Gold World News Flash |
- Slash and Earn: The Gold Stock Paradox
- Expect No Real (Forward) Guidance From Your Leaders
- Gold up 8% and silver gains 11% so far in 2014 confounding the experts
- UK fraud agency charges three ex-Barclays bankers over LIBOR
- Hathaway expects Comex gold default
- Silver Prices Rise Dramatically At The End - Are We Close To The End?
- "Soros Put" Hits Record As Billionaire's Downside Hedge Rises By 154% in Q4 To $1.3 Billion
- Fast Track Prep Tip #5: Every Prepper Needs a Cash Reserve
- Goldman Sachs' Most Dangerous Trade
- India's CAD Halves on Gold Imports Ban, Chidambaram "Weighs Easing"
- India's CAD Halves on Gold Imports Ban, Chidambaram "Weighs Easing"
- In The News Today
- We’re Going to be Hit with a Tsunami of Inflation-Peter Schiff
- Hathaway - Strap Yourself In For COMEX Default & Gold Surge
- Will the Gold and Silver Surge Continue?
- How Healthy Is The Real Estate Market?
- Don't Cry for the Shareholders of Fannie Mae and Freddie Mac
- India To "Look Into" Easing Gold Price Controls
- Bitcoin and Gold
- Peter Schiff: The Dollar Will Collapse
- Gold Price Jumps Again on 3-Month High in Shanghai Trading Volume, Western Fund Managers "Warm" But Still Think "Too Early"
- Chinese gold company to pay $665 million for U.S. oil and gas company
- Gold price in a range of currencies since December 1978 XLS version
- Spoos Rise To Within Inches Of All Time High As Overnight Bad News Is Respun As Great News By Levitation Algos
- Slash and Earn: The Gold Stock Paradox
- Gold Stocks Say "W"
- Gold Stocks Say "W"
- The Silver St. Valentine’s Day Breakout
- What Makes a Good Trade
- What Makes a Good Trade
- 'Mexico Mike' Kachanovksy: How to Buy Prime Rib Companies at Hamburger Prices
- 'Mexico Mike' Kachanovksy: How to Buy Prime Rib Companies at Hamburger Prices
| Slash and Earn: The Gold Stock Paradox Posted: 17 Feb 2014 10:25 AM PST Casey Research | ||||||||||||||||||||||||||||||||||||||||
| Expect No Real (Forward) Guidance From Your Leaders Posted: 17 Feb 2014 10:16 AM PST Submitted by Howard Kunstler of Kunstler.com, "Guidance" is the new organizing credo of US financial life with Janet Yellen officially installed as the new Wizard of Oz at the Federal Reserve. Guidance refers to periodic cryptic utterances made by the Wizard in staged appearances before congress or in the "minutes" (i.e. transcribed notes) from meetings of the Fed's Open Market Committee. The cryptic utterances don't necessarily have any bearing on reality, but are issued with the hope that they will be mistaken for it, especially by managers in the financial markets where assets are priced and traded. One such infamous moment of guidance was Ben Bernanke's May 2007 statement saying that percolating sub-prime mortgage problems were "contained." If that was a signal for anything it was a green light for banks not yet deemed too big to fail to continue constructing swindles called collateralized debt obligations (CDOs), which were bundles of already bundled mortgage backed securities based on janky mortgages for million-dollar houses owned by Las Vegas busboys, and the like, that had no prospect of ever being paid. The banks kept at it sedulously for another year, and then in September of 2008 this stream of combustible financial garbage blew up the banking system. Nobody at the Fed saw it coming, least of all Janet Yellen. And then the banking system was "rescued" by the "program" (free money bailouts) enacted by congress called TARP, while the Fed set up a carry trade system that would enable the floundering (now) too big to fail banks to convert massive volumes of zero-interest no-risk loans into a dependable revenue flow to "build reserves," that is, allow them to appear solvent while engaging in new dodges, swindles, and manipulations of markets, currencies and interest rates. Which brings us very near the present. Fed chairperson Yellen gave a marathon six-hour audience to the House Committee on Financial Services last week. It was so devoid of substance and meaning that the TV network covering it switched the feed a few times to the exciting Olympic event of curling, in which "athletes" wield brooms to induce giant polished stones to glide across a length of ice at a scoring target — that is, an entirely artificial and purposeless activity aimed at producing a trance of contentment among viewers who have nothing better to do in the middle of the day. Last May's remarks by then Fed Chairperson Ben Bernanke that the Fed might consider "tapering" its gigantic monthly purchases of US Treasury bonds plus an equal amount of stranded mortgage paper made the markets so nervous that stock indexes had a seizure and the interest rate on the lodestar ten-year treasury bill shot up 150 basis points — into a zone that would cripple the government's ability to keep its credit revolving. These dire portents prompted Bernanke to take back what he'd said, but then three months later, in the fall, he restated the taper guidance. By then, market watchers and playas were sure that he was just juking them, and anyway they were too busy stuffing their Christmas bonus stockings to take him seriously. Lo, the taper is still on under Wizard Yellen, for the simple reason that if she backed out of it now, before she officially chaired her first meeting of the Fed governors, her outfit would lose whatever shreds of credibility it still hangs onto. Even with the taper on, it is for now still pumping over half a trillion dollars a year into the banking system. There is some reason to think that it made the markets puke two weeks ago. But then a really bad employment number came out, and in the inverse climate of bad-news-being-good-news for bubble markets, that was construed as a sure sign that the Fed might have to un-taper sometime around late spring with Yellen's chairpersonship fully established. I suspect they'll do something else: they'll continue to taper down purchases of treasuries and mortgage detritus via the direct TBTF bank channel and they'll establish a new "back door" for shoveling money into the system. Nobody knows what this is yet, and it may be some time even after it starts that the mechanism is discovered. In the meantime, the seeming placidity of the renewed "risk on" mood should be a warning to market cheerleaders. Something's got to give and I think it will be the US dollar index, which has been in Zombieland since November. The world has never been so ready for a change in direction. Expect no real guidance from your leaders. | ||||||||||||||||||||||||||||||||||||||||
| Gold up 8% and silver gains 11% so far in 2014 confounding the experts Posted: 17 Feb 2014 10:00 AM PST by Peter Cooper, ArabianMoney:
Yesterday gold closed above its 200-day moving average, an important trend line and that should signal higher prices to come. Silver had a slower start to the New Year but has now sprinted ahead of its fellow monetary metal and is also above its 200-day line. | ||||||||||||||||||||||||||||||||||||||||
| UK fraud agency charges three ex-Barclays bankers over LIBOR Posted: 17 Feb 2014 09:54 AM PST By Steve Slater Britain's fraud agency started criminal proceedings against three former bankers at Britain's Barclays Plc on Monday for the alleged manipulation of Libor interest rates. The Serious Fraud Office (SFO) said it has charged Peter Charles Johnson, Jonathan James Mathew, and Stylianos Contogoulas with conspiracy to defraud between June 2005 and August 2007. The SFO last year brought charges against three former employees of Swiss bank UBS and UK brokerage RP Martin, the first people to face trial in connection with a global investigation into a rate-rigging scandal that sparked intense criticism of standards across the industry. ... ... For the full story: http://uk.reuters.com/article/2014/02/17/barclays-libor-charges-idUKL6N0... ADVERTISEMENT A Personal Touch in Buying Precious Metals If you've not secured your allocation of precious metals and numismatic coins, 2014 may be the last year to get them at affordable and undervalued prices. With huge amounts of gold leaving the West for Asia, the future availability of precious metals is very much in doubt. All Pro Gold has competitive pricing on all bullion and numismatic products -- and offers prompt delivery too. Long-time GATA supporters Fred Goldstein and Tim Murphy are glad to answer any questions or concerns about acquiring the monetary metals. All Pro Gold has an extensive electronic library of articles from the world's top market analysts. Learn more at www.allprogold.com or write to Fred and Tim at info@allprogold.com or telephone them at 1-855-377-4653. Join GATA here: Mines and Money Hong Kong http://www.minesandmoney.com/hongkong/ * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going 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: To contribute to GATA, please visit: ADVERTISEMENT Jim Sinclair plans seminars in Los Angeles and San Diego Gold advocate Jim Sinclair's next market analysis seminars will be held in Los Angeles from 11 a.m. to 2 p.m. on Saturday, March 8, and in San Diego from 2 to 6 p.m. the following day, Sunday, March 9. Details, including registration information, are posted at Sinclair's Internet site, JSMinset.com, here: http://www.jsmineset.com/qa-session-tickets/ | ||||||||||||||||||||||||||||||||||||||||
| Hathaway expects Comex gold default Posted: 17 Feb 2014 09:46 AM PST 12:46p ET Monday, February 17, 2014 Dear Friend of GATA and Gold: The rally in gold and silver is probably mostly short-covering, Tocqueville Gold Fund manager John Hathaway tells King World News today, adding that he expects a default on Comex gold contracts: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/2/17_Ha... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Jim Sinclair plans seminars in Los Angeles and San Diego Gold advocate Jim Sinclair's next market analysis seminars will be held in Los Angeles from 11 a.m. to 2 p.m. on Saturday, March 8, and in San Diego from 2 to 6 p.m. the following day, Sunday, March 9. Details, including registration information, are posted at Sinclair's Internet site, JSMinset.com, here: http://www.jsmineset.com/qa-session-tickets/ Join GATA here: Mines and Money Hong Kong http://www.minesandmoney.com/hongkong/ * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going 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: To contribute to GATA, please visit: ADVERTISEMENT A Personal Touch in Buying Precious Metals If you've not secured your allocation of precious metals and numismatic coins, 2014 may be the last year to get them at affordable and undervalued prices. With huge amounts of gold leaving the West for Asia, the future availability of precious metals is very much in doubt. All Pro Gold has competitive pricing on all bullion and numismatic products -- and offers prompt delivery too. Long-time GATA supporters Fred Goldstein and Tim Murphy are glad to answer any questions or concerns about acquiring the monetary metals. All Pro Gold has an extensive electronic library of articles from the world's top market analysts. Learn more at www.allprogold.com or write to Fred and Tim at info@allprogold.com or telephone them at 1-855-377-4653. | ||||||||||||||||||||||||||||||||||||||||
