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Kip Herriage
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28 years in financial analysis, including 15 years on Wall Street as Financial Advisor, Venture Capitalist Currently: Editor/Publisher of Vertical Research Advisory Co-Founder/CEO of Wealth Masters Intl
My company:
Vertical Research Advisory
My blog:
Vertical Research Advisory
My book:
CrashProof Prosperity; Becoming Wealthy in the Age of Risk
  • Twilight Zone Ponzi Scheme, Economic, Market And Precious Metals Update 0 comments
    Jun 6, 2013 8:47 AM
    (follow me on twitter @kherriage) Lots to cover in our ongoing, real-life Twilight Zone. The reality is that we now live in a Globalized, Central Bank Ponzi Scheme, Fiat Currency Counterfeiting, Tulip Bulb Mania, Cartel Controlled World…and the end-game is going to be ugly…on steroids. The question, as always, is one of timing.

    First, a positive note. It was incredible connecting with everyone in Las Vegas for this months m2 Wealth Conference. This was Wealth Masters 16th m2, and based on the feedback and surveys, it may very well have been the best m2 ever. A huge THANK YOU to all the WMI Members that joined us!

    Our good friend Wayne Allyn Root received another standing ovation for his keynote address and his new best selling book is nothing short of sensational. If you have not picked up "The Ultimate Obama Survival Guide; How to Survive, Thrive and Prosper During Obamageddon", I highly recommend that you do so today. It's chock full of powerful and specific ideas and applications from Wayne, who I personally know to be the truest conservative living today. Wayne was kind enough to ask me to write a chapter with my predictions and solutions (which you can find on chapter 37), and it was an honor to participate…especially with the likes of Dr Marc Faber and Mark Skousen contributing chapters as well.

    For those that may be turned off by the title of Wayne's book, allow me to set the record straight. Wayne would have written this (nearly) exact book, even if a Republican had won the Presidency. Be it Romney, McCain or whatever puppet "they" would have placed in the highest office in the land, Wayne knows, just as everyone with a pulse and half a mind knows, that the U.S. no longer has an independent and true, two party system.

    Sure, Republicans will "act" different from Dems…and they will parrot the conservative party line to a naïve public…but at the end of the day we have a government controlled by the most powerful of special interests, and whether Republican or Democrat, it is the Global Cartels of the world that rule (just about) everything. Be it the Financial Cartel (currently the most sinister and powerful), the Military Cartel (always the most aggressive and deadly), the Energy Cartel (the source of massive, multi-decade, U.S. destroying wealth transfers), the Media Cartel (controlling/brainwashing the public) or the Drug Cartel (both legal and illegal), these cartels work hand-in-hand, functioning as a shadow government, to manipulate and control the masses. With this knowledge, we can view the events of the day entirely differently from the mainstream lemmings…allowing us to make informed and correct decisions, based in the truth and outside of this real-life matrix. Understanding what I've just written is the key to making great decisions for the rest of your life. It's not always easy being a member of the "informed minority", and in fact, can be more than just a little uncomfortable when putting your plans into place. However, once you begin to examine life by asking questions like; "Qui Bono?" (who benefits) and you begin to "Follow the Money" when looking for the truth, your search will become much simpler. And importantly, being a member of communities like the one we have in WMI, and the VRA, will make the journey even more enlightening and empowering…not to mention, a lot less lonely!

    Economic/Market/Precious Metals Update

    As I start this section of the update, I want to emphasize a point that was a focus of the m2. Regardless of the severity of the next major economic crash…and make no mistake, when the fiat currency and sovereign debt bubbles burst, the end result will be nothing short of epic…those that are prepared (both mentally and financially), will not only survive the chaos, but will become the new wealthy.

    This is not an overstatement, in my view, and frankly undersells the record wealth transfer that is taking place from the uninformed to the informed.

    For those that doubt this advice, let's go back in time and take a look at the massive and unprecedented wealth destruction that has already taken place for those that have trusted in and used the fiat currency that is the US dollar (although this example can be applied with near identical results in your fiat currency as well).

    1913 was an incredibly important and almost certainly the worst year for the future of the US. The Law of Unintended Consequences states, "There will be unintended results for every human action". It doesn't take much effort to see this law's effects.

