Climbing Gold and Silver’s Wall of Worry

Confidence is slippery, even when you are a metals investor sitting atop the best performing assets of 2016. It doesn’t help when 4 years of a miserable bear market remains fresh in our memories. Any weakness in prices and it can feel like markets are getting ready to plunge right back to $13 silver and $1,000 gold.
That feeling is called the ‘Wall of Worry’, and bulls are going to have to climb it by staying in the market even if their emotions are telling them to bail. Let’s review the last 6 weeks because they are quite instructional.
June 1st: Silver closed at $15.97 and gold at $1,213. Precious metals prices stood well below the highs put in at the end of April and plenty of people declared the end of metals bull run.
There was plenty of reason to worry. At the time, markets were obsessed with Federal Reserve policy and sentiment was darkening.
The year had opened with turmoil in the stock markets. The S&P 500 was plummeting in response to a December rate hike with the expectation of more hikes to come. Precious metals surged as investors sought refuge from crumbling stocks.
In mid-February Fed officials responded to the collapse in stock prices by reversing their rhetoric on interest rates. They reaffirmed their undying commitment to growth and prosperity through freshly printed cash!
Metals got another boost and the S&P 500 took off like a rocket.
So much so that, by June, schizophrenic officials had reversed direction once again. They sounded an economic ‘all clear’ and began jawboning about raising rates. Some thought they might even get around to hiking as soon as the FOMC meeting in the middle of the month.

This post was published at GoldSilverWorlds on July 26, 2016.

Global Central Banks Are All-In: QE Running At Record $180 Billion Per Month (And Rising)

The monetary policy beatings will continue until morale improves. Eight long years after monetary policy experimentation went extreme, Reuters reports the amount of QE stimulus being pumped into the world financial system has never been higher… and it’s about to get bigger.
As Jamie McGeever reports, The European Central Bank and Bank of Japan are buying around $180 billion of assets a month, according to Deutsche Bank, a larger global total than at any point since 2009, even when the Federal Reserve’s QE programme was in full flow.

This post was published at Zero Hedge on Jul 26, 2016.

Gold and Pork Bellies

Many investors and their financial advisors consider gold to be a commodity, which makes gold no different than copper, timber, pork bellies or orange juice. They do not understand, or simply are unaware, that gold has been successfully used as money for over 3,000 years. Although some people think it is an archaic relic, the facts don’t support this view. So, what is money?
Gold is traded on the currency desks of all major banks and brokerages, along with dollars, euros, yen and pounds, and not the commodity desks along with other commodities – the FX traders know gold is money.
On the balance sheets of all central banks, gold is classified as a monetary asset, along with their foreign currency reserves. The central bankers know gold is money. Central banks do not hold any other commodity as part of their reserves. Alan Greenspan knows gold is money, as he laid out in his famous article ‘Gold and Economic Freedom’, written in 1966, before he became chairman of the Federal Reserve.
According to London Bullion Market Association (LBMA) statistics, the daily turnover of gold is $23 billion. Turnover is the difference between buys and sells, whereas the volume is the sum of the two. Although volume is not published, estimates are that it is at least seven times the turnover, or about $175 billion per day. This magnitude of volume confirms gold is traded as money, not as a commodity. As a comparison, the daily volume of copper is less than $4 billion per day as traded on the Chicago Mercantile Exchange.
One of the most important attributes of gold is that it is negatively correlated to financial assets, such as equities and bonds, and non-correlated to commodities.

This post was published at GoldSeek on 26 July 2016.

Apple Surges After Beating Expectations, Despite Forecasting Third Straight Revenue Decline

While the plunge in Twitter share moments ago put those looking forward to AAPL’s earnings on edge, Tim Cook delivered, beating on both the top and bottom line, reporting Q3 revenue of $42.4 billion, which declined 15% but above the $42.1 billion expected as a result of better than expected iPhone sales, with the company selling 40.4 million units in the quarter, down 15% but also above the 39.9 million expected.
Helping the bulls, Apple said demand for the iPhone was getting stronger and that the decline in sales of its flagship device has passed the ‘low point’
Still, despite the beat Apple reported a decline in sales and profit lower by 27% Y/Y as a result of a 33% plunge in China sales, while forecasting a third straight quarterly revenue drop, dragged down by slowing demand for iPhones amid a lackluster global smartphone market and intensifying competition in China.

