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- But Mr. Ackman, Herbalife Is A Sustainable Pyramid Scheme
- The Dichotomy Of Paper Vs. Physical Gold And Silver Markets
- Nokia: After 144% Gain, Is It Time To Bail?
- Is Silver Ready For Takeoff?
- Hamilton - QE3 Silver Impact
- Hedge Funds, Speculators, Equity Investors Long Silver in 2013
- NRA is Right on School Defense and Sick Media
- OCC Is After JPM's Whale As Trading Loss Swells Over $6 Billion
- 5 Investment Recommendations From PIMCO's Bill Gross
- Deepcaster: Mega-Banks Pushing for Mandatory Gov't Securities Investment in All Retirement Accounts
- Tiffany & Co: Because Luxury Is Back
- James Turk's Outlook for Gold (2013 to 2015)
- Fast Forward to Minute 49 : Volcker on Gold
- Gold stocks at a 12-year low in comparison with the gold price, time to buy?
- Are diamonds the ultimate in hard assets?
- Why we will get another deflationary bust as the bond markets reverse before inflation really takes off
- Ode to Blythe
- Silver's Lucky Number 7
- Gold & Silver COT Report 12/21/12: Commercials Cover 13 Million Ounces of Silver Shorts into Post QE4 Raid
- Euro Yen Update
- Trader Dan on King World News Metals Wrap
- Gold bars the size of a credit card that can easily be broken into one gram pieces and used as payment
- Light at the End of the Tunnel for Gold
- Seems to me that tyrants are more afraid of hackers and stackers than of packers of guns
- Confession: Banks Ignore Risk & Sell Unethically
- Brazil Doubles Gold Reserves as Central Banks Buy Bullion
- Tiny gold bars latest rage for jittery investors
- Frank Holmes: Light at the End of the Tunnel for Gold
- South African government lowers export quota for platinum producers
- Harmony mineworkers stage sit-in
- Two King World News Blogs
- The amount standing for deliveries in silver advances another 1.7 million oz/Silver OI advances/Iraq purchases official gold equal to 41 tonnes in last 3 months/Brazil purchases 14 tonnes with Russia adding 3 tonnes/
- Adam Hamilton: QE3 Silver Impact
| But Mr. Ackman, Herbalife Is A Sustainable Pyramid Scheme Posted: 23 Dec 2012 11:18 AM PST By Deja Vu: I'm going to assume that everyone is familiar with Ackman's short thesis on Herbalife (HLF). If not, it can be found here. I'm in agreement with Ackman's thesis that Herbalife is a pyramid scheme. Part of Ackman's thesis was that pyramid schemes must collapse in the end. I disagree with Ackman on this one point. The purpose of this article to examine the end game of this match between Ackman and Herbalife. Let me explain what I see as Herbalife's ace in the hole - the sustainable pyramid scheme. In a traditional pyramid scheme, Adam recruits Bill and promises to pay him if Bill recruits five Charlies. The five Charlies get paid if they recruit 25 Davids. The 25 Davids get paid if they recruit 125 Edwards and so on. In a traditional pyramid scheme everyone stays in and gets paid. The minute the first person doesn't get Complete Story » |
| The Dichotomy Of Paper Vs. Physical Gold And Silver Markets Posted: 23 Dec 2012 11:13 AM PST  By Tim Iacono: Recent developments in precious metals markets have offered another timely reminder that gold and silver prices are based on supply and demand in futures markets - not at coin shops or for exchange traded funds - as the paper market and physical markets continue to diverge. Despite rising demand for the physical metal, technically driven selling in futures markets has once again sent precious metals price tumbling and, unfortunately, that trend may continue. Early in the week, the prospect of a massive new money printing effort in Japan sent gold and silver prices higher, but that soon gave way to selling after a budget deal appeared to be within reach in Washington and U.S. economic reports came in better than expected. Apparently, this compelled futures traders to think that recently announced monetary stimulus of $85 billion per month by the Federal Reserve might be curtailed. Heavy technical selling ensued Complete Story » |
| Nokia: After 144% Gain, Is It Time To Bail? Posted: 23 Dec 2012 11:00 AM PST By Ashraf Eassa: In what was a surprisingly well timed piece, I recently recommended that investors fortunate enough to get on-board the Research in Motion (RIMM) train early take profits. The thesis was simple: after nearly 100% gains in a matter of months, the overhead supply should a negative catalyst hit would cause shares of the stock to collapse in on itself. Sure enough, the earnings report had enough negativity to cause the short-sellers to come out in full force. The stock dropped 22% in the following trading session. Shares of Nokia (NOK) have behaved similarly, having seen more pronounced gains from its lows, returning 144% as of the most recent closing price of $3.99. The natural inclination is to draw a parallel to RIM, as the situations are not particularly different: two turnaround plays in the smartphone market that have run up considerably on speculation that upcoming Complete Story » |
| Posted: 23 Dec 2012 10:38 AM PST By Patrick MontesDeOca: Precious metals tumbled again this week and spot gold closed at its lowest level since August on Thursday. Analysts cite a combination of factors for the continuing declines: some say investors cashed out on the likelihood that 2013 will bring higher taxes on investment income, others blame end-of-year volatility. Spot gold managed to hold around $1,700 in the first half of the week, although there were sizable and rapid selloffs midday on Tuesday and Thursday, when it broke below the key 200 MA around $1,662 to make new lows around $1,635. As we approach the end of 2012, gold stands to end the year with its smallest annual gain since 2008. GCG3 +0.75% tacked on about 5%. Silver SIH3 +1.07% gained more than 6%. This year, gold peaked near $1,800 using the March 2013 daily continuation chart, while the silver market has been undergoing a correction during Complete Story » |
| Posted: 23 Dec 2012 10:18 AM PST Adam Hamilton of Zeal, LLC writes: Silver has been selling off relentlessly since the Federal Reserve expanded its third quantitative-easing campaign last week. As that decision was highly inflationary, silver's subsequent weakness has really vexed traders. But its counter-intuitive selloff had nothing to do with fundamentals. As the Fed's past QE campaigns demonstrated abundantly, QE3 will eventually prove to be very bullish for silver's fortunes. More... Quantitative easing is a pleasant-sounding euphemism for debt monetization. Historically this dangerous practice has been scorned because it ultimately unleashes serious inflation. Monetizing debt is exactly what it sounds like. A central bank chooses to buy bonds, and then conjures up the money to do so out of thin air. This new money is injected into the economy as the bond sellers spend it, igniting inflation.
