Sunday, 28 September 2014

Gold - The End Of The Bottoming Process


In a special reprise edition of FS Insider, Jim welcomes Ronald Stoeferle CMT, CFTe, Managing Director at Incrementum AG to discuss his eighth annual “In Gold We Trust” report. Ronald likes the fact that the consensus considers the gold bull market over.

- Source, Financial Sense

Friday, 26 September 2014

I Blame The Central Banks

Chris Martenson, Http://PeakProsperity.Com
The current bubbles in financial assets -- in equities and bonds of all grades and quality -- raging in every major market across the globe are no accident.
They are a deliberate creation. The intentional results of policy.
Therefore, when they burst, we shouldn't regard the resulting damage as some freak act of nature or other such outcome outside of our control. To reiterate, the carnage will be the very predictable result of some terribly shortsighted decision-making and defective logic.

The Root of Evil

Blame can and should be laid where it belongs: with the central banks.
They were the "experts" who decided to confront the excesses of decades past (which saw borrowing running at roughly 2x the rate of real economic growth) with even easier monetary policies designed to spur even more borrowing.
Rather than take stock of the simple fact that nobody can forever borrow at a faster rate than their income is growing (no matter how large that entity may be), the Fed, the ECB, the BoJ and the BoE have conveniently overlooked that simple fact and then boldly claimed that the cure is identical to the disease.  If the problem is debt then the solution is even more debt.
If the Fed, et al. were doctors, they would prescribe alcohol to the alcoholic. They would administer more lead to the lead-poisoned patient. They would call for more water to put in the pool where a drowning individual is floundering.
The bottom line is that the Fed and its ilk made the disastrous decisions that gave us the first two burst bubbles of the new millennium. And the wonder of it all is that, instead of being met at the gates with torches and pitchforks and held to account for their errors, they have instead been granted even greater powers, less oversight, and practically zero blame.
And now they’ve given us a third and, I suspect, final bubble. By which I mean I think the effects of this bursting bubble will be so horrendous that a hundred years might pass before people will again be in the mood to speculate on fantasy wealth.
My hope is that, when this third bubble pops, the figurative (and, perhaps, literal?) torches and pitchforks come out. Finally forcing the central banks to answer to the public for their grievously poor decisions.
And yes, the investing public also bears a portion of the responsibility for playing along with the central banks. For years, some have consoled themselves with stories about how This Time Is Different, and many have ignored many obvious warning signs as they've enjoyed stock market and bond gains fueled by seemingly limitless liquidity.  
But in the end, it's the central banks that  set the tempo and the melody at the dance hall.  When they flood the world with liquidity and set interest rates to 0%, they enforce a Hobbesian choice: either play along in the risk markets, or sit in cash earning less than nothing as inflation eats away at your purchasing power.
The central banks are entirely to blame for mis-pricing money and that is the fundamental error that drives every bubble and betrays capital into hopeless investments.
So let’s all remember to place blame where it is due when the bubble bursts. We shouldn't act surprised because there’s really no honor in being caught unawares by something so obvious.

The Biggest Bubble(s) Of All Time

We’ve covered the equity bubble in the past, but today we’re going to cover the bond bubbles (yes, plural) because the current excess in the bond market is the granddaddy of them all, and is far larger than anything ever recorded in history by a very wide margin.
But for the sake of completeness, regarding equities, if you ever wanted to get the willies about the stock market in a single chart, I think this one from Doug Short of Advisor Perspectives which plots the relationship between equity prices and margin debt is about as good as it gets:
Margin debt is simply money borrowed to buy equities.  Typically speaking, an average investor with $100,000 in an account can buy up to $150,000 worth of stock. Margin debt is fuel to a rising market and a lead anchor for a falling market. 
Yes, perhaps this time is different, or perhaps it’s exactly the same with speculators borrowing more and more as stock prices rise, sure in the knowledge that they will be smart enough to get out of the way of a falling market (this time).
But, enough of Material We've Covered here recently. Back to bonds.
When the bond bubble bursts, so much that people believe to be true will be revealed to be obvious and distressingly ordinary illusions.
When there’s simply too much debt, in the period leading up to a debt bubble's bursting, everyone is counting on getting paid his or her money back, both the interest and the principal. After the bubble bursts, it’s plainly obvious that no such thing will be happening.
As is always the case with bubbles (of any sort), the only important question that needs to be answered is: Who will take the losses?
One simple answer to that question is: Whoever is holding the bonds when the bubble bursts.
Bubbles are structured like a game of hot potato. When the timer finally dings, the person holding the potato loses. It doesn’t matter one whit whether the 'hot potato' was a tulip bulb, swamp land, a house in Las Vegas, or a paper financial security.
The really striking part about the global bond markets today is that the potatoes have never been more numerous, or hotter.
I suppose this would be a good time to revisit how Einstein defined insanity: trying the same thing over and over again and expecting different results.
Unfortunately for those hoping for a different outcome, history is 100% consistent on the matter: Bubbles always burst. And when they do, what people thought was fabulous wealth is proven illusory, and it simply vanishes.
Not that this clear historical record is keeping humans from trying to cheat the odds.
Given that the Fed has engineered three increasingly larger bubbles within an unprecedentedly-short fifteen-year time span, perhaps we shouldn't persecute them. After all, they may easily be able to plead 'not guilty' by reason of insanity.

