Jim Puplava Perspectives Series

The nearly 80 percent rise of the stock market from its March lows is being primarily driven not by sound economic data or a perceived turnaround, but by massive monetary injections into the financial markets. Unfortunately, this artificial--and unsustainable--source of credit merely serves to create distortions that lead to asset booms and speculative bubbles unhinged from the real economy. Because of this, it is important to keep a watchful eye on a number of key indicators going forward...

Jim lays out a summary of the various potential events and scenarios that could derail the markets in 2007 in light of the current euphoria.

The conclusion to a four part series detailing the lives and events surrounding John and Terry Wheeler, J. Gordon Grecko, and WedgeBook Partners.

The "core rate" is a fictional concept designed to soothe the financial markets and distract them from the reality of rising inflation. The core rate does not exist anywhere in our economy. It is a fictional concept designed to obfuscate inflation. The next time you go to the grocery store and experience shock and awe as the checker rings up your shopping cart, ask him or her for the "core rate." See what kind of look you get...

The second in a four part series detailing the lives and events surrounding John and Terry Wheeler, J. Gordon Grecko, and WedgeBook Partners.

The first in a four part series detailing the lives and events surrounding John and Terry Wheeler, J. Gordon Grecko, and WedgeBook Partners.

Anyone who even remotely follows the current state of the U.S. economy realizes one irrefutable fact: our economy is driven entirely by credit. Secondly, we acknowledge the fact that credit feeds on itself and must constantly and consistently expand. Thirdly, we know that the safety of this credit-based economic system lies in the value of its assets used as collateral for that credit. Lastly, we agree that these same assets directly depend on a constant stream of new credit to support their value. So, what happens when credit dries up or contracts? We see asset prices fall, which reduces the collateral value supporting this credit. From that point on, it's a scramble to shore up the leakage in this vicious paper cycle. Because of the drastic ramifications of contracting credit, central bank policy—and our own Federal Reserve—will always favor credit expansion.

Companies, consumers, the government at all levels, the financial markets, and our entire economy are far more leveraged today than we were in 1991 or even 2000. A rise in interest rates of as much as 1, 2, 3 or 4% (as many analysts and economists are indicating) would collapse our economy and financial markets. What is sustaining the U.S. economy, our financial markets, and the American consumer is ever increasing amounts of debt and the asset bubbles that underpin that debt...

In the last month over 70% of all purchasing managers in this country are reporting price increases for everything they buy. They mean everything from aluminum, coal, corrugated containers, oil and natural gas, to fabricated steel. Natural gas prices, as shown in the chart below, have risen for over 20 months...

Seven factors are listed providing support for a new super bull-market in precious metals that will turn out to be much bigger than what occurred in the 1970s.

Stocks have risen this year on the basis that the economy and earnings are improving. This makes sense on the surface. If the economy is getting stronger, then profits would be expected to rise along with improving economic conditions. Yet we see that the employment rate remains high as businesses continue to shed jobs each month, unemployment claims hover over 400,000 typical of a recession, and capital spending by business along with business sentiment remains weak...

The precious metals market—especially silver—is a sleeping giant waiting for a catalyst to ignite it. That catalyst, I believe, will be a financial and monetary storm that is kindled by an unforeseen or unexpected event, either geopolitical or financial. Monetary authorities are desperately trying to keep the financial markets under control, but they are gradually losing their grip...

"This currency, as we manage it, is a wonderful machine. It performs its office when we issue it; it pays and clothes troops, and provides victuals and ammunition; and when we are obliged to issue a quantity excessive, it pays itself off by depreciation." ~ Ben Franklin, April 1779 "Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of dollars in circulation, or even credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is the equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation." ~ Ben S. Bernanke

In life, all of us have a vocation. For “rest” from our vocation, many of us choose an avocation. Some of us play golf, others play tennis. I enjoy reading and sailing. Like most, I have found that my work and hobbies often color my perspective of the world at large. What happens in my vocation may carry over into my avocation and vice versa. All of us tend to view the world we live in through the prism of work and play.

It is the best of times or the worst of times -- depending on which economic neighborhood you live in. For politicians it is a good time to be in office. The economy is growing at rates not seen since the 50's and 60's. Everyone who wants to work can find a job. Wages and personal income are rising. Consumer confidence is high. The stock market has risen for 17 straight years. Corporate profits are up. The world is at peace. As the President declared in his "State of the Union" speech, "We are fortunate to be alive at this moment in history. Never before has our nation enjoyed, at once, so much prosperity..."

As I sat down to write this edition of Perspectives on January 2, 2000, I thought about how much technology transformed the twentieth century. It is hard to believe that less than one hundred years ago, the landscape of America was rural. In the nineteenth century, America was unified by the technology of transportation. Railroads criss-crossed our continent, making travel between the east and west coasts a reality. The infrastructure was being laid, along with the tracks, for the U.S. to begin the twentieth century as an emerging industrial giant. The railroad, the steam engine and the telegraph were setting the stage for transforming the country from an agrarian society to an industrial powerhouse.

For Wall Street it just doesn't get any better than this. As of this writing, the new Dow Jones Industrial Average has risen 20%, the S&P 500 is up over 15% and the Nasdaq has achieved a parabolic rise of over 53%. On Wall Street, they will be handing out more than just million dollar bonuses. It will be time to break open a bottle of Dom Perignon and light up a Macanudo. For the fifth consecutive year, if things hold up, the U. S. stock market will have achieved gains in the double-digits. Even better for Wall Street, it has been another record year for IPOs and mergers. For investment bankers, this is as good as it gets. Yet all is not well for fund managers and investors.