How to Make Sure the Government Can’t Freeze Your Bank Account

By Justin Spittler

If you wake up tomorrow and your bank account is frozen… what will you do? You probably remember when the financial crisis in Greece was dominating headlines a few weeks ago. For years, Greece spent more than it took in. This led to a financial crisis that looked like it might destroy Europe’s financial system.

The Greek government closed all banks to prevent people from withdrawing all their money and crashing the banking system. Greek citizens could only withdraw €60 ($67) of their own money each day from ATMs. European authorities eventually gave Greece a bailout... and the crisis dropped from the headlines.

But here’s something you probably haven’t heard from the mainstream media….

It’s now been two months and Greek people still can’t fully access their own cash.
Reuters reports:      
                                                                                      

Greek banks are set to keep broad cash controls in place for months, until fresh money arrives from Europe and with it a sweeping restructuring, officials believe. “Broad cash controls” means Greek banks are essentially frozen. Greek people can withdraw only €420 ($460) per week of their own money.

More from Reuters:

The longer it takes, the more critical the banks’ condition becomes as a 420 euro ($460) weekly limit on cash withdrawals chokes the economy and borrowers’ ability to repay loans. “The banks are in deep freeze but the economy is getting weaker,” said one official, pointing to a steady rise in loans that are not being repaid.

One Greek farmer can’t get enough cash to run his business. It’s a nightmare. I owe many people money now - gas stations and firms that service machinery. I have to go to the bank every single day, and the money I can take out is not enough.

Short on cash, Greek people have resorted to bartering….

Reuters goes on to say:

A rising number of Greeks in rural areas are swapping goods and services in cashless transactions since the government shut down banks on June 28 for three weeks, restricted cash withdrawals and banned transfers abroad to halt a run on deposits and prevent a collapse of the banks.

“Bartering” means exchanging goods and services without using money. It’s how humans did business thousands of years ago.

Reuters reports how the Greek farmer is trying to survive the crisis:

Squeezed on all sides, the 41 year old farmer began informal bartering to get around the cash crunch. He now pays some of his workers in kind with his clover crop and exchanges equipment with other farmers instead of buying or renting machinery.

Another farmer is trading cotton and wheat for bales of hay and machine parts, Reuters says.

This is a good reminder of something we stress often: the government controls any money you have in the bank. It can decide you’re not allowed to touch your own money at any time. Or it can put severe restrictions on how much money you can take out, like the Greek government is doing right now.

We began this essay with a question: what will you do if you wake up tomorrow and your bank account is frozen? There’s no good answer. At that point, it’s too late. You need a plan in place before the government decides you can’t touch your own money.

This is exactly why we wrote Going Global 2015…..

Going Global 2015 is our guide to surviving financial crises.

It shows you specific and easy steps for protecting yourself and your family from the next financial disaster. And we’d like to send you a free copy of this hardcover book today.

You may think the odds of such a complete financial disaster happening in the US are low. But even if that’s true, it still makes sense to prepare.

You likely pay for fire insurance. Because even though your house is unlikely to burn down… the small risk of the financial devastation it would cause you is unacceptable.

A financial crisis can cause far worse financial ruin than a house fire. And fire insurance costs hundreds or thousands of dollars per year.

We will send you a free copy of this book.

We’ve done all the legwork for you. We went to foreign countries to open bank accounts. We talked to the best lawyers. We even found the one country that has never, EVER had a bank failure… and where it’s easy for an American to open an account. The best thing about Going Global 2015 is it includes steps you can take, right now, to protect yourself, your wealth, and your family.

Most people have a huge misunderstanding about this topic. They think you have to be rich to use these strategies. But Going Global 2015 will show you that’s not true at all. Almost anyone can tuck a few thousand dollars away in a safe foreign bank account... just in case the US banking system blows up again and the government can’t save it this time.

That’s what’s in it for you. You might be wondering….what’s in it for us? Why give away a book that we put so much work into for free? Well, quite simply, we believe that by trying what is essentially a free sample of some of our best and most valuable work, you might want to do business again with us in the future.

There is literally no reason not to claim your free copy of Going Global 2015. We’ll mail the 233-page hardcover book to your front door. All we ask is that you pay $4.95 to cover our processing fee.

Click here to claim your free copy of Going Global 2015.

The article How to Make Sure the Government Can’t Freeze Your Bank Account was originally published at caseyresearch.com.

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The Wall Street Titanic and You

By Tony Sagami

“I would highlight that equity market valuations at this point generally are quite high.”

—Janet Yellen

Are you worried about the stock market? If you are, you’re in the minority of investors.
Greece… China… don’t worry about it!

At least that seems to be Wall Street’s reaction to what could have been a catastrophic fall of dominoes if the European and Chinese governments hadn’t come to the rescue with another massive monetary intervention.

If you think you’ve heard the last about Greece or a Chinese stock market meltdown, you’re in the majority. Investors are pretty darn confident about the stock market.

The John Hancock Investor Sentiment Index hit +29 in the second quarter, the highest reading since the inception of the index in January of 2011.

However, overconfidence is dangerous and often accompanies market tops.

If you listen to the hear no evil cheerleaders on Wall Street and CNBC, you might be inclined to think the bull market will last a couple more decades, but we haven’t had a major correction since 2011, and the Nasdaq hit an all time high last week.

Investors are so enthusiastic that the exuberance is spilling beyond stock certificates to the high brow world of collectible art.

Investment gamblers are shopping up art in record droves. In the last major art auction, prices for collectible art reached all time highs, and somebody with more money than brains paid $32.8 million for an Andy Warhol painting of a $1 bill.

Who says a dollar doesn’t buy what it used to?

I’m not saying that a new bear market will start tomorrow morning, but I’m suggesting that bear markets hurt more and last longer than most investors realize.

The reality is that bear markets historically occur about every four and a half to five years, which means we are overdue. And the average loss during a bear market is a whopping 38%. Ouch!

On average, a bear market lasts about two and a half years… but averages can be misleading.
In the 1973-74 bear market, investors had to wait seven and a half years to get back to even. In the 2000-02 bear market, investors didn’t break even until 2007.

Unless you, too, have drunk the Wall Street Kool Aid, you should have some type of emergency back up plan for the next bear market. There are three basic options:

Option #1: Do nothing, get clobbered, and wait between two and a half and 10 years to get your money back. Most people think they can ride out bear markets, but the reality is that most investors—professional and individual alike—panic and sell when the pain gets too severe.

Option #2: Have some sort of defensive selling strategy in place to avoid the big downturns. That could be some type of simple moving average selling discipline or a more complex technical analysis. At minimum, I highly recommend the use of stop losses.

Option #3: Buy some portfolio insurance with put options or inverse ETFs. That’s exactly what my Rational Bear subscribers are doing, and I expect those bear market bets to pay off in a big, big way.

Whether it is next week, next month, or next year—a bear market for US stocks is coming, and I hope you’ll have a strategy in place to protect yourself.

If you'd like to hear what worries me most about the stock market, here is a link to an interview I did last week with old friend and market watchdog Gary Halbert.

Tony Sagami

30 year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here.

To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.

