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Contributors The Fed’s Latest Plan Is About to Trigger the Next Bubble
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After the tech bubble bust, Allan Greenspan, the Federal Reserve chairman at the time, kept interest rates below 3% for about four years. Starting in July 2003, he kept the rate at 1% for a full year. His actions led to a boom in the economy and financial markets. He was considered a genius for engineering a quick economic recovery.

But now, it’s obvious Greenspan’s cheap money policy was a huge factor behind the housing bubble. After the bust, he went from hero to villain very quickly.

At the moment, Ben Bernanke is following the footsteps of Greenspan. Only this time, he’s not only keeping rates at zero for more than four years, he’s also printing trillions of dollars.

In 2009, Time magazine nominated him Person of the Year for saving the economy from another depression. Today, Bernanke is a hero.

In reality, what he’s doing is planting the seeds for the next major financial catastrophe, just like Greenspan before him. But before the “you know what” hits the fan, there will be plenty of opportunities to make money. We can take advantage of the next Fed-sponsored bubble to easily grab some double- or triple-digit gains.

Our Fed Chairman Has No Clue

One of the Federal Reserve chairman’s most important jobs is to predict what will happen to the economy. Unfortunately, Bernanke, like most economists, is terrible at that.

In October of 2005, for example, he said the boom in housing prices was simply reflecting “strong economic fundamentals.” In February 2006, he also said housing prices would probably continue to rise. After peaking early in 2006, housing prices tumbled 30%.

In January 2008, Bernanke said: “the U.S. economy has a strong labor force, excellent productivity and technology, and is in the process of repairing itself. The Federal Reserve is not currently forecasting a recession.” According to official data, one of the worst recessions in our history started a month before Bernanke made this statement, in December of 2007.

So, the economy was already in a recession, but Bernanke had no idea. With that kind of track record, I pay very close attention to each one of his predictions. Then, I make sure I’m betting the opposite will happen.

His big prediction now is that inflation will not be a problem. That’s why he feels comfortable implementing another round of money-printing … this time with unlimited quantitative easing.

My bet is he will get to add another failed prediction to his disastrous track record.

Precious Metals: the Next Bubble

Now that the Fed has gone nuts with unlimited QE, there’s another financial bubble in the making. Greenspan’s cheap money policies led to a bubble in housing – this time, the Fed’s “cheap money on steroids” policy will result in a bubble in precious metals.

Once investors start realizing inflation will be a big problem, they will flock into gold and silver. Despite their tremendous run in the past few years, both metals will shoot even higher once inflation starts to get out of control.

While I expect gold to do well, silver will do even better. It could easily double from its current price.

But there’s an even better way to play this coming bubble: silver producers. In the sector, Endeavor Silver (NYSE:EXK) stands out because of its low production costs and amazing track record of growth.

While the industry’s average cost to produce an ounce of silver is around $10.50, Endeavor gets silver out of the ground for just $6.50, on average. As a result, the company is much more profitable than its industry peers.

In the last seven years, the company grew silver production by 957%, going from a junior to a mid-tier miner. With the recent acquisition of a new mine in Mexico, this growth trend should continue. The other big advantage they have is that the company operates in Mexico, which offers a much more stable mining environment. The risk of government expropriation, for example, is very low.

Endeavour Silver is a Great Way to Play the Bull Market in Silver

See larger image

In the chart, you can see how the stock tends to move with silver. But, the stock performs better than the metal when silver is rising. After the Fed implemented QE I, for example, silver rallied 60% and EXK rallied 180%. Following QE II, silver rallied another 170%, while EXK rallied another 230%.

Now that the Fed has implemented another round of money-printing, it’s time to buy Endeavor Silver. With unlimited QE, you can easily grab triple-digit gains with EXK. It’s a great way to play the next financial bubble.

Regards,


Evaldo Albuquerque
Senior Analyst

P.S. The Fed’s long-term policies are only one of the economic problems lurking on the horizon. Right now, my colleague, Jeff Opdyke, is seeing signs of a financial catastrophe that no one is talking about. It’s a 99-year-old ponzi scheme, and when it comes undone next year, it could wipe out the entire middle class. To learn more about this coming threat – and how you can protect yourself – click here.

 

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