How Should Investors Prepare For A Market Correction Or Bear Market?

Chris and Tom, of Palisades Gold Radio, cover a range of topics through the lens of technical analysis. They delve into the following questions:

• Where is capital flowing to in the current market environment? What are the stages of the market and where are we right now? Why is the 150-day moving average important for gauging what stage the markets are in?

• Comparing the S&P 500 to precious metals or miners, when will money flow toward the latter? How are the stock market and miners correlated? What do the topping candles on the monthly Gold chart indicate?

• Can the US dollar and Gold go up together or will they work against each other? Is Gold the ultimate safe play for global investors?

• What is the outlook for oil and how does its current position compare to 2007? What is the importance of established support levels and price action?

• AI stocks seem to be holding the market up right now. What happens when these begin to falter?

• How important is it for investors to be prepared for when the markets begin to roll over? What are the dangers of ignoring this eventuality? And what does a drawdown actually mean for an investor? What are the dangers of the Buy-and-Hold, diversification, and dividend-paying strategies?

• How do you pull money out of the stock market with your strategies? Is frequent trading better than having fewer trades? What is an Asset Revestor? What indicators, trend analysis, risk, and position management tools are used to protect capital and grow your accounts?

        Watch Chris' Interview Here

Crude Oil Fails at Critical Fibonacci Level

Crude Oil recently rallied up to the $63 level and failed. This level is a key Fibonacci price level based on our proprietary adaptive Fibonacci price modeling system. It represents a Fibonacci Long Trigger Level that would suggest that a new bullish price trend could setup if and when the price of Crude Oil rallies and closes above this level.

The fact that Crude Oil rallied above this level early on Monday, May 13, and failed to hold above this level suggests this is a failed price rally and a failed attempt to rotate higher. The failure of this price move suggests that Crude Oil may fall below current support, near $61, and begin a new downside price leg over the next 10+ trading sessions.

This Daily Crude Oil chart highlights the narrow price range, between $61 and $64.75, where a range of support and resistance levels are found with our proprietary Fibonacci modeling system. The fact that this failed price rally cleared the $63 level, then fell sharply afterward suggests that support for any upside price rally in Crude Oil is very weak. We would expect the price to rotate lower and retest the $61 level before breaking this level and moving much lower to find ultimate support.

We continue to attempt to reinforce one basic Fibonacci theory price rule for all of our followers to understand: Price must ALWAYS attempt to establish new price highs or new price lows at ALL TIMES.

We want to continue to push this message out to our followers so they can begin to understand how this price theory rule actually works in real-time application. This failed attempt to break the Bullish Fibonacci price trigger level is/was an attempt to establish a new price high. Failure to establish this new price high suggests that price will attempt to establish a new price low.

This weekly Crude Oil chart highlights the key Fibonacci trigger price levels that are located in a very narrow range near $63.25. The failed move higher, suggests a new price low will be attempted and ultimate support is currently near the $52.25 level.

With the US/China trade new still hitting the news cycles, we expect some extended volatility in the markets as well as currency price fluctuations in an attempt to mitigate the trade/stock market volatility/pricing. Additionally, we expect commodity price levels to come under continued pressure for two main reasons:

A. the U.S. Presidential election cycle continue to draw attention away from economic activity, and....

B. the global economy is already showing signs of economic and manufacturing weakness.

This US/China trade issue will certainly put more pressure on commodity prices while creating a renewed level of FEAR in the markets.

As we’ve been warning everyone for the past 5+ months – get ready for some really big moves in 2019 and 2020. This type of market is a skilled traders dream come true. Big moves, big rotations, and big profits. Also, if you have not read our Recent Gold Bottom article be sure to read that now.

This is proving to be an incredible trading year for traders who follow our trade alerts newsletter.

For active swing traders, you are going to love our daily trading analysis. On May 1st we talked about the old saying goes, “Sell in May and Go Away!” and that is exactly what is happening now right on queue. In fact, we closed out our SDS position on Thursday for a quick 3.9% profit and our other new trade started Thursday is up 18% already.

Second, my birthday is only three days away and I think it's time I open the doors for a once a year opportunity for everyone to get a gift that could have some considerable value in the future.

Right now I am going to give away and shipping out silver rounds to anyone who buys a 1-year, or 2-year subscription to my Wealth Trading Newsletter. I only have 4 left as they are going fast so be sure to upgrade your membership to a longer term subscription or if you are new, join one of these two plans, and you will receive:

1-Year Subscription Gets One 1oz Silver Round FREE 

(Could be worth hundreds of dollars)

2-Year Subscription Gets TWO 1oz Silver Rounds FREE 

(Could be worth a lot in the future)

I only have 4 more silver rounds I’m giving away ​​​​​​​so upgrade or join now before it's too late!

SUBSCRIBE TO MY TRADE ALERTS AND GET YOUR FREE SILVER ROUNDS!

Happy May Everyone!
Chris Vermeulen

Saudi Arabia's "Mini Oil Embargo" May Backfire

On October 20, 1973, Saudi King Faisal announced KSA was joining in an oil embargo against the United States and Europe in favor of the Arab position in the Yom Kippur War. In an interview with international media, King Faisal said:

“America's complete Israeli support against the Arabs makes it extremely difficult for us to continue to supply the United States with oil, or even remain friends with the United States."

The price of oil quadrupled in short order, a few months. The oil shortage in America was managed by gasoline rationing by President Nixon. Drivers could buy gasoline on “odd” or “even” days, depending on the last digit of their license plate. There was also a maximum dollar amount set on purchases of $10. Motorists often had to wait in line for an hour to buy gas.

The economic impact on the U.S. and the world economy was devastating. It caused a massive recession in 1974-75, even though the embargo was lifted in March 1974. The Saudis and other OPEC producers learned how “inelastic” (i.e., non-responsive to price) gasoline demand was and their ability to stuff their coffers even with small cuts to production.

However, this episode led to legislation to build the Strategic Petroleum Reserve (SPR) as a means to offset future supply disruptions and even deter them. At present, the SPR contains roughly 650 million barrels of crude oil located in underground salt domes across the Gulf Coast.

The drawdown capacity is rated at 4.4 million barrels per day. And supplies can begin flowing into the pipeline system with 13 days of a presidential order to commence.

Saudi’s Mini Oil Embargo 

Saudi Arabia appears to be attempting to starve the US of oil supplies in a “mini-embargo.” The idea would be to signal to the world that oil supplies are lower than otherwise would be reported internationally.

In the week ending February 22nd, imports from Saudi Arabia totaled 346,000 b/d, the lowest one-week level in the data series going back to 2010. The four-week trend of 491,000 b/d was also the lowest, and 23 percent lower than a year ago. This level does not even meet the requirements of Saudi Aramco’s Motiva refinery at Port Arthur, Texas, which has a capacity of 636,500 b/d.

Despite the lack of Saudi barrels, U.S. crude stocks have nevertheless built by 4.4 million barrels since the end of December. That is because crude production is 1.9 million barrels per day higher in the year-to-date v. last year. “Other supplies,” primarily natural gas liquids are 536,000 b/d higher in that same comparison. Meanwhile, net crude imports, including exports, were 1.877 million barrels per day lower in the year-to-date v. last year. Crude inputs to refineries were 89,000 b/d higher in that same comparison.