| Silver Prices Rise Dramatically At The End - Are We Close To The End? Posted: 17 Feb 2014 09:19 AM PST Silver or the silver price is generally much more difficult to analyze than gold. Part of the reason is that so much less is known about the specifics of the silver market. Silver analysis is often done "through" the analysis of gold. This is not completely wrong, since silver and gold mostly moves in a similar manner - they have the same monetary properties after all. | ||||||||||||||||||||||||||||||||||||||||
| "Soros Put" Hits Record As Billionaire's Downside Hedge Rises By 154% in Q4 To $1.3 Billion Posted: 17 Feb 2014 09:15 AM PST A curious finding emerged in the latest 13F by Soros Fund Management, the family office investment vehicle managing the personal wealth of George Soros. Actually, two curious findings: the first was that the disclosed Assets Under Management as of December 31, 2013 rose to a record $11.8 billion (this excludes netting and margin, and whatever one-time positions Soros may have gotten an SEC exemption to not disclose: for a recent instance of this, see Greenlight Capital's Micron fiasco, and the subsequent lawsuit of Seeking Alpha which led to the breach of David Einhorn's holdings confidentiality). The second one is that the "Soros put", a legacy hedge position that the 83-year old has been rolling over every quarter since 2010, just rose to a record $1.3 billion or the notional equivalent of some 7.09 million SPY-equivalent shares. Since this was an increase of 154% Q/Q this has some people concerned that the author of 'reflexivity' and the founder of "open societies" may be anticipating some major market downside. Then again, as the chart below shows, as a percentage of total AUM, the put position rose to 11.1% of his notional holdings. By way of reference, as of June 30 2013, his SPY put may have had a smaller notional value, but it represented both more shares (7.8 million), and was far greater as a % of AUM, at 13.5%.
Finally, remember that what was disclosed on Friday is a snapshot of Soros' holdings as of 45 days ago. What he may or may not have done with his hedge since then is largely unknown, and since there are no investor letters, there is no way of knowing even on a leaked basis how the billionaire has since positioned for the market. That said, while the SPY puts are most likely simply a hedge to his overall bullish exposure, perhaps more notable was the $25 million call position that Soros put on the gold miners ETF which has been beaten into oblivion over the past year, in the fourth quarter. Does Soros think that it is finally the miners' turn to shine? | ||||||||||||||||||||||||||||||||||||||||
| Fast Track Prep Tip #5: Every Prepper Needs a Cash Reserve Posted: 17 Feb 2014 09:00 AM PST by Rob Hanus, Lew Rockwell:
As recent as December 2013, millions of folks were left without the ability to pay for their purchases when their credit and debit cards were caught in the Target data breach. This was not something that was expected and those without supplemental credit or cash were left in a pickle during the busiest shopping period of the year. | ||||||||||||||||||||||||||||||||||||||||
| Goldman Sachs' Most Dangerous Trade Posted: 17 Feb 2014 08:42 AM PST Shah Gilani writes: Here's something you probably don't know, and it will really tick you off. You probably do know the biggest banks in the world have commodities businesses. Those lines of business might include trading desks (trading everything from gold and copper to kilowatts), transportation (pipelines, railcars and tankers) and storage (warehousing) operations, mining operations, as well as production, refining, and raw and finished commodity distribution operations. | ||||||||||||||||||||||||||||||||||||||||
| India's CAD Halves on Gold Imports Ban, Chidambaram "Weighs Easing" Posted: 17 Feb 2014 08:35 AM PST "Pros and cons" says finance minister, as gold jewelry exports also halve... GOLD IMPORT restrictions in India, formerly the world's No.1 consumer nation, are likely to be relaxed in the next six weeks, finance minister P.Chidambaram hinted on Monday. Presenting an interim budget to parliament, and ahead of April's fiscal year-end, "The goal is to contain the CAD at a level where it can be fully and safely financed," he said. "There are pros and cons," the finance minister then said when asked by journalists about relaxing the gold import rules after his speech today. "We will weigh them carefully...we will look into it. On Chidambaram's figures, India's effective ban on gold imports has helped cut the Current Account Deficit (CAD) almost in half this fiscal year. Projected to reach $45 billion for 2013/14, the CAD – which measures the gap between inflows and outflows of currency to the economy – is down from $88bn in 2012/13. Last year saw $50bn worth of physical gold bullion imported to India, the second-largest item after crude oil. Speaking about the gold imports rules last month, "In the long term, policy repression is not the solution," Chidambaram said, also pointing to end-March for a possible easing. "We have to look at a way to increase our exports and earn foreign currency to pay for our imports." India's exports of gold jewelry have sunk alongside gold imports however, the Gems & Jewellery Export Promotion Council (GJEPC) said today. The key gold-import rule, imposed after record-high inflows last summer, forced importers to re-export 20% of all new shipments. Confusion over that rule, plus 10% import duty and other restrictions, has now seen exports of finished jewelry fall 50% in April-Jan. from the same period last year, reaching only $5.5 billion. Ahead of May's general election in India, "Both major parties are now happy to see gold imports rise," notes a report from Japanese trading conglomerate Mitsui, "although any final decision will be taken by the Reserve Bank of India." "Should India relax its import restrictions," says the latest Metals Matters monthly report from London bullion market-maker Scotia Mocatta, "then [Western] institutional investors, China and India might all be competing for physical gold." | ||||||||||||||||||||||||||||||||||||||||
| India's CAD Halves on Gold Imports Ban, Chidambaram "Weighs Easing" Posted: 17 Feb 2014 08:35 AM PST "Pros and cons" says finance minister, as gold jewelry exports also halve... GOLD IMPORT restrictions in India, formerly the world's No.1 consumer nation, are likely to be relaxed in the next six weeks, finance minister P.Chidambaram hinted on Monday. Presenting an interim budget to parliament, and ahead of April's fiscal year-end, "The goal is to contain the CAD at a level where it can be fully and safely financed," he said. "There are pros and cons," the finance minister then said when asked by journalists about relaxing the gold import rules after his speech today. "We will weigh them carefully...we will look into it. On Chidambaram's figures, India's effective ban on gold imports has helped cut the Current Account Deficit (CAD) almost in half this fiscal year. Projected to reach $45 billion for 2013/14, the CAD – which measures the gap between inflows and outflows of currency to the economy – is down from $88bn in 2012/13. Last year saw $50bn worth of physical gold bullion imported to India, the second-largest item after crude oil. Speaking about the gold imports rules last month, "In the long term, policy repression is not the solution," Chidambaram said, also pointing to end-March for a possible easing. "We have to look at a way to increase our exports and earn foreign currency to pay for our imports." India's exports of gold jewelry have sunk alongside gold imports however, the Gems & Jewellery Export Promotion Council (GJEPC) said today. The key gold-import rule, imposed after record-high inflows last summer, forced importers to re-export 20% of all new shipments. Confusion over that rule, plus 10% import duty and other restrictions, has now seen exports of finished jewelry fall 50% in April-Jan. from the same period last year, reaching only $5.5 billion. Ahead of May's general election in India, "Both major parties are now happy to see gold imports rise," notes a report from Japanese trading conglomerate Mitsui, "although any final decision will be taken by the Reserve Bank of India." "Should India relax its import restrictions," says the latest Metals Matters monthly report from London bullion market-maker Scotia Mocatta, "then [Western] institutional investors, China and India might all be competing for physical gold." | ||||||||||||||||||||||||||||||||||||||||
| Posted: 17 Feb 2014 08:34 AM PST Jim Sinclair’s Commentary Here is Gold’s battleground. One day chart and present scrimmage at .80. Jim Sinclair’s Commentary Food is not in the CPI, of course. Food prices soar as incomes stand still CBS NewsFebruary 15, 2014, 8:02 PM NEW YORK – Writer Jen Singer, the mother of two teenage boys, wrestles with her grocery... Read more » The post In The News Today appeared first on Jim Sinclair's Mineset. | ||||||||||||||||||||||||||||||||||||||||
| We’re Going to be Hit with a Tsunami of Inflation-Peter Schiff Posted: 17 Feb 2014 08:31 AM PST By Greg Hunter's USAWatchdog.com Dear CIGAs, Money manager Peter Schiff has a read on gold short sellers. Schiff says, "Of course the short sellers never had the gold to begin with. They're selling gold they don't have, and I think the shorts are getting a little bit nervous, but they are going to get a... Read more » The post We’re Going to be Hit with a Tsunami of Inflation-Peter Schiff appeared first on Jim Sinclair's Mineset. | ||||||||||||||||||||||||||||||||||||||||
| Hathaway - Strap Yourself In For COMEX Default & Gold Surge Posted: 17 Feb 2014 08:14 AM PST  Today a 42-year market veteran who predicted the spike in gold ahead of time spoke with King World News about the explosive action in gold. Now that the rally he predicted is unfolding, John 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 said investors need to strap themselves in for a COMEX default and a surge in the gold price.This posting includes an audio/video/photo media file: Download Now | ||||||||||||||||||||||||||||||||||||||||
| Will the Gold and Silver Surge Continue? Posted: 17 Feb 2014 08:00 AM PST Gold and silver posted their biggest weekly gains since last August as the metals ended at three-month highs on Friday, above the psychologically important levels of $1,300 an ounce for gold and $21 an ounce for silver. A “steady as she goes” outlook from new Federal Reserve Chairman Janet Yellen combined [...] | ||||||||||||||||||||||||||||||||||||||||
| How Healthy Is The Real Estate Market? Posted: 17 Feb 2014 07:25 AM PST Submitted by Ramsey Su via The Acting-Man blog, The strength of the real estate market should not be measured by price appreciation, or the number of new and existing home sales. It should be measured by the support of underlying fundamentals and whether they can help to withstand economic cycles without policy makers having to go hog wild just to avoid a total collapse. How healthy is the real estate market today?
