Gold World News Flash |
- QE Ends, Silver Price & Quotes of History
- “The Renminbi Hub”: Chinese Banks Acquire Stakes in US and Canadian Banks. Is There a Hidden Agenda?
- Bill Murphy on Gold and Silver — “This Cannot Last”
- Save Your Swiss Gold “ Peter Schiff™s Message to Switzerland
- Worried About Gold / Silver Smash - This Is Truly Terrifying
- “A Complex System About to Collapse” — Insider Jim Rickards’ Shares Frightening Facts In This Ad For ‘Money Morning’
- Marching In The Wrong Direction
- Swiss Gold Initiative establishes new mechanism for donations
- Koos Jansen: Europe and China are contemplating a new financial system
- Politicians and 'financial platforms' are pushing oil prices down, Putin says
- Ritual Incantation - The Economic Gibberish Of The Keynesian Apparatchiks
- Chinese gold buying means price floor to Standard Chartered
- If the London gold fix may have harmed you, contact Berger & Montague soon
- Lassonde says he doesn't suspect BIS in gold market manipulation
- Silver and Gold Prices are Severely Oversold
- Ron Paul: Watch Out When People Start To Distrust Our Money
- Gold Daily and Silver Weekly Charts - Pity the Swiss
- Chinese Wealth Management Products Will Cause the Next Financial Crisis
- This Will Trigger Collapse & Shockwaves In Global Markets
- Gold market rigging drives mines out of business -- but without complaint
- U.S. Mint Sells Out of Silver Eagle Coins as Buying Surges
- Panic Gold & Silver Selling Surprises Largest Dealer In U.S.
- A Signal of Coming Collapse
- Miners facing 'bloodbath' if gold sinks to $1,000
- Greenspan: "You Should Thank Central Banks"
- Early or Wrong? Still Stopped Out of Gold Miner Stocks
- Gold Down, Biotech Stocks Up
- No Commerce without Government Sanction? “AirBnb” Law Sets Ugly Precedent
- No Commerce Without Government Sanction? “AirBnb” Law Sets Ugly Precedent
- The Swiss Gold Initiative and Why it May Affect Gold Prices
- Crude Oil, Gold, Are Commodity Price at a Major Turning Point?
- Gold, Economic Theory and Reality: A Conversation with Alan Greenspan
- Gold and Oil. Into the Abyss?
- Rick Rule: No Capitulation In Gold Stocks Yet, Only A Nasty Sell-off
| QE Ends, Silver Price & Quotes of History Posted: 07 Nov 2014 01:00 AM PST from VisionVictory: Wealth & Purpose Show 023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| “The Renminbi Hub”: Chinese Banks Acquire Stakes in US and Canadian Banks. Is There a Hidden Agenda? Posted: 07 Nov 2014 12:00 AM PST by Bill Holter, Global Research:
Why would this be happening? Why would it be happening now? First, why is China setting up shop all over the world? This is an easy one, for business, for trade, for relations. China knows exactly where the U.S. and the dollar stand, they also know fairly well where and how the U.S. and her dollar will fall. China is merely preparing the groundwork to trade with Western entities in either local currency or the yuan. In the case of Canada, China sees a very large energy source along with the mining of many necessary resources they will need in the future. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bill Murphy on Gold and Silver — “This Cannot Last” Posted: 06 Nov 2014 11:00 PM PST from DayTradeShow: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Save Your Swiss Gold “ Peter Schiff™s Message to Switzerland Posted: 06 Nov 2014 10:30 PM PST Euro Pacific Capital | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Worried About Gold / Silver Smash - This Is Truly Terrifying Posted: 06 Nov 2014 09:01 PM PST  Today King World News is featuring a piece by a man whose recently released masterpiece has been praised around the world, and also recognized as some of the most unique work in the gold market. Below is the latest exclusive KWN piece by Ronald-Peter Stoferle of Incrementum AG out of Liechtenstein.This posting includes an audio/video/photo media file: Download Now | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 06 Nov 2014 09:00 PM PST [Ed. Note: Despite lots of truth being shared in this video, our disclaimer: Jim Rickards Visits Keiser Report & Exposes Himself as an Establishment Shill Covering Up CIA Involvement in 9/11 Insider Trading, Calling It "IRRELEVANT."] from Money Morning: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marching In The Wrong Direction Posted: 06 Nov 2014 07:15 PM PST Excerpted from Paul Singer's letter to investors, MARCHING IN THE WRONG DIRECTION ZIRP and QE have levitated a number of asset classes without generating sustainable, powerful economic and employment growth in the developed world. The asset price appreciation has delighted investors, and even those who are queasy and concerned about the unsoundness of the post-crisis policy landscape have been coaxed into believing that the low volatility and high asset prices actually have predictive power in suggesting positive economic and financial outcomes for the global economy and financial system. After all, the thinking goes, if ZIRP and QE were going to cause serious generalized consumer price inflation, then it certainly would have appeared by now. The very "discrediting" of the "serious inflation" crowd gives most investors comfort that policymakers are correct and the skeptics are just dyspeptics or partisans. We cannot possibly make the following statement any more clearly or strongly: Policymakers and pundits, with rare and courageous exceptions, are marching (and looking) in precisely the wrong direction. After the 2008 financial crisis, the developed world has barely experienced positive growth despite six years of zero-percent short-term interest rates and multiple bouts of money-printing that have taken a variety of forms and that have been announced with a plethora of rhetoric and obfuscation. At the start of the crisis, there was also a massive amount of government spending, but it was dominated by political payback and an attempt to maintain the kinds of jobs that had made sense only during the distortionary boom. Of course, the government spending had a supportive effect on the economy (as all spending programs do), but as designed it did not and could not create lasting and catalytic effects on growth. Over the entire post-crisis period, there have been effectively no significant structural improvements in the basic ability of the developed world to grow faster. We have described pro-growth policies at length and in depth, but sadly they are nowhere to be found. Thus six years of QE and ZIRP and a few rounds of make-work and benefit payments have failed. At present, only the U.S. can claim something that looks like decent growth, but that is only in comparison with its "peers." We have argued above that the appearance of growth is fake and delusionary. But globally, it should be beyond debate that the policy mix has failed. Many (if not most) politicians and "experts" refuse to acknowledge this, and en masse seem to believe that the failure of inflation to reach its "targets" is the problem – as if it is inflation, and not growth, that societies need. The mantra they repeat incessantly is that money-printing, ZIRP and stimulus spending have succeeded, and that things would be much worse without those policies, and that the real problem is that governments have not done enough radical monetary easing and deficit spending! Historically, as monetary debasement gets underway, its superficially-positive effects erode over time. Investors and citizens learn the game and front-run the debasement, bidding up asset prices. The distortions caused by debasement erode the citizenry's motivation to engage in real sustainable business and consuming activity. The difference between winners and losers gets exacerbated, as speculators increasingly take the prize at the expense of savers and salaried people. Monetary manipulations lead to bad investment decisions, which in turn causes hidden shortfalls in the standard of living, which in turn engenders public resentment, especially because the reported statistics on jobs and income paint too rosy a picture. At present, the situation in developed countries can be characterized as follows: Asset inflation is roaring, but it is sectoral and skewed. Consumer inflation is understated, and thus growth is overstated. Employment data is misleading. This combination of factors means that ordinary citizens are not doing well, but the owners of high-end everything are doing just fine, with few concerns for the middle-class people who know things are not "all right," but cannot put their finger on why. At or near this stage, either because of citizen resentment and distrust or (in the case of Europe) a pronounced weakening of economic activity despite all their efforts and experimentation, monetary authorities may decide that the real problem is that they just haven't done enough. Historically, this is the point at which the risk rises that central bankers will take monetary actions that destroy their societies. Once the "tiger by the tail" phase of monetary debasement has gotten started, there has never been a good exit. Past that point of no return, the collapse of money and/or asset prices becomes the inevitable denouement, with the only questions being the timing and the severity of the collapse. Our views are formed by an examination of historical episodes of societal monetary collapse. The script is not "baked," but the common elements are clear and present. Given that the authorities are so far behind the curve in their understanding of the modern financial system, we have little hope that they can revert in time to the correct mix of policies, preserve the fiat money regime and also get the developed world growing again while whipping into shape the long-term entitlement obligations which are obviously unpayable in their present form. We wish we could report that a counter-movement is afoot, with some cadre of truth-tellers who are making the case for marching in a different direction, but sadly we cannot. The argument for "doing more" or "doing more of the same" is universal. The "risk" case is only being made circumspectly by people who are being ridiculed as clueless Cassandras. Cassandra was proven right, of course, but we have no need or desire to be right about these views. Societal stability is a good thing for all, including skeptics and pessimists. Societal breakdown and uncontrollable inflation or financial crises are massively destructive, and typically accompanied by very bad policies. No disciplined investment approach can "work" in such an environment, in which preserving the real value of capital becomes difficult if not impossible. In extremis, political governance drifts toward totalitarianism, scapegoating and violence. Let us hope that leaders emerge who understand these realities and have the courage and political skills to reorient their societies toward growth, stability and soundness. Our belief is that the global economy and financial system are in a kind of artificial stupor in which nobody (including ourselves) has a good picture of what the next environment will look like. The difference between "them" and "us" is that they mostly think that policymakers will muddle through, but we assume that a very surprising and scary environment lies in wait. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Swiss Gold Initiative establishes new mechanism for donations Posted: 06 Nov 2014 06:53 PM PST 9:50p ET Thursday, November 6, 2014 Dear Friend of GATA and Gold: Interviewed by King World News, Swiss gold fund operator Egon von Greyerz, one of the managers of the Swiss Gold Initiative, reports that the initiative has established a mechanism for accepting contributions through Swiss Post, after the Pay Pal payments service refused to process donations for the initiative, apparently responding to government pressure. An excerpt from von Greyerz's interview is posted at the KWN blog here: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/11/6_Th... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Sinclair's Next Market Seminar Is Nov. 15 in San Francisco Mining entrepreneur and gold advocate Jim Sinclair will hold his next market seminar from 10 a.m. to 3 p.m. on Saturday, November 15, at the Holiday Inn at San Francisco International Airport in South San Francisco, California. Admission will be $100. For more information and to register, please visit: http://www.jsmineset.com/2014/10/10/san-francisco-qa-session-announced/ Join GATA here: Mines and Money London http://www.minesandmoney.com/london/ Vancouver Resource Investment Conference http://cambridgehouse.com/event/33/vancouver-resource-investment-confere... * * * 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: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Koos Jansen: Europe and China are contemplating a new financial system Posted: 06 Nov 2014 06:46 PM PST 9:45p ET Thursday, November 6, 2014 Dear Friend of GATA and Gold: Bullion Star's market analyst and GATA consultant Koos Jansen today itemizes some European and Chinese government statements signifying that a new world financial system is in the works. Jansen's commentary is headlined "Beijing Forum: New Global Financial Order Is Essential" and it's posted at Bullion Star's Internet site here: https://www.bullionstar.com/blog/koos-jansen/beijing-financial-forum-new... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Silver mining stock report comes with 1-ounce silver round Future Money Trends is offering a special 18-page silver mining stock report about how to profit with the monetary and industrial metal in 2014, and it comes with a free 1-ounce silver round. Proceeds from the report's sales are shared with the Gold Anti-Trust Action Committee to support its efforts to expose manipulation in the monetary metals markets. To learn about this report, please visit: Join GATA here: Mines and Money London http://www.minesandmoney.com/london/ Vancouver Resource Investment Conference http://cambridgehouse.com/event/33/vancouver-resource-investment-confere... * * * 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: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Politicians and 'financial platforms' are pushing oil prices down, Putin says Posted: 06 Nov 2014 06:41 PM PST Gold too, Mister President? * * * Vladimir Putin: Oil Price Decline Has Been Engineered by Political Forces By Peter Spence Recent tumbles in the value of oil on global markets have been the creation of politicians, Vladimir Putin, president of Russia, suggested today. The Russian state has been heavily exposed to slumping oil values, widely viewed to be the result of a supply glut. "The obvious reason for the decline in global oil prices is the slowdown in the rate of [global] economic growth, which means consumption is being reduced in a whole range of countries," Mr Putin said. In addition to this, "a political component is always present in oil prices. Furthermore, at some moments of crisis it starts to feel like it is the politics that prevails in the pricing of energy resources," he added. Mr Putin also referred to a "distinct direct link" between physical oil markets and "the financial platforms where the trade is conducted," in explaining part of oil price changes. ... ... For the remainder of the report: http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/1121506... ADVERTISEMENT USAGold: Coins and bullion since 1973 USAGold, well known for its Internet site, USAGold.com, offers contemporary bullion coins and bullion-related historic gold coins for delivery to private investors in the United States, Europe, Canada, Australia, and New Zealand. It is one of the oldest and most respected names in the gold industry, with thousands of clients and an approach to investment that emphasizes guidance and individual needs over high-pressure sales tactics. The firm's zero-complaint record at the Better Business Bureau makes it an ideal match for the conservative, long-term investor looking for a reliable contact in the gold business. Please call 1-800-869-5115x100 and ask for the trading desk, or visit USAGold.com. USAGold: Great prices, quick delivery -- all the time. Join GATA here: Mines and Money London http://www.minesandmoney.com/london/ Vancouver Resource Investment Conference http://cambridgehouse.com/event/33/vancouver-resource-investment-confere... * * * 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: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ritual Incantation - The Economic Gibberish Of The Keynesian Apparatchiks Posted: 06 Nov 2014 06:23 PM PST Submitted by David Stockman via Contra Corner blog, If you want an illustration of the utter intellectual bankruptcy of our Keynesian policy overlords just review the attached Wall Street Journal piece on yet another downgrade by the EC of its official economic growth forecast. What’s illuminating is not that the savants of Brussels were wrong by a country-mile yet again, but that they persist in a mechanistic numbers game that resembles nothing so much as ritual incantation. Yep, the Keynesian priesthood is operating from sacred texts and magic numbers. One of these revelations says that 2% inflation was decreed by the great god of GDP and that any shortfall will precipitate his wrathful extractions from growth and jobs. But there is not a shed of empirical evidence for 2% versus 1% or 3% annual change in consumer inflation—–even if it were honestly measured. Its just revealed word as transmitted by the Keynesian priesthood. Another