Gold World News Flash |
- 17 Reasons Why Those Hoping For A Recession In 2012 Just Got Their Wish
- KWN - Special Friday Gold & Silver ‘Chart Mania’
- In The News Today
- Gold Going to $10,000/oz - Nick Barisheff
- Jeff Berwick speaks with Marc Edgington
- The Gold Price Rose Clearing it's Resistance Today but Still Needs to Confirm
- Guest Post: Central Banks Are Chomping At The Bit
- Norcini - If This Happens It Will Devastate The Gold Shorts
- Hong Kong’s Largest Bullion Vault Signals Rising Asia Wealth
- Gold Daily and Silver Weekly Charts - Cap, Cap, Cap
- Gold Seeker Closing Report: Gold and Silver Gain Almost 1%
- Is Farmland in Bubble?
- Is Auditing the Fed Positive for Gold?
- Two keys for the next gold breakout
- How Ben Bernanke Can Prevent the End of Civilization
- What Disaster Economics Means For Investors
- Nine gold sovereigns that command top dollar
- John Hathaway Predicts That Gold Will Move Substantially Higher From Here
- LGMR: Gold & Silver Jump to 3-Week Highs as ECB Chief Draghi Promises to Do "Whatever It Takes" to Preserve the Euro
- Apocalypse Ahead, What Disaster Economics Means for Investors
- Peter Schiff - Gold Just Broke Out & Is Now Off To The Races
- Ross Beaty and Doug Casey – Contrarian Masters
- Central Bank Gold-Grab Intensifies Further, Part II
- Adapt or Die
- John Embry: Gold to Surpass All-time High by Year End & Then Unleash MAJOR Upswing in PM Stocks
- Negative Interest Rates Becoming More Prevalent ? Here?s Why You Should Be Concerned
- Housing: Look Out Below
- Is Global Trade About To Collapse? Where are Oil Prices Headed? A Chat with Mish
- Keys For the Next Gold Breakout
- Will HFT Burn a Hole in Your Portfolio?
| 17 Reasons Why Those Hoping For A Recession In 2012 Just Got Their Wish Posted: 27 Jul 2012 01:00 AM PDT from The Economic Collapse Blog:
Read More @ TheEconomicCollpaseBlog.com
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| KWN - Special Friday Gold & Silver ‘Chart Mania’ Posted: 26 Jul 2012 10:02 PM PDT  With the wild action in gold and silver this week, top Citi analyst Tom Fitzpatrick put together a 'Gold & Silver Chartapalooza' where he laid out the roadmap for gold and silver to hit new all-time highs. Below is his interview and the KWN Special Friday Gold & Silver 'Chart Mania':
This posting includes an audio/video/photo media file: Download Now |
| Posted: 26 Jul 2012 09:03 PM PDT The desire of gold is not for gold. It is for the means of freedom and benefit. –Ralph Waldo Emerson Jim Sinclair's Commentary The downside is getting ready to accelerate. Pending Sales of U.S. Homes Unexpectedly Fell 1.4% in June Michelle Jamrisko – Jul 26, 2012 7:14 AM MT Contracts to purchase previously Continue reading In The News Today
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| Gold Going to $10,000/oz - Nick Barisheff Posted: 26 Jul 2012 08:40 PM PDT Gold's Going to $10,000 Per Ounce says Nick... [[ This is a content summary only. Visit my website http://goldbasics.blogspot.com for full Content ]] 
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| Jeff Berwick speaks with Marc Edgington Posted: 26 Jul 2012 08:15 PM PDT By Jeff Berwick, Dollar Vigilante: Jeff Speaks to Marc Edginton of the Edgington post. Topics discussed:
1. Gold and Silver 2. Get some money out of your own country 3. Self Directed IRAs (http://www.tdvselfdirectedira.com) 4. Second Passports (http://www.tdvpassports.com) 5. Look for opportunities in other countries
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| The Gold Price Rose Clearing it's Resistance Today but Still Needs to Confirm Posted: 26 Jul 2012 04:49 PM PDT Gold Price Close Today : 1615.10 Change : 7.00 or 0.44% Silver Price Close Today : 2743.1 Change : -1.4 or -0.05% Gold Silver Ratio Today : 58.879 Change : 0.285 or 0.49% Silver Gold Ratio Today : 0.01698 Change : -0.000083 or -0.48% Platinum Price Close Today : 1406.60 Change : -23.40 or -1.64% Palladium Price Close Today : 569.10 Change : -15.35 or -2.63% S&P 500 : 1,360.48 Change : 22.59 or 1.69% Dow In GOLD$ : $165.01 Change : $ 2.08 or 1.28% Dow in GOLD oz : 7.982 Change : 0.101 or 1.28% Dow in SILVER oz : 469.99 Change : 8.12 or 1.76% Dow Industrial : 12,892.43 Change : 216.38 or 1.71% US Dollar Index : 82.83 Change : -0.809 or -0.97% The GOLD PRICE cleared another resistance area ($1,608-$1,610) today, confirming yesterday's bump against the even-sided triangle's upper boundary. This also ranks as a breakout through and above that boundary line. In two days gold has bounded from below the middle of the Bollinger Bands to the top band. Strong, but also suggesting it might take a break and fall back. Tomorrow will tell us, within this outline: $1,625 - $1,630 is the next resistance. Can the GOLD PRICE clear that? Underneath us is support from $1,600, so gold must hold that. Caution: this may be a short-covering rally that may yet disappoint. It must keep advancing and must not fall below critical support like $1,595 - $1,600. I remind y'all what's going on. Since May gold hath formed an even-sided triangle, a formation foretelling a breakout and big move, but silent as to which direction. Gold has now broken out skyward through the triangle's upper boundary, but every breakout is untrustworthy and double-tongued until it solidly confirms its intentions. GOLD will paint the Big Yes on a rally when it closes above $1,640, the 150 day moving average. The SILVER PRICE didn't agree today. While gold rose, silver fell an irritating 1.4 cents to 2743.1c. To my suspicious mind this close looks looks a lot like somebody painting the tape, but y'all know how untrusting I am. Silver reached up and tapped on 2783c, but that came before New York opened, at 7:00 a.m. (Silver touched but did not pierce its 50 DMA at 2777c, and pierced the rising triangle's top boundary, but closed below it.) I cannot resist saying that were I the Nice Government Men avidly desiring to discourage investors fleeing into gold, I would hit the SILVER market first. Why? It's so much smaller market that it's easier to manipulate. I get more bang for my manipulating dollar. But let all that alone. We can also aver that what we behold on the chart is a plain impulsive upward move from Tuesday's low, and maybe the backing off today displayed only a market completing that wave up. If so, tomorrow might mount the clouds once again. Yet moderate that. On Fridays short term traders with profits tend to take the profits and run so they can have a peaceful weekend on their yachts, not worrying about an open position. "Oh, that Moneychanger's just hedging and talking out of both sides of his mouth!" you might say. Wrong. I'm facing the uncertainties. It appears we have a rally in gold, but I've been sucked in before, so I want confirmation. Still, I would buy some GOLD here and LOTS of SILVER. Yesterday came the "trial balloon" from the Austrian EC member, today came the "announcement" from the head of the ECB. I told y'all that Euro was getting too low and the dollar too high for those central bankers to stand. Dollar/euro rate just swam too close to the bottom of their pre-determined range. Craftily, they caught an enormous herd of shorts in the euro, as everybody and his brother-in-law has been shorting the euro for months. Nothing feeds a market like panicking shorts. Let us pause here, to get something straight. When you make an "announcement" designed to (mis)lead the market to think one particular way, that "manipulates" the market, regardless whether you bought or sold one euro for one dollar or not. And when the head of the European Central Bank, international criminal and apparatchik Mario Draghi, says publicly he will do "whatever is necessary" to maintain the euro, what conclusion will the public draw? That the euro will rise against the dollar. Unfortunately, they do not draw the correct and inevitable conclusion, namely, that he will inflate endlessly and so in the end gut the euro. But he did panic the shorts, and momentarily re-bloat stock markets. Central banking manipulation mission completed. Now it's 5:00 p.m., let's go have a martini. We saved the world for one more day. US dollar index fell a whopping 80.9 basis points (1.04%) clean through the 83 level to 82.826. When it broke 83.50 about 6:00 a.m. EST the dollar Niagaraed to 82.60 by 10:00, then flattened out exhausted. The central bank criminals have much more work to do before the tame the dollar. It remains above its 20 day moving average (DMA) now 83.04. Yet my admonition a few days ago about markets making new high after new high now bears fruit. The unrelenting fall of US treasury yields (unrelenting rise of their prices) broke yesterday and today, although that reversal has not yet been consummated. We can, then, expect the dollar to drop more not for mere technical reasons, but for overwhelming political necessities pushing central bank criminals. They must appear to ACT, whether their actions help or hinder, and hinder they will. Euro obediently gapped up today from its Tuesday low at $1.2042, clean up to its 20 DMA (123.06), although it didn't close above that mark. It closed up 1.08% at $1.2282 (US$1=e0.8142). To give y'all an idea how low the mighty euro hath fallen, it needs to climb above $1.2693 merely to offer the suspicion its trend hath in truth tergiversated. Yen backed off its attempt to escape its downtrend, dropping 0.05% to 127.87 cents (Y78.2). Tamed. Not about to run away, unless it can clear 128.77c. Stocks sprinted for the top of their recent range (12,950) with a top at 12,931.22. Settled at 12,887.93, up 211.88 (1.67%). (S&P500 rose 22.13 (1.65%) to 1,360.02.) Yet although that excites stock investors like junkies looking at a car trunk full of cocaine, it is "full of sound and fury, signifying nothing." Neither index managed to punch through that neckline hanging overhead. Just to accomplish that wedge of a breakout, that small beginning, the Dow needs to close above 13,050 and the S&P500 above 1,390. Just to show y'all that "there is nothing new under the sun," on 26 July 1790 the US Senate passed what later became the Funding or Assumption Act. What was all this? The states had huge debts from the Revolutionary War, some trading as low as 10 cents on the dollar. Under the act the federal government assumed these debts. The author of this scheme was Treasury Secretary Alexander Hamilton, centralizer and lover of central banking and every other doleful and woeful government intervention in the economy. As a result of the Act, some speculators gained a bonanza, but, of course Hamilton knew nothing about that, I'm sure. Compare this to the European Union mess today. It's much the same. The states all issued their own currencies, in which their sovereign debt was denominated, and they inflated those currencies (as did the national government) during the war. Their sovereign debt was sadly depreciated, and unlikely to be repaid. The federal government assumed that debt, and suddenly all that bad state debt became valuable. Conceptually this is precisely what that Austrian EC member proposed yesterday, that the ESM take over all the rotten sovereign debt, and fund that by the ECB. As the French say, "The more things change, the more they remain the same." (Except they say it in French, of course.) I reckon we're so docile and stupid the banks don't have to think up new ways to rob us. After all, the old ones are working just fine. Argentum et aurum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com 1-888-218-9226 10:00am-5:00pm CST, Monday-Friday © 2012, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose. No, I don't. 
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| Guest Post: Central Banks Are Chomping At The Bit Posted: 26 Jul 2012 04:16 PM PDT Submitted by Pater Tenebrarum of Acting Man blog, Perpetual 'QE'In recent days, numerous central bank bureaucrats have given us hints that another round of pump priming is more or less imminent. It started with John Williams, president of the San Francisco Fed who mused about 'QE without a limit'. The FT reported:
(emphasis added) Mr. Williams, so the FT, is thought to be 'close to the center of gravity' on the FOMC. We take this to mean that he has the helicopter pilot's ear. So if indeed the Fed were to embark on 'open-ended QE' that is predicated on developments in the vaunted 'economic data', or putting it differently, is dependent on recent economic history (a method also known as 'driving forward with one's eyes firmly fixed on the rear-view mirror'), what happens if said data fail to improve? Will the Fed then just keep printing forever and ever? As an aside, financial markets are already trained to adjust their expectations regarding central bank policy according to their perceptions about economic conditions. There is a feedback loop between central bank policy and market behavior. This can easily be seen in the behavior of the US stock market: recent evidence of economic conditions worsening at a fairly fast pace has not led to a big decline in stock prices, as people already speculate on the next 'QE' type bailout. This strategy is of course self-defeating, as it is politically difficult for the Fed to justify more money printing while the stock market remains at a lofty level. Of course the stock market's level is officially not part of the Fed's mandate, but the central bank clearly keeps a close eye on market conditions. Besides, the 'success' of 'QE2' according to Ben Bernanke was inter alia proved by a big rally in stocks. Such increases in stock prices are seen as a spur to spending, as the perceived wealth of stockholders increases. In the view of Bernanke and his colleagues, spending is what it's all about. The central bank chief holds that we can consume ourselves to prosperity. It follows from this that one should also be able to print and deficit spend oneself to prosperity, but oddly enough, it hasn't worked thus far. A reason to revisit long-cherished beliefs? Not at all! We must 'do more' of what hasn't worked thus far.
Following an unexpected earnings miss by market bellwether AAPL, the stock market had a perfect opportunity to sell off, but went sideways instead. Mr. Hilsenrath's piece I the WSJ (see further below) may well have provided the rationale - click for better resolution.
The remarks of Williams were then given another boost by Sarah Bloom Raskin, who announced the the upcoming FOMC meeting would be used to 'debate the benefits of a new bond buying plan'.
(emphasis added) We once suggested that the writing of the bureaucratese FOMC statements could be delegated to something akin to the postmodernism generator. Just put a collection of stock phrases into a computer program that then prints them out at random in grammatically correct sentences. Mrs. Bloom-Raskin already sounds as if she were connected to one. However, the final confirmation that something is in the works came yesterday when Jon Hilsenrath of the WSJ penned an article entitled 'Fed Moving Closer to Action'. Everybody knows by now that Hilsenrath is the media mouthpiece employed by the Fed. Kind of like the Oracle of Delphi, only with greater accuracy. In fact, Western media have become like the Pravda of the Soviet Union. They are no longer engaged in journalism, they simply relay vetted messages from government officials. The astonishing thing is that they no longer even try to deny it – see this recent article in the NYT, in which it is openly admitted that in order to 'retain access', every word emanating from the presidential campaigns or the White House has to be 'approved' by the apparatchiks before it sees print. Anything even remotely controversial is duly blotted out. These days, if you really want the truth ('pravda' ironically is the Russian word for 'truth'), you apparently actually have to watch Russian TV stations (such as RT) and read Russian newspapers. Anyway, Hilsenrath writes:
(emphasis added) It seems pretty clear from all this that mortgage backed bonds will be the vehicle of choice (see also comments by Alan Blinder in an op-ed at the WSJ, were he discusses the methods the Fed could use to get bank credit inflation going again). This is probably the preferred option because of the perceived shortage of highly rated collateral in the market. Moreover, it doesn't smack so much of the Fed financing the government, even though technically speaking it only ever buys already existing treasury debt from third parties – albeit sometimes within days of it coming into existence. To the extent that the Fed buys securities from non-banks, deposit money in the system will increase directly. If it buys securities only from banks, it may well end up mainly increasing excess bank reserves deposited at the Fed. However, banks are avid buyers of treasuries themselves, so the funds do indirectly tend to support government spending (it is easy for fractionally reserved banks sitting on a mountain of excess reserves to create deposits in favor of the government).
Treasury securities held by commercial banks - click for better resolution.
Given that the only goal of more 'QE' can be to goose the money supply (failing that, it would have zero effect), the question should be: is there too little money in the economy? Judge for yourself:
The US broad true money supply TMS-2, via Michael Pollaro. It has increased from $5.3 trillion at the beginning of 2008 to $8.719 trillion as of the end of June 2012 - click for better resolution.
Of course the above is a bit of a trick question. The money supply can never be 'too small'. Any size of money supply will be as good as any other to render the services money is supposed to render. Numbers in accounts are really meaningless per se – it is not important how much money there is, but what it can buy. Today, a dollar buys 97% fewer goods and services (a rough estimate) than 100 years ago. Evidently if things that cost $100 today were to cost $3 as they did in the year of the Fed's founding, we could make do with a far smaller money supply. Increasing the money supply however always has ill effects, even though a temporary 'sugar high' for the economy can often be bought that way. If increasing the money supply were a good thing, then everybody should be allowed to contribute to the exercise, since one can never have enough of a good thing. We should all have the right to run our private printing presses – after all, what difference can it possible make whether the Fed prints the money or the commercial banks create new deposits, or everybody gets in on the act? If additions to the money supply are desirable, why should Joe Six-Pack's privately printed notes not also be desirable? It is by posing such simple questions that one can immediately unmask the absurdity of the Fed's activities.
