GATA's work on gold market manipulation and Ted Butler's on silver market manipulation are pretty consistent with each other, Jeffrey Lewis of Silver Coin Investor writes this week. "GATA has exposed the reality and legal mechanism for intervention," Lewis writes. "Ted focuses mainly on the details of how that intervention manifests in the trading data."
Lewis' commentary is headlined "Gold and Silver Price Manipulation from the Top Down" and it's posted at Silver Coin Investor's Internet site here:
CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.
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Half of all proceeds from the sale of this report will be donated to the Gold Anti-Trust Action Committee to support its efforts exposing manipulation and fraud in the gold and silver markets.
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
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Barrick Gold Corp. publicly announced the pending retirement of chairman Peter Munk on Friday, after a week in which bankers faced a tepid response to the company's US$3-billion share sale.
Barrick said Friday that it expected to update investors before year end on various initiatives to renew its board, following discussions this year between directors and institutional shareholders regarding compensation practices and governance. The initiatives include "succession in the chairman role at the company, consistent with Mr. Munk's desire to retire as chairman," Barrick said.
... Dispatch continues below ...
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The message that Mr. Munk would announce his retirement by year-end had been quietly conveyed by some bankers working on Barrick's big share sale over the past week, according to sources familiar with the situation. Some investors had indicated they wanted more clarity on the board revamp before agreeing to buy any stock.
One asset manager, speaking on condition of anonymity, said he was told by a banker advising Barrick on Monday that an announcement on Mr. Munk's future would come by year-end. Another fund manager said he was told by a banker working on the share sale on Friday, Nov. 1 -- the day after the offering was unveiled -- that Mr. Munk's announcement was forthcoming. He was then told on the following Monday that no such announcement was imminent and that instead guidance would come soon.
A third person familiar with the situation said that Barrick had for some time internally laid out a succession plan for Mr. Munk as well as that of another long-term board member, former Prime Minister Brian Mulroney. This person also said that at least one large investor was given notice prior to the official announcement.
Barrick's public disclosure was less specific. In March, Mr. Munk signaled that he was seeking a successor but gave no details about when he would go.
Last week, when Barrick announced third-quarter profit of $172 million, the company signaled that board changes would be announced by year end, but there was no specific reference to Mr. Munk. It was in an amended prospectus for the share offering, made public on Friday, that the company mentioned Mr. Munk by name and added guidance about the timing of his departure.
"It looks like he desires to retire as chairman of the board as of the next" annual general meeting, said Robert Gill, vice president and portfolio manager with Aston Hill, which holds about 450,000 of Barrick's shares. "I do think it is good news for the company. It is nice to see something more tangible. I am surprised the stock has not reacted to the news yet."
A Barrick spokesman declined to comment and said Mr. Munk was not available to comment.
Barrick shares have plunged in recent years as lower gold prices and writedowns from high-priced acquisitions and mine developments have taken their toll.
But Barrick has started taking concrete steps to improve its operations and financial performance, cutting costs and identifying projects where capital spending can be reduced. The gold miner shelved its Pascua Lama project, a money pit in recent years, and is selling shares to pay back a portion of its heavy debt burden.
But Mr. Munk's future with the company remained a big question.
The uncertainty weighed on the latest deal, and Barrick's bankers have struggled to move the $3 billion of stock. A group of underwriters, led by Royal Bank of Canada, GMP Securities, and Barclays, bought the stock and is attempting to resell it at $18.35 a share to investors. Barrick's shares have consistently traded below the offer price and on Friday closed at $18.22 in New York. A drop in bullion prices on Friday to below $1,300 an ounce also cut demand for gold stocks.
With the stock available cheaper on the open market, there is little impetus for investors to buy shares from the underwriters at the initial offering price. As of Thursday night, when bankers working on the deal conferred, there were said to be orders for 75 per cent of the deal. On Friday, there was no sign the offering was much closer to being done. Now there is a widespread expectation that the deal may not be fully sold by Nov. 14, when the transaction is scheduled to close.
If buyers can't be found for all the stock at $18.35 a share, the underwriters will have to consider cutting the price, in what is called a "cleanup." The repricing won't affect Barrick, which has already sold the stock to the underwriters, but it could eat into the fees that the banks would have otherwise earned -- amounting to $90 million -- or even lead to a loss on the deal if a price cut is very deep. * * *
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GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
How to profit with silver -- and which stocks to buy now
Future Money Trends is offering a special 16-page silver report with our forecast for 2013 that includes profiles of nine companies and technical analysis of their stock performance. Six of the companies have market capitalizations of less than $800 million and one company has a market cap of only $30 million. The most exciting of these companies will begin production in a few weeks and has a market cap of just $150 million.
Half of all proceeds from the sale of this report will be donated to the Gold Anti-Trust Action Committee to support its efforts exposing manipulation and fraud in the gold and silver markets.
One look at the following weekly chart pretty much says all that one needs to know about what is happening to gold and why. This week and last week, the US Dollar has been higher. Guess what happened to gold over those same two weeks? Yep – it went lower.
The two weeks previous to those the US Dollar was weaker. Guess what gold did back then? Yes – it went higher.
It is all coming back to the US Dollar once again. Simply put, rising interest rates in the US tend to favor additional strength in the US Dollar as traders fear that apparent stronger economic readings will bring the Fed back in on the TAPER SIDE of the QE equation.
In a recent piece entitled, "How To Be Your Own Central Bank", Sprott Asset Management's Market Strategist, David Franklin, laid out a compelling case for incremental gold ownership on a personal level. Citing historical wisdom also expressed by Steve Wynn in a recent commentary, "Don't pay any attention to what people say—pay attention to what people do", Franklin advises that we carefully watch central banks, and look for the "sage investment advice" contained in their actions rather than their words—most notably in the heavy accumulation of physical gold over time.
Here is David Franklin's piece, "How To Be Your Own Central Bank" in it's entirety:
Most market watchers expect that Janet Yellen will grapple with two major tasks once she takes the helm at the Federal Reserve in 2014: deciding on the appropriate timing and intensity of the Fed's quantitative easing taper strategy, and unwinding the Fed's enormous $4 trillion balance sheet (without creating huge losses in the value of its portfolio). In reality both assignments are far more difficult than just about anyone understands or admits.
Unlike just about every other economist, I knew that the Fed would not taper in September because the economy is still fundamentally addicted to stimulus. The signs of recovery that have caused investors and politicians to bubble with enthusiasm are just QE in disguise. Take away the QE and the economy would likely tilt back into an even more severe recession than the one we experienced before QE1 was launched.
Given the Fed's failure to initiate a tapering campaign in recent months (when it was highly expected) it is surprising that most people still believe that it will pull the trigger in the first quarter of 2014. But if the Fed could not take action in September, with Ben Bernanke at the helm and the nation as yet untraumatized by the debt ceiling drama and Obamacare, why should we expect tougher treatment from Janet Yellen? This is particularly true when you consider Yellen's reputation as an extreme dove and the uninspiring economic data that has come in recent months.
Rather than explicitly describing the possibility of a reduction of asset purchases, recent Fed statements have merely said that policy would be "adjusted" according to incoming data. It has never said what direction that adjustment may take. Yet somehow the market has concluded that an imminent reduction is the only possibility. But the opposite conclusion is more likely. Recession avoidance is really the Fed's only concern and it will always come down on the side of accommodation. Therefore an expectation for a 2014 taper is just wishful thinking.
But that does not mean that QE will go on forever. It will come to an end, but not because the Fed wants it to, but because the currency markets give it no choice. A dollar crisis would ultimately force the Fed's hand, and the longer the Fed succeeds in postponing the inevitable, the more damage its policy mistakes will inflict on our economy.
Yellen's second task will be equally impossible. Since the QE campaign began in 2010 the Fed has more than quadrupled the amount of bonds that it holds on its balance sheet,to more than $4 trillion of Treasury and mortgage-backed bonds. To accumulate this massive cache, the Fed has become by far the largest buyer in both markets. Its purchases have pushed up the prices of those bonds and have kept long term interest rates low for both consumers and businesses.
When the QE was first launched, Ben Bernanke tamped down fears of the program by saying the Fed would one day sell the bonds that it was buying. But as the Fed's balance sheet ballooned, many in the market began fearing that the unwinding of these trades would crush the market for Treasuries and mortgage-backed securities. Bernanke soon allayed these fears by saying that the Fed would not actively sell, but would simply allow bonds to mature. But this is just a convenient fiction.
If stock or real estate prices were to enter into bubble territory (which I believe has already happened), or if inflation were ever to surge past the Fed's low target range (which I believe is certain to happen), then the Fed would have to sell bonds to get in front of these trends.
Through Operation Twist, the Fed has already swapped a very large portion of its short-term bonds for long-term bonds. The slow process of waiting for bonds to mature is unlikely to slow down asset bubbles or inflation. The argument also does not account for the fact that the Treasury will have to sell new bonds in order to retire the principle on the maturing bonds. Since the Fed is the primary buyer of Treasury bonds, the Fed would have to add to its balance sheet when it's trying to shrink it. Such a cycle is just a debt rollover that leaves the size of the Fed's balance sheet unchanged.
Unless other buyers of Treasuries or MBS can be found to replace the Fed's prodigious buying, the Fed will remain the only game in town. Given these realities, how can we possibly expect Janet Yellen to actually diminish the amount of assets the Fed holds? She won't be able to do it and any expectations to the contrary are pure fantasy.
So we should not be asking when Ms. Yellen will begin withdrawing stimulus and shrinking the Fed's balance sheet. Instead we should be asking how the markets will react when she runs out of excuses for delaying the taper, or ultimately decides to expand QE rather than contract it.
The death of the dollar is coming, and it will probably be China that pulls the trigger. What you are about to read is understood by only a very small fraction of all Americans. Right now, the U.S. dollar is the de facto reserve currency of the planet. Most global trade is conducted in U.S. dollars, and almost all oil is sold for U.S. dollars. More than 60 percent of all global foreign exchange reserves are held in U.S. dollars, and far more U.S. dollars are actually used outside of the United States than inside of it. As will be described below, this has given the United States some tremendous economic advantages, and most Americans have no idea how much their current standard of living depends on the dollar remaining the reserve currency of the world.
Unfortunately, thanks to reckless money printing by the Federal Reserve and the reckless accumulation of debt by the federal government, the status of the dollar as the reserve currency of the world is now in great jeopardy.
As I mentioned above, nations all over the globe use U.S. dollars to trade with one another. This has created tremendous demand for U.S. dollars and has kept the value of the dollar up. It also means that Americans can import things that they need much more inexpensively than they otherwise would be able to.
The largest exporting nations such as Saudi Arabia (oil) and China (cheap plastic trinkets at Wal-Mart) end up with massive piles of U.S. dollars...
Instead of just sitting on all of that cash, these exporting nations often reinvest much of that cash into low risk securities that can be rapidly turned back into dollars if necessary. For a very long time, U.S. Treasury bonds have been considered to be the perfect way to do this. This has created tremendous demand for U.S. government debt and has helped keep interest rates super low. So every year, massive amounts of money that gets sent out of the country ends up being loaned back to the U.S. Treasury at super low interest rates...
And it has been a very good thing for the U.S. economy that the federal government has been able to borrow money so cheaply, because the interest rate on 10 year U.S. Treasuries affects thousands upon thousands of other interest rates throughout our financial system. For example, as the rate on 10 year U.S. Treasuries has risen in recent months, so have the rates on U.S. home mortgages.
Our entire way of life in the United States depends upon this game continuing. We must have the rest of the world use our currency and loan it back to us at ultra low interest rates. At this point we have painted ourselves into a corner by accumulating so much debt. We simply cannot afford to have rates rise significantly.
For example, if the average rate of interest on U.S. government debt rose to just 6 percent (and it has been much higher than that at various times in the past), we would be paying more than a trillion dollars a year just in interest on the national debt.
But it wouldn't be just the federal government that would suffer. Just consider what higher rates would do to the real estate market.
About a year ago, the rate on 30 year mortgages was sitting at 3.31 percent. The monthly payment on a 30 year, $300,000 mortgage at that rate is $1315.52.
If the 30 year rate rises to 8 percent, the monthly payment on a 30 year, $300,000 mortgage would be $2201.29.
Does 8 percent sound crazy to you?
It shouldn't. 8 percent was considered to be normal back in the year 2000.
Are you starting to get the picture?
We need other countries to use our dollars and buy our debt so that we can have super low interest rates and so that we can afford to buy lots of cheap stuff from them.
Unfortunately, the truly bizarre behavior of the Federal Reserve and the U.S. government over the past several years is causing the rest of the world to lose faith in our currency. In particular, China is leading the call for a "de-Americanized" world. The following is from a recent article posted on the website of France 24...
For decades the US has benefited to the tune of trillions of dollars-worth of free credit from the greenback's role as the default global reserve unit.
But as the global economy trembled before the prospect of a US default last month, only averted when Washington reached a deal to raise its debt ceiling, China's official Xinhua news agency called for a "de-Americanised" world.
It also urged the creation of a "new international reserve currency... to replace the dominant US dollar".
So why should the rest of the planet listen to China?