This post was published at Zero Hedge on Jul 26, 2016.

British Columbia Cracks down on Vancouver Housing Bubble

Targets Foreign Buyers with 15% Tax.
Vancouver, British Columbia, has been in a phenomenal housing bubble. The benchmark price for homes in Metro Vancouver soared 32% in June year-over-year, according to the Real Estate Board of Greater Vancouver! Other price gauges come up with different results, depending on how they’re structured, including the chart below. But all of them point at an insane situation. For just how far this can go, read, Teardowns and Shadow-Flipping: Living Inside the Insane Vancouver Housing Bubble.
But now the government of the Province of British Columbia is doing something about it – trying to at least. The Globe & Mail:
The British Columbia government is in the midst of a wide-ranging overhaul of how the housing market is regulated and taxed, amid growing concerns that foreign ownership, rampant speculation and unscrupulous real estate agents are fueling an affordability crisis.
During the past several months, the province has announced an end to self-regulation, largely in response to a series of Globe and Mail investigations into questionable practices within the industry; a tax on vacant homes in the City of Vancouver; and a 15 per cent tax on home purchases involving foreigners.
Here’s Christine Hughes, Chief Investment Strategist, OtterWood Capital:

This post was published at Wolf Street by Wolf Richter ‘ July 26, 2016.

Twitter Plummets After Slashing Q3 Outlook

Miraculously managing to beat user growth expectations (313mm MAUs vs 312mm MAUs exp) and EPS ( 13c vs 9c exp), Twitter stock is plummeting after-hours after slashing Q3 revenue (and EBITDA) guidance drastically(from $681.4m to between $590 and $610mm). TWTR is trading down 11% after-hours…
As Bloomberg reports, Twitter said third-quarter revenue will be less than analysts expected Tuesday, a sign it’s struggling to win more advertising dollars as user growth stagnates.
The company forecast third-quarter revenue of $590 million to $610 million. Analysts were looking for $681.4 million. Monthly active users were 313 million in the second quarter, up from 310 million during the prior quarter. That beat the average analyst estimate for 312 million, according to data compiled by Bloomberg.
Second-quarter sales grew 20 percent to $602 million, compared with the $607 million estimated by analysts.
Profit, excluding some items, was 13 cents per share. Analysts forecast 9 cents on average.
So to summarize, Q2 mixed…

This post was published at Zero Hedge on Jul 26, 2016.

Something Wicked This Way Comes from the Tar Pits and Oil Sands – Crude oil price rally destroyed

The crude oil price rally has been completely destroyed, though I’ll admit I was wrong when I predicted crude oil prices would plummet in March or April as the perfect storm developed against oil prices. Instead, they rallied. In spite of that, I continued to believe my error was in timing and not in fact – not in the fact that a another harsh fall in oil prices was beating a path to our doors.
Crude oil prices beaten down by a storm still building
So, I continued to write articles about the forces building against oil prices, even in the face of a strong rally, which many believed would set a new position for oil for the remainder of 2016. That storm has, as of today, completely clawed back the post-March rally by taking crude oil prices back to a three month low and to where they stood at the start of the year as well. West Texas Intermediate just struck $42/barrel today.
That said, oil still has not gone back into the dark valley from which it came in the winter of oil’s discontent, and to which I said it would return.
I still believe the full strength of this storm is yet to be felt. I have to, however, state a caveat to my oil price predictions (of something below $30/barrel again this year) … and not because I want to hedge my bet. I don’t like hedging my bets, as I prefer to hit them straight in the nose for a clear victory.
As stated in an earlier article, however, we have no way of knowing anymore what the Fed with its cloaked operations, liberal hand, and infinite money potential is doing at any moment to manipulate the price of the oil market in the same way it has admitted to doing with the stock market. Anytime the Fed sees oil bringing a serious gale against its heavily encumbered member banks, you can be sure it will intervene to save the banks (at any cost). The Fed has become so deeply involved in markets that there is no longer any basis for assuming any market will run as a truly free market.
Nevertheless, I think forces are moving in that will ultimately blow everything outside of the Fed’s control. When we arrive at that inexorable day when all the oil tanks of the world – and all the tankers on land and sea – are full (as I’ve said we are likely to do and as appears to be more the case all the time), it will be hard for the Fed to manipulate the price of oil with nowhere to store the oil it buys. Reality finds a way to leak in or seep out … eventually.