sacred tenent avers that in handing down the laws of proper economic life, the Keynesian creator ordained that governments everywhere and always must strive to bring GDP growth to its full employment “potential” rate. No exceptions. World without end. While the texts are not clear on the precise numeric value of this divinely ordained rate of potential GDP growth, today’s congregants claim that it’s about 3%, reflecting the historic trend growth of the labor supply plus productivity gains. In fact, however, we have achieved only about half of that—about 1.8% per annum—-in the US during the last 14 years, and even a lesser fraction in Europe. Accordingly, this imaginary trend line of “potential GDP” is now far above actual output levels. This yawning gap between the real economy and its revealed potential, in turn, enables the Keynesian priesthood to demand an endless crusade by the fiscal and central banking agencies of the state to close it. This essentially means that the state’s economic apparatus is now all about stimulus, all of the time. In fact, the state’s central banking branch has gotten so deep into ritualized Keynesian governance that it’s essentially attempting to micro-manage vast accumulations of GDP—-about $17 trillion each in the US and Europe—-on a monthly basis.That’s entirely what the meeting statements and post-meeting press conferences are all about. Yet this is absurd. The information flow in a $17 trillion economy is far too vast to be digested and assessed by the 12 mortal members of the FOMC, and their policy control instrument—-the bludgeon of interest rate manipulations—- could not possibly shape its short-run course in any event. That’s especially true since the macro-economy is not a closed system, but one open to every manner of complicating and countervailing influence from trade, capital flows and financial impulses in a $80 trillion global economy. Still, the Keynesian policy apparatchiks have not even an inkling that they are attempting the impossible or that their patter about objectives, forecasts and policy actions have gotten downright moronic. And here’s where the EC’s latest retreat on its official forecast is so ludicrously illustrative. Given the massive complexity of the global economy—plus the tidal forces being unleashed by Japan’s yen destruction campaign, the cooling of China’s monumental construction binge, the dead-in-the-water bankruptcy of most of Europe and the massive shift of income and wealth to the top 1% in America— no one in their right mind should attempt to predict GDP growth to the exact decimal point three years into the future or even one year for that matter. There are imponderables, uncertainties and aberrations everywhere, and none of them are in the Keynesians’ primitive DSGE models. Yet like the Keynesian apparatus everywhere in the modern world, the EC bureaucrats are pleased to try, and feel compelled to make hairline adjustments twice a year—-mainly to cover their chronic back-pedaling on the near-term picture which, in any event, reveals itself soon enough. Thus, not too long ago the EC projected that real output gains averaged across 18 hugely divergent eurozone economies would average 2.5% during 2015. By the time of this year’s spring forecast revision, the projection was down to 1.7%; and now its fall update downgrades it further to 1.1%. Yes, and while they were splitting economic hairs, the EC prognosticators decided to embrace nine months of “disappointing” reality that has already occurred and lower the 2014 forecast to 0.8% from the spring level of 1.2%. While it was at it, the EC also resurrected its 1.7% GDP forecast—-which was projected for 2014 awhile back before it was lowered in semi-annual nicks to its current 0.8% level. It seems that this magical 1.7% growth number for the third year forward is never really abandoned; its just rolled forward year after year. Indeed, it had earlier been shuffled forward to 2015, but since that now seems out of reach, the Brussels prognosticators had no trouble seeing it coming clearly into view for 2016. This paint-by-the-numbers ritual is ridiculous because it makes not a wit of difference whether the outlook for GDP three years into the future is 0.8%, 1.2%, 1.7% or any other number in that range. Its just noise and foolishness. Why then do they persist in this pointless forecast ritual? Well, because it is written in the sacred texts that policy action to close the GDP gap is imperative, and that the size of the gap and the requisite policy interventions depend upon a macro forecast. The latter is, in effect, their policy intervention map. However, now that the output gap has become massive and the central bankers believe that there is vast “slack” in the labor force—- which is partly reflected in Europe’s official unemployment rates and largely obfuscated by the BLS’ dummied up U-3 numbers here—the Keynesian project faces a rude reality. Namely, that it is virtually impossible to believe that the “gap” and the “slack” are due to cyclical factors. Two simple time series prove the case. First, there has been virtually no increase in non-farm labor hours actually consumed by the US economy over the past 15 years. That’s not cyclical—–its a disastrous fundamental condition or trend.
Secondly, real median household incomes have been trending down for the past 15 years, as well. That too is not about temporary “cyclical” slack; it is a measure of a failing, decaying national economy.
So today’s perpetual stimulus policy is utterly unsuited to the real problems at hand because these deep challenges dwell on the supply side of the economy. The latter has become freighted down with debt, taxes, regulatory barriers, crony capitalist inefficiencies and welfare state inducements to dependency. They have nothing to do with “aggregate demand”, and couldn’t be solved with even more household and business borrowing on top of the mountains of debt already on their balance sheets. The Fed’s lunatic ZIRP policy has already proven that it can’t actually stimulate credit fueled spending for consumer and capital goods owing to the roadblock of “peak debt”. Yet the Keynesian apparatchiks continue to demand counter-cyclical “stimulus” because they are intoxicated in ritual incantation based on an earlier, more primitive Keynesian catechism. Those original texts called for episodic action at the bottom of the business cycle to prime the pump and overcome recessions. Stimulus was the exceptional condition, not the norm; it embodied the notion that after the state’s kick start——market capitalism could largely take care of itself. The corollary was that fiscal and monetary policy would rapidly normalize once the recovery commenced. Indeed, the “business Keynesians” of the early 1960’s promised that there would be an off-setting fiscal surplus during the top half of the cycle. Therefore “counter-cyclical deficits” were not a form of monetization of the state’s debts because the borrowing involved was held to be only temporary (i.e. would be repaid from recovery period surpluses). And central bankers like the great William McChesney Martin, who was no Keynesian at all, actually did endeavor to “lean against the wind” during the up-cycle and even take away the punch bowel just when the party got started. But somewhere during the last two decades the Keynesian stimulus project migrated from the fiscal authorities to the central banks. This had far-reaching consequences because it shifted the locus of policy making from the unruly, paralysis prone machinery of legislative budgets and taxes to unelected bureaucrats and academics endowed with virtually plenary powers and 13 year terms. What is worse, it put them in the full-time business of fiddling with the money and capital markets in the false belief that they could control the evolution of the macro-economy through its financial nerve center and deftly guide GDP back to the ordained path of full employment. Consequently, all hell has broken loss. These interventions have not levitated the real economy, nor have they closed the imaginary output gap. Instead, massive central bank stimulus has destroyed honest capital markets and enabled a giant casino of speculators to feast on the free money and market props, puts and bailouts offered by the central banks. Yet the true danger is not simply that the Keynesians are caught in a time warp. That is, that the fiscal Keynesianism taught by James Tobin in the 1960’s was OK because it was counter-cyclical help from the state to the private economy, but the 24/7 central banker Keynesianism practiced by his PhD student, Janet Yellen, has gone too far and is now obsolete. No, Keynesianism was always wrong. It is predicated on the alleged inherent cyclical instability of market capitalism, and a purported tendency to chronically tumble into recession, depression and an economic black hole absent the ministrations of the state. But the evidence for that is the founding event of the Keynesian gospel—–the Great Depression of the 1930s. Yet tragic as it was for mankind everywhere, the disaster of the 1930’s was not due to the inherent instabilities of capitalism or an unregulated free market. Instead, the Great Depression was born in the financial mayhem of World War I, which destroyed the monetary system and engulfed the world in debt and inflation; and in the 1920s manipulations of the Fed, Bank of England and other central banks as they attempted to restore the pre-1914 status quo ante without the fiscal and financial discipline that was part and parcel of the prosperity and stability that flowed from the liberal international order based on the gold standard and free trade in goods, capital and labor. All the milder business cycles since then have been generated by the state. These include the excesses of war finance and an overheated economy, as in the case the Korean and Vietnam wars; and the peacetime spells of excessive credit creation enabled by central banks, which had to then correct their own excesses through monetary stringency and recession. In open economies and a global trading system the only thing which counts is prices, not aggregates. America’s problem is that its production costs and labor prices are too high and its subsidies for inefficient production and non-production are too great. That is the reason why there is so much labor “slack” and why the growth of output and wealth has been so tepid since the late 1990s when the “china price” became the driving force in the global economy. Stated differently, the Keynesian notions of “potential GDP” and “aggregate demand” have no basis in the real world. They are revealed doctrine. They are the religion of the state’s economic policy apparatus. Its bad enough that this destructive economic religion leads to the farcical forecasting games evident in the EC’s chronic updates and slow-walks of the GDP numbers down. The evil, however, is that the Keynesian apparatchiks will not desist in their destructive money printing and borrowing until they have suffocated free market capitalism entirely, and have monetized so much public debt that the financial system simply implodes. * * * By Gabriele Steinhauser at The Wall Street Journal
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| Chinese gold buying means price floor to Standard Chartered Posted: 06 Nov 2014 06:23 PM PST By Debarati Roy and Nicholas Larkin The cheapest gold in four years is proving irresistible for shoppers in China and India, where rebounding demand may signal an end to the longest price slump in more than a decade. Purchases in Asia will help support prices that are headed for the first two-year decline since 2000, Standard Chartered Plc said. While surging equities and tame inflation have eroded gold's appeal as a hedge, sending bullion tumbling to $1,137.94 an ounce this week, prices are nearing the lows forecast by banks from Citigroup Inc. to Goldman Sachs Group Inc. China supplanted India as the world's largest buyer last year, when the metal plunged 28 percent. Jewelry and bullion are viewed in both countries as a store of value and are popular as gifts. China's gold imports from Hong Kong in September were the highest in five months. Indian jewelers are forecasting a surge in fourth-quarter sales. "There is a floor around $1,100 set by Chinese retail demand," Paul Horsnell, head of commodities research at Standard Chartered in London, said by e-mail on Nov. 5. "Physical demand indicators out of China and India are firming." ... ... For the remainder of the report: http://www.bloomberg.com/news/2014-11-07/china-gold-buying-means-price-f... ADVERTISEMENT Anglo Far-East is a global market leader and innovator that for more than two decades has provided private purchase, vaulting, security logistics, transport, and liquidation of allocated gold and silver bullion outside of the banking system. AFE clients include individuals, family offices, and institutions like banks and regulated funds. Anglo Far-East: Think Outside the Bank Here's what one of our generationally wealthy clients has to say about AFE: http://www.afeallocatedcustody.com/research/teleconferences/download-inf... To get started, please visit: https://secure.anglofareast.com/ Anglo Far-East: Think Outside the Bank Join GATA here: Mines and Money London http://www.minesandmoney.com/london/ Vancouver Resource Investment Conference http://cambridgehouse.com/event/33/vancouver-resource-investment-confere... * * * 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: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| If the London gold fix may have harmed you, contact Berger & Montague soon Posted: 06 Nov 2014 05:51 PM PST 8:53p Thursday, November 6, 2014 Dear Friend of GATA and Gold: If you traded gold or gold futures or options in the last decade and feel that you were injured by the manipulation of the London gold fix, you may have some recourse. In July a judge in U.S. District Court in New York appointed Berger & Montague of Philadelphia and Quinn Emanuel Urquhart & Sullivan of New York, two major law firms, to lead an anti-trust lawsuit against the London gold-fixing banks. Berger & Montague was of counsel to GATA some years ago and a press release about the firm's appointment is posted at the law firm's Internet site here: http://www.bergermontague.com/news?t=berger--montague-to-helm-gold-fix-c... More information about the case, including the text of the lawsuit, is posted at the law firm's Internet site here: http://bergermontague.com/cases?t=in-re-commodity-exchange-inc-gold-futu... ... Dispatch continues below ... ADVERTISEMENT Direct Ownership and Storage of Precious Metals Goldbroker.com is a precious metals investment company that enables investors to own and store gold directly in their own name (no mutualized ownership) in Zurich and Singapore. Goldbroker's clients are not exposed to any counterparty risks. They own gold and silver in their own names (the ownership certificate cites the name of the investor and serial number of his bars) and they have storage accounts opened in their own name as well. So Goldbroker.com's storage partner knows the exact identity of each investor. Goldbroker.com doesn't store in the name of its clients; rather, Goldbroker's clients store personally. All investors have direct access to their gold and silver bars. Goldbroker.com was launched in 2011 so that investors would avoid any counterparty risk when investing in physical gold and silver. Goldbroker.com is listed among GATA's recommended monetary metals dealers. (http://www.gata.org/node/173) To invest or learn more, please visit: In March GATA invited gold traders and investors to contact Berger & Montague to learn about the firm's investigation of the London gold price fixing: http://www.gata.org/node/13731 Now that the case has become more active, GATA again encourages anyone who believes he may have been harmed by the London gold fix -- gold traders and investors, gold mining companies, and others -- to contact Berger & Montague to learn about the case. Since the court has set a major deadline in December, it will be good to make contact with Berger & Montague soon. The lawyers handling the case may be reached by e-mail at: CHRIS POWELL, Secretary/Treasurer Join GATA here: Mines and Money London http://www.minesandmoney.com/london/ Vancouver Resource Investment Conference http://cambridgehouse.com/event/33/vancouver-resource-investment-confere... * * * 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: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lassonde says he doesn't suspect BIS in gold market manipulation Posted: 06 Nov 2014 04:58 PM PST 8:07p ET Thursday, November 6, 2014 Dear Friend of GATA and Gold: Franco-Nevada Chairman Pierre Lassonde, former chairman of the World Gold Council, told GATA today that, contrary to GATA's interpretation of his interview yesterday with King World News about manipulation of the gold market -- http://www.gata.org/node/14670 -- he did not mean to acknowledge the possibility that the Bank for International Settlements might be among the entities doing the manipulating. In that interview Eric King of King World News said to Lassonde: "Earlier today I spoke with a former board member of Paine Webber who also worked for Goldman Sachs 25 years ago, the very highly respected William Kaye out of Hong Kong. Kaye said the following about today's smash in gold: "'This is something that you see in precious