Well, China now accounts for more global trade than anyone else does, including the United States.
At this point, China is even importing more oil from Saudi Arabia than the United States is.
China now has an enormous amount of economic power globally, and the Chinese want the rest of the planet to start using less U.S. dollars and to start using more of their own currency. The following is from a recent article in the Vancouver Sun...
Three years after China allowed the yuan to start trading in Hong Kong’s offshore market, banks and investors around the world are positioning themselves to get involved in what Nomura Holdings Inc. calls the biggest revolution in the $5.3 trillion currency market since the creation of the euro in 1999.
And over the past few years we have seen the global use of the yuan rise dramatically...
International use of the yuan is increasing as the world’s second-largest economy opens up its capital markets. In the first nine months of this year, about 17 percent of China’s global trade was settled in the currency, compared with less than one percent in 2009, according to Deutsche Bank AG.
Of course the U.S. dollar is still king for now, but thanks to a whole host of recent international currency agreements this status is slipping. For example, China just recently signed a major currency agreement with the European Central Bank...
The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.
"It's a way of promoting European and Chinese trade, but not doing it with the U.S. dollar," said Brooks. "It's a bit like cutting out the middleman, all of a sudden there's potentially no U.S. dollar risk."
And as I have written about previously, we have seen a bunch of other similar agreements being signed all over the planet in recent years...
There are four "too big to fail" banks in the United States that each have more than 40 trillion dollars worth of total exposure to derivatives. The largest chunk of those derivatives is made up of interest rate derivatives. In case you were wondering , those four banks are JPMorgan Chase, Citibank, Bank of America and Goldman Sachs.
A huge upward surge in interest rates would absolutely devastate those banks and cause a financial crisis that would make 2008 look like a Sunday picnic.
Right now, the leader in global trade seems content to use U.S. dollars for most of their international transactions. China also seems content to hold more than a trillion dollars of U.S. government debt.
If that suddenly changes someday, the consequences for the U.S. economy will be absolutely catastrophic and every single American will feel the pain.
The standard of living that all of us are enjoying today depends largely upon China. They can bring down the hammer at any moment and they know it.
Having lived through the pain, you might as well stick around for the gain.
-- Rick Rule
The last two years have been tough for the natural resource sector – though as of November 5, gold was up nearly $100 from its late June low of around $1,220 per ounce1. Today (Friday, November 8) gold saw a steep fall back down to around $1,285, which has been tied to a report of stronger job growth in the U.S.2.
Adam Footer, an Investment Executive at Sprott Global Resource Investments Ltd., says
On the heels of continued volatility in key global markets, a 42-year market veteran told King World News that a stunning "90 tons" of paper gold selling was used to create the smash in the gold market today. Hathaway, who is one of the most respected institutional minds in the world today when it comes to gold, and whose fund was awarded a coveted 5-star rating, also discussed what KWN readers should expect next in this key market.
This posting includes an audio/video/photo media file: Download Now
The seeming insanity of today's "markets," in the view of Hinde Capital CEO Ben Davies, was capped this week by the rocket ride of Twitter's initial public offering. But when insanity is reality, Davies writes, "Although we promote feverishly the tenets of sound money, when it comes to markets our aim is to just make some at a rate faster than the central bankers debase it." Davies' commentary is headlined "Equities -- A Rarified 'APP'mosphere" and it's posted at the Hinde Capital Internet site here:
CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.
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WITCHES BREW: The Policies of Insolvency! (PART VI)
Bankrupting America - When leverage fails
Rarely, if ever, have I seen this level of INSANITY UNFOLDING in over 30 years watching and analyzing GLOBAL macroeconomics, politics and markets. To say it is frightening is to understate the combustible nature of the world economy and its ability to generate future growth and prosperity.
It can't and won't grow without massive reform of governments and their policies, which contrary to public opinion are deepening this MAN-MADE disaster. Conversely, times of great danger and risk offer the most outstanding investment opportunities if you can SEE IT and prepare yourself properly.
"There are two requirements for success in Wall Street. One, you have to think correctly; and secondly, you have to think independently."
- Ben Graham
The battle lines are clear; on one side of the BATTLE are the most powerful people and elites in the world, led by the Federal Reserve (Bernanke, Yellen and Co.), Bank of England (Mark Carney), and ECB (Mario Draghi). Combined with their partners in the public sectors in the capitals of the developed world: Washington DC (Barack Obama and congress), London (David Cameron and the city), Brussells (European commission) and let's not leave out Beijing, Tokyo and Germany. On the other side of the fight are Mother Nature and Darwin: the apostles of history.
In the long run, Mama Nature and Darwin have never lost this war ever, but in the short run men can appear to be IN CHARGE. In charge of the titanic that is. It is quite clear that the powers that be think they can EXTRACT any amount of blood, treasure and toil and the world will continue to grow. Nothing could be further from the truth and we await the societal & economic collapse for which they are laying the foundations.
Foundations which will be extremely hard to remove and undo as they are embedded in law and the people who must undo them are the same people that CREATED them. Only a crushing blow will roll back the insanity and the future that is coming at us like a freight train.
The socialists in disguise in the developed world's capitals have put their constituents on a modern version of the RACK and are turning the wheels VIGOROUSLY. These elites are Blind ideologues and will INFLICT any AMOUNT of MISERY on their constituents at the point of their regulatory and tax guns to achieve their ambitions of control over others.
A lot of ink has been spilled on the Healthcare.gov failures but the impact that is unfolding is far DEEPER for the future of the world's greatest economy and its private sector. The affordable care act (ACA) is the antithesis of its title: it is wholesale destruction of the healthcare industry and the lives of those who rely upon it. It is everything that socialism is: misery spread widely and less HEALTH care for (crony capitalism) much more money, it is very large doses of poison into people's lives and futures.
You must understand that control of people's lives through control of their healthcare has been a progressive goal (both from the left and the right) for many, many decades. Our system of checks and balances between the various branches of governments and congress has prohibited this dream from being realized.
UNTIL the 2008 election that is, when in a stroke of coincidence gave veto proof majority's and progressives captured complete and total power of the US government. The acceleration of central planned economies and theft of private property through printing press and RUNAWAY regulation was multiplied EXPONENTIALLY, now those balls which began rolling then are hitting the economy like a tip of an iceberg.
"A crisis is a terrible thing to waste"
- Rahm Emanuel
They didn't let it go to waste as they justified their legislative and executive branch actions as necessary to SAVE you. Unfortunately for us, all they inserted political solutions which served their lust for power over others, the money and themselves rather than practical solutions which serve all the public at large.
The moral and fiscal INSOLVENCY of the financial system was on plain display at that time. Now we are seeing the moral and fiscal insolvency of the system that allowed it to unfold.
As thinly disguised Socialists and Marxists ascended to unbridled power, the total remaking of our institutions was PUT in PLACE. Illinois is one of the epicenters of democratic/socialist corruption and it is on plain display to its residents and onlookers from around the nation, and they rose to power on a national scale 2008. That political corruption took the driver's seat of the national government at that time.
In Illinois, laws are routinely ignored and political foes are destroyed from the misuse of government power. Crony capitalists are generally the only groups which are allowed to thrive and POLITICIANS GUIDE IT ALL as divided government has gone the way of the DO DO bird (extinct), thus corruption is unrestrained. The results are predictable: an economy in free fall with those in charge PREYING upon those who aren't, at the point of a government gun. California and New York are in the SAME BOAT.
These are the places which will be at the vanguard of economic failure in the United States. It is why I recently left Chicago for Florida: to escape the unfolding destruction of my families' future. Most every country in the OECD is in secular decline as centrally planned socialist economies FAIL under their redistributionist policies.
No matter where you look, socialist states are in various stages succumbing to their moral and fiscal insolvency. Argentina, Brazil, Italy, Greece, Portugal, France, Spain each have implemented the same policies, some are further down the path to their demise/chaos and others a just a few steps behind in the SAME process.
Some still have the ability to print money and other don't. It is why the EURO is doomed as those countries which can't print must regain the ability to do so or, quite simply, the elites will be destroyed. Above all else, the euro is a device to transfer power from local governments to Brussels in exchange for the printing press which they NEVER REACH. Sooner or later, the local socialists will break away, recover seignoriege or experience an "off with their head" moment.
We all live in something for nothing societies where the majority of the people think they can live at the expense of the PRODUCTIVE minority and they have firm grips on our elected offices. The governments of the developed world are good reflections of the MAJORITY of their constituents: lazy, thieving, dumbed down, non-self-reliant, unproductive, unable to produce more than they consume, unable to do critical thinking and ignorant of history. USEFUL idiots as Lenin called them. But very dangerous as they are ripe for manipulation and can VOTE!
"A Nation of sheep breeds a government of wolves!"
- Anonymous
"Any man who thinks he can be happy and prosperous by letting the government take care of him had better take a closer look at the American Indian."
- Henry Ford
As government dependency caroms exponentially higher, the productive minority is ground under the demands of the majority. They believe they are ENTITLED to the fruits of others labor and VOTE to extract it under the point of a government gun.
They normally NEVER feel the cost of their impossible beliefs that they can live at the expense of others, but this time is DIFFERENT. The affordable care act is hitting them right where it hurts: their incomes and well-being. It now sets up the mother of all showdowns as the victim to victor ratio is enormous.
What is the victim to victor ratio you ask? There are probably ten people who are badly damaged by the law compared to one person whose life is improved. The victims are the very people the President got to vote for him to support the ACA.
Quoting Peggy Noonan -
"They said if you liked your insurance you could keep your insurance – but that's not true. It was never true! They said if you liked your doctor you could keep your doctor – but that's not true. It was never true! They said they would cover everyone who needed it, and instead people who had coverage are losing it – millions of them! They said they would make insurance less expensive – but it's more expensive! Premium shock, deductible shock.
They said don't worry, your health information will be secure, but instead the whole setup looks like a hacker's holiday. Bad guys are apparently already going for your private information. And now there are reports the insurance companies are taking advantage of the chaos of the program, and its many dislocations, to hike premiums. Meaning the law was written in such a way that insurance companies profit on it."
Now the president and progressives in congress are saying to everyone: who do you believe? Me or you're lying eyes. He is going to have a hard time pulling that over on the 4.6 million people who have received insurance pinks slips with millions more to come. Do you really think it is a coincidence that millions are being forced out and into the ACA? The very insurance companies who canceled them await them inside the exchanges with huge premium increases and deductibles. This is intentional folks…
It is clear that as we learn what was in the ACA the more monstrous and pernicious it becomes. It is a regulatory and freedom destructive morass of Washington progressive and special interest WEASEL words. It can be interpreted any way the Washington bureaucrats wish. Regulations and sales of business to crony capitalists who wait in line to buy them through K street lobbyists. Look at the volume of goods sold:
The ACA - whose intent is nothing what it has been presented as. In something for nothing societies, the true impact of policies can never DIRECTLY impact the useful idiots who supported it or the truth becomes SELF apparent. They can only touch them indirectly, so they cannot pin the tails of the donkeys who are preying on them: their leaders.
At the same time the president and his progressive supporters say he is going to "GRIND IT OUT", and HHS secretary Sebelius says delay is: NOT an OPTION". Let me translate that for you. Hell has arrived for millions and millions of people and blind ideologues are going to shove it down their throats. To that I say: good luck and welcome to Napoleon's Waterloo for the progressives in congress who passed it without a single vote from across the aisle. It couldn't happen to nicer people. They can tell you that you are benefiting 'til they are blue in the face; only their supporters look at their bank accounts to understand the truth.
The level of fraud in the financial system with utter lack of prosecution or accountability, combined with the ongoing love affair between the largest offenders and collective mainstream, results in financial media being a victim of the so-called Stockholm syndrome.
From Wikipedia: Stockholm syndrome can be seen as a form of traumatic bonding, which does not necessarily require a hostage scenario, but which describes "strong emotional ties that develop between two persons where one person intermittently harasses, beats, threatens, abuses, or intimidates the other."
Targeting JPMorgan: The financial mainstream media has an ongoing love affair with JP Morgan and Chase. Many point to the near perfect trading record of the investment banks without considering how it was accomplished.
European monetary policy/monetary conditions are too tight and, Citi's FX Technical group explains, the EURO is too strong thereby exacerbating the effects of the internal devaluation in Europe (as we noted here). Looser monetary policy and a weaker currency are becoming increasingly necessary conditions for the Eurozone to recover/survive. The present period in the Eurozone, Citi adds, where the financial architecture is coming apart at the seams is not remotely unprecedented and in fact offers a very compelling historical perspective for significant devaluation of the EUR in the years ahead.
Via Citi FX Technicals,
Given the lack of economic growth and employment growth combined with the precipitous fall in the inflation rate since July last year the ECB should be embracing looser policy and a lower EURO.
