The below chart of the Yuan/dollar exchange rate depicts that out of the blue, the so-called “pegged” relationship suddenly collapsed last week – with the Yuan dropping more than a percent against the dollar. One percent may not sound like a lot, but when calculating the impact of such moves on the world’s two largest economies – not to mention, the myriad, global businesses tied to them – the overall impact is enormous. Given the U.S. is already uncompetitive in the global manufacturing sector, if the Chinese choose to devalue the Yuan further – in turn, causing the Japanese, Europeans and others to do the same – it will only put further nails in the American economic “coffin.”
According to Morgan Stanley – which understands derivatives more than just about anyone, as pound-for-pound, they are perhaps the world’s largest derivatives dealer; an astonishing $500 BILLION of such instruments are tied to the Yuan/dollar exchange rate, of which nearly three-quarters were instituted last year. Consequently, each 1% increase in the dollar – against the Yuan – could potentially yield $2 BILLION of derivatives losses; and thus, last week’s 1% drop in the Yuan could signal the commencement of an utterly catastrophic chain of bank defaults.
Apparently, the so called “European Kick-In” – or EKI – is the level at which such losses start accelerating; and according to Morgan Stanley, this level is around 6.15 to 6.20 Yuan per dollar, compared to the current rate of 6.12, and last week’s 6.03. In other words, with just one more week like last week, global “derivatives fever” could start spreading like the Ebola virus. I guess this is why the so-called China “crisis gauge” – i.e., the spread between Chinese two-year swaps and government bonds – hit an all-time high last week. No?
Consequently, the “moral of the story” is that the list of financial “black swans” is growing exponentially; and thus, it wouldn’t take much for the END GAME of global currency collapse to accelerate from its current, dire state into all-out chaos. Under such circumstances, how can you not consider at least partially protecting your life’s savings with what has historically been the world’s most sought after assets; i.e., PHYSICAL gold and silver?
|Weekly Market Roundup|
|The rise in the gold price ran into profit-taking on Wednesday. Having risen $160 to $1345 some short-term profit taking is only to be expected, and silver followed suit.
The action in silver revolved round the March contract on Comex, with some players choosing to close their positions rather than roll it into a later month. This action can be clearly seen in the chart below.
Open interest (the blue line) fell off a cliff on Wednesday, which must have pleased the bullion banks, who are trying to control their short book, as can be seen in the following chart, of the largest four traders on Comex (a.k.a. bullion banks).
Having reduced their net shorts to less than 16,000 contracts three months ago, the largest four’s net short position had deteriorated to over 35,000 in a rising market. It is hardly surprising that at the first sign of two-way trade (indicated by volumes in the silver contract having picked up significantly this week) these traders are looking to reduce their position.
This sums up the market today, which is highly technical and dominated by short-term scalpers. Not many traders have gone long, which we know from the very negative sentiment at the time of the year-end. Instead, the action is around hedge funds caught wrong-footed by a 15% rise in the silver price. As they cut their losses by buying-to-close, the bullion banks end up getting squeezed as well.
This suggests to me that the correction in silver will not last long before lower prices attract more genuine buying. The same is broadly true in gold, though this is a more liquid market. Demand for physical metal from China and Hong Kong continues at record levels, and there is talk of the Indian Government relaxing import restrictions in this election year. I personally think it unlikely, but given that Indians are currently paying well over $1400 equivalent the effect on markets of such a move would be immensely bullish.
In the political arena attention is focusing on the Ukraine, with growing tensions between NATO and Russia, who if their actions against Georgia over South Ossetia and Abkhazia in 2008 are anything to go by, will have no hesitation in invading Crimea and other eastern regions of the Ukraine. The difference between the two is the Ukraine borders with NATO members. This could have an effect on the gold price.
Eric King: “Grant, it seems like it (gold) is climbing a wall of worry. There are only 2% more (gold) bulls today vs. the 2008/2009 collapse. So there is this ingrained bearishness and pessimism. It seems to be very bullish in that gold is just climbing this wall of worry.”
Williams: “This demonstrates just how beaten down that complex has been over the last couple of years. People’s confidence (in gold) has been shattered. ... I haven’t met any long-time gold investors who have sold their gold. They are upset because it’s been painful, but they still own their gold.
What we’ve seen, though, is a lot of the froth come out of the market. And it’s those guys who come in who will actually drive the price considerably higher. The investors continue to chip away and they buy gold every month. They bought it at $1,180 and they bought it at $1,250, and they are going to continue doing that. You are always going to have this base, but it’s when the confidence in the speculators comes back that we will see these sudden $50 or $100 pops in the price.”
“We now have violence going on between pro-Russian secessionist Crimean citizens and the ethnic Tatar protesters. Now you have the new Ukraine leader warning the Russians to put down the protests going on in the Crimea. Who is this guy? He’s a nobody. But this was who the West wanted to lead the Ukraine.
So now the US has announced that they are going to be giving at least a billion dollars to the new Ukraine government. The US has also said they would consider additional direct assistance for the ‘former Soviet Republic.’ That’s what they call it. The Russians have responded by parking a Russian intelligence ship in Cuba.
But the Russians will not let the Ukraine fall into the hands of the EU and the US. This latest attempt has all been part of a move for the EU and the US to keep gaining more and more of eastern Europe that was formerly under the Soviet bloc. This is all designed to further isolate Russia.
The bottom line is the Russians are not going to give up the key port of Sevastopol on the Black Sea. But when we hear the United States warning Russia not to get involved, this is complete hypocrisy. The US has already spent $5 billion destabilizing Ukraine.
Kina närmar sig mellanöstern och det kanske innebär att oljan kommer att handlas i andra valutor än dollar.
Source: Bloomberg and Sprott Estimates
Fundamentally my target price for gold is in the range of $7,000 to $9,000 per ounce. That’s not something that will happen straight away, but it’s not a 10-year forecast either. It’s a three- to five-year forecast, for the price to rise by about five to six times.
My analysis is based on a collapse of confidence in the dollar and other forms of paper money. To restore confidence you have two means: You either flood the world with liquidity from the International Monetary Fund in the form of Special Drawing Rights [SDRs, a form of money issued by the IMF], or we return to a gold standard.
The flooding of the market with SDRs would be highly inflationary, so that by itself would drive gold to a higher level. If they go back to a gold standard they will have to take a non-deflationary price.
People say there is not enough gold in the world. The answer is there is always enough gold in the world. It’s just a question of the price. Now, at $1,300 an ounce, there is not enough gold to support world trade and finance. But at $10,000 per ounce, there is enough gold. It’s not about gold, it’s about the price.
If you go back to a gold standard you have to avoid the blunder that England made in 1925, by going back to the gold standard at the wrong price, which proved to be highly deflationary, and contributed to the Great Depression.
I’ve done the math on that and the non-deflationary price for a gold standard today is about $9,000 per ounce.
The target price is based on supporting the paper money supply with gold. That would be using M1 [paper notes, coins, and checking accounts] as the monetary base, with a 40 percent backing. If you were to use M2 [M1 plus savings accounts and money market funds] with a 100 percent backing, that would be $40,000 per ounce.
The tightly controlled Chinese yuan will eventually supersede the dollar as the top international reserve currency, according to a new poll of institutional investors.
The survey of 200 institutional investors - 100 headquartered in mainland China and 100 outside of it - published by State Street and the Economist Intelligence Unit on Thursday found 53 percent of investors think the renminbi will surpass the U.S. dollar as the world's major reserve currency.
Optimism was higher within China, where 62 percent said they saw a redback world on the horizon, compared with 43 percent outside China.
Time and again, the Cartel moves into hyper-drive during this narrow window of time to discourage options holders from taking PHYSICAL delivery; and amidst an environment where gold registered inventories are already near record low levels, how can anyone be surprised? In fact, of the piddling 649,000 ounces of registered gold inventories as of last night, Harvey Organ believes 98,000 ounces are still awaiting delivery from the December and January contracts, whilst 394,000 ounces have been served for delivery of the February contract; let alone whatever is demanded from yesterday’s expiring March contract.
Global stock markets are teetering on the brink again with new all-time highs either close or just achieved in the case of London’s FTSE. Warren Buffett has just warned his shareholders that bull stock markets are like sex and best near the end.
If you are looking for warnings, hints, omens, red letter signs picked out in neon then there are plenty of them.
