Mike Seery's Weekly Futures Recap - Crude Oil, Natural Gas, Gold, Sugar and More

It's time once again to check in with our trading partner Michael Seery. We've asked him to give our readers a recap of the this weeks futures markets and give us some insight on where he sees the markets headed this week. Mike 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 July contract settled last Friday in New York at 45.83 a barrel while currently trading at 44.65 down over $1 for the trading week testing lows we haven't seen since November 2016. I'm not involved in this market, but I do think lower prices are ahead for the entire energy sector. At present, my only energy recommendation is a short natural gas position as complex oversupply issues continue to put pressure on prices in the short term. We are still trading far below the 20 and 100 day moving average, and that's telling you that the short term trend is lower in natural gas. The next major level of support is all the way down at the 42 level as Rig counts in the United States continue to increase supply, so if you are short a futures contract stay short & place the proper stop loss as I think lower prices are ahead. Gasoline and heating oil are also at fresh contract lows putting pressure on crude oil, and there is nothing right or positive to say about this sector at present. Today's slight rally across the board is just a dead cat bounce in my opinion and is due to oversold conditions.
Trend: Lower
Chart Structure: Poor

Get our Current Market Movement, Trade Triangle and Futures Updates

Natural gas futures in the July contract settled last Friday in New York at 3.03 while currently trading at 3.03 unchanged for the trading week despite Thursday's trade rallying 12 points due to a bullish inventory report. I recommended a short position from the 3.17 level and if you took that trade continue to place your stop loss above the 10 day high standing at 3.10 as the chart structure is outstanding. Natural gas prices are still trading under their 20 and 100 day moving average which tells you that the trend is lower as we retested 4 month lows in Wednesday's trade. Stay short as mild temperatures in the 7/10 day forecast for Midwestern part of the United States could put pressure back on this market as the energy sector looks very weak in my opinion. Natural gas prices are just an eyelash away from getting stopped out as this trade has experienced very low volatility since the entry point, but if we are stopped out we will move on and look at other markets that are beginning to trend as the trends are coming back in the commodity sectors which is a great thing to see, but stay short as who knows what Monday's price action will bring.
Trend: Lower
Chart Structure: Excellent

Gold prices settled last Friday in New York at 1,271 an ounce while currently trading at 1,256 down about $15 for the trading week and topping out at the 1,300 level. The Federal Reserve announced that they raised interest rates a .25 point and plan on raising interest rates further down the road and this sent gold prices to a three week low. I am not involved in any of the precious metals as they have been incredibly choppy in 2017 and the monetary risk and the risk/reward has not met my criteria as prices are now trading below their 20 and 100 day moving average. I'm advising clients to avoid this sector and gold at the present time. The commodity markets, in general, remain weak in my opinion except for a select few with the stock market continuing to move higher taking money flows out of the gold and moving them into the Dow Jones once again. I think that trend will continue despite the terrorist attacks happening on a weekly basis coupled with uncertainty worldwide. Prices seem to have one more leg lower to the downside with a possible retest of 1,215 in my opinion. Silver prices this week also went into the negative as those prices remain extremely choppy as well, but one day the trends will come back in the metals so keep a close eye on this market & wait for the chart structure to improve.
Trend: Mixed - Lower
Chart Structure: Poor

Sugar futures in the October contract are trading lower for the 6th consecutive trading session after settling last Friday in New York at 14.47 a pound while currently trading at 13.60 down nearly 80 points and continuing its bearish trend. I'm not sure anyone knows how low prices could go. The next significant level of support is around the February 2016 low of 12.45, and if that is broken it could retest the August 2015 lows around 10.00 that's how bearish this commodity is. This is due to overproduction and a very weak Brazilian Real which continues to put pressure on anything grown in Brazil. Sugar prices are trading far under their 20 and 100 day moving average and this trend is getting stronger on a weekly basis. I'm certainly not recommending any type of bullish position as that would be counter trend trading and trying to pick a bottom is very dangerous over the long haul. The soft commodities still look very weak as the agricultural sectors except for a couple continue to head lower so, if you do have a short futures position stay short & place the proper stop loss as you are on the right side of this trade.
Trend: Lower
Chart Structure: Solid

For more calls on this week's commodity trades like Dow Jones Industrial, Cotton and more....Just Click Here!

The Last Time We Saw This, Investors Doubled Their Money in Six Months

By Justin Spittler

Gold couldn’t catch a bid in December 2015. It was down more than 30%, and trading at the lowest price in nearly six years. Gold stocks, which are leveraged to the price of gold, were doing even worse. The average gold stock was 80% off its highs. Most investors wanted nothing to do with gold. But not Doug Casey. Doug knew gold would rebound. It was only a matter of time. He even told Kitco, one of the world’s biggest gold and silver retailers, on December 18, 2015, that he was buying gold hand over fist:

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 timing was nearly perfect.…
The day before, gold bottomed. It went on to gain 30% over the next six months. The average gold stock more than doubled in value over the same period.

I’m telling this story because an opportunity just like this is shaping up before our eyes. Only this time, it’s in the energy market.

Energy stocks have been beaten to a pulp.…
You can see what I mean below. It shows how the Energy Select Sector SPDR ETF (XLE) has done since the start of the year. This fund invests in 36 major U.S. energy companies, including Exxon Mobil and Chevron. You can see that XLE is down 13% this year. That makes energy stocks the worst-performing sector in the S&P 500.