The present period in the Eurozone where the financial architecture is coming apart at the seams is not remotely unprecedented
Quick history recap:
1989-1991: We had the savings and loan crisis in the US; a sharp down turn in housing activity and a deep economic recession
1992-1994: The “travails” in the World’s largest economy found their way into the “flawed” financial architecture of Europe (The Exchange rate mechanism) which collapsed under the stress
1997-1998: Saw the “third leg” of this dynamic feed into Emerging markets as the aggressive easing in the World’s major economic zones created a “bubble” in EM and in particular Asia. Between 1989 and 1992 the Fed lowered the Fed funds rate from 9.75% to 3%.(The USD-Index fell about 27% in this period) From 1992 to 1996 the Bundesbank lowered rates from 8.75% to 2.5%.(The cycle low was put in for the USD-index in 1992 in a similar fashion to 2008 when we also reached the cycle low in the Fed funds rate) Three years later we saw the USD-index begin a 5 year plus rally-something we believe started again in 2011.
USD-index and the Fed easing cycles (Fed funds) of 1989-1992 and 2007-2009 on the back of a housing downturn, banking stress and economic downturn
We continue to believe that we are close to the next rally in the USD-index which we expect to continue for the next 2-3 years.
When we look back to that period in the early 1990’s we see a number of stimulus dynamics that eventually helped Europe “regain its footing”
Firstly the peripheral states got two distinct elements of stimulus. Most of the ERM currencies continued to weaken against the DEM into March of 1995 as the excessively tight monetary regime (Short term rates) put in place to defend the currencies was abandoned. This was further assisted by the easing of official rates by the Bundesbank from 8.75% in 1992 to a low of 2.5% by 1996.
European currencies continued to weaken into early 1995 against the Deutsche Mark.
The Italian Lira, Spanish Peseta and French Franc (Amongst many others) weakened substantially against the DEM into the spring of 1995.(Internal FX devaluation in “Euro bloc”)
As they strengthened again from 1995 onwards the Bundesbank was still lowering rates
Long term rates then started to fall sharply from 1995 and spreads converged with Germany providing further stimulus.
This move lower generated a rapid convergence of Bond yields.
Take Italy for example: Between 1995 and 1998 the 10 year Italy-Germany spread narrowed from about 650 basis points to ZERO on the back of the convergence trade.
That provided a huge monetary stimulus at the long end of the curve (And did not even need QE to do it) the magnitude of this move was much greater than what we have seen since this spread peaked just under 2 years ago.
Between 1995 and 1999 not only did we see spreads converge but long term rates in Italy (10 year) fell from 13.8% to 3.9% (Almost 1000 basis points). Compare that to today where we have seen a high to low fall of about 380 basis points between 2011 and 2013
Further as mentioned above we then saw the EURO (As its components) drop from 1.3770 in March 1995 to .8200 by October 2000 (40%) and from a peak of 1.4900 seen in 1992 (45%). Between 1995 and 1997 the convergence trade saw European currencies strengthen against the DEM (internal devaluation) but lower long term yields, short term yields and a much weaker “EURO bloc” against the USD all provided strong offsetting monetary stimulus.
Huge external devaluation for the EURO “bloc”
Sharp fall in the EURO bloc against the USD from 1995 to 2000 and in particular the 2 years from 1998-2000 (Fall of 32%)
That 2 year fall is important for a few reasons
– It happened after we had seen pretty much the “lion’s share” of the stimulative benefit of the “convergence trade” and drop in long term yields into 1998.
– The cycle low in Bundesbank rates (2.5%) in 1996 and subsequently ECB rates (2.5% in 1999) had been met at this point
Therefore the currency became the last “vestige” of monetary easing in the post ERM crisis cycle.
So reviewing the Crisis and post crisis dynamics of the ERM collapse and comparing to today
European peripheral currencies got a massive “Euro bloc” devaluation from 1992-1995. For example the Italian Lira depreciated from around 750 against the Deutsche in 1992 to about 1,240 by 1995 (About 65%). Between 1995 and 1997 some of that was unwound (internal EURO bloc) as it retraced to around 990 which became the rate at which the EURO conversion took place. That was still a devaluation of 32% from the 1992 level. Today the internal exchange rate is fixed so Italy in this crisis has had no internal devaluation.
From 1995 to 1998/1999 Italian long term yields fell precipitously (1,000 basis points) and the spread with Germany went to ZERO providing huge stimulus. During today’s crisis Italian 10 year yields have fallen from a peak of around 7.5% in 2011 to a low of around 3.7% in 2013 and now sit over 4% while German 10 year yields are around 1.75%. By definition this is much less stimulus as well as less convergence.
The EURO came into existence in January 1999 and the ECB refinancing rate hit a cycle low at 2.5% by April 1999, a move lower from the “heady peak” Bundesbank discount rate of 8.75% in 1992 and by definition large short term monetary stimulus.(fall of 625 basis points). Today we have seen a less stimulative fall from 4.25% to 0.5% over about 5 years (375 basis points with minimal future potential to fall from here)
Between 1995 and 2000 the “EURO bloc” devalued against the USD by 40% (45% since 1992). Today, if we use October 2009 as the start of this EURO crisis (The point at which peripheral yields led by Greece began to surge) EURUSD has gone from around 1.46 at that time to around 1.35 today (A net depreciation of only about 7.5%)
The bottom line here is that in all respects the stimulative post crisis dynamics this time have been much lower than those seen after a “lesser” crisis in 1992-1995.This is before we even talk about the excessive Government debt that now exists, the stresses in the European banking system, the default by Greece, the bailout of Ireland and Cyprus and the fiscal austerity measures being employed.
In addition there is minimal new stimulative potential from traditional monetary policy with ECB rates now at 0.5%.
This leaves really two major tools for further stimulative activity following this week's rate cut...
Renewed ECB bond buying (They can no longer rely on an LTRO transmission mechanism inducing financial institutions to buy European sovereign bonds especially as they have shown the propensity for haircuts when things go wrong)…this would likely then transmit into...
A sharp external devaluation of the EURO. Given the poor economic dynamics in Europe, the collapsing inflation, global feedback loop concerns regarding tapering, some concerns about the ability of China (A major export market for Europe and Germany in particular) to maintain the prior pace of economic growth etc. there should be no concern in Europe about this. The authorities have to stop viewing a weaker EURO as part of the problem (financial crisis) and more as part of the solution (External devaluation is stimulative to the MCI (monetary conditions index) and supports export led growth). Even Germany should embrace this given the sluggishness of the EURO area economies and sharply lower and falling inflation. When we look at the longer term EURUSD chart it is very supportive of this outcome in a fashion very similar to the 1995-2000 period.
URUSD monthly chart: A very compelling historical perspective
We continue to expect a significant fall in EURUSD over the next 2+ years as we saw in 1998.We believe Europe needs and should embrace this dynamic given the ongoing danger of a deep recessionary/depressionary/deflationary environment as a consequence of fiscal austerity and the sharp internal devaluation dynamics already seen.
Within this we believe Europe should (and ultimately will) embrace the stimulative effects of such a move in conjunction with further traditional (refinancing rate) easing (Albeit at these levels the move is more psychological than anything) and non-traditional (bond buying)
On top of this the position of both the relative economic and monetary policy dynamics leaves the US further down the road and closer to a potential turn than Europe (Despite those dynamics still being weak by historical recovery standards)
Grant Williams, chief investment strategist for Mauldin Economics’ Bull’s Eye Investor, recently published a piece in his weekly newsletter Things That Make You Go Hmmm… that I thought loyal Hard Assets Alliance readers would find very interesting.
At its core, the article gives a different take on the recent downturn in gold markets.
But it’s much, much more than that, mainly because he’s connected dots no other market critic has come close to piecing together. Until now, most mainstream pundits have based the downturn in gold markets on macro factors, such as tapering by the Federal Reserve, a slowdown in China, etc.
However, as with many things, Grant sees it another way.
His theory starts in 2011, when Venezuela requested to repatriate its gold from offshore holdings in the US. He surmises that the gold due to Venezuela—and in another instance Germany—had been loaned out, either to gold fund ETFs or other banks, and that the recent downturn in gold prices has been orchestrated to allow the big central banks to buy the gold they already owe at a discount.
He then points to a few examples that support this thesis, including a strange letter from a Dutch state-owned bank claiming those who had their gold stored with the bank could only redeem their holdings in cash, along with the mysterious fall in COMEX gold inventories, among others.
It should be noted that not many people could piece together a scheme like this. Grant has years of experience on his side (26, to be exact)… not to mention he’s currently the portfolio and strategy advisor for Vulpes Investment Management, a hedge fund worth over $280 million.
Although we would have liked to reprint the original article in full, it was quite long, so I felt the best way to get the information to you was to take excerpts directly from the piece.
Let’s start at the beginning, where Grant explains the significance of a simple chart, which he claims to have studied “every day for over a decade”:
As many of you recognize, this is a chart of the spot gold price over the last four years.
However, in addition to the spot gold price, Grant added two lines: one to show the date when former Venezuelan President Hugo Chávez demanded the repatriation of 99 tonnes ($13 billion worth) of gold being held in the Bank of England on his behalf, while the other line represents the date on which the Bundesbank announced it wanted to repatriate 674 tonnes of gold from the Federal Reserve Bank of New York and the Banque de France.
Here’s an excerpt of Grant’s analysis of the first date:
“As you can see, the immediate reaction to the commencement of the global game of central bank musical chairs was perfectly understandable and completely explicable: the price soared (to a new all-time high, no less). After all, that’s what generally happens when somebody says “I want a large amount of a reasonably scarce commodity and I want it now”—or at least that’s what generally happens if said commodity needs to be bought in the open marketplace.”
He then goes on to explain why this simple supply-and-demand force may have not worked exactly how you’d expect:
“Within 17 trading days the price had fallen 16%, bottoming at $1,608 on September 28. During that time, nothing much happened in the world—unless you count the Arab Spring and the Libyan civil war, Moody’s downgrading of Japan to Aa3 and the resignation of the Noda cabinet, Ben Bernanke’s promising more QE at Jackson Hole, Hurricane Irene hitting New York City, the SNB’s pledging to print unlimited Swiss francs in order to defend a peg to the euro at 1.20, or the beginning of the “Occupy” movement—so it was hardly surprising that the price would fall.”
With those points in mind, it’s understandable that normal supply and demand dynamics may have taken a back seat. But when prices started falling (again) in January 2013 after the Bundesbank issued a similar request, things started to look suspicious:
“Once again, an initial move higher quickly morphed into a concerted move lower; and this time, with the quantity of gold required to be delivered to satisfy the Bundesbank three times greater than demanded by Chávez, the downward move in the price was correspondingly greater—to a degree that has caused consternation amongst gold watchers all around the world.”
In another twist, the Federal Reserve and the Banque de France responded by saying it will take seven years to transport the requested 300 tonnes of gold from New York City to Frankfurt, and five years to bring roughly 370 tonnes from Paris to Frankfurt:
“OK … time for a little math, methinks:
The Bundesbank wants to repatriate 300 tonnes of gold, which is, of course, sitting, untouched, at the Federal Reserve in New York.
That 300 tonnes equates to 300,000 kilograms.
A Boeing 747-400, set up in a standard cargo freighter configuration, has, according to its manufacturer, a maximum payload of 112,630 kg, a range of 5,115 miles (4,445 nautical miles), and a typical cruising speed of 0.845 mach (560 mph).
The distance between New York and Frankfurt is 3,858 miles.
So the German government could charter three 747-400s, send them to New York, load them up with their gold, and still have 37,890 kg of space left, which would allow for the mother of all shopping trips to Woodbury Common Premium Outlets in Harriman, NY, where Angela Merkel could buy enough Ann Taylor outfits to ensure a fresh one for every EU crisis meeting between now and 2016 … okay, 2015.
By way of additional perspective, between takeoff and landing, if those on board wanted to watch the entire Lord of the Rings trilogy (theatrical versions, minus the credits, NOT the extended versions), they would be forced to circle Frankfurt airport for fifteen minutes before touching down.
But … seven years.
Next, Grant goes on to offer a few theories on what could have happened (which he quickly debunks):
1: What if central banks don’t lease their gold reserves out; and, in fact, all the gold they own is stored exactly where they say it is, in the exact quantities accounted for on their balance sheets?
He then points out that central bank chairmen—including Alan Greenspan—have noted that central banks routinely lease out gold reserves, and that it’s a huge red flag that the Federal Reserve stated it will take a whopping seven years to deliver the gold to the Bundesbank.
After reasoning away the first premise, Grant goes on to offer a more likely scenario:
2: What if the gold in the central banks vaults has been rehypothecated and is no longer held in quantities even approaching those advertised? What would happen then?
Well, if that were the case, there might be a great need for this or that central bank to buy a lot of gold in a hurry, and in such dire straits that the bank(s) would at least want the price not to take the inevitable path higher that would normally accompany such a set of circumstances. If there were some way to make it actually go down in the face of such demand, well, that would be amazing, not to mention remunerative—but surely that’s impossible, right?
Hmmm…”
Grant then cites a few examples of how this could have played out, starting with a strange letter from a Dutch state-owned bank called ABN:
“Paraphrasing, ABN declared that any holders of physical gold that had custodied their metal with the Dutch bank would, henceforth, be cash-settled and could not request physical delivery of their gold (or silver—TTMYGH is very definitely an inclusive publication).
There’s a word for that where I come from: confiscation.”
For me, this is the point where things really started to get fishy; how could a major Dutch bank with over $500 billion in assets simply refuse its customers the gold they had stored?