This chart looks at that and compares it with the action of the total nominal retail sales trend for the current month and the same month in each prior year, superimposed on the chart of the Fed’s balance sheet and the S&P 500.Total retail sales are trending in lockstep with stock prices which in turn are trending in lockstep with the Fed. The trend of retail sales has been amazingly consistent whether the Fed was pumping or pausing, thanks to the heroic efforts of the 10%, and especially the 1%, to keep spending. God bless their hearts for keeping the US economy afloat.
But looking at the real spending per capita we’re left to wonder, where’s the trickle? Apparently it’s not reaching the average American. Even with the 1% disproportionately boosting per capita spending; even with foreign shopping tourists invading the US in droves to get bargains at northern border Walmarts or Fifth Avenue and Rodeo Drive shopping districts catering to rich Europeans and Asians, the trend of sales per capita is as flat as a pancake. There’s been almost no growth in the past year. The volume of sales per capita grew by 0.7% over the past 12 months. With the 1% and shopping tourists fattening those numbers, it’s a good bet that most Americans actually bought less stuff this January than they did a year ago.
The long term trend is even more bleak. In spite of gaining 10.3% off the recession low in 2009, per capita sales volume is still down 5.1% since January 2007. Most Americans just aren’t doing very well. How long is it likely that the 1% or the 10% will be able to carry nominal retail sales and US stock prices higher when the majority of the American people are not experiencing the illusion of economic growth in a real way.
|Source: Credit Suisse|
The U.S. Mint updated its sales figures today… and it was another whopper. Yesterday, the U.S. Mint sold 825,500 Silver Eagles which was about two-thirds of the weekly allocation.
The U.S. Mint raised the total allocation to its authorized dealers this week to 1,250,000 compared to 750,000 last week. Today, the U.S. Mint sold another 346,000 Silver Eagles for a total of 1,171,500.
Not only has this been another excellent month (so far) for Silver Eagle sales, it is an all-time record for February:
FEB 2010 = 2,050,000
FEB 2011 = 3,240,000
FEB 2012 = 1,490,000
FEB 2013 = 3,368,500
FEB 2014 = 3,671,500
We have also seen what’s called the gold forward offered (GOFO) rate. It is negative today, which means there is a tightness in the gold market. That’s only happened five times. It happened in June of this year. It happened in October 2008 after gold had a big decline. It happened in 2001 at the bottom of gold, and it happened in 1998, when we had the World Gold Agreement, and all of a sudden the price of gold shot up. Every time it has happened, gold has been followed by a very large rally.
If you are going to talk about gold with the reader, a lot of times if you jump right into gold, people think you are sort of a nut. I find if you tell the story through history people can see gold in a context, and when you talk about it, it doesn’t seem quite so strange.
In my new book, “The Death of Money,” there is no reason to repeat the history—that’s all in “Currency Wars”—so it’s more forward leaning, and talks more about the future of the international monetary system, a coming collapse.
And not just a collapse, because a lot of people are running around talking doom and gloom, the end of the dollar and all that. I might even agree with that, but I don’t think it has a lot of content.
What I try to do is provide a more in-depth analysis describing what will come next, what the future international monetary system will look like.
I point out that the international monetary system has already collapsed three times within the last 100 years—1914, 1939, and 1971—and that another collapse would not be at all unusual. But it’s not the end of the world. It’s just that the major powers sit down and reform the system. I talk about what that reformation will look like.
So that’s the sequel or the continuation of the story looking over the horizon. Some stuff that is before “Currency Wars” and some stuff that is after. And other content on the contemporary situation in Europe and China, so I hope people enjoy it.
Which brings the total number of recent banker deaths to 9 (via Intellihub ):
1 – William Broeksmit, 58-year-old former senior executive at Deutsche Bank AG, was found dead in his home after an apparent suicide in South Kensington in central London, on January 26th.
2- Karl Slym, 51 year old Tata Motors managing director Karl Slym, was found dead on the fourth floor of the Shangri-La hotel in Bangkok on January 27th.
3 – Gabriel Magee, a 39-year-old JP Morgan employee, died after falling from the roof of the JP Morgan European headquarters in London on January 27th.
4 – Mike Dueker, 50-year-old chief economist of a US investment bank was found dead close to the Tacoma Narrows Bridge in Washington State.
5 – Richard Talley, the 57 year old founder of American Title Services in Centennial, Colorado, was found dead earlier this month after apparently shooting himself with a nail gun.
6 -Tim Dickenson, a U.K.-based communications director at Swiss Re AG, also died last month, however the circumstances surrounding his death are still unknown.
7 – Ryan Henry Crane, a 37 year old executive at JP Morgan died in an alleged suicide just a few weeks ago. No details have been released about his death aside from this small obituary announcement at the Stamford Daily Voice.
8 - Li Junjie, 33-year-old banker in Hong Kong jumped from the JP Morgan HQ in Hong Kong this week.
FED har nu påbörjat sin minskning av stimulanser genom neddragningar för köp av obligationer vilket medför mindre nytryckta pengar till marknaden. Börserna runt om i världen stiger för att dom översvämmas av billiga pengar. Företagens vinster och omsättning motsvara inte börskursernas stadiga uppgång. Det är mer som ett pyramidspel som behöver mera nya pengar för att hålla pyramiden igång. Nu när det blir mindre pengar kommer vi närmare en nedmontering av pyramiden.
2) Värderingar enligt P/E Shiller
När det gäller den amerikanska börsen som till stor del styr övriga börser har vi nu värderingar som vi bara sett tre gånger under de senaste hundra åren. Nämligen 1929, 2000 och 2007. Mindre likviditet och höga värderingar kan bara sluta på ett sätt. P/E Shiller har övertiden ett medel p/e på 16,52 och idag över 25.
Företagens vinstmarginaler är på all time high vilket indikerar att det med största sannolikhet kommer att justeras ned till den mer långsiktiga nivån nu när vi fått en högre lång ränta. En av anledningarna till sämre vinstmarginaler i framtiden är högre räntor och att man kommer behöva betala sina anställda mer då dessa har haft en vikande löneutveckling under många år.
Dom långa räntorna har i USA gått upp kraftigt det senaste året samtidigt som börsen har stigit markant. Den tioåriga räntan har stigit från ca 1,5% till ca 2,7% på mindre än ett år. Det sker konstant upplåning med räntor som är väldigt låga för att investera i aktier vilket har blivit mindre attraktivt nu när räntorna har börjat stiga.
5) Emergin Markets
Tillväxtländerna har fått sig en knäck när inflationen har stigit kraftigt på grund av dom högre matpriserna. När nu FED minskar sin stimulans till marknaderna är det dessa länder som drabbas först. Billiga pengar i USA har sökt sig till dessa länder för hög avkastning och dessa pengar skall nu tillbaka till USA vilket medför stora försäljningar av tillgångar och valutor i dessa länder som inte klarar av säljtrycket. Detta leder till onödigt höga räntor och därmed lägre tillväxt. Turkiet är bara en av många länder som har drabbats.
6) Sämre ekonomisk utveckling
Det presenters nu sämre macro ekonomiska siffror vilket indikerar att FED drar ned sin stimulering i en vikande ekonomi. Det är inte bara USA utan även Japan och Kina som just nu har stora problem med den ekonomiska utvecklingen. Inom EU får man inte till någon tillväxt och Frankrike har stora problem och kommer bara få det värre.
7) Värdering av Sociala medier
Senaste köpet som Facebook gjorde av WhatsApp indikerar kraftigt att marknaden är alldeles för uppskruvad. Köpet värderas till ca 19 miljarder dollar för ett företag med 55 anställda vilket får ett värde på 345 miljoner dollar per anställd. När Facebook köpte Instagram man betalade ca $30 per användare och nu ca $42 vilket är 40% mer. WhatsApp har ca 450 miljoner användare och intäkten utgörs av en årlig avgift om 1 dollar. Hela affären lyser om att vi börjar närma oss toppen på dessa värderingar, köpet motsvarar 1/3 av värdet för Ford Motor.
8) Insiders säljer aktier
När insiders säljer stora poster aktier då skall man börja dra öronen åt sig. Detta sker nu och har pågått under en tid samtidigt som småspararna börjar sätta in pengar i aktiefonder. När företagen köper bolag med egna aktier då vet man att aktierna är fullvärderade. Efter över 30 år inom den finansiella marknaden vet man att när småspararna kommer in och det är insiders som säljer sina aktier till dom då är toppen nära.
