Monday, 27 March 2017

Gold & Silver Soar After The Fed’s Clown Show


The Federal Reserve’s FOMC predictably nudged the Fed Funds rate up 25 basis points (one quarter of one percent) to set its “target” Fed Funds rate level at .75%-1%. Nine of the faux-economists voted in favor of and one, Minneapolis Fed’s Neil Kashkari, voted against the meaningless rate hike.

Or is it meaningless? Ex-Goldman Sachs banker Neil Kashkari was one of the Treasury’s Assistant Secretaries when the Government made the decision to bail out Wall Street’s biggest banks with nearly $1 trillion in taxpayer money. It was also when the Fed dropped the Fed Funds rate from about 5% to near-zero percent. Despite Yellen’s official stance that the economy is expanding and the labor market is “tight” (with 37% of the working age population not considered part of the Labor Force – a little more than 94 million people) Kashkari voted against the tiny bump in interest rates. This is likely because he is fully aware of risk to the banking system – perched catastrophically on hundreds of trillions in debt and derivatives – of moving interest rates higher.

The Fed’s goal is to “normalize” interest rates. The financial media and Wall Street analysts embrace and discuss this idea of “normalized” interest rates but never define exactly what that means. For the better part of the Fed’s existence, the “rule of thumb” was that long term rates (e.g. the 10-yr Treasury rate) should be about 3% above the rate of inflation. And the Fed Funds rates should be equal to or slightly above the rate of inflation.

Using the Government’s highly rigged CPI index, it implies the Fed Funds rate would be “normalized” at approximately 2.7% and the 10-yr bond around 6% based on Wednesday’s CPI report. Currently the Fed Funds rate is 3/4 – 1% and the 10-yr is 2.5%. Of course, since the early 1970’s, the CPI calculation has been continuously reconstructed in order to hide the true rate of price inflation. For instance, the current CPI index does not properly account for the rising cost of housing, education, healthcare and automobiles.

John Williams’ of Shadowstat.com keeps track of price inflation using the methodology used by the Government to calculate the CPI in 1990 and 1980. Using just the 1990 methodology, the rate of price inflation is 6.3%. This would imply that a “normalized” Fed Funds rate would be around 6.5% and the 10-yr bond yield should be around 9.5%. So much for this idea of “normalizing” interest rates. Using the Government’s 1980 CPI methodology, Williams calculates that the stated CPI would be 10.3%.

Most of the hyperinflated money supply has been directed into stocks, bonds and real estate. But based on the cost of a basket of groceries, healthcare and housing alone, price inflation is accelerating. If the Fed were to “normalize” interest rates at 6.3%, it would crash the financial and economic system. In other words, the Fed is powerless to use monetary policy in order to promote price stability, which is one of its mandates.


Friday, 24 March 2017

The Demise of the Gold and Silver Bull Run is Greatly Exaggerated

A few analysts are once again beating the drums for much lower gold and silver prices - supposedly just around the corner. They mistake the testing of a recent breakout for a turnaround in the main trend. In the process, they are sowing confusion. Here are some charts that show the main trend, along with reasons why the price of gold and silver is on track for a sharp rise, thanks to bullish fundamentals.


In view of the fact that we expect mining stocks tolead the way, we will start with the HUI index of gold miners. Price has just finished a test of the January 2017 breakout. The green arrow points to confirmation of the uptrend that began at the blue arrow. This is referred to as an ‘ABC bottom”. The target for this breakout is 365. The supporting indicators are positive with room on the upside. 


This chart, courtesy of Goldchartsrus.com, shows the long-term trend in the US rate of inflation, along with the short-term trend in red. Both long-term and short-term rates are rising. This trend provides energy for gold and silver to rise.


Featured is the long-term gold chart in log format. Price has found support at the 150 month moving average. A breakout at the $1300 level will be very bullish and will set up a target at $2100.