Energy stocks are now off to “one of the worst beginnings to the year ever,” according to Morgan Stanley. As if that weren’t enough to scare away most investors, look at the ugly chart below. It compares the performance of XLE with the SPDR S&P 500 ETF (SPY), which tracks the S&P 500. When the line is rising, energy stocks are doing better than the broad market. When it’s falling, energy stocks are underperforming the S&P 500.

Energy stocks have been lagging the broad market for nearly a decade.…
As a result, energy stocks now make up just 5.9% of the S&P 500. That’s half of what the sector’s weighting was in 2011. Not only that, the 36 energy stocks that make up XLE are now worth less than the combined value of Apple and Alphabet, the parent company of Google.

Situations like this don’t last forever.…
Eventually, the pendulum swings the other way. The trick is knowing when that will happen. That’s obviously easier said than done. Plus, you have to understand that markets rarely change direction on a dime. Instead, they usually go through a bottoming process that can take weeks or longer. And it looks like energy stocks may have begun that process.

Energy stocks took off last week.…
XLE jumped 2.5% on Friday. That was the biggest one-day jump in energy stocks since last November. This week, XLE is up another 1.4%. Now, it would be easy to dismiss this as “noise.” But if energy stocks keep rallying, XLE could “break out.” The chart below shows the performance of XLE over the last 12 months. You can see that it’s been in a downtrend since late 2016.

You can see that XLE hasn’t broken out of its downtrend yet. But it could do that sooner than most investors think.

Energy companies are starting to make money again.…
Revenues for energy companies in the S&P 500 surged 34% during the first quarter of 2017. That was more than quadruple the S&P 500’s 7.6% jump in revenues. Wall Street now expects U.S energy companies to post an 18% rise in revenues when the second quarter is all said and done. Not only that, analysts expect the sector to report a more than 400% spike in second-quarter profits. For perspective, second quarter profits for the rest of the S&P 500 are expected to rise just 3.7%.

Once “the market” figures this out, watch out.…
Energy stocks are going to skyrocket just like gold stocks did in early 2016. Keep in mind, the bottoming process could take weeks or even months. So, wait for energy stocks to “carve a bottom” before diving in. That’s when stocks stop falling, trade in a tight range for a period of time, and then start heading higher. Stocks that carve a bottom often keep soaring. Just look at what GDX did after it carved a bottom early last year.

By waiting for energy stocks to carve a bottom, you’ll greatly limit your downside…without giving up a chance at big returns. I'll let you know when the time is right to invest in the energy sector. In the meantime, keep an eye on XLE and other energy funds like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Once they carve out bottoms, it will be a good time to buy.

The article The Last Time We Saw This, Investors Doubled Their Money in Six Months was originally published at caseyresearch.com.

FREE workshop....Big Profits from Breakouts & Mega Trends

We are excited to announce that this Thursday our friends Todd and Roger will be putting on a New FREE LIVE interactive trading workshop, where we’ll teach you how to incorporate Bollinger Bands and Price Envelopes into your trading for much bigger gains which will help you maximize the percentage of winning trades you take while decreasing your losses significantly.

They have decided to call this workshop "Big Profits from Breakouts and Mega Trends". You’ll also learn an ETF trading model that generated Todd over 963% return in just over 6 years.

Click here to REGISTER Thursday June 15th at 4:30 ET

It’s FREE to attend and it’s going to be actionable trading strategies you can start using the very next day!

Here’s just a few of the actionable strategies you’re going to learn:

* How To Use Bollinger Bands and Price Envelopes for Profitable Breakouts

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* The Rules to the Turtles Trend Following System That Made Billions Over the Past Decade

* How to avoid Massive Losing Periods That Come With Buy and Hold

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PLUS…Learn a lot more and get ALL your questions answered LIVE!

Click Here to REGISTER: Thursday June 15th at 4:30 ET

I couldn’t be more excited to have Todd and Roger show you firsthand how an ex hedge-fund manager with tremendous success and experience trades the markets.

Have a profitable day we hope to see you there!

 
See you in the markets,
Ray @ The Crude Oil Trader

P.S. I recommend you attend this class if you're interested in learning trading strategies you can incorporate into your trading right away. We anticipate this workshop will be fill up very quickly so get your reserved seat asap.

Mike Seery's Weekly Futures Recap - Crude Oil, Natural Gas, Silver, Coffee and More

Both the SP500 [key reversal down] and NASDAQ [below the 20 day moving average] closed sharply lower on Friday while the Dow managed to close higher extending the rally off April's low into uncharted territory. This will make upside targets hard to project for the Dow.

So let's get ready for this weeks trading with a heads up from our trading partner Michael Seery. We've asked him to give our readers a recap of the this weeks futures markets and give us some insight on where he sees these markets headed. Mike 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 settled last Friday in New York at 47.66 a barrel while currently trading at 45.55 down about $2 for the trading week, but still trading under their 20 and 100 day moving average as prices are looking to retest the May 5th low of 44.13 in my opinion. The longer term and short term trend is to the downside as large supplies continue to keep a lid on prices. Gasoline and heating oil also continue to move lower, and my only recommendation in the energy sector is short the natural gas market at this time. The chart structure in oil is poor as the 10 day high is around $52 which is over $6 away. I'm currently waiting for the monetary risk to be lowered and I am looking at a short position possibly in next week's trade. There are concerns about gasoline demand which has also pushed oil lower over the last several weeks, but this market has been very choppy in 2017 as the volatility in the commodity markets are starting to rise once again as the summer months are upon us and historically speaking this is when you see large price swings up or down.
Trend: Lower
Chart Structure: Poor

