Gold World News Flash |
- Weekly News Wrap-Up
- Jim Willie: Exposure of Allocated Gold Account Raids Will DEVASTATE the Major Banks
- The Channel-Stuffed GDP Report
- SILVER, the coming HYPERINFLATION & the DEMISE of AMERICA (David Morgan EXCLUSIVE)
- By the Numbers for the Week Ending July 27
- Gold Daily and Silver Weekly Charts – Capping Will Continue Until Confidence Improves
- My Response to a Gold Hater
- Temporary Reprieve: UN fails to reach deal on global arms trade treaty, as US asks for “more time”
- In The News Today…
- The Gold Price Broke Out Gaining 2.2 Percent and Must Now Close Above $1,642 to Warrant a Rally
- Guest Post: The Absurdity Of Sandy Weill
- Little Silver, Big Gold
- Harry Dent's Formula for Surviving the Great Bust Ahead
- Art Cashin - Current Liquidity In System Risks Hyperinflation
- All The Olympic Charts That's Fit To Print, And More
- Gold Daily and Silver Weekly Charts - Capping Will Continue Until Confidence Improves
- Will Gold Outshine the Dollar?
- Faith, Hope, And Draghi
- Mogambo Sure-Fire Defensive-Posture Bunker (MSFDPB),
- Gold Seeker Weekly Wrap-Up: Gold and Silver Gain About 2% on the Week
- Gold Chart and Comments
- Gold and Silver Disaggregated COT Report (DCOT) for July 27
- COT Gold, Silver and US Dollar Index Report - July 27, 2012
- "It’s Been A Fun Ride, But Prepare For A Global Slowdown"
- Will US GDP Numbers Lead to QE3?
- Gold Profits From Draghi's ECB Robbing Savings of Euro-zone Citizens
- What (Almost) Everyone Fails to Understand About Our Economy
- Cash and Courage: Rick Rule Discusses Gold and Currency Holdings
- Gold Futures CoT 4
- Legacies of Wealth
| Posted: 27 Jul 2012 10:00 PM PDT by Greg Hunter, USAWatchdog:
Treasury Secretary Tim Geithner was in the Congressional hot seat this week. Geithner was grilled with questions as to why he did not call a halt to the multi-trillion dollar Libor global rate rigging fraud. The big bankers are going to say Mr. Geithner, who was at the New York Fed when this started, basically gave his tacit approval for the fraud. I look for him to be sacrificed by the bankers over this mess. Former CEO of Citi Group, Sandy Weill, says the big banks should be broken up. What? He was one of the architects of the big bank "supermarket" model. What do you want to bet the banks will shave off the productive assets for investment banks and leave taxpayers with the debt and toxic garbage to clean up? What a weasel!!!
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| Jim Willie: Exposure of Allocated Gold Account Raids Will DEVASTATE the Major Banks Posted: 27 Jul 2012 09:30 PM PDT by Jim Willie, GoldenJackass.com via Silver Doctors:
As preface, consider that the USTreasury 10-year yield went below 1.4% this week. Some unenlightened celebrate the asset appreciation and point to a successful asset in performance in an otherwise dismal financial market. The Jackass said in the June 6th public article "USTBonds: Black Hole Dynamics" that such a success is a marquee billboard message of economic meltdown and systemic failure. As the rally continues, possibly the onliest rally outside of corn and soybeans in yet another disaster, people should focus on whether the systemic collapse will occur before the 10-yield hits 1.0% in my warning. Focus on four major points:
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| The Channel-Stuffed GDP Report Posted: 27 Jul 2012 09:25 PM PDT Via Jeff Snider of Alhambra Investment Partners, I don't think there was much in the GDP report that wasn't expected, except durable goods. The decline in durable goods was comparable to Q2 2011, right down to the primary driver of that weakness - motor vehicles. However, there was no earthquake in Japan this year to disrupt supply chains, production schedules and brand availability. Just like last year, marginal economic growth overall seems to be backfilled with a tide of inventory. The trouble with inventory at the margins of growth is that it is essentially a build-up of forward demand, and therefore susceptible to reversal should overdone production move out of alignment with final demand. Both monetary and fiscal policies actively seek to pull forward demand, meaning this inventory-driven activity conforms to policy goals. This is true in perhaps more ways than expected since the heavy arm of fiscal activism is readily apparent in an important sector of the marginal manufacturing economy. That brings up a bit of a curiosity since durable goods "sales" of motor vehicles should be largely in sync with durable goods "output" of motor vehicles:
That's a pretty big deviation in the past two quarters. The "sales" figures include the sales of motor vehicle parts, while the output figures do not, but I highly doubt the marginal difference is solely a collapse in parts purchases. It might be a statistical anomaly that gets revised away but it might also explain some of the recent weakness of the regional Fed surveys and the ISM manufacturing survey. Clearly weakness in Q2 2012 PCE is attributed to the change in the direction of durable goods (from +13.9% and +11.5% in the preceding quarters to -1% in Q2 2012); durable goods added .85 to GDP in Q1, but subtracted .08 in Q2. It is also pretty clear that durable goods weakness itself can be mostly attributed to weak motor vehicle sales (and parts). Spending on nondurable goods was largely unchanged from the preceding quarter, while spending on personal services was slightly higher (due largely to the economically "beneficial" pickup in spending on "housing and utilities"). MV sales are highly correlated to income growth, but there is also a credit availability component. I haven't seen anything recently in the consumer credit numbers that suggests there are any financing-related issues. Is this perhaps a price issue? Both sales and inventory figures in the GDP release are reported in dollar terms, so it is possible this is a function of price markdowns after leaving the factory. That still ends with the same result, however, slowing future production in response to an imbalance of supply and demand.
According to Briefing.com in February of this year, inventory levels are still below historical run rates for the domestic manufactures, though they have risen steadily at GM and Chrysler (as pointed out on ZeroHedge http://www.zerohedge.com/news/class-action-lawsuit-filed-against-gm-chan...). Ford, on the other hand, has actually trimmed its inventory/sales ratio since 2009, perhaps suggesting that inventories are being more robustly managed to concur with a far different environment (and within the industry, inventories are obviously being managed quite differently with regard to government involvement). Total car sales in the US peaked at over 17 million units, and even optimistic forecasts call for, at best, near 14 million units in 2012. This below peak buying rate has been used to build the optimistic case for auto demand since the overall age of the domestic car and truck fleet has increased from about 10.5 years in 2009 to about 11.5 years. However, that trend toward "aging" vehicles has been in place for more than a decade – average fleet age in 2002 was 9 years. If anything, the trend in the aging of the fleet has actually been relatively consistent since 2005 (with light trucks being held onto more than cars). Since this trend pre-dates the Great Recession it should not be a surprise that turnover is reduced, meaning that sales growth marginally depends more on households buying additional units. That's an expensive proposition in the post-crisis period, especially in comparison to the housing bubble that preceded it. In 2007, the number of motor vehicles per licensed driver, according to Briefing.com, was about 1.21. That rate of usage has fallen off to about 1.17 since. For a frame of reference, in 2003, just as the housing bubble was swinging into full gear, there were about 1.15 motor vehicles per licensed driver. Optimists see pent up demand in these numbers, but lack of per capita income growth may be keeping a lid on that potential demand. In my opinion, it is likely that the amount of cars and trucks produced and sold in 2007 was another artifact of monetarism that cannot be repeated in the current environment. After all, if there is so much pent up demand, then the contraction of motor vehicle sales in the GDP accounts is an empirical result that runs perfectly contrary to that optimistic expectation. Given that there does not seem to be a contemporary problem with available financing (thanks in large part to Ally Financial, formerly GMAC and still sporting that hefty federal government investment) that may mean the industry as it existed pre-crisis is itself an anachronism, and perhaps much more sensitive to changes in real economic variables at the margins. The big question for the economy is whether inventory and production levels are as sensitive. Obviously, for the overall GDP accounts, the difference between sales and output is inventory.
