It’s Friday afternoon, and global stocks have had a very, very bad day. After the Chinese stock market closed for the weekend, its regulators, in their omniscient wisdom, decided to increase the amount of permitted “shortable” stocks. Consequently, Chinese stock futures fell 7%, pulling the rest of the world falling sharply as well.
With that pleasant introduction, I’ve been asked to comment on Harry Dent’s latest “deflation” warning; which I plan to enthusiastically discuss below. But first, a few other “horrible headlines” to address; starting with yet another instantaneous validation of my work; in this case, last week’s “Fed transparency revealed, from Mr. Goldman Sachs himself,” and yesterday’s “Death of Credibility.” In those pieces, I not only discussed the Fed’s increasingly dovish stance – relative to Wall Street and MSM propaganda of imminent rate hikes; but their strategy of trotting out as many regional Presidents as possible to “baffle with bull—t.” To wit, yesterday alone, four such speeches occurred; one of which was neutral, one mildly hawkish (from “token hawk” Stanley Fischer, who idiotically, and ambiguously, claimed “markets can’t depend on the Fed staying on hold forever.” And last but not least, wildly dovish statements from Eric Rosengren and Dennis Lockhardt – which are far more germane, given 1) the expanding economic collapse; and 2) the fact that the FOMC’s voting committee is comprised nearly exclusively of similar “uber-doves.”
Zero Hedge tried to paint yesterday’s Precious Metals capping and “Hail Mary” rally upside stock reversal as “Fed speaker confusion.” However, in reality, there was no confusion at all, just prototypical market manipulation. Quite interesting, by the way, that amidst a dramatic worsening of the Greek crisis – Athenian riots and all – the dollar actually fell against the Euro. Frankly, I have not a clue what will occur in the near-term; but in the longer term – which may be a lot less “long” than most can imagine, I expect the Euro currency to be dissolved. And when it does, the dollar “liquidity vacuum” I predicted two years ago will intensify; but not as much as the gold and silver vacuum, when the heinous “New York Gold Pool” is overrun by the “unstoppable tsunami of reality.”
Before I get started, I have one more item to discuss; which frankly, floored even me when I read it. To wit, in a 25 year financial market career – featuring an exodus from Wall Street due to frustration regarding the conflict of interest foisted upon my research team by investment bankers – what I am about to report “takes the cake” for the most incestuous, front-running, unethical practice I have ever seen. Which is, per this article, that the Bank of Japan is actually a public company trading on a stock exchange! Worse yet, the BOJ owns 55% of its own stock, making it the ultimate holder of the type of “material non-public information” that put Ivan Boesky, Martha Stewart, and countless others in prison. Of course, in this case, the stakes are much higher; and as you can see in this chart, BOJ’s stock has surged on big volume right before every major easing announcement of the past four years. Which, by the way, is exactly what is occurring now – despite BOJ Governor Hideki Kuroda’s lie comment four days ago, that the Japanese economy is “recovering moderately.” I guess we’ll know shortly if this “indicator” is in fact the front running of a new round of catastrophic QE; but either way, the – hyperinflationary – result will be the same; as due to Japan’s hideous demographics, it unquestionably will be at the forefront of the “final currency war” until the Yen is inevitably destroyed.
That out of the way, it’s time for the “main event.” As you know, I am not a fan of the newsletter writing community in general; particularly in the Precious Metals realm – given how, by the nature of the business, the only way to garner subscribers is to come up with a conspiracy theory “tin hats” can latch on to; concoct a sensationalistic meme that excites or frightens readers to extremes; or claim one possesses actionable “proprietary” fundamental or technical analysis. And of course, ignore the single most important aspect of the “markets” they commentate on; i.e., the rampant manipulation of prices, particularly in the Precious Metals sector. Trust me, I’ve seen it all; and after 13 years in this sector, I am more disillusioned than ever by the so-called “good guys” in our sector – given so many appear to have sold their souls – and integrity – for paid subscriptions. Not all, of course, as I have been blessed to have met the best as well as the worst – such as my compatriots at the Miles Franklin Blog. However, as we act the way we speak; believe whole-heartedly in what we say; and most importantly, don’t charge for our views, I believe we are as free from “conflict of interest” as a Precious Metal dealer can possibly be.