This post was published at GoldSeek on 26 July 2016.

Spread Thin – How the Fed Manipulates Financial Spreads

‘The Fed is manipulating markets…’
‘Central Banks are destroying capitalism…’
‘Yellen has distorted true price discov… yada-yada-yada’
We’ve all heard the constant chorus of central bank bashing. The ridicule comes from a diverse crowd, ranging from retail Joe Schmoes to prominent hedge fund managers… and I admit, Fed economists make for easy targets.
But I figured some of you may want to know; Is this rancor justified… or are central banks just a popular scapegoat for traders who’ve continuously been on the wrong side of markets?
My answer is… yes and no. Helpful, right?
Don’t worry, I’ll explain. And lucky for us, to properly explain my answer we need to explore the central bank/market relationship. Understanding this dynamic is one of the most important concepts a trader/investor can grasp (especially in today’s world).
So let’s start with exactly what central banks do when they ‘manipulate’ markets.
The Fed has three blunt-force policy tools in its arsenal to help carry out its’ (ridiculous) dual-mandate of ‘maximizing employment’ and ‘stabilizing prices’.
These are:
Reserve requirements Discount rate Open market operations

This post was published at FinancialSense on 07/26/2016.

Podcast: Random Violence And Political Instability – The New Normal

Terrorists and other crazies have figured out that they don’t need guns. Trucks, axes and machetes will do just fine. Meanwhile, political parties around the world are imploding or otherwise descending into chaos. Welcome to the new normal, where excessive debt makes the old ways of muddling through impossible. Advice on how to invest for the inevitable bust will follow shortly.

This post was published at DollarCollapse on JULY 26, 2016.

Gold Daily and Silver Weekly Charts – Quiet Option Expiry, FOMC Tomorrow

‘It was written I should be loyal to the nightmare of my choice.’
Joseph Conrad, Heart of Darkness
“Judge them by their works. What have they done for mankind beyond the spinning of airy fancies, and the mistaking of their own shadows for gods?”
Jack London, The Iron Heel
That first quote is for Bernie Sanders, and that second sums the substance of the Fed.
I think that the gold and silver prices got pegged to the price that pleased those who wanted to take the most out of the pockets of the non-professional (directional) options players.
Tomorrow will be the FOMC, and we may see a move, depending on just what the Fed decides to do.
I can see them doing nothing, or raising 25 bp and getting it over with. I put it at almost 50-50. They are running out of time to act from a practical standpoint, but the financial system is so shaky that they are paralyzed by fear of doing anything that will cast a finger of blame in their direction.

This post was published at Jesses Crossroads Cafe on 26 JULY 2016.


Gold:1320.70 up $1.40
Silver 19.66 up 4 cents
In the access market 5:15 pm
Silver: 19.58
For the July gold contract month, we had ANOTHER GIGANTIC 435 notices served upon for 43,500 ounces. The total number of notices filed so far for delivery: 6880 for 688,000 oz or 21.3996 tonnes
In silver we had 71 notices served upon for 355,000 oz. The total number of notices filed so far this month for delivery: 2350 for 11,750,000 oz
We are now entering options expiry month for gold and silver:
i)The comex options expiry TODAY July 26.
ii)The OTC options in London expire Friday at noon July 29.
So expect downward drafts in gold and silver trading until both of these contracts expire.
Let us have a look at the data for today.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 311.698 tonnes for a gain of 9 tonnes over that period
In silver, the total open interest FELL BY ONLY 121 contracts DOWN to 220,312 AND CLOSE TO AN NEW ALL TIME RECORD AS THE PRICE OF SILVER FELL BY 4 CENTS IN YESTERDAY’S TRADING. In ounces, the OI is still represented by just over 1 BILLION oz i.e. 1.102 BILLION TO BE EXACT or 157% of annual global silver production (ex Russia &ex China).
In silver we had 71 notices served upon for 1355,000 oz.
In gold, the total comex gold ROSE BY A CONSIDERABLE 12,011 contracts despite the fact that the price of gold FELL by $3.40 yesterday. The total gold OI stands at 609,422 contracts.
With respect to our two criminal funds, the GLD and the SLV:
we had A HUGE WITHDRAWAL in gold inventory TO THE TUNE OF 4.46 TONNES. /
Total gold inventory rest tonight at: 954.23 tonnes
we had no changes into the SILVER INVENTORY TO THE SLV
Inventory rests at 348.580 million oz.
First, here is an outline of what will be discussed tonight:

This post was published at Harvey Organ Blog on July 26, 2016.

Previewing The Day’s Big Event: What To Expect From The Apple’s Earnings Report

When Apple reports earnings after the close today, all eyes will be on its revenue, specifically how many fewer iPhones it sold in the quarter (consensus expects a drop of 22%), and more importantly profits for one reason: over the past several years Apple has been the single biggest contributor to S&P profitabillity. In 2015, Apple’s profit rose 21% and it made more money than any other company in the S&P500 – at $53.7 billion in net income it accounted for 7% of the S&P’s bottom line.
However, that ended promptly in the first quarter when APPL posted a substantial drop in both EPS and iPhone sales. It is about to get worse: according to Drexel Hamilton’s Brian White, “the company is heading for its biggest iPhone decline ever.”
As such, AAPL is truly in a class of its own, details of which are revealed courtesy of FactSet’s John Butters who writes that for the calendar second quarter (fiscal third quarter for Apple), the current mean EPS estimate is $1.40, compared to year-ago actual EPS of $1.85, a 24.5% decline on the back of a 22% drop in iPhone sales. If Apple reports a year-over-year decline in EPS for Q2 2016, it will mark the second straight quarter that the company has reported a year-over-year decline in EPS. The last time Apple reported two consecutive quarters of annual earnings declines was Q2 2013 through Q3 2013 (fiscal Q3 2013 through Q4 2013 for Apple).

This post was published at Zero Hedge on Jul 26, 2016.

Are Apple Options Traders Too Complacent Ahead Of Earnings?

Despite the stock’s recent demise, and ‘shocking’ analyst downgrades, Apple options traders appear exceptionally calm ahead of tonight’s earnings report…
Even with Apple forecast to post a slide in quarterly earnings after the close, investors are calmer than they were before previous reports. As Bloomberg reports, The CBOE Apple VIX Index, which tracks volatility expectations for shares of the iPhone maker, closed yesterday at its second-lowest level on record before an earnings release, and 16 percent below its one-year average.

This post was published at Zero Hedge on Jul 26, 2016.

Italy Races To Arrange 5 Billion Bailout For Monte Paschi Before Friday’s Stress Test

As we noted over the weekend, Italy’s bank stress test the result of which is due out on Friday, is a “near-term stress event“, and one which Italy’s most troubled bank, Monte dei Paschi di Siena, is expected to fail. It is Monte Paschi’s massive non-performing debt load that is also the reason why over the past month Italy’s Prime Minister Matteo Renzi has been desperately spinning Brexit as a catalyst event which would get Germany’s blessing to enact a taxpayer-funded, public, bailout of not just the world’s oldest, and Italy’s third largest, bank but also of the entire Italian banking sector. Alas that has not panned out as expected, and Italy never got Germany’s – or Dijsselbloem’s – permission to launch another TARP.
Which explains why moments ago the FT reported that Italy was last night “racing to secure a privately backed bailout of Monte dei Paschi di Siena, the most exposed of the country’s troubled lenders, including a plan to raise 5 billion of fresh capital so as to avert nationalisation, according to bankers and European officials.”
As a reminder, Monte Paschi has been bailed out by the state twice has raised over 8 billion of capital in the past two years, money which it quickly burned through, and as of this moment it has a market cap of just over 800 million. In other words, all else equal, the Sienna bank is looking at dilution of nearly 90%. Which would be a concern if the stock wasn’t already trading as if it was insolvent, and if it hadn’t been halted already over the past two days despite a recent short-selling ban which did absolutely nothing to the bank’s long-term prospects.

