saveyourassetsfirst3 |
- 7 Observations On The Euro
- Wednesday Options Recap: RadioShack, Kohl's See Action
- 5 ETFs For Doomsday Investors
- Dan Kervick: Beware of Rule by Central Banks
- Bob Chapman : Buy more Gold and Silver
- Simple Portfolio Building: Aggressive Growth
- ETF Spotlight: Gold
- Buy Gold On The Fed Fuddle
- Satisfy High-Yield Hunger For 4 Years With 9.2% Offshore Bank Bonds
- Destruction of Spain’s Economy Duplicates Greece
- The Return of Ugly Goldilocks
- Great Expectations May Lead To Great(er) Disappointments
- Military coup in Mali raises concerns for gold producers
- Golds Breakout or Gold Stocks Breakdown?
- Gold Down 2% Following FOMC Minutes Release
- Gold price down on cautious talk from Fed
- Jim Sinclair: Yesterday was "Pure Manipulation...Almost Without Camouflage"
- Yesterday was 'pure manipulation...almost without camouflage,' Sinclair says
- Game Changer for Gold and Stocks
- Gold & Silver Market Morning, April 04 2012
- Duncan: Breakdown of the Paper Money Economy
- LISTEN: “Peter Schiff Is An Idiot”
- Silver Update: “The FED Stupid”
- Turkey Aiming to Become Big Gold Producer
- King Ibn Saud’s 35,000 British sovereigns – Gold’s historic undervaluation versus oil
- Gold Coins (US Mint) In Q1 2012 Show "No Hysteria and No Bubble"
- April 4, 1944 : Nazi Gold: The Merkers Mine Treasure
- The Golden Thorn in the Flesh I
- Gold Stocks Cheap or Silver Stocks Expensive?
- How to Avoid Investing Idiocy by Ignoring the Fed
| Posted: 04 Apr 2012 06:46 AM PDT By Marc Chandler:
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| Wednesday Options Recap: RadioShack, Kohl's See Action Posted: 04 Apr 2012 06:44 AM PDT By Frederic Ruffy: Stocks are battling off the day's lows heading into the final hour of trading, but stock market averages remain deep in the red late Wednesday. The table was set for a volatile session by sharp losses across Eurozone equity markets following a disappointing auction of Spanish bonds. Germany's DAX helped pace the decline with a 2.8 percent skid. The volatility spilled over onto US shores and seemed to overshadow the day's other news. Before the opening bell, ADP reported that the US economy added 209K private sector jobs last month; which is a bit less than expected, but seems to suggest Friday's jobs report will also show an increase of more than 200,000 payrolls. Nevertheless, the dollar is higher and big losses are being seen in some of the commodities markets. Gold is off $50 to $1622 and crude slipped $2.25 to $101.75 per barrel. The Dow Jones Industrial Average Complete Story » | ||||||||||||||||||||
| Posted: 04 Apr 2012 06:42 AM PDT By Stoyan Bojinov: Investors have seemingly brushed aside looming debt woes on both sides of the Atlantic ocean as improving growth expectations have helped pave the way higher for equity markets around the globe. Bullish momentum has undoubtedly prevailed on Wall Street thus far in 2012, although many are fearful that a steep market correction is just around the corner. Economic data releases have been encouraging over the past few months, however weakness in the housing and labor markets continues to be a major drag on the recovery efforts at home. The million dollar question that investors are asking themselves is whether to jump aboard the bull-train or stand back in anticipation of a derailment in the foreseeable future? Remember that the trend is your friend; calling the top on a bull market can be wildly profitable, however, more often than not, investors are better off buying on the dip rather than making Complete Story » | ||||||||||||||||||||
| Dan Kervick: Beware of Rule by Central Banks Posted: 04 Apr 2012 06:10 AM PDT By Dan Kervick, who does research in decision theory and analytic metaphysics. Cross posted from New Economic Perspectives The recent exchange on the nature of banking among Paul Krugman, Scott Fullwiler, Steve Keen and others has been feisty and instructive. But some readers might be left wondering whether the whole exercise is too wonky by half. The anatomical details of banking systems might be juicy and interesting for the academics who like to dissect those systems and dig deep into their entrails. But how significant are the details for practical questions of public policy? They are in fact very significant. The functional details of institutions matter, and without understanding how the banking system actually works it is impossible to distinguish causes from effects in our attempts to guide that system toward the service of the public good. Conventional textbook models of banking and monetary systems are responsible for widespread commitment to the money multiplier and loanable funds models of the relationship between central bank reserves and the volume of bank lending. Relying on these models, some prominent economists and pundits have been telling us throughout our recent economic crisis that we can address the problems of a stagnating economy and persistently high unemployment with the reserve management tools of monetary policy alone. Even worse, some monetary policy hyper-enthusiasts seem to view the Fed has having vast powers to manage the nation's overall spending level and adjust the nation's money supply up and down though mysterious and occult mechanisms that extend well beyond the grubby plumbing of the credit system. The Wizard of Fed, it seems, can control the economic minds of Americans though imperious pronouncements on his expectations for the future. Hundreds of millions of Americans, one is led to believe, pay close attention to the Beloved Leader and await his determinative dicta, and then adjust their own behavior accordingly. L'État, c'est Ben. The nation's central banker is the glass of financial fashion and the caller of the economic tune. Incongruously, this picture of an America enthralled under a slavish devotion to the oracular sayings of Chairman Ben is often brought forth as an instance of the "rational expectations" approach in economics. Allegedly, the lemming-like congruence of expectations precipitates its own self-generating rationality. Since we all know that we have all tacitly agreed to enslave ourselves to the nation's central banker, when we then proceed to conform to the general goose-stepping we are behaving quite rationally. Now I ask you: speak to several of your neighbors tonight and ask them who Ben Bernanke is and what he does, and then consider whether this precious conceit of the court theorists of the financierati has the slightest grounding in empirical reality. I have no doubt that this picture describes the attitudes of some relatively small number people. My guess is that most of the people in question watch CNBC and Bloomberg all day, and manically shuffle their money hither and thither in the asset markets as the tipsters tip and the news items roll in. But down on Main Street where the real economy lives, and where people are too busy working all day – or at least trying to get work – to spend time playing games in the markets? Does the average citizen's step either quicken or slacken to the cadences