6 Reasons Why ECB Will Avoid QE As Long As Possible (And Why The Fed Did It)

Yields on European sovereign debt have collapsed in recent months as investors piled into these ‘riskless’ investments following hints that the ECB will unleash QE (at some point “we promise”) and the economic situation collapses. However, Mario Draghi has made it clear that any QE would be privately-focused (because policy transmission channels were clogged) and the appointment of Blackrock to run an ABS-purchase plan confirms that those buying bonds to front-run the ECB may have done so in error. As Rabobank’s Elwin de Groot notes in six simple comments that he expects continued “procrastination” by the ECB over sovereign QE even after dismal economic data – and in doing so, exposes the entire facade behind The Fed’s QE.

This post was published at Zero Hedge on 08/28/2014.

Gold Daily and Silver Weekly Charts – A Tale of Two Metals Markets – Shout and Feel It

Nothing of particular interest was shown in the Comex reports from yesterday. Tomorrow we bid adieu to the August contract. Time to move our eyes to the September month which is active for silver but not gold. The precious metals are unfortunately very politicized in this currency war. That is both a risk, and an opportunity. There was intraday commentary on the metals here. There are obviously two metals markets, one of paper, and one of real metal delivered and taken. One is most expressed in the overnight market with trading in Asia and Europe, and another that starts after the New York opening bell.

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

Gold Seeker Closing Report: Gold and Silver Gain While Stocks Fall

The Metals:
Gold rose $14.33 to $1296.33 at about 8:30AM EST before it pared back to $1287.37 in the next couple of hours of trade, but it then bounced back higher in afternoon trade and ended with a gain of 0.57%. Silver surged to as high as $19.851 and ended with a gain of 0.46%.
Euro gold climbed to about 978, platinum gained $6 to $1421, and coper fell 4 cents to about $3.14.
Gold and silver equities rose over 1% at the open before they fell back towards unchanged by midmorning, but they then climbed back towards their opening highs by early afternoon and remained near that level into the close.

This post was published at GoldSeek on 28 August 2014.

The Fed’s “Mutant, Broken Market”

Undermining the Integrity of Financial Markets
Introduction
Financial markets are broken. Fundamental analysis and Modern Portfolio Theory are relics of the past. Investors used to care about maximizing a portfolio’s expected return for a given amount of targeted risk. The goal used to be that prudent diversification through the analysis of security correlations could move the Efficient Frontier Line ‘up and to the left’. In other words, improve returns per unit of risk.
Today, Fed policies have commandeered investor thinking and altered investor behavior. The powerful driver of moral hazard has fueled greed, and imbued more fear of underperforming peers and benchmarks, than fear of downside risks. Some investors are buying the riskiest assets simply because prices have been rising. Some investors say they are buying equities instead of Treasuries because ‘equities have upside, while bonds yields are puny and their prices are capped at par’.
Fed policies have led to (investor) herd behavior that has plunged market volatilities and manipulated asset prices and correlations to lofty levels. The rallying cry has simply become ‘don’t fight the Fed’. Relative return – without regard for risk – is all that matters. As a result, future return expectations have fallen with ever-rising prices; correspondingly, risk levels have risen in parallel. The allure of the Fed’s magic spell has lapsed investors into a soporific state of cognitive dissonance, with them focusing more on trying to justify valuations, rather than on the Upside Downside Capture Ratio.
Markets have thus mutated into one of two possible combustible states. Either financial assets have all transcended into prodigious bubbles, or stocks and bonds are signifying two completely separate outcomes. Either possibility will have dangerous repercussions for the economy, and for portfolios and investors. At the moment, I believe that the Treasury market has it right, signifying concerns about disinflation and future growth.

This post was published at Zero Hedge on 08/28/2014.

Why Americans Are So Sensitive To Even The Smallest Increase In Prices

In the last year, even the ‘smartest men in the room’ PhDs with advanced degrees have seen their wages shrink, according to a new study by the Economic Policy Institute. As The WSJ notes, inflation has been low by most measures in recent years, but wage growth for the majority of workers has been even lower.
That means even small amounts of inflation have been painful for vast swaths of the workforce.
In recent years, one thing is clear: Neither monetary policy nor labor market policies nor fiscal policies have been able to boost earnings for most Americans. Only workers in the 80th percentile and up have seen their wage gains outpace inflation, though not by much.

This post was published at Zero Hedge on 08/28/2014.