Get our Current Market Movement, Trade Triangle and Futures Updates

Natural gas futures settled last Friday in New York at 2.99 while currently trading at 3.04 up 5 points in an extremely low volatile trading week. I've been recommending a short position from the 3.17 level, and if you took the trade place the stop loss in Monday's trade at 3.26. Tuesday it will be lowered to 3.17 as the chart structure is becoming outstanding. For the bearish momentum to continue prices have to break the February 28th low of 2.88 which is still quite a distance away so stay short and continue to place the proper stop loss as the trend is still lower in my opinion. Prices are still underneath their 20 and 100 day moving average looking for some fresh fundamental moves to put some volatility back into this market. The energy sector, in general, continues its bearish momentum this week as oversupply issues continue to hamper this market as production levels in natural gas are increasing in 2017 and 2018. Higher temperatures in the Midwestern part of the United States are expected this weekend and that has helped prop up prices here in the short term, but the 7/10 day forecast still has average temperatures, so let's see what develops next week. I'm still looking at adding more contracts to the downside.
Trend: Lower
Chart Structure: Solid - Improving

Silver futures in the July contract settled last Friday at 17.52 an ounce while currently trading at 17.28 trading lower for the 3rd consecutive trading session after topping out at 6 week highs earlier in the week around 17.74. I'm currently sitting on the sidelines as this market remains choppy in my opinion. Silver prices are trading right at their 20 day but still below their 100 day moving average as the U.S dollar has rallied somewhat over the last couple days putting pressure on gold and silver prices. The chart structure is poor therefore the monetary risk is too high for me to enter into this market at this time. The next major level of support is right at the 17 level, and for this market to continue its bullish momentum, we would have to break 17.75. Volatility has come upon us once again which is excellent to see in my opinion. Many of the commodity markets remain mixed as they are not trading in unison and that's what I'd like to see occur once again like we experienced in years past.
Trend: Mixed
Chart Structure: Poor - Improving

Coffee futures in the July contract is currently trading at 128.25 a pound after settling last Friday in New York at 125.25 up about 300 points for the trading week. I'm currently not involved in this market. However, I will not initiate a short position as I think coffee prices are cheap and I'm looking at a bullish position once a true breakout occurs. Coffee futures are still trading under their 20 day and 100 day moving average which stands at 139 which is quite a distance away. However, the chart structure is rather solid at the present time, and the volatility is really low as prices have been grinding lower. At the present time, we are in the frost season in the country of Brazil which is the largest producer in the world as colder temperatures are expected this weekend, but no frost as the agricultural markets are starting to stabilize despite the fact of the Brazilian Real remaining very weak against the U.S dollar. If you take a look at the daily chart, there is major support around the 125 level which was hit in the last 5 trading sessions and unable to break. I do believe we are finding support as prices are bottoming out in my opinion.
Trend: Lower
Chart Structure: Solid - Improving

For more calls on this week's commodity trades like Sugar, Cotton, Corn and more....Just Click Here!

Do These Three Things to Profit When Stocks Fall

By Jeff Clark, editor, Delta Report

The stock market has entered “the worst six months of the year.” The S&P 500 makes its best gains between November 1 and April 30. The period between May 1 and October 31 tends to be negative. The exact historical figures vary depending on who you ask. But there’s a good reason the Wall Street cliché machine advises to “sell in May and go away.” Stocks don’t do very well this time of year. And most of the major stock market disruptions of my lifetime occurred during this six month window.

Smart investors should take some time off. Enjoy the fruits of the “Trump rally.” Cash in your 13% gain on the S&P 500 since last Halloween and enjoy the summer. We’ll see you back in the action in time for Thanksgiving. But, if you want to make some money while the rest of the world is losing it, then stick around. Smarter investors could have the best six months ever.

Think about this for a moment…
Over the past 20 years, the Volatility Index (VIX)—a measure of the price investors are willing to pay to insure their portfolios against a significant market decline—has traded between a low of about 10 to a high of about 80. Recently, the VIX closed at 11—one of the lowest readings in the past 20 years. This happened at a time when the S&P 500 closed near an all time high. So with the broad stock market trading at its highest level ever, insurance is about as cheap as it has been in the past 20 years.

In other words, as we enter the worst six months of the year, put options—bets that the stock market will fall—are as cheap as they’ve been in two decades. This is a remarkable opportunity to profit as stock prices decline. Speculators can risk relatively small amounts of capital and achieve HUGE returns if stock prices fall. But there are a few tricks to profiting on the downside.

How to Profit as Stocks Fall
Over the long term, stocks go up. Don’t argue about it. That’s just how it is. The stock market moves higher over time. So short sellers—those folks who profit as stock prices fall—face an uphill battle.
Of course, there are situations where short sellers will ultimately profit even if the broad stock market moves higher.

For example, companies that commit fraud, take on insane amounts of leverage, or overhype a fad business almost always eventually crash and burn. But opportunities to short the stock in these firms are few and far between. For the most part, traders who are looking to short sell are going to trade on momentum. They’re going to look for overbought situations that look ready to reverse.

They’re going to buy cheap, out of the money put options. They’re going to be lightning fast, taking profits as the trade moves in their favor. And they’re not going to stress out about losing 100% on a trade because they kept their position size small enough to digest the loss.

How This Great Trade Went South
Let me tell you a story about the absolute best and worst put option trade I’ve ever seen. The trader made the most money I’ve ever seen on one put option trade, then he gave it all back. In September 1987, I was running the trading desk for a small regional brokerage firm. We had a handful of big name clients, folks who appeared regularly on the Financial News Network (the precursor to CNBC). One of these clients was a value oriented newsletter writer. His investment style was ultra-conservative and ultra-prudent.

