Europe Legalises Theft!!!

Your Bank Deposits (and possibly your pension) are unsafe!!

Prior to me addressing the seriousness of the Eurozone debt situation and its consequences for Eurozone economies, I would like to start by pointing out (on a lighter more humorous tone) that the manner in which 'Germany's Eurozone' has dealt with the current situation reminds me of a Harry Enfield comical sketch of the methods of the Amsterdam Police's solution to deal with theft and prostitution - legalize them!!! It appears Germany has done a similar deed!! Legalized theft.

http://www.youtube.com/watch?v=IRfluaMKoOY

Firstly I should point out that the decision (I feel largely made by Germany with their own agenda at hand) made by the Eurozone to Tax or perhaps more appropriately seize 10-45% of Bank account assets in Cyprus has opened up a door the Eurozone has no prospect of closing!

The ‘United States of Europe’ and its suprationalist bodies have always prided the protection of Eurozone bank deposits and economic security of its citizens. Well, as a result of complete desperation and outright bullying, these principles have been abandoned altogether.

This raises a pertinent question for another discussion-what impact will this have for potential investors outside of Europe and their view of Europe as an investment.

The fact now presents itself in clear and esoteric format - Bank deposits in European Banks and even Pensions are not safe!  The Fact that the nationalizing of pensions in Cyprus was considered as a solution to plugging their debt suggests all that glistens in EUROPE and its glowing FTSE 100 at 6283 is indeed not GOLD!

It is in fact far from it. The solution to the Greek debt problem was to print more debt by allowing Greece to sell Treasury notes with a very high yield! I think we all agree the situation was not ideal but at least those that ‘bought’ the debt knew the risks! Admittedly Greek national debt has gone down by 12% from 2012-2013. The Eurozone response to the Cyprus bailout has been nothing short of insane! Demanding the theft of bank deposits and cashpoint withdrawal limits, temporary freezing of accounts! Is this what it takes to hold Europe together?

The consequences of the Cyprus bailout terms will have dire consequences for the Eurozone. Not only will more debt need to be created through the sale of treasury notes –no doubt at a yield worryingly near to the 4% danger level, but personal assets of Cypriot citizens will be appropriated /stolen by Angela Merkel-the wolf in sheep’s clothing!

Politicians and spin-doctors will spend the forthcoming weeks reassuring European citizens that the Cypriot situation was a unique one, but in reality this sets a precedent for Europe. Not only are European bank assets (and possibly pensions if you take the discussions of their nationalization seriously) unsafe, but its promises to protect EU savings/deposits can be now be manipulated and even sidestepped for what euro politicians term ‘the greater good’-of Europe of course! (In reality the greater good of the bigger powers in Europe such as Germany).

That leads me to another point. Those who have an avid and deep understanding of European politics will perhaps wonder why I have so far substituted the term Supranationalist for Euro politicians. This is because I feel this decision and new direction of Europe has actually been decided largely by Germany and not the Supranationalist body of Europe as a whole! The ‘Good of Europe’ in the whole was not the focal point of the EU meetings and discussions. Germany has pushed and pushed that European solidarity is the only answer but is doing it by feeding an increasingly poisonous and lethal pill of austerity to weaker nations. I am sure I am not the only one starting to see here that the supposed ‘European solidarity objective’ is now becoming (rather swiftly) a chance for powerful Eurozone countries (mainly Germany here) to push their own agenda and self-benefit! All this talk of illicit money transfers into Cyprus, and it being responsible for sheltering Russian Mob money should have been discussed before Cyprus entered Europe not simply when things go wrong! Germany’s ‘ranting’ and pointing of its finger at Cyprus for having a failing system is really a reference to the low corporation tax/income tax of 10%. We have heard this before with France and the UK pointing their finger at Ireland for offering a 12.5% corporation tax as their reason for ‘failure’. In reality Germany is using Cyprus as a way to steal Russian funds-frankly stealing from an economy far more healthy and superior to theirs. Take a look at Russia’s debt to GDP ratio of 8.2% compared to that of Germany’s 83%! (A lower % indicates a country is able to repay its debt-a healthy figure is around 30%).

Compare the national debts of 2.7 trillion (Germany) to 171 billion(Russia) and it appears if anyone should be pointing fingers it should be RUSSIA toward the direction of Germany, who seems to have used political expediency and EUROPEAN SOLIDARITY as an excuse to steal funds from Wealthy Russians! Germany’s argument that the funds are ‘dirty’ and that of mobsters does not justify it. That would be like suggesting it is ok to steal from someone if that person is a thief! Imagine the consequences of such a precedent. Well, this is exactly what has just been created!

Fact-It is not the low corporation tax or tax haven status here that is to blame. Tax havens have always existed as part of both economic booms and recessions! The Blame should be on a ludicrous attempt to unite an entire group of extremely economically different nations!

