SELL THE NASDAQ AND BUY GOLD

SELL THE NASDAQ AND BUY GOLD

December 4, 2019

by Egon von Greyerz

In the long history of governments and central banks deceiving the people, August 15 1971 was just another date in the calendar. Throughout history, the ruling elite has always cheated the people. But the leaders’ irresponsible actions are always revealed as in the end they always fail.

Still, in modern times August 15th 1971 was a monumental day. That day was not the end of the financial system, and not even the beginning of the end. But it was perhaps the end of the beginning. Historians will recognise this paraphrasing of Churchill after the Allies’ El Alamein victory in 1942.

1913 WAS THE BEGINNING & 1971 THE END OF THE BEGINNING

The beginning was the creation of the Fed in 1913 in order for private bankers to take control of the financial system and money creation. With August 1971 being the end of the beginning, we have thereafter seen the final phase lasting soon half a century and creating the most ginormous super bubble that the world has ever seen.

WE ARE NOW APPROACHING THE END

So we are now coming to the end, after over 100 years of a fake financial system, created and controlled by the bankers for their benefit. The build up has been long but the end will be fast and extremely painful. The speed at which the collapse will happen will take the world by surprise. The final phase happens at an exponential rate as I explained in my article from 2017 about filling a stadium with water:

“EXPONENTIAL MOVES ARE TERMINAL
There is a more scientific illustration how these exponential moves occur and also how they end.
Imagine a football stadium which is filled with water. Every minute one drop is added. The number of drops doubles every minute. Thus it goes from 1 to 2, 4, 8 16 etc. So how long would it take to fill the entire stadium? One day, one month or a year? No it would be a lot quicker and only take 50 minutes! That in itself is hard to understand but even more interestingly, how full is the stadium after 45 minutes? Most people would guess 75-90%. Totally wrong. After 45 minutes the stadium is only 7% full! In the final 5 minutes the stadium goes from 7% full to 100% full.”

GLOBAL DEBT HAS TREBLED IN THE 2000S

It has taken 107 years to create global debts and liabilities of over $2 quadrillion with most of it generated in the last 25 years.

Just look at global debt which has trebled in this century from $80 trillion to $258 trillion. This is another example of the final phase being exponential.

Although debt has gone up 3X in the last 20 years, what we will see in the final 5 years will be even more spectacular. As Central Banks attempt to save the system, they are now embarking on the biggest money creation in history. Saving the financial system will require more than $2 quadrillion including derivatives and the shadow banking system. Hyperinflation will multiply these figures many times.

THE END OF THE FINAL PHASE WILL BE QUICK

I would be surprised if the final phase lasts more than 5 years. It doesn’t take longer than that for asset and debt bubbles to implode. So by 2025 the total financial system will not only be unrecognisable but also a mere shadow of what it is today.

What the world will experience is the inevitable effect of 107 years of false money, fake assets, unlimited debt and false moral and ethical values.

The fact that it will all implode over a short period like 5 years, doesn’t mean that the problems are over by then. It just means that debt and asset values have all disappeared into a black hole. The debts will be gone and all the false paper assets like $1.5 quadrillion of derivatives will be gone too. Virtually all bonds will be worthless also. Many good companies will survive but profits will crash and so will P/E ratios. The result will be that stock prices will come down by 95% on average in real terms.

A world economy which was based on fake money and false values will take a very long time to recover to where we are today. It will likely be decades or even longer. Remember that the Dark Ages lasted for 500 years after the fall of the Roman Empire.

We have learnt during this final phase that it is just not possible to soundly grow an economy based on debt and printed money. Every government that has attempted this has always been caught red-handed. And this is guaranteed to happen to the current fraudulent system too.

TAXATION IS A CONFISCATORY LEVY

Throughout history, the rulers have used numerous methods to swindle their citizens. Taxation has been the most obvious of all tricks. Taxation is a confiscatory fee on the people, often levied to finance the rulers’ extravagances and wars. The first known taxation was in Egypt already 3,000 years ago. Since then, there have been a multitude of taxes on goods or trade.

