Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason
Coming up we’ll hear another tremendous interview with Gerald Celente of the Trends Research Institute and the Trends Journal. Gerald weighs in on how to play the Trump card, the chaos that’s brewing in the Euro Zone and gives us his thoughts on gold and where it’s heading. Don’t miss my conversation with Gerald Celente, one of the top trend forecasters in the world and a man who doesn’t pull any punches, coming up after this week’s market update.
Precious metals markets continued marching higher this week in spite of a stronger U.S. dollar. The Dollar Index pushed back above the 100 level and is headed for its first weekly advance of the year.
Neither the dollar rally nor the mid week oil inventory report showing a massive supply buildup in crude caused much damage in raw materials markets. Crude oil prices actually recovered off their lows following the bearish inventory report, which traders seemed to have already been pricing in. Over the last two months, oil has been locked into a tight trading range between $51 and $54 per barrel. A strong breakout higher would have inflationary implications for the economy. But a breakdown back below $50 could generate disinflationary ripples and cause the Fed to rethink the need for rate hikes.
As for the precious metals markets, gold prices are up 0.7% this week to trade at $1,230 an ounce. Silver checks in at $17.92 per ounce and is posting a 1.8% gain on the week. Platinum is down a bit today and is now in negative territory for the week, although just slightly, and is currently down 0.4% since last Friday’s close, while its sister metal palladium is surging again and is up 4.5% now on the week.
The big moves for investors so far this year have been in metals, but the big headlines continue to be generated by the stock market and the White House.
The major U.S. stock market averages rallied to new highs Thursday on renewed optimism for tax cuts. President Donald Trump promised he would put forth a bold tax cut package in the weeks ahead. This, after some establishment Republicans in Congress had indicated that they’d rather not get to work on tax relief until 2018 or maybe never. Some of the same GOP politicians who are less than enthusiastic about lowering America’s tax burden are now also talking about putting band aids on Obamacare rather than repealing and replacing it.
Monetary reform proponent Steve Forbes, who was a guest expert on our Money Metals podcast last year, delivered some pointed words this week to Congressional Republicans.
Steve Forbes: Already now, they're backing off on healthcare. They're backing off on the tax thing. They don't get something done soon, they're going to be in big trouble economically and politically especially in 2018. They could lose the House if they botch this thing on taxes.
Even if they pass the tax cut late in the year, if they make it retroactive to January 1st, that'll give them, that'll cover a lot of sins.
Perhaps Republican voters will be able to whip their members of Congress into shape on this issue. But there’s no guarantee that a tax reform bill will get signed in time for taxpayers to see any relief on this year’s taxes.
Among the many problems with the current tax code and its thousands of pages of impenetrable legalese, is that it discriminates against precious metals investors. Stocks, bonds, and most other financial assets that are held for more than one year are subject to favorable long-term capital gains treatment. Gold and silver bullion, on the other hand, get taxed at the so-called “collectibles” rate of 28%.
Until the arbitrary and unfavorable tax treatment of gains on physical precious metals is ended – something that groups like the Sound Money Defense League are working to do – an IRA can help you avoid it. Holding physical bullion coins, rounds, and bars within a self-directed IRA means your gains are sheltered from taxation. When the time comes, you could sell your bullion for cash within the retirement account, owe no taxes on the gains, and reinvest in stocks or other assets if you wish. Or you could begin taking distributions in cash. You could also choose to never sell and instead take distributions in the form of the bullion you hold in your IRA. That way you’re never in paper assets!
As with any IRA, the distributions themselves may be taxable unless they’re from a Roth IRA. But you incur no collectibles tax on any selling of precious metals that is done within an IRA of any type.
If you’re interested in setting up a precious metals IRA, a Money Metals Exchange specialist can help guide you through the process. Just give us a call at 1-800-800-1865 to get started. Or visit the IRA section of our website to learn more about how they work.
Well now, without further delay, let’s get right to this week’s exclusive interview.
Mike Gleason: It is my privilege now to welcome in Gerald Celente, Publisher of the renowned Trends Journal.
