launch rocket verticalAfter QE was unveiled in 2008, Western investors began to buy gold and related items with aggression. They believed that the Fed’s QE program would dramatically increase the money supply.  They were correct.
Unfortunately, these investors didn’t understand that if a huge money supply has declining velocity, there is no meaningful price inflation created, at least in the short term.
By 2013, mainstream reports showed that inflation had still failed to materialize. Demoralized QE-focused investors began to liquidate their gold and related holdings, and booked substantial losses. 
Did they give up just as money velocity is about to reverse the downtrend?

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1.   The Western super-crisis entered a lull period in 2013, and surging economic growth in America has become the main focus of most mainstream analysts.

2.   The stock market tends to lead the economy by about six months, so it’s likely that much of US economic growth in 2014 is already priced into the Dow.

3.   For the long term, I would focus more on Asian stock markets than Western markets, partly because population demographics show that the West has an ageing population, while most Asians are relatively young.

4.   Please click here now. While the US stock market is being carried higher by fewer and fewer stocks, the Chinese stock market (using the FXI-nyse proxy) appears to be verging on an upside breakout from an enormous symmetrical triangle pattern.

5.   While I’m totally out of the American Dow, I do own the Chinese market. I’m a buyer of more FXI on every 50 cent decline, using my “PGEN” (systematic risk capital allocator).

6.   Please click here now. After QE was unveiled in 2008, Western investors began to buy gold and related items with aggression. They believed that the Fed’s QE program would dramatically increase the money supply. As you can see from this chart, they were correct.

7.   Unfortunately, these investors didn’t understand that if a huge money supply has declining velocity, there is no meaningful inflation created, at least in the short term.

8.   By 2013, mainstream reports showed that inflation had still failed to materialize. Demoralized QE-focused investors began to liquidate their gold and related holdings, and booked substantial losses.

9.   Did they give up just as money velocity is about to reverse the downtrend? I think so. Please click here now. This M2 velocity chart shows the long term money velocity story; as the public surged into the stock market in the late 1990s, corporate executives began hoarding cash, and they have continued to do so.

10.           “For at least a decade and a half, cash has progressively increased its share of the American corporate balance sheet, to the point where U.S. quoted companies have turned into the Scrooges of the global economy…. Such is the scale of this cash pile that the U.S. corporate sector must have been partly responsible for the surge in demand for safe assets and the decline in interest rates that fueled the U.S. housing bubble.” – John Pender, Financial Times, December 31, 2013.

11.           Powerful investors like Carl Icahn are suddenly putting a lot of pressure on companies, to put their hoarded cash to work. I believe that corporate profit gains from cost cutting are peaking, and further gains will only come by increasing revenues.

12.           The probability of a turn up in money velocity in 2014 is growing, because corporate spending is likely to grow. Please click here now. This M1 velocity chart shows the collapse in velocity that has occurred since the QE program began.

13.           QE tapering will force investors to move away from mortgage securities and T-bonds. They will likely invest those funds in the stock market and private equity funds. Their substantial liquidity flows will boost M1 velocity.

14.           I predict that M1 velocity will not simply rise, but begin to surge, as QE is tapered all the way to zero in 2014.

15.           If the stock market is correctly anticipating that economic growth will increase nicely over the next six months, demand for base metals should soon overwhelm supply, creating higher prices.

16.           Please click here now. This is an interesting long term (quarterly bars) chart for copper. From a technical perspective, the 2008 collapse took the price precisely to a key trend line in the $1.50 area, but most of the trading since 2006 has taken place in what I call, the “Asian growth zone”.

17.           If a rise in M2 velocity occurs as the Chinese stock market breaks out upside, that could raise the price of copper above five dollars a pound, into what I call the “inflation zone”. Institutional alarm bells would begin to ring, and they would begin to buy commodity markets with a fair bit of size.

18.           Please click here now. That’s the daily copper chart, and there’s a key bullish breakout in play.

19.           The price of gold may have numerous rallies in 2014, but a reversal in M2 combined with five dollar copper could set off much bigger buying of all inflationary hedges.

20.           Please click here now. That’s the daily uranium chart, using the U-TSX proxy. Note the rare triple bottom in play. Gold bullion is my largest holding, and it always will be, but moving a small amount of capital from gold bullion to uranium, copper, and palladium, is probably a prudent action to take now.