$100 trillion – is that a lot?

We frequently throw around big numbers in our analysis. We even try to explain them in terms that help us mentally grasp an appreciation of their enormity (watch the video How Much Is A Trillion?, as an example). But the size of the bond market across the developed world defies even our best efforts.
After all, if $1 trillion dollars is a stack of $1,000 bills 68 miles high, then I guess $100 trillion would be a stack 6,800 miles high:
Mar 9, 2014
The amount of debt globally has soared more than 40 percent to $100 trillion since the first signs of the financial crisis as governments borrowed to pull their economies out of recession and companies took advantage of record lowinterest rates, according to theBank for International Settlements.
The $30 trillion increase from $70 trillion between mid-2007 and mid-2013 compares with a $3.86 trillion decline in the value ofequitiesto $53.8 trillion in the same period, according to data compiled by Bloomberg.
The jump in debt as measured by the Basel,Switzerland-based BISin its quarterly review is almost twice the U.S.’sgross domestic product.
Note that global debt climbed by $30 trillion between 2007 and 2013, a 42% increase while global equities actually declined a few trillion (to $54 trillion), yielding a global debt-to-equity ratio of almost 2. [Note: Global equities are nowValued At $66 Trillion and are pouring on almost $1 trillion/week lately. Of course, they have a habit of going down, from time to time, even more quickly than they rise.  Something that is easy to forget in today's environment]
So, a 42% increase in just 6 years. Did global GDP advance by 42% during this same period? No. Not even close.
Did private companies borrow all that money planning to plow back into productive enterprises? Nope. Companies borrowed relatively little of $30 trillion, and even then, they mainly used that newly-borrowed money to buy back shares and/or stash it on their balance sheets.
Who did borrow all that money then?
Why, nations did. Sovereign entities that were desperate to keep things afloat and borrow heavily (because private concerns weren't able to take on new debt fast enough). 
Why? Because the world's debt pile must keep expanding. That's the world we live in today. If the pile should start to contract, the game of Who Will Take The Losses? begins. And governments know (sometimes consciously, sometimes subconsciously) that the debt bubble has become so monstrous, and so interconnected globally, that even a moderate correction will wipe out so many players that the world financial system will be brought to its knees. Or worse.
In Part 2: Something Very Wicked This Way Comes, we provide great detail into why sovereign and corporate (both high-grade and junk) debt markets simply and mathematically must contract. Current prices are so historically divorced from fundamentals at this stage that this 'prediction' is about as elementary as counting on gravity to bring a tossed stone back to earth.
Given the excesses of the stock and bond markets I am increasingly concerned that this next bubble burst will be far worse than any that has yet come since I've been alive. Countries will fail financially and economically, political upheaval will follow, fortunes and dreams will be shattered, and lots of people will lose their jobs.
In short, lots of things will break and cease to function as the greatest wealth transfer in all of history plays out.

Sunday, 21 September 2014

Ukraine Admits Resurgent Separatists Extend Control All The Way To Sea Of Azov

The Ukraine "ceasefire" may be raging, but don't tell that to the "rebel", "separatists", "pro-Russian terrorists" or whatever it is that the ethnic Russians in east Ukraine are called nowadays, because a few short hours ago even Kiev finally admitted that the insurgency, with or without Russian backing, has finally hit the beach of the Azov Sea, which implicitly means that the only thing that is prevent the formation of a land connection from Russia to Crimea is the city of Mariupol, which as Ukraine reported overnight, it is now massing heavy weapons for what may be the most critical fight of the entire Ukraine civil war to date.