The article Connecting the Dots: The Wall Street Titanic and You was originally published at mauldineconomics.com.

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Europe: Running on Borrowed Time

By John Mauldin 

“I am sure the euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible to propose that now. But some day there will be a crisis and new instruments will be created.”

– Romano Prodi, EU Commission president, December 2001

Prodi and the other leaders who forged the euro knew what they were doing. They knew a crisis would develop, as Milton Friedman and many others had predicted. It is not conceivable that these very astute men didn’t realize that creating a monetary union without a fiscal union would bring about an existential crisis. They accepted that eventuality as the price of European unity. But now the payment is coming due, and it is far larger than they probably anticipated.

Time, as the old saying goes, is money. There are lots of ways that equation can work out. We had an interesting example last week. Europe and the eurozone pulled back from the brink by once again figuring out how to postpone the inevitable moment when all and sundry will have to recognize that Greece cannot pay the debt that it owes. In essence they have borrowed time by allowing Greece to borrow more money.

Money, I should add, that, like all the other Greek debt, will not be repaid.

I’ve probably got some 40 articles and 100 pages of commentary on Greece and the eurozone from all sides of the political spectrum in my research stack, and it would be very easy to make this a long letter. But it’s a pleasant summer weekend, and I’m in the mood to write a shorter letter, for which many of my readers may be grateful. Rather than wander deep into the weeds looking at financial indications, however, we are going to explore what I think is a very significant nonfinancial factor that will impact the future of Europe. If it was just money, then Prodi would be right – they could just create new economic policy instruments, whatever the heck those might be. But what we’ve been seeing these last few months is symptomatic of a far deeper problem than can be addressed with just a few trillion euros, give or take.

But first, I’m going to reach out and ask for a little help. I have just signed an agreement with my publisher, Wiley, to do a new book called Investing in an Age of Transformation. I’ve been thinking about this book for many years, and it is finally time to write it. As my longtime readers know, I believe we are entering a period of increasingly profound change, much more transformative than we’ve seen in the past 50 years. And not just technologically but on numerous fronts. There are going to be substantial social implications as well. Imagine the entire 20^th century fast-forwarded and packed into 20 years, and you will get some idea of the immensity of what we face.

Now think about investing in this unfolding era of change. Companies will spring up and disappear faster than ever. Corporations will move into and out of indexes at an increasingly rapid rate, making the whole experience of index investing – which constitutes the bulk of investing, not just for individuals but for pensions and large institutions – obsolete.

Just as we wouldn’t think of relying on the medical technology of the early 20^th century, I’m convinced that we need a significantly new process for investing that doesn’t depend on the concept of indexing created deep in the last century. In an age of exponential change, being wrong in your investment style will no longer mean you simply underperform: you will not merely be wrong; you will be exponentially wrong.

Of course, the flipside is that if you get it right, you will be exponentially right. We will be exploring some new investing concepts in Thoughts from the Frontline as I write the book, since this letter is actually part of my thinking process. I’ve been spending a great deal of time lately exploring new ways of thinking about the markets, different ways to manage risk, and strategies to take advantage of overwhelming change.

This project will be significantly more complex than any book I’ve attempted so far. I’m looking for a few research interns or assistants to help me on various topics. Some topics are technological in nature, and some are investment-oriented. You can be young or old, retired or working in any number of fields; you just have to be passionate about thinking about the future and be able to spend time exploring a topic and going back and forth with me through shared notes and conversations. It’s a plus if you write well. If you are interested in exploring a topic or two, drop me a note at transformation@2000wave.com, along with a resume or a note about your background, plus your area of interest. Now let’s jump to the letter.

The More Things Change

Almost four years ago, in an article on Bloomberg with the headline “Germany Said to Ready Plan to Help Banks If Greece Defaults,” we read this paragraph:

“Greece is ‘on a knife’s edge,’” German Finance Minister Wolfgang Schäuble told lawmakers at a closed-door meeting in Berlin on Sept. 7 [2011], a report in parliament’s bulletin showed yesterday. If the government can’t meet the aid terms, “it’s up to Greece to figure out how to get financing without the euro zone’s help,” he later said in a speech to parliament.

Over the last few weeks he took a similar hard line, offering the possibility that Greece could take a “timeout,” whatever in creation that is, and only the gods know how it could work for five years.
Reports of the final meeting before the agreement with Greece was reached demonstrated that there is little solidarity in the European Union. The Financial Times offered an unusually frank report of the meeting:

After almost nine hours of fruitless discussions on Saturday, a majority of eurozone finance ministers had reached a stark conclusion: Grexit – the exit of Greece from the eurozone – may be the least worst option left.

Michel Sapin, the French finance minister, suggested they just “get it all out and tell one another the truth” to blow off steam. Many in the room seized the opportunity with relish.

Alexander Stubb, the Finnish finance minister, lashed out at the Greeks for being unable to reform for half a century, according to two participants. As recriminations flew, Euclid Tsakalotos, the Greek finance minister, was oddly subdued.

The wrangling culminated when Wolfgang Schäuble, the German finance minister who has advocated a temporary Grexit, told off Mario Draghi, European Central Bank chairman. At one point, Mr Schäuble, feeling he was being patronised, fumed at the ECB head that he was “not an idiot”. The comment was one too many for eurogroup chairman Jeroen Dijsselbloem, who adjourned the meeting until the following morning.

Failing to reach a full accord on Saturday, the eurogroup handed the baton on Sunday to the bloc’s heads of state to begin their own an all night session.”

That meeting ended with Angela Merkel and Alexis Tsipras arguing for 14 hours and giving up. Donald Tusk, the president of the European Council (and former Polish Prime Minister), forced them to sit back down, saying, “Sorry, but there is no way you are leaving this room.”

Essentially, they were arguing over what form of humiliation Greece would be forced to swallow.
To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.

The article Thoughts from the Frontline: Europe: Running on Borrowed Time was originally published at mauldineconomics.com.

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Weekly Crude Oil, Gold, Coffee and Sugar Markets Recap with Mike Seery

It's been a wild ride in the markets this week. And our trading partner Mike Seery is back this week to give our readers a weekly recap of the futures market. He has been a senior analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets.

Crude oil futures in the August contract are trading far below their 20 and 100 day moving average settling in New York last week at 56.93 a barrel while currently trading at 52.66 down about $7 for the trading week hitting a three month low as I’ve been recommending a short position for quite some time and if you took that trade continue to place your stop loss above the 10 day high which currently stands at 59.70 as the chart structure will improve on a daily basis.

The next level of major support is at 49/51 as oversupply issues continue to hamper prices here in the short term coupled with the fact of a possible Chinese slowdown affecting many commodities especially oil prices, however if you did not take the original trade the chart structure is terrible at the current time as the risk/reward is not your favor so sit on the sidelines and look for better markets with less risk. The U.S dollar is sharply lower this afternoon as a possible deal with Greece is on the table, however the dollar is still up significantly in the year 2015 and that’s keeping pressure on commodities as deflation is a worldwide problem so play by the rules and place the proper stop loss as who knows how prices can go.
Trend: Lower
Chart Structure: Poor

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Gold futures in the August contract are trading below their 20 and 100 day moving average settling last week at 1,163 while currently trading at 1,160 down slightly and traded as low as 1,146 in Wednesdays trade hitting a three month low as I’ve been recommending a short position and if you took that trade place your stop loss above the 10 day high which currently stands at 1,188 risking around $28 or $1,000 per mini contract plus slippage and commission.

