Robert Kiyosaki Blog

Financial Education Portal inspired by Robert Kiyosaki


Anglo Far East – Flying by Sight Versus Instruments

Flying by Sight Versus Instruments “VFR”Visual Flight rules “IFR” Instrument Flight Rules As sponsor of a GATA presentation in Auckland by the chairman- Chris Powell over the weekend, I had the pleasure of spending time and picking his brain on many subjects. High on the list was the current correction in gold and its seeming long and sustained period of flat or lower prices. There are many measures to gauge the market but one of the best is outright sentiment and he said that for every 100 people that would have had contact with him in times past, the number is more like 20 now. If I take that same sentiment gauge and cross it over to the exploration/ junior mining sector and even the mid-tier and senior one you get a really sad story. Here is what a professional capitulation looks like from a seasoned mining writer that makes his living selling information 1/ convince me that the resource sector recovery expected this fall is no longer valid. Even the strongest companies are now weakening again and I think this is a strong indica­tion that our market troubles will continue well into next year. This unfortunate chain of events leads me to believe that we should not be buying any junior mining stocks right now. 2/ Many of us, including myself, beefed up positions in companies like “%$” thinking this would be the start of getting our portfolios back on track. It hasn’t happened and I have never felt more discouraged about anything I have dealt with in my entire life. It has felt like an emotional earthquake to my soul. 3/ Even during the 2008 meltdown situation, I felt more composed and confident because I knew we would rebound, which we did within a relatively short-period of time. But this current market situa­tion has gone from bad, to worse, to intolerable with further downside very likely. 4/ I even wrote many times in the last several years that before the screaming, parabolic market in our favour would happen we may have to deal with downside volatility that would shake us to the core. But what we are experiencing now is beyond even what I thought could happen. This is a wipe-out that will basically eliminate at least another 35% of the junior mining companies that are currently still in business. This is after those who have already shut their doors. Many more are hanging by their fingernails right now. I thought by moving towards those companies with the best assets or near-term production stories that we would protect ourselves until the dust you spoke about settled. I...

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An Easy Way to Solve the Biggest Problem Facing Investors Today

“All income-generating assets are below their average yield… and most are near all-time lows.” That’s what master researcher James O’Shaughnessy told the Big Picture Conference earlier this month. He went on to say that he believes the biggest problem facing investors today is income. You see, James’ research shows that now is the toughest time in 140 years for investors trying to generate income. But he also revealed a simple solution you can easily put to work today… Jeff showed people what to do with their money during crisis conditions and how to profit in 2014. He also put together a special offer where you can get one of his research services for free.   James has made a career of looking back at history to find insights into what’s happening today. In his fantastic book, What Works on Wall Street, he ran the numbers on nearly every investment idea you could dream up. (I keep a copy on my desk at all times.) And he’s built a successful money-management business that invests around $ 5 billion using strategies based on his research. Today, James’ research shows that most income investments, especially bonds, aren’t paying the kinds of yields investors need to survive. Bonds have been in a multi-decade bull market. As prices go up, yields come down. Thirty-year U.S. Treasurys only pay 3.65% as I write. And James believes they’ll be a losing proposition over time… “Long-term bonds have done very well for a very long time,” he says. “No one remembers that long bonds lost 68% after inflation from 1941-1981… but it can happen again.” You read that right… After inflation, “safe” long-term bonds lost 68% of their value from 1941-1981. Today, with high prices and low yields, we could be in store for another multi-decade bear market. James believes the best thing you can do to generate income is to avoid bonds and buy international stocks that pay dividends. Even during the greatest period in history for long-term bonds (1981-2011)… you’d have beaten them by simply owning global dividend-payers. Right now, he believes global dividend-payers are the easiest and safest way to generate income. And I’ve found an easy way to make the investment. This fund holds 100 of the best global dividend-payers. And it only holds companies that have consistently paid big dividends. Based on history, this is a winning strategy. The index IDV tracks has crushed the stock and bond markets since its creation in 1998. Over the last 15 years, this basket of global dividend-payers more than doubled the return on 30-year Treasurys. And it more than tripled the return of U.S. stocks. Importantly, this fund...

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Simon Black – Is this the best safe haven for you and your family?

