Day: October 28, 2014

Durable Goods Decline Second Month; Key Take-Aways

Jon

Inquiring minds are digging into the Census Bureau Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for September 2014 for hints at 4th quarter GDP.
The headline data shows new orders for manufactured durable goods in September decreased $3.2 billion or 1.3 percent. This follows an 18.3 percent decline in August.
However, transportation (especially commercial and military plane orders) are so large and volatile, the overall results are nearly useless.
For example: In June, new orders were up 22.5% with transportation orders up 73.3%. Nondefense aircraft and parts orders were up a whopping 315.6%. Last month, nondefense aircraft and parts was down 74% and this month another 16%.
Key Components
Instead of focusing on the headline numbers, let’s dive into the report to isolate key components.
The report itemizes all the categories, but it’s not easy to scroll through. This table I put together should help…

This post was published at Global Economic Analysis on October 28, 2014.

Investor Alert: Disinflation And Slowing Monetary Growth

Jon

We released earlier this year the minutes of the first two Advisory Board meetings by Incrementum Liechtenstein in these two articles: Will Inflation Make A Comeback In 2014 When The Consensus Worries About Deflation and Outlook for Gold, Stocks, Economy. Incrementum Liechtenstein is running the ‘Austrian Economics Golden Opportunities Fund,’ a fund that takes investment positions based on the level of inflation based on their proprietary ‘Incrementum Inflation Signal.’ Incrementum Liechtenstein has Ronald Stoeferle, author of In Gold We Trust, as managing partner, and Mark Valek as partner.
In the latest Advisory Board which took place earlier in October, the investment landscape driven by the disinflationary forces were discussed. Based on the Incrementum Inflation Signal, it seems that the inflation/deflation-tug-of-war is very intense these days.
The signal switched to ‘neutral’ at the beginning of August and then very quickly it indicated ‘disinflation’ once again. A rather dramatic move in the USD, commodities, gold and silver followed. As can be seen on the following chart, the signal works well in real-time.
Development of Incrementum Inflation Signal and HUI Mining Index:

This post was published at GoldSilverWorlds on October 29, 2014.

Gold Daily and Silver Weekly Charts – Quiet Option Expiration, Markets In Lockdown

Jon

One of the savvier traders and commentators I know told me this morning that ‘the markets are in lockdown,’ and I think he had it exactly right.
The Fed is very sensitive to provoking a market sell off in anything except precious metals perhaps when they formally announce the end to QE III tomorrow.
I would expect an extra effort to placate stocks and bonds. Moderate growth, low inflation, all is well, but we’ll act quickly in case anything upsets our clientele on Wall Street. As for Main Street, we’ll send a ‘get well card.’
If there are any fireworks coming in the metals it would be an FOMC related ‘gut check’ over the next couple of days.
You would have to be almost blind, deaf, and dumb, or maybe just a willfully whole lot of the last of these, to not yet realize that something very big is going on in the world of global economics.
Have you noticed that the US and a few of its client states seem to be at odds with just about everyone else in the world? That is the currency war. It is the struggle to maintain and increase political dominance through the use of the dollar and financial institutions, essentially to control the world’s money supply and extend the Pax Anglo-Americana forever.
It is good to remember that just are they are military neo-cons pursuing the New American Century, so there are their financial counterparts, who while a minority have enormous financial power and thereby political influence.
Change is coming. It will take longer than we expect, but when it starts to show, it will come much faster than expected.

This post was published at Jesses Crossroads Cafe on 28 OCTOBER 2014.

Physical Silver Being Drained A New Silver Miner Research Report

Jon

Thru today (Oct 28) the U. S. mint has sold 4,365,000 silver eagles. This is by far the highest total for October on record, with 3 business days left in the month. It remains to be seen if 2014’s yearly total will exceed last year’s 42,675,000. But if November and December continue at the September/October 4 million-plus rate, 2014 will smash last year’s record. Either way, the U. S. mint is selling more ounces of silver than all U. S. mines combined produce annually.
As most of you know the roughly 93% of the physical silver inventory – 1,062 tonnes has been removed this year from the Shanghai Futures Exchange – see this LINK.
Perhaps more interesting has been the drainage of silver from the Comex silver warehouses – since late February, while the paper silver futures open interest has been soaring…

This post was published at Investment Research Dynamics on October 28, 2014.

Does gold always respond to real interest rates?