9) Återköp av aktier
Återköpen av aktier har under 2013 flödat marknaden med pengar vilket självklart hjälpt till att få upp priset på aktien och förbättrat värderingen. Frågan är om vi kommer få lika mycket kapitaltillskott för börsen ifrån återköpen samtidigt som det är betydligt mera IPOs som drar likviditet.
Dow Jones är nu i toppen på sin megafon formation.
Dåliga lån i Spanien fortsätter öka, om nu allt börjar bli bättre inom EU skall inte kurvan gå åt andra hållet.
China, the largest foreign U.S. creditor, reduced holdings of U.S. Treasury debt in December by the most in two years as the Federal Reserve announced plans to slow asset purchases.
The nation pared its position in U.S. government bonds by $47.8 billion, or 3.6 percent, to $1.27 trillion, the largest decline since December 2011, according to U.S. Treasury Department data.
The International Monetary Fund has urged the European Central Bank to consider cutting interest rates to below zero as it warned that deflation in the eurozone was a key new risk facing the world economy.
In its assessment of global prospects published ahead of the meeting of G20 finance ministers in Sydney, the IMF said recovery from the deep global recession had been disappointingly weak and urged stronger co-operation between developed and developing countries to promote growth and financial stability.
"A new risk stems from very low inflation in the euro area, where long-term inflation expectations might drift down, raising deflation risks in the event of a serious adverse shock to activity," the Fund said.
It added that the eurozone was "turning the corner" from recession to a recovery that was uneven and fragile. Low inflation added to the problems of the troubled countries on the fringes of the euro area, where it would increase the real burden of already high levels of public debt.
"In the euro area, more monetary easing is needed to raise the prospects of achieving the ECB's inflation objective, including by supporting demand, given the weak and fragile growth, large output gaps and very low inflation," said the Washington-based IMF.
Weekly Market Roundup This week has seen precious metals prices rise strongly, with the bears caught on the hop. The chart below shows gold which at the time of writing has been consolidating under overhead supply in the $1330-50 level.
The squeeze in silver has been more dramatic, the price rising 15% this month so far. Again, there are signs of consolidation before silver goes on to challenge supply at the $22.4-23.0 range.
As I’ve stated before, the change in sentiment from the gloomy forecasts at the recent year-end is remarkable. More and more technical analysts are coming round to the likelihood that prices are bottoming out and gold may be establishing a new uptrend. This tends to feed into opinions expressed by investment strategists, who then come up with explanations as to why gold is going better in the context of broader markets and why it is likely to continue to do so. This is all part of the changing psychology behind markets.
Inevitably these strategists tend to pigeon-hole markets into annual categories. Thus, 2013 will become the year of redistribution between weak holders into stronger hands. It follows that if the current uptrend is maintained, 2014 will soon be described as the start of a new bull market, possibly multi-year, all weak holders having been taken out of the market.
This is important, because precious metals are seriously under-owned, the only bulls being die-hard fans of gold and sound money. This extreme will eventually be corrected as prices are driven upwards when investors buy into the new trend: it always is.
Chinese demand for gold continues apace, and final deliveries for January are 246 tonnes, the highest ever for any month. This is nearly double the rest of the world’s monthly mine production, and is shown in the bar chart below:
The point is Chinese demand is still accelerating, which tells us physical gold is too cheap. It seems amazing that this demand goes unrecognised. However, even the yearbooks issued by the Shanghai Gold Exchange clearly state DELIVERY IS DEMAND. Sorry about the capitals, but most analysts have missed the point, commonly stating that Chinese demand last year was only 1,100 tonnes, when SGE delivery alone was twice that. Furthermore, add in Hong Kong and we know from government statistics that total public demand in China, including 50 tonnes of coins, tops a massive 2,800 tonnes.
Why Western analysts persist in beliefs that demand in China was less than half this is their affair. Presumably this is the information that the bears have not bothered to verify, but at least GoldMoney customers are better informed.
500 Ounces of Silver Could Buy a House in the Future
Significant nominal peaks in the price of silver tend to come after significant nominal peaks in the Dow. This has been the case for the last 90 years at least.
It is no coincidence that significant silver rallies follow after significant Dow rallies end. It is simply a natural reaction to what caused the stock market rally as well as the effects of that rally. So, if it happened before, it will certainly occur again.
These stock market rallies are driven by the expansion of the money supply, causing a big increase in value of paper assets (including stocks) relative to real assets. When the increase in credit or the money supply has run its course, and is unable to drive paper price higher; value then flees from paper assets to safe assets such as physical gold and silver, causing massive price increases.
Below is a 100-year inflation-adjusted silver and gold chart (generated at macrotrends.net):
The latest from John Williams’ www.ShadowStats.com.
- Strongest Signal for a Recession Since September 2007
- January Real Retail Sales Activity Plunged by 0.6% for the Month
- Unadjusted Monthly January 0.4% CPI Inflation Squashed to 0.1% by Seasonal Adjustments
- January Annual Inflation: 1.6% (CPI-U), 1.7% (CPI-W), 9.2% (ShadowStats)
Switzerland sent more than 80 percent of its gold and silver bullion and coin exports to Asia last month, the Swiss Federal Customs Administration said today in an e-mailed report. It imported most from the U.K.
Hong Kong was the top destination at 44 percent on a value basis, with India at 14 percent, the Bern-based customs agency said in its first breakdown of the gold trade data since 1980. Singapore accounted for 8.6 percent of exports, the United Arab Emirates 7.9 percent and China 6.3 percent.
Switzerland imported 4.32 billion Swiss francs ($4.87 billion) of the metals from the U.K., or 60 percent of total inbound shipments, according to the report. The U.S. was second at 4.9 percent,Italy at 3.8 percent, Germany at 2.8 percent and Thailand at 2.5 percent, the data show.
FED håller obligationsmarknaden, men vem skall köpa när både FED och utlänningarna minskar sina köp.
“Markets are showing signs of stabilizing recently, although they are still fragile, on the back of actions by key emerging economies to shore up confidence and strengthen their policy commitments. This episode, however, underscores vulnerabilities and the challenging environment for many emerging economies.”
The IMF said its outlook remains roughly as projected in January. Global growth is forecast to increase to about 3.75% in 2014 from 3% last year, then improve further to 4% in 2015.
“However, the recovery is still weak and significant downside risks remain,” the IMF said. “Capital outflows, higher interest rates, and sharp currency depreciation in emerging economies remain a key concern and a persistent tightening of financial conditions could undercut investment and growth in some countries given corporate vulnerabilities. A new risk stems from very low inflation in the euro area, where long-term inflation expectations might drift down, raising deflation risks in the event of a serious adverse shock to activity.”
Gold: Markets tend to move in 5 waves, 3 in the direction of the trend (waves 1 - 3 - 5 ) and 2 against trend (waves 2- 4). The important thing to note here is that wave 5 on gold’s monthly bull chart has not occurred yet. Waves 2 and 4 show alternation in price action, which is indicative of countertrend moves in the 5 wave cycle.
Based on waves 1 and 3, wave 5 could very well have a $3,500 to $4,000 target because 5th waves in commodities tend to be very extended to the upside (see chart above).
Sentiment can be a fantastic contrary indicator. When there are extreme bearish readings, it generally implies the market is close to running out of sellers. 2014 started with extreme bearishness in Gold, as Goldman Sachs called it “a slam dunk” sell for lower gold prices in 2014....
But markets tend to change direction after testing price levels twice, commonly referred to as double bottom or double top, and gold now has a double bottom at $1,180 (see chart below).
I’m not a conspiracy theorist, but the facts speak for themselves: All of the sudden you are seeing a rash of bankers committing ‘suicide,’ as they call it. By some estimates we are talking about over 20 deaths now, rather than the 7 being reported. And with each new day there is a new death.
So what’s going on? Each new day there are new investigations coming out about who is rigging the FOREX markets. We know the markets are rigged, those are facts. Jim Cramer bragged last week that ‘Yes, the market is rigged.’ So it’s not a secret. But maybe the secrets are getting out, and the people that know too much are being silenced. This is more than just a coincidence, that all of the sudden there is an epidemic, so to speak, of bankers falling from buildings.