But then Grant moved on to the well-publicized fall in COMEX gold inventories, and the pieces started falling into place:
“Let’s begin our little foray into the warehouses with a look at what has happened to COMEX gold inventories thus far in 2013:
A steady decline. However, the extent of that fall becomes clearer if we take a step back and look at the COMEX inventory over the last five years, at which point “steady” becomes “precipitous”:
He then notes—which we have mentioned in previous HAA letters—the strange way GLD and other ETFs work in terms of exchanging your paper shares for physical gold.
In short, it’s nearly impossible:
“Although every ten shares of GLD are supposed to be a proxy for one ounce of gold, in order to exchange your shares for that gold, you have to have what is termed a minimum “basket” size. That is 100,000 shares. These shares are created (and redeemed) by only a limited (but mostly rather familiar) group of “authorized participants”:
JPMorgan, Merrill Lynch, Morgan Stanley, Newedge, RBC, Scotia Mocatta, UBS, and Virtu Financial.
These authorized participants transfer gold to the trustee (HSBC London) for share creation and receive the shares in return. The redemption process works the same way but in reverse and can only be activated in round “baskets” of 100,000 shares (with a basket currently equating to around $13,000,000—hardly a retail trade).”
To loyal Hard Assets Alliance readers, this should be of no surprise.
That said, Grant really brings it all back home with his last chart, which plots the spot gold price, COMEX inventories, and ETF holdings all on one graph:
“So what does all this look like if we put it together on one chart? Well, it looks like this:
As you can clearly see, virtually from the day that Germany demanded to have its gold delivered back to the Bundesbank, three very clear phenomena have occurred:
1. The gold price, which had been trending sideways, has plummeted. 2. The physical gold held at the COMEX has been pouring out of the warehouses. 3. The amount of physical gold held by the ETFs has stopped rising and started falling. Fast.
Coincidence? I very much doubt it.
Wanna know what I think, folks? I think the central banks have been leasing their gold out for decades to the bullion banks and now find themselves in the rather precarious position of needing to reclaim that which they are supposed to own before the shortfall is exposed. I think that creates a big problem for both sides of that little scheme.
I think the smash in paper was specifically designed to shake out loose holders—and it has worked to a degree, but only amongst the weaker holders of the ETFs, who tend to “rent” gold rather than own it. I think the stronger hands have been getting their gold out of the official warehouses as fast as they can; and central banks in places like China, Russia, and all over the rest of Asia and South America have been trying to buy and, crucially, to take delivery of physical gold while they still can.
I also think that retail investors—particularly here in Asia—are, unfortunately, compounding the banks’ problems by using the weakness in the paper markets to acquire as much physical metal (or, as it’s known in this part of the world, “wealth”) as they can.
To paraphrase Everett Dirkson, “A few hundred ounces here, a few hundred ounces there, and pretty soon you’re talking real problems.”
And there you have it. If you’re someone who was a bit skeptical about the recent downturn in gold, I’m sure Grant just gave you some intellectual firepower to support your claim.
There are questions that still need to be answered, the most important being how long can the big banks get away with it. That remains to be seen, but in the meantime, holding physical metals—rather than paper trading with GLD and other ETFs—is the best way to guard against financial calamity.
Hold gold and silver bullion, the Hard Assets Alliance offers you an ideal way to do your purchase. What’s more, the Action Kit gives you an in-depth look at the many options in buying, selling, and storing precious metals plus answer any questions you may have about the Hard Assets Alliance. Get your FREE Action Kit today.
Andy Hoffman talks to Megan Duffield of Silver Circle Movie to discuss the economy, precious metals, mining shares. They also talk about the producing, promoting, turn-out of the tour and the reviews of the movie.
07-Nov (The Economist) — This week’s Free exchange column examines a fascinating and important new paper from economists at the Federal Reserve Board (including William English, head of the Fed’s monetary-affairs division). The Fed researchers survey central banks’ responses to the crisis and then focus their attention on forward guidance, and in particular on how to make it work effectively.
…The authors then model several different approaches to forward guidance in order to see which produce the best results. Baseline, simple policy rules generally perform poorly. Inflation converges toward 2% painfully slowly and unemployment drops to 5.5% or so sometime around 2018. Committing to allow inflation to rise above 2% generates much better performance; the economy hits a 5.5% unemployment rate about two years earlier—assuming the commitment is credible. But, as the authors point out, it probably isn’t.
…But (in part thanks to Japan) it is also increasingly clear how an economy can launch itself off. Based on the lessons of the Depression scholars like Ben Bernanke and Lars Svensson have hit on the key ingredients to a monetary-policy solution. They are:
1. Announce an inflation or price-level target that guarantees a period of above-normal inflation. 2. Depreciate the currency. 3. Support the depreciation, to the extent necessary, through direct intervention in foreign-exchange markets: print money and buy foreign currencies or assets.
Mr Svensson describes his combining of these basic elements as the “foolproof” route off the zero lower bound.
PG View: Foolproof? Really? This piece nicely tips in the point I made in today’s DMR. It would be wise for investors to get some gold before the Fed attempts to ‘Svensson’ us all!
It was an aching week for silver and GOLD PRICES, while the US dollar and stocks rather enjoyed it. No market seems to have changed its mind this past week, except maybe bonds, but looks can deceive.
The GOLD PRICE lost 1.8% today ($23.90), falling to $1,284.50. Silver lost "only" 1.5% or 33.2 cents, ending at 2130.7c.
The rising trend line from the gold price $1,179.40 June low through the October $1,251 low now becomes the next target. Today that line hits about $1,265. If that doesn't hold, look at $1,180 again.
The SILVER PRICE rising trend line from the same bottoms lies today a little above 2100c. Below that, 2000c might catch, or 1900c.
To gainsay this gloomy outlook the gold price needs to close suddenly above $1,330 and the silver price above 2300c.
Both silver and gold prices have a seasonal tendency to post lows in September. Two years out of the last 14, gold has made its yearly low in November. But not once in all that time is there a December low. Lots in January.
The long bull market for the silver and gold prices has NOT ended. All the ingredients are in place to send them into their next rally. Y'all will swallow hard and swear I'm a lunatic, but you'd better use these declines as opportunities to buy more. Watch close. Stay calm. The federal government and the Federal Reserve are both on gold and silver's side.
US dollar index gained 38.7 basis points today (0.5%), climbing at last over the fence at 81. Next test for the dollar is, "Can you climb through the 200 DMA (81.78)?" It appears so. Dollar will reach for 83.00 if it bursts through the 200 DMA.
Euro lost another 0.43% today and ended at $1.3360. Bottom is dropping out. Once it crosses the 200 DMA at $1.3230 its fall will accelerate.
Yen yesterday made a strange, huge move from down to up, then reversed most of that today. Lost 1.05% to end at 100.87. NGM must be nervous, and getting sloppy, letting the yen trade like that.
US 10 year treasury note yield rose sharply today (=bond prices fell) and closed at 2.746, up 5.09% and above its 50 DMA (2.689%). Dollar rose, bonds fell? The kept and clueless media laid the blame on a better than forecast unemployment report today. They "reason" that the good unemployment report fueled speculation that the fed might taper sooner than expected. Beneath all this lies a deep anxiety that the bond bubble Ben Bernanke blew up with his Zero Interest Rate Policy might be bursting. The 10 year note broke (as did the 30 year) in June of this year. Although they have recovered some across the fall, the end and further fall shows in the chart. When this bubble bursts in earnest, they'll be playing "Hell Broke Loose in Georgia" in the bond market.
Despite strength today, I reckon stocks next week will drop after their long rise. This will be sharp and raise blisters on your eye-balls, but shouldn't carry too far. One more rise left in stocks yet. These big moves that slam and lurch from side to side show confusion, not strength. Dow today ended up 167.80 (down 152.90 yesterday) at 15,761.78. S&P500 gained 23.46 or 1.34% today after losing 23.34 yesterday. Ended at 1,770.61.
Last few days have sent the Dow in Gold and Dow in Silver much higher. I have to infer (absent a big drop contradicting) they are headed for those June highs at 12.514 oz and 816.77 oz. Ended today at 739.40 oz and 12.27 oz. Catches my eye that the Dow in Silver has not regained nearly as much territory as the Dow in Gold, showing silver is stronger against stocks than gold. Another inference from this chart guesses that silver and gold may drop toward their June lows, but silver will stop higher than June.
Y'all enjoy your weekend!
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
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.
It was an aching week for silver and GOLD PRICES, while the US dollar and stocks rather enjoyed it. No market seems to have changed its mind this past week, except maybe bonds, but looks can deceive.
The GOLD PRICE lost 1.8% today ($23.90), falling to $1,284.50. Silver lost "only" 1.5% or 33.2 cents, ending at 2130.7c.
The rising trend line from the gold price $1,179.40 June low through the October $1,251 low now becomes the next target. Today that line hits about $1,265. If that doesn't hold, look at $1,180 again.
The SILVER PRICE rising trend line from the same bottoms lies today a little above 2100c. Below that, 2000c might catch, or 1900c.
To gainsay this gloomy outlook the gold price needs to close suddenly above $1,330 and the silver price above 2300c.
Both silver and gold prices have a seasonal tendency to post lows in September. Two years out of the last 14, gold has made its yearly low in November. But not once in all that time is there a December low. Lots in January.
The long bull market for the silver and gold prices has NOT ended. All the ingredients are in place to send them into their next rally. Y'all will swallow hard and swear I'm a lunatic, but you'd better use these declines as opportunities to buy more. Watch close. Stay calm. The federal government and the Federal Reserve are both on gold and silver's side.
US dollar index gained 38.7 basis points today (0.5%), climbing at last over the fence at 81. Next test for the dollar is, "Can you climb through the 200 DMA (81.78)?" It appears so. Dollar will reach for 83.00 if it bursts through the 200 DMA.
Euro lost another 0.43% today and ended at $1.3360. Bottom is dropping out. Once it crosses the 200 DMA at $1.3230 its fall will accelerate.
Yen yesterday made a strange, huge move from down to up, then reversed most of that today. Lost 1.05% to end at 100.87. NGM must be nervous, and getting sloppy, letting the yen trade like that.
US 10 year treasury note yield rose sharply today (=bond prices fell) and closed at 2.746, up 5.09% and above its 50 DMA (2.689%). Dollar rose, bonds fell? The kept and clueless media laid the blame on a better than forecast unemployment report today. They "reason" that the good unemployment report fueled speculation that the fed might taper sooner than expected. Beneath all this lies a deep anxiety that the bond bubble Ben Bernanke blew up with his Zero Interest Rate Policy might be bursting. The 10 year note broke (as did the 30 year) in June of this year. Although they have recovered some across the fall, the end and further fall shows in the chart. When this bubble bursts in earnest, they'll be playing "Hell Broke Loose in Georgia" in the bond market.
Despite strength today, I reckon stocks next week will drop after their long rise. This will be sharp and raise blisters on your eye-balls, but shouldn't carry too far. One more rise left in stocks yet. These big moves that slam and lurch from side to side show confusion, not strength. Dow today ended up 167.80 (down 152.90 yesterday) at 15,761.78. S&P500 gained 23.46 or 1.34% today after losing 23.34 yesterday. Ended at 1,770.61.
Last few days have sent the Dow in Gold and Dow in Silver much higher. I have to infer (absent a big drop contradicting) they are headed for those June highs at 12.514 oz and 816.77 oz. Ended today at 739.40 oz and 12.27 oz. Catches my eye that the Dow in Silver has not regained nearly as much territory as the Dow in Gold, showing silver is stronger against stocks than gold. Another inference from this chart guesses that silver and gold may drop toward their June lows, but silver will stop higher than June.
Y'all enjoy your weekend!
Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.
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.
Heavy and relentless selling by American futures speculators has been one of the primary drivers of gold's horrendous year. These traders abandoned gold on the long side while piling in on the short side, unleashing withering selling pressure. But just in recent weeks, these speculators have started buying gold-futures contracts again on the long side. This critical and long-awaited reversal is very bullish for gold.
Futures speculators have long been at odds with gold investors. With gold futures' inherent extreme leverage and expiration dates, speculators must maintain a very-short-term perspective in order to survive. Their whole worldview is based on technicals and sentiment, with trades lasting hours, days, or maybe weeks on the outside. Gold's supply-and-demand fundamentals are largely irrelevant at this short scale.
Each futures contract controls 100 ounces of gold, worth $130,000 at $1300 gold. Yet the initial margin speculators have to put up to trade in this market are merely $8,800 per contract. This yields astounding maximum leverage of 14.8x! This dwarfs the legal limit in the stock markets of 2x, which has been locked in place since 1974 by the Federal Reserve's Regulation T. Extreme leverage is a very unforgiving game.
After speculators open a gold-futures trade, the maintenance margin drops to just $8000 per contract. At $1300 gold this enables maximum leverage of 16.3x. At those extremes, a mere 6.2% gold move against a speculator's bet will wipe out all of the capital he risked. And in futures, losses can quickly snowball far larger than the money bet. So futures speculators have no choice but to keep a very-short-term focus.