The Subprime Majority. Recently, I came across a report by the Corporation for Enterprise Development (CFED) titled Assets and Opportunity Scorecard. Some of their findings are quite interesting. According to the CFED Scorecard, 56% of all consumers have sub-prime credit. Sub-prime is "earned". A consumer has to miss a few payments, or default on a loan or two to earn that status. These 56% cannot, or should not, be taking on more debt, especially a large debt like a mortgage. They may also be struggling with a mortgage that they should not have taken out in the first place. Liquid Asset Poor. CFED found that 44% of households in America are Liquid Asset Poor, defined as having saved less than three months of expenses. As one would expect, 78% of the lowest income households are asset poor, but 25% of middle class ($56k to $91k) households also have less than three months of expenses saved. Pertaining to real estate, the report suggests that there are little savings to buy and a small cushion for changes, such as job loss. Income Inequality. The Center for Household Financial Stability of the St. Louis Fed recently released a study titled Inequality, the Great Recession, and Slow Recovery. Skip the 43 pages of academic mumbo jumbo and you will find half a dozen of very simple and informative charts, such as the two below. I will leave the inequality debate to others. With regard to a real estate stress test, it appears that households are not exactly well prepared to weather even minor economic setbacks.
Debt-income ratios by income groups – click to enlarge.
Net worth to disposable income by net worth groups – click to enlarge.
The Federal Reserve is Spent. QE1, 2 and 3 all involved the purchase of agency MBS. In January 2014, the FOMC announced that it will decrease debt purchases by another $10 billion, from the original $85 billion to $65 billion per month, $30 billion of which is supposed to be for agency MBS. That appears to be all talk. For the first 6 weeks of 2014, the Fed has already purchased $74.7 billion, or $54 billion per month. They are not only continuing the QE3 purchases, they are still replenishing the prepaid holdings from QE1 and QE2. Mortgage rates are not responding anymore. Though somewhat stabilized, the current rate (30yr) is still a full percent above the low recorded before QE3 (see the table below from Mortgage News Daily).
Furthermore, Fed members are only kidding themselves if they think they can ever tighten monetary policy. The national debt is at $17.3 trillion and growing at about $700 billion this year. The cost of financing this debt, per the Treasury, was $415.7 billion in 2013, crudely estimated at an average rate of about 2.5%. At the moment, the 3 months bill is at less than 0.2% interest, while the 10 year note is only at 2.75%. If the cost of financing this debt were to increase by just 1%, it would cost the Treasury $173 billion more a year. There is no way that the dovish Fed chair Yellen would even dream of doing that. Therefore, the risk of monetary policy is not whether the Fed will tighten, but rather what it can do to repeat a 2008 style bailout. In other words, the Fed as a safety net is full of holes that re big enough for an elephant to pass through. Exhausted Government Intervention. The FHFA just announced that HARP has reached the three million mark. We are no closer to reforming Freddie and Fannie than when they were put under conservatorship over five years ago. Numerous State and Local Governments have deployed their own foreclosure prevention laws and ordinances. The Consumer Finance Protection Bureau has created a mountain of bureaucratic red tape, adding compliance costs to the mortgage industry while providing questionable benefits to the consumer. The FHA is now pushing for lending to borrowers with credit scores as low as 580 only one year after major financial catastrophes such as foreclosure. In conclusion, the reason I remain bearish on real estate is that when the noise is filtered out, the market has only survived by means of an unprecedented amount of intervention. This dependency is not only unhealthy, its stimulating effect is now fading. If real estate prices cease to appreciate, the market will suffer, same as it did when the sub-prime bubble burst in 2006/2007. The Fed has already gone all in and there is little left it can do. Washington can always create a new set of laws to further erode private property rights as we knew them. Ironically, price appreciation is also not the answer, as it will just widen the income equality gap, turning would-be home owners into rent slaves of Wall Street's fat cats. It may be best for the market to freeze for an extended period and let consumers catch their breath. | ||||||||||||||||||||||||||||||||||||||||
| Don't Cry for the Shareholders of Fannie Mae and Freddie Mac Posted: 17 Feb 2014 07:20 AM PST "There is no distinctly native American criminal class save Congress." Mark Twain
Yesterday in The New York Times, columnist Gretchen Morgenson confirmed that the US Treasury has no intention of returning the mounting profits of the federally chartered housing agencies, Fannie Mae and Freddie Mac, to shareholders. In her fine comment, "The Untouchable Profits of Fannie Mae and Freddie Mac," she reveals that Treasury Secretary Tim Geithner approved a policy that ensures that the "existing common equity holders will not have access to any positive earnings from the G.S.E.'s in the future." A number of people have expressed shock and outrage at this shabby treatment of the common shareholders of Fannie and Freddie. In a post on Twitter in response to a tweet from your humble blogger, former FDIC Chairman Sheila Bair noted: "No sympathy for GSE shareholders here, but this is punitive compared to how AIG, Citi shareholders were treated." And of course Chairman Bair is right. The common shareholders of AIG and Citigroup were not wiped out when these organizations received government bailouts under the doctrine of "too big to fail." Our friend Nom de Plumber, who formerly worked at the Fed of New York and now makes a living in the risk management world, is similarly outraged: "If Treasury was so uncertain of GSE future, as it just stated, why did it need to seize surreptitiously such unforeseeable earnings, especially with zero public policy governance and disclosure? Either liquidate under receivership, or conserve for debt and equity claimants under conservatorship. Treasury did half and half, skimming the earnings but keeping the liabilities off the US balance sheet. It was a revenue grab, violating the Constitution… The core issue is following the asset conservation and shareholder disclosure rules which you set for others to meet. Because the GSE are public shareholder companies, their governance is not exempt from federal investor-protection laws." Morgenson notes that the public disclosure from Fannie does not mention the Treasury's intention to retain the earnings of the GSEs for the benefit of the US taxpayer indefinitely. Freddie, on the other hand, does disclose that Treasury "has indicated that it remains committed to protecting taxpayers and ensuring that our future positive earnings are returned to taxpayers as compensation for their investment." There are now a raft of lawsuits pending against the US Treasury, both by common shareholders and investors in the preferred securities of Fannie and Freddie. All follow the logic of Nom de Plumber and Morgenson, who see the actions of the Treasury as somehow unfair. The lawsuits seek restoration of earnings and damages. But while you may be able to justly criticize the Treasury for hypocrisy and inconsistency when it comes to federal securities laws applicable to private corporations, I am not sure that such arguments can be successfully made against agencies of the federal government. First let's consider why Secretary Geithner chose to support a policy of confiscation of the earnings of the GSEs. First and foremost, Geithner wanted to cripple Fannie and Freddie financially in order to prevent them from being restored to their former status in Washington. For those who have not read Morgenson's 2011 book which she co-authored with my friend Josh Rosner, Reckless Endangerment, the GSEs were the tail that wagged the dog of official policy on housing in Washington for years. By putting in place the tough agreement whereby the US Treasury injected preferred capital into the GSEs and in return has the right to confiscate