What Printing Money Does – The Credit Cycle versus Government Directed InflationOf course money is not 'neutral'. If the Fed were to increase everyone's money holdings pro rata by the exact same percentage on the same day, then it would be clear to all that it would make no difference – nobody would be any richer, and merchants would raise all prices by this exact percentage on that very day. We would expect them to, and they would be foolish not to do it. However, money enters the economy at discrete points. This has redistributive effects, as the early receivers will profit at the expense of later receivers. It also means that a price revolution will inevitably occur: it is irrelevant whether 'CPI' rises or not. Prices will be altered relative to one another. Once the money has percolated through the economy, the price structure will be different from what it was before and from what it would have been absent the inflation. If commercial banks create new deposits by granting credit, then to the extent that such credit creation is new money from thin air 'backed' by fractional reserves, we will experience the usual trade cycle: factors of production will be drawn to higher order goods production at the expense of the middle and later stages of the production structure and once the boom is underway, consumption will increase as illusory accounting profits are spent. Capital will be ultimately be consumed. The inter-temporal coordination between production and consumption will be disturbed, as the fiduciary media that come to the loan market lower interest rates and create the false impression that the pool of voluntary real savings is larger than it really is. More distant stages will tend to be added to production structure, i.e. very long term investment projects that suddenly appear to be profitable. However, the real resources to bring these projects to fruition do not really exist – eventually many of them will have to be abandoned (countless ghost towns in Spain are testament to this fact). It will also invariably turn out that businesses have invested in the wrong lines. Whether they disagree with actual consumer demand or must be abandoned for lack of complementary capital, countless malinvestments will inevitably be unmasked when the boom ends. The case of a central bank and government directed inflation is slightly different. If banks lend to money from thin air to businesses and consumers, the market interest rate will tend to be depressed below the societal rate of time preference. The business cycle briefly outlined above will result. Since a feature of the business cycle is that a production structure is erected the length of which can not be supported by the economy's pool of real funding – a production structure that ties up more consumer goods than it releases – we speak of intertemporal discoordination. The discoordination is between consumption and production schedules: had consumers really saved more, then it would be clear that they are abstaining from consumption in the present with the aim of being able to consume more in the future. But the market interest rate is falsified. It only appears as though they were abstaining from present consumption, in reality their desire to save and thus their consumption schedule has not changed. However, the lower interest rate interferes with production – a lengthened production structure will require more time to produce consumer goods. If sufficient savings were indeed available, it would eventually produce more consumer goods than previously. In an artificial credit cycle, the expected future consumer demand will never materialize. If banks lend directly to the government (a process which the buying of securities by the Fed aids and abets), then the government spends those funds directly. It does not offer them as loans to businesses, it spends them on government consumption. This will also distort the production structure, but the disturbance will be an intra-temporal discoordination. Certain business branches that are favored by government largesse will see rising prices and will be induced to expand. The result will once again be a production structure that fundamentally disagrees with the wishes of consumers. A good example of this are the failed investments in 'green energy' the government has undertaken in the course of its stimulus program. These projects certainly squander scarce resources that could be put to better use in satisfying actual consumer wants. Profit and loss accounting for such projects is a fiction. We have discussed examples of these failed projects in more detail here (scroll down to 'Stimulus Fail'). Ludwig von Mises explains the process as follows (in Human Action, p. 568):
An explanatory note: the 'price premium' is the premium on interest rates that accounts for the expected future decline in money's purchasing power. At the moment this price premium is very low, as economic uncertainty has led to an increase in the demand for money (cash holdings). It is e.g. well known that corporations hold large amounts of cash. At the same time, the inflationary policy is still widely thought to be a temporary phenomenon. 'Inflation' in the sense of a rise in the 'general price level' as measured by CPI is held to be a phenomenon that the central bank has 'under control'. It remains to be seen whether this faith persists if 'QE' becomes open-ended.
The ECB's and BoE's Failure to Inflate The Money SupplyContrary to the Fed, both the BoE an the ECB have been unable to spur money supply inflation since the crisis in the euro area began. Banks are under pressure and are calling in loans in an attempt to shrink their overleveraged balance sheets. Moreover, in the euro area, they find themselves constrained in making loans to governments that are themselves at risk of insolvency and can no longer print their own money. These governments in turn are forced to adopt austerity measures, so there is no way for additional money to enter the economy in the absence of private sector credit expansion and concurrent reductions in government spending. Countries like Spain that have experienced massive credit booms and malinvestment orgies prior to the onset of the crisis are therefore feeling the full brunt of the contraction that follows on the heels of such a bubble. Unfortunately this has so far not meant that unsound credit was liquidated. The euro-system still allows for the surreptitious funding of de facto insolvent banks via ELA (emergency liquidity assistance) and moreover enables deposit flight and current account deficits that are financed with central bank money through TARGET-2. This blunts the severity of the economic downturn only marginally, but it clearly delays its resolution. Although ECB board members including Mario Draghi himself often reiterate that they 'see no risk of deflation' for the euro area, the risk is far greater in the euro area than in the US. They refer to prices and not the money supply, but as we have often pointed out, money supply inflation has slowed to a crawl after the initial burst in growth following the 2007/8 GFC. In the UK, year-on-year money TMS growth has fallen to zero, while the broader measure M4 has declined by 3.5% over the past year. In the euro area, year-on-year growth of money TMS stands at 3.4% as of June which is an interim high actually, as even lower growth was observed throughout 2011.
UK money supply growth stalls out in spite of a massive increase in BoE credit via 'QE' - click for better resolution.
Euro area money supply growth and ECB credit – another example of a central bank 'pushing on a string' - click for better resolution.
Presumably at least some people at the central banks must be aware of this and are likely thinking about ways to counter it. After all, deflation is thought to be 'bad'. The BoE is introducing a scheme in concert with the treasury that is designed to spur lending to businesses by allowing the banks to discount corporate loans with the central bank. The ECB is mulling various other methods of prodding banks into increasing their inflationary lending. Among the measures considered is the lowering of the deposit rate into negative territory, this is to say imposing a penalty rate for holding excess reserves with the central bank. The lowering of the deposit rate to zero at the last ECB meeting was apparently only the first step, but it has already shown why this method probably won't work. The banks have simply transferred excess reserves to their current accounts in the euro system. This combines operational flexibility with the same degree of safety, while from an interest rate standpoint the situation is the same: they get zero. Investors are even prepared to endure penalty rates of varying sizes by lending short term funds to certain governments such as Germany's and Switzerland's at negative interest rates. They pay a small price for perceived 'safety', while at the same time placing a bet on eventual currency appreciation. Note also that excess reserves are the equivalent of cash assets to the banks. If the central bank imposes a negative interest rate on such holdings, and e.g. imposes a limit on the amounts that can be held in the current account facility, the banks may simply begin to hoard vault cash. While this is inconvenient, there is no legal impediment to such an operation. We would certainly see an increase in the money supply then, as the currency component would climb, but if this money is simply put into vaults to gather dust, then it may as well sit on the ECB's deposit facility – this is to say it would have to be considered as remaining outside of the economy. This would change only if depositors became nervous about the euro's future purchasing power and began to withdraw money in order to spend it before it loses its value. The latest proposal – which to be sure is not new, but was hitherto considered 'DOA' – was voiced by Austrian central bank governor and member of the ECB council Ewald Nowotny, who appears to be warming to the idea to give the planned ESM bailout facility a banking license. This would allow the bailout vehicle to function as the ECB's 'QE' arm, as it could for instance buy the bonds of Spain and Italy, and then rediscount them with the central bank and pyramid new loans atop the ones it can extend by using its own capital.