When gold plummeted in the first half of 2013, physical demand exploded worldwide. Thanks to gold's outstanding long-term fundamentals, investors were eager to take advantage of fire-sale prices to grow their positions. But to futures speculators looking days ahead instead of years, gold's free-falling technicals and hyper-bearish sentiment fueled an overpowering incentive to dump futures aggressively.
And with downside momentum in their favor, that's exactly what these traders did. They closed out many of their long-side contracts by selling them, stanching the leveraged bleeding. And they multiplied downside bets by effectively borrowing gold to sell it short. In futures markets, the price impact of selling to close long contracts and selling to open short contracts is identical. This deluge of futures supply helped tank gold.
As 2013's extraordinary and unprecedented gold-futures action unfolded, it was chronicled in a relatively obscure government report. Once a week the Commodity Futures Trading Commission releases its Commitments of Traders report. Known as the CoT, it details what commercial hedgers, large speculators, and small speculators are doing in the American futures markets. Experienced traders watch it like hawks.
But rather interestingly, last month's partial government shutdown effectively shuttered the CFTC. It was deemed non-essential, which is certainly the case compared to jobs like air-traffic controllers. So for the better part of October, the CoT report vanished as CFTC employees were first furloughed and then raced to get caught up when they returned to work. They finally finished October's CoT reports this week.
And something very bullish for gold happened during that data void, American futures speculators started to buy long-side gold contracts in major quantities again. In fact, over the past couple CoT weeks (ending October 29th) futures speculators bought more long-side gold contracts than they had since back in late November 2012. Back then gold was near $1750 and 2013's crazy selling anomaly hadn't happened!
This major gold-futures buying in recent weeks is a sea change, something we've not witnessed since the gold markets were behaving normally. And I suspect it is the vanguard of much more gold-futures buying to come, which is super-bullish for the battered yellow metal. This year's extreme selling left speculators' longs and shorts at such great extremes that it will take colossal buying to unwind them.
The massive mean-reversion buying remaining for American gold-futures speculators is revealed in this chart, which was built from the CFTC's CoT data. It shows both the total long (green) and short (red) contracts held by both large and small speculators, with gold superimposed on top (blue). The long-side buying seen in recent weeks is truly just the tip of the iceberg as gold-futures positions return to normal.
While "normal" is a somewhat-subjective term, everyone would agree 2013 has proven an exceedingly atypical year for gold. Gold experienced its worst quarter in something like a century in Q2, plummeting 23%! A once-in-a-century event is obviously far from normal. Another once-in-a-century selling anomaly happened in 2008, that epic stock panic. Sandwiched between these extremes was some semblance of normalcy.
So it seems reasonable to use the four-year secular span between 2009 and 2012 as a baseline from which to compare American speculators' gold-futures positions in 2013. That was a long time frame that included both mighty gold uplegs and serious corrections, encompassing the spectrum of gold-market technicals and sentiment. The average speculator positions in gold futures during this span are rendered above.
On average in this pre-2013 post-panic era, American futures speculators held the long side of 288.5k gold contracts and the short side of 65.4k. To put these into terms gold investors can better understand, they equate to 28.9m and 6.5m ounces of gold respectively. Or 897 and 203 metric tons long and short. This compares to the World Gold Council's 2013 annualized estimate of total global mine supply of 2765t.
Obviously these total positions changed with speculators' collective sentiment. Longs rose and shorts fell when they grew more bullish on gold, and the opposite when they waxed more bearish. But all of this normal market activity, the usual flow and ebb of uplegs and corrections, is distilled into these baseline averages. The sharp contrast between them and what we've seen this year really highlights 2013's extremes.
Let's start on the short side, with the red line in this chart. In the past four years, futures speculators tended to have about 65.4k gold contracts sold short. As you can see, the data underneath this average was pretty tight. There were few large deviations from it, and total short positions soon mean reverted after they stretched too far away. But all that changed dramatically in this year's wildly-unprecedented gold selloff.
American futures speculators got so wrapped up in the short-term downside momentum and hyper-bearishness plaguing gold in 2013's first half that their total shorts exploded. They borrowed and sold so aggressively that by early July their total short position had rocketed to an astounding 178.9k contracts! This was at least a dozen-year high, the most extreme speculator short position of gold's entire secular bull.
I wrote extensively about that anomaly back in mid-July right when that peak CoT report was released. I pointed out that epic outlying record couldn't last, that speculators would soon be forced to unwind their shorts. The only way a short futures contract can be closed is by buying an offsetting long one, and all that buying pressure would feed on itself. Thus I concluded gold was due for an imminent short squeeze.
Like all contrarian thought, the heretical concept that market extremes always mean revert was ridiculed. I was deluged by bears telling me how stupid I was for not seeing that gold would soon plunge below $1000. Yet gold indeed soared as futures shorts were forced to cover, and by late August it had catapulted $218 higher (18%) from its brutal late-June lows! Futures mean reversions are very powerful forces.
Since peak bearishness, speculators' downside bets on gold have unwound dramatically. The latest CoT available at this writing (October 29th's) shows they've collapsed to 83.6k contracts. So in less than 4 months, American futures speculators bought the equivalent of 9.5m ozs of gold in the futures markets! But they're not done. To merely return to recent normal years' average levels, another 1.8m ozs of buying remains.
But the gold-futures short squeeze is old news, the big development this week was the stunning reversal in speculators' long bets on gold. While we couldn't know it at the time since the CFTC was closed for the government shutdown, in the week ending October 15th total speculator longs fell to just 175.7k contracts. These were the lowest levels seen since December 2008, right after that once-in-a-lifetime stock panic!
Just like shorts being exceptionally high, longs being exceptionally low are a sign of peak bearishness. Despite the recent flurry of short covering, speculators still overwhelmingly believed gold was due to keep spiraling lower. Like always after a sharp plunge, commentary abounded trying to rationalize that selloff as being an ongoing trend rather than a major bottom. Futures speculators as a herd always fall for this.
I'm not a futures trader and never will be, extreme leverage is far beyond my risk tolerance. The reason I started studying what the futures speculators were doing many years ago is because they are such a fantastic contrarian indicator. As a herd they always bet wrong at extremes, getting too bullish when gold is topping and too bearish when gold is bottoming. So their futures positions extremes flag imminent major reversals.
In mid-October as longs dwindled, gold was slumping heading into the inevitable resolution of that temporary US government shutdown. Traders nearly universally believed that when the great uncertainty of that event passed, gold would quickly be hammered to new lows under June's. Futures speculators sure bought into this excessive bearishness too, continuing to reduce their long-side gold contracts.
Falling to 175.7k a few weeks ago, they were a whopping 112.8k contracts below their 2009-to-2012 average levels! That equates to 11.3m ozs of gold buying that would have to be done merely to mean revert to normal. But after market extremes, the resulting mean reversions rarely stop at the averages. Instead their momentum propels them to overshoot big in the opposite direction, which is very likely again.
Futures speculators hadn't been so bearish since just after 2008's stock panic, another time when prevailing consensus assumed gold was doomed since it hadn't surged during that crisis. Much like this year's selloff, that was not a fundamental failing but a short-term anomaly driven by an extraordinary dollar rally. This year's anomaly is the result of the stock-market levitation spawning a GLD mass exodus.
All anomalies are inherently self-limiting. Once practically everyone is already bearish, the vast majority of the selling has already passed. That leaves only buyers so the battered price soon starts rallying. In the years following futures speculators' hyper-bearishness on gold after 2008's stock panic, this metal would blast nearly 2.5x higher! It wouldn't surprise me one bit to see a similar gold surge in the coming years.
There's one final line I want to highlight on the first chart before we move on. The yellow one shows the total 2013 deviation in both speculators' gold longs and shorts from their past four years' averages. This series reveals the total gold buying left from futures speculators alone in order to mean revert back to normal gold markets. This next chart zooms in to the past year or so to offer a better view of this key metric.
The total speculator futures positions' deviation from their 2009-to-2012 averages peaked along with shorts in early July at 204.1k contracts. As these traders started to aggressively cover their shorts, their buying drove a fast gold rally as I predicted back in mid-July. By the time gold hit its latest interim high in late August, speculators had bought 68.6k contracts. This dropped the 2013 deviation back down to 135.5k.
But as you can see from the green total-longs line, nearly all that buying in July and August came on the short side. Speculators had to cover their shorts as gold rose, since their extreme leverage put their capital at great risk. Every gold contract they bought to close a short one pushed gold higher, which formed a self-feeding cycle motivating even more speculators to cover. That was good for a $218 gold surge.
Today per the latest CoT this 2013 deviation is back down to 116.3k contracts. Futures speculators still have to buy back the equivalent of 11.6m ozs of gold merely to mean revert to their 2009-to-2012 average levels of total longs and shorts with no overshooting. This remainder is 1.7x larger than the big chunk of shorts the traders initially covered in July and August which catapulted gold sharply higher! It is very bullish.
And futures speculators just started buying major new long-side gold contracts in the past few weeks. All year long, speculators have been relentlessly abandoning longs. But suddenly in the CoT week ending the 22nd, they bought 8.7k contracts. They flooded back into gold after it didn't collapse like the bears predicted after the US debt ceiling was extended. This was the biggest surge by far since early February.
And early February is very interesting technically and sentimentally. Back then gold was still trading near $1675, normal levels before any of 2013's extreme selling broke out. Gold remained far above its critical $1550 multi-year support then. It was the failure of that level in April that spawned the extraordinarily anomalous futures forced liquidation that crushed gold down 13.8% in two trading days, killing sentiment.
Today's entire gold worldview plagued by excessive bearishness is the product of the selling that started in mid-February as futures shorts tried to press their advantage, continued in April in that panic-like plunge, and climaxed in June after Ben Bernanke laid out the Fed's optimal QE3-tapering timeline. So to see futures speculators add new longs again like they last had before all that signals a major sentiment shift.
The CFTC finally got caught up with last week's CoT late Wednesday afternoon, and that revealed futures speculators had purchased 14.7k net new long contracts over the past two weeks. Again this was the best since late November 2012, when gold was trading near $1750 and no one could even have imagined what misery lay ahead in 2013. Futures speculators are buying again like they were in normal times!
This sea change makes it look like the speculator longs finally bottomed in mid-October and are heading higher. And with 116.3k contracts still left to buy to return to pre-2013 average levels of longs and shorts, this is very bullish for gold. If gold rallies proportionally in the remainder of this mean reversion to what it did initially in July and August, it will soon power another $370 higher from today's levels! Imagine that.
At $1670, gold sentiment would be wildly different than it is today. The extreme bearishness would be long gone, and there would be growing bullishness. This would not only entice more futures speculators back in, but also accelerate the reversal of capital flows back into the flagship GLD gold ETF. In the financial markets, buying begets buying. The higher any price goes, the more people want to buy it.
The 11.6m ozs of futures-speculator mean-reversion buying remaining equals the equivalent of 362 metric tons of gold. And since their all-time record high achieved less than a year ago in December 2012, GLD's holdings have plummeted 487t due to 2013's crazy-heavy differential selling pressure on its shares! So as the coming futures buying drives gold prices higher, it has a potentially far greater upside price impact.
Even though they don't like attempting to buy bottoms, it's too risky, professional investors recognize that when a price has fallen far and fast a bottoming is likely. So once a price starts rallying decisively and consistently out of those lows, they pile in to the trade. Gold saw this in early 2009 after its brutal stock-panic lows. Today's young gold upleg driven by futures buying should again trigger big new capital inflows.
And if these extend to GLD as is highly likely, reversing the fund flows back into gold from the stock markets, watch out above. If even half the capital that abandoned GLD returns in the coming year, gold is going to rocket higher. Of course when the levitating stock markets inevitably roll over, alternative investments will return to favor for portfolio diversification and capital flows back into gold will surge.
But this whole process starts with futures buying. Initially speculators cover their shorts, as we saw in July and August. Then these short-term traders start adding new longs, as we are finally starting to see in a major way in the past couple weeks. This futures buying ignites a large-enough upleg to start enticing other speculators and investors back in, and eventually all that buying feeds on itself and gold soars.
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The bottom line is futures speculators have finally started decisively buying again in recent weeks. And this is not just short covering, but serious long-side buying. They haven't bought new gold futures in such large quantities since the gold markets were normal before 2013's wildly-anomalous selloff. This is a major sea change, the vanguard of the long-awaited mean reversion in futures to catapult gold higher.
While futures speculators are the first to buy after an extreme low, they pave the way for many other speculators and investors to follow. First through short covering and then through new long-side buying, the futures speculators drive a price higher on balance to form a new uptrend. As that uptrend persists and strengthens, other traders follow them in which soon forms a very bullish self-feeding virtuous circle.
08-Nov (Globe & Mail) — If Hollywood were ever to redo the 1964 James Bond classic Goldfinger, central casting might briefly consider Nick Barisheff for the title role. The Toronto-based investment guru has the requisite gold bug credentials, but the movie makers would soon find out he has none of the menacing characteristics necessary for a good Bond villain.
Mr. Barisheff, president and chief executive officer of Bullion Management Group Inc., is in the doom-and-gloom business, that’s true, but his dark prophecies are lightened by his professorial and halting conversation style.