The rapidly-expanding money supply grows much faster than the underlying economy. So relatively more money chases after relatively less goods and services, which bids up their prices. As more money is poured into the system, each unit has less purchasing power. Inflation is ultimately an oversupply of money, which quantitative easing greatly accelerates. Investors flock to precious metals in such times.
The supply-and-demand dynamics of gold and silver protect and multiply capital when central banks are inflating their money supplies. Since fiat money can be wished into existence instantly in unlimited quantities, its growth vastly outpaces the naturally-constrained growth in global precious-metals supplies from mining. A lot more currency competing for relatively less silver inevitably drives up its price.
So make no mistake, the Fed's decision to more than double QE3 last week is wildly bullish for silver going forward. The Fed just announced an unprecedented tidal wave of money-supply growth from debt monetization that is going to start hitting our economy's shores in January. The recent silver selling is the result of unrelated bearish psychology, and such extreme sentiment anomalies never last for long.
Why is QE3 so bullish for the white metal? Because its probable scope dwarfs that of QE1 and QE2, and both of those earlier inflationary campaigns eventually worked wonders for the silver price. This first chart shows silver over the Fed's QE era of the past four years, along with QE's growth. The direct injection of new money into our economy from the Fed's debt monetizations is a great boon for silver.
This chart is updated from a more comprehensive study of the Fed's QE campaigns I wrote a couple months ago. When the Fed creates new money to buy bonds, these purchases grow its balance sheet which is shown in orange. The yellow and red lines, which are stacked like an area chart, show the types of bonds the Fed buys through QE, mortgage-backed securities and Treasuries respectively.
And it is the red Treasury buying we want to focus on today. Of all the debt a central bank can choose to monetize, its government's bonds lead to the most direct inflation. Central banks only print money to buy their government's debt when it is living far beyond its means. Thus all the money created to buy these bonds is spent nearly as rapidly as the issuing government receives it. It flows directly into the economy.
So it shouldn't be surprising that the Fed's unprecedented quantitative easing over the past four years corresponds exactly with Obama's extreme record deficits. As unchecked federal-government spending soared to a quarter of the total US economy, the Fed monetized increasing amounts of the resulting deluge of new Treasuries. And as the government immediately spent all this newly-created money, silver surged.
All three of the Fed's QE campaigns were introduced in two stages, to blunt their psychological impact on inflation expectations. QE1 was born in November 2008 and expanded in March 2009. Through it the Fed created an epic $1750b out of thin air to buy bonds, but only $300b was allocated for Treasuries. They were gradually monetized over roughly 15 months, working out to buying of about $20b per month.
And how did silver do over this entire QE1 span? Awesome, it rocketed about 80% higher! Of course this gain wasn't just from QE1 and its relatively-small Treasury monetizations. As a hyper-speculative metal extremely sensitive to sentiment, silver was ripped to shreds in the epic fear of the stock panic. So as QE1 was launched, silver started from a very depressed base. Still, the QE1 inflation was very bullish.
Today traders are freaking out because silver hasn't been skyrocketing since QE3 was born a few months ago. But look at its behavior during QE1. Though silver rose mightily on balance, it still experienced periodic sharp selloffs like in the second quarter of 2009 and first of 2010. Other times it just ground sideways and consolidated. Silver is and always has been volatile, traders have to accept that.
Though the inflation unleashed by quantitative easing is a strong tailwind, many other factors affect short-term silver psychology from time to time. Greed can erupt to catapult silver higher far faster than QE alone warrants, and fear can crush silver much lower than fundamentals merit. But normal sentiment-driven selloffs within a timeframe where the Fed is monetizing certainly don't make inflation less bullish.
Since QE1 miraculously failed to significantly raise mainstream traders' inflation expectations, the Fed was greatly emboldened for QE2. It was exclusively Treasury purchases, the purest form of inflation from debt monetization. And it weighed in at a whopping $900b over about 10 months, although the first third of this was from rolling over already-monetized mortgage-backed securities into Treasuries.
So we are talking about a $90b-per-month rate of Treasury monetizations. And as you can see above, during this QE2 span silver skyrocketed. It ultimately blasted a staggering 177% higher in 9 months, its biggest upleg of its secular bull by far! QE, especially the direct inflation that comes from monetizing Treasuries, is very bullish for silver. But like QE1, QE2 didn't mean silver never experienced weakness. ... Continued at the link below. Source: Zeal http://www.zealllc.com/2012/qe3silv.htm
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| Hedge Funds, Speculators, Equity Investors Long Silver in 2013 Posted: 23 Dec 2012 09:56 AM PST "…clients are worried that a major currency crisis or mass bankruptcies would occur." Having reached a record in November of 18,854 tons, investment in silver-backed exchange-traded products joins overall silver holdings of around $19.2 billion. According to the median conjecture of … Continue reading |
| NRA is Right on School Defense and Sick Media Posted: 23 Dec 2012 09:21 AM PST CNBC coverage of the National Rifle Association press conference one week after the Newtown, CT Lunatic went where he knew that no one could stop him from inflicting maximum mayhem without opposition – a defenseless school. Adam Lanza broke no fewer than 50 laws and the do-gooders in Washington are, of course, calling for even more laws. Laws do not protect people from lunatics. They never have and they never will.