Given that conclusion, I’m sure you think I’m here to “take Harry Dent apart,” as viciously and mercilessly as possible. But alas, I must be softening in my old age; as at this point, I’m tiring of going on the offensive. And don’t get me wrong; plenty of what Dent says – about “deflation,” demographics, and other secular factors I agree with completely – and have written about ad nauseum, such as here, and here, and here. In fact, I’d bet my spot-on prediction that the dollar would not plunge, but surge amidst the global economic crisis we are experiencing today, pre-dates nearly anyone in our business. That said, I couldn’t disagree more with his views on gold and silver. To that end, I’ll simply – calmly – discuss the flaws in Dent’s most recent article, “Gold’s Dead Cat Bounce” one by one – just as Bill Holter did a year ago. And since there are so many flaws – and my writing limit three pages – I’ll publish my rebuttal in list format.
1. First and foremost, he claims “deflation” is the enemy of gold – under the age-old propagandist canard that debt liquidation “increases dollar demand.” Yes, but it also increases demand for real assets that have proven to preserve their purchasing power throughout time – particularly during such crises. And when crises are caused by explosive money printing in the terminal stage of a fiat currency Ponzi scheme, the demand for real money increases exponentially. Not because there will necessarily be a new “gold standard” in the future, but because gold and silver are the only known substances to meet all the definitional parameters of money.
2. He discusses the “canard to end all canards”; i.e., how gold is not a crisis hedge, because it fell 33% from June to October 2008. In fact, he even goes so far as to patronize real money advocates by claiming gold “cried like a baby and ran for mommy.” For one, I was there, watching every tick; and trust me, gold didn’t “fall” 33%, but was smashed by the gold Cartel to quash its safe haven status. Moreover, Dent conveniently ignores the fact that physical gold and silver premiums soared; and in silver’s case, product was sold out for months on end, with premiums approaching 100%. Last but not least, anti-PM propagandists like to speak of the “2008 crisis” as if it ended on New Years’ Eve – when in fact, the stock market’s ultimate bottom was not until March 2009. Even with the aforementioned smash, paper gold still ended 2008 1% higher, whilst physical gold was up significantly more. And by March 2009, when the Dow was plummeting to new lows, gold had recovered all of its losses.
3. He even brings out the Great Depression claptrap – of how it was a far direr economic scenario than the late 1970s, yet gold didn’t have a parabolic run. Of course not, as the price was fixed by the government; which, in and of itself, made it a better investment than essentially all asset classes. Better yet, Roosevelt issued his infamous confiscation decree in 1933 (although no actual gold was confiscated), and simultaneously revalued the gold price higher. Furthermore, not only did gold prices vastly outperform essentially all else, but gold mining equities (which at the time were not suppressed) were, by far, the best performing market sector.
4. Possibly his most spurious claim, which I have heard in various forms over the years, is that when debt is liquidated (in the 2008-style collapse he anticipates), the supply of dollars will fall sharply, making them more “valuable.” Even Mr. Spock would blush at that shoddy logic, as the concept of a worthless asset suddenly gaining “worth” because the debt pyramid it supports collapses makes absolutely zero sense. No, when the “next 2008” occurs, all currencies – including the dollar – will be devalued by hyper-inflationary money printing. I’m not saying I disagree with his premise that hyper-inflation won’t occur, due to the offsetting collapse of dollar-denominated assets. However, confidence in the dollar’s value – and all fiat currencies, for that matter – will be dramatically shaken, if not destroyed. This is why people bought physical gold and silver hand over fist during the 2008 and 2011 financial crises; and why they will decidedly do so again, when the “Big One” hits.
5. Next, he regresses to the playpen, with the old “you can’t buy groceries with gold,” as it is not a currency. Specifically, he taunts “gold bugs” – as if anyone that believes in gold as a means of wealth protection is some kind of hardcore “prepper” with no sense of reality, per this provocative comment…“I challenge every gold bug to take a sliver of gold or a Krugerrand to Walmart or Target next time they’re buying groceries, and see if they’ll accept that as payment for the goods in the shopping cart!” Yes, Harry, I’m quite aware that gold is not currently used for day-to-day purchases; but then again, neither are stocks or bonds – or, for that matter, the real estate investments you recommend to clients. Again, we don’t own gold and silver under the expectation of a new “gold standard” – which may or may not occur; but instead, to protect purchasing power against the ravages of fiat currency inflation.
