Gold Seeker Closing Report: Gold and Silver End Mixed

The Metals:
Gold dipped $2.10 to $1164.80 in Asia before it jumped up to $1173.28 at about 6AM EST and then chopped back lower, but it still ended with a gain of 0.07%. Silver slipped to as low as $15.928 and ended with a loss of 0.8%.
Euro gold fell to about 931, platinum lost $17 to $1218, and copper fell 4 cents to about $3.02.
Gold and silver equities fell over 2% by mid-morning before they bounced back towards unchanged into midday, but they then fell back off again in afternoon trade and ended with about 3.5% losses.

This post was published at GoldSeek on 4 November 2014.

“A Brief Note On Capitalism”

A Brief Note On Capitalism
From time to time we find ourselves compelled to write a few words in defense of capitalism. Capitalism is a system according to which capital is owned by private citizens, who in turn determine its price and flow by interacting with one another. Capitalism implies that private citizens get to keep most of the fruits of their labor or the profitability of their capital. Capitalism is neither a ‘state of nature’ nor a primitive scrum. It can work (i.e., create value for owners and for society while being acceptable to the citizenry, including those without capital) only with appropriate rules of fairness and honesty, and workable standards of disclosure. To these factors must be added the ability for people, in a meritocratic way, to have a chance to participate in capitalism. The proper combination leads society to buy into the concept that the individual freedom to own property leads to the most efficient allocation of resources, which in turn results in the highest economic growth and prosperity. Capitalism is never perfect, but the closer society adheres to its general principles, the better it is for the population at large.
If you take away these elements and put the bulk of power in a society in the hands of a central authority, bureaucracy and/or central banker, then all of the natural imperfections of human decision-making – including the problem of unintended consequences, the inability of central planners ever to have enough information to make wise decisions about the allocation of resources across an entire society, corruption, arrogance, and the fallibility of human nature – are exacerbated and concentrated.

This post was published at Zero Hedge on 11/04/2014.

“Consistency Breeds Complacency”

Stocks have risen so often in the last five years that many investors may take further gains for granted even after the latest slump, according to Wells Frago’s Jim Paulsen. As Bloomberg reports, Paulsen’s ‘US stock market consistency indicator’ (which tracks the ratio of monthly gains and losses for the preceding five years), reached 3 for the first time since April 1999 – less than a year before the end of a bull market driven by Internet stocks – a level not seen since the late 1920s. Of course, it’s different this time, but as we noted earlier, the consensus bull case is unbreakable and as Paulsen notes “Consistency breeds complacency,’ or a sense of comfort among investors that’s at odds with potential losses.

This post was published at Zero Hedge on 11/04/2014.

China Expands Clearing Hub For The Yuan To The Middle East – Episode 509

The following video was published by X22Report on Nov 4, 2014
European commission now reports the recovery is delayed and Europe is in a triple dip recession. Factory orders in the US decline again. Home prices slow and are now in a decline. The housing bubble is popping. People in Europe will owe the banks money with negative interest rates. Qatar becomes a trading hub for the Chinese yuan. Illegals bring illness into the US. US wants more troops to stay in Afghanistan. NATO needs more troops in the Baltic states. Poroshenko dispatches troops to the East. FBI reports people easily swayed on the internet to cause terror. Tell on your neighbor if they look suspicious. Be prepared for a false flag event.

1,001 Nights Of Stock Market Stories

1,001 Nights Of Stock Market Stories
There is an old Wall Street chestnut that goes, ‘It’s not a stock market; it’s a market of stocks.’ Fair enough, but we’ll take a different approach today to complete this aphorism: ‘It is a market of stories.’ Yes, it is stories that vie for our attention, define our realities, and spur us to action. Recent academic work on the subject reveals that the right narrative – ideally one with a strong human element – physically changes how we process information and make us more likely to empathize with and ultimately believe the stories we hear. Too fluffy a concept for you? The research we cite was partially funded by the U. S. Department of Defense’s Advanced Research Projects Agency (DARPA), and when they have an interest in something, rest assured it has a very serious purpose. As for applications in the world of investing, recognizing powerful stories earlier than the pack is pretty much the job description for analysts and portfolio managers alike. Just be aware that it is all too easy to fall for one as well.
As a child, my parents would tell me stories out of the ‘1,001 Nights’, a collection of Middle Eastern tales that (in Western form, anyway) include Aladdin’s Lamp, Ali Baba and the Forty Thieves, and Sinbad the Sailor. Only in adulthood did I read the actual translations, which makes HBO’s Game of Thrones look like a 1950s ‘Archie’ comic book. Even the framing of the stories is pretty nasty. At the beginning of the first book we read about a king who, betrayed by his first wife, now chooses a young woman from his kingdom to wed every night. And then early the next morning he has them killed. ‘It’s not you, it’s me, but follow the man with the ax anyway’…
This goes on until the Vizier’s own daughter, Scheherazade, decides to put an end to the serial killing of the country’s maidens. She marries the king, but on their wedding night asks that her sister might visit for a few hours before the executioner comes at daybreak. The sister asks for a story, and Scheherazade obliges. The climax of the tale comes just as the sun rises, and by this point the King is so involved in the story that he grants Scheherazade a second day of life just to hear its conclusion. The next night she starts a new story, and the same thing happens at daybreak. Fast forward 1,001 nights of stories (2 years) and the King has fallen love with Scheherazade and they live happily ever after.
If you think this is just old-time storytelling with no place in a modern ‘Rational’ society, consider that the U. S. Department of Defense funds research on how humans process stories through its Defense Advanced Research Projects Agency (DARPA). These are the same folks that brought you highly advanced drone technology, cutting edge night vision systems, micro-sized GPS for people and munitions, and, well, the Internet (original name: ARPANET).