called by the Fed chairman? Does the average consumer go to the store looking for a washing machine or an iPad on the Fed's say-so? It's doubtful. This inordinate faith in and reverence for the power of the central bank and the Central Banker has had a profound effect on national policy over the past several decades. The US Congress has assigned to the Fed the "mandate" to achieve full employment, and many now routinely excoriate the Fed for failing to fulfill that mandate. And yet, while there may be more the Fed can do, there is little evidence that the Fed actually has any substantial degree of control over demand and employment in the real economy, at least in a circumstance in which interest rates have fallen as low as they can go. In fact, as various adventures in conventional and unconventional monetary policy have continued to fail, the evidence mounts that faith in monetary policy is misplaced, official mandates notwithstanding. We might as well assign to the Air Force a mandate to deliver pink ponies to every child in America. Just as there is no reason to think that Air Force brass and fighter pilots are particularly well-prepared for satisfying the equine needs of America's eager tots, it seems increasingly clear that the Fed is not the agency of government best suited to parachuting real jobs down across America. The problem in America is not bankers who won't lend. Corporations are already sitting on record-setting amounts of profits and cash, but production and hiring are not booming. The problem is that ordinary people at the foundation of our economy, the people whose desires for goods and services drive the production that employs our resources, are lacking income. They do not want more credit and more debt. They want more income. Yet it's not as though we don't know how to promote economic production, deliver income and boost unemployment when the private sector fails to deliver as much of these social goods as we need. As a monetarily sovereign country, the US government can finance an expansion in spending that does not require either new taxes or burdensome debts left to posterity. What people want the Fed to do – somehow push new, spendable monetary assets into the real economy – the political branches of the government can do better, and in a much more direct and effective way. What is called for is a renewed commitment to fiscal policy, not more exercises in conventional and unconventional central bank policy. We need to return fiscal policy to the front and center of our national discussion of economic policy. Fiscal policy and the political branches of government are needed to do what the central bank can't, and to restore our sick economy to health. But there is another reason that we need to rediscover the power and capabilities of fiscal policy. The incessant debates about the virtues of monetary policy tend to encourage people to take an excessively technocratic and abstract view of our nation's economic policy needs, and to reduce those needs to the rubric of "macroeconomic stabilization." But our nation doesn't just need jobs in general; we have specific national needs for specific kinds of work. We don't just need more production and spending in general; we need to produce and buy specific kinds of things to advance urgent public purposes. The macroeconomist sometimes views spending on a bridge or a school as spending in the abstract; spending that is justified by the mere fact that we need more spending of some kind. But the citizen sees these actions mainly as spending on a bridge or a school – something we do mainly to buy something we need. That's why monetary policy is a lame substitute for engaged fiscal policy in a democracy. A central bank can, at best, only concern itself with the public purpose of managing the flow of money and credit in general; but the public has very specific purposes in mind. We are faced with imposing national problems of social decay, public underinvestment, incoherent and feckless national purpose and unconscionable underemployment of people and resources. These are problems that can't be fixed by Fed money management and expectations setting, and many of them are challenges of national scope that manifestly exceed what we can expect from the hurly-burly and hustle of private sector entrepreneurialism. Solving these problems is going to take an activist national government, and a politically engaged and committed public, directing serious resources toward unmet public purposes. We're way beyond the point where the only macroeconomic policy we need from the national government is the limited kind of "stabilization" that can be provided by the Fed. Our country is broken and our future prosperity is in deep jeopardy. We need to define large goals, set challenging tasks and get to work. It is time to get people to stop looking to the Fed to do the jobs that can only be accomplished effectively by the American people acting with purpose through their legislative representatives. There is no pure monetary policy cure for what ails us. One prominent current enthusiast for monetary policy is Scott Sumner, who uses his blog The Money Illusion to promote an approach to monetary policy called "market monetarism". The core policy recommendation of market monetarism is that the Fed should target the aggregate level of dollar spending in the country, and maintain a stable rate of increase in that level, which includes engineering catch-up spending in subsequent years if spending in prior years false short. Sumner has no doubt at all that the Fed could hit this target if it truly sets its mind to it. Sumner recently launched a blistering attack on a new paper by J. Bradford DeLong and Lawrence Summers. DeLong and Summers argue in that paper that "discretionary fiscal policy where there is room to pursue it has a major role to play in the context of severe downturns that take place in the aftermath of financial crises." But Sumner is having none of it. Here is part of his tirade:
I find Sumner's assault on fiscal policy and Congressional action to be both economically misguided and politically disturbing. First, it is hard to understand the practical difference between "steering the nominal economy" and "fixing other problems". The economy consists in the production and exchange of things of value, and one can measure those values in various ways. One way is to measure goods and services by their current market values as expressed in dollars. But economists have also devised various methods of abstracting away from the fluctuating current dollar as a measurement standard, so as to get at some more stable measure of value that allows for meaningful comparisons across times and places. They thus distinguish between nominal and real measures of value. But while one can distinguish analytically between nominal and real measures of economic activity, there is no such thing as the "nominal economy" that can be separated out for the "other things" and steered independently of those other things. It's all the same economy, whether its values