Jon

Generally, the real interest rates are negatively correlated with the gold price, i.e. the rising interest rates adversely impact the yellow metal. Based on this adverse relationship between real interest rates and price of gold, Elfenbein built a model for the price of gold. According to it, whenever the dollar’s real short-term interest rate is below 2%, gold rallies, and whenever the real short-term rate is above 2%, the price of gold falls. Another rule of thumb is that gold moves eight times stronger than the difference between real interest rates and 2%. If the model is correct, the Fed’s future interest rates hike may be detrimental for the price of gold. However, there are many objections to the use of such a simple model, and generally to the adverse relationship between gold and real interest rates.
First, the nature of gold is much more complex than any other commodity, so searching for one ultimate factor determining its price, gold’s Holy Grail, will always result in failure. Since lots of factors affect its price, investors should beware of simple models and study history to test popular opinion.
Second, investors should be aware of the shortcomings of the correlation, which does not imply causation. It is equally possible to argue that causality runs in the other direction, i.e. the low gold price causes high real interest rates, or that both the gold price and real interest yields are driven simultaneously by some common external factors. Moreover, correlation often holds only during specific periods. High negative correlation (-0.82) between gold price and real interest rate founded by Erb and Harvey relates only to a period of 15years. With longer periods, the correlation falls to only -0.31.
Third, investors should analyze not only the changes in the real interest rates, but also their levels and trajectories. According to the quoted WGC’s report, high and rising real interest rates are much worse for the price of gold than rise from the low level. E.g., between October 2003 and October 2006 US real interest rates increased from -1 to 3%, while gold gained 60% during the period.
Fourth, investors have to remember that investment demand is only the (smaller) part of the whole demand for gold. Therefore, the adverse relationship between real interest rates and gold price is weakened by the jewelry demand, which increases, when the real interest rates rise and the gold price decreases. Similarly, industry demand can also be stimulated by the rise in the real interest rates, because such a rise is often accompanied by an improving economic situation.

This post was published at GoldSeek on 28 October 2014.

Do Howls From Rome Prove Anything?

Jon

Italian Bankers are Not Amused Italy’s banks were among the hardest hit by the ECB’s ‘comprehensive assessment’ and the associated demands to increase their capital. The protests of Italian banks which were even echoed by the Bank of Italy (i.e., Italy’s national central bank) are widely seen as a lending the stress tests legitimacy.
For instance, the FT reports:
‘Analysts and investors have taken the howls of protest from Italian central bank officials on Sunday as evidence that the European Central Bank’s health check on the continent’s banking system is sufficiently tough.
Complaints from Rome about the outcome of the ECB’s comprehensive assessment have demonstrated how Italy has emerged as the biggest loser from the process, which was designed to restore confidence in the EU’s financial system.’
[…] ‘The debate over whether the European banks have lots of holes in their balance sheets is over,’ said Davide Serra, founder of hedge fund Algebris. ‘Banks didn’t know if they had enough capital to lend until now and this will change that.’
‘We now know that we can have a 5 per cent contraction in the eurozone economy and the banks will still have more than 8 per cent capital – that is very positive for the sector,’ he said.
Alas, as this Bloomberg video shows, the debate is far from ‘over’ – not least as numerous banks just sort of scraped by.
In fact, there are other reasons to doubt the toughness of the stress test. We already discussed the large amount of legacy NPLs in the European banking system yesterday, which implies that if a severe downturn were to occur in the near future, this amount would skyrocket to an even more astronomical level.
Moreover, a post stress test aggregate capital shortfall of a mere 24 billion is just not very believable considering all the other data, especially in light of the fact that the great bulk of this shortfall is concentrated in the tiny countries of Cyprus and Greece.
How Adverse is the ‘Adverse Scenario’?

This post was published at Acting-Man on October 28, 2014.

NIGHT OF THE LIVING FED

Jon

The Night Of The Living Fed! Short-term Rates Down 500 Basis Points Since Dec 2006 Zombifying Savers (And Not Helping Mortgage Borrowers) The Federal Reserve Open Market Committee (FOMC) will be meeting Wednesday to decide whether to raise the Fed Funds target rate or continue to taper The Fed’s asset purchases.

This post was published at The Burning Platform on 28th October 2014.

