Remember this post I made on August 8, 2008?

In that post I called for $640 gold, $1100 platinum, $11 silver, $200 palladium, and Canadian dollar at 84 cents. I also predicted that the US would pull out of Iraq, and predicted that oil would slide to $55 a barrel. My prediction was that all of these things would happen before the US elections.

Let's look at just how remarkably right my predictions were.

When I made that post, prices were as follows:
Crude oil: $120/barrel
Gold: $870/oz
Silver: $16/oz
Platinum: $1550/oz
Palladium: $350/oz
Canadian dollar: 94 cents US

Today's lows?
Crude oil: $62/barrel (Prediction: $55)
Gold: $680/oz (Prediction: $640)
Silver: $8.60/oz (Prediction: $11)
Platinum: $760/oz (Prediction: $1100)
Palladium: $165/oz (Prediction: $200)
Canadian dollar: 79 cents US

Clearly some of the prices overshot to the downside but that's to be expected in any bear market.

So what about my prediction that the US would pull out of Iraq in October? Well, let's see...

US to pull out of Iraq within a timeframe of 18 months (Obama) to 48 months (McCain).

US forces to withdraw from Iraqi territory no later than Dec. 31, 2011.

I strongly encourage you to read both those articles so you can see for yourself that this Iraq timeline is a very important (and recent) development, and it applies to both Obama and McCain.

Stay tuned for the bitter-sweet celebration of the fulfillment of my final prediction: McCain becomes President.

It's official: The Council on Foreign Relations now calls the US dollar a "historical anomaly," a "piece of paper of no intrinsic merit."

Check it out - straight from the horse's mouth.

What is the Globo?

By now, you should have heard about the Euro, as it is Europe's currency. If you look hard enough you can also find something about the Amero - a proposed currency for North America. But the Globo?

The globo is the global currency to be imposed by Russia, Saudi Arabia, Brazil, Japan, China, the EU, Canada, Australia, and possibly the UK, in a joint effort to detach themselves from the US dollar.

Why do all countries want to detach themselves from the US dollar? Are they even attached to the US dollar to begin with?

Unless you've been living under a rock, you should know about the Bretton Woods agreement signed after World War II that gave the then-gold-backed US dollar reserve currency status for the entire world. The dollar then was said to be "as good as gold," and was in fact 100% backed by gold. $35 was an ounce of gold - literally.

In 1971, after a decade of deficit spending on the Vietnam War, Apollo, and Great Society programs, the US had to end the Bretton Woods agreement. The US-gold link had come under pressure from France and the UK which were buying up gold like mad and dumping US dollars, knowing that dollars were intrinsically worth less than gold. Thus, Richard Nixon was forced to terminate the Bretton Woods agreement on August 15, 1971. What followed was a decade of inflation known as the "stagflation" era, after the dollar essentially became a worthless piece of paper.

However, in the early 1980s, after the middle east was driven into bankruptcy, a new deal was established with the Arab nations (except for Iraq and Iran), whereby those countries would sell their oil in exchange for US dollars, which they would then keep in gigantic savings accounts - called "reserves" - for ever & ever & ever (because if they ever spent those dollars, the US would experience hyperinflation and the US empire would come to an abrupt end).

During the Reagan, Bush, and Clinton years, a new kind of American imperialism flourished, where the US struck deals with increasingly more countries for those countries to purchase enormous amounts of US dollars (like the Arabs did) to finance a growing US debt. Japan is now the world's foremost holder of US dollars. China also holds a lot of dollars. Keep in mind that the dollar is nothing but worthless paper. Worse still, all the countries holding US dollars must be forced (coerced) NOT to sell those dollars because if they ever did, the US would suffer a Zimbabwe-like hyperinflation.

Today, virtually every country in the world holds large quantities of US dollars in reserve. The US dollar is a price-fixed currency. The US treasury (or more accurately the Federal Reserve) sets the price of the dollar. The dollar has no purchasing power, because it's a worthless piece of paper. However, the Fed gives it the illusion of value by DECREEING what its value is. It does so by simply readjusting the number of dollars in circulation. The dollar is a FIAT currency (FIAT implies "by government decree").

Whenever the value of the dollar is driven upwards (by the Fed selling treasury bonds), all other countries suffer because their own currencies inflate relative to the dollar. Thus, it becomes harder for those countries to purchase things (like oil) on the market, because those things are sold in US dollars. However, if the dollar is driven downwards (if the Fed buys treasury bonds), the US dollar reserves of the other countries now become less valuable. Furthermore, the rapid appreciation in the domestic currencies of the other countries causes problems for exporters. So you can see why the more volatility there is in the dollar, the harder it is for other countries to maintain stable economies.

For countries other than the US, the US dollar as a reserve currency is extremely detrimental. The current system of US dollar hegemony (where the dollar is used as the de-facto global currency) is an offshoot of American imperialism and is a way for the US to control world markets.

The problem we are faced with today is an impending devaluation of global currencies (other than the dollar). The Canadian dollar has been devalued enormously this week. The Australian dollar has been totally decimated. Every currency other than the US dollar has been falling. The Japanese Yen thankfully was spared, but if the US has its way, all other currencies will be devalued massively. Why? Because the US must inflate away its debt. In order to do that, it has to print more dollars. It can only do that while maintaining stable prices (otherwise inflation will result). The ONLY way to do that is by devaluing the currencies of ALL OTHER COUNTRIES.

So China, Japan, Russia, and other economically-strong countries are now deciding (behind closed doors) that in order to maintain some kind of economic stability, they must - ASAP - decouple their currencies from the US dollar. The only way to do that is by making some other currency the global reserve currency, and therefore forcing the US dollar to be valued against that currency. And that currency is the Globo.

So as not to repeat the mistakes of the past, the countries proposing the Globo have decided that it will be backed 100% by gold. In other words, the Globo is gold. Therefore, gold will be the new global currency. One ounce of gold will be worth exactly G2461. (G=Globo)

The common wisdom of Warren Buffett, Benjamin Graham, and other great investment mentors has always been that you should pick an asset that you believe is undervalued, and go long (purchase and hold that asset) for many years as its value increases exponentially. However, since the introduction of short selling, this age-old wisdom could not be more wrong.

