Friday, July 03, 2015

Bill Murphy & Bob Hoye

July 3, 2015

Featured Guests
Bill Murphy & Bob Hoye
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Summary:
  • Bill Murphy from GATA.org and the host discuss the summer doldrums, noting how financial troubles in the EU have turned capital flows to the perceived safety of US equities / dollar.
  • However, the tactic could backfire as the temporary safe haven has enormous debt burdens as well.
  • For instance, the Governor of Puerto Rico announced this week that $70 billion in debt is unpayable, much smaller than the $400 billion owed by Greece.
  • The US is the grand champion of debt with unfunded liabilities are $210 trillion, five times the EU's unfunded burden of $40 trillion (Dr. Kotlikoff, 2015).
  • When unfunded liabilities are excluded and only debt on the books is examined, the US, UK and many competing nations share similar debt levels as Greece (Figure 1.1.).
  • Media reports suggest that China has accumulated over 10,000 tons of gold in preparation to back the Yuan with the metal, making it the new de facto global reserve currency.
  • Bill Murphy notes that the when the PMs bear market ends, prices will explode higher.
  • The host forecasts that after 2 small hikes in the benchmark rate in September and again in December, the Fed will pause, presenting an excellent opportunity to increase dollar cost averaging efforts.
  • The gold repatriation theme is gaining momentum as even US states demand billions of their gold reserves are returned.
  • Are officials positioning their chess pieces in anticipation of a new global reserve currency?
  • Bob Hoye, senior investment strategist at Institutional Advisors, and the host unravel the latest Greek drama.
  • After months of warning of a Cypriot-like moment in Greece, on Monday morning depositors were locked out of Greek banks. Only ATMs were functional, most of which have low withdrawal limits imposed. ATMs were emptied quickly, as seen in the following video.
  • The US may face a Grexit via a Puert-xit, as the Puerto Rico province battles creditors over billions of unpayable debts (Figure 1.2).
  • Several states / municipalities are approaching Detroit-style bankruptcies.
  • It's advisable for every household to prepare for something similar by increasing PMs exposure as well as stockpiling dried / canned goods / cash, etc.
  • The trouble seems to stem in part from a misunderstanding regarding debt. Debt is a valuable leverage instrument when times are solid, yet when future prospects sour, the leverage enhancing tool can become an unbeatable burden.
  • A gold market trend confirmation method involves the gold/CRB ratio ($Gold:$CRB) ratio.
  • When the ratio is above the trend line, a bull market is present, as gold outperforms the commodities-sector proxy.
  • Fed governors John Williams and Jerome Powell, expressed their hawkish rate epistemologies.
  • Instead of "one and done", "two and done, maybe" seems likely, suggestive that the benchmark rate will be hiked for the first time since 2008 in September and the second increase in December.
  • Analysts at leading investment bank Goldman Sachs reconfirmed earlier comments that the US dollar and euro would trade at parity before 2016, hinting at continued greenback strength.
  • Bob Hoye and the host share Peter Spina's sentiments that under such a deflationary environment, gold tends to hold its value relative to virtually every other asset price.

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