metals when there is clear evidence of manipulation. We saw 30 tons of gold sold at 2 p.m. Hong Kong time. That is a time in which no one does any real trading. What Asian trading is going to take place is already done by that time of the day. At that time of day people are simply waiting to hand things over to London in a few hours. Regardless, an awful lot of paper gold was intentionally dumped in a programmed algorithm. This was most likely done by the Bank for International Settlements. This was designed to condition the paper market by forcing the price lower. It was also designed to set the market up in London to open up at lower levels.' ... Dispatch continues below ... ADVERTISEMENT Own Allocated -- and Most Importantly -- Zurich, Switzerland, remains an extremely safe location for storing coins and bars of the monetary metals. If you do not own segregated physical coins and bars that you can visit, inspect, and take delivery of, you are vulnerable. International diversification remains vital to investors. GoldCore can accomplish this for you. Read GoldCore's "Essential Guide to Gold Storage In Switzerland" here: http://info.goldcore.com/essential-guide-to-storing-gold-in-switzerland Email the GoldCore team at info@goldcore.com or call our trading desk: UK: +44 (0)203 086 9200 -- U.S.: +1-302-635-1160 -- International: +353 (0)1 632 5010 King continued: "He [Kaye] is saying that somebody is in there manipulating the price of gold and they are doing it at a very high level -- the BIS. I'm just wondering if you are pissed off enough to talk about this." KWN quoted Lassonde as replying: "It would not be the first time that we've seen this and it won't be the last time either. There is obviously an entity or trading house who must have a short position and they are using the paper gold market to move the price. And if it's a fragile market they are going to get their way for a while." Lassonde told GATA today: "I did not comment on the BIS but strictly on the fact that yes, someone -- institution, private group, hedge fund, we don't know -- were throwing their weight around. ... I don't believe for one second that the BIS has anything to do with this." In any case, a summary of the documentation GATA has compiled about the gold trading long conducted, largely surreptitiously, by the Bank for International Settlements is appended. CHRIS POWELL, Secretary/Treasurer * * * Documentation of the Largely Surreptitious Involvement -- William R. White, the director of the monetary and economic department of the Bank for International Settlements, told a BIS conference in Basel, Switzerland, in June 2005 that a primary purpose of international central bank cooperation is "the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful": -- The BIS actually advertises to potential central bank members that its services include secret interventions in the gold market: http://www.gata.org/node/11012 http://www.gata.org/files/BISAdvertisesGoldInterventions.pdf -- According to its 2013 annual report, the BIS functions largely as a gold banking and gold market intervention service for its member central banks. On Page 110 of the report the BIS says: "The bank transacts foreign exchange and gold on behalf of its customers, thereby providing access to a large liquidity base in the context of, for example, regular rebalancing of reserve portfolios or major changes in reserve currency allocations. The foreign exchange services of the bank encompass spot transactions in major currencies and Special Drawing Rights (SDR) as well as swaps, outright forwards, options, and dual currency deposits (DCDs). In addition, the bank provides gold services such as buying and selling, sight accounts, fixed-term deposits, earmarked accounts, upgrading and refining, and location exchanges." Of course the only point of central banks trading in gold derivatives is to affect the price. See: http://www.gata.org/node/12717 -- Secret gold market interventions by the BIS have a long history. A report in Harper's magazine in 1983, based on a seemingly unprecedented interview with BIS officials, disclosed that the BIS was constantly intervening in the gold market in secret: -- While the BIS' involvement in the gold market is undertaken primarily on behalf of its member central banks, the bank own gold itself, according to a statement on Page 183 of its 2013 annual report: http://www.bis.org/publ/arpdf/ar2013e.pdf The report says: "A. Gold price risk "Gold price risk is the exposure of the Bank's financial condition to adverse movements in the price of gold. "The Bank is exposed to gold price risk principally through its holdings of gold investment assets, which amount to 115 tonnes (2012: 116 tonnes). These gold investment assets are held in custody or placed on deposit with commercial banks. At 31 March 2013 the Bank's net gold investment assets amounted to SDR 3,944.9 million (2012: SDR 4,018.2 million), approximately 21% of its equity (2012: 22%). The Bank sometimes also has small exposures to gold price risk arising from its banking activities with central and commercial banks. Gold price risk is measured within the Bank's VaR methodology, including its economic capital framework and stress tests." -- The BIS isn't alone in trading in the gold market surreptitiously on behalf of its central bank members. An official of one of those members, the Banque de France, told the London Bullion Market Association conference in Rome last year that his bank is trading gold for its own account and the accounts of other central banks "nearly on a daily basis": http://www.gata.org/node/13373 Join GATA here: Mines and Money London http://www.minesandmoney.com/london/ Vancouver Resource Investment Conference http://cambridgehouse.com/event/33/vancouver-resource-investment-confere... * * * 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: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Silver and Gold Prices are Severely Oversold Posted: 06 Nov 2014 03:45 PM PST
On Comex the GOLD PRICE lost another $3.10 to close at $1,142.30. The SILVER PRICE flatlined, down 2.6 cents to 1539.2c. Relative Strength Index for silver and GOLD PRICES has returned to severely oversold level. Versus "oversold" at 30, silver's RSI stands at 19.88, gold's at 21.38. Full stochastics are at lows and are trying to turn up. No sign of a reversal yet, although the speed of the fall has slowed. I read an article last night by Paul Craig Roberts and Dave Kranzler at bit.ly/1tNjnwe entitled "American Financial Markets Have No Relationship To Reality." They point out that recent falls in gold and silver have been accelerated by massive paper gold sales on the futures market, 47 tonnes' worth within a few minutes, or sales of 25 tonnes on the Comex Globex system at 3:00 a.m. Eastern time, about as thin a market as a manipulator might wish. Another 38 tonnes were sold the same day shortly before Comex opened. Remember these are tonnes of paper gold. Naked shorts. While I will admit that profit-maximizing sellers don't do such things, practically it doesn't matter whether this is a government/central bank conspiracy or simply trading sharks attracted by blood in the water. The outcome is the same. And ultimately, since all the manipulation in the world couldn't keep silver and gold from rising 2001 - 2011, the present weakness lies with silver and gold. By that I mean that confidence in scabrous fiat currencies and criminal central banks is so high that nobody's interested in gold. After all, isn't quantitative easing working? Ain't stocks rising? Well, when it stops working, and it will, abruptly, things will turn. Something near every day a reader writes to inform me how markets are rigged and it's pointless to attempt technical analysis because the gummint and Fed control everything. If that were true, only thing we could do is give up hope and take a job working for the gummint, because it would be god. If I don't accomplish a blessed thing except to remind y'all every day that, in spite of what folks around you may believe, gummint and central banks are not god, do not have godlike powers, and for the most part couldn't pour pea soup out of a boot with instructions written on the heel, well, durn, I'd be as contented as a skinny flea on a fat cat. Don't y'all understand that they WANT you to believe the myth of their invincibility? The entire monetary and financial system is a CONFIDENCE GAME, and it blows apart into instantaneous smithereens if confidence ever wanes. They're not invincible, they're hyenas and vultures. They do a great job on something weak and for the moment powerless. Against the strong and living they're not so successful, or so brave. Do central banks and government try to manipulate gold and silver? I don't doubt they do, but manipulations only work for a while, and when markets are weak. Against the rising tide of a primary trend, eventually they fail. This time, too. I think the power of Mario Draghi's tongue is fading. He said about the same thing that's been working for him so long -- "We're gonna do something" -- but it just didn't have much bang today. By the way, y'all look at a picture of him and tell me if somebody hasn't twisted his whole face to the right? Or maybe he caught it in a door? Anyway, he threatened to stimulate if folks and the economy don't straighten up. Draghi's threat and better than expected US jobless claims are the nearest causes for stocks rising today. Hush! Never mind that the jobless claims will be revised in the opposite direction in a week. They won't publish that. So stocks rose, the Dow up 69.2 (0.4%) to a new high close at 17,553.73. S&P500 also hit a new all time high at 2,029.73, up 6.16 (0.3%). Dow closed plumb up on that overhead megaphone pattern boundary I mentioned yesterday, and the S&P500 just a mouse-ear below it. I am just watching the magic of fiat money at work, with my mouth open like a fool at a tennis match. US dollar index passed that 3%-above-breakout test today by closing at 88.21, up 67 basis points or 0.77%). Indicators are overbought and toppy, but that topping process can last a while longer. Euro finally broke today, down 0.88% to $1.2375, signaling much lower prices to come. No curb before it hits $1.2042, the 2012 low. And the yen crumbled 0.42% to 86.85 cents/Y100. Yen has passed its 2008 low and hasn't been this low since 2007. No safety net before 80.55 cents/Y100, the 2007 low. Aurum et argentum comparenda sunt -- -- Gold and silver must be bought. - Franklin Sanders, The Moneychanger The-MoneyChanger.com © 2014, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down. WARNING AND DISCLAIMER. Be advised and warned: Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures. NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps. NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced. NOR do I recommend buying gold and silver on margin or with debt. What DO I recommend? Physical gold and silver coins and bars in your own hands. One final warning: NEVER insert a 747 Jumbo Jet up your nose. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ron Paul: Watch Out When People Start To Distrust Our Money Posted: 06 Nov 2014 02:33 PM PST Last month, Global Gold's Claudio Grass met with Dr. Ron Paul in Lake Jackson, Texas at the Ron Paul Institute for Peace and Prosperity. Here we show you how their discussion unfolded. This interview is part of the latest Outlook Report by Global Gold, which is available for download. To get these issues in the future sent by email, subscribe for free to Global Gold’s newsletter service. Global Gold: Dr. Paul, thank you very much for taking the time to speak with us. It is a pleasure to meet with you and learn your perspective on political and economic developments. But first, how would you describe your days since you've retired from Congress? Dr. Paul: I'm staying busy! I've been involved in several things in my life. One was practicing medicine. That was very important, but I don't do that anymore. Even when I got started into politics, I did both for a long time. When I left Congress and went back home I practiced medicine for twelve years. The other activity was promoting the cause of liberty, believing that it's the lack of liberty that causes war and causes poverty and suffering and that if people were to understand the importance of personal liberty that the world would be a much better place. So the organization that I created was called "Campaign for Liberty" but all those years whether I was in Congress or out of Congress, I have been campaigning for liberty in different ways. When I ran for office, it gave me a chance to speak about the issues. It actually all started with the breakdown of Bretton Woods in 1971. That was a big monetary event for me because I've been observing the developments and had studied Austrian economics. Even though it was anticipated, it was still very dramatic when it happened. So, a couple of years later I decided to run for office. I did not expect to win any election because, as you know, my philosophy was different. It didn't seem to fit the pragmatism that everybody wanted. When I got elected in '76, I started an organization called "The Foundation for Rational Economics and Education", the F.R.E.E. foundation, which is also the parent of the new organization now, the Institute for Peace and Prosperity. Since leaving Congress, I went in different ways, including Internet broadcasting, programming and interviews; I do a bit of that. I also have a speaking activity, where I go as frequently as I can. College campuses have received me pretty well. I enjoy that and do a lot of it. I also started a Ron Paul curriculum for homeschoolers, believing once again in the importance of education. I don't believe that everyone should be homeschooled or that some are more inclined than others but there is a certain group that can handle it – parents and students. I think that is very important. I stay pretty active and though I am retired from Congress, I am not retired from promoting the cause I am talking about. Global Gold: Fantastic! What has changed since you left Congress? Are you freer in the way you can speak and address people? Dr. Paul: My schedule is more under my control and I only go where I want to go. And if I don't want to fly every single week, I don't. When you're in Washington, government is on autopilot, it just goes. The old saying used to be "boy you're lucky the legislature is out of session, liberty is safe". This isn't true anymore, because right now the President uses executive orders to go to war, issues statements, violates civil liberties and gets involved in the economy through the central bank, his central economic planner. Even the judicial system rules against us and violates our liberties. The whole thing is so out of control. I feel I am much better off now because I can still do what I think is important, as far as writing and speaking out is concerned. At the same time, I don't have to spend a lot of time with those politicians in Washington. Global Gold: When you look at the United States, or let's say the western world in general, what do you think of the shape we're in? The stock market is skyrocketing and the real estate market seems to be recovering or even spiking in certain areas. Dr. Paul: If you look at things from the surface, it looks like things are great. I am convinced, however, that we are probably in the worst shape the world has ever been financially. There've been bubbles and distortions and currency breakdowns for thousands of years, but I don't think that the world has ever had a universal acceptance of a fiat currency like we have with the paper dollar, US Dollar, today. It is being used endlessly as the reserve currency. Debt and investments have been pyramided. Even now, stock markets are doing well and people think that bonds are lovely. It's all a deception and even if people claim there's no consumer price inflation, I think there is plenty but not as much as we are still going to see in the future. A lot of people forget that the distortions created by the inflation of the money supply will and does lead to higher prices and these may arise in different areas. In stocks and bonds, prices are very high, so the distortions are great. Somebody might say the housing market is back and doing well again. However interest rates are distorted. Interest rates tell you the right thing to do, they give you a hint. Business people aren't perfect, half of them might do a good job, the other half might do it badly, but it's all ironed out and taken care of. But when governments fix the rate of interest, everybody, in a way, makes a mistake. Some are lucky and make more money than the rest, but this is still based on bad information. That is why debt is out of control, and the bubbles keep building. If you look at the malinvestment and the amount of debt as a consequence of the dollar being the reserve currency, I think that the problem is gigantic. Despite the power of the central banks, especially our Federal Reserve and the power of politicians to spend money, ornamentally, markets are more powerful than governments. The market always reigns. I was watching and waiting for 1971 and the breakdown of Bretton Woods after we dumped almost 500 million ounces of gold, trying to prove that the government is smarter than the market. I even remember Lyndon B. Johnson in the 1960s saying "I am going to mint so many Kennedy half