The chart structure will improve starting next week as the trend still remains bearish as I still see no reason why to own the precious metals as their looks to be agreement with Greece possibly over the weekend but all of the interest still lies in the S&P 500 in my opinion which is sharply higher this Friday afternoon. The U.S dollar is down 90 points today which generally is very bullish precious metals, however gold is unchanged this Friday afternoon as volatility remains low as platinum, copper, and palladium are all near contract lows which will pressure gold prices in the long run in my opinion so continue to play this to the downside while taking advantage of any price rally while maintaining the proper stop loss of 2% of your account balance on any given trade.
Trend: Lower
Chart Structure: Excellent

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Coffee futures in the December contract settled last week in New York at 131.15 while currently trading at 129.80 a pound slightly lower for the trading week still trading below its 20 and 100 day moving average telling you that the short term trend is to the downside and the long term trend is also to the downside as I’m now recommending a short position while placing your stop loss above the 10 day high which currently stands 137.40 risking around 800 points or $3,000 per contract plus slippage and commission as this trade should only be taken with a large trading account.

Coffee prices continue their slow grinding bearish trend with very little volatility as the fundamentals have improved with Brazilian coffee exports rising to a record in the crop year ending June 30th up 6.9% to 36.5 million bags but that has been unable to support prices as we continue to move lower because of oversupply. The chart structure will start to improve in the next couple of days lowering monetary risk as many of the commodity markets still look weak as anything grown in Brazil continue to be under pressure due to the fact that the Brazilian Real is still right near a historical low versus the U.S dollar.
Trend: Lower
Chart Structure: Solid

Sugar futures in the October contract are trading above their 20 day but still below their 100 day moving average telling you that the trend is mixed after settling last week in New York at 12.30 while currently trading at 12.12 slightly lower for the trading week as I’m currently sitting on the sidelines waiting for a trend to develop.

Sugar prices continue its long term bearish trend while trading sideways in recent weeks as a breakout to the upside is 12.69 and on the downside below 11.52 so look at other markets that are currently trending as sugar prices look to go nowhere. Volatility in sugar prices at the current time is relatively low as I still do think lower prices are ahead but prices remain choppy so keep a close eye on this market as oversupply issues continue to pressure sugar coupled with an extremely weak Brazilian Real versus the U.S dollar as there are very few fundamental bullish reasons to push prices up at the current time.
Trend: Mixed
Chart Structure: Solid

Get more of Mike's call on the Commodity Markets

Mike's Trading Theory

What Does Risk Management Mean To You? I generally tell people that the reason people lose money in commodities is not due to the fact that they are bad at predicting where prices are headed, however they are bad when it comes to losing trades and refusing to take a loss which results for heavy monetary losses that are difficult to come back from.

For example if a customer has $100,000 account in my opinion on any given trade he or she should risk 2% – 3% of the account value meaning if you are wrong the worst case scenario is still a $97,000 remaining balance, however what I always see is traders risking ridiculous amounts of money and instead of the 3% stop loss will risk 20% to 30% on any given trade or even higher therefore if you are wrong on two or three trades that $100,000 dollar account could dwindle down to nothing very quickly and I’ve seen it many times throughout my career.

What many traders forget to realize is they might have 4 or 5 commodity positions on and if you have too many contracts on all at the same time and all of those trades go against you which is very possible the losses can add up to be staggering so what I am suggesting to you is if you have $100,000 account risk between $2,000 – $3,000 per trade so if you lose on five straight trades the worst case scenario is that your down $15,000 and still have an $85,000 balance which is very possible to still come back from and your still in the game.

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It Could Never Happen Here

By Jared Dillian

I was watching the 6 o’clock news and saw images of closed banks in Greece and people lined up at ATMs. I’m sure you did, too.

This must seem surreal to most people because it seems so remote. But put yourself in these people’s shoes for a second. You have money in the bank. Suddenly you can’t get to it. After standing in long lines, you can only get 60 euros at a time, which isn’t going to last you very long.

What if you didn’t plan adequately and haven’t stashed away any cash? The banks will be closed for a while. What happens?

How do you pay for rent? Or food?
How does your employer pay you?
Do you go homeless? Or hungry?
Do you get really angry, take to the streets, blame someone or something (probably the wrong thing), break stuff, set things on fire?
Will Greece descend into anarchy?
It might.

Doomsday Preppers

Of course, not everyone in Greece is hurting. Many people saw this coming and took action. They took all their money out of the banks, put it under the mattress, or maybe stored it in a safe. Maybe they bought gold, or diamonds, or something else. These people aren’t standing in lines at ATMs. They aren’t going to go homeless or hungry.

But these people get a pretty bad rap—at least here in the US, where we call them “doomsday preppers.” Or “bunker monkeys.” Or “conspiracy theorists.” Or “gold bugs.” They take a beating. Jim Rickards tweeted the other day, “I’ll bet there a lot of Greeks saying, ‘I wish I had bought some gold.’" Truer words have never been spoken.

This week’s issue of The 10^th Man is not a gold promotion, but rather a broader discussion about how you can prepare for financial catastrophe. People keep fire extinguishers and first aid kits in their cars. They test their smoke alarms twice a year. They purchase flood insurance or, in my neighborhood, hurricane shutters.
Why would you do all these things but just leave your money in the bank and hope for the best?

I have studied all kinds of financial crises in all parts of the world, from depressions to hyperinflations. The thing they all have in common is that people who do not prepare get crushed. People who are not appropriately paranoid get crushed.

There is such a thing as being too paranoid (if everything you own is in gold and hard assets, you can miss out on some meaty returns in financial assets), but a little paranoia is healthy. For a few years, I had a pretty concrete escape plan, with assets, just in case.

In case of what?.....In case of anything.

No Sympathy Whatsoever

I don’t feel sorry for Greece. I don’t feel sorry for the people in the ATM lines. They have had years to prepare for this day. Most people in similar situations don’t have so much time. I’m shocked that the banks had any deposits left at all.

Probably what will happen is that the banks will require a Cyprus-like bail-in and the depositors will take a massive haircut, getting only a fraction of what they once owned. There are no wealthy Russians to go after. The burden will fall on ordinary Greeks.

It’s also hard to feel badly for a nation of people who have chosen to pursue this ruinous political path—people who cast 52% of their votes for communists or neo Nazis, and who have proven completely unable to take any responsibility for what has transpired.

Greece will probably respond to the failure of extreme left Syriza by electing even more extreme politicians. It seems likely that they will choose a strongman to “get things done.” I think people fail to understand how totalitarianism can happen in the 21^st century. Think of this as a YouTube tutorial video on the subject.

Full Faith and Credit

A financial crisis of similar magnitude will happen in the US someday. The only question is whether it will happen in 20 years or 50 or 100 or 200. But it is a virtual certainty. My only hope is that I won’t live long enough to see it.