Demand for durable goods and motor vehicles join a downward trend in the wider economy, showing up in gross domestic purchases and real final sales, and highlighting the disconnect with inventory:
A diverging trend between final sales and overall inventories, especially as they both intersect through the sensitive motor vehicle sector, is not an indication of future strength to me. If the trend in the first chart is valid, we should ultimately expect the second chart to follow. Maybe the economy is devolving faster than previously thought in the aftermath of financial dysfunction and the largely disabled/ineffective wealth effect. We cannot ignore, however, that the intent behind increasing production may not simply be a function of pure market forces that will be solely respond to demand. After all, GM proclaims it's in a record-setting run despite the noticeable increase in inventory (in sharp contrast to Ford inventories), in what just might be a shadow stimulus. How long can this trend continue before production overruns prove too costly? Maybe GM's stock price is an indication. It's almost like the 1960's and 70's, with motor vehicles and government spending driving the marginal economy again. All that's missing is for Ralph Nader to show up and write about how cars are dangerous.
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| SILVER, the coming HYPERINFLATION & the DEMISE of AMERICA (David Morgan EXCLUSIVE) Posted: 27 Jul 2012 09:25 PM PDT |
| By the Numbers for the Week Ending July 27 Posted: 27 Jul 2012 09:16 PM PDT This week's closing table is just below.
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| Gold Daily and Silver Weekly Charts – Capping Will Continue Until Confidence Improves Posted: 27 Jul 2012 08:15 PM PDT from Jesse's Café Américain:
Gold and silver rallied as one might expect, but they were stepped on repeatedly, keeping it to a modest eight dollar gain for gold and 25 cents for silver. Let's see how real this latest twist may be. I don't think it is Bundesbank that Mr. Draghi must persuade so much as it is Frau Merkel, because it will be her very difficult task to persuade the German government to go along with whatever the banks may concoct. Read More @ Jesse's Café Américain:
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| Posted: 27 Jul 2012 07:45 PM PDT by Michael Krieger, Liberty Blitzkreig
So this morning, I woke up to an email forward from someone that used to be a client. The forward was an anti-gold rant from a sell-side (Wall Street) broker who will remain unnamed. The piece was so biased and ridiculous I took the time to write a somewhat lengthy response. I am not going to include this person's message since it is the property of his employer, but you can tell his arguments based on my answer. Hope this helps anyone that feels the need to make the bull gold argument cogently to a sheeple should you run into one in the wild. My email: Read More @ LibertyBlitzkreig.com
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| Posted: 27 Jul 2012 07:34 PM PDT [Ed. Note: Breathe a collective sigh of relief and enjoy this little, albeit temporary, reprieve. And KNOW that repeatedly contacting our Senators about this abomination, has been and will continue to be effective. This issue is the last line in the sand for the American people.] from Fox News:
Some diplomats and treaty supporters blamed the United States for triggering the unraveling of the month-long negotiating conference. Hopes had been raised that agreement could be reached on a revised treaty text that closed some key loopholes by Friday's deadline for action. But the United States announced Friday morning that it needed more time to consider the proposed treaty — and Russia and China then also asked for more time. A bipartisan group of 51 U.S. senators on Thursday had threatened to oppose the global treaty regulating international weapons trade if it falls short in protecting the constitutional right to bear arms. In a letter to President Obama and Secretary of State Hillary Clinton, the senators expressed serious concerns with the draft treaty that has circulated at the United Nations, saying that it signals an expansion of gun control that would be unacceptable.
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| Posted: 27 Jul 2012 07:15 PM PDT by Jim Sinclair, JS Mineset: There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.
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| The Gold Price Broke Out Gaining 2.2 Percent and Must Now Close Above $1,642 to Warrant a Rally Posted: 27 Jul 2012 05:09 PM PDT Gold Price Close Today : 1,618.00 Gold Price Close 20-Jul : 1,582.50 Change : 35.50 or 2.2% Silver Price Close Today : 2747.8 Silver Price Close 20-Jul : 2727.9 Change : 19.90 or 0.7% Gold Silver Ratio Today : 58.883 Gold Silver Ratio 20-Jul : 58.012 Change : 0.87 or 1.5% Silver Gold Ratio : 0.01698 Silver Gold Ratio 20-Jul : 0.01724 Change : -0.00026 or -1.5% Dow in Gold Dollars : $ 167.06 Dow in Gold Dollars 20-Jul : $ 167.50 Change : $ (0.44) or -0.3% Dow in Gold Ounces : 8.082 Dow in Gold Ounces 20-Jul : 8.103 Change : -0.02 or -0.3% Dow in Silver Ounces : 475.87 Dow in Silver Ounces 20-Jul : 470.05 Change : 5.81 or 1.2% Dow Industrial : 13,075.88 Dow Industrial 20-Jul : 12,822.57 Change : 253.31 or 2.0% S&P 500 : 1,385.98 S&P 500 20-Jul : 1,362.66 Change : 23.32 or 1.7% US Dollar Index : 82.676 US Dollar Index 20-Jul : 83.462 Change : -0.786 or -0.9% Platinum Price Close Today : 1,406.70 Platinum Price Close 20-Jul : 1,412.10 Change : -5.40 or -0.4% Palladium Price Close Today : 571.05 Palladium Price Close 20-Jul : 574.85 Change : -3.80 or -0.7% 'Twas a big week for silver and the GOLD PRICE. Gold gained 2.2%, but much more encouraging, it broke out of the even-sided triangle we have been watching so long, and confirmed that today with a second day's close outside the triangle. A great start, but by no means a sure guarantee of a rally. Might be a false breakout. Today gold knocked on the next resistance, $1,625 - $1,630, with a high at $1,629.50. Couldn't hang on there, though, and closed at $1,618, up $2.90. To warrant a rally, the GOLD PRICE must now close above $1,642, the 150 DMA and a resistance level, then move in a week or two to $1,680. More battles will fall there, as that marks the downtrend line from gold's August 2011 peak. It is reasonable to buy this breakout, or you can wait and buy when gold overcomes $1,640. Either way, you'd better be converting US dollars, euros, yen, and all the rest of them to gold and silver. Only nagging detail here is the SILVER PRICE failure to break through the top of its triangle. It pierced that line, but did not close above it. Today it gained 4.7 cents to close at 2747.8c. At its high today of 2784, silver for the second day touched its 50 DMA (2777c) but did not close above it. Momentum is up, so we ought to see that last week. GOLD/SILVER RATIO at 58.883 shows silver holding back, but it's liable to play snap-back when it moves. If you are EVER thinking about swapping gold for silver, do it NOW. Great week, but although we can see the light through the tree trunks, silver and gold have not yet left the woods. Correction lows and seasonal lows are probably behind us, and August should be a month of modest but steady gains. This week markets got off the dime and acted. Dow jumped 2%, S&P500 jumped 1.7%. The good offices of the US Dollar precipitated these gains, catalyzed by an "official announcement" from ECB head criminal, Mario Draghi. This week the dollar did in fact burst through 83.60, hitting an intraday high of 84.10 and the top of a long-standing trading channel. Bear in mind that position left it vulnerable to a correction at a minimum. Then, as one could see in the cards, that dollar/euro exchange rate was running too perilously like a panic for the dollar. Now add to that technical vulnerability a huge short position in euros. The set-up was perfect for some manipulation to yield maximum impact. Some "official announcement" was due. (I pause in this meditation to footnote the inventory of central bank weapons against panic: (1) blarney, and (2) inflation. They have no other weapons. "Blarney" includes any and all methods of calming the public's fears, and is backed by nothing at all but hot air. Blarney is Ben the Bloviator or Obama the Prevaricator or Warren Buffet the Resplendent appearing on TV chanting that the "economy is basically sound.") The official announcement came by way of ECB head Mario Draghi, who in a speech at a London investment conference made the hollow promise that the ECB would do whatever was necessary to keep the euro together. Why is that a hollow promise? Because the ECB would need about $1 trillion even to begin