[Editor’s note: Darren Kaiser, author of Sovereign Man’s Chile Property Investment Black Paper, is filling in for Simon today from Santiago, Chile.] Chile has been a pretty nice place to be over the last few years, not just to live but also as an investment destination. Anyone involved in startup businesses or real estate just about anywhere in the country over the last 3, 5, 10, even 20 years, has done quite well. But as the country becomes an increasingly popular with expats, it’s worth asking the question– is Chile’s growth and success sustainable? Or even more importantly, what happens to Chile in the event of a global economic turndown? Or a big drop in copper prices? Remember, Chile’s economy is largely resource dependent and copper is its primary export. So if there were a great economic unraveling in China (as well as in other parts of the world), it’s true that copper exports would decrease. And this would adversely affect Chile. But, unlike most other countries around the world, Chile has actually been preparing for a global economic turndown. Many years ago, the Chilean government started the Copper Stabilization Fund (now the Economic and Social Stabilization Fund) which sets aside a portion of government revenue every year when there’s a surplus and holds it as a reserve in case of a future slowdown. What a concept—saving for a rainy day. Today this fund is currently valued at $ 21.7 billion USD, about 8% of the country’s GDP. And in the case of future calamity, this cash reserve will go a long way to keep things afloat in Chile while other countries might be experiencing desperate conditions. It’s also important to point out that a large-scale global crisis would spur investors and professionals to seek international safe havens. This is where Chile shines. If major calamity strikes, Chinese, Americans, Europeans, etc. would be more motivated than ever to move their capital to a stable place where— foreigners are given the same property rights as locals property rights and the rule of law are actually well respected; and there is a surplus of fresh food and water All of this can be found here in Chile. And even with the global economy limping along as it has been, this is already starting to happen. Just a couple of weeks ago, Chile’s government announced the largest amount of Chinese investment capital ever in the country, roughly $ 1.2 billion. That’s a prodigious sum of money here, and a big indication of things to come. Every place has its issues, and Chile is far from perfect. But it definitely has a brighter...

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2014 – Helicopter Money is Coming! Jim Rickards, Currency War Update

PARTIAL TRANSCRIPT: Greetings and thank you for joining us at I’m here at the Casey Summit with Jim Rickards. He’s the author of Currency Wars. He has a new book coming out as well. What is it called? James Rickards: It’s called The Death of Money: The Coming Collapse of the International Monetary System. It’ll be out in April; April 8th is the publication date. I finished writing it about a month ago and we’re in editing. It’s a funny thing, Dan. We live in a world of what I call instant digital gratification, whether it’s YouTube or Twitter, everybody wants to put everything out there immediately, but a book is still an old-fashioned process. It takes a year to write it and edit it and bind it, so it’ll be out in April and I’ll be talking more about it between now and then. It should be very interesting because I’m sure some of your analysis will have either been proven right or proven wrong in the book, am I right? James Rickards: Well, that’s right, I mean it is forward-looking, so I say a lot of things in the book that I will be looking over in the years ahead, but sure. It’s something coming out in six months, it’ll be a good test to see how things play out. We’ll see if they play out as expected. That’s exactly right. I’ve always wondered in the dollar crisis scenario if right on the cusp of the market just melting down and going crazy that Obama and whatever Fed chairman of that time, say, next to him and they’re instituting a gold standard. Do you think it’s possible that they, right before a major crisis is about to happen, they come in and switch the currency? James Rickards: I don’t think so. I think there are several scenarios: one is that we get to a gold standard by design. In other words, people look at the system and they say that it really is not sustainable, it really is based on confidence, but we’re in the process of eroding confidence. There is no exit from quantitative easing. We should say there’s no good exit. You can back away from it, but then you’ll implode the economy in a deflationary crash. Or you can keep going and eventually cause a loss of confidence in the dollar and then have a hyper-inflationary crash, so you got a crash either way. One looks like the Great Depression, one looks like the late ’70s but worse. Those are the only two paths, but there’s no other path. There’s...

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That US debt ceiling and the Fed