dollars that the people will never be able to hoard them". But it didn't work. Silver reached USD 1.23 and people started hording them, because the silver value was higher than the nominal value of the coins. Markets are very powerful. The markets overwhelmed Bretton Woods! We printed money and pretended it didn't matter. And that's why we had that breakdown. Now we have that strange phenomenon of this unbelievable trust in the US Dollar. This could only happen because our country is (still) wealthy, but a lot of the wealth is superficial because it's based on debt. So, the people are going to be really shocked when the hit finally comes because this system has existed for so long and longer than any paper currency before it. The other thing that gives some confidence is the size of the economy and the perceptions of its health, but there is also the size of its military. If you have a very solid currency, even if you have the strongest currency, but people anticipate you will be defeated in a war next week, then all of a sudden that particular currency loses value even though common sense says it's a strong currency. Military power puts some support behind the currency. That is why I don't think the US is vulnerable economically, but I think it's vulnerable militarily. We cannot sustain what we do, even though it seems like we can. We go everywhere and "solve" everybody's problems. Just recently we've been talking in the news about what we should do in Syria and Iraq. Should we continue an 11-year war in Iraq and go back? Some politicians have come up with this astute idea that it's our moral obligation. But somebody has to pay for it! We did get a couple of dollars back when we went in to fight Saddam Hussein when he invaded Kuwait, for example. The question wasn't whether it was morally correct for us to get involved in the war, or overthrow governments and that we should do it without following the constitution. The only point being made was "we can do it and we will but we won't pay for it". In a way, that statement made by politicians was translated to "we are the mercenaries of the world". Well, that's not going to work for very long. When it's realized what kind of a problem we have with the currency and the debt, the military is going to continue to shrink. I believe that, right now, the military is on the defensive. It took a long time for Obama to really work the war propaganda to be able to enter Syria. The day will come when the dollar will weaken and we won't be able to afford our welfare state. The debt will be a big burden and we won't be able to maintain our military presence around the world. And then, believe me, the world is going to change. Global Gold: When you look at the Japanese economy, they're printing money like there's no tomorrow. And now we have a lot of countries in Europe back in a recession and inflation in the Eurozone is non-existent. So, Mario Draghi is trying everything to depreciate the Euro and at the same time put more money into the system. The ECB even recently introduced a negative interest rate for deposits at the central bank. Dr. Paul: When interest rates are zero or even negative, everyone wants to buy more. Back in 1979-1980, you could buy a US government bond and earn 15%. Nobody wanted it. Right now, of course, what people don't quite realize is interest rates are lower because the dollar is strong, but the average person who wants to educate their kids in 10-15 years is not actually investing in government bonds. It's all being bought by people who are playing this big game. Sometimes we even give money to another country just so they end up buying our treasury bills. It is amazing that this gimmick keeps working. What I believe is that one day we will wake up and the system will dissipate just as fast as it has grown, maybe even faster. It has taken lots of years to build up. It keeps getting knocked down; things have been rocky and I've see this quite a few times in my lifetime: in the 70s with high interest rates, asset bubble in 2000 and then the housing bubble. And we had this horrendous bailout and people still came back to rebuild the bubbles. They will not concede that it is better to use a hard asset as money than pieces of paper that a couple of people in a secret room decide how many of them there will be, and that whatever they decide they execute it with a click on the computer. The foreign nations are all at fault. America's not at fault, because they keep taking our money. We're not going to go back to work! In fact, Americans would never have to work again, because we can just print more money and buy everything that we need. Almost everybody knows that something will happen at some point along the way. But that's not going to happen anytime soon. Right now there's a lot of trust by foreign takers of our dollars, they keep taking them. And as long as they do that, I guess, we're going to limp along and the bubble keeps getting bigger and bigger. Global Gold: We believe we are witnessing a geopolitical power shift like we had right before the First World War where the British Empire was fighting against the rising Kaiserreich. We have a power shift where China, other Asian countries and the BRICs, are taking over. Also the US contribution to world GDP has been shrinking in the past ten years. How would you interpret this? Dr. Paul: The market is anticipating the vacuum that is building up and will come eventually. With the Russian situation and the sanctions, we're deliberately almost pushing them out of the dollar. There's a vacuum out there and the BRICs or somebody else is going to come along and create a substitute. Right now it's not clear what's going to evolve, there are still some questions. Something's got to fill the vacuum, but right now the vacuum isn't big enough. The dollar still does function, but there will be a day when it won't. I think it's a shift, as you say to the East, because we will keep selling gold and China is going to keep buying gold. I think it is so ironic that our policy is to deliberately keep the gold price down. This might be really building the case for China. But the people who are doing this don't believe gold is money anymore, so they pretend at least they don't care, because then they would have a different monetary policy. They actually convinced themselves that they're smart enough to manage money and not to have gold. One time I asked Alan Greenspan, because he had been pro-gold standard in the past and said: "What about this? You know, when we have a balance of payments problem we shift back and forth and make these adjustments". He said: "Well, it is different now, because we have learned to manage paper money as if it were gold". He said that very sincerely. And probably they do believe that they are smart enough to substitute the market. They have to be arrogant, because why should one person, like our Federal Reserve Chairman know how to fix the price of every transaction. One half of every transaction depends on the fixing of the interest rates and at the same time they decide on the level of the money supply. And yes, they have the Federal Reserve Board, but it is one person that makes the decision. They can fool a lot of people for a long time but markets will eventually catch on. Global Gold: You mentioned Greenspan. Usually when I have a presentation I always quote Greenspan about the article he wrote about gold and economic liberty in 1966 when he was still a supporter of Ayn Rand. You asked him a while back if he would like to repeal the article. What happened exactly when you asked him? Dr. Paul: I had him sign that particular article and I said "Would you write a disclaimer on it?". He said: "I still support everything I wrote". To me it was like "What is going on here? Who are you kidding?" He sounded serious. Maybe he believed in what he said but felt that the world wasn't quite ready for him. Ronald Reagan, for example, he was a loved president and he said all the right things, but deficits exploded and lots of financial problems developed over time. To Greenspan it was: "We're not ready to do it, the conditions aren't right. I'll be a good manager, you know. If someone has to manage the money, I'll do it." Of course history is going to show he didn't do a good job managing it. Global Gold: I think he really created the biggest bubble. Dr. Paul: History will show Bernanke didn't do a good job either. When low interest rates are the cause of the problem, what would you do? Lower them even more to make them negative? Global Gold: You're a fan of the Austrian School of Economic. We recently published a report on ABCT, the Austrian Business Cycle Theory, because we believe that economies operate in cycles and that the main drivers behind the cycles are the central banks by reducing the interest rates and printing large amounts of money. We also believe that we have the short-term debt cycles and the long-term debt cycles. When we go back in history, we see that the long-term debt cycle bursts every 50 to 70 years. What do you think about this cycle theory? Do you also believe we will see a big bust? Dr. Paul: Well, I think there is some truth to the big cycles. I don't think they're absolute, but the cycle is there. What if you're off ten years or so? I don't think we need cycle theories; I think that basic fundamental laws are sufficient to understand what is coming: The longer you print money and distort the market, the bigger the bubble and the bigger the bust. I wanted to study all the details of the cycles, I just know a bit about them. I know there are a lot of variables involved, because if the charts worked perfectly, that would mean that cycles would be predictable and the theories would be objective. However this conflicts with the subjective theory of value. People place value on certain things for other reasons, maybe because there've been no wars for a while, or maybe war breaks out and maybe somebody just dropped a bomb – this changes things all at once. I think cycles theories are interesting, but I wouldn't depend on them. Global Gold: In the United States, you now have almost 50 million Americans living off food stamps. In Europe, we have a high unemployment rate, especially among the young, 30-60%. So what we are witnessing is that the real economy is basically not growing in the western world, we only have this unlimited amount of money which is going into certain asset prices and spiking up the prices there. But it's not going into circulation. Do you believe that this world is going to recover? Is it getting better in the next few years or do you think the opposite is likely? Dr. Paul: It is not going to recover soon, because we haven't allowed the correction to come. The market wants it to correct. Right now, the market is saying that the conditions aren't right and confidence hasn't been restored and they're not going to build new businesses for various monetary as well as regulatory reasons. People aren't ready and I think the old saying about 'pushing on the string' is pretty true. When you don't have confidence, you can push that money in it and it doesn't go in the desired direction. The fact is that the correction has never been permitted. A correction means that when you have malinvestment, a lot of debt and the market quits functioning because of this imbalance, that you have to allow a correction. You have to liquidate the debt and have to get rid of the mistakes that were made and people have to go bankrupt. Instead, in our so-called recovery, we printed a lot of money and we bought the debt. We just transferred the debt from the rich over to the taxpayer who is ultimately behind the currency and the Federal Reserve. Just this past week, I was surprised to see this USD25 billion purchase of more mortgage debt by the Fed. We thought this was all over! How is that we are doing well? But evidently there wasn't enough money to keep those interest rates down at 2 and 3%, so the Fed ends up buying even more debt. This is the exact opposite of a correction. We have to liquidate the debt and that's what happened traditionally, even biblically, it was known as the jubilee. Debt getting too big seems to be human nature. When we compound this human factor with a currency that encourages debt, we find ourselves in a very problematic situation. I think a little more jubilee is what we need. But the debt is still out there and people have trouble understanding it. When people think of Detroit they recall it is bankrupt. They can't tax them, everybody left town. Well, how are we going to pay the retirees? The money is gone. That is a true bankruptcy but they're even going to say: "You can't let Detroit crumble, go to the federal government print some more money" and delay the inevitable. But on the federal level, nobody gets denied a cheque. More food stamps and more retirement benefits encourage people not to produce. Again, it's trust in our monetary system. As long as they trust the money, it is going to go on for a while, the bubble gets bigger and the inevitable bust gets worse. Global Gold: When we look back in history, economically unstable times are associated with a lot of debt, which is often followed by war. We just wrote an article comparing 1914 to 2014, because we see some parallels like massive centralization of the system, a lost generation due to massive unemployment and many more. This created the foundation for the extremism we saw at the time. Now when we look at what is happening on the borders of Europe, in Eastern Ukraine, and what's happening in the Middle East, Central Asia and North Africa. What is your take on that? Do you think that the situation will deescalate or is that just the beginning? Dr. Paul: No, I think it'll continue but I think it will calm down just as the confrontation with the Soviets did when they were spreading their empire and going into Afghanistan. That situation calmed down because they went bankrupt and had to go home. If people don't trust us or our money anymore, we will have to tighten our belts. Once the trust is lost, the more money you print, the less the trust is going to be. Right now, they have no other place to go. They could go and beg Europe to print Euros, but they trust the dollar more. As long as they keep doing that, these insane policies will continue. I think that governments need to fold, they need to be blamed for what they are doing. Central b | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gold Daily and Silver Weekly Charts - Pity the Swiss Posted: 06 Nov 2014 01:33 PM PST | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Chinese Wealth Management Products Will Cause the Next Financial Crisis Posted: 06 Nov 2014 01:14 PM PST This post Chinese Wealth Management Products Will Cause the Next Financial Crisis appeared first on Daily Reckoning. The next financial crisis will begin in China. This will be the event in financial markets when it happens. In this letter, I'll tell you about the trouble spots and ripple effects. More importantly, I want to steer you clear of them. Please read on… "Troubles in China Rattle Western Banks," says one Wall Street Journal headline. "String of fraud cases and problem loans stings foreign lenders as Beijing investigates executives, seizes assets," says the subhead. A few big European banks recently were on the losing end of a $475 million loan, thanks to fraud. The best part of the story was this quote: There is plenty of evidence of recklessness in China. "It was a surprise to all the banks. We didn't know," said one executive at a Western bank with direct knowledge of the matter. [Italics added]. "We didn't know…" Of course they didn't know. How could anyone suspect there would be fraud in China? Let's see, there are only about half a dozen lenders involved in a suspected fraud case at Qingdao Port. Those lenders are in for a billion dollars. There's also the case of Nomura. It lent $60 million to a Chinese shoe company just months before the CEO disappeared… along with the money. Sarcasm aside, there have been several cases of late. Yet the story I started with was a C4 story buried in the middle of The Wall Street Journal. I want to make the case to you that these kinds of stories will work their way to the front page in 2015 — and why it matters. To make my case, I draw primarily on two expert witnesses. The first is Yan Liang, an associate professor at Willamette University. She gave a fascinating presentation at the Post-Keynesian Conference I attended in Kansas City in September. The focus was on the shadow banking system. You have probably heard the term "shadow banking" tossed around and wondered what it was all about. The definition can vary, but generally, a shadow bank is a lending institution that does not have the public backstop that normal banks do. (Read: a lifeline from the central bank.) They can also use greater leverage and evade certain regulations. In China, shadow banking has quadrupled in size since 2008. Lending is not a business that grows that fast without doing reckless things. There is plenty of evidence of recklessness in China. Liang focuses on the so-called trusts and wealth management products (WMPs). These are vehicles you can invest in that will then pay you a higher interest rate than a bank deposit will. The problem is people tend to think these are as safe as bank deposits. In fact, owning them is about as safe as swallowing a box of nails.