So in September 1987, when this client bought a large number of put options on the S&P 100 (OEX), I took note. It was the first option position this client had ever purchased. He was buying these put options to hedge his managed-money portfolios against a sudden crash in the stock market.
It worked perfectly.

When the stock market crashed on October 19, 1987, the put options this client purchased rallied enough to completely offset the decline in his stock portfolios. It was, in my opinion, the most perfect hedge anyone executed prior to the crash. But it turned out to be a disaster for his accounts. You see, the money manager never sold the options.

Despite the market crashing, despite the VIX jumping above 100, despite the options he purchased trading for 20 times the amount he paid, he wanted to maintain the hedge. He wanted to keep his insurance in case stocks dropped even more.

They didn’t....When his options expired in November, even though the broad stock market was almost 25% lower than where it was when he bought the puts, his put options expired worthless. Stocks hadn’t rallied much off the October crash bottom. The S&P 500 was maybe 5% higher. The stocks this advisor held in his managed accounts were still suffering from the crash. And he never collected from the insurance he bought to protect his clients from the crash.

His clients suffered from the decline in the market, and they suffered from paying the option premium that was supposed to protect them from a crash. So what appeared to be a brilliant move in September 1987 turned out to be an expensive mistake by late November. His clients suffered from a decline in their stock holdings, and they also suffered as the OEX put options expired worthless.

A Simple Lesson
The lesson here is simple, when you’re betting on a broad stock market decline, you need to buy cheap put options AND you need to be willing to cash out of the trade when it moves in your direction—even if you think the move will go farther.
In my experience—which goes back more than three decades—if you want to profit on the short side of trading stocks, you need to get three things right…

1. You need to target stocks that are overextended to the upside and have negative divergence on the technical indicators.
   
2. You need to buy cheap put options, and you need to be willing to lose 100% of the premium you pay for the options. It should be less of a loss than short selling the stock.
   
3. You need to be willing to take profits quickly. As stocks fall, the implied volatility of the option premium increases. You don’t need to wait for the stock to achieve your downside target. The option premium will often inflate to reflect the downside potential. Be willing to sell into that.
   

Best regards and good trading,
Jeff Clark
Editor, Delta Report

Justin's note: Tomorrow, Jeff will be releasing a brand-new presentation on what he calls “the biggest breakthrough of my career.” In it, he’ll reveal a trading strategy that he’s been developing for over five years… has a success rate of 90.2%… average gains of 50%… and an average trade length of just two days.

E.B. Tucker, editor of The Casey Report, and Doug Casey have been talking all about it these past few months. They think it’s one of the most fascinating moneymaking ideas they’ve ever encountered.
Most people will be watching this presentation at 12 p.m. ET tomorrow… but as a Casey reader, E.B. will be sending you the video early, so you can start watching ahead of the crowd at 9 a.m.
We hope to see you there.

The article Do These Three Things to Profit When Stocks Fall was originally published at caseyresearch.com.

Mike Seery's Weekly Futures Recap - Crude Oil, Gold, Silver, Coffee and More

The NASDAQ 100 closed higher for the seventh day in a row on Friday as investors struggled to find fresh reasons to push shares to records after a six session winning streak ahead of a holiday weekend. Both the SP500 and Dow closed slightly lower on Friday as they both consolidated some of this week's gains ahead of the Memorial Day Holiday. The high range closes in the SP500 and Dow set the stage for a steady to higher opening when Tuesday's night session begins trading.

So let's get ready for this weeks trading with a heads up from our trading partner Michael Seery. We've asked him to give our readers a recap of the this weeks futures markets and give us some insight on where he sees these markets headed. Mike 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 July contract are trading lower for the 2nd consecutive trading session after settling last Friday in New York at 50.67 a barrel while currently trading at 48.82 down nearly $2 for the trading week right at a two week low. Crude oil has remained incredibly choppy in 2017, and I'm not involved in this market. Traders were disappointed with OPEC's decision in Thursday's trade that sold off oil nearly $3 a barrel as Rig counts in the United States continue to climb. Oil's fundamentals remain bearish with prices still trading under their 20 and 100 day moving average telling you that the short-term trend is lower. I am advising clients to avoid this commodity at present. I don't have any trade recommendations for the 1st time in over two decades because of how choppy the commodity markets are presently. However, things will change as we enter the summer months when historically speaking volatility comes back and the trends do as well.
Trend: Mixed
Chart Structure: Poor - Choppy

Get our Current Market Movement, Trade Triangle and Futures Updates

Gold futures in the June contract are trading higher by $10 this Friday afternoon after settling last Friday at 1,253 while currently trading at 1,267 up about $14 for the trading week and hitting a four week high. Gold is trading above its 20 and 100 day moving average telling you that the short term trend is to the upside as a weaker U.S dollar coupled with a terrorist attack this week helped propel prices higher. The next major level of resistance is at 1,275 & if that is broken, I would have to think that prices will retest the April 17th high of 1,297 as this is one of the only few bullish trends out of the commodity sectors. I am not involved in this market at present as the chart structure remains poor. The U.S dollar is right near a seven month low as that has certainly helped gold prices come off recent lows as that trend seems to be strong to the downside. The stock market hit all time highs once again in Thursday's trade having very little effect on gold prices as money flows seem to be going into both sectors which is very unusual, but can happen periodically with investors being interested in both sectors. In my opinion, I still believe gold prices are limited to the upside as all the excitement is in the equity markets, but there are so many problems worldwide right now that prices are supported in the short term.
Trend: Higher
Chart Structure: Poor - Choppy