A few quotes from the conference are below.
"Here is another dirty little truth that the media try their best to conceal. There exists in this country, sadly, a calloused, corrupt, and corrupting shadow industry that sells and sows violence against its own people. Through vicious, violent video games with names like Bullet Storm, Grand Theft Auto, Mortal Combat, and Splatter House and here's one; it's called Kindergarten Killers. It's been online for ten years. How come my research staff can find it and all of yours couldn't or didn't want anyone to know you had found it?" "If we truly cherish our kids, more than our money, more than our celebrities, more than our sports stadiums, we must give them the greatest level of protection possible, and that security is only available with properly trained, armed, good guys. Under Asa's (former Congressman Asa Hutchinson's) leadership, our team of security experts will make this program available for the world in protecting our children at school and will make that program available to every single school in America free of charge. That is a plan of action that can and will make a real, positive, indispensable difference in the safety of our children and it will start right now. There is going to be a lot of time for talk and debate later. This is a time, this is a day for decisive action. We can't wait for the next unspeakable crime to happen before we act. We can't lose precious time debating legislation that won't work. We must not allow politics or personal prejudice to divide us. We must act now for the sake of every child in America. I call on every parent. I call on every teacher. I call on every school administrator, every law enforcement officer in this country to join with us and help create a national school shield safety program to protect our children with the only positive line of defense that's tested and proven to work." – Wayne Lapier, Executive Vice President, NRA. (The video is truncated close the actual end of the press conference.) With an entire generation of people now desensitized to violence by film, video games and television, how long will it be before Congress takes a closer look at that cesspool? Source: CNBC http://video.cnbc.com/gallery/?video=3000136945 |
| OCC Is After JPM's Whale As Trading Loss Swells Over $6 Billion Posted: 23 Dec 2012 04:45 AM PST By The Office of Comptroller of the Currency [OCC] is demanding JPMorgan (JPM) take formal remedial actions to fix its risk control systems. OCC stands to be the primary regulator for JPM's deposit taking bank. The regulator can even levy a fine on America's largest bank. It began in May this year when the news about a huge trading loss at JPMorgan's Chief Investment Office in London hit the financial markets. The loss was reported at $2 billion, which later swelled to $6.2 billion at the end of the third quarter. This is latest in continuing issues JPM is facing after Bruno Iksil's outsized bets. Eight other regulatory bodies or related agencies are conducting investigations into the trades and the internal control systems of the bank. JPM's Different Approach To Risk Management While several investment banks failed during the financial meltdown, JPMorgan used a very different approach Complete Story » |
| 5 Investment Recommendations From PIMCO's Bill Gross Posted: 23 Dec 2012 04:34 AM PST By Learn Bonds: For anyone who does not already know, Bill Gross is very active on the @PIMCO twitter account. Last week the subject of his tweets was "5 Ways to Beat the Wealth Tax". I have included the tweets below as well as a more detailed explanation on the thoughts behind them. What does Bill Gross mean by rolling down the yield curve? Bill Gross is anticipating the treasury yield curve to remain steep for some time. His view is that interest rates on intermediate term treasuries (those that mature between 4 and 10 years from today) will remain significantly higher than shorter term treasuries. If he is correct, and you buy an intermediate term treasury today, it will increase in value as it moves towards maturity. When you "roll down the yield curve" you buy an intermediate term treasury and then sell it when it becomes a shorter term Complete Story » |
| Deepcaster: Mega-Banks Pushing for Mandatory Gov't Securities Investment in All Retirement Accounts Posted: 23 Dec 2012 04:00 AM PST Submitted by Deepcaster: The Prospective Rigging of the CPI Calculation for Social Security recipients would , yet again, make the "Official" CPI even further removed from The Inflation Reality. The Reality is that the current U.S. Inflation Rate, 9.4%, is already Threshold Hyperinflationary. The Key Point for Investors is understanding the Motivation behind Government and [...] |
| Tiffany & Co: Because Luxury Is Back Posted: 23 Dec 2012 03:12 AM PST By Matthew Frankel: Given the economic climate of the last several years, investors have been reluctant to invest in any company that produces "luxury" items. However, high-end customers have resumed spending at a quicker rate than the average consumer. With that in mind, it may be time to consider the best-in-breed luxury retailer, and I believe that to be Tiffany & Co. (TIF). The Tiffany & Co. brands include jewelry, watches, sterling silver items, china, crystal, stationary, fragrances, and leather accessories. However, jewelry is by far the largest revenue stream for the company, accounting for 91% of the company's sales in FY 2012. The company operates all over the world, with 50% of sales from America, and the bulk of the rest coming from Asia, particularly Japan. As of the end of FY 2012, the company had 247 stores in 22 countries, in addition to a web presence in 13 countries. Complete Story » |
| James Turk's Outlook for Gold (2013 to 2015) Posted: 23 Dec 2012 02:54 AM PST - With 2013 just round the corner, James Turk of GoldMoney provides an update to a longstanding forecast he made back in 2003 in Barron's. This interview was widely talked about because whilst the gold price was USD350 at the time, James stated that he envisioned the gold price to be around USD8,000 sometime between [...]  This posting includes an audio/video/photo media file: Download Now |
| Fast Forward to Minute 49 : Volcker on Gold Posted: 22 Dec 2012 10:15 PM PST |
| Gold stocks at a 12-year low in comparison with the gold price, time to buy? Posted: 22 Dec 2012 09:48 PM PST Spot the buying opportunity with gold stocks now at a 12-year low in comparison to the price of gold, reports Bloomberg TV. Of course in a stock market sell-off gold equities might well sink with all the other ships. Then again the gold price might fall further than the gold stocks making this the cheapest time to buy relative to the price of gold. ArabianMoney thinks this is where the gold market will go to next with the gold stocks well overdue for a rally. Just look at the upside on this chart after the previous double bottom in the ratio… |