In today's market, it is far more advantageous to be short for the long term, than to be long. The reason is simple: when you are long, you are paying a price for holding an asset that may or may not appreciate in value. Every day that you hold that asset, you are missing out on the interest that you would otherwise earn if you had not purchased that asset and instead kept your money in a savings account. However, when you are short, you don't have to pay that price. You borrow the asset at a specific lease rate. If the lease rate is less than the interest rate that you would earn in a savings account, then you are actually being paid for being short.

Nowadays, it is very hard to find an asset that grows by more than the interest rate in most savings accounts. It is (and has always been) very risky. However, it is very easy to find a bank that will lend you a particular asset (e.g. gold) at a near-zero lease rate. You then sell that gold immediately, pocket the money, and put it in a savings account where the growth rate is guaranteed. If gold goes down, you cover your short and make extra profits. If gold goes up, you simply double your short position. As long as the rate of return in gold does not exceed the rate of return of the savings account with virtually no volatility, you can always eventually cover your short position for a profit or simply use the interest to gradually cover your short.

Longs are getting killed, especially in the precious metals, precisely because shorts are always fundamentally favored. Lease rates on gold and silver are almost always zero or negative. Negative lease rates mean that you actually get paid for borrowing gold!

In recent news, the SEC banned short sales on all stocks. Too many ordinary people had caught on that short selling big financial firms could be extremely profitable. However, despite the short ban, the Dow plunged 7% today. Yet, the SEC remains silent on the shorting of commodities. If you cannot see the political agenda here, you are blind.

Bottom line - as long as short selling commodities is fundamentally favored by the banks (through low or negative lease rates), it is far more profitable to be short than long. Last month, three banks shorted one tenth of the yearly supply of gold (that's 250 tons), causing a devastating plunge in the gold price - all the way from $990 to $745 with no rebound. The shorts made it out with a 33% profit, even though they never sold any physical gold. The longs got destroyed. This is the sad reality of the "free market" casino. If you want to make money, you better be short, because long just doesn't pay.

Guess what, American taxpayers just got SCREWED OVER by their OWN government! The government just used their OWN money to erase the debts of PRIVATE COMPANIES.

If you're an American, now would be a good time to yell, "I'm as MAD as HELL, and I'm not going to take it anymore!"

Here's a video from Don Harrold that should get you fired up:




This is the greatest example of government tyranny since the days of Nazi Germany. Everyone should be up in arms. But the ignorant debt-slave sheeple are just happy that they still have their low-paying jobs at Walmart or McDonald's and their infinite lines of credit, while owning NOTHING.
 
Way to go America, land of the FREE, home of the BRAVE.

What is "indeflation"?

It's inflation and deflation, at the same time. And it's what's happening right now in the financial markets.

Let me explain to you how it works. As you may already know, inflation is a loss of purchasing power. Deflation is the opposite of that. So how can both be happening at the same time? Isn't that a paradox?

Right now, vast amounts of money are being wiped out as the Greenspan derivatives bubble finally implodes. There is no doubt that money is disappearing from the system at an alarming rate. As a result, prices are collapsing in just about every asset class, including commodities, and the dollar index has rallied from 70 to 80 in just a few weeks.

Yet, there is inflation going on as we speak. The dollar is losing its purchasing power. Just look at gasoline prices at the pump. Even though gasoline futures are now under $2.50/gallon (!), gas prices at the pump are unchanged! Check out the price of bullion on eBay. Just try to obtain any gold or silver at current spot prices. You will be faced with severe shortages. Bullion dealers are even offering to buy back bullion at a premium to the spot price!

Even though most asset prices are about the same as (or lower than) what they were in 2007, and even though the money supply has not grown at all, the dollar has lost purchasing power because you cannot obtain the same quantities of REAL STUFF that you once were able to obtain. The limitation is imposed by supply shortages, rather than price. The US dollar fantasy has finally slammed against the hard concrete wall of reality.

The cold reality is that the liquidity of the dollar has evaporated. The dollar is no longer liquid. Nobody wants dollars, even though the supply of dollars is dwindling. Basically, demand for dollars has dried up faster than supply. Demand for REAL things, on the other hand, is stronger than ever.

Remember how everyone was saying in 2007 that the global financial system was suffering a liquidity crisis? Well, now the US dollar is suffering a liquidity crisis. Soon, every currency in the world (since they are all backed by the dollar) will also become illiquid.

Check out the LIBOR rates this week. They were as high as 6%. The money markets are coming apart at the seams. All of this is indicative of a liquidity crisis in fiat currencies themselves. All signs are pointing toward indeflation. The REAL purchasing power of the dollar (and other fiat currencies) is going down at the same time as prices are falling and the US dollar index is rising.

A most dire thought ran through my mind... What if the US dollar has bottomed? What will happen between now and the US presidential elections?

Long-term trends in commodity prices would surely be broken if the US dollar staged any sort of rally. Already, the long-term bullish trends in palladium and oil have been broken (trends going back at least two years). Where will commodity prices be four months from now?

I have some rather shocking predictions which I hope will NOT come true, because if they do, the US will be going right back to its terminal oil addiction, and the world will not make the progress towards renewable energy that it needs to make.

I predict that by December, 2009, prices will be as follows (again, I HOPE this doesn't happen):

$55 a barrel oil

This has been predicted a while ago by Lindsey Williams, who has stated that the oil cartel will open up two gigantic oil fields: one in Indonesia and one in northern Russia. They will both be foreign, so America will continue to import its oil, when there is still plentiful oil under US soil sitting untapped.

$640 an ounce gold

We're going right back to mid-2007 levels. If you're invested in commodities, hold on to your gold because it will be the one commodity that will decline least. Gold is far less volatile than the other commodities, so you won't lose much if this scenario unfolds.

Canadian dollar at 84 cents US

This one seems almost incredible, but it will happen. The Canadian dollar is heading down, fast. Why? As commodity prices collapse, so will the Canadian dollar. Already it has broken down below a key level of support and it's now sitting at just 94 cents US! The resulting inflation, combined with extremely low oil prices, will push the Canadian economy over the edge into a recession. The only positive is that manufacturing would slowly return to Ontario thanks to the weaker dollar. Also, the lower Canadian dollar will cause Canadian commodity prices to decline less than in the US.