to do that, and if it creates that many new euros it will panic investors out of euros and Europe. Yet no rational person today expects markets, miseducated, misdirected, and misled as they have been for decades by banks and central bankers, to react rationally to such announcements, or to see through them. Thus the dollar broke, sending the euro and stocks up. Manipulation accomplished. Now for the nonce the pressure is off central bankers, but only for the nonce, because Draghi can deliver nothing. After wasting over $2 trillion in LTRO, nothing is better, nothing cured. Thus the dollar fell from the top of the channel, and today through the 20 day moving average (83.05) and nearly to the 50 DMA (82.51), losing another 19.2 basis points (0.25%) to end today at 82.676. Look for this to slow down around 81.50, but it might reach all the way to the channel bottom. today around 79.40. See my Friday commentary last week for more explanation of central bankers' need for stability. Draghi's intervention raised the euro, which gapped up from a $1.2042 low on Monday to end today up another 0.29% at $1.2305. That carries it barely above the 20 DMA ($1.2300). A chastened yen abandoned today its pretensions to rally by dropping 0.33% to 127.45 cents (Y78.45). Japanese NGM want that front to stay quiet a while. Euro/Yen cross rate has jumped, too, after declining since April 2011. Not rallied, mind you, just ceased plummeting. STOCKS jined in the gen'ral jubilation. Dow closed today at 13,075.88, up another 187.95 (1.46%). S&P500 rose 25.96 (1.91%) to 1,385.98. Behold! The controlling technical formation in stocks is the Jaws of Death, or megaphone topping formation. This shows higher or level highs with ever falling lows -- a trumpet of disaster opening its mouth eastward. Today's close took the Dow up through the neckline of the Head and Shoulders top formed within the greater Jaws of Death. Two things can happen. (1) that's as far as the move extends, and it drops back, or (2) it reaches all the way to or slightly past the last top at 13,350. Either way, eventually the Jaws of Death will sink their teeth in stocks and a grand grawing will begin. Markworthy, however, is that stocks in Dow in Gold Dollars terms only reached their position last week. Shortly stocks will diverge from gold again and the DIG$ will commence plunging. During the War for Southern Independence Confederates, beset by munitions shortages, frequently used Quaker cannon. These were logs, emplaced and carved and painted to look like cannon, to make the enemy believe they had much more artillery than they did. What Draghi shot this week was a Quaker cannon. He has no artillery, and most he can do is keep pitty-patting at the problem, hoping to slow burn it for another 10 years and keep the panic from generalizing. He can't. As I wrote last week, "I'm telling y'all, as I have told y'all, this is past saving, past reforming, and you are smoking meth if you believe the measures tried so far will resuscitate severely debt-poisoned and debt-addicted economies." Only way I know to save your capital from these criminals is to put it into silver and gold. On this dismal day, 27 July 1694, an act of parliament granted the Bank of England a 12 year charter. Within two years they had experienced their first bank run, but the incubus was firmly fixed on England by then, and England became the beneficiary of a permanent national debt. Once you get that devil on your back, it's hard to get rid of. Y'all enjoy your weekend. 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: The Absurdity Of Sandy Weill Posted: 27 Jul 2012 05:02 PM PDT Submitted by John Aziz of Azizonomics The Absurdity of Sandy Weill
This from the guy who provided the impetus and the funds to end Glass-Steagall? Totally absurd — akin to Joe Stalin renouncing Marxism-Leninism and the gulag archipelago on his deathbed. Glass-Steagall's separation between depository and speculative institutions — especially during the Bretton Woods period — was a relatively robust system; there was never a large-scale banking calamity of the nature of 2008 or 1929 under its regime. Certainly, it had its imperfections — above all else that it never prevented bankers like Weill from chipping away at it up to the point of repeal — but the proof of the pudding is in the eating, and Glass-Steagall presided over a period of growth and stability. While the data tends to show that the end of Bretton Woods in 1971 was the real catalyst of the financialisation, globalisation, deindustrialisation and debt buildup that ultimately flung the US into a depressionary deleveraging trap, the end of Glass-Steagall was profound. Depositors' funds became a medium for the creation of the huge and sprawling shadow banking and derivatives webs. The blowout growth in shadow banking was presaged by the end of Glass Steagall in 1999:
And the slow contractionary deleveraging of shadow banking has been a significant force in keeping the economy depressed since 2008. Any contrition on the part of Weill for his role in repealing Glass-Steagall might as well be an attempt to close the stable door after the horse has bolted. It's like trying to uninvent the atom bomb after Hiroshima. Weill was the guy who — above anyone else — was responsible for the damage done. Coming out and claiming that reimposing Glass-Steagall would fix the problem is inadequate. If he wants to be taken seriously he should match every dollar he spent trying to get Glass-Steagall repealed with new lobbying funds to reimpose a separation between banks that accept deposits and the shadow banking and derivatives casinos. Beyond that, I think that this is very telling. The financial institutions will do anything to avoid the ultimate free market solution — the disorderly liquidation of the system they created via default cascade. If high-ranking members of the financial elite are willing to talk about reimposing Glass-Steagall, they must be seriously concerned that the system they built is getting dangerously close to self-destruction.
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| Posted: 27 Jul 2012 03:48 PM PDT Bullion Vault
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| Harry Dent's Formula for Surviving the Great Bust Ahead Posted: 27 Jul 2012 03:40 PM PDT The Gold Report: Your considerable research over many years indicates that the size and age of its citizens drive a country's economic growth or decline. Because people have predictable consumption patterns throughout life, you can predict well in advance national economic growth or decline. How does that work? Harry Dent: We've identified a peak spending wave indicator that correlates strongly with the stock market and the economy. It doesn't apply so much to emerging countries, where we look at urbanization rates, which greatly affect incomes, and workforce growth because emerging nations don't have a middle-class curve where typical consumers earn $60,000 a year at the peak of their careers. [INDENT] Related Articles: Porter Stansberry: Enough Already, Let's Return to the Gold Standard! The Ultimate Gold Bull Peter Grandich vs. The Muted Bear Steve Palmer The Recovery Is an Illusion: John Williams [/INDENT]In developed countries, though—countries with higher-tech infrastructur...
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| Art Cashin - Current Liquidity In System Risks Hyperinflation Posted: 27 Jul 2012 03:13 PM PDT  Today 50 year veteran Art Cashin stunned King World News when he said, "... the amount of liquidity that's around the globe should be hyperinflationary." Cashin, who is Director of Floor Operations for UBS, which has $612 billion under management, also warned, "... the fall of Syria can destabilize the entire Middle-East."Cashin also discussed gold, but first, when asked if we were getting close a tipping point in reference to the Fed and other central banks trying to encourage lending and spending, Cashin responded, "You are. They talk about a lot of things they may do, including stop paying on reserves. None of that matters, Eric. There is plenty of money around but it's not finding its way into the system."
This posting includes an audio/video/photo media file: Download Now |
| All The Olympic Charts That's Fit To Print, And More Posted: 27 Jul 2012 03:12 PM PDT Update: a perfectly-timed release by S&P: S&P AFFIRMS UNITED KINGDOM 'AAA/A-1+' RATINGS; OUTLOOK STABLE. As a reminder...
In honor of today's commencement of the Olympics here are some entertaining charts that for once have nothing to do with an insolvent Europe or America, China's RAND() function, or much hated, non-magic based math, and instead have everything to do with the Olympics, and sport in general. Olympics: a blessing or a curse?