Still, I know how to prepare for it. You know, in the old days before deposit insurance, people used to keep their money in five to ten different banks to diversify their counterparty risk. If a bank was perceived to be less creditworthy, the banknotes would trade at a discount.

I think that in the days of FDIC and various investor protections, we are lulled to sleep, believing that things really are safe when in reality, they are not. We were hours away from a complete and total financial collapse when the Reserve Primary fund broke the buck and there was a run on the money market mutual funds. We were that close.

After those dark days in 2008, I vowed that I’d never be in that position again.

You do sacrifice investment returns when you do this kind of stuff. Cash or gold or diamonds doesn’t yield anything. But then again, nowadays, neither do bonds. Don’t let the financial media shame you into thinking that taking basic emergency precautions to protect yourself financially is somehow “crazy.”

You can overdo it, though. You don’t need that many cans of pork and beans.

Jared Dillian

The article The 10th Man: “It Could Never Happen Here” was originally published at mauldineconomics.

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Weekly Crude Oil, Gold, Silver and Coffee Markets Recap with Mike Seery

Our trading partner Mike Seery is back this week to give our readers a weekly recap of the futures market. He has been a senior analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets.

Crude oil futures in the August contract are up $.25 this Thursday afternoon in New York as this is the last trading day of the week due to the Fourth of July holiday currently trading at 57.22 a barrel while settling last Friday at 59.63 hitting a 10 week low as I’ve been recommending a short position for over a month and if you took that trade you’ve been very patient as prices have gone nowhere except for yesterday’s trade finishing down over $2 so continue to place your stop above the 10 day high which stands at 61.57 as the chart structure will start to improve next week as well.

Crude oil prices are right at major support as the $57 level is critical in my opinion and if prices do break that I think we could head much lower so continue to play this to the downside as large supplies continue to put pressure on this market as a build in crude oil inventories surprised the market yesterday as the U.S dollar also remains stubbornly strong. Currently we are in the strong demand season for gasoline as many drivers will be on the road this weekend, however the trend is your friend and the trend no matter how stubborn it has been in recent weeks is to the downside in my opinion as I remain bearish.
Trend: Lower
Chart Structure: Improving

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Gold futures in the August contract settled last Friday at 1,173 an ounce while currently trading at 1,163 as I’ve been recommending a short position when prices broke the 1,170 level while placing your stop loss above the 10 day high which stands at 1,201 risking around $31 or $1,000 per mini contract plus slippage and commission. Gold futures are trading below their 20 and 100 day moving average breaking out to a 3 ½ month low as a possible retest of the contract low of 1,144 is in the cards in my opinion as I was recommending a short position a month ago getting stopped out so here I’m trying again to the downside as I’m a trend follower and the trend clearly in my opinion is lower.

Gold prices have been very weak despite a possible Greece exit while as I remain very pessimistic as I see no reason to own gold at the current time as the stock market still looks strong and if Greece cannot rally gold I don’t know what can so take advantage of any rallies as the chart structure will start to improve in the next couple of days as the stop will be lowered to 1,187 as the long-term downtrend line is also intact. As a trader you must forget about your previous trade’s winners or losers and stick with your trading system as sticking to the rules over the course of time is the way to go instead of constantly flip-flopping.
Trend: Lower
Chart Structure: Improving

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Silver futures in the September contract settled last Friday in New York at 15.77 an ounce while currently trading at 15.70 in a very nonvolatile shortened trading week as I’ve been recommending a short position when prices broke 15.80 and if you took that trade continue to place your stop above the 10 day high which stands at 16.26 risking around $560 per mini contract plus slippage and commission as the chart structure is very solid at the current time.

Silver futures are right at a four month low trading below their 20 and 100 day moving average telling you that the trend is to the downside as the chart structure will improve next week and will be lowered in Tuesdays trade to 16.04 so be patient as the monthly unemployment number was released today basically pretty neutral sending gold slightly lower and having very little impact on silver prices as the volatility has slowed down tremendously.

Silver prices generally are one of the most volatile commodities in the world, however in recent months has been very quiet but something will happen in this market as I’m hoping it’s to the downside as I see no reason to own the precious metals at the current time as I still do believe all of the interest lies in the S&P 500 as money flows will continue to flow out of the precious metals and put into the stock market in my opinion.
Trend: Lower
Chart Structure: Improving

Get more of Mike's call on the Commodity Markets

Coffee futures in the September contract are hitting a four week low continuing its grinding bearish trend settling last Friday at 133.45 a pound while currently trading at 127.25 down 600 points for the trading week looking to break the contract low of 126.30 as I’ve been sitting on the sidelines in this market for several months as the trend is lower to neutral at the current time.

As I’ve stated in previous blogs I think coffee is forming a bottoming pattern and if I was a producer I think prices are cheap enough to start accumulating, however as a speculator I see no reason to enter into this market at the current time. Coffee futures are trading below their 20 and 100 day moving average telling you that the short term trend is to the downside, however the 10 day high as over 1000 points away risking about $4,000 from today’s price levels as that does not meet my criteria to enter into a trade so I remain neutral on this as I think the downside is limited in my opinion.

Many of the agricultural markets have rallied including sugar which is also grown in Brazil but we have large supplies of coffee at the current time as I don’t see any large price movement here in the short term as volatility remains relatively low especially for such a historically volatile commodity.
Trend: Lower
Chart Structure: Improving

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Capital Controls and a Bank Holiday in Greece… Here’s How You Can Profit

By Nick Giambruno

For the unprepared, it happens like a mugging….


When you hear a central banker or politician deny that something is going to happen to bank depositors, you can almost be certain that it will happen. And probably soon. Coming from a government official, the real meaning of “No, of course not” is “Could be tomorrow.”

There’s a reason for the dishonesty. The government needs to take the public by surprise. Otherwise they won’t get the results they want from capital controls or a bank holiday. The term bank holiday is a politician’s euphemism. When one happens, you won’t be celebrating. You won’t be able to access your bank account, and you’ll be worried.

How will you get by, and how long will the lockout last? And when it ends, will all your money still be there? Will any of it remain? Calling the experience a bank holiday is like calling a street mugging a surprise party. Once the banks are closed - or on “holiday,” as the government puts it - the politicians are free to help themselves to as much of the customer deposits (including yours) as they want. It’s like an "all you can steal" buffet.

A bank holiday usually dovetails with capital controls, which are restrictions on the free flow of money out of the country. Capital controls make it hard for the country’s remaining wealth to dodge a future mugging.
Bank holidays and capital controls are all about the government maximizing the amount of money available for them to confiscate during a crisis. Pen up the sheep, and they’re easier to shear.

It’s a common pattern… 1) country in financial trouble, 2) government denials, 3) surprise bank holiday, 4) wealth confiscation, and 5) capital controls.

It’s a pattern we’ve seen repeated in many countries in economic crisis.

We saw it in Cyprus during their banking crisis of 2013. The trap slammed shut without warning on an otherwise ordinary Saturday morning. The government declared a surprise bank holiday. Capital controls and a bank deposit confiscation followed. It occurred despite repeated promises from the highest Cypriot politicians that bank deposits would be safe.

And now we are seeing the same pattern in Greece.

