Peter’s basic point is that the Fed and other central banks should be careful what they ask for, because inflation isn’t easy to contain (and, despite what they might think these days, it isn’t a good thing). And that brings me to last week’s guest, Peter Boockvar, who came onto our show the same day he made a stunning prediction on CNBC — the end of the 35-year bond bull market. As I noted in our last issue, Boockvar is saying that central banks have now lost control. Even worse, their efforts are resulting in the very opposite of their intended effect. Take the Bank of Japan, for example. Everything they do to drive down the yen only serves to send the currency higher. Importantly, their attempts to drive rates lower are now being ignored by the market…by investors who increasingly see the risks underlying central bank impotence. Thus, rates have bottomed, and will eventually begin rising. Considering that low rates are the only thing still propping up the U.S. stock market, rising rates will send stocks tumbling. Rising equity values are, in turn, one of the key underpinnings of the U.S. economy. Think about it: If the vaunted “wealth effect” sought by the Fed is behind what little recovery we’ve had, what happens when this transforms into the “poverty effect” of an equity bear market? The end game comes when the U.S. economy dips into recession under the weight of rising rates and a falling stock market, forcing the Fed into launching QE4. That would send gold catapulting higher. Mike Larson, another featured speaker at the upcoming New Orleans Investment Conference, agrees that central banks are losing control. In another recent podcast of ours, Mike noted that quantitative easing, as the ultimate form of government manipulation of money, has inevitably led to “quantitative failure” by the central banks. Whatever they try to do just doesn’t work. They’re increasingly irrelevant, without the power to promote…or protect. And that brings to mind another lesson of history: All manipulations eventually end. And usually with a bang. In the aforementioned MarketWatch article the reporters quoted me on my current views. But for some reason my prediction for the quarter was left on the cutting room floor. Here’s what I told them: “Gold investors, along with those invested in every other asset class, have been biding their time awaiting clues from central banks. As a result, the markets have been relatively trendless during the third quarter and volatility has remained subdued. “But if we’ve learned one thing since the 2008 credit crisis, it’s that markets and economies don’t stand still for long, and when they do make important moves it’s often not good news. “I think U.S. economic data in the fourth quarter is going to turn sour and put the kibosh on the Fed’s December rate hike plan. This would be bullish for gold. “Alternatively, if the Fed is able to hike in December, it will release the speculative shorting pressure on gold and, similarly to December 2015, serve as a launching point for gold. “Either way, gold is very likely to break through overhead resistance in the $1,350 area, and finally break through $1,400 in the fourth quarter.” I couldn’t put it any better, myself. Importantly, the first big data point of the fourth quarter will come this Friday, with the nonfarm payrolls report for September. Last month the market was stunned by a big downside miss, with just 151,000 jobs being reported against expectations of 180,000. This time around, the consensus expectation is more modest — just 169,000 jobs for September. Another big miss to the downside will likely torpedo expectations of a Fed hike in December, and send gold running higher. The Fed’s rosy outlook for the economy already took a big hit today when the Atlanta Fed’s “GDPNow” service down-graded its forecast for third-quarter GDP to just 2.2 percent. That’s down from the service’s earlier forecasts of as high as 3.8% growth in the quarter. And the trend has been in a nosedive since early September. So while investors are anxiously awaiting the next crisis — in the knowledge that it is surely forthcoming — they may be surprised to see it come as soon as this Friday morning. You should be ready for anything. (And of course, that means you need to own gold.) All the best,
Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference P.S. As you can see, Peter Schiff, Peter Boockvar and Mike Larson all agree that central banks are losing control, and the result will be a big bull run in gold. This is what we’ve been waiting years for. And the record shows that in times such as this, the New Orleans Investment Conference leads attendees to investments that multiply in value — as much as 20 times and more. To learn how this year’s event can offer a “quadruple your money or it’s free” guarantee, click here. | 