Bet on the bookies:
A motley selection:
Who Goldman expects to win the most medals (hint: Goldman has bought CDS on them)
And finally, EURO2012 may be over, but here are some charts for the football fans:
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| Gold Daily and Silver Weekly Charts - Capping Will Continue Until Confidence Improves Posted: 27 Jul 2012 03:02 PM PDT |
| Will Gold Outshine the Dollar? Posted: 27 Jul 2012 02:53 PM PDT Merk Fund
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| Posted: 27 Jul 2012 02:29 PM PDT What can we say? From the better than expected GDP this morning Gold and the USD (and Treasury yields) diverged from the QE hope trade - but stocks didn't. Then came the statement of the entirely sublime obvious from someone somewhere about Draghi's normal pre-meeting meetings and we were off to the races to test recent highs. Treasuries exploded higher in yield, Gold popped, USD weakened (as EUR popped), and stocks ripped. But...Treasuries reverted back to pre-Draghi-levels, EUR tumbled and the USD ended near the highs of the day, Gold gave back most of its spike gains and closed in the middle of its day's range as stocks just wouldn't give up the dream. For a 2% rally in S&P 500 e-mini futures, VIX fell only modestly by 0.9 vos to 16.7% - which is above last week's close (while stocks end almost 2% above last week's close). Amid the heaviest volume in over a month and the largest average trade size in over a week, ES closed at almost 3-month highs. It appears to us that unless Draghi and Bernanke - who now seem engrossed deep in the inter-continental thermonuclear currency war - both do their bit next week (which the market has now more than fully priced in given the dismal fundamentals) then this is becoming farcical but as Maria B said "a rally is a rally, right?" Ask the ZNGA and FB buyers of the rally on IPO day. Stocks ended the day notably decoupled from risk-assets amid Treasuries worst day in 9 months.
Gold has overtaken the Long-Bond year-to-date now (only the 4th close this year) as stocks just go about their business at 3-month highs...
The S&P 500 e-mini rallied strongly to its uptrendline but once we broke an intermediate trendline there was heavy block trading into the highs (h/t @eminiwatch) - does make us wonder exactly who was chasing this into that second top of the day...
10y Treasury yield soared (on a percentage basis) the most in over nine months...tracing back to their 50DMA... (and as an aside the spread between 30Y mortgages and 10Y TSYs is at a six-month tight)...
Equities and Treasuries recoupled as did Gold and the USD - though the disagreement was clear...
as Treasuries in general have retraced most of their gains from pre-EU-Summit...
as despite today's U-Turn in the EUR, the USD ends the week -1%...
I guess that is the price stability Draghi is looking for..but compared to capital structure (rates/vol/credit - left) and broad-risk-assets (right) we disconnected - especially in te last few hours of retest...
Charts: Bloomberg and Capital Context
Bonus Chart: Spot The Odd Market Out... This chart shows inverted stocks (black) against VIX, implied correlation, and VIX futures... can you see which one has gone full retard?
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| Mogambo Sure-Fire Defensive-Posture Bunker (MSFDPB), Posted: 27 Jul 2012 02:28 PM PDT Something woke me up. I don't know what. Something, though. But once awake, it seemed to me that it was strangely quiet. And before you ask, the answer is "Yes. It is TOO quiet," which unfailingly means that something bad, usually something VERY bad, is just about to happen, like (as I learned from decades of watching TV) getting attacked with guns and/or arrows. So, naturally, I instinctively ran to the periscope and quickly scanned the perimeter of the Mogambo Sure-Fire Defensive-Posture Bunker (MSFDPB), naturally expecting the worst. Flames. Riots. Mushroom clouds rising up in the distance. Flying saucers shooting rays at things that then explode. I dunno what. But something like that. And if not the worst, then something almost as bad, because I happen to know at least the bare rudiments of the Austrian Business Cycle Theory, and I have heard of Milton Friedman, and thus I know what happens when the money supply is hyper-inflated, as has been done in the US and in EU for years and years, explaining why the Mogambo Fearfulness Meter (MFM) is redlined, with the needle pegged. With trembling hands and nimble feet, I hurriedly spun the periscope the full 360, but saw no real enemies, at least none that I couldn't handily take care of by yelling "Hey! Neighbor! Are you finally buying any gold, silver and oil to protect yourself from the inevitable inflationary catastrophe caused by the Federal Reserve, foreign central banks, the World Bank and the International Monetary Fund creating so much money and credit? Don't you realize that inflation in prices is going to soar to horrific levels and absolutely destroy the economy in some ugly hyperinflationary collapse, like it always has for the last few thousand years Without Freaking Fail (WFF) because of all this new money? What are you, some kind of brain-damaged nitwit who can only understand things if I come over there and scream in your face or accidentally shoot your stupid garbage cans full of bullet holes?" These days, they always go back into their houses, being careful to not make any sudden moves that could startle me, and keeping their hands where I can see them. Like I said; nothing I can't take care of. It was only later that I discovered that the reason for the unnatural silence is that the staggering national debt (now an astonishing $16 trillion) is ballooning at an unbelievable, terrifying speed, and is going up at the Exact Same Time (EST) as Consumer Installment Debt is rapidly going up! I punctuated that sentence with an exclamation point because I was surprised. I would have bet that with the economy declining, sales falling, losses mounting, incomes stagnating, consumer prices rising, and everyone worried about their jobs or lack thereof, people would not be running up any more debt. I was, to my complete embarrassment, wrong. In the latest Fed report, as summarized by the Wall Street Journal, Consumer Installment Debt was rising at an 8% annual rate, really galloping along, and is now back up to a staggering, horrifying total consumer debt of $2.57 trillion dollars! Trillions! Now attuned to subtle nuances of punctuation, you no doubt noticed that those last sentences ended with exclamation points for added emphasis, calling your attention to the fact that with irrational behavior like this, there was never any doubt that We're Freaking Doomed (WFD). I realize that there are people, perhaps you, who would prefer using bland, "full stop" periods as punctuation, additionally pointing out, in a cruel, snotty way, that my redundant use of "Trillions!" was stupid and pointless, and that, speaking of points, you are deducting points from my final score, to which I say "What points? What in the hell are you talking about? Screw you!" But you would use exclamation points, too, if you knew, like I knew, and still know, and now you know, too, in case you did not know, that the Wall Street Journal neglected to mention an important fact, probably because they are afraid. They are afraid that you would be so terrified that you would immediately have a heart attack, or your brain would explode, falling screaming to the floor, clutching your chest or head as the case may be, perishing in writhing, crushing agony and unbearable torment, and your survivors would not be inclined to renew your Wall Street Journal subscription. In short, nobody wins from printing the whole truth, except maybe your bereaved wife and kids, and your hateful neighbors, and relatives, and people who hate you, and you hate them back, even though neither of you can remember why you hate each other. Wait a minute! I remember! I remember why I hate that guy! Hey! I hate that guy! Anyway, the crucial bit of information left out of the Journal's article is that Consumer Installment Debt reached its peak in 2008 at just under $2.6 trillion, after rising from $725 billion in 1992 which was -- do the math yourself! -- more than tripling -- tripling! -- in a mere 16 years! Interestingly, Consumer Installment Debt never really fell much below $2.4 trillion after reaching its last peak in 2008, with consumers paying off a lousy $200 billion of their massive debt over the last 4 years, a pittance when compared to the fabled "the consumer is deleveraging/paying down debt" nonsense and lies of the last few years. So, alarmingly and in keeping with the theme of We're Freaking Doomed (WFD) that hangs like a big ol' nasty fart in a tiny elevator, Consumer Installment Debt is now back up to $2.57 trillion, very nearly back its old back-breaking record level reached in 2008, while government debt is up to a massive $16 trillion, up from less than $10 trillion in 2008! Gaaahhh! It's all too insane! Insane, I tells ya! No matter how you look at it, with monetary and financial insanity like that, Something Very Bad (SVB) is going to happen pretty soon, whereupon you will clearly remember my constantly urging you put all your money into gold, silver and oil, and your face will burn in shame that you ignored me, probably thinking to yourself "Why should I listen to this Raving Lunatic Mogambo (RLM) just because the last 4,500 years of multitudes of various rulers and governments borrowing themselves into debt, especially with a fiat currency, bears a vast, glorious, incandescent proof to such Profound Mogambo Profundity (PMP)? "And," I imagine you continuing on, "why should I buy gold, silver and oil just because it has always been a good idea to exchange devaluing things for gold and silver? Hasn't anybody ever heard of the phrase 'Past performance is not an indicator of future performance'? This means that just because it has ALWAYS happened ALL the other times in history when any government was so stupid, so ignorant, so corrupt, and so incompetent as to greatly expand the money supply, it does NOT mean that it will happen again. So maybe catastrophe will not happen this one time, once in all of history, for no particular reason!" Well, to be honest, I am not sure what you were thinking, but you SHOULD have been thinking "And thus it has always been! Thus, I see it now! Always the exact same story! And to hear wise counsel to buy gold, silver and oil is Damned Good Advice (DGA), too, dropping, as it does, like pearls before swine such as I! "Thus enlightened, yet insulted to be compared to a pig, I shall happily buy the aforementioned gold, silver and oil, and soon be thankful that I did, yet destined to be disappointed that I did not buy more than I do!" One day soon, you will rue your rash decision not to follow such Fabulous Mogambo Advice (FMA), deciding instead to send me rude emails, saying things like "You are a stupid ugly man that everyone hates, and I hate you, too, and I wish I could spit in your food and throw things at you when you aren't looking," as if I don't already get enough of that at home, but thanks for thinking of me, mom. On the other hand, you may be cheered to know that one day, maybe not today or tomorrow, but soon, and for the rest of your life (so kiss me, Ingrid Bergman, and put some tongue in it this time, baby!) you will have the leisure of having nothing else to do except think about how miserable and broke you are, and you will entertain yourself by idly trying to calculate how much money you would have made if you had listened to me and bought gold, silver and oil. It is then that you will have an exciting, "talk-about-it-at-dinner-moment" when you look at the result and say "Wow! That much?" to yourself at the astonishing answer. Then, soon after that, you will still have another big block of time to fill and, still miserable, still broke, and still with lots of time on your hands, you will idly wonder how much money was made by people who DID heed the aforementioned Fabulous Mogambo Advice (FMA) to buy gold, silver and oil at these bargain prices. Well, I am happy to tell you that you can stop wondering how much wealth! I'll tell you how much! Enough that they will sit in air-conditioned luxury behind the blacked-out windows of their long, fancy bullet-proof limousines as they speed past you, on their way to fun and fancy parties, or to fun, fancy beachside mansions, or something else equally fab-fab-fabulous and fun, while everyone ignores you laying there in the gutter. And if you listen carefully as they hurtle by in their shiny new cars, you may be able to hear them scornfully laughing at you for having been so oblivious and ignorant that you missed the most obvious, most important and most profitable investments of your Whole Freaking Life (WFL). As a preview, their condescending, scornful laughter will probably sound like this: "Hahahahahahaha!" If it makes you feel any better, they will secretly pity you. Laughing at you with contempt and disgust, yes, but pitying you, too. Or, as an alternative, you could buy gold, silver and oil now, too, and be just like them. Maybe even rule them with a dictatorial iron fist, turning them all into your unholy army of the night, mindlessly doing your nefarious bidding. Well, I'm not a very smart guy, but I know which option I prefer! Hahaha! And especially so since buying them is such a snap! As a reader once quoted me as saying, but me having no memory of it, it's as easy as "Here's my money. Give me my metal!" And is that why buying them leads one to happily exclaim, as you are walking back to your car, precious metals in hand, "Whee! This investing stuff is easy!" 
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| Gold Seeker Weekly Wrap-Up: Gold and Silver Gain About 2% on the Week Posted: 27 Jul 2012 02:22 PM PDT Gold climbed almost 1% to $1629.31 at around 8:20AM EST before it drifted back lower at times in New York, but it then bounced back higher in late trade and ended with a gain of 0.48%. Silver surged to as high as $27.839 before it also fell back off at times, but it still ended with a gain of 0.98%.
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| Posted: 27 Jul 2012 02:11 PM PDT [url]http://www.traderdannorcini.blogspot.com/[/url] [url]http://www.fortwealth.com/[/url] ECB President Draghi apparently has developed a severe case of loose lips as he cannot seemingly keep his mouth from issuing words into the atmosphere fast enough of late. The man has decided to initiate a round of verbal intervention directed at his stinking currency and as a collateral note, the global equity markets. Yesterday it was: "we will save the Euro at all costs". Today it is "let's propose another round of bond buying and lower interest rates". Just like that, it was music to the ears of the hedge fund community which wasted no time dutifully responding like the obedient lemmings that they are, jamming the S&P 500 higher, jamming nearly every single commodity market higher, and dumping the Dollar whilst simultaneously falling in love with the rotten Euro. Voila''! Problem solved - all is right with the world once again as the candy store will now be open. A point of interest in a...
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| Gold and Silver Disaggregated COT Report (DCOT) for July 27 Posted: 27 Jul 2012 02:05 PM PDT UPDATE -1: Adds commentary, charts for gold DCOT at end. HOUSTON -- This week's Commodity Futures Trading Commission (CFTC) disaggregated commitments of traders (DCOT) report was released at 15:30 ET Friday. Our recap of the changes in weekly positioning by the disaggregated trader classes, as compiled by the CFTC, is just below.
In the DCOT table above a net short position shows as a negative figure in red. A net long position shows in black. In the Change column, a negative number indicates either an increase to an existing net short position or a reduction of a net long position. A black figure in the Change column indicates an increase to an existing long position or a reduction of an existing net short position. The way to think of it is that black figures in the Change column are traders getting "longer" and red figures are traders getting less long or shorter. All of the trader's positions are calculated net of spreading contracts as of the Tuesday disaggregated COT report. Vultures, (Got Gold Report Subscribers) please note that updates to our linked technical charts, including our comments about the COT reports and the week's technical changes, should be completed by the usual time on Sunday (18:00 ET). UPDATE 1. Edit at 15:50 CT. Worthy of mention: Traders classed by the CFTC as Other Reportables reported their highest net long position for gold futures in the history of the disaggregated commitments of traders report data (back to 2006). The Other Reportables showed a net long position of 53,168 contracts as of July 24. The previous high was in the December 7, 2010 report when they reported holding 52,994 lots net long with gold the n near $1,401. (See chart below.)
We will have more in the GGR subscriber charts this weekend, including the very large reduction in net short positioning by the large commercial traders in the legacy COT report for gold despite the metal being nearly flat and important data on the changes in the COT for silver futures, including the fact that Managed Money traders reported a new record high short position for silver futures (17,575 lots short against 20,590 long) with silver a small 36-cents lower for the COT week. There is more than meets the eye with these data, however -- a "lot" more. Gold and silver are poised at the very edge of a zone which could trigger explosive short covering for one thing, and the trading which occurred after the Tuesday COT cutoff suggests quite a bull-bear battle is already underway.