The latest news is that in Australia, their stock exchange is now dealing with yuan. So the Australians are giving the Chinese more of a presence to help assist with making the yuan part of a global reserve currency. With the US now moving to taper, we have to keep an eye on what China is doing to bolster its presence, and what kind of threat that increased presence represents to the US dollar’s status as the king of currencies.
We already know that China is the largest purchaser of physical gold in the world. So people are now beginning to wonder, is China preparing to push the yuan out as the world’s reserve currency, backed by gold? The bottom line is all of this represents an enormous threat to the US dollar’s status as the world’s reserve currency.”
Key Drivers of the Precious Metals
Eric Sprott on Western central banks to India: "...because you have a fiat currency too, as we do, and we can't have people find out that we have no gold."
Eric Sprott on physical supply imbalance: "Between Hong Kong/China who imports seemingly 120 tonnes per month and India that can certainly support demand of 80 tonnes a month - you've got 200 tonnes a month just in those two countries in a world where mines only supply 185 tonnes a month."
Eric Sprott on how investors in precious metals and related equities will fare: "...the reality is probably 9 out of 10 they will all win because it's all a function of the price of the precious metals here. The precious metal price will I think bail everybody out."
Rick Bensignor of Wells Fargo Securities says his research shows parallels between the market highs in December and the peak in September 1929. However, he is ‘not looking for a crash … like what ultimately took us to the 1932 bottom,’ but a repeat of the first leg of that decline which was 15 per cent, noting that: ‘Given market forces today, a similar 15 per cent decline could happen in the near-term.’
Why would a sell-off stop there? Well presumably the Fed put would come into play with new Fed chair Janet Yellen being put to the test, and QE would quickly be back to full tilt. Traders’ inclination to buy on the dips ought to do the rest, at least in theory.
But stock markets are not designed to only head in one direction forever. It is easy to forget that after a five-year bull run. And when they change direction the fall to the downside can be much more dramatic.
If stocks have become as overvalued as they were in 1929 then a similar collapse could be anticipated. Why should equities not give back the 40-50 per cent gains of the past two years that are far from justified by profit performance over that period?
Shares have only been driven to these heights by continuous money printing that has gradually lowered the return investors will accept on stocks. Now that this money printing is being wound up and interest rates are moving higher it stands to reason that share prices will have to drop to accommodate that new reality.
During the time that Bush and Obama have been in office, the marketable debt of the U.S. government has nearly quadrupled, increasing by $8,847,994,000,000.
Analyst Doug Short has a version of the ‘Warren Buffett Indicator’ which uses the value of the Wilshire 5,000, a very broad index. It shows that stocks are more expensive than they were before the 2008 crash and almost as expensive as they were before the dot-com crash in 2000.
Warren Buffett is not exactly shouting it from the roof tops but his favorite indicator is pointing to an imminent 50 per cent crash in US stocks. The main indexes are all far too high. You don’t need to be a genius like Warren Buffett to see it.
Just consider the 30 per cent advance in the S&P 500 Index last year and the gain of around one tenth of that in US GDP. The overlay of 1928-9 on the current chart of the Dow Jones is compelling:
Again we appear to be on the precipice of a huge drop in the stock market, with a massive downside. Yet that would only wipe out the gains of the past two years. Given that they appear abnormal in the context of lack lustre US economic growth would this really be so remarkable?
Tyskland begärde att få tillbaka en del av sitt guld och plötsligt går priset ned och man tömmer Comex och ETF fonderna på guld.
The Long Term Picture for Silver
Again, I think it’s the value. I’m along the lines of Mike Maloney and others that you don’t want to focus too much on the paper price, although that’s what everyone does and rightfully so. Because if you sell metals you’re only going to get it for currency. You’re going to take that currency, and it’s either going to be a greater amount or a lesser amount than the currency you put into the investment.
You really want to look at the value, what does an ounce of silver buy historically, and what does it buy today. That is the gauge you should use to determine whether or not it’s fair valued, undervalued, or overvalued.
If you look at gold, the old adage is, of course, a fine men’s suit. You want to look at an ounce of gold, does it still do that? Or, if it buys ten suits then you might consider the fact that it’s overvalued on a historical basis.
That’s the way I’ll be looking at it more than the paper price.
I think it’s going far higher. I think you’re going to see gold overvalued and silverovervalued, and I think in an extreme way. As I just outlined, I think you’ll see where an ounce of gold doesn’t buy one fine man’s suit, it buys 10 or 50 or some extreme metric. I really think that’s where we’re going.
Regardless, I think ten years from now we could definitely be on the upswing. There are a lot of things out there, like the nanotech world, what’s going on in the energy frontier as far as being able to perhaps upgrade the system as a whole and use energy sources that are worthwhile.
I’m not talking about solar and wind. I’m not against them, but they’re really not very efficient. But other areas that might deem higher energy flex density where people have more energy available on a per capita basis, the better that is the higher living standard you have. That’s pretty easily proven.
Ten years out I’m pretty optimistic. But, I think getting to ten years out is going to be very trying over the next few. I’m looking for round numbers, if you want them.
I think $5,000 an ounce gold is probably realistic. Depending on your view of silver, if you’re super optimistic like me and you think it could follow a ten to one ratio you could use that number. Or, you think the current 50 to 1 or 60 to 1 ratio is more appropriate you could use that number.
I think we’re probably going to get to a minimum of the classic monetary ratio of 16 to 1 and as high as 10 to 1. I’ll be consistent here. I wrote about that many years ago. So, if you saw $5,000 an ounce gold then that would imply one tenth would be $500 silver.
But, let’s get past $50 again. I want to be very practical. People ask me all the time what’s the ultimate price. I say let’s be practical. Let’s see it above $26. Let’s see how it trades. Let’s get it back above $30 and see how much interest are in the metals.
I’ll go on the record as saying this. I know markets fairly well. You’re not going to see too much buying by the nonsophisticated money at these levels, unfortunately. But, what you will see once you see silver and gold work their ways higher, once you get the gold above, I don’t know, pick a level, $1,500; $1,600; $1,700, there’ll be a lot more interest in it.
And there’ll be a lot of money spent on the metals once they break to new highs. You’ll see a lot of money come into gold above the $1,900 level, and you’ll see a lot of money come into silver above the $48 level.
Unfortunately, that’s really… It’s not too late, because I think they’re going far higher than that. It’s not nearly as advantageous as buying today. But, the interest in the market today is at a low, and that’s how lows are made.
I came across a couple of “monthly” charts last week and my face just lit up! The 2 charts above (courtesy of Trader Dan Norcini) are exactly why you can no longer wait to enter the metals in either “form.” When I say either form I mean either through the mining shares (which are already 30%+ off of their lows) or the physical metal itself. When you look at these charts, please make very close note of the “MACD’s.” These are “the moving average convergence/divergence.” Without getting too highly technical they are a “trading tool,” let me explain.
Charts can be ultra-short term as in minutes or even seconds, or they can be very long term as in months or years. Obviously the very short term charts are used for trading while the long term charts will help you time your “big bets” for core capital. I have cautioned all along about not trying to “time” your purchases because the fundamentals are such that on any given day the entire system can simply “break” in which case “waiting” to purchase would be a disaster because you won’t ever have the chance. That said, I wrote a similar piece to this one back on Feb. 28th 2012 and showed how the “weekly” charts were about to break out, this was followed the next day by a massive sale of paper contracts in the “leap day massacre” and the breakouts were negated. Please understand that the bullion banks and the central banks can and do read charts which is why the “breakouts” back then needed to be suppressed and they were.
Last year China invested a record $5 trillion in plant and equipment, more than the US and Europe combined. This overcapacity in many sectors is highly deflationary, especially when combined with a credit squeeze on its $24 trillion banking system that is bigger than the US and Japan together.
Societe Generale estimates that this epic deflationary contraction will depress copper prices by 50 per cent. As followers of Dr. Copper know when this guy is sick we are all in trouble. Global equities will tumble alongside their compatriots in the emerging markets. Even oil prices could plunge to $75-a-barrel forcing the Oil States to borrow to balance their budgets.
ArabianMoney has been warning for almost a year that the next shock for global financial markets will have ‘Made in China’ stamped on it. Timing this is the great problem. But so many loans are now coming up for refinancing this year that something just has to give way soon, and a major crisis will erupt.
