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Thirty-eight years ago gold and silver prices spiked skyward reaching about $850 and $50 per ounce.

The decade of the 1970s was turbulent. President Nixon abrogated the “dollar-gold” agreement and allowed the dollar to float lower. Years of excessive deficit spending and “money printing” to fund the Vietnam War and social programs had created huge inflationary pressures.

The U.S. had spent far too much on wars that did not repay their costs, the dollar was falling, and interest rates rose during the decade of the 1970s.

Foreign governments could no longer exchange their dollars for U.S. Treasury gold. Paper dollars devalued, prices rose, and people feared for their savings.

Average Americans saw their cost of living rise and wanted something to protect their wealth from inflation. Gold and silver were in demand, and the financial news gushed over ever-rising prices, as financial news does today for ever-rising stock markets.

TODAY:

The U.S. has spent far too much on wars since 9-11, the dollar is falling, signs of inflation are visible for everyone who purchases food, medical care, or hundreds of other items (not including TVs or computers), and interest rates are rising. The bubbles in 2018 have not reached commodities (yet) but are present in stocks, which have enjoyed government, Wall Street, and central bank support via their creation of trillions in debt. That “printed money” poured into stocks and bonds.

But all things change! 

COMPARISON:  Consider silver and gold 1975 – 1980, versus Amazon and Netflix 2013 – 2018. It is common knowledge that silver and gold spiked higher in bubbles that imploded. Gold prices collapsed 70% in five years and did not make a lasting bottom until 2001. Silver was crushed and fell 95% in the next 20 years.

Examine the charts of gold and silver from their bubble runs into January 1980.

The silver price low was $3.93 in January 1975. Five years later it reached a daily “top-tic” of $50 in January 1980. The high to low ratio was over 12. Gold’s price low was $167.50 in January 1975. Its high to low ratio was about 5.

Amazon and Netflix are ubiquitous companies. Millions of individuals buy from them. Their stocks are in bubbles, like gold and silver 38 years ago.

Amazon and Netflix:  Amazon’s January 2013 low was $253.26. Its January 26, 2018 close was $1,402, up by a factor of 5.5, about the same as gold’s bubble rise. Amazon P/E per Yahoo on Jan. 29 is 363. Netflix P/E is 228. Vertical prices moves, insane P/E’s and technically over-bought = bubble territory.

Netflix’s January 2013 low was $12.96. Its January 26 close was $274.60, up by a factor of 21, much LARGER than silver’s bubble rise.

Consider Bitcoin for an extreme comparison. Five years ago the price was about $100. The peak in December was nearly $20,000, which shows a high to low ratio of 200. (Graph not shown.) Bitcoin prices have dropped about 50% and are ready to … unknown.

SENTIMENT:

Daily sentiment indexes show extremes in the dollar, the S&P 500 Index, the NASDAQ 100, crude oil, gold and silver, and many others. When sentiment gets too high (everything but the dollar) or too low (the dollar) a reversal is close. Guaranteed – NO!  Likely – YES, especially when valuations are sky high!

CONCLUSIONS:
  • Daily sentiments show a top in stock indices, if not now, then soon.
  • The correction could become a crash given these extreme levels in sentiment, technically over-bought conditions and excessive valuations.
  • Perhaps Wall Street and the Fed can juice the stock market higher (benefitting the large banks and wealthy individuals) a while longer, but the inevitable reversal could be sudden and dangerous.
  • Netflix and Amazon have enjoyed fabulous price runs in the last month and year, but their charts are reminiscent of silver and gold bubbles from 1980.
  • Netflix (five year) price increases are more extreme than silver’s price increases during the silver bubble. Netflix stock is up 40+% in January 2018. Too far, too fast!
  • Daily sentiment indicates a near-term bounce higher in the Dollar Index. I suspect it will be short lived, and after a modest bounce, the dollar will drop toward 80.
  • Crude oil, gold and silver are due for a pull-back. I expect a short-term correction followed by a continuation in the gold and silver bull markets.

Read:  The Felder Report

Read:  Egon von Greyerz

THOUGHTS:

Buy low, sell high. Don’t buy at bubble tops. Escape from a bubble while you can. Don’t wait. Better to be early than late. Silver has been money for thousands of years. Fiat dollars have devalued 98% since 1913. The only likely change will be the rapidity of future devaluations. The intrinsic value of fiat dollars is … well, you know.

Have you thought of purchasing silver for safety?

Gary Christenson