October 23, 2012
Weak earnings, Moody’s downgrade of Catalonia (still apparently a part of Spain) and a time line introduced by the New York Times for Bernanke’s eventual departure in from the Fed in 2014 have created some negative stir in the market of stocks. I am sure my regular readers are prepared for come what may, including higher volatility and the potential for flashy crashy-ness in the stock market. The Price of gold is moving opposite of a firmer dollar, meaning gold is down $15 to $1711.
Junes for a little fun…
Mr. Gold, Jim Sinclair, is bullish long term on gold as am I: “There is another change coming which is a replacement monetary system and the need for some asset on central bank’s balance sheets to have positive value, especially in the USA. Soon all that is required is a change in spread management by the gold banks and you will have whatever price the gold banks want from $3,500 to $12,400.”
Read more here: Change in spread management by bullion banks will send gold prices to $3,500-12,400 says Jim Sinclair http://shar.es/c5ANY via @sharethis
More on Gold: FLASH: German gold report reveals secret sales that likely were part of swaps | Gold Anti-Trust Action Committee: http://www.gata.org/node/11851#.UIanrlUwGlM.twitter
From Zerohedge.com, this snippet….
“German Federal auditors handed in a report slamming the Bundesbank for not inspecting their foreign held gold reserves to verify their book value. The report says the gold bars “have never been physically checked by the Bundesbank itself or other independent auditors regarding their authenticity or weight.” Instead, it relies on “written confirmations by the storage sites.” The lion’s share of Germany’s gold reserves (nearly 3,400 tons estimated at $190 billion) are housed in vaults of the US Federal Reserve, the Bank of England and the Bank of France since the post-war days, when they were worried about a Cold War Soviet invasion. The Bundesbank stated, “There is no doubt about the integrity of the foreign storage sites in this regard”. In contrast with best industry practices Germany’s gold reserves do not seem to be independently verified by a third party. Philipp Missfelder, a politician from Merkel’s own party, has asked the Bundesbank for the right to view the gold bars in Paris and London, but the central bank has denied the request, citing the lack of visitor rooms in those facilities, German’s daily Bild reported. The Bundesbank won’t let German parliament members inspect the German gold vaulted abroad because the central bank vaulting facilities supposedly lack “visiting rooms.” And yet one of those vaults, the Federal Reserve Bank of New York, offers the public tours that include “an exclusive visit to the gold vault”.
MF Global is back in the news: Corzine, banks push to end MF Global fraud lawsuit http://implode-explode.com/viewnews/2012-10-23_CorzinebankspushtoendMFGlobalfraudlawsuit.html#.UIan6Sf69xk.twitter
Reminder: The MF debacle has shown us how the banksters can filch money from segregated accounts with the ease of taking candy from a baby. Chances are good that no rule of law prevails in this situation meaning that Corzine et al shall prevail. As long as society allows Corzine and friends to get away with committing alleged financial crimes nothing is safe from confiscation whether it be a 401k, retirement, futures, or other accounts that are part of the banking/Federal Reserve system. If you hold a large majority of wealth in the aforementioned you really should be losing quite a bit of sleep and need to take action and look at hard assets and be your own Central Bank.
Let’s start this Monday on a bright and look at Real Estate. Yes, the words “real estate” and “bright” in the same sentence. I’ll not get carried away as the improvement -news focuses on Northern Nevada, specifically Reno and Sparks, but there is some good news (for sellers, not necessarily for the buyers) of a sharp trn around. It this is of interest to you, please click this link:
Housing market turns sharply: http://sns.mx/41lxy8
This scenario may well be playing out in other markets, but not to be a Monday morning wet blanket, this communication has already noted some evidence that certain markets may have already topped out with the end of summer. Wouldn’t it be a shame that just as the gusto starts to build in residential real estate that things would quickly come to a halt should other factors interfere.
What other factors? Funny you should ask, here a few that come to mind:
- · The fiscal cliff
- · The European crisis
- · That little matter of over 150 million empty condos in China and its overall economic health
- · The health of the Japanese bond market
- · The notionally valued $1 quadrillion and something derivatives market
- · $1 trillion+ annual U.S. deficits, along with the rest of the debt that has already accumulated
- · A CBO long term funding gap officially reported at over $200 trl.