This post was published at Zero Hedge on Jul 26, 2016.

SP 500 and NDX Futures Daily Charts – Earnings After the Bell, FOMC Tomorrow

Stocks traded on pretty decent volume today, despite the lack of tangible price action.
I suspect we were seeing a lot of positioning ahead of some of the big tech earnings results tonight, such as AAPL, as well as the FOMC decision on interest rates at 2 PM tomorrow.
Stocks seem fully valued here, and vulnerable to a reversal.
If the Fed does raise 25 bp it will most likely be benign to our sluggish real economy, but it might provide a jolt to the bubbles in financial assets which they have, once again, created.

This post was published at Jesses Crossroads Cafe on 26 JULY 2016.

Stocks Were Already Crashing the Last Two Times this Happened. So What Gives?

The foundations have crumbled. All bets are off.
Over the last 20 years, margin debt – when investors buy stocks with borrowed money – went through three multi-year run-ups, each topped off with a spike, followed by a reversal and decline: during the final throes of the bubbles in 2000 and 2007, each followed by an epic stock market crash – and now.
That pattern of jointly soaring and then declining margin debt and stocks even occurred during the run-up and near-20% swoon in 2011.
The grand cycle began in February 2009, at the trough of the Financial Crisis, when margin debt had dropped to $200 billion. It was followed by a multi-year record-breaking run-up, topped off with a spike that culminated in an all-time peak of $507.2 billion in April 2015. Then margin debt reversed and began to decline. On cue, the stock market began to decline a month later. Margin debt zigzagged lower, and stocks did too. But in February this year, stocks suddenly bounced off sharply – without margin debt.
The New York Stock Exchange reported on Monday that margin debt declined again in June, by $3.7 billion to $447.3 billion, just a hair above where it had been in February.

This post was published at Wolf Street by Wolf Richter ‘ July 26, 2016.

Stocks Slide After Japan’s “Helicopter Money” Plan Leaks, Underwhelms

At the same time that the Nikkei released its latest “market response” trial balloon, where it posted an article around 2am local time clearly meant for US market consumption according to which BOJ officials “were said to be leaning more toward easing”, the same Nikkei also published a preview of what Japan’s helicopter money may look like. There is just one problem: at first read, and judging by the market’s reaction, it appears to be rather underwhelming.
As the Nikkei reports, “the Japanese government has proposed distributing 10,000 yen ($95) or more to low-income individuals as part of an upcoming plan for jump-starting economic growth.”
Other proposals include a minimum-wage hike of 24 yen, or about 23 cents which would still be the most ever, to 822 yen an hour in fiscal 2016 as well as cutting the premiums that workers and their employers pay into the unemployment insurance program. The government submitted the outline to ruling coalition lawmakers Tuesday.
The plan will span a supplementary budget slated for this coming fall and next fiscal year’s main budget. The stimulus measures are expected to have a nominal value of 20 trillion yen to 30 trillion yen overall, with roughly 6 trillion yen over several years to consist of direct fiscal spending by the central and local governments. The rest would include such items as lending by government-backed financial institutions.
Some more details from the Nikkei:

This post was published at Zero Hedge on Jul 26, 2016.

Putting Lipstick on a Pig, IBM Style

Judging from the large amount of positive feedback on my June 21, 2016 column, An Anatomy of a Successful Short Sale, many of you find it as useful to spot failing companies as to uncover hidden gems.
Instead of looking through the rearview mirror at a stock that has already been beaten down, I want to take a look at a stock that my Rational Bear subscribers are currently shorting, and the reasons why I expect it to fall.
That stock is IBM.
IBM reported its quarterly results last week, and the see-no-evil analysts on Wall Street jumped for joy at what I think were terrible results.
Revenues Magic. What was so terrible? How about this – IBM has reported falling revenues for 17 consecutive quarters.
IBM pulled in sales of $20.2 billion last quarter, but that is 2.7% less than a year ago and 25% lower than in 2011.

This post was published at Mauldin Economics on JULY 26, 2016.