Trump Tweet

President Trump warned OPEC on February 25th: “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike - fragile!”

The Saudi mini-embargo to the U.S. may backfire by angering him. It would be a simple matter to replace Saudi imports altogether with a drawdown from the SPR until U.S. production rises another 500,000 b/d. Furthermore, the U.S. could replace Saudi barrels with imports from other sources, Iraq for example.

Conclusions

The Saudi ploy to drain U.S. crude inventories in support of oil prices is doomed to failure. U.S. domestic supply has risen greatly, and the net import need has dropped dramatically in the past year. The demand for OPEC’s oil is projected to drop by 1.0 million barrels per day in 2019. In 2020, the EIA projects that the U.S. will be a net oil exporter.

Furthermore, it could backfire if Trump calls for the NOPEC legislation – No Oil Producing and Exporting Cartels Act - to be passed. The House Judiciary Committee approved the bill. America's vulnerability to Saudi embargoes has long passed.

Check back to see my next post!

Robert Boslego
INO Contributor - Energies

The Dancing Bears

By Jeff Thomas

In the early 2000s, I recommended to associates that we were in for a major gold boom. Most thought that this was a ridiculous suggestion and didn’t buy a single ounce. I continued to recommend the purchase of gold regularly over the ensuing years, and the price continued to rise. Only in 2011 did they start to buy, at a time when gold was peaking. We were due for a correction and in late 2011, it arrived. For several years, the price has remained in the neighbourhood of $1,200—roughly the price it needs to be to bother removing it from the ground.

During that time, gold has periodically risen a bit, then gotten knocked down again. It’s understandable that this should happen. Central banks have a stake in holding down the gold price, since a rising gold price makes it appear more attractive than storing cash in banks. We’ve reached the point that the central banks have run out of tricks to float the economy and we’re already past due for a crash.

But crashes don’t always occur as soon as they become logical. As long as the public can be fooled into remaining confident in the system, a doomed economy can limp along for a bit before toppling. Statistics on unemployment and inflation can be fudged (and they have been). The stock market can be falsely pumped up (and it has been) in order to create the illusion that all is well. These factors, taken together with knocking down the price of gold periodically, helps to convince people that they should keep their money in cash and their cash in the bank, not in gold.

Just as in 2000, the number of people who understand that gold is not the equivalent of a stock but a store of wealth during dramatically changing times is quite small—certainly less than 1% and more likely less than 1/10th of 1%. Those that possess this understanding tend to hold gold long-term and are relatively unconcerned about fluctuations—even if they’re over $100 in a given month. They’re in it for the long haul and believe that, eventually, gold will rise dramatically and may well be the only safe haven after a crash.

But let’s go back to those speculators that waited until gold had risen dramatically before jumping on board the gold train. During the last four-year period, whenever gold rose as a result of economic and political developments, many of them would buy in once more, after it had risen significantly. Then, when it had been knocked down again, they tended to sell—often at the new bottom.

Of course, this behaviour is not limited just to the purchase of gold. In fact, a very high percentage of investors “play” the stock market in this way. They wait until everyone and his dog is buying in and the price is peaking, often buying on margin in order to maximize their positions. Then, when the bubble pops, they tend to ride the market down, hoping in vain that the price will return at least to what it was when they bought in. In essence, they tend to buy high and sell low almost every time.

The gold bears—those investors who don’t truly understand that gold is a very different animal from stocks—typically dislike gold but buy high when it becomes trendy to do so and sell low after it’s been knocked down. This dance is guaranteed to cause the gold bears to lose money time after time.

The dance is sometimes described as “chasing the market,” or “following the trends.” Brokers keep the dance going by advising their clients of established trends, telling them that they’re “missing out if they don’t get in now.” They serve as the market’s equivalent of a caller in a square dance: “Swing your client to and fro—watch his investment dollars go.”

Just as few investors understand the economic nature of gold, they also tend to overlook the fact that the broker doesn’t benefit from the success of the client—he makes his money when the client buys and sells frequently. So, of course his advice is going to be for the client to keep dancing.

So, will this dance go on as it is, ad infinitum? Well, no. There will be a dramatic change following a crash in the markets. Following any major crash, a panic occurs and whatever money is left on the table scrambles to find a new (hopefully safe) home. Following the coming crash, a portion of that money will head into gold. The price will rise dramatically, very possibly to such a degree that it can no longer be easily knocked down by the central banks.

At first the gold bears will assume that it’s an anomaly. Then, as gold passes $1,500, some will dip their toes in. As it passes $1,800, some will wade in. Beyond $2,000, this trend will strengthen quite a bit. As the crash deepens, stocks will tumble further. The bond bubble may also pop, increasing gold’s shine. At some point, bankers may begin to freeze accounts, create bank holidays, and/or confiscate deposits. At that point, gold will head into its long-predicted mania phase and the bears will be falling over each other, chasing the buying trend.

Gold will rise to a logical price in keeping with its value as a hedge against a collapsing economy. At that point, it would make sense for it to stop, but that’s not what will happen. Those who understand gold will cease their purchases and sit on what they have. But then a new dance will begin. The bears will become decidedly bullish. It’s important to note that, at this point, they will not fully understand why gold is rising so dramatically; they’ll just know that it is. They’ll want to get in on the gold rush and will do whatever they have to in order to keep buying.

They’ll find that physical gold is in short supply, as traditional holders are unwilling to sell, seemingly at any price. Potential buyers will offer $50 above spot, then $100 above spot, then more. They’ll additionally buy on margin in order to increase their position. It will be at this point that the mania will take hold. Irrationally high prices will become the new norm. How high will it go? $10,000? $20,000? Impossible to say. It will rise as high as desperation makes it rise, and we cannot now determine what that level of desperation will be.

A new bubble will be created, but this time, it won’t be in stocks or bonds. It’ll be in gold and, like all bubbles, it will eventually pop. This will occur when those who understand the nature of gold recognize that the price has far exceeded what’s logical and, as much as they value gold, they’ll sell a portion of their holdings and use the proceeds to invest in whatever assets have already bottomed and have nowhere to go but up.

They’re likely to retain a portion of their gold holdings for the same reason they always have, but will be happy to release a portion when it becomes significantly overvalued. This will cause the gold bubble to pop and the gold bears, who have recently become bulls, will wonder where it all went wrong. At this point, they still won’t understand gold; they’ll simply have chased yet another trend and lost.

So, is there a moral here? Well, if so, it’s simply that an investor should not become involved in a market that he doesn’t understand. Nor should he trust his broker to understand it for him. Ironically, as long as there have been markets, there have been those who go out on the dance floor without first learning the dance. A great deal of profit will be made by some gold investors, but the majority are likely to leave the floor with empty dance cards.

Regards,
Jeff Thomas

Editor’s Note: Gold is crisis insurance. Without it, you’re highly vulnerable. And there’s a good chance the next financial crisis could wipe you out.

New York Times best selling author Doug Casey thinks that crisis is coming soon. He shares all the details in this urgent video. Click here to watch it now.