    Prohibition is a great example to start with. A law designed to improve the morality of the country instead made us a country of lawbreakers. How about welfare and its unintended consequences. Giving welfare checks to unwed mothers has produced more children to more unwed mothers, only making the problem worse. The same can be said for the unbridled expansion of both the food stamp and disability programs, with the unintended consequences here being the destructive loss of individual self worth and a massive addition to government handouts through already bankrupt entitlement programs…talk about a demoralizing combination for all.

    1913 was the year that shows exactly what happens when the populace becomes complacent, doesn't pay attention, and is manipulated by the MSM (mainstream media) and lied to by those in power. So, exactly what happened in 1913 that was so terrible?

    Two major events:

    1) The US Constitution was amended to permit the federal government to levy the population through an income tax, which directly led to the creation of our favorite government agency, the IRS.

    2) The Federal Reserve Bank became reality, allowing Central Banks to control/manipulate our monetary system.

    With the news this week that the IRS has been targeting conservative groups for at least the last 3 years, I could spend much of this update detailing why our corrupt and progressive tax system is leading us down an almost identical path that led to the destruction of the Roman Empire. Instead, lets focus on the criminal cabal of international bankers that is our Central Banking System, the Federal Reserve.

    The FED, since inception, has had one primary mandate (the dual mandate of "ensuring full employment" is only a recent addition, and of course they have failed miserably here as well). That mandate is to protect the value of the US dollar…THE currency of our country. So, what kind of job have they done since 1913? Answer: Since the US dollar has lost 97% of its value over these last 100 years; it's safe to say that the FED has been across the board horrendous in achieving their one stated purpose for existing!

    Let's put pencil to paper and make the point crystal clear. In 1913, if you had placed $1 million in a bank account (non-interest bearing), or in a safe deposit box, or in your mattress, the present day purchasing power of your $1 million would be just $40,000…representing a loss of 97% of your money!

    However, if you had instead placed that $1 million into gold back in 1913, today you would have more than $74 million (with gold at $1400/oz). How amazing a difference is this! $40,000 vs $74 million. This is likely the most powerful example ever of both the FED's destruction of our currency and its purchasing power, along with the importance of owning gold as an incredible store of value and insurance against the FED's inept ability to succeed at its one job.

    Here's a chart of historical gold prices going back to 1833 so you can do the math yourself.

    http://www.nma.org/pdf/gold/his_gold_prices.pdf

    I will have more on the opportunity that this pullback in gold and silver is presenting us later, but keep the following in mind as well. If you had invested $10,000 into gold just over a decade ago at around $300/oz, you would have more than $46,000 today, giving you a gain of more than 360%. That same $10,000 invested in the stock market would be worth roughly $11,000, a gain of $1000 or roughly 10%. You be the judge as to which investment you would rather own.

    "Don't Fight the Tape - Don't Fight the FED"

    Since the inception of the VRA over a decade ago, I've written these words and explained this market truism more times than I can remember. Don't fight the tape and don't fight the FED is one of the first stock market/investing lessons I remember learning, and those that choose not to follow it can expect to pay the price. In fact, I have been guilty of this as well during the early phase of the stock market recovery. For those that may not fully understand its meaning, allow me to explain. First, "Don't Fight the Tape" means that it is risky to bet against the primary trend of the stock market. A simple glance at the charts since the Spring of 2009 will tell you the direction of the tape since then…UP.

    Second, "Don't Fight the FED" means that its risky to bet against the actions of the Federal Reserve. And we know what the FED has been doing over the last 5 years…printing money like its Weimer, Germany circa the 1920's.

    Leaving emotion out of the conversation, along with our common sense thoughts on which direction the stock marketshould be going, based on the underlying economic global realities, the long-time investment advice of "don't fight the tape/fed" is telling us that the stock markets of the world will continue moving higher, "until and unless" something changes. It's always the timing of the next move…the change of direction…that's the key.

    So, regardless of which way we might believe the stock market should go, when you have every Central Bank on the planet acting in unison, it sends us one clear an unmistakable message; Regardless of the costs…regardless of the unintended consequences…Central Banks, working hand in hand with governments around the world, will continue to print, print, print their fiat currencies in what has become the most epic of currency battles on record. You see, they view our depressionary, global economic realities as "war", and will do whatever they feel necessary to win this war…even if it means risking our future and the bursting of the currency and debt markets…an almost certain reality that they have decided to face sometime down the line.