Collapsing commodities --
$11 an ounce silver
$1100 an ounce platinum
$200 an ounce palladium

Palladium will retreat to levels not seen since 2003. I have a feeling Russia has way more palladium than it's telling the world. Remember that palladium has only been mined for 200 years. Therefore, the total world reserves are still very uncertain. Also, palladium has virtually zero industrial applications. Plus, with cheaper platinum, the use of palladium as a cheap alternative to platinum in catalytic converters would decline substantially. Silver is also vulnerable because it's not gold. It's not held by central banks. The decline in all of these metals will be greater than the decline in gold. The prices I'm predicting are the absolute worst-case scenario bottom prices. So you might actually want to hold on to silver and platinum because the decline will be fairly small from where we are now.

And the October surprise will be...

The October surprise that will seal McCain's victory in November is this... are you ready for this?

Victory in Iraq

Yep! There. I said it. In October of 2008, the Iraq war will come to an end. Troops will be redeployed to Afghanistan temporarily while war plans are drawn up for a war with Iran, right after McCain's landslide victory.

You may wonder what sort of psychedelic drug I took to give me this level of clairvoyance. I'll tell you in November, right after all of my predictions are fulfilled :)

Arguably the most important skill of any investor is the ability to predict the future. Why is this an important skill? Because investing is like placing a bet on a particular future outcome. If that outcome occurs, you can win many times your original investment. Take for instance Microsoft. If you could somehow have predicted in 1986 that Microsoft would take over the computing world, and placed money on that prediction by buying 1000 shares of Microsoft's stock, at 10 cents a share, you would now have $27,390 worth of Microsoft stock, from an initial investment of just $100. Predicting the future is clearly a lucrative skill.

Now, what if the primary goal for your investment strategy was less ambitious? Let's face it, Microsoft was just one tiny stock out of thousands. The chances of losing all your money were very high; over 95%; virtually certain. Not everyone has that kind of appetite for risk. Suppose you have $10,000 and want to primarily, above all, preserve its purchasing power for 50 years. How would you invest that money so as to minimize risk? How would you ride the waves of inflation and deflation safely into the future? Before we look at investment strategies, let's first look at what exactly happens to each asset class during inflation and deflation.

But before we can even do that, we need to define what it is we're talking about:

Inflation: When the value of money falls. As a result, prices generally rise.
Deflation: When the value of money rises. As a result, prices generally fall.
Steady State: When the value of money remains the same for a period of time.
Purchasing Power: The quantity of goods & services that can be purchased with a particular good or service

The Value of Money

Notice that in my definitions of both inflation and deflation I mentioned the value of money. What exactly is the value of money? How is it measured? It really depends whom you ask. But one definition which I believe to be the most correct is this: the value of money is the quantity of goods & services that one unit of money can purchase.

The CPI (Consumer Price Index) measures the price of a basket of goods & services. If you invert the CPI (take 100 and divide it by the CPI), you get the value of money. Thus, the value of money = 100/CPI. Why is this so? Recall that the value of money is the quantity of goods & services per unit of money. The CPI is the number of units of money (price) per (fixed) quantity of goods & services. Therefore, 100/CPI is the (fixed) quantity of goods & services per unit of money. That is none other than the value of money.

Note how we defined purchasing power. The value of money is exactly the same thing as the purchasing power of money. Keep this in mind for later on.

Asset Classes

Three asset classes are considered for this discussion. They are:

• Resources (Commodities)
  
• Obligations (Money, Bonds)
• Capital (Stocks, Real Estate)
  

Each asset class behaves differently during inflation and deflation, so let's take a look at each of these.

Resources

Resources are your typical commodities and hard assets. They are the physical products of an economy. They are no one's liability. Gold and silver, though considered monetary, are included in this category because they are not debt-based.

Whether it's inflation or deflation, resources (a.k.a. hard assets) are guaranteed to preserve their purchasing power. They are only subject to the laws of supply & demand. The value of money theoretically has no effect on the purchasing power of these assets, because purchasing power itself is measured in terms of hard assets. It is impossible for hard assets to lose or gain purchasing power, except through fundamental changes in supply and demand. Hard assets are a hedge against both inflation and deflation, in that they never lose purchasing power.

Many argue that deflationary periods cause hard assets to lose purchasing power. They argue that hard assets are only a hedge against inflation, not deflation. That is not the case. If milk goes down from $5 a gallon to $4 a gallon and you purchased 2 gallons of milk at $5 a gallon as an investment, rest assured that you'll still be able to exchange your 2 gallons of milk for 2 gallons of milk at any time. Now, suppose gasoline cost $2.50 a gallon prior to the deflation and $2.00 a gallon after the deflation. Before the deflation, your 2 gal of milk could buy 4 gal of gas. Guess what? After the deflation, your 2 gal of milk can still buy 4 gal of gas! As long as the supply-demand fundamentals remain the same for both items, the ratio between milk and gas prices will remain the same whether there's an inflation or a deflation.

In a steady state, something interesting happens. Resources fall in price, because production is increased. However, once again resources preserve their purchasing power, by definition.

Obligations

Obligations are of a different nature than resources. They are somebody's liability. Governments, corporations, and even individuals can finance themselves by issuing bonds. Money is also in this category because all money is created from debt.

In an inflationary period, stay away from obligations that pay less than the inflation rate in interest. Why? Suppose you hold a bond that pays 5% interest and the inflation rate is 7%. You're guaranteed to lose 2%. Worse still, the bond will have to collapse in price so that the interest rate can rise above the inflation rate. The same goes for money. In an inflationary period, money is by definition losing purchasing power.

In a deflationary period, however, money is the place to be. Debt is hoarded, especially if it pays an interest rate, no matter how small. Suppose the inflation rate is -1%. Now, suppose you hold a bond that yields 3%. In reality, you gain 4% in purchasing power. Plus, the bond will also have to appreciate in price so that the yield can fall to about 0% because it is too high above the inflation rate. Either way you win.