Silver futures in the July contract settled last Friday in New York at 16.79 an ounce while currently trading at 17.30 up about $0.50 for the trading week right near a four week high and this market remains very choppy in my opinion. Silver prices are trading above their 20 day but still below their 100 day moving average which stands at 17.43 which is just an eyelash away with the next major level of resistance at the 18/18.50 level. Terrorism throughout the world and tensions with North Korea have bolstered the precious metals in recent weeks including silver prices. Silvers chart structure is poor, meaning the monetary risk is too high and the trend is too choppy to enter into a new trade, so be patient as we could be involved over the next couple of weeks. It's time to look at other markets that are beginning to trend as there are few and far between. Silver historically speaking is an inflationary commodity, but at present inflation is still under 2% in the United States with many of the agricultural markets near recent lows once again. Silver has had a hard time sustaining any real type of rally in 2017.
Trend: Mixed
Chart Structure: Poor - Choppy

Coffee futures in the July contract settled last Friday in New York at 132.10 a pound while currently trading at 130.00 down about 200 points for the trading week continuing its slow grinding bearish momentum to the downside. I'm not involved in this market and will not take a short position and I'm advising clients to avoid coffee at present. The agricultural markets continue to look weak and the Brazilian Real is the main culprit and has put pressure on sugar, coffee, orange juice and soybean prices as these markets all look to head lower in my opinion. However, I do think the downside is limited as that is the reason I am not going short. Coffee's trading under its 20 and 100 day moving average telling you that the short term trend is to the downside as large production numbers are coming out of the country of Brazil which is the biggest producer in the world as a weak currency and abundant supply continues to keep a lid on prices. The chart structure in coffee is still is very solid and as I've written about in previous blogs, I'm interested in a bullish position if prices break the 137.75 area which is still quite a distance away so keep a close eye on this market as the volatility will not stay this low for much longer.
Trend: Lower
Chart Structure: Solid

For more calls on this week's commodity trades like Sugar, Cotton, Corn and more....Just Click Here!

This Giant Welfare State Is Running Out of Time

By Justin Spittler

The Saudis are begging Trump to stop pumping so much oil. Saudi Arabia made the plea earlier this month in its monthly oil report. The report said “the collective efforts of all oil producers” would be needed to restore order to the global oil market. It added that this should be "not only for the benefit of the individual countries, but also for the general prosperity of the world economy."

It’s a bizarre request, to say the least. You’re probably even wondering why they would do such a thing. As I'll show you in today's essay, it's a clear act of desperation. One that tells me the country is doomed beyond repair. I’ll get to that in a minute. But first, let me tell you a few things about Saudi Arabia.

It’s the world’s second largest oil producing country after the United States.…
It’s also the largest producer in the Organization of the Petroleum Exporting Countries (OPEC), a cartel of 13 oil producing countries. Like other OPEC countries, Saudi Arabia lives and dies by oil. The commodity makes up 87% of the country’s revenues. This was a great thing when the price of oil was high. Saudi Arabia was basically printing money.

But that hasn’t been the case for years. You see, the price of oil peaked back in June 2014 at over $105 a barrel. It went on to plunge 75% before bottoming in February 2016. Today, it trades under $50.

Low oil prices are wreaking havoc on Saudi Arabia’s finances.…
But not for the reason you might think. You see, Saudi Arabia is the world’s lowest-cost oil producer. Its oil companies can turn a profit at as low as $10 per barrel. That’s one fifth of what oil trades for today.

So what’s the problem? The problem is that Saudi Arabia is one giant welfare state.

Nick Giambruno, editor of Crisis Investing, explains:

Saudi Arabia has a very simple social contract. The royal family gives Saudi citizens cradle-to-grave welfare without taxation. The Saudi government spends a fortune on these welfare programs, which effectively keep its citizens politically sedated. In exchange, the average Saudi citizen forfeits any political power he would otherwise have.

Not only that, about 70% of Saudi nationals work for the government. These “public servants” earn 1.7 times more than their counterparts in the private sector.

In short, Saudi Arabia uses oil money to keep its citizens in line.…
But this scheme isn’t cheap. According to the International Monetary Fund (IMF), Saudi Arabia needs oil to trade north of $86 a barrel to balance its budget. That’s nearly double the current oil price. This is creating big problems for the Saudi kingdom. In 2015, the Saudis posted a record $98 billion deficit. That was equal to about 15% of the country’s annual economic output. Last year, it ran another $79 billion deficit.

Saudi Arabia is now desperately trying to restore its finances.…
It’s slashed its government subsidies. It’s borrowed billions of dollars. It’s even trying to reinvent its oil addicted economy. In fact, it plans to increase non oil revenues sixfold by 2030. It’s also trying to spin off part of the national oil company, Saudi Aramco, on the stock market. And it wants to create a $1.9 trillion public fund to invest at home and abroad.

The Saudis have even tried to rig the global oil market.…
It’s why they met with non OPEC members like Russia at the December meeting. At this meeting, OPEC and non OPEC members agreed to cut production. It was the first deal like this since 2001. OPEC hoped this historic pact would lift oil prices. There’s just one big problem.

U.S. oil producers aren’t playing ball.…
Instead of cutting output, they’ve rapidly increased production. You can see this in the chart below. U.S. oil production has jumped 10% since last July.

U.S. oil production is now approaching the record level set back in 2015. There’s good reason to think production will blow past that high, too. To understand why, look at the chart below. It shows the total number of U.S. rigs actively looking for oil. You can see that the total number of rigs plummeted in November 2015 before bottoming a year ago.