| Are diamonds the ultimate in hard assets? Posted: 22 Dec 2012 09:26 PM PST Bloomberg Television's Olivia Sterns reports from De Beers London headquarters. The headquarters are kept highly secure due to the valuable diamonds processed inside. Diamonds are not only a girl's best friend but also the ultimate in hard assets in terms of value and weight. Prices should surge along with the precious metals as money printing by the global central banks steps up into top gear next year… |
| Posted: 22 Dec 2012 08:52 PM PST To the average consumer this year it must appear bizarre to see the official inflation figures so low when price rises for food and energy are so obvious. Houses are also still enormously expensive in comparison to take home pay in many non-US markets with only the very low interest rates making them afforable by keeping mortgage payments down as well as the rents landlords will accept as a return on their investment. It's kind of odd too that stock markets have risen around the world this year when the global economy is at best stagnant or growth so low that it is almost no growth. China and India stand out as the exceptions but even for them growth is the slowest in a decade and possibly still slowing down. Actually the only real winners are the Oil States whose oil revenues will be the highest in history this year. Money printing era Beneath the hood of the global economy the central bankers are furiously tinkering with the engine pumping in huge amounts of lubricant to keep it going. They are printing money and have abandoned all conventional thinking about how much they can print without causing inflation. But they are causing inflation. How else do you account for puffed up stock market valuations? Or house prices staying so high in many markets? Or the surging price of fuel when demand is slowing down? Or higher food prices that mean those on fixed incomes eat less? The next crunch will come when bond markets sell-off and interest rates go up. That will trigger the deflationary bust that central bankers are working so hard to avoid. A world propped up by artificially cheap money can never be a stable economy. History shows that this can be kept up for a time but not indefinitely. Also the bigger the distortion in the market, the bigger the correction required to rebalance it. There is no escape. Messing with the money supply is playing with fire. The problem is that timing these ups and downs is well nigh impossible. Hedge funds have underperformed the general market indexes for four years by trying, and these are supposed to be the smartest traders. What you can do is buy protection against deflation and inflation by acquiring precious metals, the one sort of money that central bankers cannot conjure out of thin air. Even then there times when prices will be weak as they are now, and that is actually a buying opportunity, not a time to panic. But once the bond markets reverse it is then that the big inflation will really start and quickly get out of control. Money will flood out of the financial system in search of real things to buy and they will go up and up in price, and the real assets most in demand will be gold and silver. New money? Then the central banks will have no alternative but to reset the global financial system with a new money at its core with a far greater weighting given to gold and silver as the only assets that everybody will trust as having intrinsic value. That's going to be a traumatic experience to say the least with winners and losers and the biggest winners will be the holders of precious metals, so buy some while prices are on sale! The Mayans may not have correctly predicted the end of the world last week but the present global financial system is heading that way. |
| Posted: 22 Dec 2012 08:40 PM PST With the crash in silver prices this week I thought we needed an ode to Blythe and her server room simians. They may have won this battle but the silver warriors will win the war! Futures on the trading floor … Continue reading |
| Posted: 22 Dec 2012 02:24 PM PST The pullback in silver this week brought the important RSI indicator back down to the key 30 area. Silver is one of my favorite long term growth investments. On the long term silver chart, RSI for silver has declined to … Continue reading |
| Posted: 22 Dec 2012 02:22 PM PST Submitted by Marshall Swing: Gold & Silver COT Report 12/21/12 Commercial longs rose 832 while shedding 1,752 shorts to end the week with 48.09% of all open interest, an imperceptible decrease of -0.10% in their share since last week, and now stand as a group at 276,695,000 ounces net short, which is a decrease of [...] |
| Posted: 22 Dec 2012 12:47 PM PST This cross, after notching a recent high, moved lower the last two trading sessions of this week as nervousness over the US fiscal cliff issue brought about selling in the crosses at the expense of the Euro and some of the other "risk" currencies. That allowed a bit of a safe haven bid to come into the yen and pushed some shorts out of that market allowing this particular cross to move lower.  If the cliff issue begins to look as if there is not going to be any sort of agreement worked out before the end of the year, we could see some further safe haven flows into the Yen at the expense of this cross pushing it lower. That being said, if traders become more and more convinced that next year, the global economy will improve, we will see a strong appetite for risk and I suspect this cross will move higher. If it does, my guess is that the Yen carry trade will be quite large and this should produce a rather healthy appetite for "risk" assets such as commodities in general. The thing to keep in mind about this commodity trade will be that while there will be general fund flows into the entire sector, those commodities with STRONGLY BEARISH supply/demand scenarios will still move lower. The fund flows will slow the descent from an otherwise faster rate but the price will still move lower in those sectors which have an oversupply or lack of demand factor. In other words, we will see the CCI ( Continuous Commodity Index ) move higher with specific commodities either outperforming it or underperforming it depending on their own specific set of fundamentals. Either way, I would expect silver to be one of the outperformers, especially if copper resumes its uptrend which was derailed this week. |
| Trader Dan on King World News Metals Wrap Posted: 22 Dec 2012 12:29 PM PST Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Markets and Metals Wrap. We will be discussing the price action of both gold and silver this week and the technically significant levels on the price charts. http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/12/22_KWN_Weekly_Metals_Wrap.html |
| Posted: 22 Dec 2012 09:23 AM PST Tiny gold bars latest rage for jittery investors |