Most likely, QE will have to be switched from financing the government to buying Treasuries already owned by the private sector. Any attempt to reduce the monthly addition of raw money will simply result in bond yields and then interest rates rising. And indeed, already this week we have seen yields on short-term T-bills rise in anticipation of a possible default. The market is naturally beginning to discount the possibility that the Fed may not be able to control the situation. The T-bill issue is very serious, because they are the most liquid collateral for the $ 70 trillion shadow banking system. And without the liquidity they provide securities and derivative markets, we can say that Round Two of the banking crisis could make Lehman look like a picnic in the park. This is the sort of event deflationists have long been expecting. According to their analysis there comes a point where debt liquidation is triggered and there is a dash for cash as assets collapse. But they reckon without allowing for the fact that deposits can only be encashed at the margin; otherwise they are merely transferred, and only destroyed when banks go under. This is the risk the Fed anticipates, and we can be certain it will move heaven and earth to avoid bank insolvencies. Furthermore the deflationists do not have a satisfactory argument for the effect on currency exchange rates. Iceland went through a similar deflationary event to that risked in the US today when its banking system collapsed and the currency halved overnight. Today a dollar collapse on the back of a banking crisis would also disrupt all other fiat currencies, forcing central banks to coordinate intervention to conceal the currency effect. This leaves gold as the only true reflector of loss of confidence in the dollar and therefore all other fiat currencies. Those worrying about deflation ignore the fact that it is the fiat currency that takes it on the chin while gold rises – every time without exception. This was even the experience of the 1930s, when Roosevelt suspended convertibility, increased the price of gold by 40% to $ 35 per ounce, and the banking crisis was contained. Of course there is likely to be some short-term uncertainty; but against the Fiat Money Quantity (FMQ) gold is down 30% compared with the price pre-Lehman crisis. This is shown in the chart below.   With gold at an extreme low in valuation terms, current events, whichever way they go, seem unlikely to drive it much lower. A wise man perhaps should copy the Asians, who know a thing or two about paper currencies, and...

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Dollar Sinks, Treasurys Rise

Updated Oct. 17, 2013 9:36 a.m. ET The dollar sank, U.S. Treasury prices rallied and gold shot higher after lawmakers reached a last-minute deal to avoid a U.S. debt default, as investors anticipated that lingering uncertainty in Washington would push back the Federal Reserve’s plans to wind down stimulus efforts. The 11th-hour deal struck late Wednesday in Congress will reopen the government through Jan. 15 and extend the debt ceiling through Feb. 7, allaying fears of an imminent U.S. default. But investor relief turned to concern about the 16-day fight’s toll on the world’s largest economy. Many analysts have pushed back their expectations for a reduction in Fed bond buying—once viewed as certain to begin in September—until the first quarter of 2014. In addition, investors remain wary that U.S. lawmakers will go through a similar political standoff in early 2014, further muddying the growth outlook. Confidence in continued Fed stimulus for the near term drove down the dollar and pushed up Treasury prices. The greenback hit an eight-month low against the euro, recently trading 0.8% lower at $ 1.3646. Against the Japanese yen, the dollar slid 0.9% to buy ¥97.91. The benchmark 10-year Treasury note was 12/32 higher, yielding 2.625%, according to Tradeweb. Very short-term Treasury debt, or T-bills, rallied as the risk of a near-term default was averted. The benchmark one-month T-bill yielded 0.02%, close to levels seen before the fiscal crisis heated up. The T-bill due Oct. 24 yielded 0.03%, from a multiyear peak of 0.722% Wednesday. Gold for December delivery, the most active contract, was recently up $ 34.80, or 2.7%, at $ 1,317.20 a troy ounce on the Comex division of the New York Mercantile Exchange. “It’s very hard to see how the Fed can taper in the face of a government that might shut down every three months,” said David Scott, a portfolio manager at Stone Harbor Investment Partners, which manages $ 63.1 billion of assets. The Federal Open Market Committee holds its next policy meeting later this month on Oct. 29-30. In early U.S. trade, the Dow Jones Industrial Average dropped 0.6% to 15275. On Wednesday, the Dow rallied 1.4% after Senate leaders reached a deal to raise the debt ceiling and reopen the government. The House voted Thursday evening to pass the bill, which will reopen the government through Jan. 15 and extend the debt ceiling through Feb. 7. The S&P 500 index shed 0.2% to 1718, and the Nasdaq Composite Index lost 0.2% to 3832. The Stoxx Europe 600 was down 0.3%, Germany’s DAX 30 index fell 0.8% and London’s FTSE 100 index dropped 0.3%. —Tomi Kilgore, Min Zeng, Tatyana Shumsky...