In the steady state, obligations generally gain in purchasing power, because interest rates always tend to be higher than the rate of inflation. For example, inflation might be 3% and interest rates might be 6%. In that case, you would be gaining 3% in purchasing power.

Capital

So what is capital? Anything that helps produce income. Stocks and real-estate are very similar to hard assets, but they are actually capital, because they help produce the goods in an economy. Also, both of these assets produce income. Stocks produce income through dividends or if the company's market cap expands. Real-estate produces income through rent. Real estate is very closely tied to stocks. If stocks do poorly, so does real estate, because as companies lose income, stocks fall, people lose jobs, and there is less money available for buying real estate.

Whether it's inflation or deflation, capital will lose purchasing power. In an inflationary period, income from stocks is weakened because input costs rise. The higher input costs are initially swallowed and not passed on to the consumer. The result is shrinking balance sheets. Real estate also suffers because people lose jobs, so there is less money for buying houses. In a deflation, it is a similar story. Deflation means that people prefer to save money rather than spend it. As a result, company balance sheets shrink (this time sales shrink, rather than input costs rising). The result is people lose jobs, less money for real estate, etc.

So what is a good time for capital? When neither inflation nor deflation are occurring. In other words, when the economy is in its normal steady state, capital tends to do very well.

Conclusion

So let's conclude by summarizing what the best investments are for each of three possibilities:

• Inflation
  100% Resources
  
  
• Deflation
  80% Obligations
  20% Resources
  
  
• Steady State
  50% Capital
  30% Obligations
  20% Resources
  

I used the 80-20 rule for things that gain in purchasing power versus things that only preserve purchasing power. Now let's suppose that over the next 50 years, there's a 60% chance of steady state, a 25% chance of inflation, and a 15% chance of deflation. What should your portfolio look like?

Final Portfolio

30% Capital
30% Obligations
40% Resources

Real-World Example (Canada)

30% S&P/TSX 60 Index (XIU)
30% DEX Bond Index (XBB)
40% Central Fund of Canada (CEF.A)

Real-World Example (US)

30% Vanguard Total Stock Market ETF (VTI)
30% 20+ Year Treasury Bonds (TLT)
40% PowerShares DB Commodity Tracking Fund (DBC)

I found two articles that confirm my view that the US is currently insolvent...

The United States is Insolvent (by Dr. Chris Martenson)

Is the United States Bankrupt? (Google cached version)

Sign of a Speculative Bubble?

It is very possible that the recent rise in oil prices (after Hurricane Katrina) be due entirely to speculation. In fact, it is very possible that oil is in a gigantic bubble right now, just about to burst.

To understand why, let's go back to 1998 and check out what prices were like back then...

Oil: $16/bbl
Gasoline: $1.10/gallon

Now return to the present (2008) and check out what the prices are...

Oil: $135/bbl
Gasoline: $4.11/gallon

Something looks odd...

Did you catch it?

Oil went up 744%. Gasoline went up only 274%.

Since gasoline is produced directly from oil, this doesn't add up. Either gasoline would be $9/gallon today or oil would be $60/bbl. The oil-gas ratio was about 15 in 1998. Today, it's 33.

In other words, gasoline today is ridiculously cheap given the rise in the oil price. None of the oil price has filtered through to the cost of gasoline. The oil price is inflated 120% over "normal" levels. Oil would need to return to a price of $61/bbl to be "in line" with the price of gas at the pump.

Historical Perspective

Let's see how this ratio has varied over the ages (all-time highs are in bold type)...

1973 - 18
1978 - 23
1979 - 41
1980 - 28
1983 - 25
1988 - 19
1990 - 24
1993 - 17
1998 - 15
2000 - 19
2003 - 18
2004 - 27
2005 - 30
2006 - 26
2007 - 30
2008 - 33

The only time when the ratio was higher than it is today was in 1979! And we all know what happened that year. That year the 1970s oil bubble peaked. Huge inventories were suddenly "discovered" in 1980 and released onto the market.

Conclusion

The numbers confirm my hypothesis that this is a speculative bubble, which has been in force since 2005 and really picked up steam in late 2007. This oil-gas ratio of 33 cannot be sustained for much longer. Either gasoline will have to go up in price substantially (i.e. up to $8 or $9 a gallon!) or oil is set for a spectacular crash (from $130 down to $65 a barrel!). If I were an investor right now, I'd go long gasoline. It is ridiculously cheap right now.

The emperor has no clothes! The emperor has no clothes!

The collapse of Freddie & Fannie is the admission of the insolvency of two companies together holding about $5 trillion...
$5 TRILLION
in mortgages.

$5 trillion amounts to about 35% of US GDP, and about 50% of the US public debt!

We're talking about 35% of the entire US possibly being insolvent!

Here's a revealing video of what could happen now...

We are about to enter the last inning of the biggest financial unwinding in the US since 1979. There must be a reason why the gold price surged this week to almost $990 per ounce, during a time of extreme seasonal weakness.

Here's some data that will shock you:

• IndyMac which failed last week was 3 times bigger than all the bank failures since 2000 combined!
  IndyMac had $32 billion in total assets.
• The bond market is finally turning south. We are talking US treasuries here. These have been in a bubble since late 2007.
• A collapse of US treasuries would force the Fed to raise interest rates. Watch out! The Fed may raise interest rates early, and fast! Rising interest rates are the final step in this paper-bearish gold-bullish cycle.
• Oil fell the most in 17 years today.

I urge everyone to read this article: "What if gold gave a party and everyone came?"

What is transpiring here is nothing short of a perfect storm for gold. There are no other assets to be long right now. Oil is weakening. Housing has lost favor. The dollar is certainly not bullish. All US stock indices are falling precipitously. And now the last safe haven, treasury bonds, is overbought and crashing.

Next steps:

• Fed will raise interest rates surprisingly high, surprisingly fast. They will be forced to.
• More US banks will fail. Main Street banks where your average American holds money.
• The words "depression" and "hyperinflation" will come to be used to describe the US financial situation.

Sit back and relax because the show has just begun!

In this segment, I give you my view of where certain stocks/indexes/commodities will go during the next week, based on my own research into technical trends. I also look at my previous week's calls to see what I got right and what I got wrong.