21.           Those three markets will likely be the first commodities to react to a reversal in M2 and M1 velocity, and the simple fact is that the early bird gets the biggest worm!

22.           Please click here now. Double-click to enlarge. This weekly GDX:GLD ratio chart covers about five years of the price action of gold stocks against gold. Almost every technical indicator on that chart is flashing a bullish non-confirmation signal.

23.           Also, please note the stunning volume that has occurred over the past few months in gold stocks compared to gold. There has been some dilution of shareholders, but the bulk of this volume is likely related to a “changing of the guard” event. There is also “wedgification” beginning to appear on that chart, where one large bullish wedge morphs into smaller bullish wedges. That’s also very bullish.

24.           Strong hands understand that accelerating money velocity creates inflation. Accelerating the velocity of a money supply that was dramatically expanded in size by QE, could unleash an inflationary monster, and create a dramatic 2014 outperformance of gold stocks against gold!

Special Offer For Website Readers: Please send me an Email to freereports4@gracelandupdates.com and I’ll send you my free “Dow Darlings” report! My studies of all thirty Dow stocks show that about two thirds of them are sporting P/E ratios of twenty or higher. Ten of them offer much better value, and may be poised to substantially benefit from a rise in money velocity in 2014. I’ll show you all ten of them, and show you exactly where my buy and sell points are!

     Thanks!       Cheers  St Stewart Thomson Graceland Updates

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    • Yep RRG… you nailed that one. I have no clue how price may move going forward. Actually only know a couple things for sure:
      When it comes to PM’s–I don’t have enough.
      When it comes to Love– Life ain’t no ‘Chick Flick.’

    • you can’t print the currency, you don’t know what is going to happen when.
      How about this blog finally comes to grips with the fact that increasing the money supply aka printing money – has absolutely nothing to do with the paper price, aka SPOT, of Gold? There is no co-relation. The two are mutually exclusive. Every metric you can find indicates physical demand is through the roof. Everywhere – but especially outside the US and Canada. Accept this is irrelevant to the paper price as well. Stop waiting for a turn around!
      The massive paper gold market must go to zero for the paradigm shift you are seeking. Paper gold, that which controls the price mechanism for AU, is worthless? Can we agree? in virtually no circumstance is it redeemable for physical metal. Read the prospectus of everything from ETFs to GoldMoney to Sprott (where if you don’t have enough for a large bar – you get cash). The marketplace realizes this and, intelligently, is selling paper gold (YES millions of ounces – sometimes in your sleep! – its HST – levels are breached!)
      What are the super wealthy doing? They (APs) are redeeming their tonnes of Gold from GLD (40% down this year). Shouldn’t that be a sign?
      The only relationship SPOT has to physical is that YOU can buy it at this price… BECAUSE YOU ARE BUYING OUNCES NOT TONNES. How many analysts have we heard tell us you can’t buy large quantities without – either a huge premium – or at all!
      The paper price mechanism needs to break, not drift higher in a new Bull. $7,000, $10,000 Gold only means the paper mechanism is still in control. It won’t go down rapidly, but slowly. When it gets under $1000 – start to get excited. At some stage in the price drop you won’t be able to buy physical. I can’t tell you when that is or what price level ($900?, $750?, $500?). Just buy monthly and you don’t have to gamble on timing. You’ll hear about an emergency G20 (or some such) and a revaluation price will be announced. There will be no other options. The other metals will not take part in this revaluation. Yes, you heard me – no Silver reval. The reasons have been obvious… Silver is a commodity, Gold, essentially, is not – CBs hate Silver (recall the Hunts) and CBs aren’t going anywhere… when the currencies collapse – they own Gold and will institute the new paper money – just like every HI in history. Fiat is not going away – it will just change faces. The general populace will not wake up and buy PMs, as the Chris Duane’s tell you. Instead they will be sold another, literal, bill-of-goods. Gold will be used for international trade (Oil) and it’s price will need to increase by magnitudes for this to occur. This year, next year, 2016 – don’t gamble or time it – just buy monthly.
      I told this Forum as much (price drop) a year ago (Gold down 30% since then) but go ahead and flame me as I don’t support your delusion.
      Happy New Year Silverbugs,

