Phoenix Capital Research's blog

The following is a follow-up to the article I wrote titled "We've Broken All the Trendlines" which was featured on Glenn Beck's show earlier tonight. In it, I present the implications of those charts, and what they mean for the financial system going forward.

In plain terms, the financial system is RED ALERT. The question now is if additional liquidity can prop this giant house of cards up anymore. We’re about to find out.

The world is on its way to a Gold standard again. This is not mere conjecture or prediction. It’s fact. Utah has already passed a bill allowing Gold and Silver to be used as legal tender. Similarly, Virginia has passed legislation (though the Governor has yet to sign the bill) that would permit the state to mint its own Gold and Silver coins.

First and foremost, the bearish rising wedge pattern in the S&P 500 has broken to the downside. These patterns have a nasty habit of dropping to their base, so we could see stocks at 1100 in a hurry. Indeed, not only have we broken the lower trendline that supported stocks since September, but we’ve also taken out major support at 1,300:

Earnings season has always been a crapshoot largely because of the nature of our financial system. To whit, we have accountants whose jobs consist entirely of finding ways to minimize taxes and eek out profits from even the flimsiest of circumstances (financial firms have become masters of this).

The reasons the US hasn’t been gripped by riots are the following: 1) The security nets (food stamps, welfare, etc) continue to keep lower income Americans afloat… for now.
2) Food in the US is so processed that increases in agricultural prices don’t pass through as rapidly into higher food prices.

Neither of these will last much longer.

A secondary reason for Silver outperformance is its pricing: at $36 per ounce, buying Silver is much more affordable than Gold which costs $1,400 per ounce. Consequently, Silver is a kind of “poor man’s” inflation hedge and so is profiting from an influx of orders from those who are growing increasingly worried about inflation but cannot afford to buy an ounce of Gold.

The single most critical issue to note right now is the US Dollar’s collapse. The US Dollar has broken below its multi-year trendline in a BIG way. Any hope of a bull market run is pretty much over and we’re on our way to a MASSIVE currency devaluation.

I first published this essay in the Summer of 2009. At that time the whole world believed Obama’s Stimulus Program was working at that the stupid greenshoot recovery was underway. Today I’d like to reprint this essay because the same structural issues that plagued the US in 2009 are still valid and because this piece proved, two years ahead of time, that the US would suffer a massive economic collapse.

If you haven’t already taken steps to protect yourself from a US Dollar collapse, you need to start RIGHT NOW. Both Gold and Silver will perform well in the coming months. However, their performance will pale compared to other, less well know inflation hedges.

Why?

Everyone knows that Gold and Silver are the most obvious inflation hedges out there. And to be blunt, anyone who invests in these two assets will likely do very well in the coming months as inflation erupts in the US. However, to make truly ENORMOUS gains from inflation you need to find the investments that are off the radar... investments that the rest of the investment world hasn't discovered yet.

It’s common knowledge that stocks return an average of 6% a year (at least going back to 1900). However, Elroy Dimson, Paul Marsh and Mike Staunton from the London Business School recently revealed that when you remove dividends, stocks’ gains drop to a mere 1.7% a year (even lower than the return from long-term Treasury bonds over the same period).

At this point I can’t help wondering if China and GM should form a strategic alliance to attain truly “miraculous” growth. China could build dealerships, let GM fill them with cars, then blow them up only to build a NEW dealer to which GM could deliver a new load of cars, thus insuring record sales for GM and record GDP for China.

Fed Kansas President Honeig recently uttered a series of absolutely INCREDIBLE remarks concerning the US Federal Reserve. He said the US has “deeply” undermined free-market capitalism and that the TBTF banks pose the “greatest” risk to the economy. This kind of aggressive is a clear indication that Hoenig has seen the writing on the wall and is distancing himself from Bernanke in order to present himself as a potential future Hawk Fed Chairman.

When the stuff hits the fan this time around, the Fed will be powerless to do anything. Bernanke’s already shot every bullet he’s got. So when he loses control this time around, not only will the market crater, but the belief that has kept the financial system afloat through every Crisis of the last 30 years (namely that the Fed can always save the day) will shatter.

While everyone and their mother brays on about stocks, something of far greater import is taking place in the US bond market. That “something” is the 30-year Treasury taking out MAJOR support...