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| COT Gold, Silver and US Dollar Index Report - July 27, 2012 Posted: 27 Jul 2012 01:32 PM PDT COT Gold, Silver and US Dollar Index Report - July 27, 2012
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| "It’s Been A Fun Ride, But Prepare For A Global Slowdown" Posted: 27 Jul 2012 01:15 PM PDT While in principle central banks around the world can talk up the market to infinity or until the last short has covered without ever committing to any action (obviously at some point long before that reality will take over and the fact that revenues and earnings are collapsing as stock prices are soaring will finally be grasped by every marginal buyer, but that is irrelevant for this thought experiment) the reality is that absent more unsterilized reserves entering the cash starved banking system, whose earnings absent such accounting gimmicks as loan loss reserve release and DVA, are the worst they have been in years, the banks will wither and die. Recall that the $1.6 trillion or so in excess reserves are currently used by banks mostly as window dressing to cover up capital deficiencies masked in the form of asset purchases, subsequently repoed out. Which is why central banks would certainly prefer to just talk the talk (ref: Draghi et al), private banks demand that they actually walk the walk, and the sooner the better. One such bank, which has the largest legacy liabilities and non-performing loans courtesy of its idiotic purchase of that epic housing scam factory Countrywide, is Bank of America. Which is why it is not at all surprising that just that bank has come out with a report titled "Shipwrecked" in which it says that not only will (or maybe should is the right word) launch QE3 immediately, but the QE will be bigger than expected, but as warned elsewhere, will be "much less effective than QE1/QE2, both in terms of boosting risky assets and stimulating the economy." From Bank of America Shipwrecked That sinking feeling Sifting through our strategists' top reports this week, we can't help but notice one overarching theme – it's been a fun ride, but prepare for a global slowdown. US stocks have been particularly volatile this week on earnings and we've also had the biggest weekly outflows in equities this year. Headlines continue to be macrodominated and it's not easy to be a captain of a ship in such troubled global waters. Shiver me timbers, Mr. Market Rising Spanish and Italian bond yields were in the news this week, and the pace of the increase suggests the market believes more is needed to avoid a potential full scale sovereign bailout. According to economist Laurence Boone, the most market efficient but politically viable solution for Spain and Italy in the short term would be a combination of secondary market purchases by the European Central Bank and primary market purchases by the European Financial Stability Facility/European Stability Mechanism. The problem, though, is that this would likely produce only a temporary respite for the bond market and no sustainable relief from stress in the financial markets. The case for further Fed action As the economy sputters and downside risks grow, Fed officials once again find themselves contemplating further easing. In our view, the Fed will move when it is comfortable that the growth slowdown is likely to persist. Likely next steps: forward guidance extension and QE3 We have revised our Fed call. We now believe the Fed will extend its forward guidance to "at least through late-2015" on August 1, rather than through "mid-2015". We also expect the announcement of a $600bn QE program in Treasuries and MBS on September 13, up from $500bn in our old forecast. We expect lower 5-10y rates in the near term and recommend fading any significant knee-jerk back-up in rates on a QE3 announcement. We believe QE3 will be much less effective than QE1/QE2, both in terms of boosting risky assets and stimulating the economy. The Fed has other tools The Fed may cut IOER to 0 or 10bp, but we believe that the benefits are outweighed by the costs of disruption to the money markets. Further, the Fed can use the discount window to lend against collateral but bank capital constraints could limit the resulting increase in loan growth. There are nuclear options if the need arises With markets increasingly questioning the effectiveness or availability of the Fed's tools, we analyze aggressive "nuclear options", which will be much harder to implement, but would likely be much more effective. These include imposing a ceiling on yields; open ended asset purchases until certain mandate triggers are met (mandate targeting); FX intervention to weaken the dollar; money financed fiscal expansion; and raising the inflation target above 2%. In our view, the nuclear options become likely if the Fed believes the economy is sliding into recession or sees high risk of deflation. Euro Area: No QE yet, but official intervention is possible With Spanish and Italian bond yields at very high levels and after the 26 July comments from Draghi alluding to the ECB's readiness to act to preserve the euro, we look at the possibility of official interventions (ECB, EFSF, coupling ECBEFSF). This could take several forms – from ECB pari passu purchases of all bonds (similar to Fed and BoE quantitative easing) to EFSF targeted purchases in the secondary market for countries under a program. The most market efficient but politically viable solution for Spain (and Italy) in the short term would be a combination of secondary market purchases by the ECB and primary market purchases by the EFSF/ESM. We argue, though, that this would produce only a temporary respite for the bond market but no sustainable relief from stress in the financial markets. ECB purchases first, then EFSF/ESM once ESM is ratified In our view, bond market intervention would first take the form of SMP, which could have an important impact on yields given the lack of liquidity in the bond markets. The temporary nature and limited efficacy of such intervention, should the bond market pressure not wane, could call for larger official intervention. But this would require countries under pressure to request such support, which could take several weeks or months to materialize in the current environment. For the time being, we think Spain has some room to maneuver: 1) it is under limited pressure probably until year end, even in current market conditions; and 2) the ESM will not be in place until October, thus limiting the size of EFSF/ESM interventions. Should a problem occur, it would likely be in the form of bank liquidity access, which the ECB tends to fix by lowering collateral requirements. That said, we see four reasons for potential official intervention: 1. Fear of contagion if Italian yields rise to the same extent as Spanish yields, which could compel the ECB to intervene. 2. The EU may push Spain into requesting EFSF/ESM intervention once the ESM is operational. The loan to recapitalize Spanish banks could give the EU some leverage. 3. As we approach Q4, the market will focus on 2013 Spanish bond issuance needs. These are likely to be high given the funding needs of Spain's regions, and impossible to complete without a reduction in yield levels (and therefore probably official intervention). 4. Rating agencies downgrade toward end Q3/Q4, and disappointing news on growth is a trigger point that could push bond yields in a new upwards spiral. No Relief From Spain No relief from the (S)pain. Judging by the pace of the recent increase in Spanish government yields, it appears that – despite bank recaps and various other reforms – the market believes more is needed to avoid a potential full scale sovereign bailout. Just as the final details of the Spanish bank bailout emerged, the market has grown increasingly concerned about Spain's commitment to bail out its regions. Clearly, as we have seen, US credit is not immune when potentially systemic risks play out for Spain and Italy. However, we have argued that – with increased prospects for policy intervention – the likelihood of big systemic European events impacting US credit in major ways has declined significantly. The market appears to agree, as for example, Friday, when the most recent Spanish concerns surfaced, we saw the third largest daily inflow to high yield funds on record ($740mm). Also, the iTraxx.main-CDX.IG relationship is again near the wides, even with US credit spreads tighter. The Flow Show: Equity Exodus Biggest weekly outflows in 2012 for equities (heavy selling of SPY, IWM, QQQ and GLD). Bond inflows still booming, potentially heading for bubble, especially high yield. Bearish positioning, profit and policy expectations = upside equity trading risk. Continued stock volatility In the past two US equity trading sessions 64 stocks have moved +/- 15% in price. This level of stock volatility creates concern, indicates performance issues, coincides with redemptions and may indicate investor rush to benchmark. Wide trading range … central bankers protect floor The big picture for equities is still that a wide trading range = a classic deleveraging pattern post credit boom-bubble-bust. When floors are threatened the central banks act. In July, Europe, China equities threatening floors, Italy/Spain bond/equity/macro collapse flipping into core Europe, threat of global recession. Significant event risk next week: August 1 Fed and ISM, August 2 ECB and BoE, August 3 Payrolls. Deflationary ECB goes inflationary German 2-year breakeven rates are now negative, ie German deflation discounted. ECB must turn inflationary. This week the ECB eased rhetorically, with Draghi promising action (similar to the Bernanke QE2 speech in Jackson Hole in August 2010. Assuming this materializes, the ECB could soon be QE buying short-dated peripheral bonds. Bottom-line: the probability of an unlimited, unsterilized sovereign bond purchase program by the ECB to reduce bond yields just increased. What to watch, what to do To track ECB success/failure, watch if 10-year German bund yield rises above 1.75%, for steeper yield curve 2-10s in core bond markets UST/UKT/DBR & temporary bounce in Euro. Lower peripheral EU bond yields would mean equity reversal trades: bounce in three most oversold global sectors are Eurozone banks, Eurozone utilities & telco; EM/Canada/Oz/UK resources to Labor Day. EU/EM floors defended, fiscal consolidation needed to break US ceiling Sustained rally in unpopular equities in H2 requires at minimum ECB/Fed QE success + signs of China growth reviving. No multiple re-rating is likely without sensible global fiscal policy consolidation. Bull market/bubbles to continue in growth, yield, quality, and weakening sales growth/potential policy failure argues risk aversion is set to make a comeback September/October.