For the past month, Greece’s government has been denying that it intends to impose capital controls. Yesterday, Sunday morning, the Greek Finance Ministry repeated the denial yet again. Then on the same day - a few hours later - the Greek government declared a weeklong bank holiday. And they would impose capital controls after all.

But don’t worry. The Greek Prime Minister promised that bank deposits would be "completely safe.”
Rather than being “completely safe,” they are far more likely to be harvested by the Greek government, which is free to do as so many troubled governments have done… take the money and run.

Given Greece’s years of chronic financial weakness, none of this should come as a surprise.

There was ample time for any Greek citizen to protect himself from what the government is now doing. But now, with the bank holiday in place, it’s too late. Moving money into something that Greek politicians can’t steal with a couple taps on a keyboard - like a Greek bank account - would have bought a large measure of protection.

A bank account in another EU country like Austria, a piece of real estate in South America, some physical gold in Singapore or a brokerage account in Hong Kong would have been just what the doctor ordered. Most people understand that it’s foolish to keep all their eggs in one basket. Yet they fail to go far enough in applying the principle. Diversification isn’t just about investing in multiple stocks or in multiple asset classes. Real diversification - the kind that keeps you safe - means holding assets in multiple countries, so that you’re not overexposed to the economic and political risks that are present in every country.

The problem is, despite having options available to them, many Greeks had a “this can’t happen here” mentality. So they did nothing to prepare. The reality is, what happened in Greece can happen in any country, as it has happened throughout history.

But could it really happen in the US? According to Judge Andrew Napolitano, the troubling answer is YES. The judge is a legal expert. He knows all about bank holidays, capital controls, and other shenanigans politicians pull. The judge has said, “People who have more than $100,000 in the bank are targets for any government that’s looking for money to shore up its own inability to manage its finances.”

The whole ordeal in Greece is yet another example of why international diversification is so important. It’s a prudent strategy because it frees you from absolute dependence on any one country. Achieve that independence, and events or policies where you live can never dominate your life. Wealthy families have been doing it for centuries. Today, with modern communications, international diversification is within everyone’s reach.

International Man’s mission is to help you protect your personal freedom and make the most of financial opportunity around the world. Global diversification is at the heart of it. Discovering the best investment opportunities around the world is another. And, ironically, the best opportunities often show up after a government has done its worst to a country. For example, in places like… Greece.

Investor sentiment in Greece is nearing the point of maximum pessimism… the point at which almost nobody wants to buy. Prices of Greek stocks have already crashed headfirst into the pavement, so we may be getting close to the best time to buy. As Baron Rothschild advised: Buy when the blood is in the streets.

That’s what crisis investing is all about, and it’s enormously profitable.

Seeking out home runs in crisis markets is exactly what Doug Casey and I do in each monthly issue of Crisis Speculator. Back in 2013 there was another crisis in a Mediterranean country… Cyprus. Doug and I put our boots to the ground in Cyprus to search the rubble for investment bargains that would be too good to resist. And we found them.

Despite all the ugly headlines, sound, productive, and well run Cypriot businesses continued to produce earnings and pay dividends. Anyone with a little money and a cool head could have bought their stocks on the ultra cheap.

One of the Cyprus companies we recommended has more than tripled as of this writing. Another has more than doubled. Two others have come close to a double. Our readers have loved the experience.
We expect that even bigger bargains are emerging nearby, in Greece.

The financial crisis in Greece is not going to destroy the solid companies operating there. But it is going to make their stocks extremely cheap. And that could mean huge profits for you.

For full coverage of this rich profit opportunity, be sure to check out Crisis Speculator by clicking here.

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Shoot the Dog and Sell the Farm

By John Mauldin 

“If this were a marriage, the lawyers would be circling.”

The Economist, My Big Fat Greek Divorce, 6/20/2015

Greece is again all the buzz in the media and on the commentary circuit. If you’re like me, you are suffering terminal Greece fatigue. You just want Greece and its creditors to “do something already” rather than continually coming to the end of every week with no resolution, amid finger pointing and dire warnings from all sides about the End of All Things Europe – maybe even the world.

That frustration is a common human emotion. Perhaps the best and funniest illustration (trust me, it is worth a few minutes’ digression) is the story about one of my first investment mentors, Gary North, who was working in his early days for Howard Ruff in Howard’s phone call center before Gary began writing his newsletters and books. (Yes, I know I am dating myself, as this was the late ’70s and early ’80s, just as I was getting introduced to the investment publishing business. And for the record, I knew almost everyone in the publishing business in the ’80s. It was a very small group, and we got together regularly.)

Howard set up a phone bank where his subscribers could call in and ask questions about their investments and personal lives. One little lady had the misfortune to get Dr. Gary North on the line. (Gary was the economist for Congressman Ron Paul and went on to write it some 61-odd books, 13,000 articles, and more – all typed with one finger. He is a human word processing machine.)

This sweet lady lived way out in the country and was getting older. She asked Gary if he thought it would be a wise idea for her to move into the city (I believe it was San Francisco) to live with her daughter. Not knowing the answer, Gary helped her work out the pros and cons over the phone, and she decided to move. A few days later she called back and said that she couldn’t bring her dog with her because of the rules at her daughter’s apartment. It turns out she couldn’t live without her dog, so Gary helped her come to the conclusion that she could stay in the country.

A few days later she called him back asking whether she should change her mind, and Gary once again help her to come to a conclusion. This went on for several weeks, back and forth, move or not move, dog or no dog. Finally she called one last time. Gary, in utter exasperation and not being infinitely tolerant of indecisive people, said, “Look lady, just shoot the dog and sell the farm.” (For the record, I hope she didn't really shoot the dog. I like dogs.)

That is where most of us are with the Europeans and Greeks. I have devoted a great deal of space in this letter to Greece over the past five years and have visited the country and corresponded with many analysts and citizens about the situation. And while I want to briefly outline the Greek situation again today, as there are some subtle nuances to consider, I think this juncture is a teaching moment about the larger picture in Europe. In fact, watching this process, I have come to change my mind about the timing of what I see is the endgame for Europe and European sovereign debt. I think exploring that issue will make for an interesting letter.

Economic crises go through cycles. Here’s a chart from the clever folks at Valuewalk.com (via my friend Jonathan Tepper on Twitter).



https://twitter.com/valuewalk/status/612948290267688960

The Greek situation is presently caught in those two bubbles on the bottom. European leaders held summit meetings this week to consider new breakthrough concessions offered by Greek Prime Minister Alexis Tsipras. Let the champagne flow. Except those concessions were rejected, and the Greeks rejected the counteroffer as of this afternoon. But it’s not quite midnight yet.

Unfortunately, the wheel of debt never stops turning. If this solution is like countless others floated in the last five years, we will soon learn that it has no substance or simply won’t work. We will then reenter the crisis phase.

Every cycle breaks eventually. If you forget everything that’s happened to this point and re-imagine the crisis as an economic standoff between Greece and Germany, you have to say Germany will win. It outweighs tiny Greece in every possible category. The real question is why Germany let the fight go on this long. We will deal with that in a minute.