This post was published at Zero Hedge on 11/04/2014.

An Open Letter to Janet Yellen Pt. II

Money printing does generate tremendous income for Wall Street ‘fat cats’. Such income, however, is more than off-set by the loss of working people. Money printing is thus the most vicious redistribution of wealth. It has been always the instrument for financial tycoons and corrupted politicians to accumulate wealth. History has repeatedly shown this. You do not need to look back very far to discover this truth. As recently as in 1940, the huge scale of money printing in China generated mountains of wealth for financial tycoons and corrupted politicians.
For real world people, it is a simple common sense that wealth does not fall from the sky. It has to be produced. It is beyond me that such an obvious truth is so difficult for elite economists to comprehend. This is largely because they just sit in the ivy tower, imagining the magic golden touch such as monetary and fiscal policies, mocking practitioners. They are so ignorant and arrogant.
The problem goes even beyond ignorance and arrogance. Elite economists understand clearly that demand relies solely on income. And income means production. Given this premise, the only logical conclusion regarding the cause – effect relationship between supply and demand is that it is the former that drives the latter, and there can be no other way around. Yet they have still been obsessed with the idea that demand can be created to haul supply without supply being produced in the first place. They are not only arrogant and ignorant, but also incapable of logical thinking. Unfortunately, they have long dominated both economics study and economic policy making, cultivating fools like themselves and causing disasters after disasters.
I understand that what I said above need a theoretical explanation. But such an explanation cannot be properly provided in such a short letter. I will be more than happy to elaborate for you in some other places, if you so desire. Despite this drawback, however, what I have said is entirely supported by facts and therefore not invalid, to say the least. As indicated earlier, the worst sort of economic inequality has been created. Not only that. An assets bubble is forming, if not already formed.

This post was published at Mises Canada on November 4, 2014.

Goldman Shows “Equity Bust” Risk Highest Since 2008

With the equity market back to near-historical highs, Goldman Sachs’ Jan Hatzius revisits his analysis of the predictability of asset price busts. The main predictors of busts are past asset price appreciation and past credit growth, followed by a rising investment/GDP ratio. Hatzius warns that their model says that thefurther US equity price gains of 2014 have pushed the risk of an equity bust back up – as the chart below shows to levels not seen since 2008/9.
Goldman’s “equity bust” model is back at levels last seen in 2008/9 – though obviously well off the peak levels, as the main factor holding down the risk of another bust, especially in the housing market, is the weakness of credit growth since the crisis.

This post was published at Zero Hedge on 11/04/2014.

Is the US Dollar in a New Major Bull Market?