| Light at the End of the Tunnel for Gold Posted: 22 Dec 2012 06:49 AM PST Frank Holmes, CEO and Chief Investment Officer, U.S. Global Investors writes: Intuition was telling me something was going on these past few days in the gold market. Our investment team was watching gold and gold stocks take a tumble for no obvious reason. It wasn't only us who felt this way: many analysts were caught off-guard. One comment from Barclays Research indicated that the week was unusually "brutal … with quite a few confused participants with some seemingly positive aspects of the market not having an impact." My hunch was realized only days later when Zero Hedge posted that Morgan Stanley Wealth Management recommended that its clients dump two of John Paulson's funds. As MS clients redeemed their shares, the hedge fund giant became a forced seller of gold and gold stocks. What complicates the gold market is the fact that Paulson is such a big fan of the yellow metal that he offers a "gold share class" to investors, meaning shares are denominated in physical gold. The drawback is when an investor redeems shares, his firm has to convert from gold back to dollars, which forces him to sell his hedged position in the SPDR Gold Shares ETF (GLD). The unfortunate consequence of his actions is a short-term decline in the gold price as the market adjusts. The chart below highlights how gold, the S&P 500 Index and the 10-Year Treasury yield were plodding along together, until December 12, when the metal dramatically dropped off. This is possibly the day "Paulson may have gotten the redemption fax," says Zero Hedge.  Paulson is only one high-profile example of a stream of hedge fund managers who have suffered liquidations this year. Much to our chagrin, gold and the gold mining industry have been on the wrong side of these trades. The metal also took a hit recently when a large investor, or a group of investors, made a negative bet on gold futures, with a speculative put position from January to February nearly doubling in size. Credit Suisse suggests it may be the action of a hedge fund. Paulson's loss can be your gain. At U.S. Global Investors, we study probability and statistical models to help us improve our odds in the market. It's like counting cards in Vegas—there's no guarantee you'll hit the jackpot, but you usually improve your odds if you understand the math of probabilities and place your bets accordingly. One of our favorite charts is the oscillator which shows the probability of gold returning to its mean after a dramatic rise or fall. We believe it helps investors put the current correction in context with historical moves and determines potential buying and selling opportunities. Based on the last 10 years of data, gold seems to be approaching an oversold position after this latest correction. In standard deviation terms, the percentage change in year-over-year rolling returns, gold has made a downward move of 1.2 standard deviations. An event like this only happens about 10 percent of the time, with high odds favoring a reversion to the mean. Life is about managing expectations. With gold and gold stocks, there will be short-term anomalies, such as hedge funds' liquidation. Another historical difference for gold stocks relates to the presidential election year cycle. As we have mentioned before, gold miners tend to perform poorly in the year of a U.S. presidential election. Regardless of which party is in the White House and which party wants to take it back, going back to 1984, the Philadelphia Stock Exchange Gold and Silver Index (XAU) has declined an average of 18.4 percent in the year Americans are busy thinking about voting for a leader. It's not the end of the world for gold and gold stocks. Take a look at what happens the year following a U.S. presidential election: Going back to 1985, the XAU historically has increased substantially in post-election federal years, rising 23.4 percent, on average. With governments lacking courage for fiscal discipline, I expect that interest rates will remain in negative territory for a long time. Central bankers will continue to keep the printing presses warm as policies aren't expected to change. I believe this will keep the Fear Trade buying gold throughout 2013. In addition, emerging market central banks have been diversifying into gold. Net official sector purchases of 425 tons year-to-date is a drastic difference compared to only a few years ago when central banks were net sellers of the precious metal. Only recently, UBS reported that in November, Russia purchased nearly 3 tons of gold and Brazil bought almost 15 tons. Iraq—a notable new buyer—bought 25 tons from August through October. Given that this is the country's first increase since the early 2000s, "having a new buyer in the central bank space and especially from a new region is an important development," says UBS. While the Love Trade has been subdued this year, we see light at the end of the tunnel, not a train. One recent development is the increase in mutual fund flows of $32 billion into emerging markets since the announcement of the third round of quantitative easing (QE) in the U.S. This appears to be a powerful precursor for a stronger 2013, which would reignite the Love Trade in China and India. As we head into the final days of the year, I'd like to take this opportunity to thank our faithful readers for following, reading and sharing our thoughts on the markets. We appreciate your confidence and trust and look forward to a prosperous new year. Here's wishing you and your loved ones a very safe and joyful holiday season! December 21, 2012 (Source: U S Global Investors) http://www.usfunds.com/investor-resources/investor-alert/#.UNXHEG9QVSA |
| Seems to me that tyrants are more afraid of hackers and stackers than of packers of guns Posted: 22 Dec 2012 06:13 AM PST Stacy Thoughts: It doesn't take much deep observation to see that governments are far more afraid of hackers and silver and gold stackers than of those packing guns. I think they have zero fear, in fact, of mere guns. There … Continue reading |
| Confession: Banks Ignore Risk & Sell Unethically Posted: 22 Dec 2012 05:29 AM PST Sad. Scary. Unethical. That is how we describe the information revealed by Paul Morre, former top executive of a big bank in Scotland. We have never attended board meetings inside a bank to confirm that these statements are correct. However, basic logic combined with the evolution of the financial and banking crisis are the criteria we would use to accept this confession as evidence. Courtesy of PositiveMoney.org. Obviously most of us "intuitively" know that the most of the information contained in this confession is true. Still, it is different to hear someone "from within" talking about. The interview contains some terrific quotes which we listed at the end of this article. They provide insights on a micro level which is more or less inside a bank. On a higher level, economic and even societal, the following two quotes stand out.