Mr. Celente is a highly sought after guest on news programs throughout the world and has been forecasting some of the biggest and most important trends before they happen for more than 30 years now, and it's always an honor to have him on with us.
Mr. Celente, welcome back and thanks so much for joining us again.
Gerald Celente: Thank you, Mike.
Mike Gleason: The last time we had you on, Gerald, was the week before the election. To start off, give us your thoughts on how the first few weeks of the Donald Trump Administration have gone in your view, and have you zeroed in on any trends that you see as being likely with this new presidency?
Gerald Celente: As you know, we had forecasted him to be the winner in May of 2016 in our Trends Journal. The biggest surprise, of course, was that when you look at the facts and the facts are that Wall Street was very pro-Clinton, even to the extent when you go the weekend before election day back in November, the FBI, when they said they weren't going to go any further with looking into Clinton possible misdeeds and mishaps and missteps, you saw the markets open on Monday up 371 points on the expectation that Hillary Clinton would win. And then we know what happened on election night when the polls started showing that Donald Trump would win. We saw the Dow futures go down over 800 points and gold spike over $50 on the expectation that Trump would win.
Then all of a sudden, the next day, everything changed. Here we are. The NASDAQ, the Dow, the S&P, they're all at record highs. So what happened?
The business of America is now business. The business of America has been politics for a lot of years. Again, we're political atheists. We call things the way we see them. It's not what we like, what we want, what we wish for. It's what is. You have a lot of positive expectations coming out of Wall Street, and the consumer society. These are facts.
For example, the spike in the Dow from election day to New Year's Day was the largest we have seen since Dwight D. Eisenhower got elected in 1952. Small business confidence in December spiked to the highest level it did since 1980. So, who got elected in 1980? Ronald Reagan. What went on before Ronald Reagan? You remember the Iran hostage crisis and stagflation?
What we're saying is the trend is your friend, and follow it for what it is. We're looking at the Trump Administration on one that is positive for business with his deregulations. Again, whether you agree with them or not, we're just saying what is. And there’s certainly some of the deregulations that I don't agree with, but it's what is. The deregulation and particularly in the financial sector, and also we're looking at tax cuts, and we're looking at infrastructure build-up. So, those are positive elements for business, and of course also the bringing (of) jobs back to the United States. That's what's driving the market.
On the other hand, when we had forecasted Trump would be a winner, we said the only way he could lose is a wild card, because as trend forecasts, we always say, no one can predict the future. There are wild cards. And we also say there's no wilder card than Donald Trump himself. So, he has the ability to juice the market and to kill the market with what he does, says, and by his actions.
Mike Gleason: Furthering the point here, many of our customers are more optimistic about the future since Trump's election. And there are reasons to be hopeful, as you mentioned. He's talking about lower taxes. He implemented a hiring freeze across several abusive federal agencies. He wants to avoid going to war with Russia. He has forwarded what appears to be a good candidate for the Supreme Court. However, it's increasingly clear the Republican congress is going to drag their feet on tax reform. They've already been waffling on a repeal of Obamacare. People like John McCain and Lindsey Graham have been criticizing Trump's less bellicose posture towards Russia. Now we aren't surprised Republicans in congress have been giving little more than lip service to limited government for decades now. So given that situation, what do you think people can realistically expect in the way of reforms?
Gerald Celente: Think of the names that you mention. Lindsey Graham and John McCain. They don't count. (Mitch) McConnell doesn't count. Paul Ryan doesn't count. Go back to less than a month before the election. They weren't supporting Trump. There is no Republican Party. It's the Trump Party. Trump's in charge, has two years to do what he wants. They'll all fall in line.
As for the rhetoric, for example, you mentioned about pro-Russian stance and the anti-sentiment that he's getting from Congress. Let's flip that over and while we're concerned about, on one aspect, he talks about making peace with Russia. Non-intervention.
Then there's the Iranian issue. Going out and hearing the new Defense Secretary James Mattis saying Iran was, quote, "the single biggest state sponsor of terrorism in the world." That's just a lot of BS. Iran hasn't attacked a country in over 200 years. Yeah, they're in Syria because they were invited there by the government. The government that Obama and Clinton and the others didn't want, but that doesn't make them a terrorist nation.