Featured is the US dollar index. Price appears to be carving out a 'head and shoulders' pattern. The set-up will be confirmed in the event of a breakdown at the purple arrow. The target for this potential breakdown is at the green arrow. Gold and silver can be expected to benefit in the event. The supporting indicators are negative.

- Source, Sprott Money, Read the Full Article Here

Saturday, 18 March 2017

Canada Flagged For Recession By BIS

As if Canadians needed more proof that the country’s real estate is in a bubble, and that this misallocation has spread to other sectors of the economy, the Bank of International Settlements released its latest quarterly confirming what any critical observer can see: binging on debt is rarely a good idea.

Canada’s debt-to-GDP gap is widening and even the central bank of central banks is concerned.

The BIS uses its credit-to-GDP analysis as an indicator and predictor of troubling economic waters. They claim successes in predicting financial crises in the United States, England and a few other economies. Generally speaking, according to the BIS, when a country’s credit-to-GDP gap is higher than 10% for more than a few years, a banking crisis emerges which is followed by a recession.

Canada entered that territory in 2015, warmly welcomed by the Chinese who’s debt-to-GDP gap has put them in the danger zone for at least the last five years.

In another parallel universe, perhaps Canadian authorities took the correct measures to counteract this high credit-to-GDP gap or to even prevent it from getting this out of control. But in our reality, we kept trudging across the tundra, mile after mile, pushing our credit-to-GDP gap up to 17.4%.

China’s “basic dictatorship” means they can turn their economy around on a dime, or so goes the thinking. Perhaps they will better absorb the economic slap in the face compared to Canada’s relatively freer market and less dictatorial government.

Still, both countries have a massive real estate bubble. In China, entire cities are centrally planned and built by government-connected contractors only to house absolutely nobody.

Wealthy Chinese families, witnessing the crony-capitalist chaos and subsequent malinvestments, have taken their hard-earned cash and moved it overseas. Enter stage-right the true north strong and free enough. Foreign speculation has helped drive up real estate prices in places like Vancouver and Toronto.

Of course, despite the pandering of Vancouver’s local politicians to angry locals that have been priced out of their home markets, foreign buyers are not the sole cause of Canada’s housing bubble and may in fact have little if anything to do with it.

Foreign speculation on Canadian real estate is to Canada’s housing bubble what subprime mortgages was to America’s infamous bubble. It’s more of an effect than a cause.

So what is the cause?

Don’t look to the BIS to own up to the disastrous and downright criminal actions of central banks around the world.

They’ve identified the disease of debt, but they’re mum on the cure as well as where all this speculative credit is coming from.

The Bank of Canada revealed that Canadians have taken on $2 trillion dollars in consumer debt. And while large numbers like these are thrown around a lot in the age of low interest rates, deficit spending and quantitive easing, it helps to have some perspective. It takes 31,709 years to count to one trillion. Now multiply that by two.

71.6% of that $2 trillion consumer debt is in mortgages. The BIS warns that large debt binges like this are almost always followed by a proportional recession. Thus, Canada has been flagged for bad times in 2018.

Of course, one doesn’t need the BIS’ empirical analysis to arrive at these conclusions. Following the sound economic logic of Mises and Rothbard not only reveals exactly what’s going on here but how we got here, what to do about it, and how to avoid it in the future.


Wednesday, 15 March 2017

Here Is What You Need To Know Ahead Of Tomorrow’s Fed Rate Hike

With markets awaiting the interest rate decision, here is what you need to know ahead of tomorrow’s Fed rate hike.

Here is what Peter Boockvar wrote today as the world awaits the next round of monetary madness: The February NFIB small business optimism index moderated a touch to 105.3 from 105.9 in January and vs 105.8 in December. It still though is pretty much holding its gains post election where the October print was 94.9 and November saw 98.4. There is one very important component that has not seen any improvement and that is plans for Increased Capital Spending which stands at 26% vs 27% in January and 27% back in October. This number touched 40 multiple times in the late 1990’s and the mid 30’s in the mid 2000’s. Likely companies are still waiting for what the tax reform will look like or maybe with capacity utilization sitting at 75% vs the historical average of 80% we still have an easy money driven overcapacity overhang…