Note that this observation isn’t about which country should win; it is about who will win. Greece has some legitimate grievances. Unfortunately, these grievances aren’t going to matter in the end.

Poster Children for European Profligacy

My friend David Zervos of Jefferies & Co. has no doubt who will win. He sent me this note on June 17.

The bell is tolling for Alexis [Tsipras]. European leaders from all sides have abandoned him as he burns through every last bridge that was once in place. His only meeting of importance during this crucial week of negotiation is with Putin – which clearly does not inspire any confidence for a near term resolution. 

It is actually amazing that we have not seen any of the left-leaning party leaders from the rest of Europe running to Tsipras’ side as he truculently engages his paymasters. Where are all these European anti-austarians? Of course they are hiding from the Germans, hoping not to receive the same fate as Alexis. So there he sits, alone and under his last Soviet held bridge, just like Hemingway's Robert Jordan. He is waiting to cause just a little more damage before his time is up. 

In the end, there is no question that the Germans have executed a near flawless plan to humiliate and vilify Greece. The Greeks now stand as poster children for European profligacy. And they are being paraded through every town square in the EU, in shackles, as the bell tolls near the gallows for their leader. And to be sure, making an example of Greece is a probably the greatest achievement for the fiscal disciplinarians of Europe. Maastricht never had any teeth. But this exercise is impressive. It shows that fiscal excess will be squashed in Europe. The Portuguese, Spanish, and Italians are surely taking notice. And in the days that lead up to a Greek default on 30 June, and then more importantly on 20 July, these disciplinarians will surely display their power for all to see.

Oddly enough, I actually think this has been the German plan all along. With no real way to ensure fiscal discipline through the treaty, they resorted to killing one of their own in order to keep the masses in line. It explains why Merkel took out Samaras when she knew a more hostile government would surely emerge in Greece. This was masterful political manipulation.

The 1992 Maastrict Treaty created the European Union and led a few years later to the euro currency. Which I said at the time would be a disaster. And it has been. Leaders have been wrestling with its fundamental flaw almost from the beginning. The EU has no way to enforce fiscal standards on its member nations. The member nations likewise have no way to devalue the currency in their own favor. This can’t go on forever – and it won’t.

Germany, by virtue of its sheer size and its favored position in the bureaucratic scheme of things, grew wealthy partly by exporting to the European periphery: Greece, Italy, Spain, Portugal, and Ireland. (The rest of their 40–50% of exports of GDP come from exporting to the rest of Europe and the world. They have benefited massively from a currency that has been and continues to be weaker than it would be if it were just a German currency.)

The peripheral countries essentially exported all their cash to Germany (and to some extent northern Europe) in exchange for German goods. When they ran out of cash, not just because of their purchase of export goods but because of the uncompetitive nature of their bureaucratic and labor systems and the rather large unfunded government expenditures, they wanted yet more cash to continue to spend on government services.

Germany and the rest of Europe offered vendor financing. German and the rest of European banks loaned money to Greeks so the Greeks could buy German goods and perpetuate their government spending habits. In the early part of the last decade, tt was a deal that was seemingly made in heaven as Greece got to borrow money at German rates and Germany got to sell products in a currency driven by the valuation of the peripheral countries.

This arrangement left Greece and the other PIIGS deep in debt. Much like the American homeowners who lived beyond their means, Greece found itself overleveraged and undercapitalized. And here we are.
To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.

The article Thoughts from the Frontline: Shoot the Dog and Sell the Farm was originally published at mauldineconomics.com.

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Weekly Crude Oil, Gold, Coffee and Sugar Markets Recap with Mike Seery

Our trading partner Mike Seery is back this week to give our readers a weekly recap of the futures market. He has been a senior analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets.

Crude oil futures in the August contract are trading lower for the 3rd consecutive trading session currently trading at 58.87 a barrel while settling last Friday in New York at 59.97 down about $1 for the trading week still stuck in nonvolatile sideways trend despite the fact that prices hit a two week low in today’s trade as I’ve been recommending a short position for over a month and if you took the original trade continue to place your stop loss above the 10 day high at 61.81 risking around $3 or $1,500 per mini contract plus slippage and commission. Crude oil is trading below its 20 day but still slightly above its 100 day moving average as I’ve traded crude oil for 20 years and I can’t remember such a nonvolatile stretch like we’ve had in the last several months consolidating the giant move to the upside. The next breakout level is below 57.00 and if that level is broken prices could move sharply lower but that’s a big if as volatility is extremely low at the current time. Next week is the 4th Of July holiday weekend as I think volatility will remain low until Friday’s monthly unemployment report which could dictate the short term trend.
Trend: Lower
Chart Structure: Improving

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Gold futures in the August contract settled last Friday in New York at 1,202 while currently trading at 1,170 an ounce down about $30 for the trading week remaining incredibly choppy as I was recommending a short position getting stopped out in last week’s trade when prices bumped up against 1,200 as I’m sitting on the sidelines at the current time waiting for another breakout to occur and that could happen soon as prices remain very weak. Gold futures are trading below their 20 and 100 day moving average looking to break the critical 1,170 level and the second critical level is 1,160 if that level is broken I would have to think that the bear market is underway as I see no reason to own gold at the current time as all the interest is in the stock market which is right near all time highs. Gold only seems to rally due to the fact that Greece could possibly exit the Euro Zone and that’s why I got stopped out in last week’s trade. The chart structure in gold is outstanding but if prices do break I will be recommending a short position while placing my stop above the 10 day high which 1,205 risking around $35 or $1,200 risk per mini contract plus slippage and commission so be patient and wait for the breakout to occur.
Trend: Mixed
Chart Structure: Improving

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Coffee futures in the September contract are trading above their 20 but slightly below their 100 day moving average continuing its sideways trend settling last Friday in New York at 130 while currently trading at 136 as I do think prices have bottomed out around the 128 level, however prices have not hit a four week high so I’m waiting for a breakout to occur. The chart structure is improving dramatically as volatility remains relatively low as I do think a breakout to the upside is in the cards as prices hit a 2 week high in today’s trade as many of the agricultural markets have bottomed and are moving higher especially the grain market due to weather problems. The problem with coffee is the fact that we had huge production coming out of Brazil coupled with the fact that of a very weak Brazilian Real against the U.S dollar pushing many agricultural products that are grown in Brazil lower including orange juice, sugar and coffee in 2015, however everything comes to an end and it certainly looks to me that prices are going higher. I deal with many producers down in Brazil and in my opinion I would start to buy the actual cash coffee as I think prices are low enough but for speculators wait for the breakout which would be a 4 week high before entering which could happen in next week’s trade.
Trend: Mixed
Chart Structure: Excellent

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Sugar futures in the October contract settled last Friday at 11.55 a pound while currently trading at 11.92 up about 37 points for the week as I’ve been recommending a short position over the last month and if you took that trade continue to place your stop loss above the 10 day high which is just an eyelash away at 12.12 risking around 20 points or $220 dollars per contract plus slippage and commission as the chart structure is outstanding at the current time. Sugar prices hit a 6 year low as I remember in 2010 prices were trading around 35 rallying with many of the commodity markets due to quantitative easing as that’s how far prices have dropped as production numbers in Brazil are relatively high. Harvest is underway which generally creates a seasonal low at harvest time, however I’m a technical trader and I will continue to stick to the rules and place my stop at the 10 day high as overproduction over the last several years has sent prices to multi year lows and if we are stopped out then look at other markets that are beginning to trend.
Trend: Lower
Chart Structure: Outstanding

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Weekly Gold, Silver and Sugar Markets Recap with Mike Seery

Our trading partner Mike Seery is back this week to give our readers a weekly recap of the futures market. He has been a senior analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets.

