The Market Report: Russia’s “financial war” against the dollar
As Russia faces more economic sanctions from the Obama administration, Vladimir Putin isn’t ceding the fight. Instead, he’s retaliating and has essentially declared “all out financial war” against the U.S. How might that impact our economy and the dollar? In this week’s Market Report, Vince Miller answers these questions for you and lets you know how gold can help you prepare as our currency is further devalued.
Mark Alyn: Welcome to the Market Report with Vince Miller, with the Birch Gold Group. Thanks for being here again with us Vince.
Vince Miller: Hi Mark, pleasure to be here today.
Mark Alyn: Thank you, I’m glad to be here as well. Lots of news in Russia and the Ukraine over the last few weeks to a month. What’s going on in that area and how does that impact western countries?
Vince Miller: Well, as you know due to the situation in the Ukraine, Russia is facing more and more economic sanctions from western countries, particularly the United States. President Obama just enacted more sanctions against creating a lot of global unrest and instability, especially financial unrest and instability.
Mark Alyn: This is going to impact not only the United States but western countries, NATO countries, our allies.
Vince Miller: Absolutely, essentially right now Russia is retaliating in what I would view as an all out financial war against the United States and our friends.
Mark Alyn: How do they do that?
Vince Miller: Well, good question. First of all Russia is seeking to retaliate by selling off U.S. Treasuries. One of the things that we’ve noticed is that the Russian holdings have declined for four straight months. Literally now, at the lowest level since 2011.
Mark Alyn: That’s the holdings of U.S. dollars?
Vince Miller: That’s absolutely correct. They may try to circumvent the petrodollar which is a major concern right now between us and Western Europe. As you probably know, every dollar of gasoline, or all gasoline, has to be purchased in U.S. currency. Right now, Russia has signed bilateral trade agreements with both China and Iran to circumvent the petrodollar. And with them having their own form and means of tapping into Iranian resources and Chinese resources for oil.
Mark Alyn: And they have their own oil reserves as well.
Vince Miller: Right, the big concern is that other BRIC nations will follow. Now what you’re going to have is a great divide between what’s happening and how BRIC nations will pursue oil in the future. That’s a big concern. Basically two global economies going on.
Mark Alyn: Rather than a single one. Okay, how will that impact first the United States? What will it do to the dollar? And second how would it impact me, an individual?
Vince Miller: We already know that China and other countries are selling off U.S. Treasuries and buying tangible assets. As we talked about last week, China right now is looking to increase its gold supply, according to the World Gold Council, by 20% by 2017. Selling off U.S. currencies to buy hard assets, particularly gold and silver. We already know our relationship with Iran and how that is tarnished. Basically being a great oil source in the Middle East, they have a lot of control of there and a lot of power. So if you have China, Russia and Iran and other BRIC nations, basically non-friends of NATO and the United States, joining together this is going to create great global unrest economically. So that’s the big fear that we’re facing right now.
Mark Alyn: So not only will it create financial difficulties throughout the world but here in the United States by driving the value of the dollar down?
Vince Miller: Absolutely, and the situation that we’re talking about could have massive impacts on the U.S. stock market and other stock markets throughout Western Europe.
Mark Alyn: To hedge against inflation, should people invest in gold for the long term?
Vince Miller: Absolutely. Gold is a global reserve asset. It’s no one’s liability. It’s a store of value. It has sustained its value. Gold has never been to zero. There’s stocks that have gone from $500 a share to 0. Gold has never been to zero, that’s why they call it portfolio insurance.
Mark Alyn: And gold isn’t the only precious metal to look at when you’re investing, is it?
Vince Miller: No, silver is particularly a great buy right now. I particularly like silver because of its industrial as well as its investment purposes. Right now silver is well-priced. The historical silver-to-gold ratios, we’re really off the mark right now. Historically you can get 15 ounces of silver for every ounce of gold. Today it’s over 50 ounces of silver to every ounce of gold. So if silver, actually, was to catch up to historical levels in that gold-to-silver, silver-to-gold ratio, silver would just profit through the roof. Both gold and silver are looked at as global reserve assets that are no one’s liability.
Mark Alyn: And at the same time, having gold in your portfolio protects the value of your portfolio and is a long-term investment. Explain that.
Vince Miller: That’s right, I think you buy gold to hold. I don’t think you buy gold to sell. The value of any hard asset always goes up in time and usually it increases in value against inflation. In an inflationary environment like our government is creating by printing more money, by buying up debt, by falsely inflating the stock market through QE1 and QE2 and now QE3. You know, where else are you going to go? My clients, our listeners that call us will always ask the same question: “I just don’t have nowhere else I feel safe.” Of course there’s a safety in a presence of gold that creates some peace of mind that just failing dollars don’t.
