Another bad sign for China... Rogers: Europe to pay 'terrible price'... Gold and silver soaring... How to walk into a bank and get physical silver... It's a bull market...
In 2009, China surpassed the U.S. as the world's largest auto market. Sales in China jumped 49% that year to 13.6 million units. Meanwhile, U.S. sales slumped 21% to 10.4 million – the slowest pace since 1982.
At the time, we wondered how Chinese automobile sales could be increasing when gasoline sales were declining in the country. Master short-seller and noted China bear Jim Chanos alleged the country's government was buying cars and storing them in fields in the countryside.
The Chinese government is notorious for misallocating capital across all asset classes... most notably, real estate. China has built entire cities that stand empty. The government's goal was to manipulate growth numbers so the outside world didn't fear a slowdown. So allegations that the government was also goosing automobile sales numbers (an important economic indicator) weren't surprising.
Chinese auto sales growth slowed to 4% in August... According to the China Association of Auto Manufacturers (a government-authorized group), customers purchased 1.23 million cars. This is the second month in a row that auto sales were below expectations. August's growth rate is down from 11% in July and 16% in June.
And average passenger-vehicle prices have fallen every month this year.
This is just the latest confirmation that China is indeed slowing down. We dedicated the entire August 24 Digest to the topic... In addition to bearish "on the ground" numbers – like auto and real estate sales – the plunging equity of the world's largest mining firms indicated a slowdown. These companies derive a huge portion of revenue from China.
In that Digest, we told you not to worry... The worse the global economic landscape becomes, the more likely the world's central banks are to print. We were right. Last week, the European Central Bank announced its most aggressive bond-buying program since the crisis began. It announced it would buy existing one- to three-year maturity bonds of European Union countries, targeting Spain and Italy in particular.
And we expect the Federal Reserve to follow suit soon. It's meeting this week. So we could see renewed easing policies very soon.
As we've said for years, you can't solve a debt problem by creating more debt. It can boost markets... sometimes for years. But eventually, the fundamental economic issues (like unemployment) will overpower monetary stimulus. As legendary speculator Jim Rogers said on CNBC today, the European monetary union will eventually pay a "terrible price" for the way it's handled economic problems.
"These guys have been saying the same old garbage for a long time. It's not a game-changer. It's good for the market for maybe a month" Rogers said. "The debt keeps going higher and higher, and eventually we're all going to pay a terrible price."
Rogers says the easing will only goose markets for a few months... We think this latest round of easing (especially when the Federal Reserve steps in) could boost markets even longer... As the old adage goes, markets can stay irrational longer than you can stay solvent.
All this money printing will eventually lead to inflation. And the constant debasement of global currencies will force more money into precious metals. We're already seeing prices move higher...
Since the beginning of August, gold rose from $1,599 an ounce to around $1,730 today – an 8% increase. Silver is up from $27.87 an ounce to more than $33 over the same time period – an 18% rise.
We've been urging our readers to buy gold, silver, and the associated equities leading up to this rally. Steve Sjuggerud said last month that gold stocks looked ready to rally... Investing in gold stocks at that time could result in triple-digit gains, he said.
On July 31, Jeff Clark sent an urgent update to his S&A Short Report readers saying silver was about to break to the upside...
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Yesterday, silver popped above the down-trending resistance line. That's an upside breakout... and it brings the next resistance level at about $30 per ounce into play. It's not a guaranteed move, though. Nothing in the markets is ever guaranteed. But the odds have shifted in favor of the silver bulls. If silver can add to yesterday's gains – or at least not drop back into the triangle pattern – we should see higher silver prices for the next several weeks. |
And in the S&A Resource Report, editor Matt Badiali showed us another buy signal for silver...
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This rare buy signal came from tracking the "smart money" in silver... by betting with large, commercial silver interests and against hedge funds that typically get very bearish at market bottoms. |
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As I explained... we'd just hit a rare extreme in bearishness among the "noncommercial" hedge-fund traders. We'd hit this extreme five other times during the last 10 years... And each was followed by a big rally in silver... |
His readers are already up nearly 30% on the stock he recommended in August...
In addition to the bullish macro setup for silver, one of the world's best silver investors – resource billionaire Eric Sprott – says the world is actually running out of the metal. We discussed Sprott's views in a February 2011 Digest...
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Sprott says aggregate investment demand for silver between 2000 and 2009 was 293.8 million ounces (according to the GFMS, the world's foremost precious metals consultancy). Using his own numbers, Sprott compiles the silver holdings for seven large investors, including himself, iShares Silver Trust, ZKB, GoldMoney, etc. Just those seven entities own 519.6 million ounces of silver... That's 225.8 million missing ounces. And again... That's only seven investors. It doesn't include central banks, individuals, hedge funds, etc. |
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It's obvious, as Sprott notes, silver data has been "very, very misstated." Sprott ends his speech saying, "There's $22 billion of silver available in the world, of which the ETFs already own half, and between you guys and us we probably own the other half... Which means there's nothing left." |
You can profit from the rise in silver several ways... You can buy silver bullion or silver-related securities (stocks or exchange-traded funds focused on the metal). But Retirement Millionaire editor Dr. David Eifrig found the most interesting way to profit from silver...
He's discovered that some banks around the country have real, physical silver and are distributing it to retail clients... When you find it, you'll pay a large discount to market prices. Doc investigated this situation for more than three months. In fact, his research team was able to get five silver coins from a bank a few blocks from our Baltimore offices. To learn more about how this opportunity works, click here...
It's a bull market... New highs in blue chips, bonds, housing, oil, and banks...
New 52-week highs (as of 9/7/12): Berkshire Hathaway (BRK), Guggenheim BulletShares 2015 High Yield Corporate Bond Fund (BSJF), Cambria Global Tactical Fund (GTAA), iShares iBoxx High Yield Corporate Bond Fund (HYG), SPDR S&P International HealthCare Sector Fund (IRY), iShares Dow Jones U.S. Home Construction Fund (ITB), SPDR Barclays Capital High Yield Bond Fund (JNK), Royal Gold (RGLD), Medtronic (MDT), Chevron (CVX), ExxonMobil (XOM), Procter & Gamble (PG), Two Harbors (TWO), and Wells Fargo (WFC).
We received lots of feedback about Porter's Friday Digest and Clint Eastwood's speech... Plus, a positive note about one of our most successful services, The 12% Letter. Have you made money buying and holding Dan's World Dominating Dividend Growers? Let us know here... feedback@stansberryresearch.com.
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"I was impressed by Clint's speech, as I listened to it on NPR. And to the point I was quite amazed how much the NPR commentators disliked it and how they reacted after it was over. I was quite surprised by their distinctly negative reaction." – Paid-up subscriber Paul Rogers
"Even you can't salvage Eastwood's RNC disaster. You noticed Romney didn't get the usual post convention bump in the polls? Everybody was talking about Eastwood. Plus Romney had nothing noteworthy to say. Don't blame the media when the man can't give a decent speech. Even Fox News was shaking their collective heads.
"I haven't decided whom I'm voting for yet. But if I based it on the conventions, President Obama would get my vote for sure. I'm certainly not going to base my vote on the outrageous amount of money being spent by everybody either." – Paid-up subscriber George Fordham
"If you didn't like [Eastwood's speech], you were the ones he was talking about." – Paid-up subscriber RP
Regards,
Sean Goldsmith
New York, New York
September 10, 2012