Swedish Central Bank Lowers Interest Rates to Zero%

Jon

The Swedish Riksbank (central bank) has cut its key interest rate to zero percent. With this quantitative easing monetary policy the central bank is desperately trying to stimulate borrowing to fight deflation. The key interest rate was lowered by a quarter percentage point where experts had only expected a decrease to 0.1 percent. The Swedish Riksbank hopes to create an inflation rate of 2%. In September, consumer prices fell by 0.4%.
The entire problem remains that government cannot grasp that it is taxes and regulation. People will NOT borrow to create businesses when they do not see any opportunity to make a profit. How can dropping the interest rate from 0.25% to 0% make ANY difference? They will wipe out any savings for the elderly causing them to spend nothing if not seek employment driving unemployment higher. This is how brain-dead government operates when you NEVER consider yourself in the equation and the problem is always the people who have to be manipulated.
When the economy turns down in the USA, look out below. We are facing one of the most dramatic deflationary waves perhaps in history. This is the price of a collapse in socialism. We are going through the same collapse process that destroyed communism. It ain’t the private sector – its government!

This post was published at Armstrong Economics on October 28, 2014.

Why Gold and Silver Are the Good News Metals

Jon

Analysts and some precious metals’ sellers tend to focus on the ‘insurance’ aspect of owning precious metals. They point out that having some in your possession helps protect your wealth in case of inflation, political unrest, or for use as an ‘alternate currency’ during a natural disaster, war, etc.
Of course, these are all valid reasons for purchasing and holding ‘the precious metals four’ – gold, silver, platinum, and palladium. But the benefits go far beyond the insurance and assurance aspects. It just makes all around good sense. For you see, each of these are in their own way, ‘good news’ metals.
As the developing world’s wealth increases, hundreds of millions of people have more disposable income – money left over after covering life’s basic expenses. For millennia, a significant portion has always been directed and will continue to find its way into precious metals’ ownership.
In Asia, Indians regard gold and silver as ‘bank accounts in your hand,’ dowries for exchange upon marriage, or the raw material for the creation of jewelry having lasting beauty. In China, where the savings rate can be as high as 40% of income, precious metals fulfill the timeless role of asset preservation.
In North America, Eagle and Maple Leaf sales continue to set records. Through September of this year, roughly 26 million American Silver Eagles have been purchased – on track to set an annual record – the most since their introduction in 1986.
When my daughter graduated from high school in 2000, my gift to her was a one-ounce gold Krugerrand – for which I paid $275.
When America’s first pure gold coin, the 24 carat American Buffalo was introduced in 2006, I bought one for $800 for each of my children.
All of these coins are absolutely beautiful. They speak of our nation’s past. They bring a smile to the face of someone who holds them in their palm. They are a store of (increasing) value. They are a ‘physical reality’ by which only the person who owns them can lay claim. They are a direct and enduring link to 5,000 years of history.

This post was published at GoldSilverWorlds on October 28, 2014.

Fireworks Fly As Peter Schiff Warns “An Economy That Lives By QE, Dies By QE”

Jon

Ahead of tomorrow’s decision by the FOMC, Peter Schiff ventured on to CNBC to discuss the economy, the fed, and gold… among other things. Schiff rightly fears that while the Fed may well stop QE3 tomorrow, QE4 will not be too long behind it as he notes, rather eloquently, that “an economy that lives by QE, will die by QE” as the Fed’s total lack of willingness to allow stocks to fall (see Bullard 2 weeks ago) or a ‘cleansing’ recession leaves the nation’s economy in far worse shape than it was before the Fed’s intervention. Schiff calmly replies to the anchor’s questions (as she proclaims “I am not on the side of the Fed but…”), gently explains his view on gold when challenged about his ‘wrongness’, but when a guest starts hounding him for being dangerous to CNBC viewers wealth… Schiff (rightly) loses it – must watch!

This post was published at Zero Hedge on 10/28/2014.

Does This Look Like A Housing Recovery To You?

Jon

We just learned that the homeownership rate in the United States has fallen to the lowest level in 19 years. But of course this is not a new trend. As you will see in this article, the homeownership rate in the United States has been in a continual decline for more than 7 years. Obviously this is not a sign of a healthy economy. Traditionally, homeownership has been one of the key indicators that you belong to the middle class. When people define “the American Dream”, it is usually one of the first things mentioned. So if the percentage of Americans that own a home has been steadily going down for 7 years in a row, what does that tell us about the health of the middle class in this country?
The chart that you are about to view is clear evidence that we are in the midst of a long-term economic decline. It shows what has happened to the homeownership rate in the U. S. since the year 2000, and as you can see it has been collapsing since the peak of the housing market back in 2007. Does this look like a housing recovery to you?…

This post was published at The Economic Collapse Blog on October 28th, 2014.

States With Low Business Taxes

Jon

Each year, the Tax Foundation rates states in terms of business taxes and personal taxes. If you want to start a business, where should you live?
If you want to buy real estate as an investment, where should you live?
If you want to live where your kids have a better shot at getting a decent job, where should you live?
States marked with an asterisk have no state income tax.
The winners are:

This post was published at Tea Party Economist on October 28, 2014.

