Falling oil prices, careening equity markets, and the economic contractions in China continue to spook investors in recent weeks, leading to fears that the global economy is only steps away from a 2008-style systemic crisis. This is a perfect storm for investors to jump into safe havens including U.S.Treasuries, gold, silver and crude oil and to make extremely handsome profits over the next one-to-three years.
The zero interest rate policy (ZIRP) that the Federal Reserve turned to for so long, has made the stock market a casino to borrow low on margin and speculate high on risk, or, in the case of corporations, to issue tons of new debt and buy back their own stock. Now central banks are moving to NIRP, negative interest rate policy, so that all companies would be enticed to borrow cheap money to hire workers and grow their businesses.
These policies have destroyed honest price discovery, the key ingredients of financial market self-discipline and stability. They have created financial bubbles, which, sooner or later, must deflate or burst, leading to a huge collapse. The Fed has turned them into casinos of crony capitalist corruption.
The latest crime of negative interest rates (NIRP) exists in the Eurozone, Switzerland, Sweden and Japan. These central banks are imposing negative rates on the excess cash reserves of commercial banks. This maneuver is only squeezing bank's interest margins and causing a run on banking sector stocks.
This dangerous experiment is doing nothing for the real economies of a world staggering under huge amount of unplayable and massive excesses of debt. It is just feeding the mother of all asset bubbles.
I still believe that there is virtually no chance the Federal Reserve will raise interest rates going into March 2016. I even doubt that the central bank will do so at all this year. Ultimately, the Fed will go for the next thing with NIRP. For real people, who are trying to save money, NIRP, will be the "flashing neon light" announcing that the government is confiscating the people's savings and wealth. When the Fed actually tries to impose NIRP on their own people and not just the commercial banks, the central banks will be signing their political death warrants. That day is coming soon.
Gold is holding near the February 2016 highs, while gold shares continue to rise further. The NYSE Gold Bugs Index closed at a nine-month high. The yellow metal is off to its best start in 35 years. Precious metal funds have seen their biggest three-week inflow of investor money since June 2009.
These actions are signaling signs to me suggesting to stockpiling gold, silver and cash. The size and scope of the political, economic and financial problems that now challenge the relative stability and tranquility of developed societies are unprecedented.
For today, keep your cash in U.S. Dollars, but we are moving very soon to take advantage of new investment opportunities.
If you want to know exactly what I am buying and selling and receive my alerts join me at www.TheGoldAndOilGuy.com.
This article is commentary by an independent contributor. Chris Vermeulen is full-time trader and research analyst for TheGoldAndOilGuy Newsletter.