The total U.S. oil rig count has now risen 28 weeks in a row. There are now 396, or 125%, more rigs looking for oil in the United States than there were a year ago.

If this continues, the price of oil will slide lower.…
Saudi Arabia isn’t used to feeling this helpless. After all, the Saudis had a firm grip on the global oil market for decades. If it wanted, it could raise the price of oil by slashing production. It also had the ability to drive the oil price lower by flooding the market with excess oil. Those days are over. The United States now rules the global oil market, and it’s showing no mercy.

Unless this changes soon, Saudi Arabia is doomed.

After all, the country is already in a race against time. According to the IMF, Saudi Arabia is on pace to burn through all of its cash within five years. In other words, we’re witnessing a seismic power shift in the global energy markets, one that could cause oil prices to plunge even lower. That would be bad news for many oil companies in the short term. But it should also lead to one of the best buying opportunities we’ve seen in years. I’ll be sure to let you know when it’s time to pull the trigger. Until then, stay on the sidelines. This one could get nasty.

P.S. Crisis Investing editor Nick Giambruno predicted that Saudi Arabia’s oil addicted economy would implode back in March 2016. Not only that, he told his readers how to profit from this crisis by recommending a world class U.S. oil company.

Nick’s readers are up more than 20% on this investment. But it should head much higher once the U.S. puts Saudi Arabia out of its misery. You can learn all about Nick’s top oil stock by signing up for Crisis Investing. Click here to begin your risk free trial.

The article This Giant Welfare State Is Running Out of Time was originally published at caseyresearch.com.

Top Two Ways to Store Wealth Abroad

Nick Giambruno sits down with Doug Casey to get his take on what his favorite places and ways to store our wealth abroad.

Nick Giambruno: For centuries, wealthy people have used international diversification to protect their savings and themselves from out of control governments. Now, thanks to modern technology, anyone can implement similar strategies. Doug, I’d like to discuss some of the basic ways regular people can internationally diversify their savings. For an American, what’s the difference between having a bank account at Bank of America and having a foreign bank account?

Doug Casey: I’d say there is possibly all the difference in the world. The entire world’s banking system today is shaky, but if you go international, you can find much more solid banks than those that we have here in the US. That’s important, but beyond that, you’ve got to diversify your political risk. And if you have your bank account in a US bank, it’s eligible to being seized by any number of government agencies or by a frivolous lawsuit. So besides finding a more solid bank, by having your liquid assets in a different political jurisdiction you insulate yourself from a lot of other risks as well.

Nick Giambruno: Moving some of your savings abroad also allows you to preempt capital controls (restrictions on moving money out of the country) and the destructive measures that always follow.

Doug Casey: This is a very serious consideration. When the going gets tough, governments never control themselves, but they do try to control their subjects. It’s likely that the US is going to have official capital controls in the future. This means that if you don’t have money outside of the US, it’s going to become very inconvenient and/or very expensive to get money out.

Nick Giambruno: Why do you think the US government would institute capital controls?

Doug Casey: Well, there are about $7 - 8 trillion, nobody knows for sure, outside of the US, and those are like a ticking time bomb. Foreigners don’t have to hold those dollars. Americans have to hold the dollars. If you’re going to trade within the US, you must use US dollars, both legally and practically. Foreigners don’t have to, and at some point they may perceive those dollars as being the hot potatoes they are. And the US government might say that we can’t have Americans investing outside the country, perhaps not even spending a significant amount outside the country, because they are just going to add to this giant pile of dollars. There are all kinds of reasons that they could come up with.

We already have de facto capital controls, quite frankly, even though there’s no law at the moment saying that an American can’t invest abroad or take money out of the country. The problem is because of other US laws, like FATCA, finding a foreign bank or a foreign broker who will accept your account is very hard. Very, very few of them will take American accounts anymore because the laws make it unprofitable, inconvenient, and dangerous, so they don’t bother. So it’s not currently against the law, but it’s already very hard.

Nick Giambruno: What forms of savings are good candidates to take abroad? Gold coins? Foreign real estate?

Doug Casey: Well, you put your finger on exactly the two that I was going to mention. Everybody should own gold coins because they are money in its most basic form—something that a lot of people have forgotten. Gold is the only financial asset that’s not simultaneously somebody else’s liability. 

And if your gold is outside the US, it gives you another degree of insulation should the United States decide that you shouldn’t own it—it’s not a reportable asset currently. If you have $1 million of cash in a bank account abroad, you must report that to the US government every year. If you have $1 million worth of gold coins in a foreign safe deposit box, however, that is not reportable, and that’s a big plus.

So gold is one thing. The second thing, of course is real estate. There are many advantages to foreign real estate. Sometimes it’s vastly cheaper than in the US. Foreign real estate is also not a reportable asset to the US government.

Nick Giambruno: Foreign real estate is a good way to internationally diversify a big chunk of your savings. What are the chances that your home government could confiscate foreign real estate? It’s pretty close to zero.

Doug Casey: I’d say it’s just about zero because they can make you repatriate the cash in your foreign bank account, but what can they make you do with the real estate? Would they tell you to sell it? Well, it’s not likely.

Also, if things go sideways in your country, it’s good to have a second place you can transplant yourself to. And I know that it’s unbelievable for most people to think anything could go wrong in their home country—a lot of Germans thought that in the ’20s, a lot of Russians thought that in the early teens, a lot of Vietnamese thought that in the ’60s, a lot of Cubans thought that in the ’50s. It could happen anywhere.

Nick Giambruno: Besides savings, what else can people diversify? How does a second passport fit into the mix?

