Albert Edwards Predicts 75% Decline in S&P

Usually posts in the Watchlist category have a target date, but this time I made an exception because the prediction is so profound.

According to Edwards, Société Générale’s global strategist and prominent perma-bear, the S&P 500 could falls as much as 75%, from the recent peak of 2,100 to 550.

Edwards stated:

If I am right and we have just seen a cyclical bull market within a secular bear market, then the next recession will spell real trouble for investors ill-prepared for equity valuations to fall to new lows. To bottom on a Shiller PE of 7x would see the S&P falling to around 550. I will repeat that: If I am right, the S&P would fall to 550, a 75% decline from the recent 2100 peak.

He further noted that in the previous bear markets, it has taken four to six recessions to shake off the weak sentiment, as shown in the chart below. In other words, we’ve only had two recessions in this current cycle, and the bear market has not yet completed. Edwards

London Silver Fix Will End August 14

London Silver FixThe London Silver Fix is a daily price benchmark for the spot silver market that has been in place for 117 years. On August 14, 2014, the London Silver Fix will come to an end. The company that currently runs the silver benchmarking process known as the London silver fix, is London Silver Fixing Limited. The “fix” occurs at noon, London time, during a conference call between Deutsche Bank, HSBC and the Bank of Nova Scotia. During the call, the banks compare bids and offers for silver on behalf of themselves and their clients, and then they declare the price ‘fixed’ when supply and demand reaches an equilibrium at a certain price. In other words, a few representatives from three banks determine the price of silver on a daily basis.

Although spot silver is traded 24 hours a day, the daily fix provides price guidance that big players can use to make big deals. Some traders prefer the volatility of the silver spot price, while larger organizations, such as miners and industries that buy and sell in large volumes, prefer to complete their deals on a set daily price.

In April, Deutsche Bank resigned from the London Silver Fix panel and another similar panel that sets the benchmark price of gold, so only HSBC and the Bank of Nova Scotia remained. Because of this and all the bad press that has been circulating about precious-metal price manipulation and price fixing, the remaining banks decided to resign from the panel as well.

What happens after the London Silver Fix ends?

Nobody really knows what will happen after August 14; however, if a new system is not established, buyers and sellers will probably just use the spot silver price, or another daily benchmark such as the silver-futures closing price on the US COMEX exchange. Hopefully, the closing of the London Silver Fix will bring us closer to true price discovery in the silver markets. That’s what I’m hoping for anyway.

Baltic Dry Index Down 40% in 2 Weeks (18% In 2 Days)

The Baltic Dry Index reflects the daily charter rate that cargo ships charge for transporting essential goods like iron, coal and grain.

I’ve put the Baltic Dry Index on the watchlist before. As noted previously, a drop in the Baltic Dry Index can be a prelude to a market crash (around 8 months later) according to Brandon Smith at alt-market.com.

The Baltic Dry Index (BDI) went down in 2008, just before the market crashed, and it went down again dramatically January 2012. So, according to Brandon, we should’ve had another crash around September 2012. Obviously that didn’t pan out exactly as Brandon expected, but we haven’t had a recovery either.

Two years later, it’s now January 2014, and the Baltic Dry Index is crashing again. It’s off to the worst start of the year in over 30 years.  It’s down 18% in the last 2 days alone, which is the biggest drop in 6 years.  The BDI is back to four-month lows, and the shipping index has collapsed over 40% in the last 2 weeks.

Jim Sinclair on The Great Leveling and The Great Reset

Here are the highlights from this 45 minute interview with Jim Sinclair. Jim Sinclair predicts:

  • The Great Leveling starts next year 2014 and will last until 2016.
  • The first attempt of the Great Reset will occur in 2016. By 2020, the Great Reset will be in place.
  • The trigger will be when the USDX hits 70.
  • His near-term gold price prediction is $1,650. Then it will rise to $2,400, drop again, and then finish between $3,200 and $3,500 before the great reset begins in 2016.
  • Gold $3,200-$3,500 before 2016

$2,400 Gold by End of 2014

On October 15, 2013, William Kaye predicted $2,000 to $2,500 gold by the end of 2014 and possibly $60 for silver. This confirms Francisco Blanch’s prediction in September 2012 that we would see $2,400 gold by the end of 2014.

William Kaye

“There is absolutely no question that we are now very much in the end game.”  William Kaye, who is one of the most well-connected hedge fund managers in the world, told KWN why the recent plunge is being orchestrated and what will emerge from all of this.  Kaye, who worked for Goldman Sachs in mergers and acquisitions 25 years ago had this to say:

The objective would appear to be to try to touch the lows of late June.  We will see if they can actually make that happen.  I will say that a lot of gold is being lost by the West in the process.  By that I mean physical gold is transiting very rapidly from the West to the East.  That process is now accelerating because Asian buyers are very keen to buy into what they perceive to be an incredibly low, and without a doubt in their minds, an artificial price.

The implications are extremely serious for the West here.  The harder these guys push it, and the faster they try to push things lower, this is causing them to lose an immense amount of physical gold in the process.   We saw backwardation reappear for a brief period of time last week.

And finally

“So I would say that the fourth quarter of this year is most likely the end game.  And as we get into 2014, the risk/reward is such that it is highly likely we will see a slingshot effect much higher for the price of gold.  I would project a price of $2,000 to $2,500 an ounce for gold by the end of 2014, and quite possibly $60 for silver.  Meaning, once this short-term noise is over, the reward in the next year for patient investors will be staggering.”