Oh, yeah, they're supporting Hezbollah. Well, Hezbollah's in Lebanon and they've been fighting against the Israeli occupation and they almost destroyed the joint. Hezbollah's not a terrorist organization by a lot of nations around the world.
So this is what we're saying, Michael, is that this is what's destabilizing the markets. It's these two extreme cases. Going back to tax reform and whatever Trump is going to, he's going to get it all. These guys are going to collapse like little boys because I think when Paul Ryan isn't playing Speaker of the House, this little nobody of nothing ... I think he used to be Eddie Munster on the Munsters. There's nobody there. There's nobody in the Democratic party. There's nothing there. That's why Trump won.
That's one of our top trends coming out with our new Trends Journal. “Play the Trump card.” Trump didn't only defeat Hillary Clinton, he beat Obama. Obama campaigned more than any sitting President for a candidate in the party. Never saw anything like it. "Folks, my legacy depends on it." And the folks told him what to do with it because he didn't only lose the presidency, they lost the House, they lost the Senate, and they lost state houses across the nation in unprecedented numbers.
He beat Hollywood. He beat the Katzenbergs, the Spielbergs. He beat the Deniros. He beat the Clooneys. He beat the Beyonces. He beat the Jay-Zs. He beat Silicon Valley. We're telling people there's nothing there. You can make your future. Trump just showed it.
You got a product? Stamp that thing "Made with Pride in America" and take out the top. You want to make sneakers? You go after Phil Knight up in Oregon and say "This guy is selling out the nation, getting his product made in slave labor countries."
Just like Trump took out the top with Jeb Bush at the first presidential debate in the Republican party. So, what we're saying, Mike, is there are a lot of conflicts, but there are a lot of directions. We're telling people is to look past what you like, what you wish, what you want, what you think, and look at what is because there's never been a what-is opportunity like we see it now.
Mike Gleason: Speaking of playing that Trump card, one of the things that Trump has been talking about from day one is to make America great again by bringing manufacturing jobs back to the U.S. In terms of the ramifications to the currency markets, you have to think that the fed is going to need to be ultra-accommodative and keep interest rates low because it's going to be very difficult to get the manufacturing sector going if we have a strong dollar. So it looks to us that cheap money, inflation, and interest rates are going to persist here, Gerald, but how do you see it?
Gerald Celente: Yes. Again, the Fed is caught in a trap because if the economy continues to pick up, if they start spending more stimulus money, if inflation starts increasing, the Fed is going to be forced to raise interest rates, and it's unprecedented that we have them this low. We've never seen anything like this in the history of the world, part one or part two.
So, there's going to be a rise in interest rates, but then what happens is we are seeing what's going on. You're seeing the dollar pulling back a little bit now, but look what's going on in China. Here's Trump where he's 100% wrong, blaming China, for example, for manipulating their currency, the yuan, and driving it down purposely so they could export more product. Their exports are down. Their yuan is getting crushed. They have capital outflows that they cannot stop. You're looking at the Chinese forex reserves continuing to shrink, falling for seven consecutive months. Down below that psychologically key three trillion-dollar level.
You're seeing, by the way, Bitcoin also being boosted because the people in China see their currency being devalued and they're buying gold and Bitcoins as a safe haven. Again, we don't know where Bitcoin is going because any government could regulate that. But as we're looking at gold, it's bigger than the United States. The only reason the United States dollar, as we see it, is strong is because so many of these other currencies are so weak.
Take a trip to Mexico. Go over to Turkey. You're seeing one currency after another collapsing and some of them are regaining the strength, but the weakness is paramount. It's in front of everybody's eyes, and when you see the world's second largest economy, such as China, fighting to keep the capital outflows from stopping ... China last year scrapped over $75 billion in foreign transactions trying to stem the currency outflows.
The United States is caught in a trap here, and you pointed it out. If they raise interest rates, the manufacturers, who are they going to sell to? If they don't raise interest rates, we've got this Ponzi scheme that keeps going and building because you know that's the only reason the equity markets ever gained any strength with stock buybacks and merger and acquisition activity.