are measured in nominal terms or real terms. Perhaps what Sumner has in mind is not dollars as a nominal measure of value, but as a medium of exchange. We live in a monetary economy, and dollars are one of the things that are produced and exchanged in that economy. So the proposal might be that it should be left to the central bank to steer the part of the economy involved in the production and exchange of dollars, and leave it to fiscal policy to steer the part of the economy in which other things are produced and exchanged. But the fact is that almost every transaction that takes place in the United States takes place in dollars. The dollar economy is the real economy, and the real economy is the dollar economy. The economic system which consists of both money and the things money buys is an organic whole of integrated human activity. There is no plausible way of regulating or managing one without regulating or managing the other. Nor is there a real-world way of institutionally separating the macroeconomic stabilization functions of government from public investment and redistributive operations of government. It's all part of the same job. But what is really disturbing about Sumner's attitude is his haughty and unembarrassed contempt for democratic processes. Sumner actually believes the US should be seen as a failed state and banana republic if it fails to devolve responsibility for it economic fate onto the shoulders of an unelected, elite-governed and autocratic central bank, and away from its stupid and incompetent elected representatives. But my guess is that most Americans, schooled in reverence for democratic traditions and citizen responsibility of self-government, would view things from quite the opposite perspective. Members of Congress might be corrupt, bungling and in some cases outright incompetent – and these three traits make their sorry presence felt in some eras more than others. But as democratic citizens we know where our obligation lies in such circumstances: Throw the bums out, get a better Congress and then hold their feet to the fire to serve the public interest. If we simply pack it in instead, neglect our obligations, and dispose of our democratic institutions when they are not functioning properly, and then hand everything over to cadres of arrogant and aloof technocrats with minimal democratic accountability, we will have lost more than a few jobs. Lately, in their zeal to defend to powers of the central bank, we have been getting some truly radical, and frankly dangerous, calls from central bank enthusiasts to allow the Fed to appropriate to itself all sorts of broad spending powers that every American schoolchild has learned are the prerogative of the United States Congress and the people who elect them. And sure, if we allow the central bank to become a second, unelected Congress that can conduct a second channel of fiscal policy by crediting bank accounts and buying things, without any direct democratic accountability or debate over its spending decisions, then it can no doubt have the same kind of macroeconomic impact that an unleashed Congress and Treasury could have. But if we do cross that Rubicon and go down that authoritarian road, turning the Fed into some kind of neo-Soviet Stroibank empowered to spend and command real national resources outside the normal democratic process at the behest of a technocratic elite, we will probably never get our democracy back. People frequently rail against the pork barrel spending and earmarks that result from the legislative process. But the pork barrels don't worry me nearly as much as handing our economy over to another generation of theory-addled elitists like Alan Greenspan. As part of the democratic process, representatives come from all over the country to look for the resources to deliver the things their constituents want and need. They wrangle and haggle. And yes, in the process they land a few "bridges to nowhere." But most of what they get are bridges to somewhere. The people in New Hampshire might not like the way the people in Georgia use their share of our national resources, and the people in Georgia might feel the same way about the people in Oregon. But the end result is that things get built; people are hired; public goods are created; national and local needs are met; things get done. My sense is that Americans are dead tired of a corrupt and aimless government that can't or won't do anything important anymore; that works energetically to deliver resources to its masters in the plutocracy, but then holds up its hands and says "Sorry, out of money!" when suggestions for the pursuit of major public purposes are advanced. It doesn't have to be this way. America hasn't always had a Congress full of can't-do seat-warmers, small thinkers and penny pinchers determined to castrate the national government and let bankers and CEOs run the world. There have been times in our history when we have actually managed to organize our vast resources to accomplish important things and invest public resources in our future. We have an election this year. I suggest we use it to ditch the empty suits, the plutocratic shills and the small minds, and fill their spots with people ready to act.
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| Bob Chapman : Buy more Gold and Silver Posted: 04 Apr 2012 06:08 AM PDT Bob Chapman - Kerry Lutz 04 Apr 2012 : there are obviously bad news coming... [[ This is a content summary only. Visit my blog http://www.bobchapman.blogspot.com for the full Story ]] This posting includes an audio/video/photo media file: Download Now | ||||||||||||||||||||
| Simple Portfolio Building: Aggressive Growth Posted: 04 Apr 2012 06:02 AM PDT By Brad Kenagy: This article will be the fifth in a series of articles about simple portfolio allocations for different levels of risk tolerance. In this article, I will be constructing an aggressive growth portfolio of ETFs. There are two goals I had for constructing the following portfolio:
Portfolio Funds
Fund Selection Method I selected the above funds by roughly following the overall allocation of stocks and bonds, in the corresponding allocation Complete Story » | ||||||||||||||||||||
| Posted: 04 Apr 2012 05:34 AM PDT By Tom Lydon: After the record run in gold prices, followed by the subsequent sell-off, exchange traded funds that follow gold prices could be past their prime as one commodities market researcher argues gold has already peaked. According to the CPM Group, gold prices will remain high but won't jump above their record highs seen in 2011, reported Lori Spechler for CNBC. "We reached the cyclical peak later than we thought but by the end of the year the price was down and (gold) has been trading sideways," Jeff Christian, Founder and Managing Director of the CPM Group, said in the article. In the company's "Gold Yearbook 2012," the report said the higher gold supply coupled with a set pool of demand will keep a floor under the market, with prices to remain firm. Consequently, gold prices could begin to consolidate over the next few years. "We are looking for the price to Complete Story » | ||||||||||||||||||||