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| Norcini - If This Happens It Will Devastate The Gold Shorts Posted: 26 Jul 2012 03:15 PM PDT  Today acclaimed commodity trader Dan Norcini told King World News, "Once you had the 50 day moving average in gold violated to the upside, then you had a much larger wave of short covering which began to occur." Norcini also said, "The momentum crowd, that was waiting for $1,600 to be breached, then took over and the move has continued to feed on itself." Norcini also discussed a key level which "... is where you will really see the shorts panic." But first, here is what he had to say about the recent action in gold: "The move in gold we have been seeing was precipitated by an article which indicated the Fed was going to move in August, instead of September. Some of the shorts began to cover yesterday, and as they began driving the prices higher they tripped some key technical levels."
This posting includes an audio/video/photo media file: Download Now |
| Hong Kong’s Largest Bullion Vault Signals Rising Asia Wealth Posted: 26 Jul 2012 02:21 PM PDT
The facility, located on the ground floor of a building within the international airport compound, has capacity for 1,000 metric tons, said Joshua Rotbart, general manager for the Hong Kong-based company's Malca-Amit Precious Metals unit. [source]
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| Gold Daily and Silver Weekly Charts - Cap, Cap, Cap Posted: 26 Jul 2012 02:19 PM PDT |
| Gold Seeker Closing Report: Gold and Silver Gain Almost 1% Posted: 26 Jul 2012 02:14 PM PDT Gold jumped to as high as $1621.37 before it fell back off a bit in New York, but it still ended with a gain of 0.69%. Silver surged to as high as $27.815 and ended with a gain of 0.55%.
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| Posted: 26 Jul 2012 02:14 PM PDT When the mainstream media starts touting "dirt" as the new "black gold", does that mean farmland is in a bubble? In today's "video essay", Capital Account's Lauren Lyster poses that very question to Brad Farquhar, manager Co-Founder of Assiniboia Capital — the largest farmland fund in Canada. Take a look below… Editor's Note: The production team over at RT will actually be here in Vancouver all week covering this year's Symposium. Each day on Capital Account, Lauren Lyster will interview a different presenter from the event. To check out these interviews live, just go to the RT site, click the red "Live" button at the top of the page, then click "RT America On Air". Is Farmland in Bubble? originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".
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| Is Auditing the Fed Positive for Gold? Posted: 26 Jul 2012 01:23 PM PDT July 25, 2012 should go down in history as the date the Federal Reserve may become fully accountable to the US government. A motion to pass the bill as amended was unanimously approved by the house to require a full ... Read More...
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| Two keys for the next gold breakout Posted: 26 Jul 2012 12:56 PM PDT Clif Droke
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| How Ben Bernanke Can Prevent the End of Civilization Posted: 26 Jul 2012 12:37 PM PDT Ain't we got fun? Ev'ry morning, ev'ry evening In the winter in the Summer — Whiting, Kahn, Egan…1921 The Dow up 58 yesterday…nothing important there. Gold up $31. Hmmm…what does the gold market see? More QE? Last week, it was the IMF. It urged the Europeans to increase their money-printing efforts to avoid deflation. This week, the Financial Times tells Ben Bernanke to get off his cushy derriere and take bold, decisive action in the fight against the Great Correction. Sebastian Mallaby, writing in the FT, says Bernanke is acting like a wimp. He needs to come up with some new weapons, new strategies, and new tactics. C'mon Ben, "show some real audacity." Ben Bernanke, hero of '08, will not want to see himself stripped of his medals. He will not sit on his hands and watch as the US follows Japan down that long, lonely road towards stagnation. He will not want his resume blemished by a splotch of failure just when he faced his greatest challenge. No, dear reader, he will 'do something!' — no matter how dimwitted it may be. And here's a BBC sage reminding Ben Bernanke what the greatest economist of the 20th would have done. "What would Keynes do?" he asks. Of course, the answer is obvious to anyone who ever thought much about Keynes. He would have done just the wrong thing! But that's not the way John Gray sees it: …The influential Cambridge economist has figured prominently in the anxious debates that have gone on since the crash of 2007-2008. For most of those invoking his name, he was a kind of social engineer, who urged using the power of government to lift the economy out of the devastating depression of the 30s. That is how Keynes's disciples view him today. The fashionable cult of austerity, they warn, has forgotten Keynes's most important insight — slashing government spending when credit is scarce only plunges the economy into deeper recession. Even Richard Duncan urges the Fed to action. Duncan is unusual, though. He sees the problem clearly…which is to say, he sees it like we do. Here, CNBC reports on an interview: "When we broke the link between money and gold, this removed all constraints on credit creation. This explosion of credit created the world we live in, but it now seems that credit cannot expand any further because the private sector is incapable of repaying the debt it has already, and if credit begins to contract, there's a very real danger that we will collapse into a new Great Depression," he [Duncan] argued. "If this credit bubble pops, the depression could be so severe that I don't think our civilization could survive it." Duncan argues that governments in the developed world should borrow "massive" amounts of money at the current low interest rates to invest in new technologies like renewable energy and genetic engineering. What could he be thinking? Of course the money would be wasted. That's what government does. It borrows money from people who have proven they know how to make money and gives it to people who have proven only that they know how to take it. One will offer to build a bridge to nowhere. Another will propose to assassinate a foreigner. Millions will put out their hands for retirement/health/unemployment and other forms of assistance. And what will happen to the money? It will be gone…with only more debt…like "dead soldiers" left on the table after a party…to show for it. Still, Duncan thinks that even if the money goes down a rathole, it still might make sense: Even if this is wasted, at least we could enjoy this civilization for another ten years before it collapses," he said. That's what separates a real pessimist from us optimists. It would be nice to see what Mr. Market would do. Left to do his work, he'd surely separate many of the rich from their money…he'd blow the doors of the banks…and flatten hundreds of corporations. He'd put a swift end to this Great Correction…and then we could get back to work. But he wouldn't wipe out our whole civilization! You have to be a genuine pessimist…to believe the correction will be fatal to our civilization. Who knows? Maybe Richard Duncan is right. We're all going to die anyway. In the meantime, and in between time, ain't we got fun! Regards, Bill Bonner How Ben Bernanke Can Prevent the End of Civilization originally appeared in the Daily Reckoning. The Daily Reckoning, published by Agora Financial provides over 400,000 global readers economic news, market analysis, and contrarian investment ideas. Recently Agora Financial released a video titled "What Causes Gas Price to Increase?".
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| What Disaster Economics Means For Investors Posted: 26 Jul 2012 12:20 PM PDT A recent FT article about 'Disaster Economics' by Gillian Tett caught our attention. We've been fans of Ms Tett's work for a while, especially her excellent book 'Fool's Gold'. This article was about the bond markets ... Read More...
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| Nine gold sovereigns that command top dollar Posted: 26 Jul 2012 12:08 PM PDT Perth Mint Blog
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| John Hathaway Predicts That Gold Will Move Substantially Higher From Here Posted: 26 Jul 2012 11:50 AM PDT "Gold broke through, and closed above, both the $1,600 price mark...and it's 50-day moving average." ...
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| Posted: 26 Jul 2012 11:49 AM PDT London Gold Market Report from Adrian Ash BullionVault Thurs 26 July, 07:50 EST The WHOLESALE-MARKET gold price leapt more than 1% inside an hour in London trade Thursday morning, setting 3-week highs above $1620 per ounce after European Central Bank chief Mario Draghi said "The ECB is ready to do whatever it takes to preserve" the single Euro currency. "And believe me, it will be enough." Speaking in London one day after the gold price jumped following fresh rumors of more quantitative easing by the US Federal Reserve, Draghi did not specify plans, but did point to the high bond yields now being paid by Eurozone members such as Italy and Spain. "To the extent that the size of these sovereign premia hamper the functioning of the monetary policy transmission channel, they come within our mandate," said the ECB president. "We have to cope with the financial fragmentation, address these issues." Spanish bond yields retreated as debt prices rose today, while Eurozone stock...
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| Apocalypse Ahead, What Disaster Economics Means for Investors Posted: 26 Jul 2012 11:23 AM PDT A recent FT article about ‘Disaster Economics’ by Gillian Tett caught our attention. We’ve been fans of Ms Tett’s work for a while, especially her excellent book ‘Fool’s Gold’. This article was about the bond markets, but it was some interesting financial history and commentary that caught our attention.