Our favorite chartist Clive Maund says: ‘After a long corrective phase lasting two to three years, silver is at last ready to begin a major new uptrend… There is a strong resistance to confront at the $26 level, but once it is taken out it should then continue on to challenge its highs in the $50 area, overcome them and then traverse ‘blue sky country’ to target the upper trendline shown’:
The exact timing of such moves is impossible but this trend will definitely be a momentum trade for many investors. Indeed, it should be impossible to go far wrong with anything to do with silver.
That has certainly been the case for the New Year recommendations in our sister ArabianMoney investment newsletter. The next issue will review the performance of our precious metal plays and what represents the best investment strategy going forward (subscribe here).
The important thing to appreciate is that this is just the start of a new uptrend so now is the time to load up on these assets. But don’t hang around for too long, you are unlikely to be alone in spotting this trend…
Chinese capital markets are quietly turmoiling as debt issues are delayed and demand for "Trust" products - the shadow-banking-system's wealth management 'investments' - is tumbling. As Nikkei reports , since January, 9 companies have postponed or canceled issuance plans (around $1 billion) and is most pronounced in privately-owned companies (who lack an implicit government guarantee). This, of course, is exactly what the PBOC wanted (to instill some fear into these high-yield investors - demand - and thus slow the supply of credit to the riskiest over-capacity compenies) but as non-performing loans in China surge to post-crisis highs, fear remains prescient that they will be unable to "contain" the problem once real defaults begin (as opposed to 'delays of payment' that we have seen so far).
This agrees with my previous observation that the US economy is sinking, regardless of stock market-top fluctuations. How long, I wonder, before the real truth decorates newspaper headlines? Frankly, I’ve never seen a stock market so obsessed with current news. I grew up thinking that the stock market discounts conditions as they will materialize months in the future. Americans must be confused as they note the harsh conditions of their current life when compared to what the Federal Reserve and the government tell us. Ultimately the truth will come out. And I believe that John Williams is telling us the truth. This is indeed the longest economic downturn seen since the Great Depression.
I note that Walmart, with its slipping sales, is now being called “too expensive for the middle class.” This tells us something about the struggles of the middle class, which are now exiting Walmart, in favor of ... well, staying home. For the middle class, these appear to be hard times. Interestingly, the last two generations are the first two generations in America history that have never seen hard times -- that is, unless they've heard descriptions of hard times from their parents, who braved the Great Depression. Now we hear more and more of children moving back in with their parents, or parents moving in with their older children. I'm thinking that we will see a good deal of novel living situations as the months go by.
I hesitate to say this because it's so extreme, but I believe the world is in a depression. We're being lied to by a frightened and desperate government and Federal Reserve. Sooner or later the US public is going to realize that we're in a depression. The government and the Fed will fight the gathering depression with lies and propaganda. To fight the depression, the Fed will open the money spigots wide, creating new trillions of “dollars.” Some wise investors are aware of all this, which is why gold continues to push higher (over $1300 an ounce today).
Weekly Market Roundup Gold has now rallied over 10% since December 31. This, in the words of one analyst who achieved widespread publicity was meant to be “a slam-dunk sell”. Instead, gold has soared through its 50-day moving average as well as the 200. Furthermore, the 200-day is itself turning round and will shortly be rising. Technical analysts are beginning to think about a trend reversal signalled by a “golden cross”, with the 50-day moving average crossing above a rising 200.
The news background this week has been remarkably dull, with minor currencies consolidating against the US dollar along with equity markets. Risk investment has been marginally favoured, and gold could have been expected to decline. Instead precious metals have outperformed everything else, rising $50 on the week.
There is a developing problem in the market which is underwriting precious metal prices. We know physical supplies are tight, with record demand in Shanghai (256 tonnes delivered in January) and London’s GOFO rate has turned negative again out to three months. The shortage of physical bullion and the better price trend are happening with a high level of short positions for the trend-chasers who are generally committed to a continuing bear market. The charts below are short positions of the Managed Money (hedge funds) category on Comex.
The historic average of gold short positions is normally less than 15,000 contracts, whereas at the beginning of this month it stood at 63,755 contracts. Silver is worse, with 28,715 contracts short in an illiquid market, and a long-run average of only 5,000 short. Someone is going to have to supply long contracts to allow hedge funds to close these positions.
“Houston, we have a problem”. The Bank Participation Report (BPR) for February 4th shows the aggregate of four US banks net long of gold contracts, while 22 non-US banks are together short of 30,108 contracts. Anecdotal evidence is that the US bank longs are concentrated with one major bank. This one bank will find it profitable to squeeze the others with their short positions. This leaves no one to provide exit liquidity for the hedge funds.
In silver the position is equally delicate. The hedge funds increased their short positions after the January rally, which was the wrong thing to do (see the chart above). The BPR shows both US and Non-US banks net short of 28,200 contracts between them in equal measure, almost the same as the hedge funds’ shorts. A rallying silver price becomes a simple squeeze on the banks and the hedge funds at the same time as they both scramble to cover the equivalent of 285 million ounces of silver.
Gold and silver’s improved technical position is turning what was judged a slam-dunk sell into a nightmare on Comex for those that following last year’s downtrend. And as long-term bulls begin to realise that they have missed the market bottom and start piling in, prices could move sharply higher, given the lack of underlying bullion. The effect on the silver price is likely to be the more dramatic of the two because of its poor liquidity compared with gold.
Husmarknaden sviktar i Californien. Börjar den högre räntan göra det surt för högt belånade husägare.
Fitzpatrick’s 34-year monthly gold chart illustrates that the corrective cycle which was experienced in the gold market was very similar to what was seen from 1974 - 1976 (see chart below).
Fitzpatrick’s daily silver chart also shows that silver may be setting up for a massive advance (see chart below).
Yet, the price has gone from 116.17 on December 31, 2013 to 124.43 or an increase of 8.26, some 7%.
What this tells me is that the biggest portion of gains that gold has managed to tack on in this key indicator of Western-based investor gold demand has come from SHORT COVERING, and not from a strong influx of fresh, eager buyers.
Shanghai Gold Exchange Withdrawal Numbers January 2014
Withdrawals from the Shanghai Gold Exchange vaults in January 2014 accounted for 247 tons, which is an increase of 43 % compared to January 2013. It’s also more than monthly global mining production and an all-time record! China mainland mines about 35 tons per month which is required to be sold first through the SGE. The other 212 tons (247 – 35) had to supplied by import or recycled gold. My estimate is that scrap couldn’t have been more than 25 tons, so import in January was a staggering 187 tons. China is still draining the vaults in the west BIG TIME!
Again the former bulls fled to correction, lifting that number to 40.8% from 36.7% a week ago. A reading above 40% was last shown early Sep-13, just after another large market retreat. That proved a bottom for that decline and a similar low may have been achieved again. High correction readings don't last long. It takes a market drop to convince former bulls to shift here.
The spread between the bulls and bears narrowed again to 24.4%. The week ago difference of 28.5% showed a near 10% drop to below the dangerous 40% spread for the first time since November. The diminishing difference is a positive sign after 2013 ended with a 46.4% spread. That was the highest since October 2007 when it was 42.4%. In contrast August 2013 ended with the spread at 13.4%, close to the 10% (or less) reading that allows for buying. The bears haven't outnumbered the bulls (negative spread) since October 2011, after the correction from highs that April.
Obviously, gold has been in a painful slump since the summer of 2011. What near-term catalysts—let's say in 2014—could wake it from its slumber?
We have to put 2013 into perspective, because portfolio management is a marathon, not a 100-meter sprint. Gold had risen 12 years in a row prior to last year's price decline. And even after last year, gold has appreciated 13% per annum on average, making it one of the world's best-performing asset classes since the current financial bust began with the popping of the dot-com bubble.
Looking to the year ahead, there are many potential catalysts, but it is impossible to predict which event will be the trigger. The derivatives time bomb? Failure of a big bank? The sovereign debt crisis returns to the boil? The Japanese yen collapses? It could be any of these or something we can't even imagine. But one thing is certain: as long as central banks continue their present money-printing ways, the price of gold will rise over time to reflect the debasement of national currencies. The gold price might not jump to its fair value immediately because of government intervention, but it will rise eventually and inevitably.
So the most important thing to keep in mind is the money printing that pretty much every central bank around the world is doing. The central bankers have given it a fancy name—"quantitative easing." But regardless of what it is called, it is still creating money out of thin air, which debases the currency that central bankers are supposed to be prudently managing to preserve the currency's purchasing power.