Ah, yes – perfect conditions for a housing mini boom. Let us say our Monday prayers and ask, beg that super low mortgage rates will save the real estate market and everything else. Yet, the factors above which amount to causing negative real interest rates on an on going basis are likely to be overwhelming thorn in the side of real estate.
My own personal thoughts on the economic and financial issues at hand lead me to conclude that stagflation is going to pick up its pace. Financial laws have been violated. The Fed policy of near zero interest rates has set off a great sickness that has infected the financial system called negative real interest rates. There is no turning back as that would push interest rates higher, which would in turn kill TBTF banks. Good luck to housing, the deck is still stacked against it.
Related: Massive Foreclosures after Election-Fabian Calvo | Greg Hunter’s USAWatchdog#more-9224 http://usawatchdog.com/massive-foreclosures-after-election-fabian-calvo/#more-9224
Fundamentally, the factors for gold could not get any better, especially for the long term as fiat currencies are on a fast track to shriveling up. However, the technical picture has seen $1800 rejected by the market. There should be a major floor of support between the $1620’s and the low 1700’s. Worst case would be a retest of lows at around $1540. I am still biased toward being bullish on a longer term basis, but I do recognize that the investment community has an engrained bias toward the U.S. dollar when times get rough in the financial system. $1,540 is an outlier, but you can never say never. The positives for gold are unmistakable in the months ahead..
- · The U.S. goes over the fiscal cliff and its credit rating is downgraded. However, it’s hard to believe our lawmakers won’t come to an agreement on the debt ceiling in the nick of time since it would their feeding trough they would destroy if the government default on its debt, causing a seizure in the banking system.
- · Gold will become a tier-one banking asset.
- · Seasonality is positive for this time of year for gold
- · Wall Street analysts continue to warm up to gold (maybe that’s a contrary indicator!)
I would add that thus far the gold-doomsayers have been completely wrong. Some voices stated late last year that gold would test $1,000, or below. It did not happen. The market does not have such bearish blinders on with respect to gold, or most every other asset that trade on the futures exchanges, though it can be argued that the market for gold has been range bound since the $1,900 an ounce peak of over a year ago. I still see little doubt that the default currency of human history, gold, won’t one of these days sail past $2,000.
Related: Billionaire Frank Giustra: Gold will be the final bubble http://bit.ly/RInkMo
The stock market has also come in for woodshed treatment. Earning seasons has been lousy thus far….Top
Was the Google lesson enough for everyone yesterday? As I’ve long said, Wall Street is an entertaining place. Yesterday’s hilarity ensued after some poor soul at RR Donnelly released Google’s earnings during the middle of the day – results that were weaker than expected – though to a casual observer would look strong. The stock tumbled, going from the 750’s to a low of around 680 before it was halted at the company’s request.
To make a long story short, what was witnessed with Google is what will happen with the broader stock market – it too will be hit with some sort of news, bids will disappear and the powers that be will have no other choice but to halt the market. If they have to, they (the PTB) will keep the market closed for as long as they wish. Paper assets known as stocks will be trapped – no matter whether the certificates are in held in one’s own hand, but more than likely held by a custodian.
The system merely hammered Google because it disclosed the truth 5 hours earlier than expected. I for one am not looking forward to whatever other truth comes out to hammer individual big names in the future, or to the market as a whole.
Google also came in for a nearly 10% one day pole axing because it is more than likely that many had not completed executing their hedges before what should have been a post close earnings release.
Google is a reminder to hedge your paper market positions with something outside of the stock market casino – again that points to hard assets. Metals, certain real estate, diamonds, etc.
To put what happened yesterday into a picture:
The losers in yesterday’s fiasco are calling on the SEC to investigate. Maybe they will, but I suspect it will be life as usual on Wall Street.
Bill Gross likes to tweet. Here’s one from this morning:
Gross: The crash on Oct 19 1987 showed that portfolio insurance puts were dangerous. R central bank “puts” in the same category?Very likely.
Something to think about.
October 18, 2012
18 October 2012
The World Gold Council has released its 3rd quarter gold report. There is a treasure trove of information. The full report is linked below.