    • DVDBeaver: Maybe you should come to grips with the fact that it is the Feds paper called “dollars” that are backing the not for profit naked shorting of the paper called “silver” and paper called “gold” to drive down the price of the phyzz in the illusion called a “market”. It has everything to do with the price. In fact controlling the price is the ONLY reason for the paper called metal “market”. BTW Silver is and has been money for a very long time. Even before gold was money. Get over it. It’s not for you to decide what is and isn’t money for the rest of us. Humanity made that choice 5,000 years or more ago and they chose silver. Humanity still chooses silver over gold as money even now, today! Don’t believe it? Do the math. It’s the best money ever and certainly better than gold (because it has so many more uses other than money). Those other “indispensable” uses are it’s intrinsic value. Nothing else even comes close!

  1. “12. The probability of a turn up in money velocity is growing, because corporate spending is likely to grow”     I doubt it, where is this demand going to come from to justify corporate investment?      They will continue to hoard cash.

  2. So what is going to spark an increase in velocity? I see corporate spending as a possible driver but I thought capexes were generally low and companies were much more transfixed on buying back their stock – so I don’t see that.
     
    All QE has done is seen the bank sell their mbs’ to the american taxpayer at 100 cents on the dollar and served to clean up their balance sheets. Not to mention fuel a speculative bonanza.
     
    Don’t get me wrong I hope velocity goes buck wild and the shit hits the fan.

    p.s. apparently the cartel has seen enough of a price rise today. Fukk em in the can balls deep no lube first stroke with a running start.

  3. Good vid.
    At 15:00 yet another reason why I am weary about. I can be rendered obsolete. Silver cannot.
    Gold could be revalued from $1200 to $10,000 overnight taking everyone by surprise. And silver will quickly catch up. But when gold it taken out of the monetary equasion (it could, and many want it to be), silver will at worst have a short panic sell-off. The next day, it will still be an industrial commodity that cannot be replaced, with price-inelastic industrial demand. There’s always a silver buyer, but suppliers may well throw the towel when the market prices don’t work for them.

  4.  
    I went to a new coin shop that opened about 3 weeks ago in a town about 1 and a half hours from Toronto. I was chatting with the owner who said that since he has opened he has had over 500 customers and he sells maples for 27$ and generics for 26$ and Canadian 80% scrap for 16% over spot. He is surprised by the demand and the amount of preppers he has encountered.
    I can get maples cheaper than that so I did not buy any. I can actually still get 80% scrap dimes and quarters for just under spot.
     

  5. 7.   Unfortunately, these investors didn’t understand that if a huge money supply has declining velocity, there is no meaningful inflation created, at least in the short term.
    8.   By 2013, mainstream reports showed that inflation had still failed to materialize. Demoralized QE-focused investors began to liquidate their gold and related holdings, and booked substantial losses.
    Refreshing to read beyond manipulation articles.
    9.   Did they give up just as money velocity is about to reverse the downtrend? I think so. Please click here now. This M2 velocity chart shows the long term money velocity story; as the public surged into the stock market in the late 1990s, corporate executives began hoarding cash, and they have continued to do so.
    This is interesting because the run from $750-1870 in 08′-10′ (gold’s largest run thus far) is in its SLOWEST VELOCITY based on this M2 chart ?!? My guess this was PM investor anticipation of QE velocity that never materialized along with psychological uncertainty of the market (coupled with the momentum of a 10 year bull run). Aside from the rapid devotees on this board, it doesn’t take much to shatter public confidence. Any thoughts?

  6. Well, all my Dow Darlings, Stewart is a good sort but I got ALLLL  the gosh darn  answers
    My chronic osculator is coalescing to the caustic stokaticator,  in a ascending/descending wedgie-fication, edging to the purple haze morphi-matriculation which could uNleash the QeFLATION MONSTER.  
    In other words, Elvis has left the building so you better keep stackin’
    cuz the poop is going to fly just about ’round July,  2014.  You can bet the house on it.

  7. The government banks now holds the cash that will restart the economy. Through all the QEs 85 billion a month xs 3 years adds up to trillions of dollars. By the factor of 10 though fractional reserve banking. If they stop stake horsing the government an actually loaned this money out the  economy. You would start seeing real inflation. You don’t see much inflation because the money injected into the banks get factored by 10 then is loaned back to the government to buy its treasuries an bonds since no one else will. 

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