The article The Dancing Bears was originally published at caseyresearch.com

A Chicken in Every Pot

By Jeff Thomas

That’s a pretty powerful statement. Is it historically supportable? Let’s visit a current example – Venezuela – to examine the overall process of collectivism, then look at a few other historical cases and see what we can learn.  Collectivism will always eventually destroy the economy of any nation, no matter how great it may be.

Venezuela – 17 Years of Collectivism
In 1980, Venezuela was deemed to be the fourteenth most economically free country in the world. Today, it’s a veritable train wreck, having failed in every conceivable way. How did this happen? Was it just bad luck? No, quite the contrary.

Venezuela’s prosperity was fueled primarily by the export of oil. The downward spiral began in the 1980s as a result of a drop in the world oil price. Until that time, there had been strong public support for the free market, but diminished oil receipts resulted in a decline in living standards for most all Venezuelans, which left them open to claims by collectivist political candidates that the whole problem was the free market. In 1999, they elected Hugo Chávez, who promised to solve the problem through collectivism – the promise of a chicken in every pot.

Mister Chávez began to take from the “haves” and provide largesse for the “have-nots.” Not surprisingly, he was highly praised by the have-nots. So, he went further. He nationalized many of Venezuela’s industries. Industry became less and less profitable, so less and less money flowed through the system each year. Eventually, the revenue to the government was insufficient to pay for the promised largesse. The leader then died and the new leader, Nicolás Maduro, inherited a zombie economy. In desperation, he introduced capital controls and increased nationalization and regulations, hoping to squeeze as much as possible from the economy before it went off the cliff. The result was a fully dysfunctional economy, replete with massive job losses, increasing shortages, and, finally, starvation.

Again, having once been number fourteen on the list of economically free countries, Venezuela is now at the very bottom – at number 152 – as a direct result of collectivism. As Margaret Thatcher once said, “The trouble with socialism is that, eventually, you run out of other people’s money.” Quite so. It does take a while, however. A newly collectivist state at first appears to be solving problems. What it’s really doing is feeding off of past profits. It gobbles up the economy’s store of nuts, but when these nuts are gone, that’s it – there’s no more, and the economy collapses. People starve.

Venezuela now has increasing shortages of food, hyperinflation has set in, the government is totally corrupt, the government is running out of funds for entitlements, and government healthcare is overburdened and failing. Like Cuba in the 1980s, there are no longer any dogs or cats on the streets of Caracas, and for the same reason as in Cuba – they’re being eaten by those with no other source of protein.

USSR – 74 Years
Vladimir Lenin introduced collectivism to Russia in 1917. He was able to do so because a revolution had just been completed by the people of Russia as a result of their dissatisfaction with a decline in the standard of living of most Russians. For decades thereafter, capitalism existed within the primarily communist system, but eventually, the parasite sucked the host dry. The USSR collapsed in 1991 for the same reason Venezuela is collapsing today.

China – 29 Years
Mao Tse-tung took over China in 1949 with a collectivist regime. But the 10,000-year rule he promised fell a bit short. It ended in 1978 in an economic dead-end. It followed the same path as the USSR, but the process was quicker.

Cuba – 57+ Years
Cuba lasted a bit longer. In the 1950s Cubans had become dissatisfied, due to the decline in the standard of living for the majority of Cubans, and were ripe targets for collectivist promises. They welcomed Fidel Castro in 1959. Cuba limped along for decades, but in recent years, the coffers of the state have dried up and the only hope to keep paying the salaries to government leaders lies in the grassroots cuentapropista movement – a rebirth of the free market. Collectivism in Cuba is nearing its end.

In each of the above countries, the pattern has been roughly the same.

• A formerly prosperous country experiences a period in which the standard of living for the majority of citizens drops significantly.
  
• The voters react by electing a new leader who promises a chicken in every pot (in essence, collectivism, although it is not always called that at the time of the election).
  
• The new leader begins to rob the producers of wealth to provide largesse for those with less. This has a direct positive benefit for those with less, resulting in an increase in voters supporting collectivist promises over a period of years.
  
• Over time, the free market experiences a permanent loss of wealth, resulting in diminished largesse for those who are now dependent upon it.
  
• The government imposes increasing capital controls and other regulations, which deteriorate the free market more severely, causing inflation, shortages of goods, loss of jobs, and eventually starvation and systemic collapse.
  
• The voters choose a new leader who promises fiscal responsibility.
  
• With a return to a freer market, prosperity slowly reappears.
  

The pattern is a predictable one because it’s based on human nature. An economic downturn occurs. The voters become suckers for false promises. The new collectivist government appears successful at first, because it’s feeding off the remains of the free market. But, eventually, it destroys the free market and collectivism crashes and burns.

So what does the above review tell us? Has the world learned its lesson? Not at all. What we can surmise from the above is that, whenever the standard of living for the majority of citizens drops significantly in a jurisdiction, the voters will be ripe for empty promises. In every such case, collectivism will appear to be the best solution.

Collectivism is by its very nature a parasitical system that creates nothing. It therefore will always eventually destroy the economy of any nation where it’s implemented, no matter how great that nation may be. The only uncertainty is the number of years required for destruction.

Today we’re witnessing the collapse of the primary jurisdictions of the former “free” world. They’re operating on a quasi-capitalist system that has been eroded by repeated injections of collectivism (primarily socialism and fascism). Increasingly, voters in each of these jurisdictions are becoming convinced that the promises made by collectivist candidates “just make sense.” As the system continues to spiral downward, as it inevitably will, the scales are likely to tip, not in the direction of a return to the free market, but in the direction of full-on collectivism.

Editor’s Note: Socialism often leads to economic and societal collapse, hyperinflation, shortages, and shrinking personal freedom. This has happened most recently in Venezuela.

The truth is, it can happen anywhere. The U.S. is not immune. In fact, it’s extremely vulnerable.
Increasing socialism, bad financial decisions, and massive debt levels will cause another financial crisis sooner rather than later.

We believe the coming crash is going to be much worse, much longer, and very different than what we saw in 2008 and 2009. Unfortunately, most people have no idea what really happens when an economy collapses, let alone how to prepare….

That’s exactly why Doug Casey and his team just released an urgent video.

It also reveals how financial shock far greater than 2008 could strike America by the end of the year. And how it could either wipe out a big part of your savings... or be the fortune-building opportunity of a lifetime.

Click here to watch now

The article A Chicken in Every Pot was originally published at caseyresearch.com.

Five Ways to “Crash Proof” Your Portfolio Right Now

By Justin Spittler

The U.S. economy is running out of breath. As you probably know, the U.S. economy has been “recovering” since 2009. The current recovery, now seven years old, is one of the longest in U.S. history. It’s also one of the weakest.

Since 2009, the U.S. economy has grown at just 2.1% per year, making this the slowest recovery since World War II. Last quarter, the economy grew at just 1.1%. We won’t know how the economy did during this quarter until late October.

But we don’t expect good news, and that’s because signs of a stalling economy are everywhere.

They’re in the job market. 
The U.S. economy created 29,000 fewer jobs last month than economists expected. 
They’re in corporate earnings.
Profits for companies in the S&P 500 have been falling since 2014.
They’re even in the price of oil.
Right now, U.S. demand for gasoline is weak, which tells us Americans aren’t driving as much.