Mike Gleason: One of the key drivers for higher gold prices is negative real interest rates. We could be seeing that throughout the globe. Obviously not just here in the U.S., but globally, as you mentioned, with a lot of the problems with the currencies. If we see these inflationary pressures continuing, does it make the yellow metal look good? Basically, how are you viewing precious metals here, Gerald, over the near and medium term?
Gerald Celente: Again, we do not give financial advice. I want to make that very clear. We're trend forecasters. Here's our forecast.
Gold still has a downside risk if they start raising interest rates. The stronger the dollar gets the lower gold goes. But again, we're looking at a global economy.
Now, I mentioned about what's going on with the currency problems around the world. If you were in China, what would you rather own: gold or yuan? If you were in Turkey, would you rather have lira or gold? Or if you're in Mexico? Now the crisis is also building in Europe with the euro. We're going to see a default coming in Greece. They're even talking about them finally pulling out of the European Union.
Now we're looking at also the elections going on in Italy, in Netherlands, in Germany, in France, with the populist parties talking about pulling out of the euro zone and pulling out of the euro. If that happens, gold goes through the roof.
Our downside risk of gold, as we see it, is about $100 to $150 dollars, which is very small downside. The upside potential is well over $2,000. But our forecast for it to go to $2,000 is that first is has to stabilize strongly and solidly over $1,400... $1,480, $1,460, $1,440, that kind of thing – keep going back and forth, and then it's a hit toward $2,000. But again, there are also pressures now, particularly a strong dollar that could weigh against gold, and then we have to look globally again, and let's look at the geopolitical situation.
It's only heating up in Ukraine. That place is ready to explode. In Israel, they just passed a law where they can now expropriate Palestinian land. They're also building some 4,000 settlements on occupied territory. Again, it's not what you like, what you wish, who you support. Nothing to do with that. It's against international law. You're going to start seeing real blow-backs start to happen.
We're looking at the Middle East. There's no end in sight in the Afghan war. As a matter of fact, the United States' territory went from having their government that the United States support controlling 72% of Afghanistan. It's now down to 56%. Iraq is up for grabs. So, what we're saying is we have to look beyond the economic fundamentals and look at the entire geo-economic and geopolitical situation, and when we look at that, we say that there is no safer safe haven than gold.
Mike Gleason: Getting back to Europe here, 2017 is shaping up to be another year where events in Europe dominate the headlines. Last year we had Brexit. This year, a number of other nations will be voting… you alluded that a moment ago. There's big ramifications there for the future of the EU. France and Germany are among the nations with important elections coming up soon. Should either of those two nations select a leader who is opposed to membership in the European Union, it would very likely spell the end of that political experiment and the euro currency. And it looks like anti-EU candidates have the momentum now.
Now I know you've been watching events in Europe closely for a long time. What are you expecting to happen there, Gerald?
Gerald Celente: It's still a toss-up in France. Marine Le Pen's party, the National Front, the anti-euro, anti-European Union party, they'll win the first round, but will they win the second round? It's up for grabs. It's getting closer because the Establishment candidate, Francois Fillon, he was going to be the clear winner, but they found out and they've been reporting that he gave his wife and kids, when he was Prime Minister and other positions, over almost a million dollars in no-show jobs. So he's out.
There's also Italy, with the Five Star movement. And they just threw out Renzi and they're going to have an election over there. The Italians have had it, too. They don't want the euro. They're tired of it.
Germany, as well, and Netherlands ... There's a reality that the end of the euro is going to come sooner rather than later. When that comes, there's going to be massive destabilization, and of course, the Brexit movement continues to move forward on the currency ends. Again, gold is going to be the safe haven asset.
Having said that, you're also going to see countries trying to do everything they can to drive down the prices, particularly India, which they're already doing with all the taxes and restraints that they have, and China, trying to make it harder to buy gold. That's why a lot of people are moving into Bitcoin. Again, we're not bullish on Bitcoin simply because it could be manipulated very easily and very quickly by any government.