Furthermore, are The UK, French and German economies really in a position to be pointing fingers when their national debts stand at 1.7trillion (UK) 1.8Trillion (France) 2.2 Trillion (Germany). All three countries hold debt-GDP ratios far above/worse than the healthy level of 30% (the UK is a dazzling 92%).

One must add that Cyprus and other weaker economies in Europe have neither benefitted from Europe growth wise. Many have in fact seen 10 years of negative economic growth!!!!! Perhaps us being friends armed with economic free trade agreements and the occasional exchange of information agreements was enough. This ‘Eurozone Marriage’ is looking already like the seeds for a nasty and bitter divorce!

E.g. take for example Norway and Switzerland. Although clearly ‘friends of Europe’ trade wise and co-operate fully, they are not part of the Eurozone or the EEA. They are by far the superior economies of Europe. Clearly European friendship seems to have worked better here than marriage!

What once was viewed as a United States of Europe (perhaps slightly socialist) which held common values and moral against such wrongs as theft and human rights violations has turned into a situation that sounds like something Saddam Hussein or  Muammar al-Gaddafi would have thought up. I can indeed imagine Saddam or Gaddafi stealing their people’s bank deposits for the ‘greater good’.

Those who read our last article ‘gold the good, the bad and the ugly’ would have noticed that shortly after we saw an increase in volume of gold trading and the FTSE decrease in value. I think by now most savvy investors and those who see there is a lot going on behind the scenes have already invested heavily into Gold and/or other precious metals. Those stubborn enough to maintain their belief in the paper currency debt financed system frequently ask me where I see gold in 3-6months. Ok well rather than me preaching like your stockbroker preaches his latest ETF or ‘fund’ that has been put together by an old boys network of ‘Eton educated fellows’, I will present you with the raw economic data (explained of course) that will enable you to see things from an aerial perspective, and not the one the media wants you to see for e.g. 

The FTSE is undervalued BUY! The economy is well en route to recovery!

As you will see below from viewing the graphs that illustrate the price of gold since 2005 there is a very clear pattern that the simplest of individual could spot - yet is being overlooked by many analysts at the big banks who tend to favour debt and leverage over simple common sense!

When looking at the price of gold since 2005 one can clearly see a 21-22 month cycle 4 times each time with it arriving strikingly near to cue! (So near that it would jump up and bite you if it indeed had teeth)

The cycle runs from spike to spike, resulting in four peaks on the following dates as per the London PM FIX.

May 12^th, 2006 (at $725 an ounce)

March 17^th, 2008 (at $1,011.25 an ounce)

December 2^nd, 2009 (at $1,212.50 an ounce)

September 6^th, 2011 (at $1,895 an ounce)

Do you see clearly now the rain has gone? Clearly there is a pattern in the spacing from peak to peak! They are 22, 21, and 21 months apart; right on cue, as indicated on the following graph of the SPDR Gold Trust ETF (NYSE: GLD):

Of course, there are noticeably secondary price peaks all the way up-nothing goes up in a straight line, but these above are by far the most prominent and are consequently followed by the most severe corrections.

If the above data is anything more than a co-incidence-then logic would suggest we repeat the pattern. I.E count 21-22 months from the last peak of September 2011, this takes us to June 2013!!

Furthermore, the graph clearly illustrates that each consecutive peak is higher than the last, leading me to suggest the next peak in June to be higher than the $1,895 PM fixed high of 2011!

If we actually dig deeper, and dig deeper we shall, yet more patterns emerge that further indicate evidence of a bull rally for my favourite yellow metal!

If we take a look at the time it took for these new peaks to begin mounting their final leg to each top we see another pattern.  Below, the graph illustrates, each of the four peaks (in red) had a running start ranging from two to five months prior (in green).

Source: BigChart.com

Well, we earlier mustered up the nerve or perhaps curiosity to count 21 months forward to arrive at June, 2013 for the next peak. Why not go all the way and count back two to five months from there

If this cycle repeats itself for a fifth consecutive time, the next spike up in gold should begin no later than this coming April, and possibly as soon as any day now. This trend will continue and Gold will continue to increase in value despite the mathematically certain eventual collapse of the USD. The question is, at what price are you going to get involved in the only real protection against collapse - PHYSICAL GOLD.

By Simon J Thomas LL.B (Hons)

Head of Research/Trading Analysis

PM Trading (Europe) Ltd.

T:            +44 203 137 2691

E:            simon.thomas@pm-trading.eu
W:           www.pm-trading.eu

Buying Gold - The Good, The Bad and The Ugly

Firstly, one must distinguish between owning physical gold and paper gold. Many banks and institutions and even funds will offer investment options whereby one can ‘own’ gold at the spot price. Subsequently, the value of your ‘gold’ account would increase alongside the value of the spot price, likewise it would decrease in value with a 5% decrease in the spot price.