Today, we’re going to look at even more evidence that the economy is struggling. If this flood of bad economic data continues, the U.S. could soon enter its first recession in seven years. Normally, this wouldn’t worry us. After all, recessions are a normal part of the business cycle. But we don’t expect the next downturn to be a “run of the mill” recession. According to Casey Research founder Doug Casey, the next financial crisis will be “much more severe, different, and longer lasting than what we saw in 2008 and 2009.” The good news is that there’s still time to protect yourself. We’ll show you how at the end of today’s issue. But first, you need to understand why we’re so worried about the economy.

The U.S. auto market is cooling off..…
The auto market has been one of the economy’s bright spots since the financial crisis. Auto sales have climbed six straight years. Last year, the industry sold a record 17.5 million cars. Many analysts see the booming auto market as proof that the economy is heading in the right direction. Like a house, a car is a big purchase. Most people will only spend thousands of dollars on a car if they think the economy is doing well. After all, you wouldn’t buy a new car if you thought you were going to lose your job next month.

Because of this, car sales can say a lot about consumer confidence.

Auto sales plunged last month..…
     Yahoo! Finance reported last week:

The seasonally adjusted rate of motor vehicle sales decreased to 17 million from 17.88 million in July. Both car and truck sales were down for the month. For August, total vehicle sales were 1,512,556, down from 1,577,407 for a decrease of 4.1%.

After rising 66 straight months, retail car sales have now fallen four out of the last six months. And this trend is likely to continue. According to The Wall Street Journal, the CEO of Ford (F) said he expects his industry to sell fewer cars this year than they did last year. He expects sales to fall even more in 2017.
This isn’t just bad news for automakers like Ford. It’s a problem for the entire economy.

If people buy fewer cars, they’re probably going to take fewer vacations. They’re going to eat out less. They’re going to buy new clothes less often. In other words, the big drop off in car sales could mean U.S. consumers are starting to cut back.

The U.S. manufacturing sector is weakening right now..…
Last week, the Institute of Supply Management (ISM) reported that its Purchasing Managers’ Index fell from 52.6 in July to 49.6 in August. This index measures the strength of the U.S. manufacturing sector. When the index dips below 50, it signals recession.

The U.S. services sector is hurting too..…
The services sector is made up of businesses that sell services instead of goods. It includes industries like banking and healthcare. The ISM Services Index fell from 55.5 in July to 51.4 last month. While this doesn’t indicate recession, last month’s sharp decline was still a major disappointment. Economists expected the index to hit 55.0. Last month’s reading was also the lowest since February 2010. More importantly, the services and manufacturing sectors are now weakening at the same time.

MarketWatch explained why that’s not a good sign last week:

[I]t’s unusual that both indexes would soften so much at the same time. The manufacturing index dropped to 49.4% from 52.6% in August and the ISM services gauge retreated to 51.4% from 55.5%. The combined reading of two indexes was also the weakest in six years.
Since these indexes often track closely with gross domestic product, the surprisingly poor turn has not gone unnoticed.

Right now, several key economic indicators are saying the economy is in trouble..…
We encourage you to take these warnings seriously. If you have any money in the stock market right now, take a good look at your portfolio. Get rid of any expensive stocks. They tend to fall further than cheap stocks during major sell offs. You should also avoid companies that need a growing economy to make money. These include airlines, major retailers, and restaurants; basically any company that depends on a healthy U.S. consumer.

Avoid companies with a lot of debt. If the economy continues to weaken, heavily indebted companies will struggle to pay their lenders. You don’t want to own a company that falls behind on its loans. We encourage you to hold more cash than usual. Setting aside cash will allow you to buy world class businesses for cheap after the next big sell off.

Finally, we recommend you own physical gold. As we often point out, gold is real money. It’s preserved wealth for centuries because it’s a unique asset. It’s durable, easily divisible, and easy to transport. It’s also survived every major financial crisis in history. This makes it the ultimate safe haven asset. These simple yet proven strategies will help “crash proof” your portfolio in case the economy continues to weaken. That’s never been more important.

To see why, watch this short presentation.

It talks about a major warning sign that one of Casey’s analysts recently uncovered. As you’ll see, this same warning appeared before the savings and loan crisis of the 1980s, before the ’97 Asian financial crisis and just before the 2000 tech crash.

More importantly, it explains how you can protect yourself today. Click here to watch.

Chart of the Day

The U.S. manufacturing sector is flashing warning signs. Today’s chart shows the ISM Purchasing Managers’ Index (PMI) going back to 2000. As we said earlier, this index measures the strength of the U.S. manufacturing sector. Last month, the ISM PMI hit 49.6. Any reading below 50 indicates recession.

You can see this index plunged below 50 during the last two recessions. It also sent out a few “false signals” over the years. It dipped below 50 but a recession never followed. Like any indicator, the ISM PMI isn’t perfect. Still, it’s worth keeping a close eye on. If manufacturing activity continues to weaken, other parts of the economy will too. And the ISM PMI is just one of many economic indicators flashing danger right now.

The article Five Ways to “Crash Proof” Your Portfolio Right Now was originally published at caseyresearch.com.

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Why These Huge Bank Stocks Could Go to Zero

By Justin Spittler

Europe’s banking system looks like it’s about to implode. As you probably know, Europe has serious problems right now. Its economy is growing at its slowest pace in decades. Policymakers are now more desperate than ever and are on the verge of introducing more "stimulus" measures. And Great Britain just voted to leave the European Union (EU).

These are all major concerns. But Europe’s biggest problem is its banking system. Over the past year, the Euro STOXX Banks Index, which tracks Europe’s biggest banks, has plummeted 46%. Deutsche Bank (DB) and Credit Suisse (CS), two of Europe’s most important banks, are down 63%. Both are trading at all time lows. We've warned you to stay away from these stocks. As we explained two weeks ago, Europe’s banking system is a complete disaster.

And it’s only getting worse by the day..…

European bank stocks have crashed over the past couple days. Yesterday, every major European bank stock ended the day down. Several fell more than 5%. A few plunged more than 10%. These are giant declines. Remember, these banks are the pillars of Europe’s financial system. Today, we’ll explain why this banking crisis could reach you even if you don’t live in Europe. But first, let’s look at why European bank stocks are crashing.

Europe’s banking system has major problems..…
Europe’s economy is barely growing. And negative interest rates are killing European banks. Regular readers know negative rates are a radical government policy. The European Central Bank (ECB) introduced them in 2014, thinking they would “stimulate” Europe’s economy. You see, negative rates basically turn your bank account upside down.

Instead of earning interest on your money in the bank, you pay the bank to hold your money. The geniuses at the ECB thought they could force people to spend more money by “taxing” their savings. But Europeans aren’t spending more money right now. They’re pulling cash out of the banking system and sticking it under their mattresses…where negative rates can’t get to it.

Negative rates are also eating into European bank profits…
Today, the ECB’s key interest rate is at -0.4%. This means European banks must pay €4 for every €1,000 they keep with the ECB. That might not sound like much. But it’s a big problem for European banks that oversee trillions of euros. According to Bank of America (BAC), European banks could lose as much as €20 billion per year by 2018 if the ECB keeps rates where they are.

