The Fairy Tale of Mainstream Media and Investment Bank Analysts

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Will Silver and Gold Reach their Former Highs Again? – Are Silver and Gold Really Overvalued and to Never Reach their Former Highs Again? – Will The Fed Actually Wrap Up QE3 in 2014? – How About the Big Jobs Report and Improving US Economic Data?

The Fairytale of Mainstream Media and Investment Bank AnalystsIt takes a huge amount of nerve to be the mainstream media or an investment bank analyst these days. They have the audacity to stand on their pedestals and tell you that stocks are going “to infinity and beyond!”

Out of the other side of their mouths, most of these talking heads proceed to tell you that silver and gold are finished. Have you ever wondered how these smart people (who really do know better than this) get up every morning and look themselves in the mirror?

Despite the continued bashing by mainstream media and investment bank analysts, silver (and gold) held most of its ground for the week that ended May 3rd. In fact, if you look at silver prices versus where they closed spot markets on the previous Friday, April 26th, silver actually closed up for the week to date.

Silver closed spot markets the prior Friday the 26th at $24. They gapped up to open at $24.44 in spot markets at the beginning of the week. They finished still strong at $24.14 at this past Friday’s spot market close. This put silver down 1.2% during the Monday to Friday spot market week, but up .6% from the prior Friday spot market close to this past Friday’s spot market close.

Silver managed this heroic feat of holding its ground despite mass financial media claims that silver and gold are overvalued and can never reclaim their highs, that the Fed will wrap up QE3 in 2014, and that the U.S. job market is improving.

Will Silver and Gold Reach their Former Highs Again?

There are no shortage of analysts who glibly claim that silver and gold have seen their best days. Recall from last issue that Society General’s head of commodities stated that gold will trade at $1,100 or lower by the end of this year or early next year. Other analysts have taken pop shots at silver. They predicted that it will soon trade below $20 per ounce and perhaps as low as $16 for an ounce. The media sang this now tired tune at various points this past week.

What is the truth of these assassinations of the precious metals’ reputations? Nothing could be further from the truth! Gold and silver are actually either undervalued or at the worst case fairly valued. Consider this chart on the U.S. M1 money supply as backed by stated (not actually audited) U.S. gold reserves.


Even an elementary school student can clearly see what has been going on here!

The U.S. money supply has been radically increasing against the stated gold reserves since before 1990. In the glory days of the American empire, fully half of the U.S. dollar supply was backed up by stated gold reserves.

Fast forward to today, and you see a shockingly different picture.

We have dropped from over 50% of the money supply backed by gold to about 10%!

Yes, you read that correctly. This means that the U.S. dollar has been debased by an eye watering 80% in around twenty years. When someone tells you that precious metals like gold and silver have seen their best days, remember this chart.

Silver has similar charts that demonstrate to you why it is not overvalued at current levels. Direct your attention to this one below.

This is the price of silver from 2006 to date. The rising trend line that you see beneath it indicates the inflation adjusted price for silver. It should shock you!

Silver is not at all overvalued at today’s prices. To the contrary, it is fairly priced based on all the money that your “honest” government in Washington D.C. has been printing since the start of the “Great Recession.”

Where Are Silver Prices Heading From Here?

While we do not have a crystal ball here, we can safely point this out. The U.S. government continues to print $85 billion new U.S. dollars every single month. That represents over $1 trillion in new greenbacks per year! You can see where this will eventually take silver prices in the future…

Will The Fed Actually Wrap Up QE3 in 2014?

Speaking of the Fed and their runaway money printing spree, a Wall Street survey addressed the issue this past week. The so called wise men of Wall Street believe that the Fed will only keep QE3 going through this year and some of next year.

The CNBC April Fed Survey showed that 40 out of 46 respondents believe that the Federal Reserve will “buy assets” next year (the not so secret Fed code for “print more money”). A majority of the respondents also believe that the program will not completely end until July 2014.

Who are these mysterious respondents anyway? They are economists, fund managers, and strategists. You can call them the so called “smart money.” The problem is that many times, the “smart money” gang is either not so smart, or worse, they are outright lying to you.