In England and Wales, in 1696, a window tax was introduced. The purpose was a tax based on the prosperity of the taxpayer. Initially it was a flat tax of 2 shillings per house (£13 or $16 in today’s money). There was also a variable part above 10 windows starting at 4 shillings. People objected to an income tax since the disclosure of personal income was considered a government intrusion into private matters.

How refreshing to hear the extremely sensible values of confidentiality and privacy which prevailed at that time. What a difference to today’s world when governments are prying into our personal affairs and control the people’s every move with nothing being confidential or private. Orwell was so right when in 1949 he wrote 1984, as we now have BIG BROTHER watching every step we take. But that will end too. As the system collapses so will governments’ ability to police the people. The state will run out of money and systems necessary to control the people.

INCOME TAX IS A RECENT PHENOMENON

Coming back to income tax, it was first introduced in the UK in 1798 but was quickly repealed. It was reintroduced a few times and became permanent in the late 1800s. In the US, taxation was a major reason for the American Revolution which led to the Declaration of Independence. Income tax was first introduced in the US in 1913 at 1% on income above $3,000 which very few people earned at the time.

So for 1000s of years most nations functioned with no or very low rates of taxation. There is no reason why that couldn’t work again. But obviously not based on the incredible waste and bureaucracy in the system today. A complete revision of the tax system with a sales tax of say 10% and corporate rate of also 10% would most probably work extremely well if all the waste in the system was eliminated. People would then pay for services they used like roads.

DEBASEMENT OF CURRENCIES IS A FORM OF TAX ON THE PEOPLE

Except for confiscatory taxation, the debasement of fiat or paper money is the most common method that governments use to defraud their people. By destroying the value of money, ordinary people are robbed of their savings and their pensions. Only the wealthy can take advantage of this. They invest in asset markets, often with leverage, like stocks or property which are benefiting from the credit expansion caused by the currency debasement.

Even though the wealthy will see a colossal destruction of their wealth, they will still be left with sizeable assets as long as they don’t have major debt. Buildings and land held by the rich will still exist although worth a lot less. But when Marxist/Socialist governments take over, they will either expropriate the properties of the wealthy or tax them so highly that owners can’t afford to keep them. The UK Labour leader Corbyn has already suggested that luxury properties in Central London should be occupied by ordinary people and not the current wealthy residents.

Most ordinary people have no assets but only debt. For the ones who have houses or apartments with a mortgage, the value of their property is likely to be lower than the debt. The question is if governments will legislate to let defaulting property owners stay in their houses? But what about people who rent accommodation, will they be allowed to stay too in the coming Marxist environment?

The effects of letting everyone stay in their property even if they can’t service the debt or pay the rent will obviously lead to bank defaults. So central banks will need to print more money for this purpose to prop up failing banks.

EXTREME WEALTH INEQUALITY LEADS TO REVOLUTION

Revolutions or social unrest are often the result of economic misery for ordinary people combined with disgruntlement with the leading elite and the wealthy. In most Western countries, but also in for example China and Russia, the gap between the rich and the poor has reached extreme proportions. The graph below shows the gap in the USA between the wealthiest 0.1% and the bottom 90%. In the mid 1980s the bottom 90% owned 37% and the top 0.1%, 10% of the assets. As the graph shows, this gap has now narrowed to the extent that the top 0.1% own as many assets as the bottom 90%.

The income gains in the US show the same gap widening between the top 1% and the rest. As the graph below shows the top 1% has seen a 350% growth in income since 1980 whilst the middle 60% has only achieved a 47% increase in the same period.

This massive concentration of wealth and income is bad for the economy but more importantly very dangerous. When the economic downturn starts in the next few years, the economic misery of the poor and the hungry is likely to lead to major social unrest and even civil war. The high number of recent immigrants in many countries today could also lead to neo-nazi or other right wing groups emerging.

