Back to 1968: History Repeats Itself

JP Morgan’s “recession indicators” are now at the highest level since the last recession.

The Cass Freight Index, a trusted measure of North American freight volumes and expenditures that provides valuable insight into freight trends as they relate to other economic and supply chain indicators and the overall economy, has been falling on a year-over-year basis for 14 consecutive months.

Total business sales have been declining since August 2014 – that’s nearly two years in a row.

The Fed’s Labor Market Conditions Index has been declining for five months in a row.

The Industrial Production Index, an economic indicator that measures real output for all facilities located in the United States manufacturing, mining, and electric, and gas utilities has been declining since November 2014.

And while last month’s job report blew away analysts, let’s not forget that the employment numbers in the month prior were the worst that we have seen in six years.

These are just some of the underlying deteriorating economic factors the US is dealing with.

Throughout history, economic turmoil is often the undertone for growing riots and protests.

So let’s go back to 1968.

A Year of Global Protests and Unrest

Via “The Economic Crisis of 1968 and the Waning of the “American Century“:

“In early 1968, the most serious economic crisis since the Great Depression shook the Western world. The disruption exposed a variety of economic ills plaguing the U.S. and world economies, some of recent vintage but others with roots that reached back a decade or more.”

1968 also marked a year of global protests. There’s even a full Wikipedia page dedicated to the protests of 1968.

In America, no other protests were more prominent than those involving the Civil Rights movement. The movement eventually ended in April 1968, when Martin Luther King was killed. The Civil Rights Act was signed into law just days after.

Nearly 50 years later, we’re once again witnessing a similar fate.

In fact, the similarities between then and now are so vivid it’s scary.

In the US, riots and protests over race issues are once again on the rise and becoming more violent than ever. The nation’s economy continues to teeter and thoughts of an upcoming recession grow stronger every day.

Canada is No Different

In Canada, when Pierre Trudeau took office in 1968, Canada’s debt stood at just over $11 billion. By the time he was done, Canada was in debt by $157.2 billion – a 738.7% increase.

There’s more.

Via Jean Chretien Liberty, October 16, 2000:

“…The national debt grew from $11.3-billion in 1968 to $128-billion in 1984. The annual federal deficit went from zero to $25-billion. Ottawa’s spending rose from 30% of Canada’s total economic output to nearly 53%; our dollar plummeted from around US$1.06 in 1970 to 66 cents today. The unemployment rate has been running between three and five percentage points higher here than in the United States, and Canada reduced itself from being one of the world’s three richest nations 30 years ago (along with Switzerland and the U.S.) to one of the three leading debtor nations in the West, alongside Belgium and Italy.”

Following the massive government spend under the previous Trudeau regime, Canada struggled for years to keep up with debt payments. This led to higher taxes and reduced transfer payments to all provinces.

Today, under our new Trudeau, Canada will once again be going into a major deficit. Only this time, we’re in a period of low commodity prices – the backbone of Canada’s economy.

And although it won’t be soon, Canada’s interest rate will eventually rise; when it does, we will be left with a major debt load. Our only hope then is that commodity prices shoot through the roof.

I could go on, but you get the point.

What happened in 1968 should have taught us many lessons. Yet, here we are nearly 50 years later and both Canada and the US are running into a similar fate.

So how can we – the people who understand what’s really going on – protect ourselves from this ignorance?

There is one last comparable I want you to see.

Learning From the Past

Take a look at this chart:

In case you haven’t figured it out, the above is a chart for the price gold.

So let’s finish the excerpt from “The Economic Crisis of 1968 and the Waning of the “American Century.“:

“In early 1968, the most serious economic crisis since the Great Depression shook the Western world. The disruption exposed a variety of economic ills plaguing the U.S. and world economies, some of recent vintage but others with roots that reached back a decade or more.

…The problems, both long-term and short-run, were tightly intertwined, and they culminated in March in a speculative run on gold that Time magazine called “the largest gold rush in history, a frenetic speculative stampede that…threatened the Western world.”

In 1968, the US experienced its largest one-year deficit since the World War II period.