Let me look, in this article, at the anti-gold, the US dollar. All of a sudden, with the illusion of the end of QE, there is a strong belief that things have changed for the best for the U. S. and, more specifically, for the US dollar. All of a sudden, the US debt is gone and the deficit problem is almost solved with shale oil.
I have to admit that momentum has, all of a sudden, changed in favor of the US dollar. From a geopolitical point of view, I think the downing of the Indonesian airliner in Ukraine changed drastically, at least in the short term, the momentum in favor of the U. S. Before the incident, Europe was getting closer to Russia as the spying and other blunders by the American administration brought European leaders closer to it. All that changed after the Indonesian airliner incident in Ukraine. It was an unexpected gift to the U. S. and a major setback to Vladimir Putin’s strategy to split Europe from the U. S. However, president Putin has restrained himself in his comments to antagonize European leaders focusing his attacks on the U. S. and continuing negotiations with Europe. It is evident that he is looking for a split in the NATO alliance. Don’t count Russia and Vladimir Putin out yet, and China seems to be closer to Russia than to the U. S.
Is this the beginning of a new secular bull market in the US dollar? Some see a resemblance to the bull market started in 1980 when Ronald Reagan and the Republicans were voted in. I remember the mood in the U. S. in the last years of the Carter administration. Many of my American friends were extremely bearish on America. I remember speaking with an American couple in Montreal at the 737 Restaurant, on top of the Place Ville-Marie building, from where you can almost see the U. S. border. They were so depressed and disillusioned with their country. Americans were running away from the United States like rats from a sinking ship. It was for me a very contrarian bullish signal on the U. S., but I could not convince my American friends. We know what happened afterward. Can this be a repeat of that cycle? Some think so. I don’t. There was an illusion then that the U. S. would deal with the debt and deficit but we found out fast that the only thing changed was the type of waste. Rather than spend on civilian bureaucracy waste, Ronal Reagan and the Republicans chose military bureaucracy waste. The result was the same. The extra time gained to solve the debt/deficit problem was wasted and the U. S. finds itself today in a much worse position than in 1980.
Look carefully at this major triangle formation in the chart below. You can easily observe lower lows at each bottom and lower highs at each top. I expect this trend to continue.

This post was published at Gold Broker on Nov 4, 2014.

Gold and U.S. dollar

Gold continued weak in its performance during September. The yellow metal’s price dropped almost 5.5% from $1286.50 to $1216.5 (London PM Fix). In the last Market Overview we came to the conclusion that the real interest rate is one of the main drivers of the gold price. Although the negative relationship between real interest rates and gold prices does not always hold, the recent medium-term declines (including the last month) were probably, to a large extent, caused by the rise in the long-term real interest rates.
Graph 1: 30-year (green line) and 10-year real interest US rate (red line) from 2013 to 2014

However, many analysts write that gold suffered mainly from strengthening of the US dollar (we have also written about the short-term link between gold and USD – it was useful to time the local bottom in gold earlier this month). Indeed, the U. S. Dollar Index rose 3.85% in September from 82.7480 to 85.9360, which supports claims that it was the relentless strength of the U. S. dollar that drove changes in the gold market in the last few months.

This post was published at GoldSeek on 4 November 2014.

Bank Of America Psycho Killer Was Busy Helping Hedge Funds Avoid Taxes During His Business Hours

The most bizarre story of the weekend was that of Bank of America’s 29-year-old banker Rurik Jutting, who shortly after allegedly killing two prostitutes (and stuffing one in a suitcase), called the cops on himself and effectively admitted to the crime having left a quite clear autoreply email message, namely “For urgent enquiries, or indeed any enquiries, please contact someone who is not an insane psychopath. For escalation please contact God, though suspect the devil will have custody. [Last line only really worked if I had followed through..]‘
But while his attempt to imitate Patrick Bateman did not go unnoticed, even if it will be promptly forgotten until the next grotesquely insane banker shocks the world for another 15 minutes, the question that has remained unanswered is what did young Master Jutting do when not chopping women up.
The answer, as the WSJ has revealed, is just as unsavory: “he had been part of a Bank of America team that specialized in tax-minimization trades that are under scrutiny from prosecutors, regulators, tax collectors and the bank’s own compliance department, according to people familiar with the matter and documents reviewed by The Wall Street Journal.”
Basically, when not acting as a homicidal psychopath, Jutting was facilitating full-blown tax evasion, just the activity that every developed, and thus broke, government around the globe is desperately cracking down on, and why every single Swiss bank is non-grata in the US and may be arrested immediately upon arrival on US soil.
More from the WSJ:

This post was published at Zero Hedge on 11/04/2014.

Final Update: Republicans Have A 3 In 4 Chance Of Winning The Senate

Nate Silver is the pollster guru who has predicted races with uncanny accuracy in the past. The Democrats loved him in 2008 and 2012 because he predicted their victories. They don’t love him so much today. Looks like gridlock for Obama’s final two years, unless he does something really stupid.
After two months of forecasting, it comes down to this: Republicans are favored to win the Senate. Their chances of doing so are 76 percent, according to FiveThirtyEight’s Senate forecast, which is principally based on an analysis of the polls in each state and the historical accuracy of Senate polling.
But they are not necessarily favored to have the race ‘called’ for them on Tuesday night. Because of avariety of circumstances like possible runoffs in Georgia and Louisiana and the potential decision of Kansas independent Greg Orman about which party he chooses to caucus with, the outcome of the Senate may not be determined until days or weeks from now. The forecast refers only to the probability that Republicans will eventually claim control of the Senate by the time it convenes in January.
Still, for Republicans, it would be worth the wait after failed attempts to win the Senate in 2010 and 2012. They’ve been modest favorites in the FiveThirtyEight forecast all year, in part because the national environment is favorable for them: the group of states holding key Senate elections lean red; several Democratic incumbents have retired and the others were last elected in 2008, a high-water mark for the Democratic party; President Obama is unpopular and midterm elections have a long history of being challenging for the president’s party. Unlike in 2010 or 2012, however, the polls have moved toward Republicans in the closing days of the campaign – making their position more robust. The movement has been clearest in states like Kentucky, Arkansas and Georgia that typically vote Republican, suggesting the election may be converging toward the ‘fundamentals’ of each state.