In line with these statements, we recently summarized the unintended consequences of (excessive) money printing as explained by Marc Faber. He pointed out that central banks simply cannot determine what happens with the newly created money. He added to it that inflation, as a result of excessive money printing, does not necessarily occur in wage inflation or consumer prices. The additional liquidity, however, can create unpredictable sorts of inflations. Bubbles are the destructive manifestation of this. What follows are a couple of statements from the video interview that show how a bank operates from the inside and shows what the thinking of the organization is.
Our key take-away from this confession is that it proves the dire state of the banking system, the risk of holding assets within a bank and the unprecedented risks by excessive money creation. When inflation hits, it could hit unexpectedly and hard as explained by Claudio Grass. That is the number one reason to hold physical gold and silver outside the banking system as we have been advocating for a long time. |
| Brazil Doubles Gold Reserves as Central Banks Buy Bullion Posted: 22 Dec 2012 05:07 AM PST Yesterday in Gold and SilverAfter another high-frequency trader-induced sell off in mid-morning trading in the Far East...both gold and silver hit new lows for this move down. And as I mentioned in 'The Wrap' in yesterday's column, it takes new price lows to get more technical fund selling, that is precisely what that engineered price decline was all about. After that, the gold price moved unsteadily higher...and got sold down every time it appeared that it would get overly rambunctious to the upside once New York opened for the day. And as soon as the London close was in at 11:00 a.m. Eastern time, the price traded basically sideways into the 5:15 p.m. electronic close. The high tick of the day came at the 1:30 p.m. close of Comex trading...and Kitco recorded that price as $1,660.80 spot. The low price tick came around 10:30 a.m. in Hong Kong...and that was approximately 1,634 spot. The gold price closed the week at $1,657.00 spot...up $9.80 on the day. Net volume was around 144,000 contracts, with more than a quarter of that coming during the Far East trading session. Silver printed a new low in Hong Kong trading the same time as gold...but by the 8:20 a.m. Comex open, the silver price had rallied to slightly above its Thursday close. After a tiny sell off, the silver price moved higher with the high tick of the day [$30.38 spot] coming about fifteen minutes before the London close...around 10:45 a.m. in New York. And it was all down hill from there. Silver finished the Friday trading session at $29.96 spot...up a whole 4 cents from Thursday's close...and it should be obvious to anyone that it would have closed materially higher if a not-for-profit seller hadn't shown up when they did. But I'm not telling you anything you don't already know, am I? The dollar index opened the Friday trading session at 79.25. It rallied to around 79.40 in very short order...and then stayed around that mark until about 10:30 a.m. in London. Then away it went to the upside, with the high tick of the day...about 79.66...coming shortly after 12 o'clock noon in New York. From there it sold off a bit...and the index closed at 79.53...up 28 basis points from it's Thursday close. It was another day where there was little, if any, co-relation between the precious metal prices and the dollar index. The gold shares started off in negative territory...but rallied to their high about an hour later. Once the gold price started to slide, the shares went with it...helped along by a sagging Dow. From there, the gold equities chopped around either side of unchanged for the balance of the Friday trading session...and the HUI closed unchanged on the day...0.00%. The silver stocks finished mixed as well, but most of the stocks in Nick Laird's Silver Sentiment Index closed in positive territory...but it still closed down 0.40%. (Click on image to enlarge) Here's Nick's SSI chart on a long-term basis. Even though silver got crushed during the reporting week, the shares barely budged. (Click on image to enlarge) The CME's Daily Delivery Report showed that 54 gold and 96 silver contracts were posted for delivery on December 26th within the Comex-approved depositories. In both metals it was Jefferies, JPMorgan Chase...and the Bank of Nova Scotia. The link to yesterday's Issuers and Stoppers Report is worth a quick peek...and the link is here. There was a small increase in GLD yesterday, as an authorized participant added 9,685 troy ounces of gold. But it was the activity in SLV that was the big surprise of the day, as an authorized participant...or more than one AP...added an absolutely eye-watering 4,838,030 troy ounces of silver. That's well over two days of world silver production. I would guess that this deposit was involved in covering part of the current obscene and grotesque short position [19.17 million shares/ounces] that currently exists in SLV as of the last report at shortsqueeze.com. And while we're on that topic, it's a given that this bear raid in the Comex futures market was used by JPMorgan/Scotiabank et al to cover a huge chunk of those silver and gold ETF short positions. Ted Butler figures that it's the same banksters involved in the price management scheme on both the Comex...and in the SLV and GLD ETFs...and I agree totally. It was a quiet day for sales over at the U.S. Mint on Friday. They reported selling only 2,500 ounce of gold eagles...and that was it. Month-to-date the mint has sold 67,000 ounce of gold eagles...8,000 one-ounce 24K gold buffaloes...and 1,635,000 silver eagles. Based on these sales, the silver gold ratio is now down to just under 22 to 1. However, since the mint is not selling any more 2012 silver eagles...and there were huge one-time gold eagle sales...this ratio is skewed out of proportion for the month of December. Normal silver eagle sales for a December would be at least double this amount...and I'm still curious as to why the mint suddenly announced that they were no longer selling silver eagles from the current year, as I don't remember them ever making such an announcement in the past. Based on the above, it's my bet that January 2013 silver eagle sales will set a new monthly sales record. Over at the Comex-approved depositories they reported receiving 891,371 troy ounces of silver on Thursday...and they shipped only 50,186 ounces out the door. The link to that activity is here. Because I'm sort of in 'holiday mode' for the rest of the year, I forgot all about yesterday's Commitment of Traders Report until many hours after it had been posted on the CFTC's website...so I never got a chance to talk to Ted about it...so you're left with my comments only. I much prefer