German Finance Minister Tells EU Leaders: Free Money Party’s Over

Has Germany had enough? Hot on the heels of Mario Draghi’s ‘demands’ that EU leaders undertake “structural reforms” to boost competitiveness and overcome the legacy of Europe’s debt crisis, German Finance Minister Wolfgang Schaeuble unleashed perhaps the most worrisome statement tonight for all the free-money-party-goers – the music is about to stop. In an interview with Bloomberg TV, Schaeuble blasted “Europe needs to find ways to foster growth,” adding that “the ECB has reached the limit in helping the Euro Area.” In a clear shot across the bow of his ‘core’ cohort, Schaeuble said he “understood” Hollande’s demands but shot back that “monetary policy can only buy time.”
As WSJ notes, the French are seeking aid…

This post was published at Zero Hedge on 08/28/2014.

Bank of Canada Holds Swiss, Dutch, Swedish Gold As Swiss Repatriation Referendum Looms

Bank Of Canada Holds Swiss, Dutch, Swedish Gold As Swiss Repatriation Referendum Looms
Ex Bank of Canada governor Mark Carney, now Bank of England governor, holds up a gold coin at the Royal Canadian Mint to promote the public sale of rare Canadian gold coins previously stored at the Bank of Canada since 1935. Canadian Press/Adrian Wyld Highlights
– Upcoming Swiss vote on gold repatriation could lead to gold repatriation from Bank of Canada
– Bank of Canada only acts as gold custodian to four foreign central banks
– Switzerland, the Netherlands and Sweden say they hold gold in Ottawa
– Bank of Canada no longer a major gold custodian; Canada has virtually no gold reserves
In just three months, on November 30, the Swiss will vote in a federal referendum on the future of the country’s gold reserves.

This post was published at Gold Core on 28 August 2014.

Silver Pricing Change Takes Effect, Other metals to follow

With the launch in mid-August of a new system to arrive at the price for silver, precious metals investors are dealing with the first in a series of changes in how the market prices of silver, gold, platinum and palladium are reached.
More change is coming, since the other three metals have yet to go through the process, but what’s happened so far is this: Concerns about price fixing after everything from LIBOR to currency were found to have been manipulated led to accusations about the gold and silver markets, and in January of this year Germany’s financial regulator Bafin said that the manipulation of precious metals prices was worse than that occurring with LIBOR.
Deutsche Bank was interviewed by Bafin on the matter before the end of 2013, and in January the bank announced that it would exit the commodities business and abandon its positions in the processes of fixing gold and silver prices. Since Deutsche Bank was one of only three involved in the 117-year-old process of setting the price of silver – the other two were HSBC and Bank of Nova Scotia – that meant a new method had to be found before Deutsche Bank departed the scene.
In August, that new method launched. An electronic, auction-based mechanism has taken the place of the traditional conference call among the three banks that had determined how silver would be priced since the time of Queen Victoria. Run by CME Group Inc. and Thomson Reuters Corp., the new system uses electronically entered orders proposing a starting price; if buy and sell orders don’t match up, an algorithm will determine the price to be used for the next bidding round. CME had said in a report when the system went live that each round should take 30 seconds or less, and that participants will be able to view bid and offer volumes, as well as total volumes traded once the price is set.

This post was published at TruthinGold on August 28, 2014.

Margin Debt & Trends

The debate over the pending crash in the stock market seems endless. Whether or not margin debt as reported by the NYSE has relevance any more is an interesting question in a world in which the retail investor has abandoned investing (decline in liquidity). The real marginal buyers are hedge funds and some banks while the cash buyers remain central banks. The make-up of the market has changed and the interest rates are well below even many dividends. So talking about total margin debt nearing $500 billion cannot be compared just on a nominal basis.

This post was published at Armstrong Economics on August 27, 2014.

The Housing Echo-Bubble Is Popping

There is nothing remotely “normal” about the echo-bubble’s rise, and we can anticipate that its deflation will be equally abnormal.
Conventional wisdom on the resurgence of the housing markets takes one of two paths:
1. Housing is not in a bubble, it is merely returning to “normal”
2. Housing is bubbly in some markets, but prices will continue to rise First up: home prices, as measured by the Case-Shiller Price Index. Note the near-perfect symmetry of the echo-bubble: it has taken roughly the same time-span to inflate and reach a top as the first housing bubble from January 2004 to its peak 2 years later. Here’s an alternative view: housing is in an echo-bubble that’s popping. Courtesy of the excellent Market Daily Briefing, here are some charts that make the case that the housing echo-bubble was just another Federal Reserve-induced speculative asset bubble that’s popping, like every other speculative bubble in recorded history. The echo-bubble has topped out at about 50% of the decline from the primary bubble top to the trough in 2012.