Gold futures in the August contract settled last Friday in New York at 1,172 an ounce while currently trading at 1,201 an ounce rallying sharply on rumors of a Greece exit possibly happening over the weekend sending prices sharply higher as I was recommending a short position from around the 1,170 level getting stopped out in yesterday’s trade losing around $30 or $1,000 per mini contract plus slippage and commission.

Janet Yellen and the FOMC committee did not raise interest rates earlier in the week sending gold sharply higher hitting a 3 week high but I still remain skeptical of this rally as a deal with Greece will occur in my opinion as the stock market still remains strong keeping money out of the gold market in the short term.

Gold prices have been trading sideways for quite some time breaking out a couple weeks back as this trade went nowhere until yesterday sending high volatility back into this market as I will sit on the sidelines and look at other markets that are beginning to trend as gold remains extremely choppy at the current time.

The U.S dollar is trading near a 6 month low and that’s propping up the precious metals in today’s trade as the next major level of resistance to the upside is 1,225 but I will wait for better chart structure to develop. Trend: Mixed
Chart Structure: Poor

What's Behind the "Big Trade"

Silver futures in the July contract settled last Friday at 15.82 an ounce while currently trading at 16.01 continuing its choppy trend right near critical support in my opinion as prices have not rallied much despite the fact that gold rallied $28 dollars in yesterday’s trade . I do believe if 15.40 is broken this market turns extremely bearish, however prices have rallied off that level many times so be patient and wait for the true breakout to occur as I’m sitting on the sidelines at the current time.

Silver futures are trading below their 20 and 100 day moving average telling you that the trend is to the downside, however I don’t like to trade choppy markets so be patient and wait for the chart pattern to improve while keeping a close eye on 15.40 because if that’s broken I think prices could head substantially lower as I don’t see any reason to own the precious metals at the current time.

The problem with the precious metals is the fact that U.S interest rates are on the rise coupled with the fact of a strong U.S dollar longer term as all the interest remains in the stock market which is still right near an all-time high so wait for the true breakout to happen.
Trend: Lower
Chart Structure: Poor

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Sugar futures hit a fresh 6 year low this Friday afternoon in New York currently trading at 11.12 a pound after settling last Friday at 11.72 closing right at session lows as I’ve been recommending a short position from 12.00 & if you’ve been following any of my previous blogs you understand that this trend is getting stronger as prices are trading far below their 20 and 100 day moving averages.

Sugar prices have traded lower 4 out of the last 5 trading sessions and if you took the original trade continue place your stop loss above the 10 day high which currently stands at 12.25 as the chart structure is poor at the current time due to the fact that prices continue to head lower on a daily basis.

Sugar production has been massive over the last several years sending large supplies onto the market coupled with the fact that the Brazilian Real is historically weak against the U.S dollar which continues to put pressure on sugar prices as I’m looking to add more contracts to this position once the chart structure improves and the risk/reward meets criteria which could happen in the next couple of days.
Trend: Lower
Chart Structure: Poor

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Socialism Is Like a Nude Beach - Sounds Like a Great Idea Until You Get There

By Jared Dillian

I’ve been following the activities of Syriza for a long time. They started putting up big numbers in the polls in Greece three or four years ago. Syriza has a message that’s very popular with Greeks: Screw Germany. The word they use to describe what’s happened to Greece during the period of time since the debt crisis is “humiliation.”

To be fair, if you owe a lot of money to someone, it can be tempting to give them the finger. When Greece’s debt was restructured, it was done in such a fashion that none of the debt was really forgiven, but the maturities were extended far out in the future. Since Greece doesn’t grow (for structural, demographic, and cultural reasons), this is known as extend and pretend. Everyone knew, even back then, that the only hope Greece would have to avoid default would be whatever ability they had to refinance.

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Greece has been struggling under the yoke of this debt over the last few years, and the Greeks are sick of being serfs. So Europe gets the bird, although deep down, Greece doesn’t really want to drop out of the euro. They get a lot of benefits from being part of the Eurozone, namely purchasing power and low interest rates.

So naturally, having and eating their cake simultaneously is the goal.

But Alexis Tsipras (the head of Syriza) will threaten to not pay to get what he wants, and it will be interesting to see if Germany will call his bluff. The German people have a pretty low opinion of Greece these days, so if it’s politically palatable to eject Greece from the euro, Merkel might do it.

But Tsipras at least has a credible bargaining chip: He says he can deliver higher tax revenues through better enforcement, as Greeks are notorious tax cheats. If he can pull it off, then Greece may not default. That’s all a very nice story, but I don’t believe it for a second. There will be no increased tax revenue. It’s all talk.

I want to talk a little about Syriza and who they are, because the mainstream press likes to frame them as an “anti austerity” party. But they are much more than that. In reality, they are just one step away from full communism.

If you don’t believe me, take a look at the Syriza Wikipedia page. SYRIZA, which is an acronym of the Greek words for Coalition of the Radical Left, until recently, wasn’t really a party at all—just a collection of parties cobbled together under the auspices of screwing creditors.

Here’s a list of the parties that coalesced under the umbrella of Syriza:

• Active Citizens
   
• Anticapitalist Political Group
   
• Citizens’ Association of Riga
   
• Communist Organization of Greece (KOE):
   
• Communist Platform of Syriza: Greek section of the International Marxist Tendency
   
• Democratic Social Movement (DIKKI)
   
• Ecosocialists of Greece
   
• Internationalist Workers’ Left (DEA)
   
• Movement for the United in Action Left (KEDA)
   
• New Fighter
   
• Radical Left Group Roza
   
• Radicals
   
• Red
   
• Renewing Communist Ecological Left (AKOA)
   
• Synaspismós
   
• Union of the Democratic Centre
   
• Unitary Movement
   
• And a number of independent leftist activists

Sounds like some nice folks you’d have over for dinner and a game of Trivial Pursuit.

In addition to debt forgiveness, Syriza wants a bunch of other stuff, including forgiveness of bank debt for people who are unable to meet their obligations. It’s no coincidence that the Greek stock market was down 13% when the snap election was announced, led by the banks.

In the entire post-World War II period, you’d be hard pressed to find a farther-left national government in Europe than what Greece has now.

In the interest of full disclosure, I think it’s important to point out that I’m a very free-market kind of guy, and if something is bad for markets, I oppose it. I think the Greek Syriza experiment will turn out very badly, and the Greeks will end up with a sharply lower standard of living, however that comes about.

If it comes about by exiting the euro, an immediate consequence will be that they can count on a very weak drachma and high interest rates, possibly followed by high inflation. There will be food and energy shortages. There will be pretty much everything you had in Cuba and Venezuela, just in a less extreme form. Economic misery will abound. And just as a reminder, it is very hard for such places to be governed democratically.