    There is an alternative theory to this madness, and I'll share it with you now. Many geopolitical experts that I know and trust are certain that the actions of our global leaders are by design, and that the end-game is based on a desire for total control through one-world government…in other worlds, totalitarianism. They argue that by bringing down the economy through a coordinated and systemic financial collapse, there will be pleading cries from the masses of the world for HELP…at any and all costs. Those that doubt this as a possibility underestimate the mindset of megalomaniacs, especially those in a position of great power. Basic psychology teaches us that when people are desperate they will agree to pretty much anything tomorrow if it means the pain they are in will be lessened today. Remember the character Wimpy from the cartoon series Popeye? Wimpy's quote "I will gladly pay you Tuesday for a Hamburger today" explains this concept perfectly. And guess when Wimpy first said his now famous phrase…1932…or just as the effects of the Great Depression began to kick in.

    Which future will we face? Only time will tell, but this much we know for certain; the masses of the world…as always…will be ill-prepared to deal with it.

    Mr. Market Always has a Game Plan

    In the not too distant future, one that I have predicted will come by the end of 2014 (in my book, CrashProof Prosperity), the planet will come face to face with the collapse of all collapses…but here's the key; Mr. Market is very, very smart. Mr. Market can best be identified as ensuring that the majority of investors get it wrong. Because that's how it works…the majority is always wrong, especially right at a market top or a market bottom. Mr. Market loves to wait until every last sucker has bought into the insanity of the bubble. Be it Tulips in the 1600's…stocks in 1929…the Dot Coms in 2000…or US Real Estate in 2007, the majority is on the wrong side.

    Mr. Market has now decided to catch as many people on the wrong side as possible in what has become the two largest bubbles in the history of mankind; these bubbles are fiat currency and sovereign debt.

    The single best tool in discovering "when" the next bubbles will burst is technical analysis, and I rely on T/A a great deal when looking for the "turn". Right now T/A is sending a clear message about the overall market, and it will be a surprise to no one to learn that in the current environment of Central Bank money printing that equities continue to head higher. Every Central Bank on the planet is printing unprecedented amounts of fiat currency. More than $10 trillion in just the US…more than $2 trillion in China…more than $3 trillion in Japan, and more than $5 trillion in Europe. That's a total of $20 trillion printed since just 2007, yet global economies continue to struggle. Does this make sense to you?? Of course not…because it makes sense to no one that understands economics, particularly how the free market system is supposed to work.

    Japan is truly in never-never land. I've written and warned about the demographic nightmare of Japan for years, where a dramatically aging population will soon cause a tidal wave of bankruptcies, with entitlement programs imploding in their own footprints. The birth rate in Japan is now the lowest on record…they now believe that bringing children into their bleak world makes little to no sense…and combined with a debt to GDP ratio of more than 250%, Japan's leaders have reached the desperation phase. Hence the actions of Japan's Central Bank, where they have announced a massive stimulus program that even includes buying Japanese equities! Since January, Japanese stocks have surged more than 38%, so on the surface it may appear that the strategy is working…but it only appears that way…because in the end this type of blatant economic manipulation only works for so long. This is NOT a free market system at work!

    But in the short term, "Don't Fight the Tape and Don't Fight the Fed" applies in Japan as well. The Black Swan event that I've been warning about could easily start in Japan, so I will be watching their moves closely. However, in an era of print, print, print in order to rescue global economies, we should expect stock prices to continue to climb…until this Ponzi Scheme ceases to work and currencies collapse, sending bond yields screaming higher…with an end result of hyperinflation and never before witnessed economic decline. A Great Depression that makes the 1930's look like a walk in the park.

    In the short term, we should also pay attention to another piece of sage market advice. "Sell in May and Go Away", encompasses the fact that historically more than 90% of all stock market gains occur between September to May. There is an important distinction to keep in mind, and that is when the year starts with gains in January and February (as we saw to start this year), Sell in May and Go Away does not actually hold true. Either way, here's what we should me mindful of…technical analysis, or "The Tape". As long as the trend remains higher, don't be surprised to see the smart money continue to push the market higher, and that for the declines to be small in nature. The insanity of Central Bank manipulation WILL end, and technical analysis will give us the advance warning that we need to go aggressively short the equity markets.