Let's begin...

But first, last week's score: 4.5 / 6 (okay)

1. US Dollar Index

Last Week's Prediction: LONG (Stop 72)... HALF RIGHT (got the stop right)

Right now, the US dollar is at 71.89. This is lower than last week but it's not an all-time low. For next week, a short rally is to be expected followed by more downside. I'd jump in short on the next rally.

My call: SHORT
Stop: 72.70

2. Dow Jones Industrial Average

Last Week's Prediction: SHORT (Stop 11,450)... RIGHT

The Dow took its embedded stochastic and fell some more. It's sitting at 11,100 now. If you went short on 11,290 you'd be about 1.7% up. Continue to be short but take 50% off the table. Move your stop in to 11,240. Enjoy.

My call: SHORT
Stop: 11,240

3. Gold

Last Week's Prediction: LONG (Stop $925)... HALF RIGHT

OK I'll admit it - I was wrong about my stop. Gold fell to $918 this week then rallied all the way to $970! If you held in there, good for you. Otherwise, you just missed a gigantic move to the upside. I'd continue long but narrow my stop over to $945. Don't put too much money on the table now because resistance at 1000 is a sure thing.

My call: LONG
Stop: $945

4. Silver

Last Week's Prediction: LONG (Stop $17.70)... RIGHT

Unlike gold, I got silver spot on! (Pun intended). The pullback happened exactly as I described and if you hung in there with your long position you'd be up about 3.8%!! Booya! What's next? A slight pullback to $18.20 then the moon! $21 is the next stop to the moon so put your stop at $18.20 and continue long and enjoy the ride.

My call: LONG
Stop: $18.20

5. Crude Oil

Last Week's Prediction: LONG (Stop $140)... HALF RIGHT

Oil plunged to $137 this week then recovered to above $142. Not bad but not good either. If you were stopped out great. Now's the time to load up again. Keep trying that $140 stop with your long position. Something's bound to happen.

My call: LONG
Stop: $140

6. Pick of the Week - Platinum

I think platinum is going to make a move next week. Usually platinum leads gold and silver in rallying but this time it was the other way around. In fact, platinum has been sitting idle for months now. Resistance at $2100 is futile. Go long, put a stop at $1950 and enjoy.

My call: LONG
Stop: $1950

Last Week's Pick:

Remember last week I picked NVIDIA. I told you to go long after the stock had crashed 30%! I told you to put your stop at $10 (to allow for a bit more downside). Now, generally stocks like NVIDIA are for the long-haul so what happens in a week is pretty meaningless. However, this week NVIDIA didn't fall much. It fell to $11.67 a share. I was DEAD ON ACCURATE!

In this segment, I give you my view of where certain stocks/indexes/commodities will go during the next week, based on my own research into technical trends. I also look at my previous week's calls to see what I got right and what I got wrong.

Let's begin...

But first, last week's score: 5 / 6 (excellent)

1. US Dollar Index

Last Week's Prediction: STAY AWAY... RIGHT

Right now, the US dollar is at 72.72. This is less than 0.5% higher than last week. There was no major change, so my call to stay away was right. Now, for next week, you should expect a rally in the dollar, to over 73 and maybe even over 74. Place your stop on 72.00 and enjoy.

My call: LONG
Stop: 72.00

2. Dow Jones Industrial Average

Last Week's Prediction: SHORT (Stop 11,700)... RIGHT

The Dow took its embedded stochastic and fell, but not by much. It's sitting at 11,290 now. If you went short on 11,350 you'd be about 0.54% up. Continue to be short. Move your stop in to 11,450. Enjoy.

My call: SHORT
Stop: 11,450

3. Gold

Last Week's Prediction: SHORT (Stop $930)... RIGHT

Last week I called gold SHORT. Well, gold called my bluff by crashing (up) through $930. If you placed your stop on $930 you would not have lost anything. The spike up to $950 was nothing, so you couldn't have gone long either. But now, gold's stochastics are starting to embed (on the BUY side). Gold is at $934 now. Go long with $925 as your stop.

My call: LONG
Stop: $925

4. Silver

Last Week's Prediction: SIT TIGHT... WRONG

If you followed my prediction and stayed out of the silver market, you would've not lost any money, but you would've stayed out of a very nice rally. My predicted pullback to $16.80 never materialized.

Silver now is sitting at $18.15. I could not be more bullish on silver right now. We may see a pullback to $17.70 but there's the very high chance that silver will challenge $19 next week and maybe even make it up to $20.

My call: LONG
Stop: $17.70

5. Crude Oil

Last Week's Prediction: LONG (Stop $140)... RIGHT

Oil struggled this week. Although it hit $146 at one point, it's back down to $144. If you went long last week you would've made about 2% on your investment. What should you do now? I'm waiting for a pullback to $140, but then we should see crude challenge the $150 area. However, if we fail to hold $140 next week, all my money will be on the short side at that point. In any case, reduce your long position.

My call: LONG (cautiously)
Stop: $140

6. Pick of the Week - NVIDIA

Everyone knows NVIDIA. They make excellent graphics cards. So why did they fall 31% today? Earnings forecasts weren't very good. However 31%? It seems like an over-reaction, and a great time to buy this amazing company at a discount.

My call: LONG
Stop: $10

Last Week's Pick:

Remember last week I picked the S&P/TSX Composite. I told you to go short. Well, I was RIGHT! It never touched 14,500 but it came close... my stop was DEAD ON accurate! Now it's down to 14,000 and you'd be foolish not to take a profit at this point. Hope you enjoyed the ride!

Last week, I did my first installment of my "Weekly Market Calls."
In this segment, I give you my view of where certain stocks/indexes/commodities will go during the next week, based on my own research into technical trends. I also look at my previous week's calls to see what I got right and what I got wrong.

Let's begin...

But first, last week's score: 2.5 / 6 (pathetic)

1. US Dollar Index

Last Week's Prediction: LONG (Stop 72.90)... HALF RIGHT

If you went long on 73.04 with stop on 72.90, you would have lost 0.19% (1.9% leveraged 10:1). Not a major loss, but I admit I got this one totally wrong. However, I did get the stop right.