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| Will US GDP Numbers Lead to QE3? Posted: 27 Jul 2012 01:07 PM PDT Today's AM fix was USD 1,618.75, EUR 1,321.43, and GBP 1,031.51 per ounce. Yesterday’s AM fix was USD 1,603.00, EUR 1,321.74and GBP 1,034.26 per ounce. Silver is trading at $27.79/oz, €22.65/oz and &ound;17.74/oz. Platinum is trading at $1,420.70/oz, palladium at $571.75/oz and rhodium at $1,150/oz.
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| Gold Profits From Draghi's ECB Robbing Savings of Euro-zone Citizens Posted: 27 Jul 2012 12:50 PM PDT SPOT MARKET gold bullion hit a five-week high at $1625 an ounce during Friday morning's London trading, on course for a weekly gain that would see the pattern of alternating up and down weeks stretched to week number eleven. Silver bullion also held onto most of its recent gains, trading around $27.70 per ounce for much of the morning.
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| What (Almost) Everyone Fails to Understand About Our Economy Posted: 27 Jul 2012 12:39 PM PDT Synopsis: In today's edition of The Room, David Galland confesses he has missed something obvious about the economy, that you have probably missed, too. Dear Reader, Before I begin today's musings, I would like to give a musical nod to Bush, a band that seems to me to be largely overlooked. If you are unfamiliar with them (and don't mind some fairly hard rock), here are a few selections to keep you company this fine day… Glycerin… Everything's Zen (live)… Comedown. And so, with feet and fingers tapping madly, we move on…
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| Cash and Courage: Rick Rule Discusses Gold and Currency Holdings Posted: 27 Jul 2012 12:26 PM PDT In today's "video essay", Capital Account's Lauren Lyster asks Rick Rule if now is a good time to hold cash in addition to physical gold, and when it might be advantageous to transfer your holdings across asset classes. 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". Cash and Courage: Rick Rule Discusses Gold and Currency Holdings 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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| Posted: 27 Jul 2012 12:24 PM PDT Gold has been deeply out of favor lately, languishing in its usual summer doldrums. This sentiment wasteland is driving traders to flee wholesale, including the futures players. Their mass exodus from the gold market is readily ... Read More...
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| Posted: 27 Jul 2012 12:00 PM PDT Dave Gonigam – July 27, 2012
There's a saying about family businesses that grow into large enterprises: "The first generation enjoys, the second generation employs and the third generation destroys." Bill has had decades of enjoyment building up Agora Inc. from scratch. The company is on to its second generation, particularly his eldest son Will, and it employs many hundreds of people on every continent. Bill and Will Bonner are determined to defy the odds and extend the life cycle far beyond three generations. Last night, a sizeable contingent of the crowd at this year's Agora Financial Investment Symposium gathered to hear them describe how they plan to turn their "new money" into "old money."
Such arrangements cost up to $1 million just to set up… plus, fees into perpetuity. Then there are the folks Bill calls "the patsy rich." Someone builds a business, sells it and retires and suddenly sits on a pile of money. "He knows how to make it, but not how to hold onto it. There's a whole industry out there, Wall Street people whose job is to separate him from his money. They're parasites." The idea of a family office as Bill and Will are developing it keeps the parasites at bay… while ensuring the money isn't dissipated. "This is family money, not spendable money," Bill explains. "What do you use it for? You use it to start a business, for education — you can use it for emergencies. You can use it for all kinds of things, but not to spend. Each generation has to live on what it can earn." There's a lot to unpack in these ideas. Bill and Will barely scratched the surface last night. We'll get into it more next week. By the way, this wasn't Bill's main talk here in Vancouver. Per custom, that comes at the end of the conference today, and has the intriguing title The Declining Marginal Utility of Stuff. Details on Monday!
Mr. Casey performed a rather, um, unconventional analysis of a chart that's familiar to 5 readers: the pie chart of the federal budget…  Medicaid takes up the lion's share of the "health" category on this chart. Medicare? That's its own category… and its own point of discussion. "It's a philosophical issue, really." "When you reach a certain age," Doug explained, "your body starts to desert you and you become an active liability to your fellows. In preindustrial cultures, what used to happen was the honorable course. If you became a liability to your fellows, you'd walk off into the forest or step onto an ice floe. It was only the most cowardly and despicable and degraded people who would hang around and cause everybody else to take care of them." The scariest part of the chart isn't the biggest, though: "Our $16 trillion national debt currently costs $200 million a year to finance," which works out to a "blended" interest rate of only 1.25%. "Interest rates in the future will not go just to the level they did 30 years ago. I think they'll go higher," Doug suggests. What can you do? "You should have a lot of gold. It's the only asset that's not someone else's liability." He also recommends "diversifying politically," or having your assets under the jurisdiction of more than one government — spread the risk. And finally, he says "learn to speculate effectively" and take advantage of the market distortions wrought by governments and central bankers.
The Commerce Department is out this morning with its first guess on second-quarter GDP. At an annualized 1.5%, it's weak, but it beat the "expert consensus." Risk on, baby!
In another raucous presentation, called This is Your Brain on Stocks, Mr. Ritholtz poked fun at all the stupid things investors do, in part because our brains are hard-wired to do so. He pointed to a classic study of "experts" who appear on TV. Their "predictions" turn out to be no more sound than those of an average member of the general public. No matter: "The more confident an expert sounds, the more likely viewers will believe him. And the more confident he sounds, the more likely it is he'll have a worse track record." As for politics, keep it out of your portfolio. Mr. Ritholtz says he has scads of liberal friends in New York who were convinced the Bush tax cuts would kill stocks in 2003. He also has scads of conservative friends in Greenwich, Conn. who were convinced Obama's policies would kill stocks in 2009. Neither assumption worked out very well…  "Each group missed out on an epic bear market rally because of their politics." [Ed. Note: Mr. Ritholtz's presentation is one for which the visuals are essential to the message. Besides, without the visuals, you won't know half the stuff the crowd is laughing about. We continue to get raves for the fact we're offering high-definition video of this year's Symposium, in addition to the customary audio package. Sign up for access here.]
Mr. Farquhar has done business in Tajikistan, Niger, Egypt, Jamaica and Mongolia… but yesterday, he spotlighted an off-the-beaten-path opportunity closer to home: natural resources in Saskatchewan, smack in the middle of the Canada's three "prairie provinces." "Saskatchewan is like Alberta 40 years ago," he says. That's a huge promise in light of the boom in Alberta's oil sands. Saskatchewan is playing catch-up because the provincial government was run by outright socialists from the mid-1940s until 2007. The place is loaded with oil, uranium, potash… and Mr. Farquhar's focus, quality farmland. That land is vastly underpriced relative to surrounding provinces — and U.S. states. But a quiet boom is under way. Prices are already up 80% from the bottom, but it's only the beginning. A similar boom in the 1970s brought a run-up of 690%. Mr. Farquhar has developed multiple ways to play the trend, and one of them is open to U.S. investors. You can learn a lot more about this unusual opportunity in an interview with Lauren Lyster of RT's Capital Account; the program has been spotlighting Symposium speakers all week…  Note well: Doug Casey is Lauren's guest today at 4:30 p.m. EDT, with a replay at 7:30. RT America is streaming at this link.