The Euro STOXX Banks Index plunged 2.8% on Monday..…
Yesterday, it fell another 4.9%. The selloff hit everywhere from Frankfurt to Milan. Spanish banking giant Santander closed the day down 5%. The Bank of Ireland fell 8%. And Commerzbank AG, one of Germany’s biggest lenders, fell 9% to a record low. Commerzbank’s stock plunged after it said negative rates were eating into its profits.

Meanwhile, Deutsche Bank and Credit Suisse fell 3.7% and 4.7%, respectively. Investors dumped these stocks after learning that both are going to be dropped from the Euro STOXX 50 index, Europe’s version of the Dow Jones Industrial Average.

Italian stocks fell even harder yesterday..…
UniCredit, Italy’s largest bank, fell 7% before trading on its stock was halted. Regulators stopped the stock from trading due to “concerns about its bad loan portfolio.” The stock has plunged 72% over the past year. Bank Popolare di Milano, another large Italian bank, fell 10%. And Banca Monte dei Paschi di Siena, Italy’s third biggest bank, plummeted 16%. Monte Paschi plunged after a banking watchdog said it was in the worst shape of all European banks. It’s down 85% over the past year.

Italy is ground zero of Europe’s banking crisis..…
Right now, Italy’s banks are sitting on about €360 billion in “bad” loans, or loans that trade for less than book value. That’s almost twice as many bad loans as Italian banks had in 2010. According to the Financial Times, bad loans now account for 18% of all of Italy’s loans. That’s more than four times as many bad loans as U.S. banks had during the worst of the 2008–2009 financial crisis.

Policymakers are scrambling to contain the crisis..…
Last month, the Italian government said it may pump €40 billion into its banking system to keep it from collapsing. A couple weeks later, Mario Draghi, who runs the ECB, said he would support a public bailout of Italy’s banking system. That’s when the government gives troubled banks money and makes taxpayers pay for it.

We said these emergency measures wouldn’t fix any of Italy’s problems. At best, they’ll buy the government time. Unfortunately, policymakers will almost certainly “do something” if Europe’s banking system continues to unravel.

The ECB could cut rates again, which would only make it harder for European banks to make money. It could also launch more quantitative easing (QE). That’s when a central bank creates money from nothing and pumps it into the financial system. Right now, the ECB is already “printing” €80 billion each month. But again, this hasn’t helped Europe’s stagnant economy one bit.

Whatever the ECB does next, you can bet it will only make things worse..…
As we've shown you many times, governments don’t fix problems. They only create them or make problems worse. If you understand this, you can make a lot of money betting that governments will do the wrong thing.

Casey Research founder Doug Casey explains:

The bad news is that governments act chaotically, spastically.
The beast jerks to the tugs on its strings held by various puppeteers. But while it’s often hard to predict price movements in the short term, the long term is a near certainty. You can bet confidently on the end results of chronic government monetary stupidity.

According to Doug, gold is the #1 way to protect yourself from government stupidity..…
That’s because gold is real money. It’s protected wealth for centuries because it’s unlike any other asset. It’s durable, easily divisible, and easy to transport. Unlike paper money, gold doesn’t lose value when the government prints money or uses negative interest rates.

These stupid and reckless actions push investors into gold. They can cause the price of gold to soar. This year, gold is up 27%. It’s trading at the highest level since 2014. But Doug says it could go much higher in the coming years. If Europe’s banking system continues to unravel, investors will panic. Fear could spread across the world like a wildfire. And gold, the ultimate safe haven, could shoot to the moon.
If you do one thing to protect yourself, own physical gold.

We also encourage you to watch this short video presentation.
It talks about a crisis that’s been brewing since the last financial crisis—one that's currently being fueled by government stupidity. The bad news is that we’re already in the early stages. The good news is that you still have time to seek shelter. You can learn about this coming crisis and how to protect yourself by watching this free video. We encourage all of our readers to do so. It’s one of the most important warnings we’ve ever issued. Click here to watch it.

Chart of the Day

Deutsche Bank’s stock is in free fall. You can see in today’s chart that Deutsche Bank has plummeted 75% since 2014. Yesterday, it hit a new all time low. If Deutsche Bank keeps falling, investors could lose faith in the financial system. And a panic could follow. At least, that’s what Jeffrey Gundlach thinks.

Regular readers know Gundlach is one of the world’s top investors. His firm, DoubleLine Capital, manages about $100 billion. Many investors call him the “Bond King,” a title that PIMCO founder Bill Gross held for years. Like us, Gundlach thinks Europe’s banking system is in serious trouble. And like us, he thinks European policymakers will spring into action if things start to get ugly. Reuters reported last month:

"Banks are dying and policymakers don’t know what to do," Gundlach said. "Watch Deutsche Bank shares go to single digits and people will start to panic… you'll see someone say, 'Someone is going to have to do something'."

Right now, Deutsche Bank is trading under $13. Less than three years ago, it traded close to $50. If Europe’s bank stocks continue to plunge, the ECB will likely “double down” on its easy money policies. This won’t repair Europe’s economy… It will destroy the euro, the currency that the ECB is supposed to defend.
This is why it’s so important that you “crash proof” your wealth today. Click here to learn how.

The article Why These Huge Bank Stocks Could Go to Zero was originally published at caseyresearch.com.

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Why This Stock Rally Won’t Last…And What You Need to Do With Your Money Today

By Justin Spittler

Silver is sending us an important warning. Yesterday, the price of silver closed at $20.30, its highest price since July 2014. Silver is now up 45% this year. That’s nearly eight times better than the S&P 500’s 5.9% return. And it’s almost double gold’s 25% gain this year. If you’ve been reading the Dispatch, you know silver is rallying for the same reason gold’s taken off. Investors are worried about the economy and financial system.

Like gold, silver is real money. It’s also a safe haven asset that investors buy when they’re nervous. Unlike gold, silver is an industrial metal. It goes into everything from batteries to solar panels. Because of this, it's more sensitive to economic slowdowns. That’s why many folks think of silver as gold’s more volatile cousin.
Lately, silver has been acting more like a precious metal than an industrial metal. It’s soaring because the global economy is in serious trouble. Today, we’ll explain why silver is likely headed much higher. And we’ll show you the best way to profit from rising silver prices.

Silver has been in a bear market for the better part of the last five years..…
From April 2011 to December 2015, the price of silver plummeted 72%. This 56 month downturn was the longest silver bear market on record. As brutal as this bear market was, we knew it wouldn’t go on forever. That’s because silver, like other commodities, is cyclical. It experiences booms and busts. As you just saw, the losses in commodity bear markets can be huge. But the gains in commodity bull markets can be even bigger. During its 2008–2011 bull market, silver soared an incredible 441%. That’s why we watch commodities so closely. Every few years, they give you the chance to make huge gains in a short period of time.

On December 18, Casey Research founder Doug Casey said silver wouldn’t get much cheaper..…
Doug told Kitco, one of the world’s biggest precious metals retailers, that gold and silver were near a bottom:

My opinion is if it's not the bottom, it's close enough to the bottom. So, I have to be an aggressive buyer of both gold and silver at this point.