| Posted: 04 Apr 2012 05:33 AM PDT  By Markos Kaminis (Wall St. Greek): Stocks are down and gold is lower on the latest Federal Reserve FOMC Meeting Minutes. The skinny is that the Fed sounded less dovish, and might be less accommodative in the future. It's counter intuitive, because the Fed would only be less giving if the economy were solidifying. Nevertheless, stocks are lower because there could be less support from the Fed, and the market is not sure the notoriously faulty forecasters are on target. Gold is dropping, because of two reasons. If the Fed is less free with dollars, then the currency should strengthen; and if the economy is improving, than riskier assets should do better. Here's why I suggest ignoring the Fed fiddling, and buying gold on the dip. The Federal Reserve's Federal Open Market Committee (FOMC) published its meeting minutes for its March 13 meeting Tuesday afternoon. You can go ahead and read it, but all you need Complete Story » | ||||||||||||||||||||
| Satisfy High-Yield Hunger For 4 Years With 9.2% Offshore Bank Bonds Posted: 04 Apr 2012 05:06 AM PDT By Randy Durig: "Hungary" for higher yields? These government guaranteed Hungarian Development Bank euro bonds are currently yielding over 9.2%, are Ba1 rated, and mature in May of 2016. The strategic mission of the state owned MFB is to provide development funds necessary to realize the economic development goals determined by the medium and long term economic strategy of the Hungarian government, and to be an active participant in the renewal and development of the Hungarian economy. Therefore, we see the additional bump up in yield that these state owned bank bonds as having an savvy advantage over similar maturity, similar risks, but lower yielding Hungarian government bonds denominated in Euros. As the European Central Bank continues to flex its muscle and harden itself against the debilitating troubles of a debt burdened Eurozone, the US dollar's longer term weakening trend against many world currencies remains a major concern for investors seeking protection against Complete Story » | ||||||||||||||||||||
| Destruction of Spain’s Economy Duplicates Greece Posted: 04 Apr 2012 04:13 AM PDT More than two years ago I began warning readers of the most heinous acts of fraud ever perpetrated by the Western banking crime syndicate, which I dubbed "economic terrorism". These swindles involved nothing less than the destruction of entire European economies, solely so that the banksters could profit on approximately $100 trillion in bets they had placed on the debts of these economies. The mechanics of this economic rape have been explained many times in the past. First of all the bankers duped governments and institutions all over the Western world into placing trillions of dollars (and/or euros) in bets that interest rates were about to soar higher – just before they crashed interest rates to the lowest levels in history. This swindle is known as "interest rate swaps". The second (and even more destructive) form of fraud perpetrated against these governments didn't even require their participation – merely their naïve acquiescence. The bankers began placing huge bets (totaling at least $60 trillion) that these nations would default, and then had the audacity to call these bets "insurance" (credit default swaps). Note that such "insurance" had been banned in the U.S. for more than half a century – based upon anti-gambling statutes. Here is the question which these banksters would never answer: how does a third party placing bets on whether someone's home would burn down provide any "insurance" to the owner of the home? The answer of course is that it doesn't. What it did do, however, was to create a $60 trillion motive for "arson". This is precisely what we have we have seen. After the banksters (primarily based in Wall Street) got assorted chumps to take the wrong side of this $60 trillion, unregulated mountain of bets – betting that these Euro governments would not default – they then began to systematically burn-down the economies of Europe one by one. I have explained this process several times in the past already, so those readers new to this will have to refer to my previous work. In a nutshell, the Wall Street terrorists can manipulate the interest rates of these nations to (literally) any number they choose via the fraudulent manipulation of the credit default swaps market. I warned readers that this made Greek default inevitable, since if interest rates can be manipulated to any level then any nation can be bankrupted on its debt. This is exactly what took place with the destruction of Greece's economy. Each time that Greece's government served the bankers by announcing a new round of "austerity", the terrorists would immediately drive-up the interest rates on Greece's debt so much higher that every dollar of budget-cutting was consumed in higher interest payments…plus a little bit more. The result was that instead of austerity improving the solvency of Greece's economy, the Wall Street terrorists always ensured that its economy was worse off after each new round of budget cuts – immediately creating even more pressure for even more austerity. It was nothing but a totally masochistic vicious circle. At one point the banksters had manipulated Greek interest rates more than 50 times higher than those of the U.S. – despite the fact that (as I have explained previously) the U.S. economy is even more fundamentally insolvent than that of Greece. Now the terrorists have targeted Spain. | ||||||||||||||||||||
| Posted: 04 Apr 2012 02:43 AM PDT
In today's carnage we added to our precious metals-related shorts — FCX, silver, and a few other selected plays — as the bearish metals thesis plays out. While we are not long-term bearish gold (in the long term we are neutral for now), the near term price action has been fairly compelling. Regarding our "Gold looks terrible: clarifying thoughts" piece, Mercenary community member Luke writes in: I am an "open minded" gold investor, so I loved the article; however, my concern is that the US Government cannot AFFORD to let interest rates rise at all or the government debt servicing will eat up all of their revenue. I agree with most of your points, and it would make sense that interest rates SHOULD rise shortly – but if that means unsustainable debt servicing, then don't you think the Fed will do everything to fight an interest rate rise? First off, good on you for being open-minded Luke. As we like to say, "Love your family — not your positions. Be loyal to your friends — not your trades."
Your concerns about debt service issues are valid. The problem has to do with timeframes! I believe it was Brian Gelber in Market Wizards who first pointed out the timeframe problem. There are significant issues when it comes to pairing long-term fundamental factors with short to intermediate term moves. Simply put, you can't trade weekly or monthly time frames off what could amount to a multi-year view!
