The Biggest Crisis in the World?

Fears of 'currency wars' return... The biggest crisis in the world?... IEA: Oil oversupply will be nearly gone this year... Another double-digit decline is coming... History says gold is headed even higher... You haven't missed the boat...

Another central bank has joined the "easing" bandwagon...

The Monetary Authority of Singapore ("MAS") manages monetary policy a bit differently than most other countries. Rather than setting short-term interest rates, it controls the exchange rate of the Singapore dollar versus an undisclosed basket of currencies.

In a surprise move last night, the MAS set the rate of appreciation at 0%... effectively saying it will not allow its currency to strengthen anymore. This was a significant move – the policy hasn't been used since the depths of the 2008 financial crisis.

The Singapore dollar fell more than 1% against the U.S. dollar – the biggest move since China set off a global currency "rout" last August. Several local currencies, including New Zealand's dollar, Malaysia's ringgit, and Indonesia's rupiah, plunged as well, suggesting there are concerns that other central banks in the area could follow the MAS' lead. As Hirofumi Suzuki, an economist at Japan's Sumitomo Mitsui Banking, noted to Bloomberg Business...

Today's decision by the Monetary Authority of Singapore has put downward pressure on currencies in the Asia-Pacific region. Some market participants fear a revival of a competitive currency devaluation.

Regular Digest readers know we believe this trend will lead to disaster as the global paper-money system unravels. But we aren't alone.

Lately, we're seeing more and more high-profile figures – including several top investors – speak out in agreement. Even some prominent government officials appear to be losing faith in the insane policies of central banks...

On Tuesday, German finance minister Wolfgang Schaeuble joined the chorus. In an interview with news service Reuters, speaking on the European Central Bank's low (and now negative) interest rates, he said...

It is undisputable that the policy of low interest rates is causing extraordinary problems for the banks and the whole financial sector in Germany. That also applies for retirement provisions.

He also said it appears these policies are "largely exhausted," and that central banks would be wise to start "unwinding" these measures.

We aren't holding our breath.

Yesterday, we shared BlackRock CEO Larry Fink's recent commentary on these policies from his annual letter to shareholders. Today, he went even further...

In an interview with financial-news network CNBC this morning, Fink predicted the spread of negative interest rates is going to become the "biggest crisis" in the world...

We have become too dependent on central bankers... It was supposed to be a temporary healing process. I don't call seven years, eight years temporary anymore. I don't see how that has a positive impact on the economy.

Over 70% of our clients are retirement plans and insurance plans. Our clients are in pain. Our clients are very worried how they're going to be able to meet their liabilities.

I don't believe we're focusing on what negative and low interest rates are doing to savers. We think this is going to become the biggest crisis globally... We have to focus on this.

If the International Energy Agency ("IEA") is correct, global oil markets will "move close to balance" in the second half of the year.

In a report this morning, the IEA predicted the global surplus of oil would fall to just 200,000 barrels per day by the end of the year, compared with nearly 1.5 million barrels per day today.

While it said there is unlikely to be any real impact from this weekend's OPEC production "freeze" discussions, it said there is "no doubt" oil supplies will fall from here.

It admitted that U.S. shale oil production "has been more resilient to lower prices and the drop in drilling activity than expected" but said there are now signs that U.S. production declines are "accelerating." In particular, it pointed to data released yesterday showing U.S. crude oil production fell below 9 million barrels per day last week for the first time in 18 months.

In the meantime, there are reasons to believe oil prices could still be headed lower.

In yesterday's True Wealth Systems Review of Market Extremes, our colleagues Steve Sjuggerud and Brett Eversole explained why oil prices could fall dramatically from here. From the issue...

Oil might be the most frustrating asset on the planet today... Crude prices have fallen as much as 57% over the last year (peak to trough). But they're up an enormous 52% in just the last two months. Volatility is high... which leaves most folks wondering where prices will go next. But today we have an answer...

After the big rally of the past two months, the bullish oil trade is getting crowded. According to the latest Commitment of Traders ("COT") report for oil, futures traders are ALL betting on higher oil prices. More from the issue...

Speculative bets on higher oil prices recently hit an important level. This tells us traders all expect higher oil prices. Take a look...

Importantly, each time COT contracts have broken above that level and then fallen back below it, oil prices have fallen dramatically. Take a look at the returns...

Extreme Date	1-Month	3-Month	6-Month	12-Month
10/22/2013	-7%	-6%	3%	-18%
8/12/2014	-4%	-19%	-47%	-55%
7/14/2015	-17%	-6%	-37%	N/A
Average	-9%	-11%	-27%	-36%

As you can see, this extreme led to double-digit average declines over the following three-, six-, and 12-month periods.