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| Peter Schiff - Gold Just Broke Out & Is Now Off To The Races Posted: 26 Jul 2012 11:17 AM PDT  Today Peter Schiff told King World News that "Gold has now broken out of a channel. There was a very nice trendline and we just broke out of that today." He also said, "Now that we have broken out of that channel, there is a lot of room to the upside." Schiff discussed the Fed, mining shares, and key levels in the gold market, but first, here is what he had to say about today's comments out of Europe by Draghi: "Draghi is just saying he's going to print as many euros as he has to. That's what people are interpreting here is him saying, 'We are not going to let countries default. We're going to keep countries on board, which means we are going to acquiesce to the pressure to print money.'"
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| Ross Beaty and Doug Casey – Contrarian Masters Posted: 26 Jul 2012 11:06 AM PDT HOUSTON -- It is no accident that a large number of the big names in the resource biz are coming out with a variation of the same message. That message is simple and elegant. Buy "stuff" when it gets ridiculously cheap and run counter to the trend. – Then hunker down, hang on to that position with both clinched fists and wait for the pendulum to make its way back the other way. Being a contrarian is not easy, but is a path a very few, very smart people have taken to achieve enormous wealth.
The current condition of the small resource company market is a contrarian target rich environment, in other words. We sincerely doubt that even the masters of contrary theory thought such a compelling opportunity was possible with gold above $1,500 and silver more than five times what it was in 2002, but now that it is here, it stimulates and energizes the contrarians among us. Hence the large number of uber-contrarians appearing in public now to remind us that it is at times like now when great positions are built – for when the market no longer has a world-class "hate" on for the companies we call The Little Guys. We have shared a few of those recent appearnces in the VultureInReview section of the blog and plan to continue doing so. (See VultureInReview link at the top of the page, and of course the GotGoldBog entries along those lines.) Enter Ross Beaty and Doug Casey at a recent conference below. Pay attention to Beaty's philosophy on when to build a position. It is the kind of thinking we small resource company Vultures understand.
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| Central Bank Gold-Grab Intensifies Further, Part II Posted: 26 Jul 2012 11:03 AM PDT In Part I, readers had revealed to them the latest chapter in Western bankers' newfound love-affair with gold. Indeed, as central banks around the world swap their own paper for gold at the fastest pace in history, it's quite clear which monetary asset these charlatans really believe is a "barbarous relic." After bad-mouthing gold for decades (and continuing to get their media trolls to attempt to frighten people away from gold today), we are currently witnessing history's greatest "bash and buy". Both European banking authorities and those in the U.S. are now proposing reclassifying gold as a "Tier 1" financial asset. As was previously noted, this would have the effect of instantly making gold twice as attractive and twice as valuable to all of these large, Western financial institutions. What makes these developments especially interesting at the present time is that they are occurring at the end of another long period of sideways trading in the gold and silver markets. Throughout this 10+ year bull market, these temporary periods of sideways price-action where the bankers are able to trap gold and silver within trading ranges have preceded the largest/longest rallies over the past decade – where gold and silver prices smash through all previous (nominal) highs. While the bankers are typically the last to notice and understand the consequences of their relentless manipulation, if you hit a dog over the nose with a rolled-up newspaper enough times, eventually the dog will get the message. Thus the bankers themselves know their "fun" has nearly come an end (at least for an extended period of time), and they will have to once again sound the retreat on gold and silver prices. Being greedy (above all else), these banksters manage to be quite pragmatic: when they know that gold and silver are set to blast-off once again, many of them like to come along for the ride. So, with a long period of sideways trading in the precious metals sector nearly at an end; with the bankers themselves in the process of reclassifying gold to make it much more valuable (for themselves); and with the bankers having a known tendency to switch sides and jump on the bandwagon (for short stretches); now is the time for all savvy precious metals investors to empty-out their bank accounts and sink every last dollar into silver and gold. Right? Not so fast. There is, in fact, only one thing that the banksters like to do more than make money, and that's to be able to make money while simultaneously whipsawing other investors (and hopefully totally destroying them). As a result, the banksters have come up with a particularly fun game that they like to play called Bait the Chumps. It's actually a really easy game to play when you are given complete and utter freedom by both government and "regulators" to rig/manipulate markets. First you target a sector with especially bullish long-term fundamentals – meaning that precious metals is the banksters' favorite playground for this game. Then, at a time when investors are already sensing that a rally is imminent you send out some really obvious "bullish signals". Then you simply wait for the mice to take the cheese. Once the rodents have all latched onto their fromage, you spring your ambush. All the greedy, new "longs" who went out and leveraged themselves to the hilt on margin because they "knew" the sector was about to take off are instantly obliterated. The downward momentum this creates then makes it possible to blow even moderately leveraged traders out of the water, and so the dominoes fall. With the whole market expecting a sector to "zig", the bankers simply rig a "zag". This is a classic win/win for these Vampires: not only do they get the tactile pleasure of destroying other investors, but the downward price action generated in the process then allows the bankers to do their own buying even cheaper.
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| Posted: 26 Jul 2012 10:51 AM PDT Dave Gonigam – July 26, 2012
And so Chris Mayer kicked off this year's edition of the no-holds-barred, politically incorrect affair we call the Whiskey bar. Our Wednesday night panel discussion at the Agora Financial Investment Symposium, fueled with quality alcohol, brought forth the usual one-liners and applause lines… plus a discussion of the U.S. housing market every bit as lively as this editor hoped for. A handful of highlights…
Seriously, you had to be there. Or failing that, you can get the recordings of every session in the main hall this week… in high-definition video. Meanwhile, an intriguing subtheme has emerged at this week's Symposium. While this year's confab is dubbed "Innovate or Die: Empire at a Turning Point," the word that's turned up most often is not "innovate," but "adapt." Addison foreshadowed this adaptability idea in his welcome letter to attendees. "If enterprises and empires must adapt to changing circumstances, so must your investment strategy." Dan Denning said on Tuesday investors must be like the platypus: Duck billed, beaver tailed, web footed, it has fully adapted to the harsh environment of eastern Australia. The adaptability theme emerged during several of yesterday's talks…
Faber sees no end in sight to the Fed's zero interest rate policies… not as long as the Treasury has massive deficits to finance. "Fiscal deficits of less than $1 trillion are out of the question for the next 10 years." A "fiscal cliff" at year-end? Dr. Faber says "a fiscal Grand Canyon" is far more likely: Politicians will be too scared to let the automatic spending cuts go into effect. So… How to invest? You essentially have two choices: Either you have to be an impeccable market timer — in which case you're reading the wrong e-letter — or you go Dr. Faber's route. "I prefer to have diversification of different asset classes." In his case, those classes are equities, cash and bonds, real estate and gold. Within the stock market, he figures blue-chip dividend payers will deliver better yields than Treasuries over a 10-year span, and he named a few. (Check out an interesting chart to that effect later in this episode of The 5.) "I've also started to buy some stocks in Portugal, Italy and France. The markets there are essentially at or below the March 2009 lows. If the S&P were to fall to the March 2009 low, it would be cut in half from present levels." That's a fairly low-risk proposition.
European Central Bank chief Mario Draghi pledged to do "whatever it takes" to save the euro. How he would do so, he did not specify. No matter, it's another risk-on day, fueled by the bloviations of central bankers…
"Millions of consumers want an iPad and many want a computer, yet every single person in the world needs global resources. We need companies to grow our food; we need oil, natural gas and coal to fuel our cities. We need to drive to work and school each day, and we need to keep our house warm in the winter and cool in the summer. And so do the other 7 billion people on the planet." Nothing wrong with Apple in Frank's estimation. You're just better off buying the stuff Apple uses to build its products. Frank's presentations are always chockablock with eye-opening graphs and tables. This one stood out to your editor: Look at what a zero-interest rate policy has begat…  Mr. Holmes packs a lot of information into his talks: Sometimes he'll breeze through his PowerPoint so quickly you can't pick up all the subtleties in real-time. Which, in a sense, gives you a leg up on the people who are here in person: With our new video recordings of the Symposium talks, you can linger over any chart for as long as it takes to sink in. And you can rewind to pick up a point you missed the first time. We have folks in attendance this week who've signed up for the recordings for just that reason. You can do the same.