all earnings of Fannie and Freddie indefinitely, Geithner sought to cripple these institutions as a political matter. I rather agree with his judgment, but wish that he had put the two GSEs into receivership during the crisis. With the higher fees put in place under the conservatorship, Fannie and Freddie look really profitable, at least in a nominal sense. But if those profits are adjusted for the risk the GSEs take on housing, there are no profits. Geithner told Congress in 2011: "The Administration is committed to a system in which the private market – subject to strong oversight and strong consumer and investor protections – is the primary source of mortgage credit." But the reality is that the U.S. government is the only entity that is willing and able to truly underwrite the risk of the multi-trillion dollar housing market. As we saw during the housing boom of the 2000s, when for a brief couple of years private investors did support a large chunk of the mortgage finance market, as soon as the true risks were revealed the private capital ran for the door. Even commercial banks are unwilling to support more than a tiny fraction of the housing sector's overall risk with their own capital. In his book The Death of Liberalism, R. Emmett Tyrrell notes that during the chaos following the 2008 subprime market collapse; "Some institutions went down in flames, and the government backed institutions, Fannie and Freddie, went hat in hand to the taxpayer." Chairman Bair is right when she notes that the shareholders of AIG and Citigroup were treated better than are the shareholders of Fannie and Freddie, at least insofar as their ability to benefit from the financial recovery of these firms. But the key point to take away from that comparison is that the GSEs are not private corporations chartered under state law. In the United States, the roots of the subprime crisis of 2008 and the political reaction thereto stretch back to the founding of the republic. In a legal sense, the power of the federal government to regulate finance begins with the 1819 Supreme Court decision establishing supremacy of federal law over conflicting state law. In McCulloch v. Maryland, the Supreme Court settled a dispute that arose when Maryland sought to tax The Second Bank of the United States, which that was seen as endangering Maryland's state banks during the depression of 1818. The landmark Supreme Court decision confirmed that the Government of the Union, though limited in its powers, is supreme within its sphere of action. The Court said that federal laws, when made in pursuance of the Constitution, form the supreme law of the land. As a practical matter, the power of the US Treasury and ultimately Congress over the GSEs is absolute. The terms imposed by Treasury in return for the bailout are harsh and perhaps even unfair in a narrow sense, but it is far from clear that private shareholders have any power to object or seek redress. If, for example, Congress passed legislation tomorrow extinguishing the GSEs without any compensation to the private "shareholders" whatsoever, it is clear that there would be no legal basis for objecting to this action. Likewise, if Treasury were to put the GSEs into receivership, the private stakes could be wiped out and Fannie and Freddie would emerge as they existed when first chartered by Congress. In a moral sense this would be wrong, but in a legal sense there seems little basis for private citizens to object. The second issue that is equally powerful is the question of risk. The whole operational basis for the GSEs was their implicit guarantee from the U.S. government. Neither of these entities ever had sufficient private capital to achieve the "AAA" credit standing that Fannie and Freddie commanded in the past and still command today. At best, the private shareholders of the GSEs were free riding on the backs of the U.S. tax payer, collecting supranormal returns for taking little or no risk – or at least we thought. For years the common and preferred shareholders of Fannie and Freddie benefited from the pretense that these corporations were, in fact, private for profit entities. But in the background, federal officials regularly assured their counterparts around the world that the debt issued by Fannie and Freddie had the full faith and credit of the United States. When push came to shove during the subprime crisis, the implicit guarantee became explicit and the private shareholders of both GSEs paid a terrible price. But they should not have been surprised. Morgenson includes an important quote in her piece: "People disagree about what should happen to the G.S.E.'s," said Matthew D. McGill, a lawyer at Gibson, Dunn & Crutcher in Washington who represents Perry Capital. "But if the plan is to wind them down, Congress provided a means to do that in the 2008 law — it's called receivership, and it provides a host of procedural protections to claimants. What the Treasury cannot do is abuse its conservatorship powers to nationalize the companies and then, when it deems convenient, wind them down without the protections enacted by Congress." Well, maybe. The trouble here is that the Treasury is only accountable to Congress, not to the private shareholders seeking redress in the courts. The GSEs are creatures of the federal government, not the states. They were "privatized" in name only under the Administration of Lyndon Johnson, more as an effort at fiscal window dressing than as a serious attempt to separate them from the federal government in a financial, operational or risk perspective. While private investors in the GSEs may not like the way that they have been treated since the 2008 bailout, there seems little that they can do except waste money on a lot of litigation that seems unlikely to bring relief. Federal judges do not like second guessing Congress or the Executive Branch when it comes to the exercise of basic Constitutional powers. For decades, private investors benefitted from the pseudo privatization of the GSEs and reaped enormous returns for essentially doing nothing. Now those shareholders who were too dumb to head for the door when the music stopped want to be made whole for their losses. When considering what is fair to private investors in this situation, the treatment of the investors in the Madoff fraud comes to mind. The investors are given back their original investments, but none of the pretended gains because the money was never really invested in the first place. Perhaps such a scheme would be appropriate here. But the only thing you can really say to investors in a GSE is "caveat emptor." When you as a private individual undertake to do business with a sovereign entity governed by politicians, you have only yourself to blame when the U.S. government decides to break its own rules on disclosure and securities fraud. This is just another Washington fable which reminds us all of the words of Mark Twain: "History has tried hard to teach us that we can't have good government under politicians. Now, to go and stick one at the very head of the government couldn't be wise." | ||||||||||||||||||||||||||||||||||||||||
| India To "Look Into" Easing Gold Price Controls Posted: 17 Feb 2014 06:37 AM PST Two weeks ago, gold jumped to a then-2014 high, following reports out of India that the head of India's Congress Party, Sonia Gandhi was pushing the government to cut its duty on gold and other restrictions. Today, now that the upward move in gold has finally resumed, it appears that the nation with the world's most draconian gold capital controls, is finally starting to crack under pressure from the people, as well as a surge in gold smuggling via illegal channels to unprecedented levels. Reuters reports that India "will look into relaxing gold imports curbs, but won't let its current account deficit (CAD) balloon, Finance Minister P. Chidambaram said on Monday." More:
Of course, to borrow a line of thought from economists, while China may have overtaken India in official gold transfers the Indian demand for gold is still there, "pent up" and as vibrant as ever, and in fact should the government finally undo one or all of its anti-gold capital controls, all demand hell may break loose. Just how pervasive are said controls? Below is a partial list we put together last year. Should the government's resolve begin to truly crack, the "price discovery" result could be more violent than if the PBOC were to announce today what its true gold holdings currently are.