Right now, the US dollar is at 72.37. This is not a bad time to cover your shorts (if you went short). Why? Because we are hitting the bottom of the Bollinger bands, so my prediction is the US dollar will rebound next week but it may fall further by the end of the week. There is too much uncertainty to go long though.

My call: STAY AWAY!

2. Dow Jones Industrial Average

Last Week's Prediction: LONG (Stop 11,800)... HALF RIGHT

Boy did I ever get this one epically wrong! However, with that tight stop in place you would've lost only 0.4%! I got the stop right, but I got the direction wrong.

The Dow took a beating late this week, or better said, it crashed like it was 1929. For the moment stochastics are getting embedded, which means SELL the next rally. This is a classic case of a downward spiral, and we may have a lot more downside room remaining. My feeling is we could see Dow 8,800 before we level off.

My call: SHORT
Stop: 11,700

3. Gold

Last Week's Prediction: LONG (Stop $890)... HALF RIGHT

Gold fell through $890 down to $880, so if you followed my stop you would've been stopped out. However, if you only followed my call, you would've been right (and up by 2.8%).

Gold is now extremely overbought. I'm looking for a (potentially sharp) pullback next week to perhaps as low as $876. I'd be willing to venture a short here with my stop on $930. If you went long, SELL SELL SELL...NOW (unless you can stand losing 5% next week).

My call: SHORT
Stop: $930

4. Silver

Last Week's Prediction: LONG (Stop $17.00)... HALF RIGHT

Well, this week silver fell well through my stop of $17.00, so on that part I was wrong. However, I was right about going long, because silver is up 1.8% on the week.

Next week, I see a pull-back to the $16.80 area, before the next rally. I certainly wouldn't go long at this point, nor would I go short. Just sit tight, and if you went long last week, reduce some of your position now.

My call: SIT TIGHT

5. Crude Oil

Last Week's Prediction: SHORT (Stop $140)... HALF RIGHT

Well, last week I told you crude was overbought and would probably break down. I was wrong on that part. Crude just burst through $140 today! However, my stop was DEAD ON ACCURATE.

Now that we've busted through the "psychological" $140 number, it's basically smooth sailing ahead (and up). This one is easy to call: Go long, set your stop at $140, and enjoy the ride!

My call: LONG
Stop: $140

6. Pick of the Week - S&P/TSX Composite

The Canadian version of the Dow has been doing quite well this year. However, has the tide turned? The chart looks ominously bearish. There's a triple top, followed by a break-down. However, for the medium term, we're looking at a potential rally back to the 50-day moving average at 14,500. So if you're going to go short, set your stop there. In any case, this is NOT a bull market.

My call: SHORT
Stop: 14,500

Last Week's Pick:

Remember last week I picked palladium. Well, as it turns out, palladium is down now but only by a bit. My call was wrong and my stop was wrong, so I got that one TOTALLY WRONG. Oh well...

Today, the Dow just crashed below the all-important 11,800 support level... and all hell broke loose. Here's a collection of MAINSTREAM articles that just came out showing the gravity of the situation:

CNN Money - "Buffett vs Bernanke: The Inflation Showdown"

New York Times - "Fuel Prices Shift Math for Life in Far Suburbs" (i.e. the end of suburbia!)

USA Today - "Hitting Home: New faces join ranks of the homeless"

The last one reminds me of a prophetic quote by Thomas Jefferson:

"If the American people allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered."

But on the plus side, gold is up today...by nearly 3%!

Remember how, before its collapse, Enron was driving up energy prices in California through unregulated futures trading?

Remember how traders at Enron cheered every time a transformer burned out or every time there were forest fires?

Well, try applying this idea to oil. How do you control the oil market? If you make a country politically unstable to shut off its oil supply, what happens to the oil price?

This is exactly what Iraq was about. It was NOT about gaining access to "highly valuable" oil supplies. It was NOT about finding those weapons of mass destruction. It was NOT about Iraqi freedom!

It was about DESTROYING oil supply in order to drive up oil prices!

Just like Enron, the cartel controlling oil which included Bush, Cheney, Haliburton, and the Carlyle Group, decided it was time to boost profits for their little share of the oil industry by creating events which would lead to a rise in oil prices.

Think about it: Bush & Cheney live off-grid, independent of oil. In fact, they're some of the "greenest" individuals in America! There's a good reason for this, and it has nothing to do with peak oil. It has everything to do with the fact that they knew that they would cause an oil price spike of gigantic proportions and they simply didn't want to be paying those high prices. I mean, what good is a rising investment if you then have to pay more for the things you need?

Right now, for example, the price of oil is significantly higher than all other commodities. It's out of sync. The gold-to-oil ratio which has traditionally stayed around 15, is now below 7! Oil is at a ridiculously high price even when priced in gold! That cannot be explained by inflation alone.

Even more puzzling is the fact that oil supplies have remained flat or declining since about 2003. Now, you could say peak oil has arrived, but I think far more likely is that supply has been deliberately kept at that level. Why? First of all, peak oil theory does not predict a flat line longer than about a year. The current flat-lining for 5+ years is HIGHLY atypical of peak oil. Second, look at Venezuela's internal oil prices. They are ridiculously low! This indicates Venezuela is not exporting as much oil as it could be. Look at China, which is subsidizing the cost of oil without a problem. There seems to be plenty of oil to go around, but somehow it does not reach the global market. The PRIME reason for the flat oil supply in the past 5 years is NOT peak oil! It is political instability! Iraq's oil supply has dropped significantly since the invasion. And Venezuela (since the arrival of Chavez) has had its supply fall off as well. By "supply" I mean the amount of oil reaching the global market. We have a situation which is much more like the oil shocks of the 1970s than a global peak in oil production.

So now, naturally, Bush & Cheney are talking about invading Iran. McCain is even singing about it! There's a good reason for this. Iran has a fairly large oil reserve that is coming to market rather undisturbed right now. If they could go in there and f**k things up (to use Cheney's language), oil would go through the roof!

So there you have it folks, a perfectly logical explanation for why oil prices are so high, and why America's increasingly getting bogged down in unnecessary wars. Much of America's military involvement in the world right now is related to cornering the oil market.