His message is simple: Canadians need to hold more gold and other precious metals in their investment portfolios or face the wasting effects of inflation on their purchasing power in the years ahead.
Why? Because governments are engaged in a “race to debase” their currencies. Some, like Japan’s government, are trying to end decades of economic doldrums. Others, Mr. Barisheff argued, are cranking up their printing presses to inflate their currencies and get away from mountains of debt.
[source] PG View: Mr. Barisheff’s advice would hold true for American investors too…
What we've pointed out is how easy it is for the bullion banks –who are distributors of gold globally as well as speculators and brokers to so many of the huge professionals in the gold market as well as for themselves—to 'manage' the gold price to where they want it to go; however, they cannot override the underlying current of the gold price. They can manage individual waves and can for a while manage the tidal effects, but when you see the fundamental changes happening in the gold market globally, even the professionals in the gold market cannot override them of influence the changes in current for more than a short time.
With the fragmentation of the gold market, as we're describing in this series on the gold market, the gold price is not reflecting the true balance of demand and supply. It's reflecting the balance of the demand and supply that's routed through London and other developed world markets and distribution systems.
s we have mentioned previously, charting the U.S. Dollar gives the trader a great advantage in trading other currencies. Normally we watch the Euro in conjunction with the Dollar, because each currency is the largest component ... Read More...
GATA again will participate in Cambridge House's Vancouver Resource Investment Conference, to be held at the Vancouver Convention Centre West on Coal Harbor in that most beautiful city on Sunday and Monday, January 19 and 20, 2014.
In addition to GATA Chairman Bill Murphy, board member Ed Steer, and your secretary/treasurer, speakers will include GATA favorites David Morgan of The Morgan Report and Silver-Investor.com, David Franklin and Rick Rule of Sprott Asset Management, geologist and newsletter writer Mickey Fulp, Jeff Berwick of The Dollar Vigilante, U.S. Global Investors CEO Frank Holmes, GoldSeek.com proprietor Peter Spina, and Peter Schiff of Euro-Pacific Capital.
Scores of resource companies will be exhibiting and their executives will be available for conversations with investors. Admission will be free for people who register in advance. And the conference has arranged discounted room rates with three first-rate hotels adjacent to the convention center: the Pan Pacific, the Fairmont Waterfront, and the Fairmont Pacific Rim.
Information about the conference is posted at the Cambridge House Internet site here:
CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.
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In the latest Silver Institute newsletter, several advances have been reported when it comes to applications of silver in industry. In particular, the industrial applications are in the field of photography (first article), bio-batteries (second article), clean energy (third article) and energy (fourth article). Courtesy: Silver Institute.
A Place for Silver in the Growing "Slow Photography" Movement
There's a new trend gaining speed in the age of digital photography: so-called "slow photography" using old-fashioned silver-halide film.
The slow photography movement has been gaining traction in recent years in the same way that some audiophiles have rejected digital music because they believe that vinyl is truer to the original sound. To slow-movement photographers, silver halide films produce richer, more nuanced images than digital cameras.
It seems like the last 2 days have been a massive NASDAQ-TWTR pairs trade... Today saw broad stock indices best day in a month despite the early "good news is bad news" sell-off as newly minted TWTR heads towards its first bear market threshold off the highs. The Dow managed to get back to a record high close by the end of the day. Treasury prices were clubbed like a baby seal with yields jumping their most in over 4 months. Shorts were grossly squeezed today ("most shorted +2.9% vs Russell +1.1%). Gold was down 1.4% on the day (oil and copper flat) and 2% on the week. VIX was banged back under 13% and the JPY weakness sparked by the taper-on-driven USD strength kept carry traders alive. All in all - only equity markets reacted "positively" to the good news with a panic-buying-frenzy in the last 30 minutes as rates, FX, and precious metals all shifted in a "taper-on" trend...
POMO and 330RAMP took care of business today...
All you need to know about today in 2 tweets...
Stocks desperate for today's Mega POMO to begin already
Treasuries were battered to a ley technical levels...
But rates, Gold, and stocks diverged...
as PMs slid with oil flat...
The USD was well bid after the "good news" this morning - whether that implicit JPY weakness (that drove stocks via carry) was 'real' risk-on or just taper concerns will have to be seen...
EURJPY was in charge again - as post jobs POMO ripped us up to convergence...
Charts: Bloomberg
Bonus Chart - Another all-time low in TWTR (within 1% of a bear market...)
In this article Jeff claims that GATA refuses to post his articles because they are in league with the Rothschilds…
GIVE ME A BREAK JEFF!
Of the more absurd things I have read in the gold/silver manipulation “blogosphere”… this tops them all! GATA has no obligation to post anything you write on their website. Just because they stopped posting your articles doesn’t mean that they have “gone to the dark side”. All it means is that Chris Powell either doesn’t like you or he doesn’t think your articles are worth posting to HIS subscriber base. Half the things I write about Chris won’t post because they are too controversial. SO GET OVER IT!
We all make choices on what articles we post or reference on our websites. Chris Powell and his www.GATA.org website is no different.
Jeff – If you have an axe to grind with Chris for not posting your articles that’s your issue with him.
If you are trying to degrade the good name of GATA your gonna have to deal with me…and all of us who have been fighting to end the manipulation of gold and silver for 15 years.
Let’s get the angry finger pointed in the right direction.
One could take another equally valid point of view: the reason for deteriorating liquidity in bond markets is due in part to yields being unnaturally low. If you price bonds too highly, which amounts to the same thing, few investors want to buy them without the unconditional support of the central bank as a ready buyer. This, after all, is why just the hint of tapering recently was enough to derail the markets. So here again we come up against the same choice: if the Fed insists on mispricing the market with its interventions and zero interest rate policy it must fully support the market with both QE and also twist applied to the yield curve to maintain market liquidity.
For the investment analysts and commentators that still expect tapering this must come as something of a surprise. The underlying point they have missed is that once a central bank embarks on a policy of printing money as a cure-all, it is impossible to stop, or even to just taper without risking a liquidity crisis. Increasingly illiquid markets are now telling us that QE should be increased.
I am very pleased to participate in this event in honor of Stanley Fischer. Stan was my teacher in graduate school, and he has been both a role model and a frequent adviser ever since. An expert on financial crises, Stan has written prolifically on the subject and has also served on the front lines, so to speak--notably, in his role as the first deputy managing director of the International Monetary Fund during the emerging market crises of the 1990s. Stan also helped to fight hyperinflation in Israel in the 1980s and, as the governor of that nation's central bank, deftly managed monetary policy to mitigate the effects of the recent crisis on the Israeli economy. Subsequently, as Israeli housing prices ran upward, Stan became an advocate and early adopter of macroprudential policies to preserve financial stability.
Stan frequently counseled his students to take a historical perspective, which is good advice in general, but particularly helpful for understanding financial crises, which have been around a very long time. Indeed, as I have noted elsewhere, I think the recent global crisis is best understood as a classic financial panic transposed into the novel institutional context of the 21st century financial system.1An appreciation of the parallels between recent and historical events greatly influenced how I and many of my colleagues around the world responded to the crisis.
Besides being the fifth anniversary of the most intense phase of the recent crisis, this year also marks the centennial of the founding of the Federal Reserve.2It's particularly appropriate to recall, therefore, that the Federal Reserve was itself created in response to a severe financial panic, the Panic of 1907. This panic led to the creation of the National Monetary Commission, whose 1911 report was a major impetus to the Federal Reserve Act, signed into law by President Woodrow Wilson on December 23, 1913. Because the Panic of 1907 fit the archetype of a classic financial panic in many ways, it's worth discussing its similarities and differences with the recent crisis.3
Like many other financial panics, including the most recent one, the Panic of 1907 took place while the economy was weakening; according to the National Bureau of Economic Research, a recession had begun in May 1907.4Also, as was characteristic of pre-Federal Reserve panics, money markets were tight when the panic struck in October, reflecting the strong seasonal demand for credit associated with the harvesting and shipment of crops. The immediate trigger of the panic was a failed effort by a group of speculators to corner the stock of the United Copper Company. The main perpetrators of the failed scheme, F. Augustus Heinze and C.F. Morse, had extensive connections with a number of leading financial institutions in New York City. When the news of the failed speculation broke, depositor fears about the health of those institutions led to a series of runs on banks, including a bank at which Heinze served as president. To try to restore confidence, the New York Clearinghouse, a private consortium of banks, reviewed the books of the banks under pressure, declared them solvent, and offered conditional support--one of the conditions being that Heinze and his board step down. These steps were largely successful in stopping runs on the New York banks.
But even as the banks stabilized, concerns intensified about the financial health of a number of so-called trust companies--financial institutions that were less heavily regulated than national or state banks and which were not members of the Clearinghouse. As the runs on the trust companies worsened, the companies needed cash to meet the demand for withdrawals. In the absence of a central bank, New York's leading financiers, led by J.P. Morgan, considered providing liquidity. However, Morgan and his colleagues decided that they did not have sufficient information to judge the solvency of the affected institutions, so they declined to lend. Overwhelmed by a run, the Knickerbocker Trust Company failed on October 22, undermining public confidence in the remaining trust companies.
To satisfy their depositors' demands for cash, the trust companies began to sell or liquidate assets, including loans made to finance stock purchases. The selloff of shares and other assets, in what today we would call a fire sale, precipitated a sharp decline in the stock market and widespread disruptions in other financial markets. Increasingly concerned, Morgan and other financiers (including the future governor of the Federal Reserve Bank of New York, Benjamin Strong) led a coordinated response that included the provision of liquidity through the Clearinghouse and the imposition of temporary limits on depositor withdrawals, including withdrawals by correspondent banks in the interior of the country. These efforts eventually calmed the panic. By then, however, the U.S. financial system had been severely disrupted, and the economy contracted through the middle of 1908.
The recent crisis echoed many aspects of the 1907 panic. Like most crises, the recent episode had an identifiable trigger--in this case, the growing realization by market participants that subprime mortgages and certain other credits were seriously deficient in their underwriting and disclosures. As the economy slowed and housing prices declined, diverse financial institutions, including many of the largest and most internationally active firms, suffered credit losses that were clearly large but also hard for outsiders to assess. Pervasive uncertainty about the size and incidence of losses in turn led to sharp withdrawals of short-term funding from a wide range of institutions; these funding pressures precipitated fire sales, which contributed to sharp declines in asset prices and further losses. Institutional changes over the past century were reflected in differences in the types of funding that ran: In 1907, in the absence of deposit insurance, retail deposits were much more prone to run, whereas in 2008, most withdrawals were of uninsured wholesale funding, in the form of commercial paper, repurchase agreements, and securities lending. Interestingly, a steep decline in interbank lending, a form of wholesale funding, was important in both episodes. Also interesting is that the 1907 panic involved institutions--the trust companies--that faced relatively less regulation, which probably contributed to their rapid growth in the years leading up to the panic. In analogous fashion, in the recent crisis, much of the panic occurred outside the perimeter of traditional bank regulation, in the so-called shadow banking sector.5
The responses to the panics of 1907 and 2008 also provide instructive comparisons. In both cases, the provision of liquidity in the early stages was crucial. In 1907 the United States had no central bank, so the availability of liquidity depended on the discretion of firms and private individuals, like Morgan. In the more recent crisis, the Federal Reserve fulfilled the role of liquidity provider, consistent with the classic prescriptions of Walter Bagehot.6The Fed lent not only to banks, but, seeking to stem the panic in wholesale funding markets, it also extended its lender-of-last-resort facilities to support nonbank institutions, such as investment banks and money market funds, and key financial markets, such as those for commercial paper and asset-backed securities.
In both episodes, though, liquidity provision was only the first step. Full stabilization requires the restoration of public confidence. Three basic tools for restoring confidence are temporary public or private guarantees, measures to strengthen financial institutions' balance sheets, and public disclosure of the conditions of financial firms. At least to some extent, Morgan and the New York Clearinghouse used these tools in 1907, giving assistance to troubled firms and providing assurances to the public about the conditions of individual banks. All three tools were used extensively in the recent crisis: In the United States, guarantees included the Federal Deposit Insurance Corporation's (FDIC) guarantees of bank debt, the Treasury Department's guarantee of money market funds, and the private guarantees offered by stronger firms that acquired weaker ones. Public and private capital injections strengthened bank balance sheets. Finally, the bank stress tests that the Federal Reserve led in the spring of 2009 and the publication of the stress-test findings helped restore confidence in the U.S. banking system. Collectively, these measures helped end the acute phase of the financial crisis, although, five years later, the economic consequences are still with us.