Francisco Blanch

Francisco Blanch, from Bank of America Merrill Lynch, stated:

“Given the new open-ended nature of QE3, the upward pressure on gold prices should continue until employment is strong enough to require a change in policy,” Blanch added. “In our view, this is unlikely to happen until the end of 2014.”

The Fed used open-ended language in describing how long QE3 would last, saying in its statement it would continue these purchases — and possibly employ other methods — until the outlook for the labor market improves substantially. As we all know, nothing has improved at all, let alone “substantially.”

Blanch explains in his report, Gold Under QE-Infiniti: The combination of open-ended MBS purchases, and the possibility of additional Treasury bond purchases starting in December, could further lift gold prices by adding over $2 trillion to the Fed’s balance sheet over the next two years.

Please note: Posts in the Watchlist are more accountability than fortune-telling. When people make claims and future predictions, like Max Keiser’s prediction of fiat collapse, I like to make a note of it, so we can determine who is accurate and who is not. I also use the Watchlist as a reminder of important events, like Fed meetings and deadlines.

Debt Ceiling Limit: October 17

In a letter to Congress, Jacob J. Lew warns that the government will reach the debt ceiling limit on October 17. The thing I find most interesting is Lew’s claim that “it would be impossible for the United States of America to meet all of its obligations for the first time in our history.” In fact, the US government has declared bankruptcy in 1933, 1950, and insolvency in1977. Various portions of the federal government were also forced to shut down during the 80s when the bills couldn’t be paid. Not to mention, that any time you have to print money to pay your bills, you’re technically bankrupt, even if you haven’t declared it.  Maybe by “our history” he meant his and Boehner’s history together?

The original text of the letter follows:

September 25, 2013
The Honorable John A. Boehner
Speaker
U.S. House of Representatives
Washington, DC 20515

Dear Mr. Speaker:
I am writing to follow up on my previous letter regarding the debt limit and the Department of the Treasury’s ability to continue to finance the government.
As I have written previously, Treasury’s estimates are subject to inherent variability due to a variety of factors, such as the impact of sequestration and the challenges of forecasting the timing and amount of daily government transactions. On August 26, I wrote to inform you that the extraordinary measures we are employing to preserve borrowing capacity would be exhausted in the middle of October. We estimated that, at that point, we would have approximately $50 billion to fund the government-an amount insufficient to cover net expenses for a meaningful period of time.
Since August, we have received quarterly corporate and individual tax receipts and additional information regarding the activities of certain large trust funds, including military retirement trust funds. Treasury now estimates that extraordinary measures will be exhausted no later than October 17. We estimate that, at that point, Treasury would have only approximately $30 billion to meet our country’s commitments. This amount would be far short of net expenditures on certain days, which can be as high as $60 billion. If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history.
The House of Representatives recently passed legislation that includes an ill-advised provision to prioritize payments, which would not protect the full faith and credit of the United States. Any plan to prioritize some payments over others is simply default by another name. The United States should never have to choose, for example, whether to pay Social Security to seniors, pay benefits to our veterans, or make payments to state and local jurisdictions and health care providers under Medicare and Medicaid. There is no way of knowing the damage any prioritization plan would have on our economy and financial markets. It would represent an irresponsible retreat from a core American value: We are a nation that honors all of its commitments.
The debt limit impasse that took place in 2011 caused significant harm to the economy and a downgrade to the credit rating of the United States. The drawn-out dispute caused business uncertainty to increase, consumer confidence to drop, and financial markets to fall. If Congress were to repeat that brinksmanship in 2013, it could inflict even greater harm on the economy. And  if the government should ultimately become unable to pay all of its bills, the results could be catastrophic.
The President remains willing to negotiate over the future direction of fiscal policy, but he will not negotiate over whether the United States will pay its bills for past commitments. Extending borrowing authority does not increase government spending; it simply allows the Treasury to pay for expenditures Congress has already approved. As such, I respectfully urge Congress to act immediately to meet its responsibility by extending the nation’s borrowing authority.
Sincerely,
Jacob J. Lew
Identical letter sent to:
The Honorable Nancy Pelosi, House Democratic Leader
The Honorable Harry Reid, Senate Majority Leader
The Honorable Mitch McConnell, Senate Republican Leader
cc:
The Honorable Dave Camp, Chairman, House Committee on Ways and Means
The Honorable Sander M. Levin, Ranking Member, House Committee on Ways and Means
The Honorable Max Baucus, Chairman, Senate Committee on Finance
The Honorable Orrin G. Hatch, Ranking Member, Senate Committee on Finance
All other Members of the 113th Congress

Andrew Maguire Predicts Massive Rebound in Gold Price

Yesterday, Andrew Maguire said, “all they (central planners) are doing is delaying an extremely disorderly rebound (in the price of gold).  Give it a few days because at least 90 tons of central bank buying today was seen below $1,550, into the afternoon fix (in London).  As we cascade down here you can guarantee that what they (Eastern buyers) are doing is ‘spot indexing,’ which is basically locking in the price in the paper market and will allocate that at an upcoming fix (in London).

So I give it (at the most) two to three days before this has a massive rebound effect, and the short fuel above the market now is at absolutely unprecedented levels.”

Could he be right?  Possibly.  Unlike many of the other predictions in my Watchlist category, however, we won’t have to wait long to find out.

October 18 to 19, 2012: European Council Meeting

The European Council meets at least twice every six months in the Justus Lipsius building in Brussels. It comprises the heads of state or government of the EU Member States and the President of the European Commission. It is chaired by its President, Herman Van Rompuy. The High Representative for Foreign Affairs also takes part in its meetings.

No doubt, there will be much discussion about Spain, Greece and a performance by Nigel Farage.

Read the European Council Interim Report from their last meeting.