Trusts, for instance, use a lot of leverage. The average is about 40 times for the largest trusts, Liang says. (See the chart above.) To show you how fragile a 40-times leverage ratio is, let me use an analogy. Imagine you owned your house at 40 times leverage. That means for every $100 of value in your house, you have just $2.50 of your own money in it. In such a case, just a 2.5% drop in the value of the house means you suffer a 100% loss of your equity. And it is not like the trusts are investing in super-safe stuff. They make risky loans in infrastructure, real estate and industries with excess capacity. Also, they are opaque. Liang says that "only 29 out of 66 registered trusts disclose capital, and most (except for two publicly listed trusts) failed to report returns." I imagine the ones not reporting are not proud of the results. The wealth management products are just as bad. To an investor, they look like time deposits. But they pay higher rates because they take your money and invest it in risky loans to small businesses. Worse, Liang says that shadow banks often issue new WMPs to pay off old ones and dodge reporting bad loans. It's like a big Ponzi scheme. In fact, a Chinese regulator, Xiao Gang, did call them a "Ponzi scheme" last year in public. (Amazing that he still has a job. People who say stuff like this tend to wind up behind bars.) It's easy to hide these things in China. Banks "often act alone in originating, distributing, custodying and managing WMPs," says Liang. There is no independent party monitoring these things. The maturity of WMPs is also getting shorter. So in 2007, only 10% of WMPs matured in less than 90 days. More than half were at least a year out. By the end of 2010, about 40% matured in less than 90 days. And less than 20% had maturities longer than a year. "But the funds raised could be invested in long-term projects, such as real estate," Liang says. "So again, liquidity risk is excessive." In other words, many WMPs hold long-term assets such as real estate on 90-day financing. Crazy. Add to all this the fact that companies in China are having a hard time making money. The nearby chart, from Liang's presentation, shows China's corporate sector performance. The trend is bad. More and more companies are losers (almost 18% of the sector). And the median return on assets (or ROA) has fallen to under 3%. Weak. And these data are a year old. We can only guess where the numbers are now.
At this point, to further bolster my case, I'd like to call Charlene Chu to testify. I heard her talk at Grant's fall conference. Her title was "Crash, Boom or Muddle? Casting China's Future." Charlene Chu is the head of Autonomous Research Asia, started in Hong Kong in September 2014. Before that, she was a director at Fitch in Beijing, where she worked for eight years. Chinese banks were her beat at the rating agency. And before that, she worked for the Federal Reserve Bank of New York. "The China today is not the China of before the financial crisis," Chu began. If you go back to the early 2000s, China's was a banking sector in which there were hardly any other investment alternatives. Everybody put their money in the bank, Chu said. Every bank offered the same interest rate. You had no incentive to move your money from one bank to another. And there was no property market. There was barely a stock market. Chinese banks had virtually no liabilities. That's all changed today. Echoing Liang, Chu showed that China has a debt problem. In her analysis, Chu did not care much for GDP growth, which most people focus on. She said it was the "most politicized number in the economic world right now, and it is not that informative." Instead, she focused on the massive loan growth in China. For six years in a row, China's banks have extended net new credit. The total is an "astonishing amount." If put in U.S. dollar terms, "we're talking about $5 trillion of credit being extended for six years in a row. "Under those kinds of circumstances, I think any country in the world would be growing at a very rapid rate," she said. "The real question we should be asking about China is why isn't growth stronger?" China is slowing down, despite massive credit growth. She called into question the big and wide divergence between the picture in the financial data from banks and what is happening on the ground. "I was in Beijing a couple of weeks ago," she continued. "Across the board, everybody is expecting a slowdown." To answer the question she posed in her presentation, "Crash, boom or muddle?" she quickly dispatched one scenario. "I don't see any case for a boom." Neither do I. Chu says China will muddle. In the Q&A, she did allow that if it got really bad, the Chinese authorities might have to make choices about who they bail out. Foreign bank claims might, in such a case, get the old shaft. Commodities China buys heavily… would seem to be vulnerable to disappearing demand. Meanwhile, stupid foreigners (mostly banks) have been lending money in China as if a boom was a given. Lending rose 47% in the 12 months ending in June, says the Bank for International Settlements. China is also the largest emerging-market borrower by far. Liang also goes for the muddle-through scenario. "State-owned banks dominate China," she said, "and the central government has the capacity to write off bad debt and recapitalize banks. Think the late 1990s." I will dissent from my esteemed China watchers. Markets don't work so neatly. Big credit problems don't go quietly into the night. Authorities, even Chinese ones, have no magic wands to wave and make problems go away. Markets boom and bust. I think China's bust will be nasty and shake global markets to the core. I would treat Chinese investment ideas as if they have Ebola. Some supposedly smart investors (this means you, GMO!) are bullish on Chinese banks. They cite, among other things, a low price-to-book ratio. But I agree with Chu: "The price-to-book ratios for Chinese banks are not low when you realize that 50% of the capital could be impaired in a very short amount of time." Stay away from China. Stay away from firms lending money in China. Those are easy steps. More difficult is to predict the ripples a financial crisis in China would create. Commodities China buys heavily — like iron ore, oil, copper and potash — would seem to be vulnerable to disappearing demand. I have no doubt China will be a much bigger economy in 10 years' time. But that doesn't mean investors have to make money, especially foreign ones. Regards, Chris Mayer P.S. I follow a similar set of investment rules, they're acronym is CODE. Today, I gave readers of our email edition a unique chance to access this system. It’s a small part of the exclusive content you receive when you sign up for our reckonings. Everyday we’ll send you insights and commentaries you won’t find on our site. Click here to sign up for The Daily Reckoning. It’s 100% FREE. The post Chinese Wealth Management Products Will Cause the Next Financial Crisis appeared first on Daily Reckoning. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| This Will Trigger Collapse & Shockwaves In Global Markets Posted: 06 Nov 2014 12:18 PM PST  Today a 42-year market veteran spoke with King World News about the remarkable event that is going to trigger collapse and send shockwaves in global markets. Below is what Egon von Greyerz, who is founder of Matterhorn Asset Management out of Switzerland, had to say in this extraordinary interview.This posting includes an audio/video/photo media file: Download Now | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gold market rigging drives mines out of business -- but without complaint Posted: 06 Nov 2014 11:47 AM PST The World Gold Council can always become the World Derivatives Council. * * * Gold Firms Plan Drastic Cuts to Stay Afloat as Bullion Sinks By Silvia Antonioli and Nicole Mordant Struggling gold producers plan increasingly drastic measures such as scrapping dividends, cutting jobs, halting projects, and shutting mines to survive the latest price plunge, but not all of them will make it. ... According to Citi analysts, about three quarters of gold mining companies burn cash at spot prices just below $1,200 on an all-in cost basis, which includes head office, interest, permitting, and exploration costs. ... "The bigger problem is that if they cannot afford to reinvest and explore, there will be a sharp drop in production a year or two from now," said Meryl Pick, an equity analyst at South African fund Old Mutual. "If current prices persist we may see more shafts going onto care and maintenance." ... For the report in its entirety: http://www.reuters.com/article/2014/11/06/gold-mining-costs-idUSL6N0SU50... ADVERTISEMENT Free Storage with BullionStar in Singapore Until 2016 BullionStar is a Singapore-registered company with a one-stop bullion shop, showroom, and vault at 45 New Bridge Road in Singapore. BullionStar's solution for storing bullion in Singapore is called My Vault Storage. With My Vault Storage you can store bullion in BullionStar's bullion vault, which is integrated with BullionStar's shop and showroom, making it a convenient one-stop-shop for precious metals in Singapore. Customers can buy, store, sell, or request physical withdrawal of their bullion through My Vault Storage® online around the clock. Storage is FREE until 2016 and will have the most competitive rates in the industry thereafter. For more information, please visit Bullion Star here: Join GATA here: Mines and Money London http://www.minesandmoney.com/london/ Vancouver Resource Investment Conference http://cambridgehouse.com/event/33/vancouver-resource-investment-confere... * * * 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: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. Mint Sells Out of Silver Eagle Coins as Buying Surges Posted: 06 Nov 2014 09:42 AM PST The gulf between the physical precious metals markets and the paper or electronic gold and silver markets is growing again and risks becoming as broad as it has ever been. Demand for gold and particularly silver bullion has been very high across the world in recent weeks. The sharp price falls in recent days has led to even greater demand and concerns about supply and rising bullion premiums. Now the U.S. Mint is sold out and the Canadian Mint is rationing supplies. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Panic Gold & Silver Selling Surprises Largest Dealer In U.S. Posted: 06 Nov 2014 08:47 AM PST  Today the man who owns the largest gold and silver dealer in the United States told King World News he was surprised by the amount of panic selling in gold and silver taking place at these levels. This has created an interesting dynamic in terms of buyers and sellers. Below is what 41-year market veteran Bill Haynes had to say about the massive activity he is seeing in gold and silver. This posting includes an audio/video/photo media file: Download Now | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 06 Nov 2014 07:00 AM PST Monetary Metals | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Miners facing 'bloodbath' if gold sinks to $1,000 Posted: 06 Nov 2014 06:52 AM PST The chief executive of the largest London-listed gold miner sounds a warning for the industry  This posting includes an audio/video/photo media file: Download Now | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Greenspan: "You Should Thank Central Banks" Posted: 06 Nov 2014 03:16 AM PST Yes, he really said that. And he also said the Fed doesn't suppress gold prices... ALAN GREENSPAN, infamous US Fed chairman from 1987-2006, appeared last month at the New Orleans Investment Conference, the longest running financial event in the United States. Here in this transcript shared by The Gold Report, Dr.Greenspan is interviewed by Gary Alexander, senior writer for Navellier & Associates, alongside Marc Faber, who at age 24 earned his PhD in economics magna cum laude from the University of Zurich, has lived in Hong Kong nearly 40 years, and – having served from 1978 to 1990 as managing director of Drexel Burnham Lambert (HK) – now publishes the monthly Gloom Boom & Doom Report – as well as investment advisory publisher Porter Stansberry. You can order audio CDs and video DVDs of the conference here. Gary Alexander: You said that when you were named to the position of Federal Reserve chair you left the world of theoretical economics philosophy and entered the arena of action. How did you convince people to see things your way, or did you feel that most of the compromise went the other way? Alan Greenspan: When I wrote a paper on how agricultural subsidies made no sense to the farmers in the long run, two Republican senators from Nebraska taught me the reality of actually implementing the values we hold as best we can in the context of a political environment. I never changed my fundamental views because they were rational. President Ronald Reagan advised that other than your core beliefs, which are protected by the Constitution, sometimes you have to compromise. We learned to change the world bit by bit. Gary Alexander: When you took office in August of 1987, the gold price was $460 an ounce on your first day. It peaked at $504 per ounce in December of 1987. Over the next 12 years, it was cut in half to $252 per ounce by August of 1999. Many believe that during that time, the Fed must have been selling gold or manipulating the market in some way to push the price of gold down. Was anything like that happening? Alan Greenspan: No. Some central banks were major sellers of gold in that particular period. We were very concerned about that. If all the central banks sold gold at the same time, it really would have brought the price down. So they set up a partitioning scheme – some called it a cartel – where individual central banks were given quotas of what they could sell at certain times. The United States abstained from that group. In my new book, I cover the role of gold and why the US doesn't sell all of its gold. If it's a barbarous relic, as some say, and it earns nothing and it costs money to store it, why are central banks holding so much of it? Gary Alexander: That's a question I was going to ask you. Ron Paul asked Ben Bernanke in Congressional testimony that simple three-word question "Is gold money?" which got a one-word answer, "No". What do think? Alan Greenspan: It's currency, of course. Gold, and to a lesser extent silver, are the only major currencies that don't require a third party credit guarantee. Gold is inbred in human nature. Gold is special. For more than two millennia, gold has had virtually unquestioned acceptance as payment to discharge an obligation. Remember, Germany could not import any goods in the last part of World War II unless it paid in gold. Today, China is beginning to convert part of its $4 trillion foreign exchange reserve into gold as a partial diversification out of the Dollar. Irrespective of whether the Yuan is convertible into gold, the status of the Chinese currency could take on unexpected strength in today's fiat money, floating international financial system. It would be a gamble for China to try to buy enough gold bullion to displace the United States' $328 billion of gold reserves as the world's largest holder of monetary gold. But the cost of being wrong, in terms of lost interest and cost of storage, would be quite modest. If China embarks on a gold accumulation program, global gold prices will rise, but only during the period of accumulation. Gary Alexander: One of your statements in your book is that even though the gold standard was not practical, you still believe in the theory of the gold standard. Alan Greenspan: A return to the gold standard in any form is nowhere on anybody's horizon. Gary Alexander: The Fed has now been around for a hundred years. Would the Fed be considered a successful manager of the value of the Dollar over the last century? Alan Greenspan: Remember, what the Fed does is what Congress requires of it. When the Fed started out, US currency was still on the gold standard. It was set up largely in response to the panic of 1907 as the lender of last resort. The gold standard was abandoned in 1933 because it appeared to be depressing the general price level and inhibiting recovery out of the Great Depression. More important, the restrictive nature of gold undermined the fiscal flexibility required by the New Deal's welfare state. Some blamed gold for the depression, but the problem wasn't convertibility to gold, it was a problem with the people pricing it. What followed was fiat money price inflation. Between 1933 and 2008, prices for personal consumption increased more than thirteenfold. Central banks were then ceded the role of controlling the supply of money, and hence prices. The goal became keeping the rate of inflation down rather than the level of prices unchanged. As the world adopted a welfare state psychology, challenges began to emerge. Values, culture, ideas and philosophy determine what economic policies look like. Unless and until you change that, nothing will