Every once in a while finance gives us these gifts—little controlled experiments where you can watch how two competing economic philosophies play out. East and West Germany. North and South Korea. Even among the 50 US states. As you go around the world, you can see what works and what doesn’t.

Many people think the Scandinavian countries are socialist, but they aren’t—they are very capitalist economies with high levels of redistribution. Sweden was socialist from 1968-1993, but not today. Don’t confuse that with what is going on in Greece. Greece’s economy already is dysfunctional, and it’s going to get worse. We are going to see what happens to this little Marxist archipelago, formerly a member in good standing of the European Economic Community.

But I am getting ahead of myself. As of today, they’re still a member.

The trades here are very easy. It’s hard to have a stock market in a country where property rights barely exist. It’s hard to have bank loans or bonds where debt can be arbitrarily forgiven by the government. The nonexistence of capital markets is bad, contrary to what some folks think.

I don’t usually say things like this, but any Greek stock above zero is a potential short. Politics, like stocks, has a habit of trending—for a very long time.

P.S. Thanks to David Burge (@iowahawkblog) for the inspiration for this week’s title.

Jared Dillian

The article The 10th Man: Socialism Is Like a Nude Beach—Sounds Like a Great Idea Until You Get There was originally published at mauldineconomics.com.

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Thoughts from the Frontline.....France: On the Edge of the Periphery

By John Mauldin

"The emotional side of me tends to imagine France, like the princess in the fairy stories or the Madonna in the frescoes, as dedicated to an exalted and exceptional destiny. Instinctively I have the feeling that Providence has created her either for complete successes or for exemplary misfortunes. Our country, as it is, surrounded by the others as they are, must aim high and hold itself straight, on pain of mortal danger. In short, to my mind, France cannot be France without greatness.

– Charles de Gaulle, from his memoirs

Recently there have been a spate of horrific train wrecks in the news. Almost inevitably we find out there was human error involved. Almost four years ago I began writing about the coming train wreck that was Europe and specifically Greece. It was clear from the numbers that Greece would have to default, and I thought at the time that Portugal would not be too far behind. Spain and Italy clearly needed massive restructuring. Part of the problem I highlighted was the significant imbalance between exports and imports in all of the above countries.

In the Eurozone there was no mechanism by which exchange rates could be used to balance the labor-cost differentials between the peripheral countries and those of the northern tier. And then there's France. I've been writing in this space for some time that France has the potential to become the next Greece. I've spent a good deal of time this past month reviewing the European situation, and I'm more convinced than ever that France is on its way to becoming the most significant economic train wreck in Europe within the next few years.

We shifted focus at the beginning of the year to Japan because of the real crisis that is brewing there. Over the next few months I will begin to refocus on Europe as that train threatens to go off the track again. And true to form, this wreck will be entirely due to human error, coupled with a large dollop of hubris. This week we will take a brief look at the problems developing in Europe and then do a series of in-depth dives between now and the beginning of winter. The coming European crisis will not show up next week but will start playing in a movie theater near you sometime next year. Today's letter will close with a little speculation on how the developing conflict between France and Germany and the rest of its euro neighbors will play out.

France: On the Edge of the Periphery

 

I think I need first to acknowledge that the market clearly doesn't agree with me. The market for French OATS (Obligations Assimilables du Trésor), their longer-term bonds, sees no risk. The following chart is a comparison of interest rates for much of the developed world, which I reproduce for those who are interested in comparative details. Notice that French rates are lower than those of the US, Canada, and the UK. Now I understand that interest rates are a function of monetary policy, inflation expectations, and the demand for money, which are all related to economic growth, but still….



France's neighbors, Italy and Spain, have rates that are roughly double France's. But as we will see, the underlying economics are not that much different for the three countries, and you can make a good case that France’s trajectory may be the worst.

"No: France Is Not Bankrupt" – Really?

 

We will start with a remarkable example of both hubris and economic ignorance published earlier this year in Le Monde. Under the headline "No: France Is Not Bankrupt," Bruno Moschetto, a professor of economics at the University of Paris I and HEC, made the following case. He apparently wrote this with a straight face. If you are not alone, please try not to giggle out loud and annoy people around you. (Hat tip to my good friend Mike Shedlock.)

No, France is not bankrupt .... The claim is untrue economically and financially. France is not and will not bankrupt because it would then be in a state of insolvency.

A state cannot be bankrupt, in its own currency, to foreigners and residents, since the latter would be invited to meet its debt by an immediate increase in taxation.

In abstract, the state is its citizens, and the citizens are the guarantors of obligations of the state. In the final analysis, "The state is us." To be in a state of suspension of payments, a state would have to be indebted in a foreign currency, unable to deal with foreign currency liabilities in that currency….

Ultimately our leaders have all the financial and political means, through the levying of taxes, to be facing our deadlines in euros. And besides, our lenders regularly renew their confidence, and rates have never been lower.

Four things leap to mind as I read this. First, Professor, saying a country is not bankrupt because it would then be insolvent is kind of like saying your daughter cannot be pregnant because she would then have a baby. Just because something is unthinkable doesn't mean it can't happen.

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.

Don't miss this week's webinar "Advanced Study of the Opening Gap in Crude Oil"

Gold and Silver on the Verge of Something Spectacular

Gold and silver have taken more of a back seat over the past 12 months because of their lack of performance after topping out in 2011. Since then prices have been trading sideways/lower with declining volume. The price action is actually very bullish from a technical standpoint. My chart analysis and forward looking forecasts show $3,000 ish for gold and $90 ish for silver in the next 18-24 months.

Now don’t get too excited yet as there is another point of view to ponder....

My non technical outlook is more of a contrarian thought and worth thinking about as it may unfold and catch many gold bugs and investors off guard costing them a good chunk of their life savings. While I could write a detailed report with my thinking, analysis and possible outcomes I decided to keep it simple and to the point for you.

Bullish Case: Euro land starts to crumble, stocks fall sharply sending money into gold and silver which are trading at these major support levels which in the past triggered multi month rallies.

Bearish Case: Greece, Spain and Italy worth through their issues over the next few months while metals bounce around or drift higher because of uncertainty. But once things have been sorted out and financial stability (of some sort) has been created and the END OF THE FINANCIAL COLLAPSE has been avoided money will no longer want to be in precious metals but rather move into risk on.

Take a look at the gold and silver charts below for an idea of what may happen and where support levels are if we do see money start to rotate out of metals in the next 3-6 months.

Over the next few months things will slowly start to unfold and shed some light on what the next big move is likely going to happen to gold and silver.

The price movements we have seen for both gold and silver indicate were are just warming up for something really big to happen. It could be a massive parabolic rally to ridiculous new highs in 2012/2013 or it could be a huge unwinding of the safe havens as countries sort out their issues and the big money starts moving out of metals and into currencies and stocks.

Only time will tell and that is why I analyze the market multiple times per week to stay on top of both long term and short term trends.

To keep up with Chris Vermeulen and his thoughts on current trends and trades for gold, silver, oil, bonds and the stocks market checkout The Traders Video Playbook


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