This post was published at Charles Hugh Smith on WEDNESDAY, AUGUST 27, 2014.

Bloomberg Shock: Economics Is Storytelling, Not Science

Economics Isn’t Science or Literature … Economists use many of the same tools as scientists and engineers — matrix algebra, multiple regression, control theory. But they don’t use them in the same way. In economics — especially macroeconomics — the goal is often to persuade other people of your point of view. As Federal Reserve economist Kartik Athreya writes in his 2013 book “Big Ideas in Macroeconomics”: My view is that a part of what we do is “organized storytelling, in which we use extremely systematic tools of data analysis and reasoning, sometimes along with more extra-economic means, to persuade others of the usefulness of our assumptions and, hence, of our conclusions…This is perhaps not how one might describe “hard sciences[.]” – Bloomberg Editorial
Dominant Social Theme: Even though economists don’t really know anything and can’t, it’s still a swell science.
Free-Market Analysis: Bloomberg’s Noah Smith is back with an editorial explaining that even though economics isn’t a science, it’s still a swell “culture.”
What’s funny about this article is that Smith’s admission as to what economics really is corresponds entirely to the points that Austrian economists have made regarding economics: It’s not a science and not especially predictive.
Of course, Mr. Smith would not mention Austrian, free-market economics in his current column, as he doesn’t like Austrian economics.

This post was published at The Daily Bell on August 28, 2014.

Can The New Silver Fix End The Ongoing Silver Price Manipulation?

The new silver fix is a fact since 17th August 2014. The silver fix has been a driver in setting the silver price in the last 117 years, but now a revised ‘fixing mechanism’ with other ‘fixing members’ is in place. Up until August 14th2014, three institutions have been participating to the daily silver fix, i.e. Deutsche Bank AG, HSBC Bank USA N. A. and The Bank of Nova Scotia. In the new silver fix, the participating members are HSBC, ScotiaMocatta and Mitsui.
Before looking into the question what to expect from the ‘new’ silver fix, it is important to understand what the ‘old’ silver fix has done to the price of silver. Commodity analyst Dimitri Speck has focused his research on discovering silver price manipulation related to the silver fix, more so than the Gold Fix. Based on his extended statistical analysis around intraday average price patterns, he was able to pinpoint when exactly the manipulation (or, intervention) took place, and he provided the world unbiased charts. The next paragraphs focus on his findings; they are based on Dimitri Speck his book ‘The Gold Cartel.’
The book ‘The Gold Cartel; Government Intervention in Gold, the Mega-Bubble in Paper and What this Means for your Future’ is written by commodity analyst and precious metals expert Dimitri Speck. The book is available at Amazon. It is one of the few ‘must read’ books on precious metals with important investment insights for serious investors.
The key in uncovering the silver price manipulation is to analyze price patterns in three distinct time frames:
Before 2010 Between 2010 and April 2011 After May 2011 In the period before 2010, the intraday average silver price chart clearly shows statistically significant anomalies. The first chart shows the intraday average price between August 1998 and 2011. The obvious observation is that a significant price break down has been appearing right at the silver fix, which is at 7AM EST (New York time). A second sharp decline is visible at 10AM EST, which is probably linked to the gold fixing, see below. The chart takes into account almost 13 years of data, it excludes every form of coincidence or randomness.

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

Initial Jobless Claims Drop Back Under 300k, Continuing Claims Rise

“Slack” or “no slack” – initial claims tumbling along the bottom of the lowest levels in a decade suggest the US economy’s job creation is as good as it gets. Initial claims was stable at 298k (vs expectations of 300k) down very small from the 299k adjusted data for last week. Continuing claims rose 25k on the week and missed expectations but also continues to tread water at the lowest levels since 2007.

This post was published at Zero Hedge on 08/28/2014.

Q2 GDP Revision Unexpected Rises On Alleged Jump In Capex To Highest Since 2011

Following the unexpected surge in Q2 GDP, which beat most analyst estimates, there was widespread expectation that based on real-time data, the revised Q2 print would be worse. So perhaps it is appropriate that the Bureau of Economic Analysis punked everyone once again, when moments ago it released the first revision to the Q2 GDP print, which instead of dropping to the consensus expected 3.9%, it instead rose to 4.2%, up from the 4.0% initial report.