Consider that from that same survey, only a third of respondents believe that gold prices will be higher next year, while the same number believe that gold prices will be lower next year. Obviously, smart money is not paying much attention to the cold, hard facts!

What the Fed said about its quantitative easing at their FOMC meeting this past week was quite clear. They will now allow themselves the flexibility to increase the amount of their QE3 purchases each month as necessary.

Some estimates say this could mean that Helicopter Ben Bernanke and his merry men band of outlaws will print an addition $10 billion greenbacks per month!

How can you possibly believe that the Fed will actually stop printing money next year when they are just now gearing up to print even more money per month? Once again, the truth remains stranger than fiction!

How About the Big Jobs Report and Improving US Economic Data?

By the end of the week, the government had released its much heralded and anticipated U.S. jobs report, along with a batch of important U.S. economic data. The unemployment rate ticked down a tenth of a percent to 7.5% (ooh…aah!).

Financial Media anchors called their brokers and the “smart money” (here we go again) raced out to buy any and all stocks that were not nailed down to the floor. At the same time, they were out trying to say “I told you so” about why the precious metals have no future. After all, if the economy is really on the mend, why would you be so foolish as to buy the “has been” relics silver and gold?

Are you ready for the truth about the jobs report and the other U.S. economic data that the government quietly released a little later? The only question is where to begin! Hours worked in the report showed a stark decline of .2 percent.

This translates to around a half million jobs lost!

The hours worked part of the report showed sobering declines in the manufacturing, defense, retail, construction, hospitality, and leisure areas of the economy (The categories that actually make up much of the job base in the entire U.S.).

The average work week in the U.S. declined to 34.4 hours. Last time we checked, a full time job offered you forty hours or more of work!

How about that drop in the unemployment rate? It sounds impressive! When you look further down the report to the true measure of unemployment (that President Bill Clinton steered away from so that the job numbers would look higher than they actually were), it tells a different story.

The real unemployment rate, per the government’s own numbers in the report, actually rose from 13.8% to 13.9%! (And as billionaire business mogul Donald Trump famously claimed a few months back, even that number is low…) Only six states actually have real jobless rates of less than 10%.

Financial mass media and the talking heads claim that the jobs report will get stronger and better as we enter the second half of the year. Yet, the Congressional Budget Office says that the rate of layoffs is anticipated to increase this summer!

In fact, they estimate that the mandated federal spending cuts will decrease employment rolls this year through end of September by around 750,000 more jobs! The truth is that the majority of the government agencies have only begun to enact their mandatory job cuts. This federal job cutting will increase all through the summer…

The Worst Economy in 83 Years!

Right, but is not the general economic data improving, you might wonder? Bespoke Investment Group pointed out this past week that the current annual GDP growth of less than 3 percent since 2005 makes this the worst economy in 83 years! We haven’t seen such anemic GDP growth over such an extended period since 1929. We all know what happened around that time— the Great Depression…

Finally, let’s objectively examine the other U.S. economic data. The government quietly slipped it through in the middle of the irrational stock market rally and precious metals sell off that happened Friday after the unemployment data.

The all important U.S. service sector growth (that represents more than 2/3 of the entire U.S. economy) dropped to its feeblest level in nine months! New U.S. factory goods orders plunged four percent in their largest drop in seven months! It is safe to say that U.S. economic data released Friday ranged from bad to abysmal…

Do not think for one moment that the smart money is really buying this overblown and tired U.S. stock market rally. Listen to the under-reported comments from a large hedge fund and money manager fund investment conference this last week…

In a reference to investing in stocks now, Wilbur Ross said “sometimes it is better to hide.” Harris claimed that all traditional asset classes are over valued. The enormous private equity group Apollo’s manager Leon Black quipped that this is a fabulous environment in stocks, so long as you are selling them…

If the real question that haunts the financial mass media talking heads’ minds is has the precious metals’ rally ended, then think about this. Silver and gold have a long term track record of 8,000 proven years of bull market history under their belts! We dare the global stock markets and their mainstream media prophets to try to compete with that…

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