Mark Alyn: Of course as the world economy changes with the events in China. People have to be aware and use gold and silver as that hedge against inflation and to protect their wealth.
Vince Miller: Right, Mark. I mean right now, gold is at a 3-year low right now. As we say a lot on this show, the rule of Wall Street tends to be sell over-valued assets, buy undervalued assets. I like what Stephen Leeb had to say. He basically said, “China and Russia are positioning themselves to have their currencies revolve around gold, and as this becomes quite clear to the world the price of gold could shoot into the stratosphere. It’ll be widely recognized that gold is coming back into the monetary system. This will mean silver prices will go into the stratosphere. People will look at the last few years, as just a long consolidation on the way to sky rocketing gold and silver prices. How often can investors buy insurance with eight times the upside in price? This doesn’t happen very often, but this is one of those rare moments in time.”
Mark Alyn: And so this is a good time to buy? A lot of people say, “I should have bought it five years ago because it was less then and it went up.” When is the best time to buy gold?
Vince Miller: Well you know the old saying, “The best day to plant a tree was 20 years ago. The second best day is today!” You’re buying metal, not to make money. You buy gold to protect money. To protect buying power. So it doesn’t really make a difference when you’re buying gold. The old saying, it’s like a person that rents verses a person that owns their house. I guess a renter is just a bad businessman giving money to a good businessman. So maybe on the short term it makes plausible sense to rent. But if you’re going to stay some place for a long period of time at some point that ratio offsets itself. It’s always far better to own a tangible asset in an inflationary unstable environment, than not. So that’s what metal is. We deal here at Birch with the physical, tangible asset of the metal itself.
Mark Alyn: So, as other economies in the world, China and Russia – which is what we’ve been talking about recently – do things to devalue the dollar, people should really take a look at their portfolios and think about investing in these precious metals. We’ve talked about gold, we’ve talked about silver, there’s platinum. These are the kinds of things that can be used to safeguard wealth for today as well as for tomorrow.
Vince Miller: Well that’s absolutely true. I mean in 2005 gold was trading at about $400 an ounce, Mark. In 2008 when the markets crashed and the credit crisis hit, the average investor in the United States lost between 40-50% of their value almost overnight. Well what do you think gold did?
Mark Alyn: Went up?
Vince Miller: That’s right, gold went from $400 an ounce around in 2005 to $800-$900 an ounce in 2008-2009.
Mark Alyn: As we wrap up our program for this week, Vince, people can ask questions by writing us, emailing us at email@example.com that’s firstname.lastname@example.org Or they can call at (800) 355-2116, that’s (800) 355-2116 and your staff will be able to answer any and all of their questions.
Vince Miller: Absolutely Mark and I would get on the phone right now. I would call a gold specialist. If you have any questions give us a call here at the Birch Gold Group, let us answer them. Let’s talk about what’s going on in the world, we can address the issues and your concerns of your portfolio and talk to you about what metals are right for you. Not all gold and silver is created equal. We sell a variety of metals that cater to a variety of needs that investors that want to hedge into precious metals have. So, we can help you with that, we can help strategies the metal portfolio for you. We like to diversify between the options that investors have. If you have a retirement account, a lot of clients have moved their retirement accounts out of the equities and want to position them into physical gold, physical silver. It’s a great way. These types of accounts in my opinion make the perfect marriage for physical gold and silver because you don’t day trade, you don’t play the margins in an IRA account. It’s designed for long term growth over time, so is gold. You buy gold to hold not to sell so because you don’t day trade those types of accounts and you don’t day trade those metals generally, it makes a good marriage between the two. So give us a call. We can talk to you about how to get that IRA protected in physical gold if you haven’t an old 401(k) from a former employer. If you’re over 59 and a half in a current employer more than likely we can help you with an in-service transfer to get that taken care of. If you have cash on hand, you just want to get it converted out of what most people call the dead dollar and put it into something that has at least sustained value.
Mark Alyn: I just want to say that the Birch Gold Group is a specialist in IRA gold investing for IRAs.
Vince Miller: Certainly we are, absolutely.
Mark Alyn: Hey Vince, thank you very much for joining us and again if you want information just email us at email@example.com, firstname.lastname@example.org. Or call (800) 355-2116. (800) 355-2116. This has been the Market Report with Vince Miller. I’m Mark Alyn. We’ll see you on our next show. Bye bye for now.brics, china, federal reserve, gold, petrodollar, russia, vladimir putin