From a home base in Bangkok, Doug Barnett launched his Thai Focused Equity Fund in 1990. His earliest investors have made 34 times their money. Berkshire Hathaway has grown its investors' money a "mere" 18 times in the same period. The Thai stock market, meanwhile, has gone nowhere. Mr. Barnett brings the same Graham-and-Dodd mentality to the work he does. But while Buffett will buy entire companies and finds himself unable to sell… Barnett is satisfied with large stakes, which he'll unload once the story's no longer compelling. (Barnett also doesn't get sweetheart deals like the one Buffett got with Goldman Sachs in 2009.) Case in point: On Wednesday, he sold a Thai coal stock. Turns out coal everywhere in the world is getting beaten down because the natural gas boom in North America is cutting into demand for coal-generated electricity. But it was a heck of a ride… since 2001, up 3,392%.
But there's much euro-drama to work out first. Frank sees a eurozone breakup as possible, but unlikely. There are too many questions that Draghi and Co. would rather sidestep: How do you keep it a secret? Is it only Greece that goes, or the entire PIIGSty? Will the defaults be phony or real? How do you print replacement currencies (in secret) to avoid bank runs? Result: "The euro will remain weak, but not crushed, which says a lot about the U.S. dollar." Mr. Trotter's presentation here in Vancouver built nicely on his colleague Chuck Butler's talk the day before. While Chuck spelled out the reasons you need to diversify out of the U.S. dollar, Frank identified six currencies that offer the biggest upside with minimum risk. Listing the six, and the reasons they'd do well, takes up more time than we have in our mere 5 Mins…. but with access to the recordings of this year's Symposium talks, you'll take in everything you need to make an informed decision.
Mr. Tucker recalled a time when statists of all stripes had the goal of "progress" and greater material prosperity. Fabian socialists sought to spread the wealth. The Bolsheviks aimed to electrify all of Russia. New Deal projects promised a higher quality of life. No more. Attitudes changed with the publication of John Kenneth Galbraith's The Affluent Society in 1958. Material progress took a back seat to three concerns — health, the environment and "security." It's this shift, Jeffrey explained, that's responsible for everything from low-flow toilets to "energy-efficient" light bulbs that induce migraine headaches. "It is now the ethos of government to deny us." The one saving grace — and it's a huge one — was the privatization of the Internet in 1995. "This is the thing that has saved our civilization. We talk about the Great Recession — if it weren't for the emergence of digital economic life, I can't even imagine where we would be today. We could be approaching Stone Age levels." Jeffrey's talk was packed with interesting nuances that I want to go back and listen to again… and this is a guy I talk with on a daily conference call! You'll no doubt get a lot out of it too. And other speakers from the Thursday lineup… like the always colorful Marcio Mello, CEO of HRT Petroleo. He delivered a candid talk relevant both to shareholders of his firm and anyone with money in the energy space. And there was another round of afternoon workshops in which the names and ticker symbols flew. If you can't be with us, we always offer the next best thing — our high-quality recordings of the conference. And this year, the next best thing is even better, with a high-definition video option. So whether you want to watch at your desktop or listen on the go, we have you covered. Take advantage of your "virtual entry pass" to Vancouver right here.
"Yesterday it was sold for $1,768,000. It is considered a 'tear-down' and another million will be invested in that little city lot for a new dwelling." "I don't see the market cooling at all. There are some very wealthy people out there." The 5: "The Canadian real estate debate," writes the aforementioned Brad Farquhar, "would also benefit from the info that Canadians cannot get fixed-rate 30-year mortgages like you can. "At CIBC, where I bank, the current posted seven-year fixed rate is 6.35%, although they are having a 'sale' at 3.99%. The posted 10-year rate is 6.75%, and it is likely possible to negotiate this down." "The average homeowner has a floating-rate mortgage or a much-shorter term. Even assuming they all had seven-year 3.99% mortgages, what happens in seven years when everybody's mortgage resets at 8% or 10%?"
"Sounds like someone else has read As We Go Marching by John T. Flynn (1944). In the book, Mr. Flynn sets out the differences between communists, socialists and fascists — and does so quite well. After reading As We Go Marching, there is really no question as to whether or not the U. S. government is on a fascist course. Then it is up to each reader to decide for himself/herself how far down the road we are." "Thank you for being there. Enjoy it every day." The 5: Our own Byron King wrote the introduction to Laissez Faire Books' reissue of Flynn's essential volume. He was signing copies here in Vancouver this week. You can get your own here. Regards from Vancouver, Dave Gonigam P.S. "Everyone was glued to the six big screens hanging from the ceiling," writes our roving reporter Jim Amrhein, "eager to see what their own minds look like as they pick trades and investments." Jim is describing Barry Ritholtz's talk about how your brain's wiring can sabotage your investment strategy. The funny thing is that while Jim and I are covering the same conference — heck, we've sat next to each other most of this week — our dispatches end up completely different, even when we're writing about the same speaker! But it's always good to see things from another perspective: Jim carries on our "team coverage" of yesterday's Symposium activities at this link.
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Once again, Syria is at the top of the News Wrap-Up. Russia is sending a large contingent of marines to Syria. They will park off the coast, ready to go ashore if needed. I told you this was not going to go down like Libya. Russia has a naval base in Syria and is a big ally of the Syrian government. Now, Iran is saying it will come to the help of the Syrian government and will not permit a regime change. This is a bloody civil war that has claimed the lives of nearly 20,000 Syrian citizens. There is no end in sight.
The equity market took off like a scalded cat this afternoon in the US as word went out that Mario Draghi was going to visit Germany and spread the gospel of saving Europe by printing money and rigging the markets.
U.N. member states have failed to reach agreement on a new treaty to regulate the multibillion-dollar global arms trade.
"We're totally unqualified to give advice on old money, because we never had any!" quipped Bill Bonner. "Our money is so new the ink isn't even dry yet."
"Nobody else is doing this," Bill explained of his Bonner and Partners Family Office. "Typically, family offices are vehicles in which families manage their wealth. Typically, they're almost forced into an arrangement with a private bank."
The typical Medicaid beneficiary is "the morbidly obese type that you see on Black Friday at Wal-Mart jostling to spend their welfare checks," said the inimitable Doug Casey earlier in the day.
U.S. stock indexes are adding to yesterday's big gains. The S&P is within reach of 1,370.
Politics are "a luxurious indulgence," counsels fund manager and blogging sensation Barry Ritholtz. "I can't afford it."
"If you can't relocate, emigrate or travel, at least get your money a passport," advises Brad Farquhar, chief of the suitably named Nomad Capital.
Another off-the-beaten-path opportunity: Thailand, where a fund manager has quietly amassed a record that's "better than Buffett's."
Precious metals are treading water as the week winds down. Gold is up a bit, to $1,620. Silver's down a bit, to $27.48.
After the latest "save the euro" jawboning from European Central Bank chief Mario Draghi, the dollar index is set to end the week around 82.7 — down from 84 on the nose on Tuesday, which was a two-year high.
"We remain convinced the U.S. dollar will decelerate downward in the next five-10 years," says EverBank Direct president Frank Trotter.
"They're on the verge of ruining indoor plumbing," said Laissez Faire Books executive editor Jeffrey Tucker in a talk that went over extremely well with the Vancouver audience.
"My parents," writes a reader weighing in on the Canadian housing market, "purchased their three-bedroom bungalow in Vancouver in 1966 for $17,000."
"Give the writer a big bravo," says a reader who agrees with a reader's assessment yesterday that the current U.S. president hews not to socialism, but to fascism.
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