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8.19.14 - Stock Market Warnings Are Growing Louder

Gold prices slightly lower on a stronger U.S. dollar ahead of Janet Yellen's speech expected at the end of the week. U.S. stocks higher, Nasdaw Composite hits 14-year highs. Gold last traded at $1,296 an ounce. Silver at $19.41 an ounce.

With the NASDAQ trading at a 14-year high, is it any surprise the warnings about a stock market bubble are getting louder?

The NASDAQ climbed yesterday to its highest level since March 2000 as the market cheered the easing of some of the geopolitical tensions that have been worrying market observers.

The stock market, however, is driven by underlying economic factors long term. Geopolitical factors may come and go, but the economic factors are ALWAYS present.The underlying economic fundamentals simply do not support a NASDAQ at its highest levels since Bill Clinton was president.

Sentiment also plays a big role in the financial markets. A poll by the Wall Street Journal shows nearly half of all Americans believe the US economy is in a recession. Given the parade of disappointing economic reports over the past few months, this belief is understandable.

Yet the NASDAQ is at a 14-year high? This just does not add up.

As a result, some of the brightest minds in the financial world are sounding alarms about the stock market.

Nobel Prize-winning economist Robert Shiller wrote in the New York Times last week that "The United States stock market looks very expensive right now."

Hedge fund king Carl Icahn blogged last week that, "We can no longer simply depend on the Federal Reserve to keep filling the punch bowl."

Icahn called the current scenario a "dangerous financial situation."

Ex-Treasury secretary Robert Rubin wrote in the Wall Street Journal last week that, "The risk of excesses and the consequent instability have increased substantially."

Despite the stock market at record heights, a new survey for shows over 1/3 of people (36%) in the U.S. have nothing saved for retirement. One contributing factor to this alarming figure, and the widely held view that the US economy is in recession, is the fact that the past five years of so-called economic recovery have done almost nothing to boost paychecks for average Americans. This marks the weakest growth since World War II.

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8.14.14 - Investors Continue To Find Safe Haven In Gold As Global Economies Struggle

Gold prices end higher for a third straight session on weak jobless claims data. U.S. stocks end higher as softer-than-expected economic data reinforced speculation that the Fed won't rush to raise interest rates. Gold last traded at $1,315 an ounce. Silver at $19.91 an ounce.

The markets seem to be ignoring the troubling economic news over the past 24 hours. Instead, the financial world is choosing to focus on possible easing of tensions between Ukraine and Russia.

Two of the biggest economies in the world faltered in the 2nd quarter. Japan's GDP fell in the 2nd quarter by a whopping 6.8%. Wall Street is making excuses for the drop, blaming it on localized tax issues, but there's a problem with this view. It turns out that Germany's GDP also fell in the 2nd quarter.

There are scarcely two more important, modern, industrialized economies in the world than those of Germany and Japan. The fact that both economies are shrinking is not something the financial markets can ignore for long.

Disappointing news also came from the US economy. The number of Americans filing new claims for unemployment benefits rose more than expected last week. Initial claims for state unemployment benefits increased 21,000 to a seasonally adjusted 311,000 for the week ended Aug. 9, the Labor Department said today. Moreover, the prior week's claims were revised to show 1,000 more applications received than previously reported.

This is the highest level of unemployment claims since June and the biggest shortfall between actual and expected claims in 3 months.

The news isn't any better for the US dollar, which continues to come under pressure from Russian and Chinese machinations.

President Vladimir Putin said today that Russia should aim to sell its oil and gas for rubles globally because the dollar monopoly in the energy trade was damaging Russia's economy, which is basically in recession.

Meanwhile, some analysts are worried China could be ready to start dumping its existing holdings of US Treasuries.

Such a move would be quite damaging to the US economy, bond and stock markets because it would spike interest rates sharply higher.

One clear safe haven for investors is gold.

McEwen Mining founder and chief owner Robert McEwen told CNBC yesterday that he sees gold going to $5,000 per ounce in the next three to four years.

Baker Steel Capital Managers Managing Partner David Baker isn't predicting $5,000 gold but he is forecasting higher gold prices and is advising clients to hang on to gold because of "abnormal monetary policies of central banks."

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8.12.14 - Federal Reserve's Loose Monetary Policy Continues To Hurt Economy

Gold prices end higher on poor economic data from Germany. U.S. stocks lower as investors remain jittery amid growing global tensions. Gold last traded at $1,310 an ounce. Silver at $19.93 an ounce.

A Federal Reserve official is finally admitting what has been apparent to most Americans for years: this so-called economic "recovery" is weak at best and certainly disappointing.

The Federal Reserve’s No. 2 official acknowledged Monday that global growth had been “disappointing” and warned of fundamental headwinds that might temper future gains.

Stanley Fischer, who took over as vice chairman of the Fed in June, pointed to weak labor force participation and a soft US housing recovery as two reasons for disappointing economic growth, saying this could be a long-term phenomenon.

The labor force participation rate has remained near modern-era lows for years, coming in at just 62.9 percent last month. This statistic offsets other statistics that the administration has been touting as evidence of an improving employment picture.

The housing sector has also continued to weigh on the recovery, said Mr Fischer, who echoed the concerns of the Fed’s chairwoman, Janet Yellen. Unlike the vigorous rebound in housing activity that followed previous recessions, tighter credit conditions have led to faltering home construction.

Despite this though, Fischer claimed that the Fed's Quantitative Easing program had been successful. Private sector economists often disagree with that assessment. Unprecedented loose monetary policy has resulted in a world awash in dollars and created a new asset bubble, the impact of which is still yet to be felt.

Perhaps the most stark evidence that Quantitative Easing has in fact failed is a startling statistic from the United States Conference of Mayors. U.S. jobs pay an average of 23% less today than they did before the 2008 recession. In total, the report found $93 billion in lost wages. While Fed policy has benefited a few fat cats on Wall Street, it has robbed Main Street USA of wealth through debasement of the currency and a failure to spur economic growth.

In gold market news, a highly respected financial commentator, says the derivatives activity that has suppressed the price of gold is unraveling as the financial world becomes more aware of the dangerous geopolitical situation around the world.

Dennis Gartman, whose opinions are much sought after in the mainstream investment sector, has told clients the following in his latest newsletter ...

“The Force has already lost one very important battle: it has lost the battle at 975 euros/oz., with gold trading now at or near 982 euros and with the truly psychologically and technically important 1000 euros/oz. level only just a bit ahead. Once 1,000 euros is taken out -- and we think that it shall be, if not today, then next week if the geopolitical events unwind as badly as we fear they might -- then there is nothing that stems the advance until 1,100 euros, noting that the peak for gold in euro terms was 1,350 euros back in late 2012.

Too often, commentators look at gold only in dollar terms, but with the Eurozone having a similarly sized population and a GDP on a broadly similar scale to that of the U.S., gold price movement in the Euro are equally important in the global picture. There are massive dangers ahead for the precarious global financial system with serious fighting in Ukraine, Syria, Iraq and Libya. Flexing of fundamentalist Islamic muscle in the Middle East and North Africa is destabilizing.

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