The land of the rising sun has a deadly serious "interest rate affordability" problem too. At some point, in relation to retirement demographics and spender-vs-saver calculus, Japan will experience "exploding debt dynamics" and the fiscal situation will collapse. But here's the rub: While that statement is true, it has been true for years! Roughly speaking, the Japanese Goverment Bond (JGB) market is 95% supported by domestic savers. When the demographic tipping point materializes, the JGB market will hit "the end of the line" as Mrs. Watanabe crosses from saver to spender in her advancing age. When this happens, falling JGBs coupled with rising debt service costs will result in epic disaster… and the vaporization of the yen in monetized support of the bond market, as the BOJ is forced to "destroy the currency for the sake of the economy" (to paraphrase Von Mises' biggest prophecy). But WHEN will this happen? Heck, it could be happening right now (which is why we're short yen). But it might not happen until 2013… or 2017… who really knows? Getting back to U.S. fiscal issues: You may be correct that government debt service issues will eventually force the Fed to go "nuclear," essentially vaporizing the dollar (by way of printing press) in an effort to monetize (stabilize) the bond market. But again, when will this happen? There are duration risk and "can kicking" factors to consider. And what might gold do in the meantime? Our central argument is not that the long-term gold bulls / dollar bears are necessarily wrong… but rather that gold could fall precipitously between here and there (even if they are right). For trading and even investing — though far moreso the former — timing is critical, and must be factored into your convictions. There is nothing wrong with making a conviction-based investment and holding through short-term adversity, if such is your style and temperament… as long as you can quantify the worst case adversity scenarios (in terms of unfavorable price action) and anticipate your reaction to them. If you are truly committed to the long gold case, for example, you must quantify what that means in regard to near term "uncle points:"
Both outcomes are entirely theoretically possible, even if your long term forecast for U.S. government debt service issues turns out 100% correct. (And the question of whether the debt service issue really is a bull factor for gold is a whole 'nother can of worms, by the way — having to do with monetary theory — that we have discussed in past but will not get into here for the sake of time.) Being traders and Soros-style fallibilists — always aware of our potential to be wrong — we embrace the virtues of flexibility, sticking to the mantra that "the small loss is the best loss" and taking a short bias to gold in the near term (always having the option to flip long later). Ugly Goldilocks The real problem with gold right now is a scenario in which the U.S. economy "recovers" at just enough pace for inflation to remain low and stimulus to be withdrawn. This is the "ugly goldilocks" scenario — one in which things are muddling along, but the poor position of middle class consumers, stubbornly high unemployment and stagnant wages keep inflation concerns in check. Consider the following headlines, which together paint a very ominous picture (for gold that is):
You see the picture that paints? The average situation for Joe Sixpack sucks and Wall Street knows it. But middle class pain is also reining in "core" inflation — not including food and gas prices, of course, but the Fed doesn't care about those. This results in a positive equity, "abandon gold" scenario where, once again, the imminent inflation and fiscal destruction is put on Japan-style hold. (Did I mention that bets against the Japanese government bond market have been going sour for so long, they call it "the Widow-Maker Trade?") Goldilocks could whack equities too As this note is being written, live trades executing in the background, the S&P is seeing its most meaningful correction in a while (down a little over 1% as I type). This speaks to another irony — the same hole that gold has fallen into could suck in equities too. It works more or less like this:
The above, in fact, is what Tuesday's action was all about. The Fed minutes were not a game changer in and of themselves, but a harbinger of probability shifts in the direction of the stimulus withdrawal scenario. Now, it may be that Bernanke reverses position and starts talking "QE3″ again — sooth saying the market — IF general economic conditions deteriorate. But if general U.S. economic conditions do NOT deteriorate — if "ugly goldilocks" continues apace — then we could actually see the stock market correct meaningfully! In this scenario, good news (for the economy) is bad news (for the stock market) due to stimulus withdrawal. And also bad news for bonds… "Trade of the Year" Candidates If you'll forgive an uncharacteristic bit of horn tooting, on February 14th we wrote "Long bonds and Yen: Big Shorts for 2012?" We put our money (trading capital) where our mouth is on both of those positions, to good result. Then, on March 30th, yours truly tweeted the following:
We took that opportunity to agressively pyramid our existing TBT position. You see what happened next…
 CLICK TO ENLARGE Furthermore, on March 20th we tweeted the following:
And you can see how that one is going:
 CLICK TO ENLARGE What's the moral here? Follow our tweet streams? Better yet, follow the Mercenary Live Feed. That's where we tell you what we're thinking and why, every day, and share our real-capital trade executions, along with position size metrics and portfolio composition, in real time. Look, there is no crystal ball at Mercenary headquarters. We get our share of stuff wrong. But that's the whole idea behind the trading game… when you are wrong keep it small… "the small loss is the best loss." Then keep your eyes open.. look for opportunities to ramp up exposure in premium situations as they unfold… and know how to dial it up when Mr. Market tips his hand. By the way, we love questions and comments in respect to market action, themes and trends, economic theory etc… in addition to discussion points, some of you have even forwarded your own trading theories and high quality research pieces, which we love. This kind of interaction is what the Mercenary community is all about. Write to us! You can ping us directly via jack@, mike@ or nathan@, or general purpose via feedback@mercenarytrader.com. funny old world innit, JS  | ||||||||||||||||||||
| Great Expectations May Lead To Great(er) Disappointments Posted: 04 Apr 2012 01:26 AM PDT This morning, the meltdown continued in gold, but this time, unlike during yesterday's after-hours electronic trading, silver and the noble metals joined gold and fell hard as well. Once again, the only green color to be seen was the net change in…the greenback. | ||||||||||||||||||||
| Military coup in Mali raises concerns for gold producers Posted: 04 Apr 2012 01:15 AM PDT Gold production in Mali is being called into question following a military coup two weeks ago. African media are reporting that many foreigners are fleeing the country. In recent years Mali has ... | ||||||||||||||||||||
| Golds Breakout or Gold Stocks Breakdown? Posted: 04 Apr 2012 01:00 AM PDT SunshineProfits | ||||||||||||||||||||
| Gold Down 2% Following FOMC Minutes Release Posted: 03 Apr 2012 11:13 PM PDT Gold traded sideways in Asia prior to a further $10 drop after the open of European trading. Heightened risk aversion saw all markets fall yesterday after the Federal Reserve said inflation appears to be under control. | ||||||||||||||||||||
| Gold price down on cautious talk from Fed Posted: 03 Apr 2012 09:30 PM PDT The minutes from the Federal Reserve's March 13 meeting were released yesterday. Though they again emphasised the Fed's intention to keep rates "at exceptionally low levels through ... | ||||||||||||||||||||
| Jim Sinclair: Yesterday was "Pure Manipulation...Almost Without Camouflage" Posted: 03 Apr 2012 09:10 PM PDT Yesterday in Gold and SilverThe gold price didn't do much of anything through all of Far East, European and North American trading on Tuesday. But then about one minute before 2:00 p.m. Eastern time, the bid disappeared, sell stops were hit...and that, as they say, was that. By the time the low was in [$1,637.90 spot] an hour later, the gold price was down very close to forty bucks from Monday's close. Gold gained back about nine bucks of its loses going into the close of electronic trading in New York...and finished at $1,645.80 spot...down $31.20 on the day. For such a big price move, net volume wasn't overly heavy...around 143,000 contracts.