So in all, we are rapidly approaching a very unstable and also dangerous period both economically and socially. We have already seen major protests and violence today around the world plus a significant increase in crime. Many governments can’t cope with the present level of crime and protests. In Sweden for example the prisons are full already. When these problems escalate, the world is likely to become a less safe place as governments lose control of law and order.

NASDAQ FALL WILL BE GREATER THAN IN 2000-02

Stock markets are at the end of a secular bull market. The quarterly chart of the Nasdaq shows the picture clearly. This index has gone up 112X since 1973. Once this market turns, the fall can be very rapid. In 2000-2002, the Nasdaq fell 80%. It would be surprising if the coming fall is smaller than the last one. Thus a 95% fall would not be surprising, at least not to me. I was personally involved with an e-commerce company in the late 1990s. I saw the bubble then and we therefore sold the company in early 2000 to a corporation quoted on the Nasdaq. We were paid in stock, but I set as a condition that we could sell our stock immediately. And we did of course. The company that bought our business and many others went bankrupt a few years later.

I am absolutely convinced that the situation today is worse than in 2000 and the bubbles are of course much bigger. Anyone holding onto Nasdaq stocks or any other stocks will see a total destruction of values and wealth in the next few years. So a CAVEAT EMPTOR! (buyer beware) warning here is totally motivated.

GOLD HAS MERELY STARTED THE MOVE

When stock markets fall, precious metals will continue their secular bull market which initially started in 1971 with the last leg starting in 2000. Anyone doubting that we are in a bull market needs to look at the annual charts of gold in US dollars and Euros. The picture could not be clearer. The 20 year bull market that started in 2000 has only seen one year with a major correction which was in 2013. (The green bars are up years and red ones down years).

This is a remarkably strong picture and anyone that has doubts about the future direction of gold should take heed. We have hardly started the move at this point. When the events I discuss in this article come into play, gold will move at a pace that will surprise everyone. We will see multiples of the current price before the current bull market ends.

But remember that physical gold should not primarily be owned for capital appreciation purposes. Above all, we hold gold as the best protection against a rotten financial system and insurance against unprecedented financial, economic and political/geo-political risk.

Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management
Zurich, Switzerland
Phone: +41 44 213 62 45

Matterhorn Asset Management’s global client base strategically stores an important part of their wealth in Switzerland in physical gold and silver outside the banking system. Matterhorn Asset Management is pleased to deliver a unique and exceptional service to our highly esteemed wealth preservation clientele in over 60 countries.

NEGATIVE RATES ARE KILLING THE WORLD

NEGATIVE RATES ARE KILLING THE WORLD

October 18, 2019

by Egon von Greyerz

“BREXIT, is in the last innings, UK will get out – This is how Egon von Greyerz starts the interview with Eric King of King World News. Egon goes on to say that in the long run the EU will dissolve, country after country, until it finally collapses under its own weight.

Egon further expresses his concerns about the FED’s emergency liquidity intervention, which has resulted in the relaunch of QE. Banking pressures are not only limited to the US, it’s a global phenomenon. Looking at Europe, German, French and Italian Banks have been extremely fragile for a very long time. 

Besides that:

  • The Paper shufflers: Gold ETF holdings have spiked with virtually no physical demand.
  • In the long run gold fundamentals know only one way: UP.
  • Gold has broken its 2011 highs in virtually every single currency. $ 2’000, $ 3’000 and $ 5’000 are just starting numbers.
  • Central banks support gold on a daily basis, by continuing to debase currencies.
  • People going to lose a major part of their wealth, caused by an implosion of bubble assets such as stocks, bonds and properties.
  • Shortages are starting: As indicated by Perth Mint’s Silver delays.
  • In this vicious debt cycle, central banks have only one option leftDebase currencies and create an inflationary nightmare.
  • Europe, Japan or America, they all must print unlimited money for the banking system to survive.
  • Negative rates are killing the world: No savings possible, only money printing and skyrocketing deficits are guaranteed.
  • It’s inevitable: A paradigm of overspending and living above your means will end.
  • Better get prepared: There is nothing governments can do, than to continue debasing currencies. Inevitably, gold will reflect that in a major way.