Once the fire is out, public attention turns to the question of how to better fireproof the system. Here, the context and the responses differed between 1907 and the recent crisis. As I mentioned, following the 1907 crisis, reform efforts led to the founding of the Federal Reserve, which was charged both with helping to prevent panics and, by providing an "elastic currency," with smoothing seasonal interest rate fluctuations. In contrast, reforms since 2008 have focused on critical regulatory gaps revealed by the crisis. Notably, oversight of the shadow banking system is being strengthened through the designation, by the new Financial Stability Oversight Council, of nonbank systemically important financial institutions (SIFIs) for consolidated supervision by the Federal Reserve, and measures are being undertaken to address the potential instability of wholesale funding, including reforms to money market funds and the triparty repo market.7
As we try to make the financial system safer, we must inevitably confront the problem of moral hazard. The actions taken by central banks and other authorities to stabilize a panic in the short run can work against stability in the long run, if investors and firms infer from those actions that they will never bear the full consequences of excessive risk-taking. As Stan Fischer reminded us following the international crises of the late 1990s, the problem of moral hazard has no perfect solution, but steps can be taken to limit it.8First, regulatory and supervisory reforms, such as higher capital and liquidity standards or restriction on certain activities, can directly limit risk-taking. Second, through the use of appropriate carrots and sticks, regulators can enlist the private sector in monitoring risk-taking. For example, the Federal Reserve's Comprehensive Capital Analysis and Review (CCAR) process, the descendant of the bank stress tests of 2009, requires not only that large financial institutions have sufficient capital to weather extreme shocks, but also that they demonstrate that their internal risk-management systems are effective.9In addition, the results of the stress-test portion of CCAR are publicly disclosed, providing investors and analysts information they need to assess banks' financial strength.
Of course, market discipline can only limit moral hazard to the extent that debt and equity holders believe that, in the event of distress, they will bear costs. In the crisis, the absence of an adequate resolution process for dealing with a failing SIFI left policymakers with only the terrible choices of a bailout or allowing a potentially destabilizing collapse. The Dodd-Frank Act, under the orderly liquidation authority in Title II, created an alternative resolution mechanism for SIFIs that takes into account both the need, for moral hazard reasons, to impose costs on the creditors of failing firms and the need to protect financial stability; the FDIC, with the cooperation of the Federal Reserve, has been hard at work fleshing out this authority.10A credible resolution mechanism for systemically important firms will be important for reducing uncertainty, enhancing market discipline, and reducing moral hazard.
Our continuing challenge is to make financial crises far less likely and, if they happen, far less costly. The task is complicated by the reality that every financial panic has its own unique features that depend on a particular historical context and the details of the institutional setting. But, as Stan Fischer has done with unusual skill throughout his career, one can, by stripping away the idiosyncratic aspects of individual crises, hope to reveal the common elements. In 1907, no one had ever heard of an asset-backed security, and a single private individual could command the resources needed to bail out the banking system; and yet, fundamentally, the Panic of 1907 and the Panic of 2008 were instances of the same phenomenon, as I have discussed today. The challenge for policymakers is to identify and isolate the common factors of crises, thereby allowing us to prevent crises when possible and to respond effectively when not.
Gene Arensberg of the Got Gold Report notes today that this morning's pounding of gold began 20 seconds before the U.S. payrolls report was officially released, suggesting again that someone gets premature access to the data -- or that maybe someone in the U.S. government makes sure that the data will be appropriately construed by the "market." Arensberg's commentary is headlined "Gold Dives 20 Seconds Before BLS Payroll Figures" and it's posted at the GGR Internet site here:
CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.
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Having recently cautioned there was a danger that "all hell is going to break loose," today Bill Fleckenstein warned King World News "this will be the last hurrah" for "maniacal central bankers." He also gave KWN an incredible look into what is really happening in the gold and silver markets, as well as the end game. Below is what Bill Fleckenstein, who is President of Fleckenstein Capital, had to say in this fascinating interview.
This posting includes an audio/video/photo media file: Download Now
Heavy and relentless selling by American futures speculators has been one of the primary drivers of gold's horrendous year. These traders abandoned gold on the long side while piling in on the short side, unleashing withering selling pressure. Read More...
by Adrian Ash & Miguel Perez-Santalla, MineWeb.com
Four reasons to waste your time with the deeply historic, deeply human value ascribed to gold…
PEOPLE love to debate, but sadly sometimes it crosses a line and turns argumentative. That’s what is happening right now with the debate over gold.
There have been several high-profile articles, most recently in the Wall Street Journal, saying you should eliminate gold as a worthwhile part of your portfolio. Primarily because of this year’s lower price.
Against that idea, many bloggers and private investors, wondering why gold prices have fallen, say that it shouldn’t have dropped. There must be some conspiracy driving down prices when money-printing and our still-weak economy should be driving gold higher. But that still puts current price performance front and center in the debate over whether it should or shouldn’t feature in your portfolio. So it misses several key points about why gold is uniquely valuable as an investable asset.
It's with a heavy heart that I write this commentary: the corruption of what was formerly an entity of information and truth. My own discovery of this dirty-little-secret came personally.
For approximately four years GATA (the "Gold Anti-Trust Action Committee") had been publishing my commentaries, and with increasing frequency over the past year, in particular. Then, abruptly, all such publishing instantly and permanently halted.
The basis for this sudden (and total) censorship of my commentaries? I was told that "one of GATA's most significant individual supporters" had claimed that there were "anti-Semitic" undertones in one of my (more than 1,000) commentaries: "The One Bank".
There are numerous problems with this false-accusation, beginning with the fact that none of my commentaries (including the one in question) ever mention the ethnicity of any individuals discussed, for the simple reason that this is "analysis" – and only relevant data is included in such analysis.
There is always a considerable amount of discussion in 'our part of the internet' about the role China is playing, and will play, in the monetary system. Currently China holds (or more accurately, is believed to hold) $3.66T in foreign reserves – assumed to be primarily in US Treasuries. While the total comes from PBOC, the composition of the assets held is speculative. There is also, of course, the ever-popular 1,054.1 metric tons of Chinese gold reserve:
“China hasn't announced any changes to state gold reserves since authorities in 2009 said bullion holdings totaled 1,054.1 metric tons.” — though the Bloomberg article does grudgingly acknowledge that there ‘may be some discrepancy’ between the reported end-2008 figure and current reality…
So, what's up? Is China content to ride the status quo, keep buying foreign currencies to keep the yuan down? Is it moving to advance the cause of the SDR by pushing for inclusion in it, along with Russia? What, if anything do the above have to do with the buildout of Chinese gold production capability, and in-country reserves?
Heavy and relentless selling by American futures speculators has been one of the primary drivers of gold’s horrendous year. These traders abandoned gold on the long side while piling in on the short side, unleashing withering selling pressure. But just in recent weeks, these speculators have started buying gold-futures contracts again on the long side. This critical and long-awaited reversal is very bullish for gold. Futures speculators have long been at odds with gold investors. With gold futures’ inherent extreme leverage and expiration dates, speculators must maintain a very-short-term perspective in order to survive. Their whole worldview is based on technicals and sentiment, with trades lasting hours, days, or maybe weeks on the outside. Gold’s supply-and-demand fundamentals are largely irrelevant at this short scale.
The Downturn in the Spot Gold Price By Hard Assets Alliance Team By Robert Ross, Hard Assets Alliance Senior Analyst Grant Williams, chief investment strategist for Mauldin Economics’ Bull’s Eye Investor, recently published a piece in his weekly newsletter Things That Make You Go Hmmm… that I thought loyal Hard Assets Alliance readers would find […]
by Peter Schiff 07-Nov (EuroPacific) — It’s starting to feel like we are part of a giant poker game against the US government, whose hand is the true condition of the American economy. The government has become so good at bluffing that most people feel compelled to watch how the biggest players in the game react to determine their own investment strategy.
Unfortunately, this past month revealed that even pros like Goldman Sachs have no idea what sort of hand Washington is really hiding.
…So, who should investors believe about gold? Wall Street bankers who directly benefit from asset bubbles created by the Fed’s inflationary stimulus?
No, it’s time for individual investors to leave the table and redeem their chips. Just remember – the longer you wait to cash out of the US dollar, the less you’re going to get for your winnings.
The PRICE of GOLD slumped $20 per ounce in 10 minutes Friday lunchtime in London, as the Dollar rose after much stronger than expected US jobs data. Non-farm payrolls added 204,000 jobs net in October, the Bureau for Labor Statistics said, beating analysts' lowest prediction in a year of 125,000.
Peter Schiff, author, CEO of Euro Pacific Capital and host of The Peter Schiff Show joins me to discuss the Federal Reserve, the impending collapse of the United States, and all things Obamacare.
As for the Fed’s recent announcement that QE will continue unabated Peter says, “The Fed will keep blowing air into the bubble until it bursts and the only thing that will stop them is a currency crisis… The Fed has to maintain the illusion and the only way to do that is with the drug of QE.”
On Obamacare and government entitlements Peter says, “We once had a great free market economy that was the envy of the world. People were coming here from all over the world to participate in FREEDOM. We had limited government and maximum prosperity. Even though we had no government benefits at all, the poor people from all over the world wanted to come here. Why did so many poor people want to come to a country with no welfare benefits, no medicare and no food stamps? Because they knew that the best way to get out of poverty was the OPPORTUNITY to work in a FREE MARKET… We had a great country and we screwed it up.”
The Japanese nuclear agency recently green-lighted the removal of the spent fuel rods from Fukushima reactor 4′s spent fuel pool. The operation is scheduled to begin thismonth.
The success of the cleanup also has global significance. So we all have a direct interest in seeing that the next steps are taken well, efficiently and safely.
If one of the pools collapsed or caught fire, it could have severe adverse impacts not only on Japan … but the rest of the world, including the United States. Indeed, a Senator called it a national security concern for the U.S.:
The radiation caused by the failure of the spent fuel pools in the event of another earthquake could reach the West Coast within days. That absolutely makes the safe containment and protection of this spent fuel a security issue for the United States.
Hiroaki Koide – a nuclear scientist working at the University of Kyoto – says:
I’m worried about whether Tepco can treat all the 1,331 [spent-fuel] assemblies without any problem and how long it will take.
Award-winning scientist David Suzuki says that Fukushima is terrifying, Tepco and the Japanese government are lying through their teeth, and Fukushima is “the most terrifying situation I can imagine”.
Suzuki notes that reactor 4 is so badly damaged that – if there’s another earthquake of 7 or above – the building could come down. And the probability of another earthquake of 7 or above in the next 3 years is over 95%.
Suzuki says that he’s seen a paper that says that if – in fact – the 4th reactor comes down, “it’s bye bye Japan, and everyone on the West Coast of North America should evacuate. Now if that’s not terrifying, I don’t know what is.”
The operator of Japan’s crippled Fukushima nuclear power plant … will begin a dry run of the procedure at the No. 4 reactor, which experts have warned carries grave risks.
***
“Did you ever play pick up sticks?” asked a foreign nuclear expert who has been monitoring Tepco’s efforts to regain control of the plant. “You had 50 sticks, you heaved them into the air and than had to take one off the pile at a time.
“If the pile collapsed when you were picking up a stick, you lost,” he said. “There are 1,534 pick-up sticks in a jumble in top of an unsteady reactor 4. What do you think can happen?
“I do not know anyone who is confident that this can be done since it has never been tried.”
Conditions in the unit 4 pool, 100 feet from the ground, are perilous, and if any two of the rods touch it could cause a nuclear reaction that would be uncontrollable. The radiation emitted from all these rods, if they are not continually cool and kept separate, would require the evacuation of surrounding areas including Tokyo. Because of the radiation at the site the 6,375 rods in the common storage pool could not be continuously cooled; they would fission and all of humanity will be threatened, for thousands of years.
Former Japanese ambassador Akio Matsumura warns that – if the operation isn’t done right – this could one day be considered the start of “the ultimate catastrophe of the world and planet”:
(He also argues that removing the fuel rods will take “decades rather than months.)
Nuclear expert Arnie Gundersen and physician Helen Caldicott have both said that people should evacuate the Northern Hemisphere if one of the Fukushima fuel pools collapses. Gundersen said:
Move south of the equator if that ever happened, I think that’s probably the lesson there.
We are now within two months of what may be humankind’s most dangerous moment since the Cuban Missile Crisis.
***
Should the attempt fail, the rods could be exposed to air and catch fire, releasing horrific quantities of radiation into the atmosphere. The pool could come crashing to the ground, dumping the rods together into a pile that could fission and possibly explode. The resulting radioactive cloud would threaten the health and safety of all us.
Former Ambassador Mitsuhei Murata says full-scale releases from Fukushima “would destroy the world environment and our civilization. This is not rocket science, nor does it connect to the pugilistic debate over nuclear power plants. This is an issue of human survival.”
Even Japan’s Top Nuclear Regulator Says that The Operation Carries a “Very Large Risk Potential”
Even the head of Japan’s nuclear agency is worried. USA Today notes:
Nuclear regulatory chairman Shunichi Tanaka, however, warned that removing the fuel rods from Unit 4 would be difficult because of the risk posed by debris that fell into the pool during the explosions.
“It’s a totally different operation than removing normal fuel rods from a spent fuel pool,” Tanaka said at a regular news conference. “They need to be handled extremely carefully and closely monitored. You should never rush or force them out, or they may break.”
He said it would be a disaster if fuel rods are pulled forcibly and are damaged or break open when dropped from the pool, located about 30 meters (100 feet) above ground, releasing highly radioactive material. “I’m much more worried about this than contaminated water,” Tanaka said
Nothing remotely similar has been attempted before and … it is feared that any error of judgment could lead to a massive release of radiation into the atmosphere.