The silver price on Tuesday was far more volatile...and far more interesting. The price hardly moved from the $33 spot price level all night long...but at 9:00 a.m. in London, about 20 cents got carved off the price. The next rally of any substance began around 1:00 p.m. in London...about twenty minutes before the Comex open at 8:20 a.m. Eastern time. It was obvious from that point onward that the silver price really wanted to sail...but as you can tell from the saw-tooth price pattern during the Comex trading session, even the smallest price advance was running into 'resistance'...especially the vertical price spike that occurred just minutes before the Comex close. Then JPMorgan et al showed up at 2:00 p.m...and that was it for the day. The high tick...$33.42 spot...came at 1:25 p.m. Eastern time. Sixty-five minutes later the low price tick was in at $32.40 spot. The silver price gained back 28 cents from that low, closing the New York electronic trading session at $32.68 spot...down only 31 cents on the day. Net volume was in the neighbourhood of 37,000 contracts.
The dollar index trading just under the 79.00 mark right up until a few minutes before 2:00 p.m. in New York. The index went vertical...and by the time the high of he day was in precisely sixty minutes later, the dollar index had gained just under 70 basis points. The index gave up a bit of those gains going into the New York close, but not a lot. When all was said and done, the dollar index was up a hair over 50 basis points yesterday, which is hardly a big move in the grand scheme of things. Yesterday was another example of 'ramp the dollar/kill the precious metals'...as the both events began simultaneously...which is impossible in the real world. What happened yesterday was a mini version of the drive-by shooting on February 29th.
The gold stocks opened lower yesterday...and the share price action pretty much reflected the move in the gold price that began about one or two minutes before 2:00 p.m. Eastern time. At one point the HUI was down over four percent...but managed to reduce those loses going into the close. The HUI finished down 3.34%.
The silver stocks got it in the neck as well...and Nick Laird's Silver Sentiment Index closed down 3.15%.
(Click on image to enlarge) The CME's Daily Delivery Report showed that 313 gold and one lonely silver contract were posted for delivery on Thursday. In gold, the biggest short/issuers were the Bank of Nova Scotia and Goldman Sachs with 172 and 98 contracts respectively. The biggest long/stopper by far was JPMorgan with 165 contracts in its client accounts and 136 in its in-house trading account. The Issuers and Stoppers Report is linked here. There were no reported changes in GLD yesterday...and there was a minor withdrawal from SLV...only 135,735 troy ounces, which I would guess was a fee payment of some type. The U.S. Mint had a rather smallish sales report. They sold 2,000 one-ounce 24K gold buffaloes, along with 125,000 silver eagles. After a busy Friday, there wasn't much activity over at the Comex-approved depositories on Monday. They didn't receive any silver...and shipped a smallish 109,320 troy ounces out the door. I have fewer stories for you today, which I'm quite happy about. As Ted also pointed out, 'da boyz' are still in control of the metal markets...and show no signs of backing off at the moment. Man vs. Machine: How Each Sees The Stock Market. Peter Schiff - Reaction to Fed Minutes Wrong, QE3 is Coming. T. Boone Pickens: Oil Could Surge to $148 by Summer. Critical ReadsSomething Strange: The Economy Is Behaving Badly In The Least Expected WayLooking back over the latest few weeks of economy data, something stands out: Things are playing out almost 100% different than what people expected The weekly retail data has been great. Today's number was one of the best in a year. We had a few dicey weeks right when the gas surged, but everything's hunky dory on this front. On the other hand, the big stuff has not been good. Every single piece of recent housing data has been a miss...and then today, it came out that the March auto sales numbers dipped sharply from February. Also, construction numbers beyond housing have been poor. So basically, the high-frequency consumer stuff has been fine, and the big money, investment stuff has backslid. We'd rather have it be the other way around. This short Joe Weisenthal piece was posted over at the businessinsider.com website yesterday...and it's Roy Stephens first offering of the day. The link is here. Murtha Airport, brought to you by American taxpayersThe Murtha Airport in Johnstown, Pennsylvania is a prime example of taxpayer spending that refuses to die. Representative John Murtha steered some 150 million of taxpayer dollars to this eponymous airport over the last decade and despite the fact he died more than a year ago, the money keeps on coming. Three years ago, we first visited the tiny airport, and found a monument to pork barrel spending: An airport with a $7 million air traffic control tower, $14 million hanger, and $18 million runway big enough to land any airplane in North America. For most of the day, the only thing this airport doesn't have is airplanes. This yahoo.com story was sent to me by reader 'Roger'. The video runs 3:28 minutes...and is worth your time. The link is here. T. Boone Pickens: Oil Could Surge To $148 By SummerLegendary oil man T. Boone Pickens warns supply constraints could send oil prices back to all-time highs by this summer. He argued that increased production from Saudi Arabia would not be able to offset the impact of tighter supplies caused by Iran sanctions. This very short piece was posted over at the businessinsider.com website yesterday...and is Roy Stephens second offering of the day. The link is here. None Of The World's 20 Safest Banks Are In The US: SurveyGlobal Finance is publishing a sweet list of the world's top 50 safest banks in their April issue. Rankings were determined by credit rating and balance sheet. Only major institutions qualified. Main takeaway: American banks are really not safe at all, at least compared to their global peers. Not a single U.S. bank figured in the top 20...and just five are in the top 50. This is another businessinsider.com story from yesterday...and another Roy Stephens offering as well. It's a one-minute read...and it's worth it. The link is here. Man vs. Machine: How Each Sees The Stock MarketThis is the shortest item I've ever posted. It contains two graphs...and two sentences containing 14 words in total. The sentence that accompanies the first graph reads "What you see with one-minute bars." The second graph is accompanied by a sentence that reads "What the algos see in 9.5 seconds." This is computer-driven trading...another name for high-frequency trading. Both charts are worth a minute of your time...and expand them to full-screen size for maximum effect...especially the second one. This zerohedge.com piece was sent to me by reader U.D. yesterday and is a must read. The link is here. Putting It All Into PerspectiveSo here it is again, clean, simple, precise...and so easy it can be printed out and pinned to one's wall - the chart below from Citi's Matt King puts everything in its proper perspective (if in a slightly optimistic light). The first two columns show the "impact" of Lehman and the Greek PSI - i.e., the amount of debt that was eliminated. These two tiny bars are what nearly caused the end of Western civilization (per Hank Paulson), and led Europe on a two year voyage to preemptively offload Greek exposure to European (and American) taxpayers. That's the good news. The bad news is the column on the far right. This is the amount of debt that in Citi's estimate, has to be "reduced" across the four major developed markets for the world to return to a sustainable debt level. That's right: $30,000,000,000,000. By 2016. And after that it just gets even more parabolic. This zerohedge.com piece was sent to me by Australian reader Wesley Legrand. Not only is it a must read, but I suggest you read it very, very carefully as well. The chart tells all...