Doug Casey: It’s still quite possible—and completely legal—for an American to have a citizenship in a second country, and it offers many advantages. As for opening up foreign bank accounts, if you show them an American passport, they’ll likely tell you to go away. Once again, obtaining a foreign bank or brokerage account is extremely hard for Americans today—that door has been closing for some time and is nearly slammed shut now. But if you show a foreign bank a Paraguayan or a Panamanian or any other passport, they’ll welcome you as a customer.

Nick Giambruno: The police state is metastasizing in the US. Is that a good reason to diversify as well?

Doug Casey: It’s a harbinger, I’m afraid, of what’s to come. The fact is that police forces throughout the US have been militarized. Every little town has a SWAT team, sometimes with armored personnel carriers. All of the Praetorian style agencies on the federal level—the FBI, CIA, NSA, and over a dozen others like them—have become very aggressive. 

Every single day in the US, there are scores of confiscations of people’s bank accounts, and dozens having their doors broken down in the wee hours of the night. The ethos in the US really seems to be changing right before our very eyes, and I think it’s quite disturbing.

You can be accused of almost anything by the government and have your assets seized without due process. Every year there are billions of dollars that are seized by various government entities, including local police departments, who get to keep a percentage of the proceeds, so this is a very corrupting thing.

People forget that when the US was founded there were only three federal crimes, and they are listed in the Constitution: treason, counterfeiting, and piracy. Now it’s estimated there are over 5,000 federal crimes, and that number is constantly increasing. This is very disturbing. There is a book called Three Felonies a Day, which estimates that many or most Americans inadvertently commit three felonies a day. So it’s becoming Kafkaesque.

Nick Giambruno: Thanks, Doug. Until next time.

Doug Casey: Thanks, Nick.

Editor’s Note: The US is nearing the worst financial disaster of our lifetimes. It’s inevitable. And it’s the single biggest threat to your financial future.

Fortunately, you can learn the ultimate strategy for turning the coming crisis into a wealth-building opportunity in this urgent video from New York Times best selling author Doug Casey.

Click Here to Watch it Now

The article Doug Casey’s Top Two Ways to Store Wealth Abroad was originally published at caseyresearch.com.

Mike Seery's Weekly Futures Recap - Crude Oil, Gold, Silver, NASDAQ 100 and More

Trading for the week of May 8th through May 12th ended with the Dow and SP500 indexes closing lower as investors reacted to an uncertain political environment stemming from President Donald Trump's firing of former Federal Bureau of Investigation Director James Comey. Meanwhile, retail sales and consumer prices rose in the latest month, albeit by a slower pace than had been expected, offering a mixed picture of the state of the economy. The NASDAQ 100 closed higher on Friday, the high range close sets the stage for a steady to higher opening when next weeks trading begins.

So as we like to say....no better time than right now to get the a heads up from our trading partner Michael Seery. We've asked him to give our readers a recap of the this weeks futures markets and give us some insight on where he sees these markets headed. Mike 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 June contract are trading higher for the 3rd consecutive trading session after settling last Friday at 46.22 while currently trading at 48.00 a barrel and I'm currently not involved in this market. Oil prices had a spike bottom last Friday which was May 5th at 43.76 & has rallied about $4. This market remains choppy just like all the other commodity sectors. However, if you are short a futures contract, I would place the stop loss above the 10 day high which stands at 49.32 as prices are still trading under their 20 and 100 day moving average telling you that the short term trend is lower. OPEC has come back into the news possibly cutting production once again to try to prop up prices as oversupply issues are the biggest problem with this sector as every time prices rally rig counts in the United States increase, therefore, putting pressure back on prices. Prices have surged over the last several days off of the API report which showed a larger draw down of crude oil supplies, but basically, I think a lot of this was short covering as prices were in oversold territory.
Trend: Lower
Chart Structure: Solid

Get Chris Vermeulen's Short & Long Term Gold Projections

Gold futures in the June contract settled last Friday in New York at 1,226 an ounce while currently trading at 1,230 down about $4 for the trading week and is still hovering right near a 7 week low. I'm currently sitting on the sidelines at present. As I've written about in previous blogs, I remain bearish on gold, and I think the stock market will continue to move higher. If you are short a futures contract, I would place your stop above the 10 day high which stands at 1,272 as the chart structure will start to improve later next week, therefore, lowering the monetary risk. Gold prices are still trading under their 20 and 100 day moving average is telling you that the short term trend is lower as volatility is relatively low. I don't expect that to continue for much longer as generally speaking volatility starts to increase in the summer months for the commodity markets. The precious metals have been on the defensive over the last couple of months as silver and platinum are also right near multi month lows as the commodity markets remain extremely choppy and have been over the last 6 months.
Trend: Lower
Chart Structure: Poor - Improving

Silver futures in the July contract settled last Friday in New York at 16.27 an ounce while currently trading at 16.45 up about $0.20 for the trading week and it's still right near a 5 month low as prices have rebounded due to oversold conditions in my opinion. At the current time, I'm not involved in silver as prices have dropped over $2 from their April 17th high and the chart structure is very poor. Silver futures are trading far under their 20 and 100 day moving average telling you that the short term trend is to the downside and prices are probably looking to retest the December 23rd low around 15.84. The precious metals remain weak because all of the interest remains in the U.S stock market which is right near all time highs once again. Silver prices have been extremely choppy over the last 6 months rallying several dollars and then selling off several dollars as that has been the case with many of the commodity sectors. In years past we had terrific trends, but that has not been the case in 2017 as the risk/reward is not in favor at the present time so move on and look at other markets that are beginning to trend.
Trend: Lower
Chart Structure: Poor