Looking elsewhere within the report saw Plans to Hire fall 3 pts to 15%, the same level as November but up from 10% in October. Plans to Increase Inventory rose 1 pt to 3% but that’s not much different than the 2% seen in October. Expectations is where the real optimism still is as those that Expect a Better Economy sits at 47%, down 1 pt m/o/m but up from -7% in October. Those that Expect Higher Sales dropped 3 pts to 26% but was at 1% in pre election. Those that said it’s a Good Time to Expand was down by 3 pts to 22% but higher by 13 pts post election. The Positive Earnings Trends component fell 1 pt and still remains negative at -13% but up 8 pts from October.

Inflation

On the inflation front, Higher Selling Prices was up 1 pt to 6% which matches the highest since December 2014 and up from 2 in October. On the wage side, current Compensation Plans fell 4 pts to 26% after rising by 4 pts in January and not much different than the 25% seen in October. Future Compensation Plans also hasn’t changed much as it sits at 17% vs 19% in October and 14% in September. There remains the issue of finding qualified employees as job openings Not Able to Fill is at the highest level since December 2000 which provides hope that wages will improve from here.

To this last point, the NFIB said “Many small business owners are being squeezed by this historically tight labor market. They are not confident enough to raise prices on consumers, which limits how much they can increase compensation and makes them less competitive in attracting qualified applicants.” This also helps to explains the very low level of jobless claims. The NFIB said the 2nd biggest problem of small business is “finding qualified labor”, ahead of regulations, weak sales and insurance costs. Taxes is the top problem.

Reflecting the rise in LIBOR which sits at the highest level in 8 years, “The percent of owners reporting paying higher interest rates on their last loan jumped 7 pts to 11% in January and held at 9% in February, after averaging less than 2% since the recovery started in 2009.”

Hope

Bottom line, hope is what has driven the optimism but actual economic improvement has been more modest. The NFIB CEO made clear that “The sustainability of this surge and whether it will lead to actual economic growth depends on Washington’s ability to deliver on the agenda that small business voted for in November. If the health care and tax policy discussions continue without action, optimism will fade.” We will get this reform in some fashion I’m very hopeful but the market expectations bar is very high.

With the US 10 yr yield sitting at its highest level since September 2014 at 2.62%, Bill Gross we know is of the opinion that this is the breaking point that separates the end of the bond bull market or not (I believe it’s over and my readers know I’ve been saying that since August/September).

Overseas

Sovereigns in Europe and Japan are also testing their recent high yields today. The JGB 40 yr yield is just 1.5 bps from a 13 month high. The German 10 yr yield is 1 bp from a 14 month high and the French 10 yr yield is 2 bps from a 1 ½ yr high. I remain bearish on these bonds.

We saw some mixed data out of China overnight where authorities combined the January and February levels in order to take out the Lunar holiday distortion. Retail sales in February ytd rose 9.5% y/o/y, below the estimate of 10.6%, down from 10.4% seen in December and the slowest pace of gain since December 2003. The blame is being attributed to a drop in auto sales y/o/y because of a new tax on small cars and off a higher base last year. Industrial production grew by 6.3% ytd y/o/y, a hair above the estimate of 6.2% and up from 6% in January. Also out was fixed asset investment ytd y/o/y which grew by 8.9%, a quicker pace than the 8.3% that was forecasted. Bottom line, fixed private investment and property continued to lead the Chinese growth but I’ll say for the umpteenth time, I have no idea what’s temporarily stimulus driven and what is organic. The Shanghai comp was unchanged but the H share index was higher by .6% after jumping by almost 2% yesterday.

