 1980, 37oz of Gold would cost you about £41 000! This in itself is one of the many reasons why Silver is a far better investment that Gold. Historically, Gold has always underperformed against Silver. For instance in 1980, Gold rose by a factor of 24 (which is very good), but Silver increased by a factor of 36.

So there you have it. My main reason why I believe that we've got a few more years of falling house prices and that there's no need to rush around and get on the ladder just yet. The silver lining of this whole topic really is Silver itself.

Hope you found this useful and please email me if you have any questions or if you down right disagree with me. I'm always keen for healthy debate!


* Do you know where the word 'mortgage' comes from? It comes from the French as usual - 'mort' (life) and 'gage' (gauge). So literally speaking, a mortgage is a "gauge of one's life", which is pretty close to truth actually because people tend to spend their whole life paying off their mortgage and after doing so, pop their clogs not long after.

The world economy is melting up...

A very good video explaining some of the underlying fundamental reasons why we need to start opening our eyes beyond the mainstream news...

What's wrong with QE? Everything...

Very quick market update: 16 Sep 12

Let's look at Silver from an engineer's view...

A good outline of the Silver market

This is a promotional video of Endeavour Silver. I'm not promoting them in anyway. In fact it's counter-intuitive as I sell bullion myself, but the video is good at explaining in very simple terms what's developing...

If there is one audio clip you listen to today...it should be this one...

Wise, wise words...

Ignore the annoying voice at the beginning.

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2012/9/2_Egon_von_Greyerz.html

Gold and Silver Update - 13 Sep 12

I've been talking about the psychological $35 level for a few months now and that we would be achieving this very soon. Well these updates haven't been wrong yet, so my previous assessment of reaching $35 soon and $50 within months still stands. If you haven't got physical gold and silver, now is the time to get it. We will never see sub $30 silver again or sub $1700 gold. Stay tuned for this weekend for a full market video update...

Silver Update 11 Sep 12

Just a really quick update due to lack of time this morning but long story short, things are looking great for silver at the moment. Enjoy...