6. Last but not least – and only “last” because I have run out of space; is his commission of the cardinal sin of monetary theory by referring to “the dollar’s” strength in terms of other currencies, as opposed to real items of value. To wit, I have long discussed how it’s not possible for the “reserve currency” to collapse versus other fiat currencies during a crisis; particularly, not the key components of the dollar index, like the imploding Euro and hyper-inflating Yen. As I discussed in “if a nuclear bomb destroyed Europe,” just because the dollar goes up against the Euro, it doesn’t mean it will go up against gold. Throughout history, all 599 fiat currencies have fallen against gold; and last I looked, nearly all are doing so today. Frankly, one of the least important factors in my analysis of Precious Metals is the “dollar index.” And when Greece inevitably sets off the chain of events that destroys the Euro, said “dollar index” will be even less relevant – that is, if it still exists.
Don’t get me wrong, I could double or triple this “rebuttal list” if I had the time and space to critique all 12-pages of this “must not read” report. However, suffice to say, my primary complaint is that not only does it ignore the most important factor in the Precious Metals market – i.e., Cartel price suppression; but discusses gold as it were some ordinary commodity, with essentially no utility or investment merit. And this, whilst speaking of the dollar as if it can only get stronger throughout time; particularly during times of crisis, let alone, crises of the Federal Reserve’s own making.
In the final analysis, only you can determine how to protect your assets from what’s coming; which, by the way, both Harry Dent and the Miles Franklin Blog agree upon. As for me, I’ll stick with the only assets to have proven themselves throughout history; let alone, at prices below both the marginal cost of production and long-term industry-sustaining cost.
Harry Dent: “Our target for gold is $700 to $740 per ounce by early 2017. Ultimately, it could see $400 to $250 several years down the road.”
Gee I dunno Andy, it appears that the wisdom of H. Dent can spot what both you and Holter are completely overlooking, namely that historically Paper and Ink have been extremely much rarer commodities found on this planet then either Gold or Silver.
I wonder how much Paper & Ink Dent finally sold out for?
Perhaps more than what Louise Yamada did last year with her lame assertions?
Stack Gold & Silver Coins (ie REAL “Money”/ “Dollars” )
Cheers, S. Rex
Andy,
Excellent article.
I guess Harry Dent is smarter than China, Russia, India, and other countries buying all the gold they can and as fast as they can.
Maybe Dent is so intellegent he will run the world !!!!
Always remember this..
Seldom are things as they appear to be.
One needs to devote effort and time in order to uncover the truth.
Time has consistently shown that FIAT always fails and real money survives.
We have already entered the age of DIGITAL money.
That scares the hell out of me.
A few hours listening to Mike Maloney is time well spent.
Do you know the percentage of the gold help by the public that
got turned in, in 1933? thanks
Sorry, don’t know.
However, what really happened is that a lot of gold was turned in BEFORE the decree, as the government said “we need gold to expand the money supply and get out of the Depression. Turn it in – for gold backed dollars – and get them back later, after the crisis is over.” People did so patriotically, and then Roosevelt screwed them with the 1933 decree – after which, no one turned in anything.
Andy, Thanks for the excellent rebuttal of Harry Dent’s article. Your timely messages keep us on the correct path during these days of so much rhetoric and dis-information done so eloquently by those who think they have it all figured out. I believe we will see stagflation before we see deflation as the FED will print 24/7 to ultimately create inflation which will result in hyperinflation within this decade.
Thanks so much, agreed!
And Harry Dent seems to be a “Yield” kind of guy.
Yield today. Yield tomorrow. Yield Forever.
For Harry Dent: that’s all that matters.
Unfortunately, it’s really Gold and Silver.
Yesterday. Today. Tomorrow. And Forever. No?
Yes, “yield” on real estate. Unless you can’t rent it – much less, for your desired price; or the property needs maintenance; or property taxes go up; or prices fall and you need to sell.
Mr. Dent’s forecast should be measured by his past forecasts ! In Mr. Dent’s first book , The Great Boom Ahead , Mr. Dent called for the U.S. stock market to reach 36,000 on the D.O.W. by the end of 1999 ! His next publications called for the D.O.W. to crash to 7,000 by 2013 and for the Stock Market not to recover until 2023 !
Two negative results of his two future forecasts of the U. S. Stock Market , should give an individual a pause in considering Mr. Dent’s research and forecasts !
On the other hand , economists have been know to understand the ramifications of Bankster’s policies after the Fact !
Amen. No one seems to point out his horrific track record. He is a sensationalist, grabbing on to the trend du jour, and projecting it to infinity. This brings in lots of suckers; er, subscriptions.