Of note in Europe was the German ZEW March economic confidence expectations index rose to 12.8 from 10.4 last month, vs 16.6 in January and about in line with the estimate of 13. It stood at 6.2 in October. Current conditions did match a nearly 6 yr high. The comments from ZEW were somewhat mixed: “The fact that the ZEW Indicator of Economic Sentiment only shows a slight upward movement is a reflection of the current uncertainty surrounding future economic development. With regard to the economic situation in Germany, no clear conclusions can be drawn from the most recent economic signals for January 2017. While industrial production and exports witnessed a positive development, the figures for incoming orders and retail sales were less favourable. The political risks resulting from upcoming elections in a number of EU countries are keeping uncertainty surrounding the German economy at a relatively high level.” We can add the possibility of a BAT tax in the US to the list of uncertainties for German exporters. The euro is down a touch with the DAX flat.

Ahead Of Tomorrow’s Rate Hike

Ahead of the Fed hike tomorrow we see PPI today and CPI tomorrow. The energy driven headline number is expected to result in a 2.7% print tomorrow. I include one more chart before we hear from the FOMC. It is C&I loans and we can see clearly that they’ve plateaued here. Why? I’m not exactly sure yet.

- Source King World News

Thursday, 9 March 2017

White House Daily Briefing, Sean Spicer - Vault7, WikiLeaks, CIA, Budget Blueprint, Border Crossings...


In this daily White House briefing, Sean Spicer discusses recent news affecting the President of the United States and his administration, such as the reduced illegal border crossings, the recent CIA hacks by Wikileaks, Vault7 and Trumpcare.

- Source

Friday, 3 March 2017

GATA Chairman On Silver MASSACRE: We Know Who Did It and Why


Murphy reveals why shares were slaughtered ahead of today’s silver BOMBING, and why this is leading to something spectacular in the silver market…

A big move is coming and almost no one is prepared for it.

- Source, SD Bullion

Monday, 27 February 2017

Jeff Clark - Silver Demand Facing a Seismic Shift


Which precious-metal hungry nation's government has declared a war on cash & gold which is driving a seismic shift into silver, and will this demand overwhelm the world's razor-thin supply to skyrocket the physical silver market? Jeff Clark, Senior Precious Metals Analyst at GoldSilver.com, returns to Reluctant Preppers to weigh in from the Silver Screen to the Silver Skyrocket we can watch for​ going forward!


Friday, 24 February 2017

Einhorn Shorts Sovereigns, Affirms Gold on Trump Uncertainty

Hedge fund manager David Einhorn is betting on declines in government debt and a rebound in gold to guard against the risk of inflation under President Donald Trump.

“We made several changes to the macro portfolio in response to the election,” Einhorn said Thursday in a conference call discussing results for Greenlight Capital Re Ltd., the Cayman Islands-based reinsurer where he is chairman. “It was various long positions in sovereign fixed income that we eliminated. We added some additional shorts in sovereign fixed income, and we added to our long equity exposure.” He didn’t specify which nations’ debt he was betting against.

Einhorn is seeking to extend a rally in the investment portfolio of Greenlight Re, which said late Wednesday that it posted back-to-back quarterly profit for the first time since 2013. The portfolio was helped in the last three months of 2016 by bets on General Motors Co. and Japanese bank Resona Holdings Inc., while gold was a weak spot.

Still, “our long-term outlook remains bullish,” for the metal, Einhorn said. “The new administration comes with a high degree of uncertainty, and its policy initiatives appear to be focused on stimulating growth and, with it, inflation.”

General Motors shares jumped almost 10 percent in the fourth quarter and rallied further this year. He said the stock is still undervalued, citing misplaced concerns about the eventual shift to driverless cars.

The stock will continue to climb, “especially if employment strengthens and translates into higher wages,” he said.

Einhorn said the reinsurer’s investment portfolio slipped by about half a percent in January. Greenlight Re climbed 5 cents to $23.35 at 4 p.m. in New York, extending its advance to 2.4 percent since Dec. 31.

The company is seeking to improve insurance underwriting results and is looking for a new chief executive officer after saying in December that Bart Hedges will step down this year.

- Source, Bloomberg

Tuesday, 14 February 2017

THIS Is Why The Elite HATE Trump So Much

Have you ever wondered why the elite hate Donald Trump so much?