happen. It is ideas that matter in economics. Gary Alexander: Interest rates remained very low from 2001 to mid-2004. The Fed fund rate was around 1% from 2004 to 2006. Do you regret, in retrospect, keeping rates so low? Might that have contributed in any way to the housing and real estate bubble? Alan Greenspan: It became apparent after the dot-com boom that the central banks had lost control of the wrong end of the money. In other words, the Federal Reserve and all the central banks fixed the short end like the federal funds rate, but not the real rate on 10-year notes. We began to see a huge amount of international arbitrage in the bond markets. The result was the federal funds rate went down for a year to 1% because we hadn't seen price inflation. Money supply growth, long-term rates, all of the measures of inflation were unchanged. No one raised the issue at the time. Indeed, Economist Milton Friedman praised Federal Reserve policies. It wasn't until 2006 or 2007 that there was a retrospective look at what occurred. Gary Alexander: We all saw the headlines about people flipping homes and borrowing and refinancing homes and turning them into ATM machines. Wasn't that an indication that something was out of control? Alan Greenspan: That had nothing to do with Federal Reserve policy. That was Fannie Mae and Freddie Mac keeping their debentures at an extraordinarily low level subsidized by the Federal government guarantee that they wouldn't be allowed to fail. Then the Department of Housing and Urban Development required that the two lenders invest a significant amount of their balance sheet into affordable housing loans. That led to huge numbers of subprime mortgages with low down payments and adjustable interest rates. Eventually, it blew the system apart. Gary Alexander: I'd like to turn now to the years after you left the Fed, which you wrote about in The Age of Turbulence. We've now had almost six years of effective zero interest rate policy and not much measurable inflation. You wrote: "Thus without a change of policy, a higher rate of inflation can be anticipated in the United States. I know that the Federal Reserve left alone has the capacity and perseverance to effectively contain the inflation pressures I foresee. Yet to keep the inflation rate down to a gold standard level of under 1% would have to constrain monetary expansion so drastically that it could temporarily drive up interest rates in the double-digit range." However, they have done the opposite. The balance sheet has exploded, and yet rates have stayed so low. Inflation is not that measurable, and people are fearing deflation. Could you please explain the map of this territory? Alan Greenspan: Money supply hasn't grown. The reason is very little of those excess reserves has been re-lent into the market to IBM or General Motors. That is because there is too much uncertainty, banks are better off holding it for 25 basis points. So we are left with this huge potential inflationary explosion tinder. Once those assets are triggered into the marketplace, then inflation will rise. It has to rise. Gary Alexander: My theory is the federal government doesn't want to raise rates because it has a $17 trillion budget deficit to pay with interest, and that's going to hurt. Alan Greenspan: When I was at the Fed, there was never a discussion between the Fed and the Department of the Treasury about the impact of rates on paying the deficit. With the size of the outstanding debt that we now have, the deficit could become fairly crippling if rates go up. Gary Alexander: I want to ask you about banks. You say three times in your book that banks have failed terribly in regulating themselves and it's usually the whistleblowers who draw attention to it. Today, we have the concept of too big to fail. Do you think we should allow big banks to fail? Alan Greenspan: The premise of a financial system is to facilitate the movement of society's savings into productive capital assets, which will create a rising standard of living. To the extent that you don't allow creative destruction of companies, you do not optimize the use of the savings of a society. The issue that people don't want to address is the fact that creative destruction is an essential characteristic of a market economy, but it does have two aspects to it: creative and destructive. People like the creative, but they don't want the destructive. You cannot have it both ways. You either have a high standard of living by allowing the savings of society to increase productive assets or you finance everybody – creative or not – and by doing that, you're creating real serious problems. Porter Stansberry: The thing that I think has changed in our economy during my lifetime is that debt has gotten so cheap. Debt used to be the last resort for people, now it seems to be the first choice. It makes our institutions fragile in a way that they were not before. The investment banks that blew up in 2008-2009, requiring huge bailouts from taxpayers, were fragile because they were leveraged 50:1. People who ran those institutions thought that was normal and sane. And it wasn't. We've all seen the culture of our country change. In my view, that's because we've gone from the role of the creditor to the role of the debtor. There are many institutions that enabled that process. The Fed is one of them. Alan Greenspan: The standard of living in the economy is fundamentally tied to the issue of productivity and the degree of independent innovation. We have a very substantial degree of entitlements within this economy, an aggregate of Medicare, Medicaid, Social Security and a whole variety of other programs, all of which are mandated, not appropriated, by Congress under both parties. This leads to a reduction in the level of gross domestic savings, which immediately translates into lower capital of stock and lower standards of living. There is no way out of this arithmetic through bookkeeping. We are eating our seed corn. Marc Faber: There are many reasons the Western economies are slowing down. One is government spending. Between 1870 and 1910, nowhere in Europe or in the US was it above 15% of the economy. Now, US government spending, including states and municipalities, is at around 40% of gross domestic product (GDP). In France, government spending is 57% of GDP. The larger the government becomes, the less economic growth there will be. So Dr.Greenspan and I agree on the problem, but who financed all these entitlements? I believe the central banks with their artificially low interest rates are deliberately creating bubbles even though in a bubble, the majority loses, and the minority makes a lot of money. Alan Greenspan: The presumption is that if the Federal Reserve were not funding the deficits, they wouldn't happen. You have it backwards. Politicians mandate the degree of expenditures and taxes. What would happen if there is no central bank is that interest rates would push up and crowd out the private sector. That is what actually occurs unless the central banks intervene. Central banks are not the primary cause of this problem, they are responding to government spending. If the government spending weren't there, the issue wouldn't arise. Gary Alexander: With the current Federal Reserve probably winding up quantitative easing (QE) soon, what do you see as the outcome of the current Fed policies under Janet Yellen over the next year? Porter Stansberry: I really think that the current Fed is in a terribly difficult situation. The federal government is way over its head in debt. It's $150,000 per taxpayer in debt. There is just no way politically to cut these expenditures nor is there a way to generate enough in income taxes or corporate taxes to cover the shortfall. I've looked at the data. It shows that even if you doubled the amount taken in income taxes, we'd still be running a deficit. So the Fed is in a really tough place. It is in charge of financing the government's runaway spending and uncontrollable debt. Regardless of what the hawks may say, I just don't believe that the Fed is ever going to become very aggressive with the purse strings. I think that we're locked into a pattern of larger and larger QEs, lower and lower rates, until finally something breaks, whether that's the commodity markets or the bond markets. I actually sort of feel sorry for the folks who are at the Fed currently because they're stuck between a rock and a hard place. Marc Faber: My sense is that the Fed and other central banks around the world will keep interest rates at very low levels for a very long time. The whole investment world has been distorted by essentially zero interest rates and expansionary monetary policies. Alan Greenspan: If the Federal Reserve wants to keep the same degree of tightening, it has to actually raise the rate it's paying on the money. There's no other alternative. The issue of the size of the balance sheets is beyond comprehension. We are going to have to wait and see what happens when the huge amount of unused reserves starts moving. We have never seen anything like this before. If anyone has the guts to go out and forecast five years out from now, good luck. Porter Stansberry: Dr.Greenspan, you famously said while you were at the Fed that spotting bubbles is notoriously difficult until in retrospect. There are a couple of things going on today that strike me as bubble-like behavior: Nasdaq trading at almost seventy times earnings, high-yield corporate debt offering less than 5%, beachfront condos in Miami selling for $30 million. Do any of those things strike you as being in bubble territory? Alan Greenspan: Commercial real estate, which was dead in the water with respect to price and volume, has now had a significant change in pricing. Prime areas have seen a surge in funding, but the volume of activity is not back to where it was. Multifamily is doing better because a lot of people have shifted from home ownership to rental status. You will know you are in very serious trouble when there is price inflation but no buyers; that's suggestive of something not well going on. Yes, I think there are many signs. The stock prices have been very surprising. This is not sustainable, but we are not seeing any signs of inflation or real interest rates rising...yet. Bubbles are easy to see, but difficult – if not impossible – to pinpoint when they implode because of the way markets work. If people see it coming, it won't happen. No one can forecast when those bubbles will break. Gary Alexander: Marc Faber, what is the significance of the Swiss referendum coming up next month to have 20% gold backing, repatriated gold and forbid gold selling? Marc Faber: I think it will be rejected. If the proposal was for 100% backing, I would more enthusiastically endorse it. Twenty per cent, in my opinion, is neither here nor there. I believe that smart investors need to have their own gold reserves. I would never trust anyone to hold these gold reserves on my behalf because they can lease it out or they can sell it. Gary Alexander: Dr.Greenspan, did you in July 1998 testify that the Fed stands by, ready and willing to buy gold should the situation rise where it's necessary? Alan Greenspan: No. But I have been writing about the significance of the gold standard since the 1960s. The crucial question is not the amount of gold individual countries own, only if they are willing to convert their currency into gold. The rest is strictly an investment position.
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| Posted: 06 Nov 2014 02:34 AM PST Two assets with more in common than you might guess... ONE of the greatest fears this October – possibly the most volatile month of the year – was the correlation between the S&P 500 Index's ascent in the first three quarters of the year and the possible ramifications of the end of quantitative easing (QE), writes Frank Holmes at US Global Investors. It's well known that Japan and Singapore have been buying their countries' blue chip stocks with their excessive money printing. Today, about 1.8% of the Japanese market is owned by the Bank of Japan. American investors fear the Federal Reserve might do the same and take away the punch bowl, so to speak. As you can see, the S&P 500 Index has been rising in tandem with government securities, and it's uncertain what will happen when QE ends.  The Ebola epidemic has also contributed toward moving the needle to the fear side of the spectrum and driven investors to seek shelter not in gold necessarily but in so-called "Ebola stocks". For every negative, as tragic as they often are, there is a positive. When a major hurricane hits Florida, for instance, insurance stocks fall while real estate stocks rise. The deadly Ebola virus, on top of an aging demographic, has helped make health care and biotechnology pop this year. The Daily Reckoning's Paul Mampilly, in fact, calls this rally "the biggest biotech market ever." Possibly. Before we get too excited, let's look at the numbers. Over the last 10 years, the S&P 500 Biotechnology Index has had a rolling 12-month percentage change of ±23. As of this writing, the index is up 32 percent, meaning it's up by only 1.3 standard deviation. In other words, biotech is behaving approximately within its expected range. Gold bullion, over the same period, has had a percentage change of ±19 – not so dramatically different from biotech – and is down by 1.3 standard deviation. Again, this is "normal" behavior.  As you can see, biotech corrected and then rallied firmly into the sell zone. Seventy percent of the time, it's normal for the asset class to rise and fall one standard deviation. As I always say, each asset class has had its own DNA of volatility over the last 10 years. Knowing this helps you manage your expectations of how they perform.  Even health care and biotech companies not actively working toward finding treatments and vaccines for the virus seem to have incidentally benefited from the rally. As for gold, between mid-August and October 3, the precious metal completely ignored the fact that September is historically its best-performing month, tumbling 9 percent from $1310 to $1190. It soon rebounded in the days leading up to Diwali. Gold stocks, on the other hand, have yet to recover. Since the end of August, the NYSE Arca Gold BUGS Index has plunged 25 percent to lows we haven't seen since April 2005. The Market Vectors Junior Gold Miners ETF has lost nearly 30 percent; the Philadelphia Gold and Silver Index (XAU), 25 percent. On a few occasions I've pointed out that in the last 30 years, the XAU has never experienced a losing streak of more than three years. As of this writing, it's lost close to 17 percent, with only two months left. The cards are definitely stacked against the XAU, but I remain optimistic it can continue the trend.  Many investors are understandably concerned that mining companies in West Africa will suffer because of Ebola. Several companies operating in the three hardest-hit countries have indeed been hurt by the virus, some of them being forced to halt production. However, none of our funds has any direct exposure to them. The three companies that we own in US Global Investors' gold mining funds continue to operate normally in the region. Here I must remind investors that we recommend 10-percent holding in gold: 5 percent in bullion, 5 percent in stocks. Rebalance every year. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| No Commerce without Government Sanction? “AirBnb” Law Sets Ugly Precedent Posted: 06 Nov 2014 01:30 AM PST An Investor’s Week in TechGreetings, fellow technophiles. This week we’re going to try something new, and I’d like your feedback. Once upon a time, I used to fill the pages of Casey Extraordinary Technology with a monthly summary of noteworthy news from the tech world that investors should be aware of. Predictive, anomalous, or just interesting, the goal was to be information and opinion dense. As the portfolio swelled, that fell to the wayside. Looking to broaden coverage in these weekly letters, it seemed a perfect opportunity to bring that format back and get you something with a lot more “sink your teeth in” depth than just a single topic a week. If you enjoy our usual longer, more in-depth articles, no worries. We’ll keep writing them and cover them below with everything else, if we keep this new format. Please give it a read, then let me know what you think in the comments or by replying Apple Pay Launches with a Thud, Getting Denied at Big RetailersThe pitched battle to replace your wallet—or what’s inside it—just got much hotter. In the race to dominate every aspect of your personal life, Apple premiered its much-hyped Apple Pay service last week. Owners of the new iPhone 6 series of phones can now finally use a technology that has long since been available on tens of millions of Google Android phones to pay for things. Much like those cellphone barcode boarding passes at the airport, the idea is to replace a simple passive object (for the airport, paper; for Apple, the old magstripe credit card) with better technology. The process for paying with Google or Apple’s tech goes like this: you get out your phone, swipe it by a specially equipped machine, enter a pin on the phone (or use your fingerprint in Apple’s case), then select a card account, which then transmits one-time-use credit card info to the machine. Tech proponents say it’s much more secure since an unscrupulous employee or even a hacked payment terminal can’t steal a card number that can be used again. To me, it sounds like a lot of work to do what a card already does without having to worry about dead batteries, crashing apps, etc. Not that I have an opinion… But CVS certainly has one. The store announced that it would disable the near-field communications (NFC) tech that Apple and Google use on its payment terminals, blocking the new service. The move was meant to support CurrentC, an alternative developed by an industry trade group to which CVS, Rite-Aid (which also made the same move), and many other retailers belong. Over the years, CurrentC has deployed simpler barcode-based smartphone apps for a wide variety of platforms, including iOS and Android, but they’ve been known to be terribly buggy and not very convenient. To push back this hard, CVS must see Apple’s involvement in the credit card chain as a major threat to margins. After all, it’s had NFC support for Google Wallet for quite some time (evidence of just how poorly Google executed its Wallet marketing). Reviewers who spent any time with the new solutions came back nonplussed too. Engadget summed it up well (my emphasis): Mobile payments are arguably a lot more secure. Your actual credit card number is never handed over to merchants. Apple Pay uses a Secure Element chip that encrypts user data and assigns a unique device number to each phone, while Google Wallet transactions are made with a virtual prepaid MasterCard that’s different each time. Mobile payments could therefore be the answer to the ever-present threat of data breaches and identity theft. But until we can get it accepted at every merchant and figure out a way we can use the phone to securely carry our ID as well, it simply isn’t going to replace your wallet. Nor are credit card makers content to let the wallet be replaced. They have their own secure solution, “chip+pin” (or EMV), with similar security features. Instead of adding a phone into the mix, they make the credit card smarter, holding on to the credit card number until you enter a code to unlock it. A compromised payment terminal is a risk, like what happened at Aldi a few years back, but then again so is a hacked phone with NFC… and which is more likely? One has to wonder if merchants and Visa will be happy about adding powerful new players into the payment chain. Though, when consumers catch wind of the newest glaring security hole in those chip+pin cards discovered last week, which allows hackers to steal up to a million dollars per card simply by walking near you, they might just demand Apple Pay. Elsewhere in the ecommerce world... US Credit Card Security Push Will Replace Billions in HardwareWe don’t usually lump credit card payment terminals into the “cool gadget” category, but last week the former head of aforementioned Google Wallet—who left to do his own startup (the hard part of being one of Silicon Valley’s big employers is that your best people can easily leave and compete with you)—announced a slick-looking new device to replace those tired-looking payment terminals at cash registers around the US. Dubbed Poynt, the announcement is not coincidentally timed. Next year the US starts adopting new payment security standards, which will require almost every terminal not replaced in the last year or two to be ditched in one fell swoop, lest the merchants using them face big penalty charges for using old, less secure tech. It’s going to be a multibillion-dollar hardware upgrade cycle; thus competitors new and old (like VeriFone) are salivating at the chance to gain some share during the swap. Poynt works with the old magstripe cards we know, but also supports EMV, the standard those who live in Europe, Asia, and even Canada have long had. It’s also wireless, Bluetooth, and NFC compatible—meaning it works with Apple Pay and Google Wallet, if those ever do take off (they won’t). TechCrunch has all the details and lots more slick gadget photos. No Commerce Without Government Sanction? AirBnb Law Sets Ugly PrecedentIt may sound like something out of a fascist regime, but that seems to be the direction we’re headed in America. In the country where Marshmallow Fluff went from a home kitchen to a multimillion-dollar business, it’s anathema to think that today’s laws would make the whole endeavor illegal from the get-go. But evidence continues to mount that we have gone decidedly anti-commerce. The latest turn of events: the People’s Republic of San Francisco is pushing a law to severely restrict the use of HomeAway and AirBnb-style hotelier sites. Prodded by angry neighbors—or by the hotel lobby, do you think?—the city decided to permit only residents of the city to use their property as such. Nonresident owners are being told they cannot do short-term rentals, only long-term ones. The city council says they’re doing it to prevent or lessen a housing shortage in the city. Yet more evidence of government protecting entrenched business models (hotels in this case… just like the ludicrous laws to prevent car manufacturers from selling directly instead of through dealers, meant to slow down Tesla’s onslaught). Thankfully, HomeAway is suing to block the law… as are others. (Curiously, AirBnb isn’t suing, as the law is actually designed to support its business model, requiring the companies arranging rentals to collect taxes centrally, which it can do; HomeAway can’t do that without a big change to its business. This is, at least, according to HomeAway.) It reminds me of the ludicrous battle that occurred down the street from my place in Vermont, where neighbors were mad at The Alchemist, brewers of top-ranked microbrew Heady Topper. Its creators were forced out of their small brewing site by neighbors who didn’t like the traffic from customers. The business was drummed out of town with help from the zoning board. Yet the company couldn’t move to the next town over because a competitor started making a squawk about some rare bird that supposedly nests where The Alchemist wanted to build its new location. The whole debacle is still unfolding many months later. Is this the world we now live in, where success is punishable by law, unless you grease the right palms? Let’s all hope that intelligence prevails in the judiciary of California (just typing that out is depressing), and it upholds the ability of people to engage in commerce without permission. If not, I suspect we’re screwed as a nation. If only our lawmakers would focus on protecting us from real threats like the unprosecuted frauds of the mortgage debacle, instead of piling on superfluous new regulations that just deter or extort business. SSD Consolidation ContinuesThe days of the spinning hard drive are numbered. Cellphones, tablets, etc. have never even considered them an option. They suck way too much power and take up far too much space. The solid state drive (SSD) is less power hungry, shockproof, and WAY faster. Only problem is it’s still an order of magnitude more expensive than its predecessor. So when it comes to storing lots of data that don’t all need to be accessed at lightning speeds, spinning disks still rule. Until that cost gap finally closes, SSD manufacturers are using software to make their devices work in tandem with old-fashioned spinning disks, giving them a way to still be valuable for those big archival data farms. In fact, HDD sales are up 6% over last year, to a projected 423 million shipments this year. The latest sign that SSD makers see this as big game came with Samsung’s purchase of hot San Fran startup Proximal Data. The deal, done at an undisclosed price, was the second for Samsung that also grabbed NVELO, which was working on the same kind of technology in 2012. The Hackings Will Continue Until Morale ImprovesIt looks like viruses are on their way for Mac users, thanks to a big security flaw in the new OSX Yosemite. That just piles on top of the serious flaw in popular content management platform Drupal, which powers such websites as Whitehouse.gov and which left potentially millions of domains exposed and many confirmed hacked last week. Within hours of the October 15 notice to the world that the software was vulnerable, hackers began exploiting it to steal data, inject malicious code, and otherwise take over websites unbeknownst to owners. It’s not just hackers either. ATT and VZW are placing “supercookies” on your phone to track and report all kinds of stuff. Better start actually reading those terms of service agreements you click right past. Your cellphone company isn’t the only one selling every bit of data it can about you: your ISP at home sells your clickstream too, and lots more. Same with your credit card. The rule is simple: if you need it private, don’t put it on a computer of any kind. At least not one connected to the Internet. It’s unfortunate for all of us, not just the celebutants who had their privacy flagrantly violated for the world’s unscrupulous to see, but it’s the time we live in. If you do want to keep something secret, then follow this fantastic guide to how Edward Snowden did it. Darknet Commerce Is BoomingThe Economist recently published a great overview of the growth of so-called Darknet sites, which use software to keep user identities hidden from prying eyes (a somewhat dubious claim, many studies have shown). With perceived anonymity as cover, all kinds of illicit activity occurs, including the sale of drugs and weapons. The article included this great chart of the comeback since the infamous Silk Road marketplace was shut down: Of course, even on the Darknet—maybe especially on the Darknet—you’re not immune to hackers. Recently, at least one node of the Tor anonymous peer-to-peer network was hacked. Intruders were wrapping any downloaded program with a Trojan Horse, regardless of where it came from, as it passed through the hacked computer. The risk of any proxy service, P2P or centrally managed, is that it provides a bottleneck for hackers to exploit. The same could be done to a commercial proxy as well, or even your ISP, were they to be hacked… so keep that virus scan up to date. Plus, who wants to be on the Darknet anymore, now that it has Facebook? Wii U Sales Boom, Nintendo Profits, Thanks to Go-KartsLast week Nintendo surprised a whole lot of people by finally being profitable again, albeit for a very brief period of time. The company’s Wii U console hasn’t sold nearly as well as previous generations. It’s also losing share to the latest PlayStation and Xbox models—something consensus chalked up to its decidedly kiddie vibe and giant-awkward-touchscreen-joystick-controller-thingies. But last week we found out otherwise. Thanks to the release of the eighth iteration in its Mario Kart series, system sales boomed, and the company finally made some money again… albeit for one quarter. Reuters has the detailed numbers, but with 1.1 million consoles sold in the quarter, putting Nintendo in at well over 7 million total consoles sold, the Wii U is now firmly ahead of Microsoft (which sold 3.9 million Xbox Ones so far) and Sony (4.1 million PS4s) in the console race. Still, the company has been bleeding money up until now. And the gaming and business press have been pushing Nintendo to change its game plan, putting out its famed character games to license for mobile devices and possibly for other consoles, too. Punditry has it that the company could make a lot more money by reaching far more devices. Software certainly has higher margins, especially for Nintendo’s competitors, which sell their beefed-up systems at cost. For now at least, it looks like Satoru Iwata (Nintendo’s 12-year CEO, who is just recovering from cancer surgery) may have had the formula right all along, pushing his marketing budget to the moon to gain share on the back of fun games, not hardware specs. He’s playing the Silicon Valley race, focusing on market domination over profitability up front, only to turn the corner late and hard, sure of his traction, to cement a commanding lead. Microsoft is slashing prices to try to catch up from third place, but as an owner of two Xbox One consoles, I can tell you I’m a little bit jealous of the Wii U crowd right now, wishing there was even one decent exclusive game for my year-old super hardware. Instead, I’ve got a half-working Xbox Fitness with less content than when it launched, and a bunch of boring shoot-‘em-up games (I guess that’s why Microsoft canned its home-baked TV/movie studio). Now that looks like fun… and as Jordan Shapiro points out, it’s much more mature than the shooter fare. No wonder GameStop’s revenue jumped 25% near the same time as Nintendo’s return to profitability. Great games, not hardware specifications, sell consoles. A master lesson from the longtime video game champions, Nintendo. A few other reads of note:
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| No Commerce Without Government Sanction? “AirBnb” Law Sets Ugly Precedent Posted: 06 Nov 2014 01:30 AM PST An Investor’s Week in TechGreetings, fellow technophiles. This week we’re going to try something new, and I’d like your feedback. Once upon a time, I used to fill the pages of Casey Extraordinary Technology with a monthly summary of noteworthy news from the tech world that investors should be aware of. Predictive, anomalous, or just interesting, the goal was to be information and opinion dense. As the portfolio swelled, that fell to the wayside. Looking to broaden coverage in these weekly letters, it seemed a perfect opportunity to bring that format back and get you something with a lot more “sink your teeth in” depth than just a single topic a week. If you enjoy our usual longer, more in-depth articles, no worries. We’ll keep writing them and cover them below with everything else, if we keep this new format. Please give it a read, then let me know what you think in the comments or by replying Apple Pay Launches with a Thud, Getting Denied at Big RetailersThe pitched battle to replace your wallet—or what’s inside it—just got much hotter. In the race to dominate every aspect of your personal life, Apple premiered its much-hyped Apple Pay service last week. Owners of the new iPhone 6 series of phones can now finally use a technology that has long since been available on tens of millions of Google Android phones to pay for things. Much like those cellphone barcode boarding passes at the airport, the idea is to replace a simple passive object (for the airport, paper; for Apple, the old magstripe credit card) with better technology. The process for paying with Google or Apple’s tech goes like this: you get out your phone, swipe it by a specially equipped machine, enter a pin on the phone (or use your fingerprint in Apple’s case), then select a card account, which then transmits one-time-use credit card info to the machine. Tech proponents say it’s much more secure since an unscrupulous employee or even a hacked payment terminal can’t steal a card number that can be used again. To me, it sounds like a lot of work to do what a card already does without having to worry about dead batteries, crashing apps, etc. Not that I have an opinion… But CVS certainly has one. The store announced that it would disable the near-field communications (NFC) tech that Apple and Google use on its payment terminals, blocking the new service. The move was meant to support CurrentC, an alternative developed by an industry trade group to which CVS, Rite-Aid (which also made the same move), and many other retailers belong. Over the years, CurrentC has deployed simpler barcode-based smartphone apps for a wide variety of platforms, including iOS and Android, but they’ve been known to be terribly buggy and not very convenient. To push back this hard, CVS must see Apple’s involvement in the credit card chain as a major threat to margins. After all, it’s had NFC support for Google Wallet for quite some time (evidence of just how poorly Google executed its Wallet marketing). Reviewers who spent any time with the new solutions came back nonplussed too. Engadget summed it up well (my emphasis): Mobile payments are arguably a lot more secure. Your actual credit card number is never handed over to merchants. Apple Pay uses a Secure Element chip that encrypts user data and assigns a unique device number to each phone, while Google Wallet transactions are made with a virtual prepaid MasterCard that’s different each time. Mobile payments could therefore be the answer to the ever-present threat of data breaches and identity theft. But until we can get it accepted at every merchant and figure out a way we can use the phone to securely carry our ID as well, it simply isn’t going to replace your wallet. Nor are credit card makers content to let the wallet be replaced. They