Money printing does the exact opposite; it destroys purchasing power, and the gold price in terms of that currency rises as a consequence. The gold price is a barometer of how well—or perhaps more to the point, how poorly central bankers are doing their job.
Besides gold, what one secular trend would you be most comfortable betting a large portion of your nest egg on?
Own things, rather than promises. Avoid financial assets. Own tangible assets of all sorts, like farmland, timberland, oil wells, etc. Near-tangibles like the equities of companies that own tangible assets are okay too, but avoid the equities of banks, credit card companies, mortgage companies, and any other equities tied to financial assets.
-Prominent retailers are closing hundreds of stores all over the United States. Things have gotten so bad that some are calling this a "retail apocalypse"...
- JC Penney, which lost $586 million in three months in 2013, is planning to close 33 stores in 19 states and lay off 2,000 people. JC Penney’s stock has lost 84 percent of its value since February 2012.
- Sears has decided to shut down its flagship store in Downtown Chicago, and it has closed 300 stores in the United States since 2010. Stock analyst Brian Sozzi noted that Sear’s inventory levels have fallen by 23.7 percent since 2006. He also noted that Sears had $4.4 billion in cash and equivalents in 2005 but $609 million in cash and equivalents in 2012. Sozzi, who calls himself a guerrilla analyst, has a blog full of disturbing pictures of empty Sears stores.
- Macy’s, one of the few retail success stories, is planning to close five stores and eliminate 2,500 jobs.
- Radio Shack is preparing to close 500 stores, according to The Wall Street Journal.
- Best Buy recently closed 50 stores and eliminated 950 jobs at stores in Canada.
- Target announced plans to eliminate 475 jobs and not fill 700 empty positions to reduce costs.
- Aeropostale is planning to close 175 stores.
- Blockbuster has closed down all of its stores.
-McDonald's is reporting that sales at established U.S. locations were down 3.3 percent in January.
-In January, real disposable income in the U.S. experienced the largest year over year decline that we have seen since 1974.
“A break above $20.60 would mean another $1.60 or so to the topside, which will take silver to the $22.20 area as a double bottom target. There is a also second area of resistance at $23.08, which was the high of the last bounce.
Similar to the $1,434 area on gold, if silver can get up and test $25.10, and ultimately get a weekly close above that level, then we would be looking for a move to the upside in excess of $6 from that major breakout point. Meaning, we would look for silver to move well above the $30 level after that key resistance is taken out on the upside (see chart below).
It looks as though the metals may be set to rise much further if we can see this type of strength in the silver market. This would also mean that silver would advance much more aggressively vs gold in percentage terms. As an example, if we see gold move from the $1,300 to $1,650, that’s a decent move. That’s about a 27% gain.
But a move on silver from roughly $20 to the $31 area, that would represent a 55% surge, or double the percentage gain that would be seen in the gold market. This would obviously mean the magnitude of the advance in the price of silver would be extremely aggressive."
The gold market is picking up momentum. If you go back to the similar move in 2012, it was at this point that the gold market began to accelerate to the upside, especially once gold broke above the 200-day moving average, which as I said is currently at $1,306. What is most impressive here is how gold has continued to rally, even in the face of a strong bounce in the equity markets.
We are watching the area of the last high, which comes in around $1,362, but the most important level by far is going to be the $1,434 level. This was the peak that was seen in gold during the bounce last year. For us gold looks clearly set up to head in the direction of that major level at $1,434.
It will be incredibly important to see how gold acts if and when it gets up to that $1,434 level, whether or not gold can break it decisively and get a weekly close above the key area. If we do get a weekly close on gold above $1,434, it would strongly suggest this move is going to take us significantly higher in gold -- possibly even to the area around $1,650 to $1,700.”
Janet Yellen, in her first speech as new Fed chair "stayed the course" on the Taper:
- *YELLEN SAYS FOMC LIKELY TO CONTINUE QE TAPER IN MEASURED STEPS
- *YELLEN SAYS RECOVERY IN LABOR MARKET IS `FAR FROM COMPLETE'
- *YELLEN SAY FED TO `CONTINUE TO MONITOR FOR EMERGING RISKS'
- *YELLEN: MAIN RATE LIKELY TO BE LOW WELL PAST 6.5% JOBLESS RATE
Of course, the Q&A (and hawkish follow-up panel) may well be the "common knowledge" setting moment for today but for now, the Taper is on and forward-guidance.
Today the Shiller S&P 500 PE Ratio is at 26.4. But going back 100+ years, the historic mean of the index is 16.5. This means the current ratio is 61% higher than its long term average.
Despite the short-term memory-losing recency-biased perspective that a 2-day rally in stocks has seemingly set in investors' minds, Citi's FX Technicals group remains concerned that the S&P 500 is stretched by historical standards. At this point, they add, the S&P is more stretched than in 2007 and a bit less stretched than 2000 with the line in the sand around 1,700.
Via Citi FX Technicals,
The S&P 500 is stretched by historical standards:
– At the peak on 15 Jan 2014 the S&P was 12% above the 55 week moving average which itself was 20% above the 200 week moving average
– At the peak in 2007 the S&P was 8.5% above the 55 week moving average which itself was 14.5% above the 200 week moving average
– At the peak in 2000 the S&P was 14% above the 55 week moving average which itself was 29.5% above the 200 week moving average
Via Citi FX Technicals,
Gold is putting in a base
Gold continues to look constructive overall and a test of $1,361 and eventually $1,433 is expected
A rally through there would be a major bullish break.
As seen throughout the last major bull market in gold, there appears to be an inverse relationship between Gold and Equities at this stage of the cycle
While we have not yet seen significant bearish breaks on Equities, just as we have not seen bullish ones on gold, the price action on both are beginning to point towards exactly that.
Just nu är intresset för guld på absoluta botten och många menar att den uppåtgående trenden för guld har brutits. Men om man tittar på det fundamentala för guld så är trenden fortfarande uppåt och jag skall här ange tio skäl varför.
1) Trots att FED har börjat med neddragningar av sina stimulanser så har vi fortfarande mycket stora stimulanser runt om i världen. Att trycka nya pengar innebär att värdet på det man ökar kvantiteten av kommer att minska och eftersom guld är en valuta som man inte kan trycka mer av kommer värdet över tid att öka.
2) Efterfrågan från Asien ökar och då framför allt från Kina. Kineser vet vad det innebär att späda ut valutan med mera nytryckta pengar och köper därför guld för att skydda värdet av sina tillgångar. Detta kommer inte att minska utan snarare att öka då skulderna runt om i världen ökar exponentiellt.
3) Kinesiska centralbanken ökar sina inköp då man med all sannolikhet kommer att backa upp sin valuta med guld inom en snar framtid. Senaste rapporteringen om deras innehav var ca 1 000 ton och skall man upp till samma nivå som USA ca 8 000 ton så skall det köpas mycket guld inom de närmaste åren.
4) Olika myntverk runt om i världen rapporterar om rekordförsäljning av olika guld mynt och man arbetar dygnet runt och hinner ändå inte leverera i tid eller efterfrågad volym.
5) Guldpriset är nu under produktionskostnad för många guldbolag vilket innebär att det kommer att stängas en del produktion och därmed minska utbudet samtidigt som efterfrågan är rekord stor.
6) Comex som sätter guldpriset i form av future kontrakt har rekord små lager. Under 2013 minskade lagret av guld för leverans på future marknaden till att just nu endast uppgå till ca 357 000 ounces till ett värde av ca 450 miljoner dollar. Det är idag mer än 100 gånger mer sålt guld på future marknaden än det finns att leverera. Det är bara än tidsfråga innan Comex får göra alla affärer i kontanter och därmed säga adjö till guld affärer i pappers kontrakt.
7) Under hela 2013 har man haft stora uttag ur samtliga ETF fonder som har guld som ända tillgång. Allt detta guld har stillat den ökade efterfrågan. Nu verkar det som om det finns inte mer guld att hämta från dessa fonder då den största ETF fonden GLD har haft insättningar av guld. Förra veckan under två dagar. Ett klart trendbrott.