$30 Trillion worth. The link is here. Peter Schiff - Reaction to Fed Minutes Wrong, QE3 is Coming"People that are assuming it (QE) is off the table based on these minutes are wrong. I would really fade this trade. I don't see why gold would be getting crushed based on these minutes. I looked at the minutes and yes, the Fed didn't come right out and say QE3 is coming. They are not going to do that. They are never going to do that." "They know that complicates what they are trying to do. The Fed is trying to stimulate the economy with inflation, without letting people know there is inflation. It would complicate this charade if they were to telegraph their intentions because that would make prices rise even faster." This blog was posted over at the King World News website yesterday...and the link is here. Dr. Dave Janda interviews your humble scribeThis past Sunday I had the good fortune to be interviewed by Dr. Dave Janda over at WAAM 1600 all-talk radio out of Ann Arbor, Michigan. The interview runs about twenty-five minutes...and it's posted over at the davejanda.com website. The link is here. Euro zone unemployment reaches near 15-year highUnemployment in the euro zone reached its highest level in almost 15 years in February, with more than 17 million people out of work, and economists said they expected job office queues to grow even longer later this year. Joblessness in the 17-nation currency zone rose to 10.8 percent - in line with a Reuters poll of economists - and 0.1 points worse than in January, Eurostat said on Monday. This Reuters story was filed from Brussels on Monday...and I 'borrowed' it from yesterday's King Report. The link is here. Stolen Tax CD Case: Germany Outraged over Swiss Arrest WarrantsMany German politicians and tax collectors are furious about Switzerland's decision to issue arrest warrants against three German officials who bought a stolen CD with tax data. The move has gone down well in Switzerland, where politicians have praised the country's assertiveness. But it is unclear how the Swiss authorities will proceed -- the main witness is dead. I ran a similar story to this in yesterday's column, but this one is far more in-depth. Like yesterday's story on this issue...it, too, is posted over at the spiegel.de website...and is another Roy Stephens offering. The link is here. A 10-Year Old Boy Came Out With A Tyrannical Solution For Greece, And It Involves A Giant PizzaYesterday the finalists for the Wolfson Economics Prize were announced. This year, the prize is offering £250,000 to whoever has the best idea for an orderly breakup of the Euro. There was also an honorable mention to 10-year old Jurre Hermans of the Netherlands. I don't know about you, dear reader, but his solution probably makes as much sense as the rest of them. This story really had some legs yesterday...and showed up in The Guardian, The Telegraph...and even The Wall Street Journal. This particular copy of the story, complete with drawings, was posted over at the businessinsider.com website yesterday...and I thank Roy once again for sending it. The link is here. Three stories from the Tehran TimesThe first story is headlined "Uruguay willing to trade rice for Iranian oil". The second bears the title "Japan refiners decide to continue buying Iran oil"...and the last story is headlined "Gilani renews commitment to Iran pipeline". All of these stories are worth skimming...and all are courtesy of Roy Stephens | ||||||||||||||||||||
| Yesterday was 'pure manipulation...almost without camouflage,' Sinclair says Posted: 03 Apr 2012 09:10 PM PDT  Yesterday's pounding of gold amid the announcement of the Federal Reserve's minutes was "pure manipulation ... executed almost without camouflage," gold advocate and mining entrepreneur Jim Sinclair told King World News last night. But, as it is manipulation "against the tide of the market," Sinclair adds, it will fail as gold goes to $4,500. May we all live to see the day. I thank Chris Powell for wordsmithing both the title and the introductory paragraph. Jim's comments are well worth reading...and the link to the KWN blog is here. | ||||||||||||||||||||
| Game Changer for Gold and Stocks Posted: 03 Apr 2012 09:00 PM PDT | ||||||||||||||||||||
| Gold & Silver Market Morning, April 04 2012 Posted: 03 Apr 2012 09:00 PM PDT | ||||||||||||||||||||
| Duncan: Breakdown of the Paper Money Economy Posted: 03 Apr 2012 08:31 PM PDT
from Jim Puplava and Financial Sense: In his previous book, The Dollar Crisis (2003), Duncan explained why a severe global economic crisis was inevitable given the flaws in the post-Bretton Woods international monetary system, and now he's back to explain what's next. The economic system that emerged following the abandonment of sound money requires credit growth to survive. Yet the private sector can bear no additional debt and the government's creditworthiness is deteriorating rapidly. Should total credit begin to contract significantly, this New Depression will become a New Great Depression, with disastrous economic and geopolitical consequences. That outcome is not inevitable, and this book describes what must be done to prevent it. Alarming but essential reading, The New Depression explains why the global economy is teetering on the brink of falling into a deep and protracted depression, and how we can restore stability. Much More @ FinancialSense.com
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| LISTEN: “Peter Schiff Is An Idiot” Posted: 03 Apr 2012 08:29 PM PDT VNote: Dave Ramsey usually endorses some solids principles, one of which is to stay away from debt. However, in this classic from January of 2008, Ramsey acts a fool and goes off on the Schiff family. from thevictoryreport1: ~TVR | ||||||||||||||||||||
| Silver Update: “The FED Stupid” Posted: 03 Apr 2012 08:28 PM PDT | ||||||||||||||||||||
| Turkey Aiming to Become Big Gold Producer Posted: 03 Apr 2012 08:06 PM PDT Turkey has the potential to become one of the world's largest gold producing countries. At the end of 2010 there were just four gold mines operating in the country, but the government has been working on plans to drastically boost production. | ||||||||||||||||||||
| King Ibn Saud’s 35,000 British sovereigns – Gold’s historic undervaluation versus oil Posted: 03 Apr 2012 06:11 PM PDT | ||||||||||||||||||||