There have certainly been many politicians throughout the years that have been disliked, but with Trump there is a hatred that is so intense that it almost seems tangible at times. During the campaign, they went to extraordinary lengths to destroy him, but it didn’t work. And now that he is president, the attacks against him have been absolutely relentless. So why is there so much animosity toward Trump? Is it just because he is not a member of their club?

The truth, of course, is that it runs much deeper than that. Ultimately, the elite hate Trump because he is opposed to their demonic one world agenda. Many among the elite are referred to as “globalists” because their eventual goal is to unite the whole world under a single planetary system. These globalists truly believe that they know better than all the rest of us, and they want to impose their way of doing things on every man, woman and child on the entire planet.

So they get really angry when Donald Trump talks of “building a wall” or establishing a travel ban from certain countries because they eventually want a world without any borders at all.

And they get really angry when Donald Trump says that he wants to pull the United States out of international trade deals, because the elite were using those international trade deals to slowly integrate all nations into a single one world economy.

And they really don’t like when Donald Trump criticizes Islam, because Islam is going to be a key component of the one world religion that they plan to establish.

For quite a while the globalists were on a roll, but recently they have experienced some tremendous setbacks. Britain’s vote to leave the EU and the election of Donald Trump were not supposed to happen, and this has left many globalists searching for answers. In fact, just today I came across a New York Times article entitled “Besieged Globalists Ponder What Went Wrong“…

Until recently, you didn’t hear people being referred to as “globalist” very often. But in a time of rising nationalism, those who see the upside of globalism have become a distinct — and often embattled — tribe.

Last week, the globalists had a big family reunion in New York. The gathering was focused on the United Nations General Assembly, but a growing array of side conferences and summits and dinners also attracted concerned internationalists of every stripe: humanitarians, leaders of nongovernmental organizations, donors, investors, app peddlers, celebrities.

As you can see, even the New York Times uses the term “globalists” to describe these elitists.

At one time you would have been considered a “conspiracy theorist” is you spoke of “globalists”, but at this point the elite are not even trying to put up a facade any longer.

And of course Donald Trump made opposition to globalism one of the central themes of his campaign, and it really struck a chord all across America. As Dr. Jim Garlow noted in an article that went viral just before the election, Trump’s opposition to globalism was one of the key things that set him apart from Hillary Clinton…

Trump opposes globalism. Hillary thrives on it. Globalism is far more than “geographical” or “eliminating national borders and boundaries.” It is spiritual and demonic at its core.Few—very few—understand this. This is quite likely one of the main reasons why Trump is hated. Do your homework on this one. Think “principalities and powers.” Serious. Extremely serious.

The reason why the threat of globalism is so serious is because if a single global system is ever established there will be no escape from it.

Just think about it – where could you go to escape a government that literally rules the entire world?

These globalists are completely convinced that if they could just get control of everyone and everything that they could establish some sort of environmentally-friendly socialist utopia where war and poverty are eradicated. But in order to do that, they would need to be in a position to micro-manage the lives of every single person on the planet.

In their minds it would not be tyranny, but for those of us that love freedom that is precisely what it would be.


Friday, 10 February 2017

London Analyst Issues Dire Warning: Trump Could Trigger A Great Depression


In This Exclusive Interview, London Analyst Alasdair Macleod Issues A Dire Warning: If Trump Fails to Learn THIS, He Will Lead America Into A Repeat of the Great Depression…

Since the beginning of the year, gold and silver have been some of the best-performing assets. London Analyst Alasdair MacLeod joins SD to discuss the recent price action in the precious metals markets. MacLeod sees inflation to be the story in 2017, which means higher prices for gold and silver.

MacLeod says Trump is missing the fundamental reason behind trade imbalances. The solution to trade imbalances is sound money.

