While short term overbought, everything that I see is confirming that the 3 month highs we’re seeing right now in precious metals are only just the beginning. The planets appear to be aligned for us. In just the last 2 months the VRA has total gains of more than 370% in our VRA Core Portfolio mining stocks.
Bu today, I have to share some details from a phone call I had with a long time VRA Subscriber from New York. “John” is a senior bank officer with one of the largest banks in the country. I assured him that I wouldn’t include his real name (or the name of his bank), but everything else is as exactly as he told me.
Extraordinary Phone Call
“John”, my banker friend in New York (not his real name, but he is from NY) has been with his “monstrosity of a bank” (his words, not mine) for more than 20 years. He started with them right out of college and loves what he does for a living. I know this to be true because he’s one of the few people I know that puts in as many hours as I do. It’s his passion…and he’s very, very good at it.
John no longer works with retail customers…he’s high end commercial/Wall Street lending only these days…but because of his senior position, he sees all the reports. In a nutshell, here’s what John told me today:
First, the Trump phenomenon has already had a huge impact on the level of business they are doing. In his words, “the change was like night and day”. John told me that within just a few days of the election, top CEO’s, CFO’s and senior company leaders were on the phone to them, asking what their options were to increase the amounts they could borrow. Again, in John’s words, “it was like somebody put the word out on CNN or on the cover of the NY Times…the economy is back…and everyone just wanted to get going, now.”
Second, John told me that his bank “pretty much immediately began freeing up lending”. We already knew that banks have been sitting on record levels of cash…it’s now clear these excess reserves are about to start working their way back into the US and global economy (roughly 1/3 of John’s business is with international clients).
I asked John if this means we’re headed back to “fog a mirror” loans…2004-2006, easy money credit without the ability to pay it back, should the economy go into the tank again. His candid answer was “no…well, not yet anyway”.
He also shared details about lending approval rates, which have already jumped “significantly”, just since the election.
Finally, when I asked John “why”…exactly what does he attribute these changes to…his answer came quick: “it’s all about Trump. People around here see Trump as a financial and real estate giant. If you had to pick one person to jump start the US economy and give us a chance of getting back to 4% GDP, it’s this guy.”
I’ll be honest with you. This call absolutely blew me away. Not because I was really all that surprised to hear John say these things…but because they confirmed for me exactly why I voted for Trump. It made me feel even more like I made the right decision (not that I would have ever voted for HRC…yuck).
It also confirms the action that the VRA System has been seeing in the financials. You may remember the VRA Updates, where I included charts and analysis of the financials, back in the Spring. They were telling us back then that something big was coming in bank stocks.
Take a look at this 1 year chart of XLF (financial ETF):
Stunning move higher since the election. And folks, know this as well; when the bank stocks get going, they tend to run for 2-3 years. This means the 20% move higher since November 8th is likely just the beginning.
This also tells us that the global relation trade is very, very real. But it also tells us that the FED is WAY behind the curve. Unless they start raising interest rates and fast, we’re about to see a level of inflation that we have not had in many, many years.
And what sector loves inflation, more than any sector on the planet? You guessed it…precious metals. Especially when real interest rates are negative (as they are right now). Real interest rates are determined by taking the 10 year Treasury Bonds yield (currently 2.3%) and subtracting the level of inflation (CPI).
I’ve never believed the BS numbers that the government gives us on inflation, showing the CPI increasing at just 2% a year. Let’s assume that the real number is really 5% (still too low in my book)…this gives us a real interest rate of roughly -2.7%…and rapidly growing. This is HUGE for gold and silver! This is what the smart money is looking at…this is why precious metals and the miners are taking off…especially the ones that the VRA recommends.
And it confirms almost everything that John told me today. Look out everyone…it looks like serious growth is on tap for the US and global economy. BTW, this is also very big for oil and natural gas…coming demand could eat into energy supplies fast than just about anyone is predicting. My $70 oil target for this year could be on the low side…maybe even by quite a bit.
Until next time, thanks again for reading…