Recent Collapse of Precious Metals Heralds The Coming Collapse of the Stock Market

This sounds ominous . . .

John Hathaway is Senior Director of Tocqueville Asset Management fund group. For 15 years he has managed Tocqueville Gold (TGLDX). He has worked in finance for forty years and to his recent comment above on the economy he added:  "The derivative books of the seven or eight largest US banks are completely opaque and incomprehensible. They are going to be big trouble in the future. The world is falling apart..."

Prominent Columbia University Economist Dr. Jeffrey Sachs shares this view on the "criminality" and opacity of the financial system.

The G20 nations are insolvent, joblessness is increasing, retail sales in America are sagging and shrinking in Europe: but the markets are soaring. The fundamentals and financial system have parted ways. The times are badly out of joint, it is the stuff of tragedy.

The fiat system and, indeed, the West is at the climax of its identity crisis and the masters of the game are imposing the glory of the Emperor's new clothes that grow more blatantly threadbare each day. We must live with fraud.

Vanishing jobs, lower real income and net worth, hidden but inexorably rising costs: failure of values in all forms. The markets and those who tout them deny its illness and blame the physician, PMs and sound money. Retail sales slowing toward negative turf and PMI manufacturing at 50.7 echo what we lived through from 2005-1Q 2009. Wealth consolidation events are coming with increased frequency like waves in a storm, like birthpangs of a new order.

As ex-USD trade agreements spread amid growing global awareness (no doubt shared in London, DC and NYC) that the USD is doomed as a world reserve currency.  From 1981-2002 PM prices were stagnant: it can happen again. The basics say PMs should rise but the powers have the ability to create facts on the ground. The Goldman Sachs short sell just proved it.

Thus, despite inviting valuations, if you already have PM miners as 10-20% of your nut, hold them or trim your holdings. If your income stream is adequate you can add a bit at these levels or the next big dip which probably will be this quarter.

It is important to remember that the sell-off was a paper-triggered event of cascading stops, margin calls and algorithm trades. If you entered since April 15, you're fine: hold or add PMs depending on your investable cash.

Those of you who need or wish to avoid miners may use low cost index funds like Vanguard S&P (VOO), small cap value (VBR), yes, capture some dividend: the NASDAQ has the farthest to go even to approach its nominal high. For income, try oil and gas energy play Vanguard Natural Resources (VNR) with its annualized yield of 8.8%, paid monthly.

Global REITs like the Vanguard ETF (VNQI) has been stellar YTD but it is difficult to read the global situation except for the negatives which are clear. Outside the fiat bloc there is lucidity on PMs: as I have discussed often, wealth is being shifted West-to-East, the betrayal of Chiang Kai-Shek in 1949 signaled this as did the Nixon-Rockefeller "opening to China" in 1973. I have been explaining that a new reserve system is being born in agony and blood: the narrative is being fulfilled. Western oligarchs see China as a model of socio-governance because Communists know how to manage human inventory. It is a sad truth of these times.

The West was born in identity theft and is dying in the same way: what goes around comes around: the wheel will come full circle.

By Emmit Kodash of Seeking Alpha

http://seekingalpha.com/article/1413081-gold-and-markets-married-by-fiat-pm-collapse-precedes-markets?source=email_portfolio&ifp=0