Quarterly statistics commentary Q3 2012
This commentary summarises gold’s price performance in various currencies, its volatility statistics and correlation to other assets, and the macroeconomic factors that influenced gold’s behaviour during the quarter. It provides macroeconomic context to the investment statistics published at the end of each quarter and highlights emerging themes relevant to gold’s future development. In this issue, we explore the influences that unconventional monetary policy has on financial markets. In particular, we discuss the effect of central bank policy actions on gold.
Q3 2012 in summary
•Gold (US$/oz) returned 11.1% in the third quarter as investors responded to further central bank measures aimed at stimulating the economy. Volatility decreased during the period, with gold prices experiencing little movement in the first half of the quarter; correlations to other assets, generally low, remained similar to those seen in Q2.
•Central banks announced a continuation of their unconventional monetary policy programmes in Q3.
•Central banks have numerous rationales for undertaking unconventional monetary policy, including lowering borrowing costs and supporting financial markets.
•Financial assets have responded to central bank policy announcements, but gold’s reaction has been the strongest.
•There is a consensus that these policies drive investment into gold purely due to inflation-risk impact. We believe that there is not one but four principal factors that provide further support to the investment case for gold:
- Inflation risk
- Medium-term tail-risk from imbalances
- Currency debasement and uncertainty
- Low real rates and emerging market real rate differentials
MORE… from the WGC.
First-Time Treasure Hunter Discovers Trove of Roman-Era Gold Coins http://abcn.ws/T2CT4W
Good going Central Banks! Central banks have created $9 trillion during the crisis, equivalent to the value of all the gold ever mined http://econ.st/RCKwyX
Three Scenarios For Gold http://www.zerohedge.com/news/2012-10-17/three-scenarios-gold …
Is the price of silver about to surge? I don’t know, but othersthink it’s about happen: http://www.livetradingnews.com/the-silver-price-to-surge-90235.htm#.UH_9XYhN3Pk.twitter
I will note that lots of silver has been moving out of Brinks in recent weeks, by the tonne.Top
Spain is still a non junk status country. The market rumors were wrong. The dollar is weaker and gold rose to $1755 overnight, but has since pulled back to unchanged. But don’t worry, junk status is eventually going to come for Spain., but maybe Spain gets a reprieve until after the U.S. election.
Bad news is banned until after election day, it would seem. What’s welcomed is very good news. After the controversy last week over a face rippingly positive Labor Market report, this morning’s Housing Starts come in up 15 percent. Can we que the Frankie Valli music? “You’re just too good to be true….” That was a great hit when music was great. Seriously, are we now entering housing bubble 2.0? Pme month’s of data does not a trending make, so we shall see if this strong housing data is not a fluke and the next batch comes after election day.
We have a bi polar economy. On the one hand, housing is portrayed as strengthening, on the other food stamp enrollment was up again to nearly 47 million. Labor Department roles look strong until you find out the numbers are skewed by workers being dropped from the calculation and that there has been an onslaught of part time hires who sought the part time work for economic reasons. Yes, to quote Mr. Dickens: “It was the best of times it was the worst of times; it was the age of wisdom it was the age of foolishness…”
Charted, the headline ride of 15% still looks small in comparison to the 10 year average, or where we once were.
I can see it now. Whoever wins in November will be the loser again, and the American public will also be the loser. To run for the White House can be equated to either loving the power trip, or a need to feed a very large ego. Otherwise, what’s to be gained but a huge set of problems that make the occupants of 1600 PA Ave., go gray. Eventually, say in early 2013, the bad and ugly data (or reality) will catch up to these amusing pieces of data we’ve been seeing recently. I’m surprised they aren’t daring (whomever they is) enough to conjure up something like at 100% gain. Lol. Oh, and to quote Art Cashin at UBS on last night’s debate, “Not A High Moment In The History Of The Republic.” Funny and true.