| Gold Coins (US Mint) In Q1 2012 Show "No Hysteria and No Bubble" Posted: 03 Apr 2012 05:17 PM PDT gold.ie | ||||||||||||||||||||
| April 4, 1944 : Nazi Gold: The Merkers Mine Treasure Posted: 03 Apr 2012 04:53 PM PDT US Archives | ||||||||||||||||||||
| The Golden Thorn in the Flesh I Posted: 03 Apr 2012 04:00 PM PDT Gold University | ||||||||||||||||||||
| Gold Stocks Cheap or Silver Stocks Expensive? Posted: 03 Apr 2012 03:43 PM PDT Although gold prices are off their highs of 2011, they still remain at a reasonably high level. The fact that gold prices remain high and the fact that the stock markets are near their highs would make one assume that gold stocks did well too, right? Wrong! | ||||||||||||||||||||
| How to Avoid Investing Idiocy by Ignoring the Fed Posted: 03 Apr 2012 03:37 PM PDT Far away from the frontiers of the 21st century, the US Federal Reserve is still stuck in the past...past errors of monetary policy...and textbook theories of macroeconomic management that neither promote recovery nor allow for past mistakes to be acknowledged. But yesterday the Fed was busy freaking out investors. The Fed has no plans for another round of quantitative easing, according to the March 13th minutes of the Federal Open Market Committee (FOMC), which were released today. According to the minutes, "A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below." The statement suggests the Fed thinks the US economy is expanding and that inflation is low. Thus, there's no need for more "stimulation" with another round of Quantitative Easing. Of course, the Fed is probably wrong on both counts. The US economy is not on a long-term path to recovery and inflation is almost certainly higher than the official figures show. It wouldn't be the first time a central bank was wrong in its interpretation of economic events. But that is neither here nor there. The investment reaction to the minutes was swift and bearish. Stocks, gold, oil, and bonds initially fell. Stocks rallied a bit by the close, but still finished down. All of this is nonsense. That is, it's absolute idiocy to base your investing strategy on expectations for more stimulus from the Federal Reserve. That is not the best reason to buy stocks. It is not even a reason. It is a hope, or probably just a gamble. At the worst, it is a giant, unproductive distraction from thinking about the things that will really determine whether you make or lose money in the next 10 years. The Fed has succeeded in putting itself at the centre of day-to-day investment calculations. But this hasn't promoted certainty about what to expect. It's promoted speculation about how to get ahead of the Fed and profit from its next move. This attitude of front-running monetary policy has taken over asset markets. We should backtrack for just a moment. Monetary policy certainly WILL have something to do with your winners or losers for the next 10 years. If your investment strategy is based on a benign belief that official interest rates will remain low and asset prices will benefit, you're almost sure to lose money. You'll get blindsided by just the sort of event that central bankers and economists are never clever enough to see coming. But in saying this, we're taking the other side of the trade from Goldman Sachs' chief economist, Jan Hatzius. He went on CNBC yesterday afternoon and said that more asset purchases from the Fed will probably happen by June. Hatzius says that Operation Twist - where the Fed kept interest rates on 30-year bonds low - is set to end in June. He reckons QE3 will be its successor. Should you really take the other side of the trade with Goldman? Well, in our view the best thing you can do is not to make the trade at all. Don't base your investment strategy on expectations of stimulus and central bank asset purchases. That is a loser's game. You can't win it. The only way you can win it is if you're a bank or a broker using leverage and gambling with other people's money. Those guys can win because they can't lose. The clients take the loss, the firm takes the profit. Our mate Kris Sayce has taken the same view with his small-cap strategy for 2012. Kris did a good job of getting into the market in 2009 before the first round of QE. This liquidity boost lifted stocks all over the planet, including Australia. But each new round of QE or stimulus since has had a shorter and less significant impact on stock prices. Kris has taken the view that the QE/stimulus discussion is an attention trap. Instead, he's trying to find good small businesses with business models that don't depend on leverage to increase earnings. More importantly, he's looking for a small business that can increase its earnings dramatically, even in the current environment. Of course he's looking for that, you might imagine. We all are! Well, no, we all aren't! That's one point Kris has made in his newest report. If you focus on the small end of town and look at businesses from the ground up, you're doing work that most people aren't doing right now. That gives you an advantage as an investor. And that's a great start. The important point, we think, is that when you measure the market by a broad index like the All Ordinaries, you can see it's done almost nothing for the last seven years. Granted, whether you made money or not determines when you began investing, and if you have any particular stocks that would have outperformed the index. But there's an important point takeaway from all this.  The takeaway is that the fund managers and index trackers hang on every word from the Fed because those words influence the indexes. All the Fed and central bank liquidity goes into the same big stocks and securities. For fund managers whose job it is to track an index, following the Fed is the key to avoiding professional embarrassment and meeting minimum performance standards. They are playing an entirely different game from you, an individual investor. We'd encourage you to not play their game. If you play their game, you'll see your index tracking funds and investments move up and down with various policy announcements. And then seven years later you'll be no closer to meeting your retirement goals. Seven years is a long time to make no money in the markets. Can you afford another seven years of flat stock prices? Another 12 years? Another 23 years? Those are not random numbers. If you'd bought Japanese stocks at the peak of one of their periodic rallies over the last 23 years, you would still be underwater.  Japan's stock market peaked in 1989 and has never recovered. There have been multi-year tradeable rallies where you could have made money. But buying and holding for the long term when you're in the middle of a cyclical period of deleveraging will simply not work. Remember, Japan is the global leader in using monetary policy and low interest rates to recover from an asset bubble and a debt crisis. You can see what that's done for stock prices, and for investors. Regards, Dan Denning From the Archives... Why BHP Should Be Bracing Itself For a China Slowdown What Does "the Market" Mean to You? Why Australian House Prices Are Set to Crash Why US Manufacturing Could Be Made in America...Again! The Best Real Estate Bets
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