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Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management
Zurich, Switzerland
Phone: +41 44 213 62 45

Matterhorn Asset Management’s global client base strategically stores an important part of their wealth in Switzerland in physical gold and silver outside the banking system. Matterhorn Asset Management is pleased to deliver a unique and exceptional service to our highly esteemed wealth preservation clientele in over 60 countries.

Silver – Golden Opportunity

SILVER – GOLDEN OPPORTUNITY

September 6, 2019

by Egon von Greyerz

There is one spectacular investment opportunity today that virtually no one talks about. It represents less than 0.1% of global financial assets. This investment has a potential upside of 36x or 3,500%. The downside is extremely limited since supply is finite and demand strong. It is selling at around production cost and has a real intrinsic value. It has also been money for thousands of years.

Yes, I am of course talking about silver. It is probably one of the most undervalued investments that you can buy today. Since the top in 2011 at $50, silver went as low as $14 in 2015. But we must remember that silver was $4 in 2002. Many investors have been burnt by silver, buying high and selling low. I heard of investors who bought at $50 as they expected a breakout above the 1980 high at $50. A fall of up to 70% since then obviously hurts but fortunately all silver investors will be amply rewarded in coming years, whatever their buying price was.

If you hold silver today, or if you intend to buy, you are now looking at one of those times in history when an investment is likely to make spectacular gains for an extended period of several years. At some point, probably this year, silver will move up several dollars in a day or two and later tens of dollars. Over the next 5 years silver could exceed $500.

SILVER IS NOT FOR WIDOWS AND ORPHANS

But let me warn you already now. Silver is not for widows and orphans. The move up will also see periods of vicious corrections that will keep you awake at night, if you are a nervous investor. Thus there will be a massive volatility so the gains will also involve regular pains.

So definitively better to buy now before the real move starts. We have already seen a $4 move from the lows at the end of June, but that is nothing compared to what is coming.

It is normally not worthwhile to wait for  pullbacks because they might not come or they will come from much higher levels. So although we will see massive volatility in silver, most of the surprises will be on the upside. There will be periods when all technical indicators are screaming overbought but the price continues to run. But don’t forget that there will also be vicious corrections like the one we have just seen which is a great opportunity to buy silver.

GOLD / SILVER RATIO IS THE KEY

So why I am so certain that silver will move up now. I have often stated that the real upturn in the precious metals will always be led by silver. Once gold broke the 6 year Maginot resistance line at $1,350 in late June, this was the signal for the metals getting out of the starting blocks.

So that break was the signal and the gold/silver ratio peaked a few days later at 94. (See chart) As silver is now going up faster than gold, the ratio is coming down fast and has so far lost 13%. But that is just the beginning. I expect that ratio to first come down to the 2011 low at 30. This means silver will go up 3x faster than gold (ratio goes from 94 to 30).

WHEN GOLD REACHES $2,000, SILVER COULD BE $66

If we take an example that gold will reach an intermediate top at say $2,000, and the gold/silver ratio then reaches 30. That would mean a silver price of $66.

The long term historical average of the ratio is 15. That corresponds pretty well to the quantity of silver to gold in the ground which is 19 times and to the quantity of silver to gold mined which is 9, ( 9 ounces of silver mined for every one ounce of gold ).

LONG TERM TARGETS GOLD $10,000 & SILVER $666

If we take our long term forecast for gold which is at least $10,000 in today’s money, and apply the gold/silver historical ratio of 15, we get a silver price of $666 which is quite possible.

GoldChartsRUS has produced a silver chart adjusted for real inflation (Shadow Statistics inflation index) which produces an adjusted silver price of $840 in 1980 instead of the actual peak price of $50. Thus, a price of $666 is certainly possible in the next 5 years.