That is, just because something is bound to happen doesn't mean it'll happen right away. Mr. Butler noticed the U.S. government racking up debt at a precipitous rate starting in 2001. But it didn't show up in the form of a falling dollar index until the following year. Now? The debts have become far larger, and even more unsustainable. But with fear abounding over Europe, it's not showing up in a weakening dollar. Not now. But it will. That gives you time to carry out the most important diversification Chuck believes you need in your portfolio — currency diversification. Make sure you're exposed to currencies other than the U.S. dollar, while there's still time. EverBank offers a host of innovative products to that end. [Ed. Note: We're in EverBank's debt for sponsoring the outstanding welcome reception here Tuesday night. They put on quite the shindig!]
Byron was in a reflective mood, drawing on a vast store of knowledge acquired at the Naval War College. His concern: How the nation might adapt to the realities of expensive energy and crushing debt. The lessons he drew came in part from ancient Rome, from the British loss at Saratoga during the American Revolution (really, you have to see the talk for yourself)… but mostly from the American experience during World War II. For all his faults, President Franklin Roosevelt adapted: "During the 1930s and the New Deal," said Byron of FDR's attitude, "industrialists were 'malefactors of great wealth.' But by 1940 as war loomed, FDR needed productive skills of the business people." In that vein, Mr. King had a fine addition to the you-didn't-build-that discussion: One of the government accomplishments the current president crowed about, Hoover Dam, couldn't have happened without steel from Henry Kaiser's mills. And as war loomed, William Boeing designed the B-17 independent of any government agency; it wound up shooting down more enemy aircraft than any other model. "The arsenal of democracy," says Byron, "was created with urgency by U.S. private industry." We live with their legacy today. Navy ships — mostly designed by the Gibbs & Cox naval architecture firm — mapped the bottom of the ocean, making possible the underwater energy discoveries that help fuel cars and ships and planes today. Byron saved his favorite names in the energy space for his afternoon workshop. But fear not: As part of the audio/video package we offer, you also get a concise write-up of the "breakout sessions" — complete with names and ticker symbols. Access here.
Mr. Franklin — the head of Sprott Private Wealth — identified close to a dozen certainties. Among them…
The most powerful certainty Mr. Franklin pointed to is the same one he identified last year: Gold's outperformance in an environment of "negative real interest rates." Look at what gold does when the after-inflation return on a 10-year Treasury note falls below 2%…  The biggest takeaway: "If you don't have exposure to gold stocks at the moment and you believe in gold, now is the time to get in," says Mr. Franklin. Yes, the sector's beaten down right now. That's the point. The average pullback in the HUI index in the last decade was 38%. It's been followed by an average 120% increase. Little wonder Franklin is nibbling away on behalf of his high-net-worth clients, adding gradually to their gold stock positions every month.
"That's the hand we've been dealt. What do we do with that hand?" Mr. Covel's adaptation method might strike you as unorthodox: He is an evangelist for "trend trading." Don't be misled by the name: "Trend" does not entail chasing after the latest fad. And "trading" doesn't entail trying to pick a top or bottom to the market. Rather, it means watching closely for when an asset — any asset — has already started a move up and bailing after it's started a move down. Trend trading works, says Mr. Covel, no matter what Ben Bernanke says about monetary policy and no matter what Congress does — or doesn't do — about the $15.8 trillion national debt. He recalls the words of the legendary trader and hedge fund manager Paul Tudor Jones: "The illusion has been created that there is an explanation for everything, with the primary task to find that explanation." Trend trading foregoes the need for explanations — which sounds like a much simpler way to make money than to fuss over what politicians and central bankers are going to do next. [Ed. Note: Watching Mr. Covel's presentation in person, it becomes quite apparent — the advantages to our new video offerings of this year's recordings of the Symposium. Frankly, the audio alone won't make much sense. But seeing the kind of chart action he talks about, it's crystal clear. We've had a tremendous response to our addition of video this year. And it's not some jerky, pixelated thing, either: This is high-definition video, worthy of the biggest TV in your house. It's the overwhelming choice of folks who are signing up for the recordings of this year's conference. Check it out.]
"If he researches history a bit more, I believe he will realize Obama is actually a fascist, in that he wants you to own the business under HIS rules of operation."
"It's sad that anyone who would write such trash might be eligible to vote; sadder still that he's no doubt one of many who will vote based on the crap he's swallowed and now regurgitates."
"But do you really not consider what he did with GM, which included taking away the rights of the bondholders, through an appointment of an unelected car czar, a nationalization of that company of sorts? Does he really need to do that to an entire industry (think health care insurance laws) for you to acknowledge that some of his decisions are socialism, despite the fact that other crony capitalists like Goldman still contribute to him and other like-minded politicians?" "Let's just let the facts fit the description of what our president is or isn't, without labels… but I think you are incorrect when you say his alleged 'socialism' to date is sheer hyperbole." The 5: A reasoned point. One of the speakers here in Vancouver this week harkened back to George W. Bush's infamous words in the teeth of the 2008 crisis: "I've abandoned free-market principles to save the free-market system." Going back to the first reader's point, the only thing that would have made it better is if he'd paraphrased Nixon and added, "We're all fascists now." Regards from Vancouver, Dave Gonigam P.S. "This market's so much bigger than the stock market," said Doug Casey at last night's Whiskey Bar. "It's set for a catastrophic collapse." "I look at it the way I looked at the Nasdaq in 1996," added Barry Ritholtz. "You know it's going to go higher, you know it's going to end badly, but you don't know when." In a new and rare video release, Bill Bonner describes "the fattest, juiciest financial bubble that's ever existed." He describes what it is, and what you can do about it — while there's still time — at this link. P.P.S. "Even the bad food here is good," writes roving reporter Jim Amrhein, reviewing the gustatory delights of Vancouver. For his latest dispatch — always colorful, and frequently covering ground we don't have room for in our humble 5 Mins. — click here.
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| John Embry: Gold to Surpass All-time High by Year End & Then Unleash MAJOR Upswing in PM Stocks Posted: 26 Jul 2012 10:50 AM PDT I think the big issue going forward is the growing shortage of available physical gold. I strongly believe one of the reasons for the shortage is a lot of it is headed East. The last four or five months of the year gold should challenge, and easily take out, its all-time high. So says John Embry in edited excerpts from his interview with Eric King of King World News which can be read in its entirety here. [INDENT] Lorimer Wilson, editor of [B][COLOR=#0000ff]www.munKNEE.com (Your Key to Making Money!) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) has edited the article below for length and clarity – see Editor's Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.[/COLOR][/B] [/INDENT] Embry concludes his remarks by saying: “For what it's worth, there is an enormous amount of interference in the gold and silver share market. I think that will end as soon as go...
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| Negative Interest Rates Becoming More Prevalent ? Here?s Why You Should Be Concerned Posted: 26 Jul 2012 10:50 AM PDT The once unthinkable might become policy: negative nominal interest rates. Investors should care as they may be increasingly punished for not taking risks yet masochistic investors believe they may be the prudent ones given the risks lurking in the markets. What are investors to do, and what are the implications for the U.S. dollar and currencies? Words: So says Axel Merk ([url]www.merkfunds.com[/url]) in edited excerpts from his original article*. [INDENT] Lorimer Wilson, editor of [B][COLOR=#0000ff]www.munKNEE.com (Your Key to Making Money!) and www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) has edited the article below for length and clarity – see Editor's Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.[/COLOR][/B] [/INDENT] Merk*goes on to say, in part: ...