In 2016 – for the first time since 2009 – the federal budget will increase in relation to the size of the economy.

Via CBO’s Summary of The Budget and Economic Outlook:

“In 2016, the federal budget deficit will increase, in relation to the size of the economy, for the first time since 2009, according to the Congressional Budget Office’s estimates. If current laws generally remained unchanged, the deficit would grow over the next 10 years, and by 2026 it would be considerably larger than its average over the past 50 years, CBO projects. Debt held by the public would also grow significantly from its already high level.”

During 1968, foreign central banks feared that the growing US deficit would make their dollars worth less, and sold dollars in exchange for gold.

Today, central banks around the world – including Russia and China – are doing the same thing once again.

Via The New Housing Bubble Just Began:

“We are now witnessing the fastest pace for a U.S. debt selloff by global central banks since at least 1978.

Via CNN:

“…China, Russia, and Brazil sold off U.S. Treasury bonds as they tried to soften the blow of the global economic slowdown. They each sold off at least $1 billion in U.S. Treasury bonds in March.

In all, central banks sold a net $17 billion. Sales had hit a record $57 billion in January.

So far this year, the global bank debt dump has reached $123 billion.

It’s the fastest pace for a U.S. debt selloff by global central banks since at least 1978, according to Treasury Department data published Monday afternoon.”

Meanwhile, we are witnessing the continued accumulation of gold by these nations.

In other words, nations are dumping US Treasury and buying gold.”

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Timing is Everything: Gold Portfolio Update

Last year in July, I said gold stocks were about to break through.

Today, numerous gold stocks are trading at or near 52-week highs.

Then, earlier this year in May when gold was smashed down, I said that we should expect a rally in gold and not to fall for the manipulated downward price movement.

A week after, gold immediately bounced back – as did many gold stocks.

Then, just last week, I issued a special report about my latest gold opportunity, emphasizing that the fallout from Brexit would send gold higher.

That opportunity was First Mining Finance (TSX-V: FF) (OTCQX: FFMGF) and I am glad we timed that one – having already missed the opportunity once before.

At the time of the report, First Mining Finance was trading at less than CDN$0.70.

In less than a week following that report, shares of First Mining hit a high of CDN$0.95 – an increase of more than 35%. Shares closed Friday at CDN$0.87.

Meanwhile, Integra Gold (TSX-V: ICG) (OTCQX: ICGQF), another gold stock in the Equedia Letter Portfolio* continues to make new highs, hitting a high of CDN $0.88 this week before closing at CDN$0.87 on Friday. Integra was added to the Portfolio last year at a price of CDN$0.34, for nearly a 160% increase.

*The Equedia Letter Portfolio represents companies introduced to readers within the last year.

Red Eagle Mining (TSX-V: RD) (OTCQX: RDEMF), a recent addition to the Equedia Portfolio*, which was introduced at a closing price of CDN$0.68, also reached a new high close of $0.83 this week, before closing at CDN$0.77 on Friday. I have a feeling that this one may soon take off – especially as it nears its first gold pour and paves its way into becoming a junior gold producer.

Despite all of these companies now trading near their all-time highs, they are still undervalued, in my opinion, at current gold prices. Some profit taking wouldn’t be a bad idea but if gold continues to climb – and many signs point to that being the case – these stocks could climb much higher.

And if gold does what it did following 1968, then we may be in for the opportunity of a lifetime.

Seek the truth,

Ivan Lo

The Equedia Letter

www.equedia.com

Disclosure: We’re biased towards First Mining Finance, Red Eagle Mining, and Integra Gold because they advertisers. We were granted and also continue to own options in these companies. You can do the math. Our reputation is built upon the companies we feature. It’s your money to invest and we don’t share in your profits or your losses, so please take responsibility for doing your own due diligence. Remember, past performance is not indicative of future performance. Just because many of the companies in our previous Equedia Reports have done well, doesn’t mean they all will. Furthermore, First Mining Finance, Red Eagle Mining, and Integra Gold and their respective management have no control over our editorial content and any opinions expressed are those of our own. We’re not obligated to write a report on any of our advertisers and we’re not obligated to talk about them just because they advertise with us.