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| Posted: 17 Feb 2014 06:31 AM PST I’d been wondering what these two curves looked like for some time – wonder no more, thanks to the Bitcoin Charts website, StockCharts, and couple of handy graphic programs. It would seem there are a lot of common interests between Bitcoin owners and holders of gold, so, the strong inverse correlation between the two late last [...] | ||||||||||||||||||||||||||||||||||||||||
| Peter Schiff: The Dollar Will Collapse Posted: 17 Feb 2014 06:30 AM PST Peter Schiff: Gold Update, The Dollar Will Collapse First, Janet Yellen Wants More Inflation & More Peter Schiff, the CEO of Euro Pacific Precious Metals, says, "The messes get progressively bigger because the bubbles get progressively bigger. We have the biggest bubble ever blown... [[ This is a content summary only. Visit http://www.GoldSilverNewsBlog.com or http://www.newsbooze.com or http://www.figanews.com for full links, other content, and more! ]]  | ||||||||||||||||||||||||||||||||||||||||
| Posted: 17 Feb 2014 06:08 AM PST GOLD PRICE gains of 4.0% last week were extended Monday morning, with silver prices also jumping again as world stock markets rose for the 9th day running. Asian trade saw the gold price jump to $1330 per ounce, its highest level since end-October. The price of wholesale silver investment bullion bars jumped with 2 cents of $22.00 per ounce, rising 10.0% from this time last week. "My view is that it may be too early to start allocating heavily to gold," says London multi-asset fund manager Eugene Philalithis at Fidelity. "However, if the view on gold prices changed then I think mining stocks would deserve a look." "The market's friendliness to gold is all very new," says a note from Swiss investment bank and London market-maker UBS. "While US clients are warming to gold again, they're not outright bullish. Some investors are just looking for short-term opportunities. There remains a large dose of hesitancy." Latest data from US regulators said Friday night that speculative traders raised their bearish bets against the gold price yet again on Comex last week, but their bullish bets grew faster. So overall, the speculative net long position in gold futures and options rose to the equivalent of 310 tonnes, the largest level since the gold price was last above $1300 in early November. Speculative traders in silver also grew their net long position. But bullish silver bets barely rose, while bearish bets were cut by almost one-fifth in the week-ending last Tuesday. Meantime in China today – where new data showed bank lending surging by $217 billion in January, more than 170% the pace of new lending in December – gold and silver trading in Shanghai leapt to multi-month highs as prices rose. China's key gold price pushed up to a $7 premium above London spot, while trading activity totaled more than $2.0bn, its highest level since mid-November. Silver trading on the Shanghai Gold Exchange reached almost $2.5bn in the most popular contract, the greatest level since mid-September. "For the first time in a little while," says Walter de Wet at Standard Bank, "Asia was a keen buyer of gold this morning...with not only the [Shanghai] premium moving higher...but the gold price also finding good support." "China's unfolding credit crunch is having an unforeseen and dramatic impact on gold prices," reports The Daily Telegraph in London, "as investors urgently stock up on the precious metal." The US Dollar meantime fell to a 3.5-year low to Sterling as New York markets stayed closed for Presidents Day. Broad commodities indexes ticked 0.3% higher. Italian, Spanish and other "weaker" Eurozone bond prices rose sharply, pushing 10-year yields down 5 basis points, while German and UK bonds were unmoved. | ||||||||||||||||||||||||||||||||||||||||
| Chinese gold company to pay $665 million for U.S. oil and gas company Posted: 17 Feb 2014 05:18 AM PST By Michelle Yun HONG KONG -- Goldleaf Jewelry Co., a Chinese jewelry retailer with gold mining investments, plans to buy U.S. oil and gas operator ERG Resources LLC for at least $665 million. Goldleaf's shares surged. The Beijing-based company will pay for the acquisition with a private share placement, raising as much as 5.7 billion yuan ($940 million) from no more than 10 investors, Goldleaf said in a statement today to the Shenzhen stock exchange. It will hold 95 percent of Houston, Texas-based ERG after the purchase. The acquisition is in line with the company's strategy to become a "cross-border, trans-market, international resources enterprise," Goldleaf said in a separate statement. ... ... For the full story: http://www.bloomberg.com/news/2014-02-17/chinese-gold-retailer-to-pay-66... ADVERTISEMENT Buy metals at GoldMoney and enjoy international storage GoldMoney was established in 2001 by James and Geoff Turk and is safeguarding more than $1.7 billion in metals and currencies. Buy gold, silver, platinum, and palladium from GoldMoney over the Internet and store them in vaults in Canada, Hong Kong, Singapore, Switzerland, and the United Kingdom, taking advantage of GoldMoney's low storage rates, among the most competitive in the industry. GoldMoney also offers delivery of 100-gram and 1-kilogram gold bars and 1-kilogram silver bars. To learn more, please visit: http://www.goldmoney.com/?gmrefcode=gata Join GATA here: Mines and Money Hong Kong http://www.minesandmoney.com/hongkong/ * * * Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006: http://www.goldrush21.com/order.html Or by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Help keep GATA going 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: To contribute to GATA, please visit: ADVERTISEMENT How to profit with silver -- Future Money Trends is offering a special 16-page silver report with 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. To learn about this report, please visit: http://www.futuremoneytrends.com/index.php?option=com_content&id=376&tmp... | ||||||||||||||||||||||||||||||||||||||||
| Gold price in a range of currencies since December 1978 XLS version Posted: 17 Feb 2014 05:13 AM PST Excel file of gold price charts and data - Updated weekly in 19 curriences: US dollar, Euro, Japanese yen, Pound sterling, Canadian dollar, Swiss franc, Indian rupee, Chinese renmimbi, Turkish lira, Saudi riyal, Indonesian rupiah, UAE dirham, Thai baht, Vietnamese dong, Egyptian pound, Korean won, Russian ruble, South African rand, Australian dollar | ||||||||||||||||||||||||||||||||||||||||
| Posted: 17 Feb 2014 04:26 AM PST After tumbling as low as the 101.30 level overnight on atrocious GDP data, it was the same atrocious GDP data that slowly became the spin needed to push the USDJPY higher as the market became convinced that like everywhere else, bad news is great news and a relapse in the Japanese economy simply means more QE is coming from the BOJ despite the numerous articles here, and elsewhere, explaining why this very well may not be the case. Furthermore, as we noted last night, comments by the chairman of the GPIF panel Takatoshi Ito that the largest Japanese bond pension fund should cut its bond holdings to 40% were used as further "support" to weaken the Yen, and what was completely ignored was the rebuttal by the very head of the GPIF who told the FT that demands were unfair on an institution that has been functionally independent from government since 2006. The FSA "should be doing what they are supposed to be doing, without asking too much from us," he said, adding that the calls for trillions of yen of bond sales from panel chairman Takatoshi Ito showed he "lacks understanding of the practical issues of this portfolio." What he understands, however, is that in the failing Japanese mega ponzi scheme, every lie to prop up support in its fading stock market is now critical as all it would take for the second reign of Abe to end is another 10% drop in the Nikkei 225. All this, and the opening of Europe at 3:00 am Eastern - because with the US closed, not even the algos could use the traditional 9:30 US open as a driver to send USDJPY higher - served as sufficient catalysts to push the USDJPY not only to fill the "data" gap but to launch it to overnight highs, which in turn has sent the Spoos to fractions of its all time high. And just like that the second EM crash in one year is long forgotten. Here's looking forward to the third one. In other news, selling pressure on Bunds amid the looming supply this week worth approx. EUR 25bln vs. last week's EUR 20bln, failed to support equity markets in Europe which are seen trading mixed as market participants use what has been a quiet trading session to book profits. As expected, BTPs outperformed, after Moody's changed their outlook on Italy's Baa2 government bond rating to stable from negative. This saw IT/GE 10y spread move to its tightest level since July 2011, with touted buying by leveraged accounts supporting the belly of other peripherals. Looking elsewhere, USD/JPY remained supported by a firmer USD and also reports citing the head of the Japanese government advisory panel saying that the public pension fund GPIF should cut bond holdings to 40% within 2 years. At the same time, after touching on its highest level since November 2009, GBP/USD has since edged lower and into negative territory, amid touted profit taking related flow ahead of key macroeconomic releases due out later on in the week. Looking at the week ahead, today's President's Day holiday in the US will result in a pretty quiet Monday in the US. Later in the week, we can look forward to the minutes from the Fed's January 28-29 FOMC meeting (Wednesday), January CPI (Thursday) and initial jobless claims (Thursday). The FOMC minutes might not shed too much more light on monetary policy than what was revealed in Yellen's recent congressional testimony but we may get some more interesting tidbits about the Fed's forward guidance. January's CPI is expected to print at 1.6% YoY (+0.1% MoM) in both the headline and the core. The other notable US data releases are the New York Fed Empire survey (Tues), housing starts (Wed), Philly Fed (Thurs), and existing home sales (Fri). However, given the weather-related distortions to many of the economic data series reported up to this point, many so-called economists warn that these releases may be less reliable in terms of gauging the underlying trend in the economy: after all who can expect seasonal adjustments to adjust for, gasp, the seasons! Unfortunately, this is likely to be an ongoing theme at least until much of the wintry weather across the country subsides at which point any bounce in activity can be blamed on the recovery and any weakness will be due to rainfall in the spring and hot weather in the summer, and so on. On Tuesday, the Fed Board of Governors will host an open meeting where they plan to consider rules for enhancing prudential standards for banking holding companies. The St Louis Fed's James Bullard will be speaking on Wednesday and Thursday. Out of Europe, we have a similarly quiet start to the week before the Euroarea balance of payments and German ZEW survey are published tomorrow. The key data this week is Thursday's manufacturing and services PMIs. It's a fairly big week for UK macro with CPI tomorrow, followed by unemployment and the BoE minutes on Wednesday. However there are probably not too many more surprises lying within the latest BoE minutes after the quarterly inflation report was released last week. A G20 finance ministers and central bank governors meeting is scheduled for the weekend of 22/23rd of February in Sydney. Tomorrow, the BoJ will end its latest policy meeting where no major changes in policy are expected. Nonetheless there is a growing chorus of commentators expecting the BoJ to have to expand policy further at some point in the 1H of 2014 particularly if there is a slowdown in demand following a sales tax hike in April. The BoJ releases minutes from its January meeting on Friday and the country's latest trade report is due on Thursday which is expected to show a further deterioration in the trade balance. In EM, the data docket is headlined by China's flash manufacturing PMI on Thursday. Of the EM central banks, eyes will be on the policy meetings in Turkey, Hungary and Chile. Our EM economists expect the CBT to be on hold after the substantial tightening of last month, where as in Hungary they expect the NBH to cut again in its last easing of the cycle. A cut is also expected from the Chilean central bank. Overnight bulletin from RanSquawk