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| Posted: 26 Jul 2012 10:49 AM PDT I don't think we are at the beginning of the recovery. I think we are at the end of a disastrous debt supercycle that has gone on for the last thirty or forty years, really. It started when Nixon defaulted on our obligations under Bretton Woods and closed the gold window. Incrementally, year after year since then, we have been going in a direction of extremely unsound money, of massive borrowing in both the private and the public sector. - David Stockman, former OMB Director for Reagan and former CongressmanI have to admit, I get excited when I put forth a thesis and the data confirms my view. I didn't expect immediate confirmation yesterday when I proffered that the housing market was getting ready to go into "collapse" mode again that the "tight inventory" argument being used by perma-bulls/frauds like the National Association Reality was Orwellian b.s. Yesterday afternoon a reader linked this article from a New Jersey newspaper: "The long-expected second wave of foreclosures in states where courts delayed their processing appears to have begun in New Jersey and area counties, with filings jumping in the second quarter from a year ago." LINK Then this morning Bloomberg reported this: "Foreclosure filings rose in almost 60 percent of large U.S. cities in the first half of 2012, indicating many areas will have more distressed homes on the market later this year, RealtyTrac Inc. reported." LINK THEN, the National Association of Realtors reported that pending sales for June dropped 1.4% unexpectedly in June. A .9% increase was forecast by Wall Street's Einsteins. Even more significant - and reinforcing a serial of downwardly revising previously reported data - the NAR downwardly revised the pending homes sales number for May. Here's a LINK People, this is the seasonal time of year that the housing market is supposed to be at its relative healthiest. In fact, the NAR data is seasonally adjusted - imagine how ugly the raw data must be. The NAR's excuse for the drop in pending home sales is "tight inventory." But we know that's a bunch of b.s. I know short-sales are failing to close en masse. I personally know someone who was sitting in a house with adefaulted mortgage waiting for a short sale to close that failed because the financing fell through. Furthermore, a lot of the bank-owned inventory was shifted to FNM/FRE, who then off-loaded it onto investors in big blocks thru a sale-to-rent program initiated by the Obama Administration. The rental inventory is going to balloon back up, including many apartment buildings that have been started and which have caused the building starts statistic to bounce over the past year. Interestingly, I happened to notice the other day that rental prices for homes in the Denver area had softened up from this past winter. I wonder why? As the rental inventory expands and drives rents lower, it will also drive home values lower. This process will be exacerbated by this coming 2nd wave of en masse foreclosures. I'm not the only one who perceives this insidious negative feedback cycle starting back up. I linked this analysis the other day, but here it is again and it's worth reading: LINK For every area of the market, I have certain analysts to whom I pay attention, mostly to confirm my own thinking or gain new insight. Mark Hanson is the guy worth paying attention to for housing market analysis. If you are thinking about buying a house because your realtor is telling you that the market is tight and prices are going higher, don't do it. If you are thinking about selling your house to capture remaining equity value, get it done as soon as possible. This fall/winter could be very ugly, and not just for the housing market... 
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| Is Global Trade About To Collapse? Where are Oil Prices Headed? A Chat with Mish Posted: 26 Jul 2012 10:28 AM PDT Last week, I agreed to do an interview on OilPrice.Com. The initial interview was conducted over the phone, with follow-up emails. The interview first appeared on OilPrice and is repeated here. Read More...
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| Keys For the Next Gold Breakout Posted: 26 Jul 2012 10:11 AM PDT Gold's historic run-up from $250 to nearly $2,000 an ounce in the last 10 years has underlined the long-term value and intrinsic worth of a key asset. It has also provided a fabulous, once-in-a-lifetime investment opportunity for many individuals, not to mention a long-term momentum trade for both retail and institutional investors.
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| Will HFT Burn a Hole in Your Portfolio? Posted: 26 Jul 2012 08:52 AM PDT Synopsis: A 2007 SEC regulation designed to make the stock market more fair has backfired badly. By Doug Hornig, Senior Editor High-frequency trading (HFT) is one of the hottest developments – and most controversial topics – in investing today. It's arrived so fast that many investors have been left scratching their heads, wondering, "What is HFT anyway? Where did it come from, and should I be worried about it?" The answers have to do, unsurprisingly, with the federal government... but also, oddly enough, with the speed of light. That's because, although light is the fastest thing in the universe, its velocity is finite. The sun that we see is the sun as it existed about 8.3 minutes ago. That's how long it takes light to cover the 93 million miles to Earth, and it's a measurable amount of time. On the surface of our planet, however, distances are so much shorter that we tend to think of the time required for light to go from any given Point A to Point B as negligible – and for most purposes, that's true enough. It usually doesn't matter that it takes a teensy bit longer for a light beam to travel from New York to San Francisco than it does to Chicago. With HFT, it does matter. In times past, analyzing the market's daily actions was sufficient for decision-making. Over the years with electronic trading tools, that period shifted down to hours, and even minutes. Analysts watched stocks continuously on their Bloomberg terminals, and at the first sign of impactful news, they bought or sold. But these days, everyone has access to the same basic tools. Even the dedicated, stay-at-home day trader can do simple "algorithmic" trading – using a computer to automatically execute trades when preprogrammed conditions are met – if he so desires. Because each invention of the algorithmic trader was so easily copied and cloned, some serious market players have gone in search of sustainable competitive advantages – ways to give themselves an edge that is not so easily eroded. They started building sector-specific software. They targeted their models at new geographies, watching the entire world's markets together instead of in isolation. They sought to divine actionable patterns from the massive piles of data they were collecting. They applied social science to their models. Arbitrage strategies. Crowd theory. Game theory. All for a better, faster tool to pick winning investments. As each firm found an advantage in the markets, their competitors aimed to one-up them. Some built smarter systems, hiring away engineers from Microsoft and Google. They focused on faster code, pushing the envelope of parallel processing and simulation technology. They invested in artificial intelligence and flexible pattern recognition. Any kind of cutting-edge science, really. Others simply put their systems closer to the exchange, to gain a few milliseconds over the competition. Thus was born HFT. It couldn't even have existed before the advent of superfast computers and the ability of programmers to write some very complex algorithms. Gifted with all this electronic market analysis, intrepid data sleuths began to notice patterns emerging. They saw opportunities to arbitrage inefficiencies in the markets and began to trade those alone. High-frequency traders have no interest in any company whose stock they're trading. They don't care about its earnings, what sector it's in, who's on the board of directors, how it fares in technical analysis, nor what its long-term prospects are. They may not even know its name. At the end of every day, after trading tens of millions of shares, they really don't want a single share of stock on their books at all. What attracts them is making a tiny profit on an opportunity that comes and goes in the blink of an eye. And to repeat that over and over, until the tiny profits fill a big bag with dollars. But it wasn't just the technological arms race that got the ball rolling toward HFT. It also required a little nudge from government regulators who were blissfully unaware of the law of unintended consequences. Washington, DC's involvement was the result of new trading options that appeared in the late '90s, like electronic communications networks (ECNs) and Alternative Trading Systems (ATSs). In brief, these are trading systems that are not regulated as exchanges, but exist as venues for matching the buy and sell orders solely of their own subscribers. As Benn Steil, economist and senior fellow at the Council on Foreign Relations, argues: "the historic regulatory model is based on the notion that there are logical distinctions between the roles of exchange, broker and investor. Technological developments have broken that down entirely." Government took note, of course. Securities regulators have always considered as one of their primary functions the responsibility to see that markets are "fair." When Joe Investor buys or sells a stock, he should be assured of at least an equal opportunity of getting the best possible price, every time. The government fears that if this confidence in the integrity of the system were to be compromised, the whole financial house of cards might come tumbling down (which is ironic, considering that it is creating conditions for such a crash by over-politicizing the economy). Yet the proliferation of new systems and exchanges meant that there were bound to be price variances among them at any given trading moment. And this created "unfair" arbitrage opportunities for those smart enough and quick enough to take advantage of them. The SEC's "solution" came in 2007, in the form of Regulation NMS (National Market System). NMS allowed any stock on any exchange to be traded on any other exchange, with the order automatically filled at the best bid or best offer. But for that kind of price discovery to happen, each order must be routed to all potential exchange locations at the same time, before any trade can be executed. Which is where the speed of light comes in. If every order is routed to every exchange at the exact same time, then theoretically no trader can gain a leg up on others by being first in line. That's what the SEC intended. Unfortunately, it's not an achievable goal in this universe, where light speed dictates the velocity at which data can travel over a fiber optic network. It takes about 100 milliseconds for light to travel from New York to San Francisco, but much less than that to make it to a nearby neighborhood. Not a difference that humans can detect... but computers can. And they can fill the gap between, say, 10 and 100 milliseconds – called the "latency period" – with a complex series