This post was published at The Burning Platform on 4th November 2014.

Is The Swiss Gold Referendum Impacting The Price Of Gold

The ‘Save our Swiss Gold’ referendum is currently making headlines around the world. For those who haven’t followed this story, here’s a short recap [you may jump to the charts below if you are already up to date]: the Swiss will vote on the 30th of November to force the Swiss national Bank (SNB) 1. into increasing Gold reserves to 20% of its balance sheet, 2. to forbid it from selling any of its Gold in the future and 3. to force it to hold all these Gold reserves within the country. What the referendum is really after is to curb the SNB’s rapid expansion of foreign currency reserves (now totalling almost U$500bn, or more than 80% of its balance sheet or circa 75% of the Swiss economy’s national output). In a world of central bank balance sheet expansion and concerns over ‘fiat’ money, this goal may seem a reasonable one. Now consider the historical context. These reserves started to accumulate in the wake of the 2008 financial crisis and during the subsequent Eurozone debt crisis as the SNB attempted to mitigate the Swiss Franc’s ‘Save haven’ status and its rapid appreciation vs the Euro by buying foreign denominated securities. Indeed, from 2007 to 2011 EUR/CHF had dropped almost 40% from 1.60 to near parity pushing Switzerland into recession and deflation (the Eurozone is Switzerland’s largest trade partner representing more than 45% of its exports and 65% of its imports). In August 2011, the SNB introduced a 1.20 floor level on EUR/CHF committing to defend it and triggering a further acceleration of foreign denominated asset purchases. If this intervention cannot go on for ever, it is widely accredited for having put Switzerland back on the growth path.
Now, the latest polls are tight with 44% in favour of the referendum, 39% against, with 17% still undecided. The Swiss National Bank is voicing aggressively against it (a rare event in Swiss politics) and to be fair, we would agree with it, as passing this referendum will significantly reduce its ability to defend the floor with dire economic consequences if it were to break. Analysts do believe the bill has limited chances of making it through as most major parties are against it and historically, the undecided do end up voting against what they don’t understand.
Accept our apologies for this long introduction, but isn’t it a dream come true for many gold bugs out there? In a recent study, a large US investment bank estimates that in order to comply with the referendum (the initial 20%), the SNB would need to buy circa 1’500t of gold, spread over 5 years (300 t/year) and that ‘while gold liquidity should be efficient to accommodate these purchases, this dynamic would reinforce a firm floor at $1’200/oz, with price potentially rallying to $1’350/oz in the intermediate aftermath of a possible referendum’. Although low probability, anticipation of the referendum should at least have some impact on the market discounting machine. Let’s look at the charts (they are quite unilateral for now).

This post was published at GoldSilverWorlds on November 4, 2014.

Spot The Bubble

Presented with little comment aside to suspect the answer to our implicit question is something like “it’s the new economy” or “you don’t understand the new valuation metrics”
Alibaba tops Walmart’s Market Cap… Walmart’s quarterly sales are 44x Alibaba’s – that is all.

This post was published at Zero Hedge on 11/04/2014.

Only A Few Years Left Until The Nikkei Hits Dylan Grice’s Price Target Of 63,000,000

Back in May 2011, long before the second and far more disastrous reign of Abe, and even longer before Japan unleashed the most insane episode of Banzainomics, pardon QE11 (or thereabouts), we predicted what the BOJ would do up to and including its recent QE tack-on to its ludicrous debt monetization program in “Japan Resumes Hyprintspeed Part 1: A Look At The BOJ’s Current, And Future, Quantitative Easing.” Specifically we said:
… as the past 30 years have shown, the country at this point has no other choice but to take the same toxic medicine which merely removes the symptoms briefly, while making the underlying problems far worse. Also, with the Fed threatening to end QE2 in precisely two months, someone out there has to be dumping hundreds of billions in infinitely dilutable 1 and 0s into primary dealer prop desks. Since then we have had not only Operation Twist and QE3, but also the most aggressive central bank monetary expansion in modern history in Japan also known as Abenomics. And, in fact, when the BOJ’s QE 11 (or thereabouts) proved to be too weak, Kuroda unleashed even more of the same, further solidifying the conclusion: for Japan at this point, it’s game over.
But even before our forecast of Japan’s endgame, one strategist was laying out precisely what would happen in Japan with uncanny accuracy, if a few years early. That person is, of course, SocGen’s Dylan Grice.
And since he has been right until now, here is how we forecasts Abe’s doomed experiment will end, and why the Nikkei hitting 63,000,000 in 11 years is anything but the Hollywood ending Abe is looking for.