SILVER PAPER SHORTS – ONE YEAR’S PRODUCTION

We must remember that the futures markets are totally manipulated with chronic short massive positions. Just the silver shorts in New York and China represent more than one year’s silver production. Once the futures market breaks, there will be no physical silver available.

Silver demand is now increasing dramatically and the ETFs have seen an increase of 125 million ounces in the last month. That makes 500 million per year which is 50% of annual production. Investment silver is normally around 30% of demand with the rest being industrial use and silverware. Thus, there is not enough silver for this elevated demand and we must question if the ETFs actually are getting the deliveries of physical silver or just paper promises. I would not count on that they are getting physical silver.

There is a similar situation in gold. Since June gold ETFs, Published Repositories and Mutual Funds increased their gold holdings by 250 tonnes which is a record since 2016. The question is where is the gold coming from to meet this increased demand?

SWISS REFINERS REPORT WEAK PHYSICAL DEMAND

Swiss refiners are still reporting very slow business and high stock levels. They are seeing material coming back from the Far East including China and Thailand. The same with many bullion banks which are reporting unusually high stocks. We would clearly have expected the Swiss refiners who produce 70% of all the gold bars in the world, to reflect the increase in demand from ETFs and other sources. I can only assume that the ETFs are not actually getting physical deliveries but are just buying paper gold with an undertaking by the bullion bank to deliver physical.

This confirms my strong opinion that no one should ever buy gold or silver ETFs. All you get is a piece of paper that you own x ounces of gold. Most ETF prospectuses state that they don’t have to hold the physical. And judging by the slow business and high stock levels of refiners and bullion banks, the ETFs seem to top up their paper stock rather than the physical.

Even if the ETFs do hold physical metals, it is still within the banking system with all the risks that involves. Investors in ETFs don’t have their own bars, they have no access to their gold. The gold is not insured and it is subject to all the risks of the financial system, especially if the ETF only has a paper claim on the bank it bought the gold or silver from.

Gold has had a spectacular year so far and outperformed virtually all major investment classes. In 2019, gold is up 20% in US dollars, 24% in Euros, 25% in UK Pounds and 15% in Yen.

In August we have seen strong moves in gold. Gold took off when the Maginot Line was broken at $1,350 back in June.

GOLD PAPER MARKET STILL RULES

The lack of physical demand confirms what we have always known, namely that the gold price is determined by the paper market. So in spite of the best year for gold since 2009, it is not yet reflected in the physical market. In one way, this situation makes the coming price move in gold and silver even more bullish. Futures exchanges and bullion banks are clearly accumulating even bigger short paper positions in gold and silver. When the paper market breaks there will be absolute panic in the physical market with gold going up by $1000s and silver by $10s. That will definitively happen in the next few years but it could happen at any time.

GOLD IS FOR WEALTH PRESERVATION AND NOT FOR PRICE GAINS

I have given some potential price projections in this article. They are by no means meant to be sensational since I believe they are very realistic. But remember that you are not buying gold or silver for short term price gains and therefore price targets are unimportant.

Physical precious metals are bought for wealth preservation purposes. You buy and own physical gold and silver as insurance against a totally rotten and manipulated financial system which is unlikely to survive in its present form.

If you don’t already own gold and silver, buy now. Don’t be greedy and wait for pullbacks. That way, you might miss the boat totally which doesn’t just mean losing a potential investment gain. No, it means that you will be totally unprotected and unprepared for what is going to hit the world in coming years.

Even if you have to pay up when buying in the near term, that is totally irrelevant. In a few years gold and silver will be multiples of where it is now. And if you store it in the safest vaults and jurisdictions, you will be able to sleep well at night.

Egon von Greyerz
Founder and Managing Partner
Matterhorn Asset Management
Zurich, Switzerland
Phone: +41 44 213 62 45

Matterhorn Asset Management’s global client base strategically stores an important part of their wealth in Switzerland in physical gold and silver outside the banking system. Matterhorn Asset Management is pleased to deliver a unique and exceptional service to our highly esteemed wealth preservation clientele in over 60 countries.