***
A spokesman for Tepco … admitted, however, that it was not clear whether any of the rods were damaged or if debris in the pool would complicate the recovery effort.
Among the risks [Hiromitsu Ino, professor emeritus of nuclear engineering at the University of Tokyo] and other experts cite is the possibility that a container being used to move the units falls and breaks apart, exposing the fuel to the air.
Similarly, Edwin Lyman – a nuclear expert and the chief scientist for the Union of Concerned Scientists notes:
The biggest risk with Unit 4 pool unloading is that a spent fuel cask might drop and damage the pool, causing a leak that could expose some fuel and cause overheating.
Professor Richard Broinowski – former Australian Ambassador to Vietnam, Republic of Korea, Mexico, the Central American Republics and Cuba – and author of numerous books on nuclear policy and Fukushima, says some of the fuel rods are probably fused.
Murray E. Jennex, Ph.D., P.E. (Professional Engineer), Professor of MIS, San Diego State University, notes:
The rods in the spent fuel pool may havemelted …. I consider it more likely that these rods were breached during the explosions associated with the event and their contents may be in contact with the ground water, probably due to all the seawater that was sprayed on the plant.
Fuel rod expert Arnie Gundersen – a nuclear engineer and former senior manager of a nuclear power company which manufactured nuclear fuel rods – recently explained the biggest problem with the fuel rods (at 15:45):
I think they’re belittling the complexity of the task. If you think of a nuclear fuel rack as a pack of cigarettes, if you pull a cigarette straight up it will come out — but these racks have been distorted. Now when they go to pull the cigarette straight out, it’s going to likely break and release radioactive cesium and other gases, xenon and krypton, into the air. I suspect come November, December, January we’re going to hear that the building’s been evacuated, they’ve broke a fuel rod, the fuel rod is off-gassing.
***
I suspect we’ll have more airborne releases as they try to pull the fuel out. If they pull too hard, they’ll snap the fuel. I think the racks have been distorted, the fuel has overheated — the pool boiled – and the net effect is that it’s likely some of the fuel will be stuck in there for a long, long time.
The racks are distorted from the earthquake — oh, by the way, the roof has fallen in, which further distorted the racks.
The net effect is they’ve got the bundles of fuel, the cigarettes in these racks, and as they pull them out, they’re likely to snap a few. When you snap a nuclear fuel rod, that releases radioactivity again, so my guess is, it’s things like krypton-85, which is a gas, cesium will also be released, strontium will be released. They’ll probably have to evacuate the building for a couple of days. They’ll take that radioactive gas and they’ll send it up the stack, up into the air, because xenon can’t be scrubbed, it can’t be cleaned, so they’ll send that radioactive xenon up into the air and purge the building of all the radioactive gases and then go back in and try again.
It’s likely that that problem will exist on more than one bundle. So over the next year or two, it wouldn’t surprise me that either they don’t remove all the fuel because they don’t want to pull too hard, or if they do pull to hard, they’re likely to damage the fuel and cause a radiation leak inside the building. So that’s problem #2 in this process, getting the fuel out of Unit 4 is a top priority I have, but it’s not going to be easy. Tokyo Electric is portraying this as easy. In a normal nuclear reactor, all of this is done with computers. Everything gets pulled perfectly vertically. Well nothing is vertical anymore, the fuel racks are distorted, it’s all going to have to be done manually. The net effect is it’s a really difficult job. It wouldn’t surprise me if they snapped some of the fuel and they can’t remove it.
The consequences could be far more severe than any nuclear accident the world has ever seen. If a fuel rod is dropped, breaks or becomesentangled while being removed, possible worst case scenarios include a big explosion, a meltdown in the pool, or a large fire. Any of these situations could lead to massive releases of deadly radionuclides into the atmosphere, putting much of Japan — including Tokyo and Yokohama — and even neighboring countries at serious risk.
Experts question whether it will be able to pull off the removal of all the assemblies successfully.
***
No one knows how bad it can get, but independent consultants Mycle Schneider and Antony Froggatt said recently in their World Nuclear Industry Status Report 2013: “Full release from the Unit-4 spent fuel pool, without any containment or control, could cause by far the most serious radiological disaster to date.”
08-Oct (USAGOLD) — Gold fell back below $1300 level in early New York trading as October jobs data beat expectations, moving the taper-expectations needle yet again. The dollar jumped to set a new high for the week and bonds tumbled.
Nonfarm payrolls rose 204k in October, well above market expectations of +122k. There were significant back-month revisions as well. Nonetheless, the unemployment rate edged higher to 7.3%, as the labor force participation rate fell to 62.8%. “Friday's jobs report looks encouraging on the surface but a little flaky not far beneath,” said The Wall Street Journal’s Jon Hilsenrath.
Take it with a grain of salt. Broadly speaking the jobs recovery remains anemic. It is by far the slowest recovery from any post-WWII recession; as this chart from Calculated Risk shows month in and month out:
Nonetheless, on the heels of Thursday’s better than expected advance Q3 GDP print, today’s jobs data has ramped expectations of an impending Fed taper. A Wall Street Journal survey earlier in the week showed less than 10% of survey participants expect a December taper, 33% see January and 40% expect tapering in March. It will be interesting to see how much the needle has moved by the next survey.
Stocks sold off initially on the jobs data, but have since recovered (reportedly on program buying). The yield on the 10-year bond surged 12 bps after the report and those gains seem to be sticking. The last time that the 10-year yield approached 3% on taper worries, the stock market collapsed and signs of renewed weakness in the housing market was seen.
I maintain a healthy level of skepticism about the taper, certainly before March, but even beyond. For a country now more than $17 trillion in debt — and the debt ceiling suspended until February — the Fed simply can’t afford to allow interest rates to rise more than they already have. That 10-year yield is up 112 bps year-on-year, adding significantly to debt servicing costs, which in turn detracts from economic growth.
Out clients buy gold for long-term wealth preservation and hedging purposes. With no prompting from us, the vast majority always have those underlying reasons in mind and are quick to call and bolster their positions when prices drop. Deep down they know that the U.S. and other major economies continue to dig themselves into an ever-deeper debt hole.
As that hole gets deeper, the prospects for those economies to grow their way out of debt dims. If you also believe that defaulting on that debt is not a viable means of escape, that really only leaves currency devaluation.
The currency wars continue, with the ECB firing the latest salvo this week with a 25 bps rate cut, and hints that more may be in the offing. The euro dutifully plunged to an eight-week low against the dollar, making the greenback suddenly appear reinvigorated. Heightened taper expectations and the resulting bump in U.S. yields provided an additional underpinning for the dollar.
A stronger dollar negatively impacts foreign demand for U.S. goods and services, which will weigh on overall economic growth moving forward. While the advance Q3 GDP indication looked good, the above expectations piece was attributed to inventory build. The economy effectively borrowed economic growth from the future to restock now, causing a number of economists to negatively revise Q4 growth prospects.
Borrowing prosperity from the future is a huge problem in many respects. Smart folks save for the future rather than borrow from it. The really smart ones choose to save in gold.
In a recent piece entitled, "How To Be Your Own Central Bank", Sprott Asset Management's Market Strategist, David Franklin, laid out a compelling case for incremental gold ownership on a personal level. Citing historical wisdom also expressed by Steve Wynn in a recent commentary, "Don't pay any attention to what people say---pay attention to what people do", Franklin advises that we carefully watch central banks, and look for the "sage investment advice" contained in their actions rather than their words---most notably in the heavy accumulation of physical gold over time.
Here is David Franklin's piece, "How To Be Your Own Central Bank" in it's entirety:
"'Fedspeak' was first used to describe the long, often
It's with a heavy heart that I write this commentary: the corruption of what was formerly an entity of information and truth. My own discovery of this dirty-little-secret came personally.
For approximately four years GATA (the "Gold Anti-Trust Action Committee") had been publishing my commentaries, and with increasing frequency over the past year, in particular. Then, abruptly, all such publishing instantly and permanently halted.
The basis for this sudden (and total) censorship of my commentaries? I was told that "one of GATA's most significant individual supporters" had claimed that there were "anti-Semitic" undertones in one of my (more than 1,000) commentaries: "The One Bank".
There are numerous problems with this false-accusation, beginning with the fact that none of my commentaries (including the one in question) ever mention the ethnicity of any individuals discussed, for the simple reason that this is "analysis" – and only relevant data is included in such analysis.
It's with a heavy heart that I write this commentary: the corruption of what was formerly an entity of information and truth. My own discovery of this dirty-little-secret came personally.
For approximately four years GATA (the "Gold Anti-Trust Action Committee") had been publishing my commentaries, and with increasing frequency over the past year, in particular. Then, abruptly, all such publishing instantly and permanently halted.
The basis for this sudden (and total) censorship of my commentaries? I was told that "one of GATA's most significant individual supporters" had claimed that there were "anti-Semitic" undertones in one of my (more than 1,000) commentaries: "The One Bank".
There are numerous problems with this false-accusation, beginning with the fact that none of my commentaries (including the one in question) ever mention the ethnicity of any individuals discussed, for the simple reason that this is "analysis" – and only relevant data is included in such analysis.
The manipulation of gold prices, along with practically every other asset class, has perfectly transparent legal precedent. The precious metals political hot potato taboo has been strong enough to make it almost impossible for the mainstream to understand. And while it is perfectly plausible and even celebrated by the practitioners, the greatest threats to economic stability (LIBOR, bonds and interest rates, equities, electricity) are openly discussed facts. Obviously, history has demonstrated that these great unnatural “tinkerings” always end badly.
For over four years now, the mainstream media continues to parrot the Federal Reserve’s assertion that QE is in fact a monetary tool that will create jobs.
This assertion overlooks Japan, where QE efforts equal to over 25% of GDP have failed to improve the unemployment situation significantly, as well as the UK where QE efforts equal to over 20% of GDP have proven similarly ineffective.
We now can definitively add the US to the list of QE failures.
It’s been 14 months since the Fed announced QE 3 and nearly 12 months since it announced QE 4: both open ended programs that have run continuously since they were announced.
And yet through this period the employment population ratio (which measures the percentage of working age adults who are in fact employed) has in fact FALLEN.
The above graph shows in clear terms that the US is not creating jobs at a rate that can account for population growth. QE 3 and QE 4 have failed to have any significant effect. In fact, if you consider that the chart has dropped dramatically in the last quarter (giving QE 3 and QE 4 a year to have an effect) one can definitively say that QE has been a total failure as far as jobs growth is concerned.
This is nothing new. If you look at the five-year chart you cannot with a straight face say QE has succeeded in any meaningful way.
QE does not create jobs. It has been a total failure. And yet, five years after the Fed embarked on this policy we continue to hear people talk about how the real problem is that we need MORE QE.
QE failed for Japan. It has failed for the UK. It ha failed for the US. Collectively, countries comprising over a third of the world’s GDP have proven QE doesn’t work.
On the heels of continued volatility in key global markets, a 42-year market veteran told King World News that a stunning "90 tons" of paper gold selling was used to create the smash in the gold market today. Hathaway, who is one of the most respected institutional minds in the world today when it comes to gold, and whose fund was awarded a coveted 5-star rating, also discussed what KWN readers should expect next in this key market.
One look at the following weekly chart pretty much says all that one needs to know about what is happening to gold and why. This week and last week, the US Dollar has been higher. Guess what happened to gold over those same two weeks? Yep – it went lower.
In a recent piece entitled, "How To Be Your Own Central Bank", Sprott Asset Management's Market Strategist, David Franklin, laid out a compelling case for incremental gold ownership on a personal level. Citing historical wisdom also expressed by Steve Wynn in a recent commentary, "Don't pay any attention to what people say—pay attention to what people do", Franklin advises that we carefully watch central banks, and look for the "sage investment advice" contained in their actions rather than their words—most notably in the heavy accumulation of physical gold over time.
The level of fraud in the financial system with utter lack of prosecution or accountability, combined with the ongoing love affair between the largest offenders and collective mainstream, results in financial media being a victim of the so-called Stockholm syndrome.
Earlier Conclusions
In the latest Silver Institute newsletter, several advances have been reported when it comes to applications of silver in industry. In particular, the industrial applications are in the field of photography (first article), bio-batteries (second article), clean energy (third article) and energy (fourth article). Courtesy: 
Just a quick note about an article written by Jeff Nielson of Bullion Bulls Canada entitled: 
One could take another equally valid point of view: the reason for deteriorating liquidity in bond markets is due in part to yields being unnaturally low. If you price bonds too highly, which amounts to the same thing, few investors want to buy them without the unconditional support of the central bank as a ready buyer. This, after all, is why just the hint of tapering recently was enough to derail the markets. So here again we come up against the same choice: if the Fed insists on mispricing the market with its interventions and zero interest rate policy it must fully support the market with both QE and also twist applied to the yield curve to maintain market liquidity.
Four reasons to waste your time with the deeply historic, deeply human value ascribed to gold… 
It's with a heavy heart that I write this commentary: the corruption of what was formerly an entity of information and truth. My own discovery of this dirty-little-secret came personally.
There is always a considerable amount of discussion in 'our part of the internet' about the role China is playing, and will play, in the monetary system. Currently China holds (or more accurately, is believed to hold) 
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