    Finally (for now at least), the following article is from my friend and former beltway insider Paul Craig Roberts. It sheds new light on the drop in gold and silver prices, and I've seen his very informed opinion stated nowhere else. Gold and silver remain the only true currencies on the planet, and should be purchased on a monthly basis…or as often as possible.

    Until next time,

    Kip

    Gangster State America By Paul Craig Roberts May 14, 2013 "Information Clearing House" - There are many signs of gangster state America. One is the collusion between federal authorities and banksters in a criminal conspiracy to rig the markets for gold and silver.
My explanation that the sudden appearance of an unprecedented 400 ton short sale of gold on the COMEX in April was a manipulation designed to protect the dollar from the Federal Reserve's quantitative easing policy has found acceptance among gold investors and hedge fund managers. The sale was a naked short. The seller had no gold to sell. COMEX reported having gold only equal to about half of the short sale in its vaults, and not all of that was available for delivery. No one but the Federal Reserve could have placed such an order, and the order came from one of the Fed's bullion banks, one of the entities "too big to fail."
Bill Kaye of the Greater Asian Hedge Fund in Hong Kong and Dave Kranzler of Golden Returns Capital have filled in the details of how the manipulation worked. Being sophisticated investors of many years of experience, both Kaye and Kranzler understand that the financial press runs with the authorized story planted to serve the agenda that has been put into play. Institutional investors who have bullion in their portfolio do not want the expense associated with storing it securely. Instead, they buy into Exchange Traded Funds (ETF) and hold their bullion in the form of a paper claim. The largest, the SPDR Gold Trust or GLD, trades on the New York Stock Exchange. The trustee and custodian is a bankster, and only other banksters are able to turn investments into delivery of physical bullion. Only shares in the amount of 100,000 can be redeemed in gold.
The price of bullion is not set in the physical market where individuals take delivery of bullion purchases. It is set in the paper futures market where short selling can drive down the price even if the demand for physical possession is rising. The paper gold market is also the market in which people speculate and leverage their positions, place stop-loss orders, and are subject to margin calls. When the enormous naked shorts hit the COMEX, stop-loss orders were triggered adding to the sales, and margin calls forced more sales. Investors who were not in on the manipulation lost a lot of money.
The sales of GLD shares are accumulated by the banksters in 100,000 lots and presented to GLD for redemption in gold acquired at the driven down price. The short sale is leveraged by the stop-loss triggers and margin calls, and results in a profit for the banksters who placed the short sell order. The banksters then profit again as they sell the released gold into the physical market, especially in Asia, where demand has been stimulated by the sharp drop in bullion price and by the loss of confidence in fiat currency. Asian prices are usually at a higher premium above the spot prices in New York-London. Some readers have said "don't bet against the Federal Reserve; the manipulation can go on forever." But can it? As the ETFs such as GLD are drained of gold, their ability to cover any of their obligations to investors diminishes. In my opinion, these ETFs are like a fractional reserve banking system. The claims on gold exceed the amount of gold in the trusts. When the ETFs are looted of their gold by the banksters, the gold price will explode, as the claims on gold will greatly exceed the supply. Kranzler reports that the current June futures contracts are 12.5 times the amount of deliverable gold. If more than 8 percent of these trades were to demand delivery, COMEX would default. That such a situation is possible indicates the total failure of federal financial regulation. What the Federal Reserve has done in order to maintain its short-run policy of protecting the "banks too big too fail" is to make the inevitable reckoning more costly for the US economy. Another irony is the benefactors of the banksters sale of the gold leeched from the gold ETFs. Asia is the beneficiary, especially India and China. The "get out of gold line" of the US financial press enables China to unload its excess supply of dollars, accumulated from the offshored US economy, into the gold market at a suppressed price of gold.
Kranzler points out that not only does the Fed's manipulation permit Asia to offload US dollars for gold at low prices, but the obvious lack of confidence in the dollar that the manipulation demonstrates has caused wealthy European families to demand delivery of their gold holdings at bullion banks (the bullion banks are essentially the "banks too big to fail"). Kranzler notes that since January 1, more than 400 tons of gold have been drained from COMEX and gold ETF holdings in order to satisfy world demand for physical possession of bullion. Again we see that institutions of the US government are acting 100% against the interests of US citizens. Just who does the US government represent?

    Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate. He has had many university appointments. His internet columns have attracted a worldwide following.

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