adding extra bits from Ted, as he's the number one authority on this report. In silver, for positions held at the close of Comex trading on Tuesday, there was a small improvement in the Commercial net short position...2,584 contracts to be precise. The Commercial net short position now sits at 276.7 million ounces. The 'Big 4' traders are short 258.8 million ounces of that amount...and the '5 through 8' traders are short an additional 56.6 million ounces of silver. The 'Big 8' combined are short 315.4 million ounces of silver, or 114.0% of the Commercial net short position. As far as concentration goes...once you remove as many spread trades as are reported from the total open interest...the 'Big 4' are short 50.7% of the entire Comex futures market in silver...and it's my guess that JPMorgan Chase [and most likely Scotiabank in #2 spot] are short about 90% of that amount on their own...and the other two traders in that category hold immaterial amounts. And don't forget for one minute that these are minimum concentrations. If all the market-neutral spread trades were removed...including the ones that aren't reported as a separate line item in the Disaggregated COT Report...the actual concentrated short positions would be noticeably more grotesque than they already are. As of yesterday's COT Report, there were 40 traders on the short side in the Commercial category...and just two of them are short about 45% of the entire Comex futures market in silver. If you have any questions, please forward them to Bart Chilton at the CFTC. In gold, the Commercial net short position improved by a more substantial 12,746 contracts...and as of the Tuesday cut-off, the Commercial net short position is now down to 20.21 million troy ounces. The 'Big 4' traders are short 12.51 million ounces of gold...and the '5 through 8' traders are short an additional 5.31 million ounces of gold. The 'Big 8' are short 88.2% of the Commercial net short position in gold. As far as concentration goes, the 'Big 4' are short 34.5% of the entire Comex futures market in gold...and the '5 through 8' traders are short an additional 14.7 percentage points. So the 'Big 8' are short 49.2% of the entire Comex futures market in gold on a net basis...and that's a minimum concentration number. It almost goes without saying that these numbers posted above are all "yesterday's news" as Ted would say...as the price/volume action from Wednesday and Thursday are not included and, without doubt, the Commercial net short position fell precipitously on those days. What may not have changed is the concentration of the 'Big 2'...but 'none of the above' will be known for sure until the Commitment of Traders Report that comes out on December 28th. To put yesterday's COT Report in a yearly context...click on the interactive link for silver here...and gold here. Here's Nick Laird's chart of the Big 4 and Big 8 traders for all physical commodities traded on the Comex...and it's my guess that 90% of the red bar in silver is the combined short positions of JPMorgan Chase and Scotiabank. So you can see that the six other traders don't account for much in the grand scheme of things from a concentration point of view. I don't have all that many stories for a Saturday column...but a fair number of them are big reads...so I hope you can find the time over the holidays to read the ones that interest you the most. I wouldn't read much into yesterday's precious metal price action...or the price action of their associated equities. Frank Holmes: Light at the End of the Tunnel for Gold. Tiny gold bars latest rage for jittery investors. South African government lowers export quota for platinum producers. Monstrous 4.84 million ounces of silver deposited in SLV. Critical ReadsZERVOS: The Fed Is Risking An Inflation Disaster, And There Will Only Be One Place To HideJefferies' economist David Zervos is back in a new note, which takes stock of developments at the Fed and the Bank of Japan. The Fed, of course, recently adopted [the] Evans Rule, which indicates that tightening won't occur until unemployment gets to around 6.5%, or inflation expectations are around 2.5%. The Bank of Japan is expected to see a new round of aggressive policy, thanks to the wishes of incoming Prime Minister Shinzo Abe. While markets seem to be pretty happy about it all (especially in Japan) Zervos thinks it will end in uncontrollable inflation, like in other past Keynes-inspired experiments. This story was posted on the businessinsider.com Internet site early Friday afternoon...and I thank Roy Stephens for today's first story. The link is here. With Farm Bill Stalled, Consumers May Face Soaring Milk PricesForget the fiscal crisis and the automatic budget cuts. Come Jan. 1, there is a threat that milk prices could rise to $6 to $8 a gallon if Congress does not pass a new farm bill that amends farm policy dating back to the Truman presidency. Lost in the political standoff between the Obama administration and Congressional Republicans over the budget is a virtually forgotten impasse over a farm bill that covers billions of dollars in agriculture programs. Without last-minute Congressional action, the government would have to follow an antiquated 1949 farm law that would force Washington to buy milk at wildly inflated prices, creating higher prices in the dairy case. Milk now costs an average of $3.65 a gallon. Higher prices would be based on what dairy farm production costs were in 1949, when milk production was almost all done by hand. Because of adjustments for inflation and other technical formulas, the government would be forced by law to buy milk at roughly twice the current market prices to maintain a stable milk market. This news items showed up on The New York Times Internet site on Thursday sometime...and I thank West Virginia reader Elliot Simon for his first of two stories in a row. The link is here. Bill Gross: Fed's 'Hot Air' Will Keep Bond Bubble AloftAfter getting burned in 2011 by betting against Treasuries, Bill Gross learned a time-honored lesson: Don't fight the Fed. "Of course there is" a bubble in the bond market, PIMCO's founder and co-CIO tells The Daily Ticker. "[But] I don't think rates are going to go much higher...the Fed is blowing lots of air -- some say hot -- and constantly inflating the bubble." As announced at its most recent FOMC meeting, the Fed plans to buy $45 billion of Treasury securities per month starting in January, in addition to the $40 billion of mortgage-backed-securities it has been buying. The $80 billion to $90 billion of checks per month will "keep that balloon inflated," says Gross. This CNBC article, with a 6:21 minute embedded video clip, was posted on their website just minutes after the markets closed on Friday afternoon...and I thank Elliot Simon once again for sending it along. The link