of instructions. If you want to exploit the profit potential inherent in this latency, what you must do is site your operations closer to the source of the action than the other guy. You'll choose to be snugged up to the trading floor in New York, the center of most financial transactions, rather than to set up shop in Miami, Dallas, or San Francisco. That's called "proximity trading," and it's accomplished through the phenomenon known as "colocation," another of today's big buzzwords. New York is the obvious choice for this, and sure enough, there are two huge colocation data centers in the city. Manhattan, however, has some serious drawbacks – most obviously, the price of buying or leasing real estate. Then there is the voracious power consumption of these massive server farms, also prohibitively expensive downtown. Finally, there is the frightening fear of data loss, companies' need for data protection if something goes badly wrong on Wall Street. Hence, in the US you'll find most of these facilities in New Jersey. It's a millisecond farther away, but many companies are willing to make the tradeoff, and they've defined a swath of land that in the trade is known as "the donut" – a semicircle around New York City with a width of 30-70 kilometers. Within the donut lie the ideal colocations based on the parameters of land availability, power availability (including backup), construction cost, and likelihood of effective disaster recovery (which goes so far as to take into account the projected blast radius of a small nuclear device). Enormous outlays of capital are required in order to build out colocation centers around the world's financial centers, and no one would bother if they didn't have clients waiting. Clients they have. High-frequency trading is now estimated to drive at least 50% of the stock market, with some pushing its share as high as 70%. It also takes about a quarter of futures markets. And it is highly lucrative. According to analysts at the Tabb Group, HF traders earned around $13 billion in profit in 2010; the number was probably much higher last year. HFT has received a full measure of negative press. But there's nothing in and of the practice itself that is bad. At its core, it's no different from business as usual. Market makers have always stood ready to execute both buy and sell orders, profiting off the spread. This is what provides liquidity to the trading floor and keeps the system running smoothly. If anyone from an individual to a mammoth fund wants to trade a stock, they can. The only difference with HFT is that machines can do it faster and more efficiently, making adjustments in fractions of a second if need be, and ensuring that investors do realize the best price on their trades. At the same time, though, HFT technology permits the extremely rapid placing and withdrawal of orders, up to thousands of times per second. And, it is this speed that has led directly to one of the most controversial of HFT's practices, a ploy called "fluttering." Using this technique – where thousands of orders are placed and then rapidly canceled before they are acted upon – high frequency traders' computers can nibble at the market, until they find a pattern or an anomaly that exists for only a moment (something that simply may be due to them having a lower latency period than a competitor) and can then exploit it. To envision how HFT plays out in the real world, here's an excellent illustration from an article by Bryant Urstadt, writing in the MIT Technology Review: "Imagine that a mutual fund enters a buy order, telling its computer to start by offering the current market price of $20.00 a share but to take any asked price up to $20.03. A high-speed trader … can use a 'predatory algo' to identify that limit by 'pinging' the market with sell orders that are issued in fractions of a second and canceled just as fast. It might start at $20.05 and work its way down to $20.03, canceling and reordering until the mutual fund bites. The trader then buys closer to the current $20.00 price from another, slower investor, and resells to the fund at $20.03. Because the high-frequency trader has a speed advantage, he is able to do all this before the slower party can catch up and offer shares for $20.01. This speedy player has found the buyer's limit, gathered up and sold an order, and snipped a few pennies off for himself." Since these anomalies result in differences of only pennies, and since we as retail investors plan to hold our stocks for far longer than a minute, why should we care what HFT traders do? We shouldn't, defenders of the practice say. In fact, they maintain that by pulling bids and asks closer together, they're providing us with a free service that helps us benefit from proper price discovery. Moreover, they claim that they're well positioned to right a ship that's tipping precipitously, and to steer it back toward fair value. They say that's precisely what happened during the infamous "Flash Crash" of May 2011, when the Dow plunged nearly 1,000 points in less than 20 minutes. Investigations after the fact have shown that the meltdown was initially triggered by one (human) trader who accidentally tried to sell a massive amount of S&P 500 futures contracts, setting off a string of toppling dominos as other traders' stop limits were breached. HFT didn't cause the crash, say proponents; in fact, it saved the day, bringing the market back before humans could react, by right pricing the assets. Innumerable small trades quickly stairstepped the market back up to nominal value. Others are rather less sanguine – including the SEC, which called HFT a "contributing factor" in the Flash Crash. Furthermore, critics point out that HF traders can gouge investors who place market orders. We've probably all experienced buy or sell orders that were filled at some price that seemed out of whack with whatever the stock was doing on that particular day. HFT could be to blame, some say. And the heist takes place in a legal area that is very grey indeed. Steve Hammer, founder of HFT Alert, explains: "[Fluttering] is not enough time to get an execution. It's illegal to put in a phony bid or a phony offer but that's what's happening. HFTs create in essence financial spam, which increases the latency in the system and allows them to push prices in one direction or the other. People seeing lots of volatility in a stock who put in market orders are giving the systems license to steal. If they can cross the market and lock the spread for a fraction of a second, they can take out any limit order above or below that price, resulting in a very brief, wide swing in the price of that stock, 5-6% in a single second, even though if we're looking we see no change whatever in price or spread, yet here come all these trades through that are outside the spread at that point in time." Another claim is that HFT is destroying the futures markets, i.e., those with a legitimate need for hedging are seeing their positions blown up by high-frequency manipulators who cause such volatility that the hedgers are forced into unnecessary margin calls. Wherever the truth about HFT may lie, the tempest it has caused was bound to generate some new regulations, and it has. A recent SEC proposal would eliminate one controversial tactic of high-frequency traders: the "flash trade," in which exchanges alert designated traders to incoming orders. Critics call it a variation of front-running, an old (and illegal) practice that involves traders buying and selling in advance of large orders. Nasdaq, meanwhile, announced a new policy in March, under which it will charge its members at least $0.001 per order if their non-marketable order-to-trade ratio exceeds 100:1. (Non-marketable orders are those posted outside the national best bid and offer.) The fee will be limited to those individual market participants that send in at least one million orders per day, although market makers will also be exempted, even though some market-making firms are considered HFT shops. In the end, it would appear that we'd better get used to HFT. It is likely here to stay, regardless of new regs or what we may think of it. Technological advancement is a genie that, once out, can never be forced back in the bottle. In the investment markets, traders will always try to use new technology to gain an edge, counter-traders will always seek ways to negate it, and government will always invent "fixes" that are a step behind the times. For those of us who invest in a company for weeks, months, or years, HFT will make little difference. But to be on the safe side, always place limit orders, never market orders.
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If you were hoping for a recession in 2012, then you are going to be very happy with the numbers you are about to see. The U.S. economy is heading downhill just in time for the 2012 election. Retail sales have fallen for three months in a row for the first time since 2008, manufacturing activity is dropping like a rock, sales of new homes are declining again, consumer confidence has moved significantly lower and a depressingly small percentage of businesses anticipate hiring more workers in the coming months. Even though the Federal Reserve has been wildly pumping money into the financial system and even though the federal government has been injecting gigantic piles of borrowed cash into the economy, we still haven't seen an economic recovery. In fact, we appear to be on the verge of yet another major downturn. In California the other night, Barack Obama told supporters that "
"My favorite government agency is one that's defunct, and my favorite politician is one that's dead."
"We've reached a stage," says Dr. Marc Faber, "where people say, 'I'd rather know I'm losing 4% a year holding cash than handing it to a money manager and possibly losing 30%'."
Stocks are roaring this morning; all 30 Dow components are up. The index has poked above 12,900 for the third time this month.
"Investors are overlooking the fact that Apple's products are 'wants, not needs,'" says Frank Holmes.
"What appears to be evident may not be imminent," cautions EverBank World Markets president Chuck Butler.
"We can no longer run the American empire on cheap energy and unsound money," declared Byron King. It is time, once again, he said, to adapt.
If we're stuck "managing wealth in uncertain times" — the title of David Franklin's talk — then the best way to adapt is to identify the few things that are certain and work with those.
Gold is adding to yesterday's gains. At last check, the bid was $1,617. Silver's up to $27.70.
"We are all here," Michael Covel told the assembled throng in Vancouver, "because we know zero interest rate policies have taken all cash in this room and made it worthless unless you invest it in risky assets.
"One of your readers called Obama a socialist," writes a reader who caught our newest controversy, launched in yesterday's episode.
"I appreciate that you pointed out to the reader who wrote the following that President Obama is not a socialist, but I'm disappointed that you failed to ask the name of the planet on which that reader lives."
"I'm not into name-calling either, per your answer in not calling our president a socialist…or anything else for that matter.
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