In the long run, though, this strategy will backfire for the oil industry. Why? Because when enough people stop consuming oil, the price will crash and the price will end up LOWER than where it started because demand has been destroyed. The massive stockpiles of oil will then be revealed and rapidly released into the market, driving prices even lower. So, they may be able to game the system for now, but sooner or later the system will be gaming THEM.

Aside: Have you noticed Alan Greenspan going to the Saudis telling them to de-peg their currency from the dollar? Why would he want to do that? Do you think he has ANY concern for the Saudis' financial well-being? I think he just wanted the Saudis to get into trouble with the US so that the Saudi oil supply would be disrupted, driving up oil prices even more. There seems to be a lot of sabotage going on if you look for it, where agents of the US government (like Alan Greenspan) are going around trying to deliberately get the US into trouble with other countries.

I'm starting a new segment on this blog known as the "Weekly Market Calls."
I'll be giving you my view of where certain stocks/indexes/commodities will go during the next week, based on my own research into technical trends. Every week (starting next week) I'll also be looking at my previous week's calls to see what I got right and what I got wrong.

Let's begin...

1. US Dollar Index

The US dollar is at a temporary low of 73.04 right now, just touching the 50-day moving average. I see the dollar moving higher next week, possibly taking out the 74 level decisively. This is on a purely technical basis. If you are short, definitely cover some of your position now.

My call: LONG
Stop: 72.90

2. Dow Jones Industrial Average

The Dow is at a very dangerous low right now of about 11,850. This may look bearish but my gut says this is a bear trap. The stochastics are dangerously oversold. I would NOT want to be a bear right now. I'm looking for the Dow to rally next week, but I'd be cautious about going long or short (short especially).

My call: LONG (with caution)
Stop: 11,800

3. Gold

Gold has rallied nicely and seems to be staying above $900. However, it is in a medium-term bear trend. In the stochastics, it is getting slightly overbought. I'm looking for a minor pull-back in gold next week but it's definitely nothing to trade on. There's a nice base of support at $890 so if you're bullish you might go long at this price.

My call: LONG
Stop: $890

4. Silver

Silver is making a turn-around toward bullish after being very oversold for several weeks and maintaining a solid bottom at about $16.50. I would be a bull right now simply because silver is sitting right on its key support (of several moving averages). Support is at $17.10. With respect to silver, I'm bullish as can be.

My call: LONG
Stop: $17.00

5. Crude Oil

Crude is overbought right now and it's making lower lows and lower highs. There is major psychological resistance at $140. This is not good and is an indicator of weakness. The stochastics have turned down and it could be that we'll finally see a major sell-off in crude next week. I would take my chances and go short crude next week. The downside target is a juicy $122. I'd put my stop right at the $140 resistance level and see how it goes.

My call: SHORT
Stop: $140

6. Pick of the Week - Palladium

Ah! My favourite precious metal! Palladium in case you haven't noticed is making higher highs. It has turned around after a major sell-off. It is however very high above all averages right now. Could it run higher? Sure. Could it pull back? Of course! I would definitely not be short right now (there's not much downside). So what else can I be but long?

My call: LONG
Stop: $420

A note about the Pick of the Week:

Every week I will choose one additional item to report about (different from the previous week). It'll be my way of keeping things interesting.

The era of cheap labour is ending. Here's how I came to that realization:

The average wage of Chinese workers in 2007 was around 25,000 yuan per year, according to this article. This was an increase of 19% over the previous year! Now, keep in mind the yuan is artificially pegged to the US dollar. China could at anytime choose to revalue its currency versus the US dollar. In fact, the RMB is rising right now, so the average wage increased by more than 19% in US dollars! Taking the USD-RMB exchange rate into account, the average wage in China actually increased about 27% in US dollars in 2007.

In India, the story is the same. In 2007 alone, the average wage of Indian workers rose by 14%! And if you look at the rupee, the exchange rate went from 44 INR to 1 USD in early 2007 to 39 INR to 1 USD in early 2008. In total, Indian wages rose 28.6% in US dollars in 2007!

What does it mean when wages in the traditionally-cheap countries are rising at about 28% per year in USD dollar terms? It means US companies will soon run out of places to exploit cheap labour. It means the average American will soon start paying more for manufactured goods but at the same time the average American worker will finally have some bargaining room in terms of wages. This all seems to point toward a nasty wage-price spiral coming soon in the US. Bernanke has repeatedly stated that US dollar devaluation will only cause the prices of imported goods to rise. Either he is an idiot, or he is deliberately lying, because I've just demonstrated how US dollar devaluation can cause US workers to receive higher wages, which in turn can fuel domestic inflation through the dreaded wage-price spiral. America, you have been warned.

M2 money supply in 1930s = $40 billion
Gold price in 1930s = $35/oz
Silver price in 1930s = $1.30/oz

M2 money supply today = $7.7 trillion
Expected Gold price today = $6,700/oz (7.5 times today's actual price!)
Expected Silver price today = $250/oz (15 times today's actual price!)

Conclusion:
As the legendary Mogambu Guru (Richard Daughty) would say, We're freakin' doomed!

You should be able to buy a very decent house with 60 oz of gold or 1500 oz of silver.

Instead, with today's prices, it takes over 400 oz of gold (over 22,000 oz of silver!).

Those who hold gold & silver will be greatly rewarded in the years to come.

Washington, DC, June 8, 2018 - Today, President Paul responded to some questions from the press about the US government's policies. Speaking at the White House, he responded to criticism that his energy policy was not doing enough to reduce America's dependence on foreign oil. He also addressed issues about the national debt and the economy. Here is a transcript of that meeting:

Reporter: Since the collapse of the airline industry in 2012, nothing has been done to improve the speed of railroad transportation between distant cities. Moreover, some of our railroads still run on diesel, which is now over $20 a gallon. A lot of folks are just stuck because they can't afford the high fares. It costs over $5000 to go from Atlanta to Miami! What are your plans for improving our railroads, Mr. President?

President Paul: As I stated many times, it is not within the federal government's mandate to improve the design of our railroads. All we can do is regulate railroad travel between states. It's up to the states and private corporations to decide how they will address this issue.