The Nasdaq 100 in the June contract settled last Friday in Chicago at 5648 while currently trading at 5678 up another 30 points hitting another all time high this week. I'm not involved in this commodity. However, I am very bullish the stock market, and I've written about this in many previous blogs, I do think higher prices are ahead. The NASDAQ 100 is trading far above it's 20 and 100 day moving average being propelled by Apple Computer. Apple is up another $2 hitting another all time high as the tech sector is still on fire. I'm certainly not recommending any bearish position as this is the strongest trend out of all of the markets at the current time. I do think the Dow Jones and the S&P 500 will continue to follow. However, the NASDAQ is the strongest of all of the stock indices and clearly is the leader to the upside. Fundamentally speaking this market has the perfect situation occurring with extremely low interest rates coupled with outstanding earnings and a Trump administration that is pro business so who knows how high prices can go, but in my opinion, they are going much higher so if you are in a bullish position stay long.
Trend: Higher
Chart Structure: Improving

For more calls on this week's commodity trades like Wheat, Sugar, Corn and more....Just Click Here!

The Bond King Says "Short U.S. Stock"

Short the SP500.....That’s not something most investors would consider right now. After all, US stocks have been rallying for eight straight years. At this point, it’s hard to even remember what a down market feels like.

But that’s exactly what Jeff Gundlach thinks you should do. Gundlach, as you may know, is one of the world’s brightest investors. He manages more than $100 billion at his firm DoubleLine Capital.

On Monday, he told a room full of investors at the Sohn Investment Conference in New York to short (bet against) the SPDR S&P 500 ETF (SPY). This fund tracks the S&P 500. It’s the most heavily traded ETF on the planet.

It’s a bold call, to say the least.…
But Gundlach has a history of nailing calls like this. At last year’s Sohn Conference, he told investors to short the Utilities Select Sector SPDR Fund (XLU) and buy the iShares Mortgage Real Estate Capped ETF (REM). If you had taken Gundlach’s advice, you’d be up 40% on this trade today. Gundlach was also one of the few people to predict that Donald Trump would become president of the United States. In June, he told CNBC:

People aren't getting along, they're not happy because of technology taking jobs, and sort of this long, slow grind of a new economy. And so they're looking for change, and I think Trump is going to win on the basis of that.

In other words, it pays to listen to Gundlach.…
But here’s the thing. Gundlach doesn’t think you should get out of stocks completely. Instead, he thinks you should “go long” emerging markets. These are countries that are on their way to becoming “developed” countries like the United States. Brazil, Russia, India, and China (also known as the “BRICs”) are the largest emerging markets.

On Monday, Gundlach told investors at the Sohn Conference to buy the iShares MSCI Emerging Markets ETF (EEM), which tracks over 800 emerging market stocks. It’s one of the safest and most diversified ways to play emerging markets. Of course, you would have already known that if you’ve been reading the Dispatch.

After all, I’ve been pounding the table on emerging market stocks for months.…
In February, I outlined the bullish case for emerging markets. A month later, I told investors to “forget about US stocks” and consider emerging market stocks. I even recommended checking out EEM, just like Gundlach. Not only that, Gundlach likes emerging markets for the same reasons we do. I’ll share those with you in a moment. But let’s first look at why the “Bond King” thinks you should short the S&P 500.

U.S. stocks are incredibly expensive.…
Just look at this chart. It compares the total market value of the S&P 500 with the annual economic output of the United States, as measured by gross domestic product (GDP). This key ratio is now at the highest level since the dot com bubble.

US stocks aren’t just expensive from a historical perspective, either.…
They’re also much more expensive than emerging market stocks. Gundlach explained to CNBC on Monday:

The valuation of emerging markets is half the valuation of the S&P 500 when you look at things like price to sales, price to book, [and] Dr. Shiller’s CAPE ratio.

Dispatch readers know CAPE stands for cyclically adjusted price to earnings. It’s the cousin of the popular price to earnings (P/E) ratio. The only difference is that it uses 10 years’ worth of earnings instead of one. But just like the P/E ratio, a high CAPE ratio means stocks are expensive. You can see below that the CAPE ratio has surged to 29.5. That’s 76% higher than the S&P 500’s historical average. US stocks have only been this expensive two times in history: just before the Great Depression and during the dot com bubble. Meanwhile, the CAPE ratio for EEM is floating around 14, meaning it’s 52% cheaper than SPY.

To be fair, emerging market stocks have been cheaper than US stocks for years.…
And they’ve still underperformed them. But that’s starting to change. Just look at the chart below. It compares the performance of the S&P 500 with EEM. When this line is rising, it means US stocks are doing better than emerging market stocks.

You can see that’s been the case for years. But this key ratio just broke a long term upward trend line.
This tells us that emerging market stocks should outperform US stocks for years to come.

If you haven’t already, I recommend you pick up some emerging market stocks today.…
The easiest way to do this is with EEM or another major emerging market fund. These funds will give you broad exposure to emerging markets. Once you build a core position in emerging markets, you could consider investing in individual emerging markets. Right now, three of our favorite emerging markets are Poland, Colombia, and India.

As for U.S. stocks, I wouldn’t encourage everyday investors to short the S&P 500 like Gundlach recommends. Instead, I suggest you be very selective about what U.S. stocks you own. Avoid stocks trading at nosebleed valuations. Own companies with resilient business models and little debt.

The article “The Bond King” Says Short US Stocks was originally published at caseyresearch.com.