Bank of America
I must touch on Bank of America and it being heralded for breaking even with a whopping EPS of 0 cents per share. I am laughing all the way to my better TD Bank (at least I can get a lollipop at TD. Bof A is up 4 cents on its let’s not knock ‘em dead numbers. The very important numbers reveal another zombie. Noninterest income for the firm, traditionally about half of total revenues in addition to Net Interest Income, has continued to decline, and slid to $10.5 billion down from $18.0 billion year over year. There was a surge in reserve reduction, and despite what said to be a recovery housing picture, the bank’s charge off reserves also soared. Like the old saying goes – “something rotten in Denmark is….”
This is why I like hard assets like the precious metals, especially gold. I would choose gold over fuded numbers, even real fudge, on any day.Top
October 16, 2012
Coke’s revenues were off by $100 mln (pretty insignificant) while earnings managed to meet expectations. Its stock is down a tad. The blame goes to a strong dollar for the short of expectations revenue. Soon enough worries about a strong dollar shall be harder to come buy as paper currencies weaken in general. But rest assured, Coke still sells plenty of Coke.
Goldman Sachs, ever doing God’s work, showed up this morning with EPS that beat Wall analyst expectations. It stock is a scosh higher as a lot of love has been lost on that issue. Wall Street giving it its “who cares” stamp of approval. But it is all enough to get Wall Street’s Dow up another 100+. A friend of my wife had quite the outburst on Facebook about health insurance at Goldman . Apparently her husbank being a mere mortal VP, or rank and file non partner has been warned about 2013 rate increases. My wife’s friend, that would be the wife of the Goldman VP, had some unkind words about the middle class, though I always thought of the couple has been in the upper middle class. I guess appearances are deceiving.
Citi’s chief Vikram Pandit is out… just like that. Clashes with the board are cited. What could have soured relations? The 88% drop in last quarter’s profit?? Lol. I’d wonder about anyone who would want that job of running a walking zombie of a bank. It would either be ego driven motivation, or someone who wants the power as the big Kahuna CEO. Ok, both reasons are ego driven. Hey, that sounds like anyone who would run for the White House! Citi tried out the air above $37 ($37.70, yet the stock has gone nowhere since the big 1 for 10 reverse split), but the air for now was too thin. Pre reverse split it’s as if this C stock is still below $4 a share. Yikes!
Remember, QE remains in the mix. While Citi may have exhausted its headline stock moving news for now, banking stocks going forward are still the intended target of Fed largess. QE will over time destroy the Fed balance sheet, but shall rid the banks of much of their bad mortgage paper, which banks get to categorize as far more than the junk paper is really worth, and shall be bought by the Fed for much more than it’s worth of basically ZERO. But that’s the thing about Bernanke, he’ never seen a shred of worthless paper that he doesn’t considered valued at par-100!
Related: SHEILA BAIR: The Board Made The Right Decision, Pandit Didn’t Know How To Execute http://read.bi/PzUJNq
That get’s us back to gold. It has admittedly drifted back to the level of where it was before QE3 was announced. I still favor gold as it is the natural alternative to the QE mindset.
I want to repeat what I presented later in the day yesterday concerning inflation. Here is an anecdotal sample of inflation through a note found on a web forum. In the real world, at the supermarket, prices have doubled and tripled in just the last 8 years.
“I found an 8+ year old grocery store receipt on the weekend. Wow…
1st thing I noticed, my wife and I have hardly changed anything about our buying and eating habits.
The 2nd thing I noticed was the crazy increases we have had in prices.
1 can Campbell’s Vegetable soup was listed as $0.89
We now pay $2.19 for the same can.
Fresh Haddock Fillets were $3.99lb. Now $7.99lb.
4 litres of Skim Milk was $4.59…now $7.59.
1 loaf of whole wheat bread was $.99…now $2.99.
Fresh Green Pepper was $1.99lb…now $3.99lb.
Canned tomato juice was $0.99 a can…now $2.29 a can.
Obviously there was waaaaay more on the receipt, but I just can’t believe the inflation. I’m sure many people have had to stop buying items they are used to buying, and change their life styles a great deal. I have not gotten to that point yet, but I’m feeling the pinch. It sucks. Changes are needed.”
Jim Again. NB. I corrected the spelling errors. It’s amazing how bad spelling gets as you dig through the web. Did these bad spellers skip every English class during their school careers? I digress.