Asian Headlines JPY swaps curve bear-steepened overnight in reaction to lower JGBs amid better bid equity markets in Asia. Helping factor for Asian stocks were reports citing the PBOC that the Chinese banking sector lent CNY 1.32trl (approx. USD 220bln) in January, the largest loan disbursement in four years (CNBC). This may allay fears that the Chinese credit sector was contracting in the second half of last year due to the PBoC's warning shots on irresponsible lending. In other news, the head of the Japanese government advisory panel said the public pension fund (with AUM of over USD 1trl) should cut bond holdings to 40% within 2 years, should put half its assets in stocks and that the GPIF should increase its annual return target to 5%. (BBG/FT) Also of note, the BoJ are said to be considering refraining from a 2015 monetary base forecast in order to avoid committing to unprecedented easing for a specific period, according to sources. (BBG) Japanese GDP SA (Q4 P) Q/Q 0.3% vs. Exp. 0.7% (Prev. 0.3%) (BBG) GDP Annualized SA (Q4 P) Q/Q 1.0% vs. Exp. 2.8% (Prev. 1.1%) EU & UK Headlines Apart from positioning for the upcoming supply, there was little in terms of underlying flow, with only two 5y corporates to contend with for swappers. BoE's Carney reiterated that rate rises will be gradual and limited, and will only come when there is sustainable growth in jobs, incomes and spending. Carney said the unemployment rate has risen faster than anticipated but there is still slack in the labour market. (BBC) While short-sterling curve has in fact outperformed, the price action was largely attributed to touted short-covering after heavy bear steepening observed last week following the presentation of the QIR by Carney. US Headlines **Note: US floor trade closed for US Presidents' Day Alongside expectations, the US President Obama signed through legislation that raises the US debt limit through to March 2015. (CNBC) Equities UK FTSE-100 index outperformed its peers this morning, driven higher by RSA Insurance shares which surged over 3% following reports that the company is selling new shares and auctioning its business in Canada. In Europe, stocks were supported by telecommunications sector, with Vodafone shares still buoyed by Friday's reports that hedge fund manager John Paulson has increased his stake in the company, with the investor seeing the company as a potential takeover target. According to a regulatory filing on Friday the fund's stake is valued at USD 1.4bln FX In spite of lacklustre performance by EUR/USD, EUR/GBP benefited from GBP weakness and trended higher since morning and moved above the 61.8% Fibonacci retracement of the July 2012 low to February 2013 high at 0.8160. Of note, analysts at SocGen believe that current GBP level offers good entry points for long-term strategic short vs. USD. Commodities According to CFTC, speculators net long positions in gold have increased by 9,884 contracts to 69,291 contracts. Speculators added 8,028 bullish bets in silver which turned the market to net longs of 7,675 lots. Goldman Sachs says taking a cautious view on copper. UBS says most clients see gold 'gradually' climbing this year and establishing a new price range above USD 1,300/oz. AngloAmerican's CEO Mark Cutifani has stated that South African Platinum mines that have been affected by recent strikes may not have a long term future as the Co. starts to focus on less labour-intensive assets * * * In conclusion, here is the overnight recap from DB's Jim Reid Both EM and China have seen aches and pains so far this year but the data over the weekend in China is helping markets this morning. China's January 2014 monetary statistics showed that there were newly issued loans of Rmb1.32trn (up 23% yoy) and total social financing (TSF) of Rmb2.58trn (up 1.4% yoy). This beat consensus estimates of Rmb1.1trn by 20% and Rmb1.9trn by 36% respectively. Within this, weakness in newly issued trust loans (-49% yoy) and corporate bonds (-85%) was offset by bank-centric financing (+8%yoy), particularly RMB loans (+23% yoy). DB's Chinese bank equity analysts write that this development confirms their view that tighter regulation on the shadow banking system will lead to a shift in credit demand towards banks to offset the de-leveraging of the weaker/risky part of the financial system. More broadly, the sentiment on China has improved in the recent week or so following a better-than-consensus trade report (albeit with some debate on seasonal and over-invoicing effects), benign inflation data and the weekend's credit aggregates – all this has helped the Hang Seng China Enterprises index rebound 6% this month. The next important Chinese datapoint will be this Thursday flash manufacturing PMI. Asian equities are trading about half a percent to a full percent higher this morning. In Japan, Q4 GDP printed at 0.3%, significantly lower than the 0.7% expected, weighed by a -0.5% contribution from external demand (stagnant exports and high growth of imports). Japanese equities (Nikkei +0.5%) have recovered from early lows but are still underperforming other Asian equities today. Coming back to the topic of China's shadow banking sector, retail investors in a troubled trust product (Jilin Songhua River No.77) created by Jilin Province Trust Co and backed by a loan to a coal company (Shanxi Liansheng Energy Co) are set to be repaid on their investment as part of a restructuring plan reported in domestic media today (21st Century Business Herald). This is the second high profile trust restructuring in China in the last few weeks. Shanxi Liansheng, which is involved in the cement, real estate and power industries and is the largest privately owned coal miner in the Shanxi province, managed to secure a RMB2bn (US$330m) loan from China Development Bank, some of which will be used to repay retail investors, suggesting another high-recovery outcome for this group of investors. Recall that investors in China Credit Trust's "Credit Equals Gold" product recovered their principal last month when an unnamed investor stepped in to purchase the underlying collateral. These sorts of developments in China's trust sector look set to be an ongoing theme this year. It still feels we live in an environment where allowing the free market to determine defaults/recoveries involves too much systemic risk. China is seemingly now going through what DM has been going through over the last few years. Outside of China, much of the weekend press was related to the ongoing political developments in Italy. The PM-in-waiting and Mayor of Florence, Matteo Renzi has been summoned to meet with President Napolitano this morning where he may be given the mandate to form a government. Already, centre-right coalition partners (namely the New Centre Right led by Angelino Alfano) have suggested they need more time to evaluate whether to stay in the government coalition though commentators point out that with Alfano's popularity waning, the New Centre Right has an incentive to support the new government to avoid snap elections. The FT's Wolfgang Muchau described the challenges ahead for Renzi as addressing one of Italy's three economic problems: "very large debt....no growth; and it is a member of a poorly functioning monetary union" (Financial Times). So far the developments have so far been shrugged off by markets with Italian bond yields still near record lows and the FTSE MIB index up 3.8% last week. Moody's postmarket change in Italy's outlook (from negative to stable) last Friday perhaps reinforced that the short-term outlook continues to improve as funding remains relatively easy. Challenges await the new PM though. In the UK, in an interview published over the weekend the BoE's Mark Carney said impediments to the economic recovery that are keeping U.K. interest rates at a record low will persist including economic weakness in Europe, repair of public balance sheets and improvements to the financial system. "All of those forces conspire collectively to keep that level of interest rates down", Carney said (BBC). With forward guidance via formal thresholds now seemingly redundant one would expect more of this verbal guidance to dominate the central bank landscape. Looking at the week ahead, today's President's Day holiday in the US will result in a pretty quiet Monday in the US. Later in the week, we can look forward to the minutes from the Fed's January 28-29 FOMC meeting (Wednesday), January CPI (Thursday) and initial jobless claims (Thursday). The FOMC minutes might not shed too much more light on monetary policy than what was revealed in Yellen's recent congressional testimony but we may get some more interesting tidbits about the Fed's forward guidance. January's CPI is expected to print at 1.6% YoY (+0.1% MoM) in both the headline and the core. The other notable US data releases are the New York Fed Empire survey (Tues), housing starts (Wed), Philly Fed (Thurs), and existing home sales (Fri). However, given the weather-related distortions to many of the economic data series reported up to this point, DB's Joe LaVorgna warns that these releases may be less reliable in terms of gauging the underlying trend in the economy. Unfortunately, this is likely to be an ongoing theme at least until much of the wintry weather across the country subsides. On Tuesday, the Fed Board of Governors will host an open meeting where they plan to consider rules for enhancing prudential standards for banking holding companies. The St Louis Fed's James Bullard will be speaking on Wednesday and Thursday. Out of Europe, we have a similarly quiet start to the week before the Euroarea balance of payments and German ZEW survey are published tomorrow. The key data this week is Thursday's manufacturing and services PMIs. It's a fairly big week for UK macro with CPI tomorrow, followed by unemployment and the BoE minutes on Wednesday. However there are probably not too many more surprises lying within the latest BoE minutes after the quarterly inflation report was released last week. A G20 finance ministers and central bank governors meeting is scheduled for the weekend of 22/23rd of February in Sydney. Tomorrow, the BoJ will end its latest policy meeting where no major changes in policy are expected. Nonetheless there is a growing chorus of commentators expecting the BoJ to have to expand policy further at some point in the 1H of 2014 particularly if there is a slowdown in demand following a sales tax hike in April. The BoJ releases minutes from its January meeting on Friday and the country's latest trade report is due on Thursday which is expected to show a further deterioration in the trade balance. In EM, the data docket is headlined by China's flash manufacturing PMI on Thursday. Of the EM central banks, eyes will be on the policy meetings in Turkey, Hungary and Chile. Our EM economists expect the CBT to be on hold after the substantial tightening of last month, where as in Hungary they expect the NBH to cut again in its last easing of the cycle. A cut is also expected from the Chilean central bank. | ||||||||||||||||||||||||||||||||||||||||
| Slash and Earn: The Gold Stock Paradox Posted: 17 Feb 2014 02:04 AM PST Dear Reader, Lest we appear to be cheerleaders praising the virtues of gold regardless of the harsh realities of the marketplace, we've got some bad news to discuss this week. There's more than a silver lining, of course; as Doug Casey likes to remind us, crisis and opportunity are two sides of a single coin. In this case, as Jeff Clark outlines below, there's good news despite the bad news for gold producers, and the implications for the future are actually quite bullish. The woes of producers aside, the last few weeks have been spectacularly good for many gold stocks, including almost all of our gold juniors. The timing couldn't have been better for those who just joined us as a result of our Upturn Millionaires broadcast. I do believe this is just the beginning, and welcome you aboard. Sincerely, Louis James P.S. New Casey Phyles are forming in Andorra; Knoxville, TN, and London, ON, Canada. Individuals wishing to join any of these phyles or checking to see if a Phyle exists near them can direct inquiries to phyle@caseyresearch.com for more information.