This post was published at Zero Hedge on 08/28/2014.

Scottish Independence, Part 1

It’s NOT All about Pounds and Oil ‘We shall not rebuild civilization on a large scale. It is no accident that on the whole there was more beauty and decency to be found in the life of small peoples, and that among the large ones there was more happiness and content in proportion as they had avoided the deadly blight of centralization. Least of all shall we preserve democracy or foster its growth if all the power and most of the important decisions rest with an organization far too big for the common man to survey or comprehend. Nowhere has democracy ever worked well without a great measure of local self-government, providing a school of political training for the people at large as much as for their future leaders. It is only where responsibility can be learned and practiced in affairs with which most people are familiar, where it is the awareness of one’s neighbor rather than some theoretical knowledge of the needs of other people which guides action, that the ordinary man can take a real part in public affairs because they concern the world he knows. Where the scope of the political measures becomes so large that the necessary knowledge is almost exclusively possessed by the bureaucracy, the creative impulses of the private person must flag. I believe that here the experience of the small countries like Holland and Switzerland contains much from which even the most fortunate larger countries like Great Britain can learn. We shall all be the gainers if we can create a world fit for small states to live in.’
Friedrich Hayek, The Road to Serfdom (1944), Chapter 15 (emphasis added)

Austrian economist and political philosopher Friedrich A. Hayek
(Photo credit: unknown)

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

GDP ‘Good News’ Sparks Bond Buying & Stock Selling, Treasury Curve Crumbles Further

US GDP beat expectations ‘proving’ that government data shows the recovery meme is on track (as long as it doesn’t snow ever again). The market’s reaction… intriguing – stocks shrugged even as a USDJPY pump tried to get things going; gold and silver moved modestly higher; and Treasury yields… fell notably at the long end. 30Y is now trading with a 3.06% handle and 5s30s is back below 145bps…!

This post was published at Zero Hedge on 08/28/2014.

Argentina Proclaims Peso Devaluation “Obviously Won’t Happen” – Just Like It “Vowed” In 2013

May 2013, President Kirchner: “As long as I’m president, those who want to make money through devaluations, which other people have to pay for, will have to keep waiting for another government,”
Jan 2014: Argentina Devaluation Sends Currency Tumbling Most in 12 Years
Aug 2014: Argentina’s Cabinet Chief Jorge Capitanich said today a devaluation of the peso, “obviously won’t happen.”
So what’s next?

This post was published at Zero Hedge on 08/28/2014.

Analyst: Fed’s low interest rates could bring ‘scary’ 60% market crash

Markets could soon face a fall of up to 60 percent, two experts told CNBC on Wednesday.
A jolt to international confidence in central banks will lead to a 30 to 60 percent market decline, David Tice, president of Tice Capital and founder of the Prudent Bear Fund, told CNBC’s ‘Power Lunch.’ When this happens, he said, markets will face a ‘period of extreme turmoil.’
This crash will be precipitated, he said, by a disillusionment with the Federal Reserve’s ‘confidence game,’ which will then see inflation rise, and the Fed scramble to raise rates. At that point, Tice added, ‘the Fed starts to lose control.’
Another market watcher also called for an impending fall.

This post was published at Investment WatchBlog on August 27th, 2014.

Ebola Devastates West Africa: Revenues Down; Markets Not Functioning; Projects Canceled; GDP Plunges 4%

In all of its infinite wisdom, the “market”, which stopped reacting to newsflow or discounting the future some time after the Fed officially announced it would centrally-plan it indefinitely, decided that just like the trade war against Russia is irrelevant only to find itself a week ago with Europe staring at the abyss of a triple-dip recession, so it decided that the worst Ebola outbreak in history is a non-event, even though it has put virtually all of western Africa on indefinite lockdown, and as Reuters reports, is “causing enormous damage to West African economies and draining budgetary resources.” In fact the damage from Ebola to Africa is already so acute, it is expected that economic growth in the region will plunge by up to 4 percent as foreign businessmen leave and projects are canceled, according to the African Development Bank president said.
“Revenues are down, foreign exchange levels are down, markets are not functioning, airlines are not coming in, projects are being canceled, business people have left – that is very, very damaging,” African Development Bank (AfDB) chief Donald Kaberuka said in an interview late on Tuesday.
“The numbers I have had vary from one percent to four percent of GDP. That is a lot in a country with a GDP of US$6 billion,” Kaberuka said, when asked to quantify the impact.

This post was published at Zero Hedge on 08/27/2014.