Steve and Brett noted COT speculative contracts fell back below 350 as of last week... meaning this bearish signal has officially been triggered. History suggests lower oil prices are likely, starting soon.

Steve and Brett also shared their latest thoughts on gold...

As you likely know, gold has been on a tear. It rallied more than 16% to start the year, its best quarterly gain since 1986. Many gold stocks have absolutely soared. But according to their research, history says the biggest gains are likely still ahead...

We looked at every 15%-plus quarterly jump in gold. These kinds of moves have only happened 15 other times since 1971 (about 9% of the time). Importantly, gold tends to keep soaring after these big quarterly returns. The table below shows the returns...

	3-Month	6-Month	1-Year
Return after 15%-plus quarterly gain	6.6%	8%	31.6%
Typical return	2.4%	5%	10.9%

As you can see, over the past 45 years, similar extremes in gold have led to average additional gains of 32% over the following year.

They also noted that a similar move would take gold back up to $1,600 an ounce...

That probably seems crazy to most folks after the crash in gold prices in recent years. But history tells us it's entirely possible, starting now. Both of our [gold trading systems] are flashing "buy" right now. And this rare extreme points to much higher prices. When you put this all together, owning gold is a no-brainer today.

George Milling-Stanley agrees...

In case you aren't familiar, he is the head of the gold-strategy team at State Street Global Advisors. This is the company that runs the $33 billion SPDR Gold Trust (GLD), the biggest gold exchange-traded fund in the world. Milling-Stanley says he's seeing a change in the gold market. As he explained in a recent interview with CNBC...

I think to a large extent it's investor buying, not hot money... The interest is coming across the board from institutions and individual investors.

For 40-something years, since I first got into gold investing in the 1970s, people have been saying it doesn't pay a return. Well, guess what? Not much else does these days, either. People are charging you to store money. GLD costs less at 40 basis points annually than holding Swiss francs.

People have not missed the boat. Just five years ago gold was $500-$600 dollars higher than today. Anyone who wanted to sell back gold or wanted profit taking at $1,800 already did so. So I'm not expecting a surge in people selling back or recycling until gold goes a lot higher.

If you missed the big rally in gold and gold stocks to start the year, it's not too late... The reasons to own gold have never been more important... and history suggests much more upside lies ahead.

If you'd like to learn more about our brand-new Stansberry Gold Investor service, click here. (This link does not lead to a promotional video.)

Finally, we'll end today's Digest with a little good news for a change...

Regular readers may recall that our colleague Dr. David "Doc" Eifrig shared an urgent warning for retirement investors last September. In short, the Obama administration had proposed a new rule regarding IRAs and other retirement accounts.

It was supposed to reduce fees and conflicts of interest among brokers. But as Doc explained, the rule had a "fatal flaw" as written that would cause big problems for many investors. As he explained in the September 23 Digest...

If passed, this rule will restrict the trading of options in IRA accounts. Many of you sell covered calls in IRA accounts for income and capital gains. Some have even used it as a way to create portfolio protection. If this rule passes, that could end immediately.

Many people use options to increase leverage and make big bets. But in a paternalistic attempt to protect people from themselves, the Department of Labor may take away our ability to use options correctly to actually decrease our portfolio risk. That's patently unfair. You deserve every retirement-savings tool at your disposal.

The Department of Labor was accepting comments on the rule until the following day, and Doc urged Stansberry Research readers to let the government know this was unacceptable.

We were thrilled that many of you apparently did just that. The number of public comments received jumped by thousands in the final hours after Doc's recommendation. But we had no way of knowing if our comments would make a difference. Until last week...

Last Wednesday, the government finally released its final version of the rule. We're happy to report it allows all asset types – including options and futures – to be used in IRAs and 401(k)s.

Granted, it's a relatively minor victory. But it's proof that a small number of educated folks can still make a difference... And it's one less thing investors trying to save for retirement have to worry about today.

New 52-week highs (as of 4/13/16): Aflac (AFL), Becton Dickinson (BDX), Ciner Resources (CINR), Johnson & Johnson (JNJ), 3M (MMM), Sysco (SYY), and Wells Fargo – Series W (WFC-PW).

A light day in the mailbag. What's on your mind? Let us know at feedback@stansberryresearch.com.

Regards,

Justin Brill
Baltimore, Maryland
April 14, 2016