is here. Swaps 'Armageddon' Lingers as New Rules Concentrate RiskOn a good day, 27-year-old Bobby Timberlake at CME Group Inc. in Chicago rounds up $2.5 billion from the world's biggest traders and banks such as JPMorgan Chase & Co. to cover their losses in the $639 trillion derivatives markets. What happens on a bad day will test new rules in the Dodd-Frank Act designed to prevent a repeat of 2008's credit crisis. Starting in March, as much as 79 percent of derivatives trades known as swaps must be backed by collateral and go through clearinghouses such as CME Group. Traders may have to post $927 billion with Timberlake and his peers at LCH.Clearnet Group Ltd. and IntercontinentalExchange Inc., whose role as middlemen is to ensure participants get paid. This arrangement can withstand almost any shock, including defaults by four of the biggest lenders, according to the clearinghouses. Some bankers and researchers aren't convinced. They warn unprecedented amounts of risk will be concentrated in a handful of clearinghouses -- some newly eligible for emergency Federal Reserve loans. If they fail, taxpayers who financed $1.2 trillion of bailouts last time could be on the hook again. This long article showed up on the Bloomberg website early Friday morning Mountain Time...and I thank Washington state reader S.A. for bringing it to our attention. The link is here. Doug Noland: Recalling John Law"There are good reasons to think that the nature of money is not yet rightly understood." John Law, 1720 (with the collapse of the Mississippi Bubble) "Irredeemable paper money has almost invariably proved a curse to the country employing it." Irving Fisher, 1911 "There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." John Maynard Keynes, 1920 "It's difficult not to be pessimistic on how this will all play out. I assume they'll figure out some stopgap measure to dodge around the "cliff." I have faith in our democracy, although I worry about post-boom misunderstandings, animosities and deep divides. At the same time, I have lost all confidence in our central bank. Their flawed doctrine is my biggest worry, as they operate unchecked and outside the democratic process. Our nation – and the world – is in this state of instability, uncertainty and confusion because contemporary money and Credit is so unsound and poorly managed. Admittedly, this sounds archaic. The root of the problem is not well understood. And, regrettably, the Bernanke Federal Reserve is in the process of only making the problem worse. Markets cheer." Another excellent read from Doug Noland over at the prudentbear.com Internet site. It was posted there yesterday evening...and I thank reader U.D. for sharing it with us. The link is here. Kyle Bass: The EntanglementThis one hour video presentation from Kyle was taken at the AmerCatalyst 2012 conference on October 1, 2012...and was posted on the youtube.com Internet site a week ago. It's on my must watch list for this weekend...and I might humbly suggest that it should be on your must watch list as well. I have the feeling that I may have posted this already...several months ago...but I can't be sure. But if I did, here it is again. I thank reader E.W.F. for bringing it to my attention yesterday...and now to yours. The link is here. |
| Tiny gold bars latest rage for jittery investors Posted: 22 Dec 2012 05:07 AM PST  Private investors in Switzerland, Austria, and Germany are lining up to buy gold bars the size of a credit card that can easily be broken into 1-gram pieces and used as payment in an emergency. Now Swiss refinery Valcambi, a unit of U.S. mining giant Newmont, wants to bring its "CombiBar" to market in the United States and build up its sales presence India, the world's largest consumer of gold, where the precious metal has long served as a parallel currency. Investors worried that inflation and financial market turmoil will wipe out the value of their cash have poured money into gold over the past decade. Prices have gained almost 500 percent since 2001 compared to a 12 percent increase in MSCI's world equity index. |
| Frank Holmes: Light at the End of the Tunnel for Gold Posted: 22 Dec 2012 05:07 AM PST  Intuition was telling me something was going on these past few days in the gold market. Our investment team was watching gold and gold stocks take a tumble for no obvious reason. It wasn't only us who felt this way: many analysts were caught off-guard. One comment from Barclays Research indicated that the week was unusually "brutal … with quite a few confused participants with some seemingly positive aspects of the market not having an impact." My hunch was realized only days later when Zero Hedge posted that Morgan Stanley Wealth Management recommended that its clients dump two of John Paulson's funds. As MS clients redeemed their shares, the hedge fund giant became a forced seller of gold and gold stocks. |
| South African government lowers export quota for platinum producers Posted: 22 Dec 2012 05:07 AM PST  South African platinum producers are already enduring significant production drops caused by the massive strike activities among mining workers. Now that the situation is somewhat back to normal, the government led by the African National Congress (ANC) is upsetting companies and markets with its plans to introduce legal changes. |
| Harmony mineworkers stage sit-in Posted: 22 Dec 2012 05:07 AM PST  Harmony Gold Mining Company says about 1 700 mineworkers‚ representing Thursday's day shift at its Kusasalethu mine near Carletonville‚ remain underground and they are refusing to return to surface. Demands from the underground mineworkers‚ led by Amcu union representatives‚ include the withdrawal of the suspension of the 578 employees including contractors which were suspended on Wednesday December 19‚ the company said in a statement. Talks with the employees and Amcu representatives are ongoing in order to resolve the situation. |
| Posted: 22 Dec 2012 05:07 AM PST  The first is with Andrew Maguire...and it's headlined "Shocking $2.89 Premium for Physical Silver in China". The second blog is with Egon von Greyerz. It's entitled "US Debt & Liabilities Set to Increase a Staggering $70 Trillion". |
| Posted: 22 Dec 2012 04:29 AM PST This posting includes an audio/video/photo media file: Download Now |
| Adam Hamilton: QE3 Silver Impact Posted: 22 Dec 2012 04:03 AM PST Submitted by Adam Hamilton: Silver has been selling off relentlessly since the Federal Reserve expanded its third quantitative-easing campaign last week. As that decision was highly inflationary, silver's subsequent weakness has really vexed traders. But its counter-intuitive selloff had nothing to do with fundamentals. As the Fed's past QE campaigns demonstrated abundantly, QE3 will eventually [...] |
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