- Source, Zero Hedge

Friday, 19 September 2014

George Soros Warns "This Is The Worst Possible Time" For Scottish Independence

"This is the worst possible time for Britain to consider leaving the EU – or for Scotland to break with Britain. The EU is an unfinished project of European states that have sacrificed part of their sovereignty to form an ever-closer union based on shared values and ideals. Those shared values are under attack on multiple fronts. Russia’s undeclared war against Ukraine is perhaps the most immediate example but it is by no means the only one. Resurgent nationalism and illiberal democracy are on the rise within Europe, at its borders and around the globe."

- Source, Zero Hedge

Wednesday, 17 September 2014

Reason # 3 The Silver Noose is Tightening: A Perfect Storm for Mining

A Perfect Storm for Mining

While it may seem to some that mines might be able to continue producing the amount of silver they’ve been accustomed to producing well into the future, the truth is that these mines, especially primary silver mines, are starting to hit the silver wall of reality.


With the costs of petroleum and diesel soaring, ore grades plunging, and the price for their product free-falling, there’s a perfect, catastrophic storm brewing in the mining sector.
The banksters’ precious silver supply, despite all their efforts, is stagnant, and actually decreasing. They’re moving heaven (and twice as much earth) just to sustain this inadequate supply just.a.little.bit.longer.

The moment the metal stops, or even slows its flow in any reasonable quantity, is the moment the scheme comes crashing down. That’s a problem too, because the evidence is mounting that we are headed into a “peak silver” scenario.

It gets worse for our bankster friends massively short silver, much worse…

- Source, The Wealth Watchman, via The Silver Doctors

Monday, 15 September 2014

Reason # 2 The Silver Noose is Tightening

Humanity is returning to its long-lost silver roots: fiat currencies, both of the United States, and the world governments at large, have been compromised. They have long ceased to be a reliable stores of wealth, or an asset unto themselves. Fiat currencies are simply paper scrip, denoting the debt of a system of large, private banks. Whereas, silver has been money for thousands of years.

Everywhere you look, the trend is the same: people are awakening to the state of the world’s financial health, and are swapping their currencies for silver and gold. This goes counter to the interests and desires of these banks, who wish to keep their privilege of being the sole creators of these units of debt that people mistake for “money”. 

Silver is a direct threat to their debt/currency system, which is why they rig its price on a constant, perennial basis.
The problem is that their market rigging has created a world in which silver is just too cheap. Way too cheap.


Saturday, 13 September 2014

PM Fund Manager: The Bottom is In!

I think the best indicator that we are at a bottom is the attacks I have been getting via email, comments that I can’t post because they are so insanely idiotic and even on twitter. Frankly, given the degree of manipulation by the Fed-sanctioned banks and the anti-gold bias of the financial media, I am stunned that anyone would expect that my “bottom” call would be perfect to the day. Here’s an example of completely fraudulent propaganda coming directly from Wall Street. This was an email received by Dennis Gartman yesterday that he published in his daily newsletter today:

Interestingly we got an e-mail yesterday from an individual noting that he had been told by his brokerage firm that it was illegal to own gold in non-US dollar terms. This is nonsense; of course one can own gold in non-US dollar terms… otherwise the NYSE would be trading our ETFs… GYEN; GEUR, GGLD and GLDE illegally, or the CME would be illegally allowing us to be long of gold/short of the EUR, or the Yen or Sterling or any combination therefore. We are stunned by the nonsense that is sometimes so prevalent in the markets.”

THAT is what anyone who is trying time the precious metals market is up against. What’s ironic is that, when I ask any of the morons ridiculing me on my views to show me their market view/analysis, I get crickets in response.

I am standing by my call that we are at, or at least forming, a bottom in this vicious manipulated attack on the precious metals. I had taken some profits on some trading positions in my fund two weeks ago to raise some cash, knowing the end of August is one of the most manipulated times of the year, and I have been putting it back to work into every single stock for which I have posted research reports. Yesterday AND Friday.

Patience is the key because eventually manipulated markets – throughout all of history – end badly for the manipulators. George Soros has bet at least $2 billion on put options that the S&P 500 will experience a significant. Do you think he’s losing sleep on that bet? No, based on his history of betting against Government manipulation, I would bet good money that he added to his short bets over the past couple of weeks.

- Source, Dave Kranzler via the Silver Doctors

Thursday, 11 September 2014

Reason #1 The Silver Noose is Tightening

Time is running out for the banksters, not in spite of silver prices continuing to crater, but because of it!