Last week the government told us the PPI rose by more than 1 percent in September. The CPI, reported today, for September including energy rose .6 percent, or 7.2% annually. I’m sorry, the core CPI gain of .1% is not worth analyzing. Unless you are in a very urban area, chances are you are a purchaser of gasoline. The increases in gasoline, 7% in September and 9% in August are just too large to factor out when one speaks of inflation. We were lucky this past month, as food prices only rose a scant .1%. Thus far the government’s scare forecast of a coming hog price surge and the summer dough affecting corn have yet to materialize.
What’s green is really blue. Electric Car Battery Maker A123 Systems Files Bankruptcy http://bloom.bg/R82yXJ via @BloombergNews
More rumors that Moody’s is getting ready to downgrade Spain to junk. That would cast a brief pall on this little rally of the last few day in stocks.
Rumors of a mini bailout of Spain have been denied.
October 15, 2012
A few pieces of news concerning the markets and gold:
- Over the weekend Bernanke defended QE3: Bernanke defends Fed stimulus as China, Brazil raise concerns http://reut.rs/RIYRaf Jim again: Finally Bernanke admits what he has denied for a number years: That we are in a currency war, but because he’s the BRAIN, all is fine and dandy. Bernanke effectively told emerging markets that he wants a devalued dollar. Some observers say Bernanke is speaking “fighting words” and telegraphing them directly to China.
- Related Link: Bernanke – I Want To Pick A Fight With China: http://bit.ly/V03ey2
- Labor troubles abound in South Africa, but the price of gold continues to drift lower. Gold Fields suspends all KDC output due to strike – Sowetan Live: Bullion producer Gold… http://goo.gl/fb/OnSuk
- More accounting tricks and treats: U.S. stock indexes cling to opening-bell gains as Citigroup surges on earnings news http://on.mktw.net/XdrrUN
The numbers from Citi are cited as the reason the Dow is up about 25 points. Gotta love one time benefits.
There’s the headline talk of a big jump, a big jump in Retail Sales. No so fast. The “Not seasonally adjusted” figure which plunged by $34 blin. The numbers are flashing recession potential.
The Empire Manufacturing data was also tilted negative.
Noticed on the web….
I found an 8+ year old grocery store recipt on the weekend. Wow…1st thing I noticed, my wife and I have hardly changed anything about our buying and eating habits.
The 2nd thing I noticed was the crazy incrases we have had in prices.
1 can Campbells Vegetable soup was listed as $0.89
We now pay $2.19 for the same can.
Fresh Haddock Fillets were $3.99lb. Now $7.99lb.
4 litres of Skim Milk was $4.59…now $7.59.
1 loaf of whole wheat bread was $.99…now $2.99.
Fresh Green Pepper was $1.99lb…now $3.99lb.
Canned tomato juice was $0.99 a can…now $2.29 a can.
Obviously there was waaaaay more on the recipt, but I just can’t believe the inflation. I’m sure many people have had to stop buying items the are used to buying, and change their life styles a great deal. I have not gotten to that point yet, but I’m feeling the pinch. It sucks.
Changes are needed.
The government’s latest release of producer prices (wholesale inflation) shows an overall calm picture IF volatile food and energy prices are factored out to arrive at what the economic wonks call “core PPI,” or what I call the “lithium version” of the inflation report.
Producer prices up on surging gasoline, core rate flat http://reut.rs/X08Ifb @ Reuters
Goldman Sachs knows what’s coming: Food Inflation To Surge, Goldman Warns http://www.zerohedge.com/news/2012-10-10/food-inflation-surge-goldman-warns …
Gold has been running in place recently, but a move above $1800 and beyond will be at hand as inflationary pressures increase and Central Bank printing continues. But it’s not so much that the a renewed bull market for gold awaits in the wings that’s import. Gold will be your hedge again the declining buying power of paper currency.
This blog is read by a worldwide audience. Whether it be euros, yen, ofr Federal Reserve Notes, etc., it is simple a race to the bottom for paper money.