This kind of ownership can be enticing to some as this obviously bypasses a number of factors such as the 1‐3% premium paid to the broker for buying physical gold and of course the cost of actually storing the physical gold safely.

The danger of course with this investment in paper or perhaps more appropriately ‘illusory gold’ is that in the event of the bank running into difficulties, then the value of your ‘gold’ would not be honoured and your investment would be lost! This scenario should not be ruled out in light of banking collapse such as Lehman Brothers, Merrill Lynch and of course Bear Stearns in the U.S.

Another Alternative to buying gold and perhaps the most popular with the masses is via ‘shares’. Of course we can quote many success stories here such as RIO TINTO, BHP BILLITON and hundreds more. Buying shares in the correct gold mining entity can in fact yield extremely high % returns even over a short timeframe, although it does not come without its obvious risks.

Firstly, a successful investment into gold mining shares relies not just on the increase in the price of gold, but heavily on the continued success and strategic functioning of the management. If something goes wrong at the higher level of management this could have dire consequences for the share price. Furthermore, mining shares trading on an index such as the FTSE100 or the DWJ IND AVG can also be dragged down by other negative or external stimulus not specific to the price of gold or their internal functioning. In general, it is safe to say that investing in mining shares can indeed have more upside potential than physical gold, but carries with it far more variables, and consequently is far higher risk.

Finally, last but not least‐the ownership of physical gold bullion. Whilst unattractive to the masses as it requires cost of storage, arrangement of delivery and obviously more than ‘a click of a button’ to sell, this is in fact the ONLY true protection against inflation, economic volatility and frankly another market collapse.

If we put politics and stockbroker ‘chit chat’ to one side we see the cold raw facts. 1‐Gold bullion has risen by 500% over the past 10 years, and has increased in value every year without exception for 10 years. Furthermore, countries such as China, Russia, India, Italy, France, USA (supposedly), Philippines, Indonesia, Azerbaijan are all currently buying, In fact stockpiling gold. Yet the FTSE 100 has rallied to 6530 points‐just 202 points shy of where it was in 2007 (6732) prior to the banking collapse that claimed the lives of Lehman bro’s, Merrill Lynch, Bear Stearns and resulted in effectively doubling  the US national debt.

To say the least, it is interesting to note that the powers that be seem to be buying gold (albeit relatively cheap gold at 1600USD troy ounce) whilst speculators are buying the FTSE100 (even after Britain lost its AAA credit rating a mere 4 weeks ago!

Yet, I must re‐iterate, the above is merely a string of fairly logical observations. If we believe the media, the game is over for Gold the European and US economies are well on the way to recovery and we can all get back to normal‐take on more debt, mortgage what we can’t afford, and of course buy up shares in the ‘phantom’ FTSE100 Bull rally! What I cannot grasp however are their reasons for such claims!

Again the facts speak for themselves. The current UK national debt is 2.2 TRILLION USD an increase of 10% from last year. Unemployment is still approx. 7.7 % (2.2% higher than 2007). Interest rates are still 0.5% with banks failing to pass on these rates to buyers!

Furthermore, the National debt of the UK compared to GBP Is 91%! This means that 91% of all income from UK goods and services comes from debt (creation of debt‐borrowing). 30% is considered a healthy amount and indicates a country can pay its future debt from its good and services/revenues. For example Russia is 8.2% Australia is 27%, china is 16% and the USA is 75%. This means the only possible way for the US and UK to ‘survive’ economically next year, and the year after, is to create even more debt! 

When viewing these statistics in addition to the fact that nations seem to be mass buying gold it does far more than merely suggest that things are about to change‐and change rapidly indeed!

On the contrary of course if we listen to the politicians (and many FTSE investors seem to be doing just that) then there are in the words of the great Benjamin Disraeli ‘lies, damn lies and statistics’.  This seems to be the current avoidance of reality of attitude we are seeing primarily in the US and UK.  Of course Mario Draghi and Germany are doing everything to keep Europe united and will continue to feed the ‘weaker’ countries such as Greece, Portugal, Spain, Ireland, the pill of austerity until at which time their insanely high taxes force the people to vote a government that vows to take their country out of Europe! Then we have the domino effect and we effectively go back perhaps 10 or even 20 years. To the time where Spain/Portugal/Greece were cheap holiday destinations and they derived their income from just that (as well as perhaps oranges).  

The million dollar question (not that I like to even use the word dollar) is when will this happen? 

This is difficult to say, but it seems apparent that certain European countries are getting ready for this potential or in fact inevitable scenario, by buying up gold, or in Germany’s case demanding their gold back from fort KNOX USA, and ensuring the public that the stock market and European supranationalism is still the path to the American dream!

by David Carter & Simon J Thomas

PM Trading (Europe) Ltd.

T:   +44 203 137 2691

E:   info@pm‐trading.eu 

W:  www.pm-trading.eu