8) Guld producenter av guld har fått se sina aktier stiga ordentligt under januari och gruppen är klar vinnare under den första månaden 2014. GDX som är ETF index för de största guldproducenterna har stigit med ca 8% under första månaden en klar indikation att intresset för sektorn är tillbaka.
9) Dom stora bullion bankerna som sköter handeln och future marknaden för guld har gått från att var mycket korta guldpriset till att under 2013 bli mycket långa guld priset. JPM som är störst på derivat marknaden för guld är nu lång och det är nog bara en tidsfråga när dom släpper upp guldpriset.
10) Det påstås att som januari går så går börsen hela året. SP 500 har gått ned under januari med ca 3,5% och guldet har gått upp med ca 3%. Följer vi detta så är det guldet som skall ha ett bra år och börsen skall ha ett jobbigt år.
Det är nu bara att bestämma sig för om man skall ha fysiskt guld eller om man skall investera i bolag som producerar eller hittar nya fyndigheter. När det gäller bolag som producerar kan jag rekommendera Lake Shore Gold (LSG) som är noterade i Kanada. Företaget har tagit alla investeringskostnader och producerar med High Grade och har positivt cash flow. När det gäller företag med guldet i marken rekommenderar jag det skuldfria Botnia Exploration noterat här i Sverige. Företaget har ca 250 000 ounce high grade i marken och borrar just nu för att öka detta till ca 400 000 ounce. Dagens värdering gör att du köper vid 250 000 ounce, guldet till ca $32 och vid 400 000 ounce $20 för guld i marken. Det är långt ifrån dagspriset på ca $1 250 och du behöver inte bekymra dig om att förvara på säkert ställe då det är säkert förvarat i marken. Det är bara och sitta och vänta på uppgången.
Man skall dock vara mycket försiktig med investeringar pappersguld då man ej vet vad som händer då Comex inte kan leverera guld för sina utställda future kontrakt. Eller om det finns tillräckligt med guld som backar upp ETF fonderna.
Guld och FEDs balansräkning brukar följas åt. Är det dags nu igen så har vi snart en notering av guld över 2000 dollar.
There is a total supply of gold in the world. But to corner a market or squeeze a market, you don’t need to buy all the gold, you just need to buy the floating supply. Think of all the gold in the world, it’s about 170,000 tons. Think of a little sliver on top of it that is the floating supply available for trading.
Gold that’s in the Comex or JPMorgan or GLD vaults is available for trading. Gold purchased by the Chinese will not see the light of day again for the next 300 years, and is not available for trading. So with the gold going from West to East, and from GLD to China, the total amount of gold is unchanged, but the floating supply is declining rapidly.
This means that the paper gold that sits on top of the floating supply is becoming more and more unstable and vulnerable to a short squeeze, because there is not enough physical gold to support it. So that’s likely to collapse at one point and lead to a short squeeze and heavy buying.
Mycket dåliga jobb siffror, 113 000 mot förväntade 180 000, december uppreviderat endast 1000 till 75 000.
Finally, I've admitted it to myself. I'm afraid we're in a primary bear market in the economy and the stock market. I believe it's going to be an absolute “brute.” And I'm afraid of what might lie ahead.
And the worst of it is that we're being deliberately lied to by the Fed and by our government. The markets (which normally tell us the truth) are being controlled and manipulated by the government and the Federal Reserve.
Ben Bernanke is reputed to be an “expert” on the Great Depression of the 1930s. I don't know about his expertise regarding the Depression, but I'm damn sure Bernanke doesn't understand markets.
I've asked myself why Bernanke got himself into this predicament? I believe his problem is that he studied the Great Depression strictly from the standpoint of economics and the Fed's role in the Depression. But Bernanke never studied nor understood the role of the stock market during the 1930s.
I had the fortunate experience of studying the events of the 1930s under the tutelage of the great Dow Theory genius, E. George Schaefer. George understood the power and essence of the primary trend more thoroughly than any analyst I have ever known. I consider a thorough knowledge and understanding of the primary trend the single most important and least understood area of stock market analysis.
I sincerely doubt whether Yellen will realize that we are now in a resumption of the primary bear market that started in 2000. I liken the whole current picture to a ship that has sprung a terrible leak and the captain is waving an empty bottle while singing, “Happy days are here again.”
And sure enough, the January ADP print missed as we expected, printing at 175K vs the expected 185K, while the December 238K was revised lower to 227K, confirming that ADP is nothing but an NDP trend follower and an absolutely worthless and meaningless data point that does nothing to add relevant data to the economic picture.
For those who care, this was the biggest miss since August and the largest monthly drop since August 2012, and the weakest print since August as well.
A disturbing aspect to the new silver COT report [on Friday] was that JPMorgan does not appear to be signaling a turn up in silver prices just yet, as the bank added a thousand contracts to its short position. In fact, JPMorgan appeared to be the only commercial short seller in silver for the reporting week, something that happens with disturbing regularity, but not usually as silver prices decline. When you think about it, nothing could be more manipulative. At 17,000 contracts net short, JPMorgan holds a short corner in Comex silver futures of 14.4% on a net basis.
With JPMorgan having cornered the Comex gold futures market to the long side---and simultaneously holding a short market corner in silver, there should be little surprise in how prices moved during the reporting week; strong in gold, weak in silver. I don’t deny that the raptors have a strong influence on price and in maneuvering the technical funds to buy and sell, but when you hold a controlling market share (as JPMorgan does), you basically control the market. - Silver analyst Ted Butler: 01 February 2014
The International Monetary Fund says the probability of the world economy falling into a deflation trap may now be as high as 20%.
It is remarkable that the G2 monetary superpowers – the U.S. and China – should both be tightening into this risk, though perhaps they are already damned either way given the level of asset speculation.
“We need to be extremely vigilant,” said the IMF’s Christine Lagarde in Davos. “The deflation risk is what would occur if there was a shock to those economies now at inflation rates below target. I don’t think anyone can dispute that eurozone inflation is way below target.”
The shock is already before our eyes as Turkey, India, and South Africa hit the brakes, forced to defend their currencies as global liquidity drains away.
The World Bank warns that withdrawal of stimulus by the U.S. Federal Reserve could throw a “curved ball” at the international system. “If market reactions to tapering are precipitous, developing countries could see flows decline by as much as 80% for several months,” it said. They may need capital control.
Roughly US$4-trillion (pounds 2.4-trillion) of foreign funds swept into emerging markets after the Lehman crisis, mostly by then “momentum money” late to the party.
The IMF says US$470-billion is directly linked to money printing by the Fed. “We don’t know how much of this is going to come out again, or how quickly,” said an IMF official.
Europe has let its defences collapse behind a Maginot Line of contractionary policies. Eurostat data show that Italy, Spain, Holland, Portugal, Greece, Estonia, Slovenia, Slovakia, Latvia, as well as euro-pegged Denmark, Hungary, and Bulgaria have all been in outright deflation since May once taxes are stripped out. Prices have been dropping in France since August.
Eurozone M3 money growth has been negative for eight months. Bank credit to the private sector has fallen by euros 155-billion (pounds 127-billion) in three months, according to the European Central Bank.
The U.S. has a slightly bigger buffer, but not much. Growth of M2 money has been slowing even faster than it did in the six months before the Lehman crash, but then the Fed no longer pays any attention to such data so it may well repeat the mistake. The Fed is surely courting fate by cutting off US$10-billion of stimulus each meeting in the face of incipient deflation.
BIS points to ‘powerful contagion risk’ from QE tapering for emerging markets far worse than the Asian Financial Crisis
The BIS highlights a ‘massive expansion’ of dollar borrowing in global bond markets by emerging market banks and companies, and that leaves them vulnerable to rises in interest rates and depreciating local currencies. Another recent study suggests Chinese dollar borrowings exceed $1.1 trillion.
‘The deeper integration of emerging market economies into global debt markets has made emerging market bond markets much more sensitive to bond market developments in the advanced economies,’ noted the BIS paper. ‘The global long-term interest rate now matters much more for the monetary policy choice facing emerging market economies than a decade ago.’
The BIS concluded that money printing by the Fed had kept emerging market borrowing costs 250 basis points lower than historic averages until the first hint of an end to QE last May. This is completely at odds with the Federal Reserve’s insistance that its monetary policy changes have a marginal impact on emerging markets. In fact they are in the front line.