have their own secure solution, “chip+pin” (or EMV), with similar security features. Instead of adding a phone into the mix, they make the credit card smarter, holding on to the credit card number until you enter a code to unlock it. A compromised payment terminal is a risk, like what happened at Aldi a few years back, but then again so is a hacked phone with NFC… and which is more likely? One has to wonder if merchants and Visa will be happy about adding powerful new players into the payment chain. Though, when consumers catch wind of the newest glaring security hole in those chip+pin cards discovered last week, which allows hackers to steal up to a million dollars per card simply by walking near you, they might just demand Apple Pay. Elsewhere in the ecommerce world... US Credit Card Security Push Will Replace Billions in HardwareWe don’t usually lump credit card payment terminals into the “cool gadget” category, but last week the former head of aforementioned Google Wallet—who left to do his own startup (the hard part of being one of Silicon Valley’s big employers is that your best people can easily leave and compete with you)—announced a slick-looking new device to replace those tired-looking payment terminals at cash registers around the US. Dubbed Poynt, the announcement is not coincidentally timed. Next year the US starts adopting new payment security standards, which will require almost every terminal not replaced in the last year or two to be ditched in one fell swoop, lest the merchants using them face big penalty charges for using old, less secure tech. It’s going to be a multibillion-dollar hardware upgrade cycle; thus competitors new and old (like VeriFone) are salivating at the chance to gain some share during the swap. Poynt works with the old magstripe cards we know, but also supports EMV, the standard those who live in Europe, Asia, and even Canada have long had. It’s also wireless, Bluetooth, and NFC compatible—meaning it works with Apple Pay and Google Wallet, if those ever do take off (they won’t). TechCrunch has all the details and lots more slick gadget photos. No Commerce Without Government Sanction? AirBnb Law Sets Ugly PrecedentIt may sound like something out of a fascist regime, but that seems to be the direction we’re headed in America. In the country where Marshmallow Fluff went from a home kitchen to a multimillion-dollar business, it’s anathema to think that today’s laws would make the whole endeavor illegal from the get-go. But evidence continues to mount that we have gone decidedly anti-commerce. The latest turn of events: the People’s Republic of San Francisco is pushing a law to severely restrict the use of HomeAway and AirBnb-style hotelier sites. Prodded by angry neighbors—or by the hotel lobby, do you think?—the city decided to permit only residents of the city to use their property as such. Nonresident owners are being told they cannot do short-term rentals, only long-term ones. The city council says they’re doing it to prevent or lessen a housing shortage in the city. Yet more evidence of government protecting entrenched business models (hotels in this case… just like the ludicrous laws to prevent car manufacturers from selling directly instead of through dealers, meant to slow down Tesla’s onslaught). Thankfully, HomeAway is suing to block the law… as are others. (Curiously, AirBnb isn’t suing, as the law is actually designed to support its business model, requiring the companies arranging rentals to collect taxes centrally, which it can do; HomeAway can’t do that without a big change to its business. This is, at least, according to HomeAway.) It reminds me of the ludicrous battle that occurred down the street from my place in Vermont, where neighbors were mad at The Alchemist, brewers of top-ranked microbrew Heady Topper. Its creators were forced out of their small brewing site by neighbors who didn’t like the traffic from customers. The business was drummed out of town with help from the zoning board. Yet the company couldn’t move to the next town over because a competitor started making a squawk about some rare bird that supposedly nests where The Alchemist wanted to build its new location. The whole debacle is still unfolding many months later. Is this the world we now live in, where success is punishable by law, unless you grease the right palms? Let’s all hope that intelligence prevails in the judiciary of California (just typing that out is depressing), and it upholds the ability of people to engage in commerce without permission. If not, I suspect we’re screwed as a nation. If only our lawmakers would focus on protecting us from real threats like the unprosecuted frauds of the mortgage debacle, instead of piling on superfluous new regulations that just deter or extort business. SSD Consolidation ContinuesThe days of the spinning hard drive are numbered. Cellphones, tablets, etc. have never even considered them an option. They suck way too much power and take up far too much space. The solid state drive (SSD) is less power hungry, shockproof, and WAY faster. Only problem is it’s still an order of magnitude more expensive than its predecessor. So when it comes to storing lots of data that don’t all need to be accessed at lightning speeds, spinning disks still rule. Until that cost gap finally closes, SSD manufacturers are using software to make their devices work in tandem with old-fashioned spinning disks, giving them a way to still be valuable for those big archival data farms. In fact, HDD sales are up 6% over last year, to a projected 423 million shipments this year. The latest sign that SSD makers see this as big game came with Samsung’s purchase of hot San Fran startup Proximal Data. The deal, done at an undisclosed price, was the second for Samsung that also grabbed NVELO, which was working on the same kind of technology in 2012. The Hackings Will Continue Until Morale ImprovesIt looks like viruses are on their way for Mac users, thanks to a big security flaw in the new OSX Yosemite. That just piles on top of the serious flaw in popular content management platform Drupal, which powers such websites as Whitehouse.gov and which left potentially millions of domains exposed and many confirmed hacked last week. Within hours of the October 15 notice to the world that the software was vulnerable, hackers began exploiting it to steal data, inject malicious code, and otherwise take over websites unbeknownst to owners. It’s not just hackers either. ATT and VZW are placing “supercookies” on your phone to track and report all kinds of stuff. Better start actually reading those terms of service agreements you click right past. Your cellphone company isn’t the only one selling every bit of data it can about you: your ISP at home sells your clickstream too, and lots more. Same with your credit card. The rule is simple: if you need it private, don’t put it on a computer of any kind. At least not one connected to the Internet. It’s unfortunate for all of us, not just the celebutants who had their privacy flagrantly violated for the world’s unscrupulous to see, but it’s the time we live in. If you do want to keep something secret, then follow this fantastic guide to how Edward Snowden did it. Darknet Commerce Is BoomingThe Economist recently published a great overview of the growth of so-called Darknet sites, which use software to keep user identities hidden from prying eyes (a somewhat dubious claim, many studies have shown). With perceived anonymity as cover, all kinds of illicit activity occurs, including the sale of drugs and weapons. The article included this great chart of the comeback since the infamous Silk Road marketplace was shut down: Of course, even on the Darknet—maybe especially on the Darknet—you’re not immune to hackers. Recently, at least one node of the Tor anonymous peer-to-peer network was hacked. Intruders were wrapping any downloaded program with a Trojan Horse, regardless of where it came from, as it passed through the hacked computer. The risk of any proxy service, P2P or centrally managed, is that it provides a bottleneck for hackers to exploit. The same could be done to a commercial proxy as well, or even your ISP, were they to be hacked… so keep that virus scan up to date. Plus, who wants to be on the Darknet anymore, now that it has Facebook? Wii U Sales Boom, Nintendo Profits, Thanks to Go-KartsLast week Nintendo surprised a whole lot of people by finally being profitable again, albeit for a very brief period of time. The company’s Wii U console hasn’t sold nearly as well as previous generations. It’s also losing share to the latest PlayStation and Xbox models—something consensus chalked up to its decidedly kiddie vibe and giant-awkward-touchscreen-joystick-controller-thingies. But last week we found out otherwise. Thanks to the release of the eighth iteration in its Mario Kart series, system sales boomed, and the company finally made some money again… albeit for one quarter. Reuters has the detailed numbers, but with 1.1 million consoles sold in the quarter, putting Nintendo in at well over 7 million total consoles sold, the Wii U is now firmly ahead of Microsoft (which sold 3.9 million Xbox Ones so far) and Sony (4.1 million PS4s) in the console race. Still, the company has been bleeding money up until now. And the gaming and business press have been pushing Nintendo to change its game plan, putting out its famed character games to license for mobile devices and possibly for other consoles, too. Punditry has it that the company could make a lot more money by reaching far more devices. Software certainly has higher margins, especially for Nintendo’s competitors, which sell their beefed-up systems at cost. For now at least, it looks like Satoru Iwata (Nintendo’s 12-year CEO, who is just recovering from cancer surgery) may have had the formula right all along, pushing his marketing budget to the moon to gain share on the back of fun games, not hardware specs. He’s playing the Silicon Valley race, focusing on market domination over profitability up front, only to turn the corner late and hard, sure of his traction, to cement a commanding lead. Microsoft is slashing prices to try to catch up from third place, but as an owner of two Xbox One consoles, I can tell you I’m a little bit jealous of the Wii U crowd right now, wishing there was even one decent exclusive game for my year-old super hardware. Instead, I’ve got a half-working Xbox Fitness with less content than when it launched, and a bunch of boring shoot-‘em-up games (I guess that’s why Microsoft canned its home-baked TV/movie studio). Now that looks like fun… and as Jordan Shapiro points out, it’s much more mature than the shooter fare. No wonder GameStop’s revenue jumped 25% near the same time as Nintendo’s return to profitability. Great games, not hardware specifications, sell consoles. A master lesson from the longtime video game champions, Nintendo. A few other reads of note:
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| Crude Oil, Gold, Are Commodity Price at a Major Turning Point? Posted: 06 Nov 2014 01:08 AM PST As most of you probably know, I have been expecting the CRB to form a major three year cycle low sometime next summer. However, I'm now starting to see some things that might indicate a major cycle bottom is going to occur earlier than I expected. Since oil is the main driver of the CRB, and most commodities will follow its lead, I'm going to focus on the action in oil. Notice in the next chart that oil has now reached oversold levels similar to, if not more extreme than, the previous two 3 year cycle lows. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gold, Economic Theory and Reality: A Conversation with Alan Greenspan Posted: 06 Nov 2014 12:57 AM PST When Dr. Alan Greenspan became chairman of the Federal Reserve, he moved from the world of rhetorical economics to the world of action. His most recent memoir, "The Map and the Territory 2.0: Risk, Human Nature, and the Future of Forecasting," attempts to make sense of how the financial crisis of 2008 came to be and how we can better predict future crises, along with the role of gold in a global monetary system. In this excerpt from Greenspan's appearance at the New Orleans Investment Conference with Navellier & Associates Senior Writer Gary Alexander, Gloom, Boom & Doom Report Publisher Marc Faber and Stansberry & Associates Investment Research Founder Porter Stansberry, The Gold Report delves into the role of gold versus fiat currency, why central banks own so much gold if it is truly "a barbarous relic," and the reason China is buying so much gold today. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Posted: 05 Nov 2014 06:29 PM PST SafeHaven | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rick Rule: No Capitulation In Gold Stocks Yet, Only A Nasty Sell-off Posted: 05 Nov 2014 02:59 PM PST Submitted by Sprott Global: Have we just experienced 'capitulation' in gold stocks, or just a particularly nasty sell-off? Rick often mentions that 'capitulation' is a looming threat in a bear market. When it looks like stocks are already 'down and out', investors get driven over the edge and decide to sell at any price they can get. Investors want out. People who work in mineral exploration and development also give up and look at other career options. Back in March, Rick said gold could fall back to around $1,150 this year. In mid-October, Rick made a stronger prediction – October could be the month that we see capitulation in the junior market. "October is a month full of emotion" he said, and it's easy for a weak emotional market to be driven over the edge by short-term volatility and a natural decline in prices due to tax-loss selling. "The market is cheap but it will get dirt cheap in a capitulation. I think there is a 50 percent chance for a terrifying capitulation sell-off within the next two weeks." In a complete capitulation, stocks melt down dramatically and some stocks just go 'no bid.' That hasn't happened yet, which means that we may be witnessing a very nasty sell-off, but not complete capitulation. "For those of you fond of surf," Rick explained at our San Diego office, "capitulation is sort of like getting caught under a particularly big wave. You get pummeled and tumbled around under water. Capitulation in 2000 only lasted for about two weeks. Just like when you're stuck underwater and struggling to come back up, a short amount of time can seem like an eternity." The most important thing to do now? Prepare yourself psychologically. "Abandon your 'hope stocks' – the ones where there is no catalyst, asset, or enough cash to do anything important. Get rid of the stocks you own that have no reason to go up, and get into ones that do," Rick advises. In a complete sell-off, you may find that just a few investors will make the difference as to whether a particular stock survives, which means you must be willing to be one of those investors if the market gets much worse. This 'psychological preparation' made all the difference in the summer of 2000, the last time that we saw capitulation in junior mining stocks. "The capitulation in 2000 was the single most beneficial event of my career, as a consequence of my psychological preparation to face the sell-off," said Rick. Capitulation or not, why the sudden leg down? "It's an emotional market. An example of irrational behavior is that investors are more willing than ever to put money into bonds at levels that guarantee a loss in purchasing power. The Treasury rate is now lower than prior lows, at around 3.1 percent for 30-year bonds (source). "In addition, benchmarks in platinum and other metals suggest a weakening economic outlook," Rick explained. This, he says, is also the real reason that oil prices are much lower. The economy is simply a lot weaker in the US and globally than commonly believed. This has weakened all equities, not just precious metals. Just as the 2000 low came around the time that the tech boom imploded, a capitulation today could coincide with a sell-off in stocks across the board. Rick's market call, which was recorded for our clients on October 16th, looks prescient in hindsight. We've indeed seen a nasty sell-off, but I don't think it's quite a capitulation. For one thing, Rick explained, when a capitulation occurs, the issuers also 'give up.' Right now, we're still in a game of chicken that we've been playing with junior miners for the last two years or so. They believe they can wait out the bear market to raise money. If they're right, they might not have to submit to terms that Rick would call 'fair.' If they're wrong, they'll end up having to raise cash at terms that are much more favorable to financiers like Rick. The idea now is to prepare for this possibility, and decide which stocks we own are worth saving if the market truly goes 'no bid,' as we might have to put up more capital to keep them solvent. The rest we probably shouldn't own at any price.
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Very big news on the banking front, 
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