There are just too many signs flashing from all directions, that the supply needed to run this massive con are not enough. There’s simply not enough silver available at sub-$20, to keep delivering to everyone in the world who wants it.

And who wants it? Everyone and their grandmother, that’s who!
This is particularly true in the realm of industrial usage, like the world’s newest crush: solar energy.

- Read More at The Wealth Watchmen

Thursday, 21 August 2014

David Stockman - The Collapse Of The American Imperium


David Stockman, former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier is an insider's insider. Few people understand the ways in which Washington DC, The Fed, and Wall Street work and intersect better than he does.

He's extremely concerned by the "perfect storm" he sees of concurrent failures in US policy across foreign, monetary, economic, and fiscal fronts.

- Source, Peak Prosperity

Monday, 18 August 2014

U.S. Housing Prices Now In A Decline

By Michael Lombardi, MBA for Profit Confidential


The S&P Case-Shiller 20-City Home Price Index, a measure of the Housing Market in key American cities, declined in May by 0.31% from April—the first monthly decline in home prices in 27 months. (Source: Federal Reserve Bank of St. Louis web site, last accessed July 30, 2014.)

The number of homes being built in the U.S. is also falling. In June, the annual rate of new homes being built in the U.S. housing market declined 9.3% from May to the lowest level in eight months. (Source: U.S. Census Bureau, July 17, 2014.)

And pending home sales in the U.S. housing market declined in the month of June by 1.1% from the previous month. Pending home sales now sit 7.3% lower than they were in June of 2013. (Source: National Association of Realtors, July 28, 2014.) Pending home sales are considered to be a leading indicator of the housing market.

As no surprise, companies directly related to the housing market are struggling. The chart below of the U.S. Housing Index tracks the stock prices of companies involved in construction, mortgages, and home-building materials.



Chart courtesy of Www.StockCharts.Com

Dear reader, please let me set the record straight: I don’t expect to see an outright collapse in home prices like we saw in 2007. What I am pointing out to you today is that the momentum we saw in the U.S. housing market in 2012 and 2013 is dissipating.

This observation is consistent with my view that the U.S. economy is stalling here in 2014. Even the stock market, a leading indicator, by turning negative for 2014, is warning us of trouble ahead.

Saturday, 16 August 2014

China’s Debt Soars To 250% Of GDP



But many analysts remain concerned about China's growing level of credit and the risks it poses to the country's economic health.

"People have been ignoring a lot of risks out of China; look at the property market, look at how fast bad debts have been showing up in the financial system," said David Cui, head of China equities at Bank of AmericaMerrill Lynch.

"Things have got so bad – it will probably take a financial crisis to cleanse the bad stuff out of the system – for the government to write off debt, to let banks raise more equity... and also severely reduce overcapacity," he added.

Earlier this year China experienced its first corporate credit default in 17 years sparking fears the incident could prompt a domino effect.

"I think there will be an avalanche of defaults coming out of the system. This is only the beginning," said Cui.

"The key issue is excessive capacity and overleverage when you combine these two factors it makes defaults almost inevitable," he added.

China's state auditor said in late December that local governments had outstanding debts of $3 trillion as of the end of June 2013, up 67 percent from the last audit in 2011.

Meanwhile country's corporate debt hit a record $12 trillion at the end of last year, Standard & Poor's estimated, equivalent to 120 percent of GDP.

China's debt to GDP level is still lower than other major world economies, however.

The U.S. had a total debt-to-GDP ratio of about 260 per cent by the end of last year, while the U.K.'s ratio was at 277 per cent. Japan topped the world table at 415 per cent, according to Standard Chartered.

Thursday, 14 August 2014

Rick Rule - This Gold Sell Off Is A Normal Event In This Market

“What Janet Yellen said was that the recovery was tepid at best – if we have a recovery at all. The political narrative dictates that low interest rates are needed in order to help the economy.

“My own belief is that interest rates will remain low in the next 18 months or 2 years, but for a different set of reasons. There isn’t much private demand for loans, even at this low interest rate. But there is an implicit transfer of wealth from savers, who benefit from higher interest rates, to spenders. It’s the spenders who are more numerous, which means that the government will look out for the spenders at the expense of the savers.

“Secondly, the extraordinary levels of Federal, State, and local debts would be difficult to service at higher interest rates. As a result, I think that the Fed will continue to do whatever it can in order to keep interest rates constrained for as long as possible. As long as the demand for debt from the private sector remains low – in other words, until the economy recovers -- I believe you will see artificially low interest rates.”

- Source, Rick Rule

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