Reporter: But, Mr. President, wouldn't the government be able to provide subsidies or tax incentives to the railroad companies? Why do we still subsidize the two remaining oil companies, Exxon and Shell? Couldn't we shift those subsidies to the railroad industry?

President Paul: I am planning to remove the subsidies for the oil companies as soon as possible, but I need to speak with the directors of those companies first to reach a deal. Folks, I know it sounds tough, but we need to cut spending. Our national debt is $20 trillion! Do you want to leave this kind of debt to your children and grand-children to pay off? We have to rely on the free market as much as possible to solve our problems. Otherwise, we'll go bankrupt.

Reporter: Speaking of which, can you give us an update on your plans for reducing the national debt?

President Paul: Well, we've made a lot of progress already! When I started my presidency, we had a national debt of $27 trillion, thanks to the reckless deficit spending policies of the Democrats. So, we're making progress. If the Federal Reserve helps us and keeps its interest rates at 0% like it has for the past 5 years, I'm sure we can reduce our debt to about half of what it is now by the time my term in office is done.

Reporter: Mr. President, do you have anything planned for reducing the nation's unemployment? Currently we are at 11% unemployment and that's by the government's statistics, which tend to be a little optimistic. All of these people are living off food stamps right now, and you said you are planning to cut off all entitlements. Is this reasonable?

President Paul: I mentioned before that I wouldn't cut welfare entitlements until enough people were no longer dependent on them. So, my policy right now is to keep those programs intact for now. We have a serious economic problem because there hasn't been enough investment in the right sectors. Therefore, there aren't enough jobs for people. We need to create investment and stop the mal-investment.

To be continued...

This is a must-see video about fiat currency and why you should own gold and silver:

Back in January of 1980, aside from the fact that I was not yet alive, the price of gold reached a new all-time high of $875 an ounce. It was a brief high but it left its mark in history. This year, the price of gold, for the first time, broke out above the $875 price level and has been setting new all-time highs. Clearly, gold is in a bull market. (Check out my 2008 Summer Gold Price Outlook for a short-term prediction on where this market is going)

Gold was in a bull market all through the 1970s. It started out at a mere $35 an ounce and ended the decade above $800. The current bull market in gold, most experts agree, began in 2000, with Gordon Brown's sale of half of England's gold, for just over $250 an ounce. Since then, gold has climbed an ever steeper wall of worry, reaching $1000 back in March of this year. Clearly, gold's bull market has attracted the attention of investors world-wide. However, nobody quite knows the answer to the question: how much higher can it go?

There are many ways to "calculate" (or "guess") the price of gold at the end of this bull market. One way is to use past performance as an indicator of future performance. Exactly what they tell you NOT to do. Kids, don't try this at home.

Using Past Performance

Using the previous bull market as an example, gold should reach $6250 at the top of this bull market, since gold climbed by a factor of 25 in the 70s, so it must do the same this time. Or must it?

Using M2 Money Supply

Let's look at the money supply versus the price of gold. The last time (before the Bretton Woods agreement) when the public was allowed to own gold was in the roaring 20s, at a price of $20 an ounce, so we'll start from there. I'm using M2 money supply here since there was no M3 back in the 1920s.

In 1928, at the height of that economic boom, the M2 money supply stood at $47 billion. By 1980, it had grown to $1.6 trillion. That is a 34-fold growth, leading to a 1980 calculated gold price of $680 based on the inflation of the money supply from 1928 until 1980. That is roughly what the average price of gold was in 1980. Therefore, it can be said that 1980 was the last time gold was correctly valued, with respect to the M2 money supply.

Today, the M2 money supply is $7.7 trillion. The M2 money supply has grown 4.8 times since 1980. As a result, the price of gold today should be about $3260. But let's not forget that, because of speculation, the gold price in early 1980 actually reached $875. Multiplying that by 4.8, we get $4200.

Using Purchasing Power

Perhaps the most accurate way to find out how much gold is worth today is to look at its purchasing power historically. That is, how much could once ounce of gold buy at a particular point in time?

Using house prices from the 1920s, a bungalow cost $2200. Today, such a bungalow would cost about $180,000, keeping in mind that Oakland, CA was rather rural back in 1921. That's an 82-fold price increase. Using that, and the fact that gold was $20 an ounce back then, gold should be at $1640 an ounce today.

Looking at prices from the 1930s, when gold was at $35 an ounce, a gallon of gas was $0.10. Granted, there was not much demand for gasoline back then, but assuming that supply was in balance with demand (as is the case today), and knowing that gas is now $4 a gallon, that results in a gold price of $1400 an ounce.

In 1980, the median US home price was $74,000. Today, it's around $260,000. The gold price averaged $680 in 1980, so today the price of gold would have to be $2390 to have the same purchasing power.

The average salary in 1980 was $10,000. Now, it is $31,000. A gold price of $2100 today would represent the same fraction of your salary as the $680 price did in 1980.

Averaging all these things up, we end up with a gold price of $1880 for gold to keep up its historical purchasing power.

Averaging It All Up

Let's create a weighted average gold price that best represents the accuracy of the above 3 methods.

The formula would be something like this:
10% x Past Performance + 20% x M2 Money Supply + 70% x Purchasing Power

For past performance, we'll use $6250. For money supply, we'll use $4200. For purchasing power, we'll use $1880.

And the result is...

$2780

This is what the gold price should be by the end of this bull market, with a range of $1400 - $6250. Even the low end of this range is higher than the current price of gold, which means my current outlook for gold is extremely bullish.

For those who believe that inflation leads to higher commodity prices, and deflation leads to a lower commodity prices, historical data would prove otherwise.

First, let's define the terms inflation and deflation. When I talk about inflation, I am referring to an increase in the total supply of money and credit. The opposite - a decrease in the total supply of money and credit - would be called deflation.

The M3 monetary aggregate (a.k.a. M3 money supply) is a value released by the Federal Reserve indicating the total number of US dollars in circulation, either as paper or as electronic credit. This value has been provided by the Fed up until 2005 when they mysteriously ended the M3 data series. However, M3 money supply is still tracked by Shadow Government Statistics, at http://www.shadowstats.com