Slash and Earn: The Gold Stock ParadoxJeff Clark, Senior Precious Metals Analyst My jaw dropped lower and lower last Thursday as I perused quarterly reports from some of the world's largest gold producers. Many of the results were shockingly bad. Impairment charges, reserve write-downs, earnings losses, and dividend cuts—no company escaped the fallout from lower gold prices. Some reported bad news on every aspect of their businesses. But here's the most striking thing: The market didn't care. It's almost paradoxical—gold stocks rose heartily that day, even those reporting the worst results. GDX (Gold Miners ETF), which consists solely of producers, was up 4.4%.That's not a lack of concern we're seeing; it's outright, almost reckless bullishness. So what the heck is going on? Earnings Down, Stocks UpTo get the full picture, first here's a look at the write-downs and losses reported by five of the world's largest gold producers last quarter. Total losses for these five companies exceed $5.4 billion. Write-downs were $6 billion. That's a lot of money for an industry as small as ours. And there's more to come: Newmont's (NEM) report is due on Friday, and with reserves based on $1,400 gold, an impairment charge is virtually guaranteed. AngloGold Ashanti (AU) could have similarly ugly news later this week. Golden Star Resources (GSS) and IAMGOLD (IAG) will almost certainly report write-downs as well, due to high costs and/or low grades. But gold stocks are up. Here's a chart of the year-to-date gains of the same five producers, along with GDX and gold. It's amazing—these gains look more like annual returns instead of 45-day results. Why Are Gold Stocks Doing So Well?There are several reasons… Bad news was priced in. Many analysts expected bad news from the producers, so Mr. Market was looking at other factors to determine if he should buy or sell. Companies are leaner and meaner. It wasn't all bad news…
The market clearly expects margins and bottom lines to materially improve due to the positive changes most management teams have been able to make. Sentiment has shifted. A number of analysts have started to take notice of the deep valuations gold stocks offer. There's a sense among an increasing number of investors that the worst is over in the gold sector, and therefore that bargains had best be snapped up while they're still available. The broader stock market is weak. There's an inverse relationship between gold and the S&P; more often than not, when one is weak, the other tends to be strong—and Wall Street has been weak. Gold is rising. With each tick up in the gold price, producers become more attractive. Most investors know you can get leverage to the gold price through a gold stock, as has just been amply demonstrated in the last few weeks. That said, gold stocks have been rising sharply since their December 31 lows—some charts have gone almost vertical—so don't be surprised if we see a pullback soon. But a larger shift in the gold market is under way; we're moving from a two-plus-year bear market to the beginnings of a new bull market—and that's when we stand to make the most money. As Doug Casey said in our recent Upturn Millionaires video event: "You have to look at the bright side of this resource market, and that is that it's the most volatile class of stocks in the world. When they become overpriced, they become extremely overpriced, and when the market bottoms, they become unbelievable values. And that's where we are right now." And as mentioned last week, Louis James has just published his new 10-Bagger List for 2014 in the February issue of the International Speculator. It contains his 9 favorite picks he believes could make 1,000% gains over the next year. You can get instant access to the list—plus two free special reports—if you try the International Speculator risk-free today. Love it or your money back; and even if you cancel, you get to keep all the newsletter issues and special reports you received. But act quickly: The next breather gold takes could be the last great buying opportunity before the gold market really takes off. Click here to get started. | ||||||||||||||||||||||||||||||||||||||||
| Posted: 17 Feb 2014 01:11 AM PST Fundamentals improving with the charts. And they need to... LET'S PREFACE this post with a statement that has not changed since I began public writing nearly 10 years ago, says Gary Tanashian in his Notes from the Rabbit Hole. Gold is not about price; gold is about value. This point was hammered home to me 11 years ago by a person who had much influence upon my viewpoint toward the financial system and its various diseased components at a time when I was ready to listen and understand. So whether we are talking about 2013′s epic price crash or a new bull trend in 2014, the simple fact is that physical gold itself is a store of monetary value. That applied last year as the value was marked down by greed and confidence and it will apply this year as it is marked up in the face of a likely unwinding of those things. Humans, what funny and hyper kinetic animals. Ah, but this post is about the fun part, the speculative part where we humans can make gains from gaming the simple store of value and its wild little brother, silver. As asset market speculators we care about prices, right? How about the share prices of the completely blown to bits miners that dig the stuff out of the ground? There is a reason we put so much effort (i.e. risk management) into not letting the declines of the last 2+ years hurt us, and that reason was to be fully intact for when it is time to speculate. Now, a bottoming process has been ongoing since last spring, believe it or not.  The Inverted Head & Shoulders scenario may or may not be the ultimate outcome of the weekly chart above, but NFTRH has been operating to its potential for months now as the grind in gold stocks has well, ground on. In fact, a grinding bottom would provide a better basis or platform for the rally (or baby cyclical bull) than the vertical thing that failed in 2012 off a 'W' bottom attempt. But it takes a new daily trend to even begin moving from a potential bull phase to an actual bull phase. Several weeks ago NFTRH was noting that a bull signal (for a rally at least) would be indicated by a rise above the 50-day moving averages in tandem with MACD going green (0+). While I personally positioned during the false breakdown below 200, it was advised that conservative investors and traders might wish to wait for the above noted signals. Check. As to whether this is a new cyclical bull market or just a rally, the weekly chart above will eventually decide that question. There is no need to define it yet, because a bull phase is a bull phase as far as speculators are concerned. If it is a bull market, there will be plenty of time for late comers to jump in and mark it up later.  As for staying aboard the rally in the meantime, here is where the fundamentals will come into play, joining the technicals. During much of 2013 we were treated to much railing from within the gold 'community' that gold's fundamentals had never been better. But in reality, gold's fundamentals as NFTRH views them – which are beyond the scope of this post (ref: Gold Mining is Counter Cyclical), but are definitely not what you read in the mainstream financial media or hear touted by certain gold bug analyses – degraded consistently in 2013. It can be argued that these fundamentals were jimmied and rigged by all too cynical policy making, but just because something is rigged, you as a speculator, do not stand in front of it. In fact, as a speculator you put your dogma on a leash and trade what is, not what your inner most convictions tell you should be. In other words, trade your brain not your heart. The daily trend in the precious metals and in particular gold and silver stocks, which have led the metals as we would like to see in a real bull phase, has turned up. A new bull market is still a ways from being indicated, but for now we'll take a rally and realize that with the bearishness of the last 2+ years and the grind that the recent bottoming activity has been, a new cyclical bull market could also be in play. Do not listen to the hype. The macro fundamentals have begun to improve for the gold sector and this will need to continue. NFTRH will manage these fundamentals every step of the way, as well as keep a running tab on the technicals. There will be hysterical rises and challenging declines going forward, but sector fundamentals and support parameters will successfully guide us. | ||||||||||||||||||||||||||||||||||||||||
| Posted: 17 Feb 2014 01:11 AM PST Fundamentals improving with the charts. And they need to... LET'S PREFACE this post with a statement that has not changed since I began public writing nearly 10 years ago, says Gary Tanashian in his Notes from the Rabbit Hole. Gold is not about price; gold is about value. This point was hammered home to me 11 years ago by a person who had much influence upon my viewpoint toward the financial system and its various diseased components at a time when I was ready to listen and understand. So whether we are talking about 2013′s epic price crash or a new bull trend in 2014, the simple fact is that physical gold itself is a store of monetary value. That applied last year as the value was marked down by greed and confidence and it will apply this year as it is marked up in the face of a likely unwinding of those things. Humans, what funny and hyper kinetic animals. Ah, but this post is about the fun part, the speculative part where we humans can make gains from gaming the simple store of value and its wild little brother, silver. As asset market speculators we care about prices, right? How about the share prices of the completely blown to bits miners that dig the stuff out of the ground? There is a reason we put so much effort (i.e. risk management) into not letting the declines of the last 2+ years hurt us, and that reason was to be fully intact for when it is time to speculate. Now, a bottoming process has been ongoing since last spring, believe it or not. The Inverted Head & Shoulders scenario may or may not be the ultimate outcome of the weekly chart above, but NFTRH has been operating to its potential for months now as the grind in gold stocks has well, ground on. In fact, a grinding bottom would provide a better basis or platform for the rally (or baby cyclical bull) than the vertical thing that failed in 2012 off a 'W' bottom attempt. But it takes a new daily trend to even begin moving from a potential bull phase to an actual bull phase. Several weeks ago NFTRH was noting that a bull signal (for a rally at least) would be indicated by a rise above the 50-day moving averages in tandem with MACD going green (0+). While I personally positioned during the false breakdown below 200, it was advised that conservative investors and traders might wish to wait for the above noted signals. Check. As to whether this is a new cyclical bull market