Then going back to gold. When gold prices start to really spike, you're going to start seeing the governments coming in and doing massive short sales in the paper market trying to drive down the price. There's no question about it, because what's going on now is the ultimate threat to fiat currencies. They're digital currencies not worth the paper they're not printed on.
It's not going to be straight run up. However, having said that, when it all comes down, there's going to be, again, no safer haven than being in gold. No commodity, no currency is going to be worth more than gold as we see it.
Mike Gleason: There seems to be growing social unrest in the U.S. and around the globe. What's behind it? Will it continue? And where is this all leading, Gerald?
Gerald Celente: What's behind it are people are tired of getting shafted. We talked earlier about the trade deals. The fact of the matter is, what are we going on, 23 years with negative trade deficits with Mexico? We used to have positive trade deficits from positive trade before NAFTA. It's not working.
The people are tired of having service sector jobs that don't pay standard of living wages. I'm not making that up. I'll give you an example.
In the United States, 51% of the people at full time jobs are earning less than $30,000 a year. Here's another fact. Obama brags, "Folks, I created over 10 million jobs." You're right. You did. Now let's look at the Harvard-Princeton study that come out and showed that 94% of those jobs are temporary jobs.
What's going on is the unrest is that people are tired of getting shafted by globalization, multi-nationalization, and centralized governments. That's what's going on in Europe, and that's what's starting to happen in the United States.
You see, Trump ... It's not the messenger, it's the message. If there was a different messenger than him, they would've creamed Clinton. He won, as we said, despite him being the wildest of wild cards. How many times did he almost kill his candidacy? It's the message and the message is people are tired of getting shafted.
I mentioned about Fillon in France. That's not the exception, it's the rule where you have all these little clowns, these little boys of nothing, that are running governments that take care of their own and shaft everybody else. That's what's going on in Italy. They're tired of the corruption, and it's going on in the United States.
Again, going back, there is no Democratic and Republican party. They're a little bunch of nobodies. Who do you have? I mentioned the names. Mitch McConnell, Lindsey Graham, Paul Ryan. Not a man among them. Look at the Democrats. Little Chucky Schumer. A little bunch of cry-baby nobodies. Diane not-so-Feinstein. A bunch of losers.
Play the Trump card. Look at what it is. Create your own future. There's never been a better time than now, and we're going to be highlighting a lot of this in the new Trends Journal.
Mike Gleason: Well, outstanding stuff, Mr. Celente. Thanks so much for joining us again. You've always been a great guest and we love having you on. I appreciate your candid insights as usual.
Now before we let you go, as we always do, please let folks know how they can get their hands on the tremendous information you put out both online and with the Trends Journal magazine, as well as anything else that's going on there at the Trends Research Institute… including a conference and retreat that you're doing in Ireland in a few months. Talk about that as well.
Gerald Celente: Yeah, that's right. We have one in Ireland, and you can find out more, of course, by going to our website, TrendsResearch.com. Besides the conferences, of course, we have the Trends Journal, the quarterly. A Trends monthly. A Trend alert each week. Trends in the News broadcasts each weekday night. Also, we're going to be opening up the Trends Journal in India. Very big launch coming up. As you mentioned, we have the conference in Ireland. If you want to find out more about that, go to TrendsConferences.com. And you can find out more about that.
Thank you so much for having me on your show and for all that you do.
Mike Gleason: Likewise, and thanks for coming on. Excellent stuff. Hope we can catch up before long as we continue to sift through what appears to be shaping up to be a very tumultuous year around the globe, and ultimately what it will mean for precious metals investors.
Thanks again, Mr. Celente, for being so generous with your time and I hope you have a great weekend.
Gerald Celente: Thank you.
Mike Gleason: Well that will do it for this week. Our sincere thanks to Gerald Celente, Publisher of the renowned Trends Journal. For more information, the website again is TrendsResearch.com. Be sure to check that out.
About the Author:
Mike Gleason is a Director with Money Metals Exchange, a precious metals dealer recently named "Best in the USA" by an independent global ratings group. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.