This post was published at Zero Hedge on 11/04/2014.

National Economic Suicide: The U.S. Trade Deficit With China Just Hit A New Record High

Did you know that we buy nearly five times as much stuff from the Chinese as they buy from us? According to government numbers that were just released, we imported 44.9 billion dollars worth of stuff from China in September but we only exported 9.3 billion dollars worth of stuff to them. And this is not happening because our economy is so much larger than China’s. In fact, the IMF says that China now has the largest economy on the entire planet on a purchasing power basis. No, the truth is that this is happening because our economy is broken. Every month, we consume far more wealth than we produce. Because the outflow of money is far greater than the inflow, we have to go to major exporting nations and beg them to lend our dollars back to us so that we can pay our bills. Meanwhile, the quality of the jobs in this country continues to go down and our formerly great manufacturing cities are rotting and decaying. We are committing national economic suicide, and most Americans don’t seem to care.
Barack Obama is constantly hyping a “manufacturing resurgence” in America, but the numbers don’t lie. In September, our manufactured goods trade deficit with the rest of the world soared to a new all-time record high of 69.16 billion dollars. For the year, we are nearly 12 percent ahead of last year’s record pace.
When we buy far more things than we sell, we get poorer as a nation.
How do you think that we ever got into a position of owing China more than a trillion dollars?
We just kept buying far more from them than they bought from us, and their money just kept piling up. Now it has gotten to the point where our politicians literally beg them to lend our money back to us. They are the head and we are the tail.
And we did this to ourselves.
Once upon a time, the United States was the greatest manufacturing powerhouse that the world had ever seen. But now China manufacturesmore stuff than us and China also accounts for more total global trade (imports plus exports) than us.
This should never have happened. Several decades ago, the Chinese economy was a complete joke. But decades of incredibly foolish decisions by our politicians have resulted in the loss of tens of thousands of manufacturing facilities, millions of good paying jobs and the destruction of vast stretches of our economic infrastructure.
During the same time frame, gleaming new manufacturing facilities have gone up all over China.
China is literally wiping the floor with us on the global economic stage and most Americans don’t even understand what is happening. Here is more on the trade deficit numbers that were just released from the RealityChek Blog…

This post was published at The Economic Collapse Blog on November 4th, 2014.

Proof That Gold Is Manipulated Using Paper Gold

It’s so easy to spot, even a caveman using a crayon and a ruler etching lines on graphs and making crystal ball readings could see it (source: Nick Laird via Ed Steer’s Gold and Silver Daily, edits in color are mine):

This graph shows the average intra-day price movements of gold over a 5-yr period. As you can see, on average over 5 years, during the time of day when the Asian physical delivery markets are open, the price of gold has positive returns. During the time period when the Lonon/US fractional-hypothecated fiat paper gold markets are open and Asia is closed, the price of gold declines.

This post was published at Investment Research Dynamics on November 4, 2014.

EC Slashes Eurozone GDP Forecasts (But Not Enough); Goldman’s Model Shows Europe in Recession Now

The European Commission slashed Eurozone GDP Estimates (yet again), yet they remain in positive territory.
Revision Summary
The EC revised Ireland, Malta, and Slovenia up. Greece and Netherlands were flat. The EC revised every other country lower from forecasts made in May of 2014. Notably, the EC cut the Germany forecast from 2% to 1.1% now. France went from 1.5% to 0.7%.

This post was published at Global Economic Analysis on November 04, 2014.

And This Is How You Spike Markets In The New Normal

Because when you have no POMO, and no QE on the horizon, you can always break a stock exchange and send the entire market… higher!?
*CBOE HAD 2ND PERIOD OF ISSUES W/ QUOTE DISSEMINATION TODAY To wit: “The CBOE did not disseminate quotes between 11:45am CDT and 11:48am CDT in the following classes- DEM, DENN, DEPO and PCLN. All systems are operating normally.”
And the result:

This post was published at Zero Hedge on 11/04/2014.