Macleod Warns If Trump fails to learn this, he will lead America into a repeat of the Great Depression…

- Source, Silver Doctors

Tuesday, 7 February 2017

Shock Poll Shows Merkel Losing Chancellorship If Elections Held Today; JPMorgan Stunned

Overnight we reported that Germany's default swaps spiked to the highest level since Brexit as a recent poll showed that Merkel's lead in the polls had slid to multi-year lows ahead of Germany's elections later in the year, provoking some concerns that a formerly unthinkable "tail risk" outcome was becoming more likely. 

However, according to new data unveiled today, Merkel's headaches are only just starting, because in a brand new poll released this afternoon, the CDU would get 30% of the vote, while the suddenly resurgent SPD would get 31%. This means that the SPD's new head, Martin Schulz, would enter any coalition talks as the leader of the largest party, hence becoming Chancellor, leading to a stunned reaction by JPMorgan.


In a note released this afternoon by JPM's Greg Fuzesi, the strategist writes that following the recent resignation of Sigmar Gabriel as leader and chancellor candidate of the SPD, there has been much attention on how his replacement Martin Schulz would perform. Having spent most of his career in the European Parliament, most recently as its president, and being relatively unknown in Germany, this is not easy to predict. In his first major TV interview, he was recently pressed to explain how exactly he differs from his predecessor Gabriel and also from Chancellor Merkel, and what his focus on fairness would mean in practice. This was not entirely straightforward for him.

Nevertheless, opinion polls were beginning to show a bounce last week and this appears to be continuing.

This afternoon, a new opinion poll from INSA showed the SPD gaining further support and overtaking the CDU/CSU for the first time in many years. If elections were held now, the INSA poll suggests that the CDU would get 30% of the vote, while the SPD would get 31%. This means that Schulz would enter any coalition talks as the leader of the largest party, hence becoming Chancellor.




It also means that a SPD-Green-Left coalition would currently win exactly 50% of seats, so that a government without the CDU/CSU could even be possible. In effect, the SPD has gained 10%-pts of support in past two (weekly) INSA polls, taking votes away from all other parties (see second chart below). Interestingly, the AfD has also suffered a significant decline.




Given that Schulz is relatively new to German politics, a novelty factor may be partly responsible for the jump in the polls. It is far too early to say whether this will endure, given that the election campaign has yet to properly begin. It will also be important to see whether other polls replicate the swing. The SPD has gained support in all recent polls, but these are all a week or more old and do not show the latest jump in the INSA poll. That said, there is no reason to dismiss the INSA poll. It is the newest organization and the only one to be done entirely online, but it (arguably) performed only marginally worse than other polls at the last Bundestag election.

A Schulz-led SPD-Green-Left coalition or a Schulz-led grand coalition would certainly be a huge event in German politics. Such possibilities no longer look like tail risks. A SPD-Green-Left coalition would bias German policymaking towards greater fiscal expenditure and investment, and center-left policies. But, even such a coalition would not mark a dramatic break with the past in many areas and would, we expect, continue Germany’s strong support of the EU and single currency.

In short, "Chancellor Schulz" may be just what Brussels, and to a lesser extent President Trump, ordered.

- Source, Zero Hedge

Friday, 3 February 2017

How Will Trump’s Border Tax Affect the Price of Silver?



You know, I don’t think it really would have much impact on very much. I mean, look, Mexico is having some challenges right now for sure, you know, with energy prices so low. The revenue is going into…the government Treasuries are lower than it is or it has been historically. So, you know, they have gone after the mining sector, you know, we know that. I think everyone listening to this knows that the tax was brought into place back in 2014. 


We’re paying that tax. It’s just basically normal course. If you compare it to other countries around the world, Mexico is about in the middle when it comes to taxation industry. 

So it’s a relatively low-cost country to be active in as a company. You know, with the peso the way it is, labor is extremely cheap. The peso is around 23 to 1, which is, you know, pretty good for us as our revenue is in U.S. dollars and 75% of our costs are in pesos. And the peso was about 12 to 1 just two years ago. 

It’s now 24 to 1 or 23 to 1. So it’s made a huge difference for us. So, you know, I’m not expecting much change in Mexico as a result of Trump coming in at all.

- Source

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