Doug’s call was dead on. Silver bottomed at $13.70 an ounce on December 17. That same day, gold bottomed at $1,051 an ounce. In other words, Doug was one day off from perfectly calling the bottom in gold and silver.

The price of silver has soared 49% since December..…
But it could head much higher in the coming years. Remember, silver soared 441% during its last bull market.
Silver is “cheap” too. It’s trading 58% below its 2011 high, even after this year’s monster rally. It’s also never been more important to own “real money.” That’s because it looks like the world is on the cusp of a major financial crisis. Doug explains:

Right now, we are exiting the eye of the giant financial hurricane that we entered in 2007, and we’re going into its trailing edge. It’s going to be much more severe, different, and longer lasting than what we saw in 2008 and 2009.

As longtime readers know, the last financial crisis caused the S&P 500 to plunge 57%. It sparked America’s worst economic downturn since the Great Depression. And it allowed the government to launch a series of radical “stimulus” measures, none which actually helped the economy.

BlackRock (BLK) sees tough times ahead too..…
BlackRock is the world’s biggest asset manager. It oversees $4.6 trillion. That’s more than the annual economic output of Japan, the world’s third biggest economy. BlackRock manages more money than Goldman Sachs (GS), JPMorgan Chase (JPM), and Bank of America (BAC). This makes it one of the world’s most important financial institutions…and one that probably understands the global economy better than almost any other company on the planet. Like us, BlackRock’s chief investment strategist, Richard Turnill, thinks the next few years could be very difficult. CNBC reported on Monday:

"This feels more and more like we're in an environment of low returns and high volatility for some time," Richard Turnill said on "Squawk Box.” "The period of political [Brexit] uncertainty ahead of us isn't going to last for weeks or quarters, but potentially for years," he said.

According to BlackRock, the “Brexit” made the global economy more unstable..…
If you’ve been reading the Dispatch, you know Great Britain voted to leave the European Union (EU) on June 23. The Brexit, as folks are calling it, shook financial markets from Tokyo to New York. It erased more than $3 trillion from the global stock market in two days. 

Then, stocks started to rally. By this Tuesday, global stocks fully “recovered” from the Brexit bloodbath. The S&P 500 and Dow Jones Industrial Average even hit new all time highs this week.

Many investors took this as proof that the worst was over. We, on the other hand, reminded readers to not lose sight of the big picture. We explained that stocks were rallying because they’re the least bad place to put your money right now. We encouraged you to not “get sucked back into the stock market.”

Larry Fink doesn’t think U.S. stocks should be rallying either..…
Fink is the chairman and CEO of BlackRock. That makes him one of the most powerful people in the world.
Like us, Fink isn’t “buying” this stock rally. CNBC reported yesterday:

"I don't think we have enough evidence to justify these levels in the equity market at this moment," Fink said Thursday on CNBC's "Squawk Box."

According to Fink, stocks are rallying for the wrong reasons:

He said the recent rally has been supported by institutional investors covering shorts, or bets that stocks would fall, and not individual investors feeling bullish.
"Since Brexit, we've seen ETF flows almost at record levels … $18 billion of inflows," Fink said. "However, in the mutual fund area, we're continuing to see outflows."
What that tells you is retail investors are pulling out, he said. "You're seeing institutions who were short going into Brexit … all now rushing in to recalibrate their portfolios."

In other words, this rally could fizzle out any day.

We recommend you invest with great caution right now..…
If you still own stocks, consider selling your weakest positions. Get rid of your most expensive stocks. Only hang on to companies that you know can make money in a long economic downturn. We also encourage you to own gold. As we said earlier, it’s real money. It’s preserved wealth for centuries because it possesses a unique set of attributes: It’s durable, easy to transport, and easily divisible. You can take a gold coin anywhere in the world and folks will instantly recognize its value.

We recommend most folks to hold 10% to 15% of their wealth in gold. Once you own enough gold, consider putting money into silver. It could deliver even bigger gains than gold in the years to come. To learn why, watch this short video presentation. It explains why the biggest threat to your wealth right now isn’t an economic recession, a stock market crash, or even a global banking crisis.

It’s something much bigger and far more dangerous. The good news is that you can protect yourself from this coming crisis. Watch this free video to learn how.

REMINDER: Our friends at Bonner & Partners are holding a special training series..…  
If you’ve been reading the Dispatch, you know part of our job is to share exciting opportunities with you when we hear about them. Today, we invite you to take part in a special training series hosted by Jeff Brown, editor of Exponential Tech Investor.

If you haven’t heard of Jeff, he’s an aerospace engineer, tech insider, and angel investor. His advisory, Exponential Tech Investor, focuses on young technology companies with big upside. For example, Jeff recommended an IT security company in October that’s already up 72%. Another one of Jeff’s picks has jumped 38% since February. And one is up 178% in less than a month.

In Jeff's training series, he reveals his secret to making money in technology stocks. He also talks about a HUGE opportunity taking shape in the technology space.  Click here to sign up for Jeff’s training series.

It’s 100% free and will take up less than 15 minutes of your time. Click here to register.

Chart of the Day

Silver stocks just hit a new three year high. Today’s chart shows the performance of iShares MSCI Global Silver Miners ETF (SLVP), which tracks large silver miners. As regular readers know, silver stocks are leveraged to the price of silver. It doesn’t take a big jump by silver for them to skyrocket. This year, silver’s 45% jump caused SLVP to soar 171%. It’s now trading at its highest level since April 2013.

If you think gold and silver are headed much higher like we do, you could put some of your money into gold and silver stocks. According to Doug Casey, these stocks could enter a “super bubble” in the coming years. Keep in mind, these are some of the most volatile stocks on the planet. Many gold and silver stocks can swing 5% or more in a day. If you can stomach that kind of volatility, you could see huge returns in gold and silver stocks over the next few years.

The article Why This Stock Rally Won’t Last…And What You Need to Do With Your Money Today was originally published at caseyresearch.com.

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The Bear Market in Commodities Is Over…Here’s How Casey Analysts Are Cashing In

By Justin Spittler

It’s official. The bear market in commodities is over. If you’ve been reading the Dispatch, you know commodities have been in a crushing bear market for more than five years. The Bloomberg Commodity Index, which tracks 22 different commodities, has plunged 58% since April 2011.

In January, it hit its lowest level since 1999. Then, commodity prices took off. According to the Financial Times, 15 out of the 22 commodities that make up the Bloomberg Commodity Index are up on the year. The price of oil is up 85% since February. Sugar is up 81% since August. Soybeans are up 33% since March.

The index is up 11%. It’s off to its best start to any year since 2008. And it’s up 21% since mid-January.
According to the popular definition, a bull market begins when a stock, commodity, or index rises 20% from a low. By that measure, commodities are “officially” in a bull market.

You can see how commodities have bottomed in the chart below:

For months, we’ve been saying commodities were close to a bottom..…
The 5-plus year bear market in commodities has slammed the world’s largest miners. According to accounting giant PricewaterhouseCoopers, the world’s 40 largest publicly traded miners lost a combined $27 billion last year. To survive, commodity companies have cut spending to the bone. They laid off hundreds of thousands of workers. They sold parts of their business and abandoned projects. Some companies even cut their prized dividends.