The BIS report adds that dollar debt issuance has been so great in the emerging markets that they are at risk of a ’sudden stop’. That was happened in Dubai in 2009 when the global financial crisis derailed the local property boom. Hundreds of thousands of workers were sent home as building and infrastructure projects stalled.
US Treasury Secretary Jack Lew has warned the US may default on its debt by the end of the month if Congress does not raise its borrowing limit.
Mr Lew said he could rely on emergency measures to pay US debts after the limit is reinstated on 7 February.
But he anticipated the treasury's reserves would quickly be exhausted as it issues annual income tax refunds.
Congress suspended the debt limit in October as part of a deal to reopen the federal government after a shutdown.
The $16.7tn (£10.2tn) cap will be reinstated on Friday.
"Without borrowing authority, at some point very soon, it would not be possible to meet all of the obligations of the federal government," Mr Lew said at the Bipartisan Policy Center in Washington on Monday.
The treasury secretary said the US treasury department could resort to accounting mechanisms to avoid breaching the limit until the end of February.
When President Obama was first inaugurated on Jan. 20, 2009, the debt of the U.S. government was $10,626,877,048,913.08, according to the Treasury Department’s Bureau of the Public Debt. As of Jan. 31, 2014, the latest day reported, the debt was $17,293,019,654,983.61—an increase of $6,666,142,606,070.53 since Obama’s first inauguration.
The total debt of the United States did not exceed $6.666 trillion until July 2003. In the little more than five years of the Obama presidency, the U.S. has accumulated as much new debt as it did in it’s first 227 years.
The Markets Are Going To Continue To Decline
Would you like an example? How about Facebook? This company sports a $150+ billion market capitalization a PE ratio of over 150 and a book value of only around $12 billion which mostly was accrued from their IPO proceeds. This puts them at the doorstep of the 20 largest companies in the U.S. and amongst the top 50 in the world by market capitalization! Really? If Facebook all of a sudden “went away” in a puff of smoke would the world really change that much the following day? Yes there would be “withdrawal symptoms” displayed by some but it wouldn’t be like flipping a light switch only to find that there is no more electricity. Or walking into your garage and out onto the street to find that all automobiles have vanished. How about global cell phone service going down and not coming back up? How would the world change the following day? But Facebook having a top 20 market cap? Is something like that with such a small tangible book value really so indispensable that it should be included in the top 20 companies…by “value?”
On the flip side of Facebook is the mining industry. I say “flipside” because Facebook is something that is perceived to be indispensable yet isn’t and the mining industry is viewed to have zero necessity at all but actually will be seen as the foundation to the global financial system after the great unwind. The market caps of the entire global precious metals mining industry is roughly $300 billion or double that of the single company Facebook.
Since 1990 there have been several major currency crashes throughout the world.
Consider the Mexican peso crash of 1994, when — in just 42 days — the value of the currency plummeted 39%.
Or in 1997 during the Asian Currency Crisis, when Thailand's currency — the Thai baht — lost 23% of its value in just 25 days... and then lost another 41% of its value in the following six months.
But these weren't isolated events...
The same thing happened in Brazil in 1996... in Russia in 1998... in Argentina in 2001... in South Korea in 2007... and in Iceland in 2008.
Each time, tens of millions of people were affected.
What Will Happen to the US Dollar?
But it is tough to say when people will turn their backs on the dollar. The best things that ever happened to the US dollar were the Yen, the Euro, and the Pound. They are all basket cases.
I am not confident at all with regards to the value of these currencies.
In previous bear markets, such as 1973-74, I moved myself and my subscribers into cash, and all seemed well. In this bear market, I’m puzzled as to where safety lies. I have picked gold and silver … Time to repeat the Lord’s prayer with conviction. It’s no fun writing an advisory report at this juncture.
Question -- will Janet Yellen pursue the same course that Ben Bernanke has chosen? Or will she finally take the Fed's heavy hand off gold? My guess is that she will follow in Bernanke's path and manipulate gold while continuing to print Federal Reserve notes by the trillions.
One amazing thing about a primary bear market is that it tends to expose all cheating and lying and criminal activity. As Warren Buffet put it, when the tide runs out at the nudist camp, the bathers can finally tell the men from the women.
Following the great crash of 1929, the market rallied into 1930 in a huge upside correction of the crash. The Dow hit a high in January, backed off during the month of February and then rallied to a second lower peak in March. Following its second lower peak, the Dow resumed its bear market action and headed persistently lower. It was here that the US economy started to fall apart in earnest.
If Bernanke understood markets he'd understand why he's now fighting a losing battle with the US economy. By spending trillions of dollars at the 2009 lows, the Fed was able to trigger a huge and overdue upward correction of the crashing primary bear market. Thus, the bear market was temporarily held back.
Sales of gold coins by the U.S. Mint rose 63 percent in January to the highest since April as futures rebounded.
The volume climbed to 91,500 ounces from 56,000 ounces in December, while sales of silver coinsalmost tripled to 4.78 million ounces, the highest in a year, mint data showed yesterday.
In January, gold futures rose 3.1 percent, snapping a four-month slump, as a rout in emerging-market currencies increased demand for the metal as a haven. Mints from the U.S., the world’s biggest, toAustralia boosted sales with Austria’s Muenze Oesterreich AG operation running 24 hours a day to meet a surge in demand.
“Any kind of uncertainty attracts people to gold,” Scott Carter, the chief executive officer of Los Angeles-based Lear Capital, said in a telephone interview. “The long-term buyers accumulate gold every time there is a drop.”
One of the world’s largest money mangers, Mohamed El Erian, just quit, while three bankers apparently committed suicide this week.
One former Deutsche Bank executive, William ‘Bill’ Broeksmit, was found dead after police received reports of a man found hanging at a London house.
Later that day, JP Morgan tech executive Gabriel Magee fell to his death from the bank’s London headquarters. Those close to who him where shocked, citing there was absolutely no indication that there might be anything in his private or professional life that would’ve cause him to take his life.
A few days after the deaths of the two London finance workers, former Fed member and chief economist at Russell Investments, Mike Dueker, was also found dead after falling from a 50-foot embankment. Pierce County Detective Ed Troyer said the death appeared to be a suicide.
Last week, a U.K.-based communications director at Swiss Re AG – the world’s second-largest reinsurer with focus on risk transfer, risk retention financing, and asset management, died. The cause of death has not been made public.
On Monday, the Russian Central Bank issued a statement warning that virtual currencies, or “money surrogates” are illegal under Article 27 of the Federal Law “On the Central Bank of the Russian Federation”.
This is, of course, directed at Bitcoin users. First China, now Russia. Whose next?
Meanwhile, according to Bloomberg via Zerohedge, ‘My Bank’ – one of Russia’s top 200 lenders by assets – has introduced a complete ban on cash withdrawals until next week. In other words, if you have money there, you can’t take it out.
It has now come to light that the Russian Central Bank has now shut down the My Bank. It has also shut down Moscow-based lender, Priroda Bank.
Den disponibla inkomsten i USA minskar och samtidigt är det färre som arbetar och drar in till skattekistan. Var skall tillväxten komma ifrån. Tillväxt skapas utifrån
1) Dom reala lönerna ökar konstant och bidrar till ökad efterfrågan. Ser vi ej.
2) Fler arbetar och skapar mer köpkraft. Ser vi ej.
3) Kreditexpansion vilket leder till ökad efterfrågan. Ser vi ej.
4) Produktivitets förbättringar vilket leder till bättre och billigare produkter. Ser vi fortfarande.
Man har dessutom använt sig av noll ränta och pengatryckning under de senaste fem åren vilket inte hjälpt till att få punkterna 1-3 och gå åt rätt håll.
Allt tyder på att ekonomin är på väg åt helt fel håll och det kan bara sluta med att systemet måste göras om och att skuld bubblan spricker.
Perhaps the only question we have after seeing the attached table, which shows that as of Q3, 2013 JPMorgan owned $65.4 billion, or just over 60% of the total notional ($108.2 billion) of all gold derivatives in the US, is whether the CFTC will pull the "our budget was too small" excuse to justify why it allowed Jamie Dimon to ignore any and all position limits and corner the gold market?
And purely as a reference point, the chart below compares the total value of gold held in JPM’s vault (registered and eligible) as of Friday’s closing price with its reported gold derivative notional holdings.
Finally, for the purists out there, we realize that gross is not net… until there is a breach in the derivative counterparty collateral chain, and gross becomes net.