Pity Them: Sweden Relents To Krugman

Jon

We have clearly entered unchartered financial and economic terrain, a sentiment that applies so broadly as to lose almost all meaning. In fact, the world has strayed off the beaten path for so long ‘we’ have little memory of what ‘normal’ actually feels and looks like. The latest figment toward that direction is the growing errors of orthodoxy as it relates to Europe. Sweden’s central bank, Riksbank, seems to now be setting its monetary policy via Paul Krugman’s criticism.
The ‘problem’ for Sweden is the same problem for Europe, as the two are inseparably tangled in economics and even finance. Such reality contradicts orthodox economics, and thus all their prescriptive measures, that depends on a closed system approach – that Sweden in general, and Riksbank in particular, can set its own course in a vacuum.
As is well-known, economists detest ‘deflation’ as the worst economic condition, and only partly because of their distrust of common folk. As it is, Sweden has seen consumer prices fall in 16 of the past 24 months (we could be so lucky). Riksbank began to raise its benchmark repo rates four years ago to stem the flow of ‘capital’ into its housing sector. And small wonder that they were so concerned about a housing bubble given that ‘money’ came out of a Europe then in desperate trouble seeking shelter from the euro.
Since the Swedish central bank stopped its rate hike program in 2011, consumer prices have fallen in what these orthodox economists are seeing as correlation and causation.
Stefan Ingves, the Riksbank’s governor, has come under pressure from the likes of economist Paul Krugman for lifting rates in 2010 and 2011 to counter what Sweden’s central bank saw as a risk of a housing bubble. Mr Krugman called that policy ‘sadomonetarism’, as unemployment remained above the historical average and inflation was weakening.
Is it likely that ‘deflation’ in Sweden is a Swedish problem alone, of its own interest rate policy?

This post was published at David Stockmans Contra Corner on October 28, 2014.

Clip Of Unmanned NASA Rocket Exploding Shortly After Takes Off

Jon

Several months ago, a Russian rocket, carrying Russia’s most advanced communications satellite, exploded on launch and the west was amused at Russia’s seeming incompetence, while birthing extensive speculation of the NSA’s involvement. Well, moments ago either Karma, or Russian hackers, intervened, and 6 seconds after launch, the NASA unmanned Antares rocket of rocket-maker Orbital Sciences, likewise ended its mission prematurely in a massive flaming fireball.
A video of the explosion:


This post was published at Zero Hedge on 10/28/2014.

Please, Hillary, Tell Us More About Job Creation

Jon

Oh, Hillary.
The reigning queen of lying, backpedaling, and political spin is at it again. She really seems to have developed foot-in-mouth syndrome, hasn’t she? Hey, she probably learned from the best – her husband, Bill ‘I did not have sexual relations with that woman’ Clinton.
Last Friday, Killary Hillary spoke at a campaign rally for Massachusetts Democratic gubernatorial candidate Martha Coakley.
During that speech, she said this:


This post was published at The Daily Sheeple on October 28th, 2014.

SP 500 and NDX Futures Daily Charts – FOMC Tomorrow and the End of QE III and NDX Futures Daily Charts – FOMC Tomorrow and the End of QE III

Jon

The Street hit the stock market with tranquilizers and vitamins ahead of the end of QE III which will most likely come tomorrow with the Fed’s afternoon FOMC announcement.
I expect the market to be supported, and perhaps find support as well.
This is a technically traded, highly dangerous market beneath the surface calm.

This post was published at Jesses Crossroads Cafe on 28 OCTOBER 2014.

Historic Short Squeeze, Biggest In 3 Years, Sends Small-Caps Soaring; Dow Tops 17,000

Jon

In a strangely familiar case of deja vu all over again, stocks surged (alone in the cross-asset class world of economic reality) on the day before an FOMC statement. The Russell 2000 has had its best 10-day run in 3 years, best day of the year, and managed to scramble back to its 100- & 200-day moving-average. Dow 17,000 was another key technical level that was achieved. S&P 500 was levitated on volume around 40% below average into the green for October. VIX was banged under 15 and tracked stocks. Away from the equity-vol complex, asset-classes were unimpressed – HY credit, bonds, JPY, and the USD all diverged from stocks. USD weakened slightly, and commodities all gained on the day. TSY yields were up 2-3bps and HY closed practically unchanged. “Most shorted” stocks rose almost 3% – the biggest squeeze since Dec 2011 – smashing the Russell 2000 higher.

This post was published at Zero Hedge on 10/28/2014.