This is classic behavior of a bottom..…
As you may know, commodities are cyclical. They go through big booms and busts. That’s because commodities like copper, natural gas, and oil have unique supply/demand dynamics. For example, when oil prices get too low, many companies that produce oil go out of business. Also, when oil prices are cheap, folks are likely to use more of it. You’re likely to drive more when gasoline prices are cheap than when they’re expensive.

Eventually, prices get so low that demand exceeds supply. Prices bottom out and begin to rise. That’s when a commodity bear market turns into a commodity bull market. When a commodity bull market gets going, the gains can be huge. During the 2002–2008 commodity bull market, the Bloomberg Commodity Index rose 172%. Shares of some of the world’s largest mining companies climbed many times higher. For example, Anglo American (AAL.L) returned 464% over the period. BHP Billiton Limited (BHP) returned 1,106%.

The weak dollar has also given commodities a boost..…
The U.S. Dollar Index has fallen 5% this year. This index tracks the dollar’s performance against major currencies like the euro and Japanese yen. The dollar is the world’s most important currency. Most investors “think” in dollars. If you look up the price of sugar, corn, or gold, you’ll see its price in dollars. So when the dollar loses value, it takes more dollars to buy the same amount of a commodity. That’s why a weak dollar is good for commodities.

Still, there’s at least one reason to be skeptical about the rally in commodities..…
Commodities are the “building blocks” of the global economy. And Dispatch readers know that economic growth has come to a standstill. China, the world’s largest commodity consumer, is growing at its slowest pace since 1990. The U.S. is growing at its slowest pace since World War II. Japan’s economy hasn’t grown at all in two decades. When the economy slows, developers build fewer homes, office buildings, and bridges. That means they use less copper, aluminum, steel, and other commodities.

If you’re buying commodities today, make sure to buy ones that can do well while the economy struggles..…
Some commodities depend more on economic growth than others. For example, lumber, which is used to build homes, benefits from the tailwind of a growing economy. Soybean prices, on the other hand, can rise no matter how well the economy is doing. That’s because people have to eat no matter what’s happening with the economy.

So while the Bloomberg Commodity Index is up 11% this year, not every commodity has rallied. Natural gas prices are still down 9% on the year. Copper is down 3%. Meanwhile, soybean prices are up 34% Although several Casey analysts have recommended commodity investments this year, they’ve been very selective about the types of commodities they recommend. This approach has paid off…..

➢ Nick Giambruno, editor of Crisis Investing, used the crash in oil prices to pick shares of a world-class oil company. This stock is up 13% since March.

➢ E.B. Tucker, editor of The Casey Report, used the turnaround in commodities to buy two gold stocks. One of those is up 47% since March. The other is up 31% since April. He also recommended a silver stock that’s jumped 36% since April.

➢ Louis James, editor of International Speculator, is cashing in on the commodity rebound too. One of his stocks has surged 162% since September. Another is up 122% since July. A third is up 63% since March.

Most investors would do well owning just gold..…
As we often say, gold is real money. It’s preserved wealth for thousands of years because it has unique set of qualities: It’s durable, easy to transport, and easily divisible. It has intrinsic value that folks recognize around the world. Like many commodities, gold “officially” entered a new bull market earlier this year. It’s in an uptrend, yet still cheap. It’s trading 34% below its 2011 high. Unlike many commodities, gold can do well even if the economy is struggling. It’s a safe haven asset that’s protected wealth through history’s worst financial crises.

Casey Research founder Doug Casey thinks we’re on the verge of a major financial crisis..…
Doug says the coming crisis will be “much more severe, different, and longer lasting than what we saw in 2008 and 2009.” When it hits, “paper currencies will fall apart, as they have many times throughout history.”
Doug says this will spark a “true mania” in gold. That’s why we encourage everyone own physical gold. Putting just 10% or 15% of your wealth in gold could help you avoid big losses during the next financial crisis.

Finally, an important announcement from Jim Rickards..…
Part of our job at Casey Research is to share interesting opportunities with you. That's why we're passing along this important news from our good friend Jim Rickards. You've probably heard of Rickards. He’s one of the most respected analysts in the business. He’s a gold expert and author of The New Case for Gold. Jim recently launched a new service to help readers take advantage of the coming gold boom. Because he’d like as many folks as possible to read his service, he’s arranged a special deal exclusive to Casey Research readers. You can learn more by watching this free video. In short, if you take Rickards up on his special offer today, he’ll send you two “G-series” gold coins in the mail.

Again, this deal is only for Casey Research readers. Click here for the full story.

REMINDER: Casey Research founder Doug Casey will be in Poland next weekend..…
Doug will be presenting at the "Alternative for Difficult Times" seminar in Warsaw on June 18 and 19. Nick Giambruno, editor of International Man, will be there too. Doug and Nick will be there for the Polish launch of Doug's classic book, Crisis Investing. They will also be presenting at a seminar discussing the impending global financial hurricane, the state of freedom around the world, and how you can protect yourself and even profit from these trends.

Click here for more information.

Chart of the Day

Gold has been one of the best places to put your money this year. Today’s chart shows the performance of gold, commodities, bonds, U.S. stocks, and global stocks this year. You can see gold is up 17% this year. It’s crushed stocks, bonds, and even commodities as a group. For most of this year, gold was the top performing commodity. It was up more than 22% at one point. Then, it cooled off. It’s down more than 3% since late April.

We think gold is in the early innings of a major bull market. And, as we often say, bull markets don’t move in straight lines. It’s healthy for gold to take a “breather” after its red hot start to the year. If you’re looking to buy gold, we recommend using down days as buying opportunities. And again, for specifics on a coming opportunity in gold, we recommend you check out Jim Rickards' short video right here.

The article The Bear Market in Commodities Is Over…Here’s How Casey Analysts Are Cashing In was originally published at caseyresearch.com.

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Gold and Oil Are Soaring…Justin says There is Only One You Should Buy

By Justin Spittler

Gold had a HUGE day yesterday. The price of gold jumped 2.5% to $1,263/oz. Gold is this year’s top performing asset. With a 19% gain since January, it’s off to its best start to a year since 1974, according to Bloomberg Business.

Casey Research founder Doug Casey thinks this is just the beginning.....
In case you missed it yesterday, Doug explained why gold is set to rise at least 200%...and possibly even 400% or 500%. It’s a “must-read” essay, especially if you’re worried about the fragile stock market, slowing economy, or reckless governments.

In short, Doug believes the government has set us up for a crisis that “will in many ways dwarf the Great Depression.” And Doug expects the coming economic disaster to ignite a historic gold bull market.

When people wake up and realize that most banks and governments are bankrupt, they’ll flock to gold…just as they’ve done for centuries. Gold will rise multiples of its current value. I expect a 200% rise from current levels, at the minimum. There are many reasons, which we don’t have room to cover here, why gold could see a 400% or 500% gain.