Hey bro – – I know how boring it can be to have to crank out something new every day . As an Austrian , many of your articles are basic for me . And , I do realize you are writing for the masses and new guys into the market . It’s good business !
There are many days I read the first paragraph and skip the article as I am all over “this market” . However , after Dent being on USA Watchdog lately , I must say you did one hell of a job with this article . It was necessary , and ,accurate . Great job . regards , Hugh
Thanks!
a
andy,you and bill both nailed the sucker.
Thanks. Even added a follow up this morning.
Harry Dent is a dent-in-the-head moron who is a paid shill for JPMorgan, Goldman Sachs & HSBC. Enough said. How do these shills sleep peacefully at night?
Which character is more dangerous: Harry Dent who is overt in evil pronouncements? Or wolf-in-sheep’s-clothing Jim Rickards, who says half correct things, but mixes them up with half CIA propaganda to achieve “controlled opposition” effect?
“The best way to control the opposition is for you to lead it yourself.” – Vladimir [Ulyanov] Lenin
“….as I have been blessed to have met the best as well as the worst – such as my compatriots at the Miles Franklin Blog.”
Now THAT’S funny.
If you say so.
Many more of these people than you would think are actually paid agents of the banking cartel. If they are doing everything they can to discourage physical stacking, it’s a pretty good bet. There’s a tinfoil hat theory for ya Andy 🙂
Hey John,
Nice to hear from you.
Actually, this board has very few trolls on it. The worst one is from Australia, of all places.
a
I actually believe much of what Harry says but his deflation assumption has one HUGE assumption, that the FED will allows most of its owners to go bust….which is what happens to banks in deflation. If the FED would allow this, Harry is right.
But the FED won’t allow it, the will restart QE and make it blatant. They will have no choice.
Harry himself has been lamenting the FED’s interference in the capitalistic cleansing of bankruptcy which the FED steadfastly refuses to allow to happen to its owners. This will not change so when the next crisis comes, the FED will print like Zimbabwe.
Down we go.
Cheers,
Jim
Thanks Andy.
Harry Dent turned my belief system upside down for a moment. This is because a lot of what he says does make sense. I slept on his arguments and woke up realising they are full of fallacies. Mainly gold isn’t just a commodity–it’s money. Gold may also become international currency once again.
This is the man who at the top of the internet bubble in 1999, predicted Dow 41,000 and NASDAQ 20,000 by – get this – 2008; followed by his equally wrong-footed prediction, in April 2011, that the Dow would fall to 3,000 by – drum roll please – 2014.
Great article Andy!! As always I enjoy reading your words of wisdom and dissection of all the confusing B.S. out there. I read both yours and Bills rebuttals after seeing the USA Watchdog interview with Dent. I read a lot of different “sources” to try to get a bearing on what is going on. I’ve been seeing a lot of “gold/silver bug” bashing going on in certain circles such as H. Dent and Martin Armstrong. I think Dent focuses too much on demographics and history when things were “normal(?)” and Armstrong touts that PM’s are a hedge against confidence in government and not a hedge against inflation and that the “gold/silver bugs” have it all wrong. At least the one thing everyone seems to agree on is that things are all jacked up and that the future is going to be “very unstable” to put is mildly.
Thanks for all you do bro!!
Respectfully,
Danny
Thanks Danny. You have a good grip on the essentials.
a
I lost some sleep after watching Greg Hunter’s interview with Harry Dent. But I went back to basics and concluded his prediction that fewer dollars, after a write off of huge amounts of debt, would be bad for gold, while at the same time the dollar would surge, was wrong. Thank you for taking up the issue.
My conclusion, and I’m just guessing: An ounce of gold equals a suit of cloths; fewer suits of cloths, each will cost more dollars; but an ounce of gold will still buy a nice suit.
If Harry Dent is right about the strength of the dollar after a crisis, then you are right about the relative value of gold to the dollar as the dollar surges, IMHO. Gold and silver are the only reliable store of wealth in the worst of circumstances. Although Harry did say one thing I thought was prophetic; that in the worst circumstances he would want to have an large supply of small bottles of booze, which I think is a good idea on several fronts, lol.
Please read my and Bill Holter’s refutations to Dent’s ridiculously flawed logic…
/the-deflation-boogeyman
/dangerously-dented-logic
…as well as my prediction TWO YEARS AGO that the dollar would soar during a financial crisis…
/2014-predictions
…not to mention, that gold and silver soared in January when the dollar surged; that is, before the Cartel came in with both barrels in February and since.