or just a rally, the weekly chart above will eventually decide that question. There is no need to define it yet, because a bull phase is a bull phase as far as speculators are concerned. If it is a bull market, there will be plenty of time for late comers to jump in and mark it up later. As for staying aboard the rally in the meantime, here is where the fundamentals will come into play, joining the technicals. During much of 2013 we were treated to much railing from within the gold 'community' that gold's fundamentals had never been better. But in reality, gold's fundamentals as NFTRH views them – which are beyond the scope of this post (ref: Gold Mining is Counter Cyclical), but are definitely not what you read in the mainstream financial media or hear touted by certain gold bug analyses – degraded consistently in 2013. It can be argued that these fundamentals were jimmied and rigged by all too cynical policy making, but just because something is rigged, you as a speculator, do not stand in front of it. In fact, as a speculator you put your dogma on a leash and trade what is, not what your inner most convictions tell you should be. In other words, trade your brain not your heart. The daily trend in the precious metals and in particular gold and silver stocks, which have led the metals as we would like to see in a real bull phase, has turned up. A new bull market is still a ways from being indicated, but for now we'll take a rally and realize that with the bearishness of the last 2+ years and the grind that the recent bottoming activity has been, a new cyclical bull market could also be in play. Do not listen to the hype. The macro fundamentals have begun to improve for the gold sector and this will need to continue. NFTRH will manage these fundamentals every step of the way, as well as keep a running tab on the technicals. There will be hysterical rises and challenging declines going forward, but sector fundamentals and support parameters will successfully guide us. | ||||||||||||||||||||||||||||||||||||||||
| The Silver St. Valentine’s Day Breakout Posted: 17 Feb 2014 01:09 AM PST In this Weekend Report I would like to show you the Chartology of silver that you won’t see anywhere else on the planet. Some of these charts might not conform to the classic textbook scenarios most chartists believe are the only correct ways to construct a chart pattern. I have learned through many years of charting the markets that there are areas in this field that can be opened up for further interpretation and still fall within the loose confines of what is considered a chart pattern. Keeping an open mind in any of the trading disciplines of the markets from Elliot Wave, to cycles or charting can give one more insight and clarity than any one book can give you. Real time analysis and interpretation is the only way to really get to know your chosen field for investing in the markets. | ||||||||||||||||||||||||||||||||||||||||
| Posted: 17 Feb 2014 01:08 AM PST First you gotta buy. Be ready to sell before that... MY FRIEND Mark LoPresti caught me, writes Steve Sjuggerud in his Daily Wealth. I had my chest out, proudly telling him a stock story. "I bought the stock around $2. It ran from about $2 to $8.75. And it's now around $6.50 today," I explained. Mark listened politely. Then he asked exactly the right question: "So what's your exit strategy?" The correct answer, to my own dismay, was that I didn't have a proper one. He got me. I have some ideas in my head about how this will end. The stock could be taken over for around $15 a share. Liquidation value is probably (worst-case) around $8 a share. But neither of those is an actual exit strategy. They are simply benchmarks in my head. A good trade consists of two things...a good entry price and a good exit price. I got the first part right...But it seems I don't have a clear plan for the second part. And that's no good! Meanwhile, the stock is now down about 25% from its highs. The typical exit strategy I recommend in my newsletters is a 25% "trailing stop." Based on my own advice, I should sell this stock now, right? Typically, if I use a 25% trailing stop, I expect the idea has the potential for at least a 75% return. That way, my "reward-to-risk ratio" is 3 to 1. I think of investing in this way: What's my potential reward? And how can I control my risk? There are plenty of exit strategies out there (beyond your basic trailing stops). And there are many variations on those strategies (like volatility-based stops, Dollar-based stops, and much more). Nobody cares more about teaching you how to get exit strategies right than my good friend Dr. Richard Smith. I highly recommend you visit his website, www.TradeStops.com, and check out his "Info Center" there to learn more about them. (I don't get any compensation for mentioning Richard's site, but TradeStops is our corporate affiliate at Stansberry & Associates.) My goal today isn't to go over all your choices in exit strategies. It's to teach you that you must always have an exit strategy in place when you enter a position. What will make you sell? How much does it have to go down, or up, to cause you to sell? If you can't answer those questions, you have no exit strategy. With no exit strategy, you are officially "winging it." I thought I would never be caught without an exit strategy... But my friend Mark caught me. I have my excuses. As I told Mark, "The stock is extremely illiquid, so I can't use a traditional trailing stop." That is true. However, that misses the point. I might not be able to use a traditional trailing stop...but still, at this point, I don't have a defined sell strategy if things go wrong. I'll have to work on the exit strategy for my trade. I recommend you head over to www.TradeStops.com and start creating exit strategies for your stocks if you don't already have them in place... Please, don't get bogged down. The important thing is to have a plan. Just about any plan is better than no plan at all. Get your exit strategies together now. | ||||||||||||||||||||||||||||||||||||||||
| Posted: 17 Feb 2014 01:08 AM PST First you gotta buy. Be ready to sell before that... MY FRIEND Mark LoPresti caught me, writes Steve Sjuggerud in his Daily Wealth. I had my chest out, proudly telling him a stock story. "I bought the stock around $2. It ran from about $2 to $8.75. And it's now around $6.50 today," I explained. Mark listened politely. Then he asked exactly the right question: "So what's your exit strategy?" The correct answer, to my own dismay, was that I didn't have a proper one. He got me. I have some ideas in my head about how this will end. The stock could be taken over for around $15 a share. Liquidation value is probably (worst-case) around $8 a share. But neither of those is an actual exit strategy. They are simply benchmarks in my head. A good trade consists of two things...a good entry price and a good exit price. I got the first part right...But it seems I don't have a clear plan for the second part. And that's no good! Meanwhile, the stock is now down about 25% from its highs. The typical exit strategy I recommend in my newsletters is a 25% "trailing stop." Based on my own advice, I should sell this stock now, right? Typically, if I use a 25% trailing stop, I expect the idea has the potential for at least a 75% return. That way, my "reward-to-risk ratio" is 3 to 1. I think of investing in this way: What's my potential reward? And how can I control my risk? There are plenty of exit strategies out there (beyond your basic trailing stops). And there are many variations on those strategies (like volatility-based stops, Dollar-based stops, and much more). Nobody cares more about teaching you how to get exit strategies right than my good friend Dr. Richard Smith. I highly recommend you visit his website, www.TradeStops.com, and check out his "Info Center" there to learn more about them. (I don't get any compensation for mentioning Richard's site, but TradeStops is our corporate affiliate at Stansberry & Associates.) My goal today isn't to go over all your choices in exit strategies. It's to teach you that you must always have an exit strategy in place when you enter a position. What will make you sell? How much does it have to go down, or up, to cause you to sell? If you can't answer those questions, you have no exit strategy. With no exit strategy, you are officially "winging it." I thought I would never be caught without an exit strategy... But my friend Mark caught me. I have my excuses. As I told Mark, "The stock is extremely illiquid, so I can't use a traditional trailing stop." That is true. However, that misses the point. I might not be able to use a traditional trailing stop...but still, at this point, I don't have a defined sell strategy if things go wrong. I'll have to work on the exit strategy for my trade. I recommend you head over to www.TradeStops.com and start creating exit strategies for your stocks if you don't already have them in place... Please, don't get bogged down. The important thing is to have a plan. Just about any plan is better than no plan at all. Get your exit strategies together now. | ||||||||||||||||||||||||||||||||||||||||
| 'Mexico Mike' Kachanovksy: How to Buy Prime Rib Companies at Hamburger Prices Posted: 17 Feb 2014 12:00 AM PST You scan the menu and notice that the prime rib and the hamburger are the same price. What do you order? The precious metals market isn't so different, according to "Mexico Mike" Kachanovsky, consultant to hedge funds and mining companies and contributor to SmartInvestment.ca. The market has pulverized the price of top-notch mining stocks to the same level as the struggling names. So, which would you buy? In this interview with The Gold Report, Kachanovsky reveals how to find the prime rib of the gold market. | ||||||||||||||||||||||||||||||||||||||||
| 'Mexico Mike' Kachanovksy: How to Buy Prime Rib Companies at Hamburger Prices Posted: 17 Feb 2014 12:00 AM PST You scan the menu and notice that the prime rib and the hamburger are the same price. What do you order? The precious metals market isn't so different, according to "Mexico Mike" Kachanovsky, consultant to hedge funds and mining companies and contributor to SmartInvestment.ca. The market has pulverized the price of top-notch mining stocks to the same level as the struggling names. So, which would you buy? In this interview with The Gold Report, Kachanovsky reveals how to find the prime rib of the gold market. |
So far the gloom and doom about gold and silver prices from Goldman Sachs, Barclays and Morgan Stanley has proven very wide of the mark with prices rebounding by eight and 11 per cent from big losses last year.
We prep because stuff happens. Little stuff, big stuff and everything in between. And while the focus of our preparations is often a major disaster or collapse of some type, the reality is that our preps come in handy for all types of other scenarios as well.
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