Debt Ceiling, FED Rate Hike and Gold
The next 2 weeks are critical for 3 metals more than any other: Cobalt, Zinc and Gold.
The U.S. Congress will again, on the 15th, be forced to confront the debt ceiling debate that Obama delayed from his term to Trump’s.
This chart shows how from 1966 and until present day, the total public debt sits at a whopping $20 Trillion.
Because this debt cloud has been promising to rain disaster for so long, we have become accustomed to take it for granted.
Less than 1% of the population owns gold and silver, for example, even though 2008 proved to any citizen of the world that there are some institutions, which are clearly above the law.
The November elections made millennials, those who saved frugally under Obama, very optimistic and they are spending again.
For 8 years, since the market bottomed in March of 2009, we’ve witnessed one of the longest stock bull markets in history.
Only the 90’s bull was longer, and ended with a huge crash. Percentage wise, it is also approaching 2nd place since WW2.
BlackRock, the largest private equity fund in the world, who’s Ex-CEO called the Social Security trust fund – “Nothing to trust and without funds”, have ran data back through all the previous tightening periods, and found the S&P 500 underperforms.
There’s an interesting phenomenon happening right now: On one hand, uncertainty in the Google trends is at an all-time high, and on the other hand, the U.S. consumer is as comfortable as he has been since before the 08′ crisis that the economy is healthy.
I want to remind you that today’s stock market is unattainable for the average worker, as it takes a record of 27 work weeks to buy a single point of the Dow Jones at these levels.
There are countless FOREX day traders and speculators, but the volume of national fiat currencies is much larger so these fluctuations aren’t noticeable like they are in Bitcoin.
What this tells me is that right when retail America, who always buys when it’s “safe” to buy, and all the big funds have made their money and want to sell their shares at the high, the market is becoming very popular.
Add to this fact that the jobs market is pricing in Trump’s domestic plan to keep jobs home, create an enormous infrastructure plan, now estimated at $4 Trillion, and an Asian infrastructure plan currently forecasted at $26 Trillion, and you’ll see why Cobalt and Zinc, two metals that go into a tremendously wide array of cutting-edge products, are absolutely surging higher.
There’s a reason that stock prices are insanely high. Think of it this way, the S&P 500 is trading at a P/E ratio of 26.63 – that’s higher than any time in history, except the Dot.Com bubble.
If someone was to buy these 500 companies, and turned them private, it would take 26.63 years of earnings to make his principal back. That’s a bad investment, and is only sustained because of one factor – Low, zero and negative interest rates.
Right now is a good time to make sure you own safe havens.
The U.S. Federal Government cannot default on its obligations, therefore the debt ceiling issue will probably be handled in a manner that will create the least friction – politically and economically for the system, and this means more inflation.
By June 1st, the government is out of cash.
With the recent jobs report now published, and the manufacturing strength in Europe and China, it is becoming more likely that the FED will again raise rates.
Gold has been up this year, even though the FED has, again and again, stated that it will raise rates more than once in 2017 – the reason is that inflation is rising faster than bond yields, so real rates are negative still!
If gold makes a move that is even half of the last tightening period, it will end 2017 around $1,620 per ounce.
This is not a one-time occurrence – the FED has tightened many times before, and as long as these hikes have followed inflation rising, gold outperformed massively.
Since this week is a critical week for gold, we will watch closely how it reacts to these two financial and political events.
What’s undoubtedly clear is that Cobalt and Zinc are now in a classic bull market, caused by a surge in demand and a supply shortage.
Cobalt mostly comes from the Congo, (over 50%), and big buyers like Apple, Tesla and Microsoft are being pressured not to buy from artisanal mines, where children are working in sub-human conditions – this is causing further stress on the market, and exploration companies with viable assets and aggressive management teams are going to make a fortune for their shareholders.
Zinc is the world’s 4th most in-demand metal, and collectively, the U.S. and Euro-Asia are going to put $30 Trillion Dollars at making their infrastructure up to 21st century standards.
If you are not a zinc bull, research the supply and demand fundamentals today.
I spoke with a representative of the largest Zinc Study Group organization this week, and he basically told me that unless new supply comes online soon, there will be programs that will be delayed by years.
Governments can’t afford this, and the free market knows this.
Trump and Yellen will take center stage this week, but while most novice investors will focus on the over-priced large-caps, Wealth Research Group will be focusing on the core fundamentals of an infrastructure political environment – critical minerals.
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