Interesting reading: BBC News – Africa gold rush lures children out of school http://bbc.in/ReIK3l
I have put this video up before, but not on the CAMI site. What happens when hyperinflation takes its toll? Watch this, directly from Zimbabwe.People turn to gold. http://youtu.be/Jt15F21jpN8
Even if this country doesn’t reach the point of Zimbabwe (I like to delude myself into thing we are not a Zimbabwe) let’s just that as the dollar declines, there are a number of other countries that would face similar Zimbabwe-like circumstances.
Stocks at the time of the writing of this update are higher. JPMorgan pulled another rabbit out of the hat and post solid quarterly results. For now, I am still leaning bullish on stocks thanks to QE3. Nothing got any better on the European financial front during the past week, yet Wall Street has managed to climb the wall of worry.
Central Banks Can’t Inflate Markets Forever: El-Erian : http://bit.ly/TGmFjE
Forever? That’s a long time and is a reflection of the hubris that is built into the financial system and its participants. I wouldn’t be betting on Forever, but clearly the $10,000 an ounce gold barkers who have been barking about $10,000 gold for the last three years will be right someday, but it could take some additional time. Let’s at least get to $2,000 first and then we can re review the timeline to $10k gold.
Have a Weekend!Top
October 11, 2012
Is anyone really surprised that Spain was downgraded again to BBB- by Standard and Poor’s? This death by a thousand cuts thing by these self important ratings agencies gets old after a while. Well, of course, S&P would downgrade Spain to BBB-. Spain should actually be in the C range to D as in D for dummies and dimwits. The credit ratings agencies slowly lower the rating to give the usual extend and pretend extra time when time really has run out. But the game continues on and its look like short squeeze Thursday as the crowd reckons there is still more time for drama. The next step in the script is supposed go something along the lines that Spain asks for and get a bailout with big strings as in a change of leadership to a Golman Sachs bred technocrat, but so far Spain has been resistant to such a plot complication. Stay tuned for more disorder in the court!
Related: GOLDMAN’S COHN: Only A ‘Small’ Chance The Euro Area Sticks Together http://read.bi/RhOw4F
Heard on the Twittersphere: “UBS raises 2012 gold forecast to USD 1700 from USD 1680 an ounce.” They are a bit behind the times.
Priceless Commentary On Apple. MSM wants you to think it’s finished, when in reality Appleis raking in over $76-thousand dollars a minute in PROFIT: http://www.zerohedge.com/contributed/2012-10-10/aapl-makes-76103-while-you-read
From the paradigm of Apple mirth and merriment, let’s return to a nightmare scenario. Greek unemployment has now crossed the 25% level.
Following the latest unemployment numbers here in the US, the incumbent of the White House has much to bark about, with unemployment (the blue line) still under 25% – whoopee!
October 10, 2012
These have been somewhat quiet days for gold related news. I’ve taken to waiting until noon to send this daily commentary in hopes of catching some late breaking late morning developments.
Yesterday I talked about the coming next phase of the gold bull market due to a move by the banking regulators to bless gold as a Tier One Asset, or a cash equivalent. I offered a bit of solace for long suffering silver holders who may very well be holding silver at its present level in the low 30’s but who bought at closer to 50. Naturally if gold rallies 20 to 30 percent once it attains a cash equivalent status, silver will rise, though silver will be the riskier investment vs gold since it will not be in cash equivalent club. TO be objective, here is a nice infographic extolling the virtue of gold. This comes courtesy of http://www.mining.com/infographic-is-silver-the-new-gold-44174/ Let me clear about my position. I do not think Silver is the NEW GOLD. I feel that silver will always take a back seat to gold unless silver, too, becomes a tier one asset. But having said, it is possible that silver could outperform gold a knee jerk percentage basis once the crowd comes to the realization that GOLD will be a TIER One asset and that silver will bounce higher in a sort of a lockstep with gold…
Yes, this is one long infographic. Excellent work. Though, imho, it will take another big move up for gold to above the $2000 level to get silver closer to $50. Certain larger players in silver may dump silver in favor of the tier one asset, Gold. You can bet there will be a ton of put and call speculation in silver that will cause plenty of volatility and should dreaded margin calls show up? Silver will get hammered back into place although I feel the time of silver in the $30 range may soon come to an end and that a higher floor for silver may be in store for longer term holders.