Gold stocks will soar even higher.....
Longtime readers know gold stocks offer leverage to the price of gold. A 200% jump in the price of gold could cause gold stocks to spike 400%...600%...or more. The Market Vectors Gold Miners ETF (GDX), which tracks large gold miners, has soared 52% this year. Yesterday, it closed at its highest level since February 2015.

But gold stocks are still extremely cheap..…
Doug is loading up on gold stocks right now.

Right now gold stocks are near a historic low. I’m buying them aggressively. At this point, it’s possible that the shares of a quality exploration company or a quality development company (i.e., one that has found a deposit and is advancing it toward production) could still go down 10, 20, 30, or even 50 percent. But there’s an excellent chance that the same stock will go up by 10, 50, or even 100 times.

If you’re interested in multiplying your money by 5x or 10x in the coming gold “mania,” now is the time to take a position in gold stocks. The window of opportunity won’t stay open long. As Doug said, gold stocks will skyrocket once people realize the financial system is doomed. Because this window of opportunity is small, we’re currently running a special $500 discount on our service that recommends gold stocks, International Speculator. Click here to learn more.

Crude Oil is also soaring.....
As Dispatch readers know, there’s been nothing but bad news in the oil sector for nearly two years. The price of oil crashed 75%. Two months ago, it hit its lowest price since 2003. But since then, oil has climbed 36%. It jumped 5.1% yesterday. Why the big reversal? We’ll get to that in a second. First, let’s recap the recent disaster in the oil industry.

The world has too much oil.....
From 1998 to 2008, the price of oil surged more than 1,200%. Last year, U.S. oil production surged to the highest level since the 1970s. Global output also reached record highs. High prices encouraged innovation. Oil companies developed new methods, like “fracking.” This unlocked billions of barrels of oil that were once impossible to extract from shale regions. Today, the global economy produces more oil than it consumes. Each day, oil companies produce about 1.9 million more barrels than the world needs.

Crude Oil companies have slashed spending to cope with low prices.....
They’ve sold assets, abandoned billion dollar projects, cut their dividends and laid off more than 250,000 workers since June 2014. According to investment bank Barclays, oil and gas producers cut spending by 23% last year. Barclays expects spending to fall another 15% in 2016. This would be the first time in two decades the industry has cut spending two years in a row. Last week, the number of U.S. rigs actively pumping oil and natural gas plummeted to its lowest level in 70 years.

With oil prices rising, many U.S. companies can’t bring rigs back online fast enough.....
They don’t have enough workers or equipment after all the spending cuts. The Wall Street Journal reports:

Some of the largest U.S. oilfield services firms have laid off 110,000 people in the past year, Evercore ISI analysts estimate, and many of those workers have no plans to return to the industry.

Close to 60% of the fracking equipment in the U.S. has been idled during the downturn, according to IHS Energy, which estimates it would take two months for some of that equipment to return.

The Wall Street Journal continues:

Still, even if prices return to levels where shale drillers can make money again, many companies are vowing to be cautious. Some are tempered by what occurred last spring, when producers jumped back into drilling new wells after oil prices briefly hit $60 a barrel, inadvertently worsening a supply glut that ultimately made prices worse.

This is a dramatic shift in thinking by the industry.....
Oil companies had been pumping near-record amounts of oil for almost two years, despite low prices. Many companies had no choice. When all your revenue comes from selling oil, you have to keep pumping and selling oil. Companies could either sell oil for cheap or go out of business.

With fewer rigs pumping oil today, oil prices are climbing..…
Still, the oil crisis is far from over. Even with the recent rally, the price of oil is 65% below its 2014 high. It’s trading around $38 a barrel. Many companies won’t earn a profit unless oil gets back to $50. According to The Wall Street Journal, one-third of U.S. oil producers could go bankrupt this year. A wave of bankruptcies would likely trigger another leg down in oil stocks.

The oil market is highly cyclical.....
It goes through big booms and busts. Today, the industry is going through its worst bust in decades. It will boom again...but not until the world works off its massive oversupply of oil. According to the International Energy Agency, the oil surplus could last into 2017.

Last month, Saudi Arabia, Russia, Qatar, and Venezuela agreed to cap oil output.....
Saudi Arabia and Russia are two of the world’s three largest oil-producing countries. Qatar and Venezuela are also major oil producers. These countries agreed to “freeze” their oil production at January levels. They quickly broke the agreement. On Monday, CNN Money reported that Saudi Arabia and Russia actually boosted output last month. Both countries are pumping record amounts of oil. They don’t have much choice. Oil makes up 80% of Saudi Arabia’s exports. It accounts for 52% of Russia’s exports.

Nick Giambruno, editor of Crisis Investing, doesn’t think Saudi Arabia will survive the crisis.....

But he says the U.S. shale industry will survive.

By keeping the market saturated with oil, the Saudis are driving down the price. They hope to drive it down low enough and long enough to bankrupt the shale industry…since shale oil costs more than Saudi oil to produce. The U.S. shale industry is a major source of competition.

In the 1990s, the U.S. imported close to 25% of its oil from Saudi Arabia. Today—because of high U.S. shale oil production—the U.S. imports only 5%. The Saudis are having some success. In the past year, at least 67 U.S. oil companies have filed for bankruptcy. Analysts estimate as many as 150 could follow. The shale oil industry is in ‘survival mode.’

The Saudis have damaged the U.S. shale oil industry. And they’ll continue to cause more damage. But they won’t bankrupt every producer. The shale industry has more staying power than Saudi Arabia. Some producers now say they’re profitable with $40 oil. And their pace of innovation will drive that even lower. The industry will survive.

The Saudis are playing a dangerous game.

If the Saudis don’t stop flooding the market—and there are no signs they will—they won’t be shooting themselves in the foot…but in the head. Saudi Arabia will either collapse or surrender—and stop flooding the market. Either way, oil will eventually go a lot higher.

Shale oil stocks are a train wreck right now. Occidental Petroleum Corporation (OXY), the largest shale oil producer, is down 30% since June 2014. EOG Resources Inc. (EOG), the second-largest shale oil producer, is down 35%.

Nick sees huge opportunity here. He often reminds readers that a crisis is the only time you can buy a dollar’s worth of assets for a dime or less. And shale oil stocks are in a major crisis right now. Nick has already picked out a “best of breed” U.S. shale oil company. But before pulling the trigger, Nick is waiting for the Saudi government to show signs of cracking. The point of maximum pessimism will present a “once-in-a-generation opportunity” to pick up this shale company at an absurdly cheap price.

You can get in on this opportunity by signing up for Crisis Investing. Click here to begin your 90-day risk-free trial.

Chart of the Day

Oil is still near its lowest level in years. As we mentioned earlier, oil has rallied 36% over the past few weeks. That’s a big jump in a short period. But oil isn’t in the clear yet.  Today’s chart shows the performance of oil since 2014. You can see that the price of oil is still well below its 2014 high. It’s trading at prices last seen during the last financial crisis. Many oil companies can’t survive with current oil prices. Some will go out of business. And a wave of bankruptcies will likely spark another leg down in oil stocks. We recommend avoiding oil stocks for now.

The article Gold and Oil Are Soaring…But There’s Only One You Should Buy Today was originally published at caseyresearch.com.

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