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Valuing gold

The original article shows just how unsound currency has become since the banking crisis, with FMQ appearing to be hyper-inflating from that time. This article explores the implications for the price of gold. Firstly lets look at Chart 1, the chart of FMQ.   It differs slightly from the chart in my original article, in that I have recalculated the exponential growth curve at 5.859%, which was the average annual growth rate for FMQ between 1960 and 2008 before the banking crisis. This throws up a larger gap of $ 4.5 trillion between that long-term trend and FMQ today. Therefore, FMQ is now 62% over trend. This is a massive and potentially currency-destructive development going unrecognised. But since July 2008, the month before Lehman Brothers collapsed, gold has risen from $ 918 to about $ 1270 today, which is a 38% increase. Does this illustrate that gold is broadly discounting monetary developments? The answer is no, because the question ignores the accumulating quantity of above-ground gold and more importantly the expansion of FMQ. And while both have increased over the last five years, FMQ has expanded much more rapidly than the stock of gold. The net effect is illustrated in Chart 2, where gold at $ 918 has been indexed to a base of 100 as at July 2008.   This chart shows that at Friday’s nominal price at $ 1270, gold adjusted for increased gold stocks and FMQ has actually fallen to 68, 32% down from its pre-Lehman crisis level. Of course, any value we place on gold is entirely subjective; but in coming to that view we naturally assume that the quantities involved do not change. The more sensible thing to do in forming a judgement is to take changing quantities into account, particularly when the expansion of the currency is unprecedented and appears to be out of control. Before Lehman collapsed, there was a general lack of awareness of the risk that the whole financial system was in danger. In this context, a gold price of less than $ 918 was perhaps justifiable. After the event, while the Fed struggled to stabilise the banking system, the gold price initially fell to $ 656, or to 71 on our index, reflecting fears of a deflationary collapse. As the Fed showed signs of succeeding with monetary expansion, gold began to rise and in January 2009 regained the pre-Lehman crisis level in nominal terms for the first time. It wasn’t until September 2010 that gold recovered to pre-Lehman levels in real terms deflated by both FMQ and the increased stock of gold. The conclusion is simple: gold should logically...

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Silver & Gold – Hidden Secrets Of Money 4 – The Biggest Scam In The History Of Mankind (In 7 Easy Steps)

You are about to learn one of the biggest secrets in the history of the world…it’s a secret that has huge effects for everyone who lives on this planet. Most people can feel deep down that something isn’t quite right with the world economy, but few know what it is. Gone are the days where a family can survive on just one paycheck…every day it seems that things are more and more out of control, yet only one in a million understand why. You are about to discover the system that is ultimately responsible for most of the inequality in our world today. The powers that be DO NOT want you to know about this, as this system is what has kept them at the top of the financial food-chain for the last 100 years… Learning this will change your life, because it will change the choices that you make. If enough people learn it, it will change the world…because it will change the system . For this is the biggest Hidden Secret Of Money. Never in human history have so many been plundered by so few, and it’s all accomplished through this…The Biggest Scam In The History Of...

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Simon Black – Gold, and the four words that define western economic policy

[Editor’s note: Tim Price, frequent Sovereign Man contributor and Director of Investment at PFP Wealth Management in the UK is filling in for Simon today.] Despite nearly $ 17 trillion reasons, there are investors stupid enough to believe that debt issued by the world’s largest debtor country (i.e. US Treasuries) should be treated as a risk-free asset. This is even more astounding given that the possibility of formal default is only a matter of days away. Treasury bond defenders will no doubt point out that in a fiat currency world where the central bank has the freedom to print ex nihilo money to its heart’s content, the very idea of default is absurd. But that is to confuse nominal returns with real ones. Yes, the Fed can expand its balance sheet indefinitely beyond the $ 3 trillion they have already conjured out of nowhere. The world need not fear a shortage of dollars. But in real terms, that’s precisely the point. The Fed can control the supply of dollars, but it cannot control their value on the foreign exchanges. The only reason that US QE hasn’t led to a dramatic erosion in the value of the dollar is that every other major economic bloc is up to the same tricks. This makes the rational analysis of international investments virtually impossible. It is also why we own gold – because it is a currency that cannot be printed by the Fed or anybody else. On the topic of gold, the indefatigable Ronni Stoeferle of Incrementum in Liechtenstein has published his latest magisterial gold chartbook. Set against the correction in the gold price 1974-1976, the current sell-off (September 2011 – TBD) is nothing new. The question is really whether financial and debt circumstances today are better than they were in the 1970s. We would suggest that debt fundamentals are objectively worse. Trying to establish a fair price for gold is obviously difficult, but treating it as a commodity like any other suggests that the current sell-off is not markedly different from any previous correction during its bull run: To cut to the chase, it makes sense to own gold because currencies are being printed to destruction; the long-term downtrend in paper money (as expressed in terms of gold) remains absolutely intact: And we cannot discuss the merits of gold as money insurance over the medium term without acknowledging the scale of the problem in (US) government debt, now closing in on $ 17 trillion. Whatever happens in the absurd and increasingly dangerous debate over raising the US debt ceiling, the fundamental problem remains throughout the western economic system. The piper must,...

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