Europe: Stagnation, Default, Or Devaluation

Last week’s Jackson Hole meeting helped to highlight a simple reality: unlike other parts of the world, the eurozone remains mired in a deflationary bust six years after the 2008 financial crisis. The only official solutions to this bust seem to be a) to print more money and b) to expand government debt. Meanwhile, Europe’s already high (and rising) government debt levels and large budget deficits raise the question whether we should worry about ‘debt thresholds’, past which increasing deficits, and hence growing sovereign debt, no longer add to growth? Such a constraint could come from one of at least two sources:

This post was published at Zero Hedge on 08/26/2014.

Treasury Curve Collapse Signals Multiple Expansion Exuberance Is Over

Thanks to buybacks, multiple expansion has been the driver of equity market strength as non-economic actors know one thing – buying stocks at record highs pays better than ‘investing’ in Capex or growth. However, the Treasury market’s yield curve is sending a message loud and clear that multiple-expansion is due to end. As Wells Fargo’s Gina Martin Adams notes, “Index P/E is likely to fall,” as the spread between 10Y and 2Y yields compresses.

This post was published at Zero Hedge on 08/26/2014.

Meet The LMCI – -The Fed’s New Goal-Seeked, 19-Factor Labor Market Regression Rigmarole

In the rush to make QE’s taper and the follow-on ‘forward guidance’ appear more data-related than of due concerns about the structural (and ultimately philosophical) flaws in the economy, the regressionists of the Federal Reserve have come up with more regressions. The problem was always Ben Bernanke’s rather careless benchmarking to the unemployment rate. In fact, based on nothing more than prior regressions the Fed never expected the rate to drop so quickly.
Given that the denominator was the driving force in that forecast error, the Fed had to scramble to explain itself and its almost immediate violation of what looked like an advertised return to a ‘rules regime.’ When even first mentioning taper in May 2013, Bernanke was careful to allude to the crude deconstruction of the official unemployment as anything but definitive about the state of employment and recovery.
So at Jackson Hole last week, Bernanke’s successor introduced the unemployment rate’s successor in the monetary policy framework. Janet Yellen’s speech directly addressed the inconsistency:
As the recovery progresses, assessments of the degree of remaining slack in the labor market need to become more nuanced because of considerable uncertainty about the level of employment consistent with the Federal Reserve’s dual mandate. Indeed, in its 2012 statement on longer-run goals and monetary policy strategy, the FOMC explicitly recognized that factors determining maximum employment ‘may change over time and may not be directly measurable,’ and that assessments of the level of maximum employment ‘are necessarily uncertain and subject to revision.’
Economists inside the Fed (remember, these are statisticians far more than anything resembling experts on the economy) have developed a factor model to determine what Yellen noted above – supposedly they will derive’nuance’ solely from correlations.

This post was published at David Stockmans Contra Corner on August 26, 2014.

Gold Jewelry Demand in India Improves

Those who root for gold root for India. Despite a welcome June rally, it’s been a rocky second quarter for the world’s second-largest consumer of the metal, with demand down 18 percent compared to last year.
But consumer appetite seems to be on the upswing following a tepid July. Gold premiums rose to between $10 and $13 a troy ounce this month, compared to zero last month. Such premiums are good indicators that buyers are willing to spend more on gold jewelry and other forms of bullion.
That premiums have risen also suggests that Indians are making their gold purchases ahead of Diwali, or the Festival of Lights, a traditional time to participate in what I call the Love Trade. This year Diwali begins on October 23.
Other global celebrations and events that trigger the Love Trade include the Indian wedding season, the Chinese New Year, Ramadan and, of course, Christmas.

This post was published at GoldSeek on 26 August 2014.

The Retail Trader Lockout – Today’s ‘Market’ “Issues” Were Worse Than The Flash Crash

For 39 minutes today, as we noted earlier, the US stock “market” broke. As Nanex details, a total of 1,384 symbols were affected as 100s of stocks trade with crossed NBBOs, practically eliminating any chance for retail traders to transact. Options market were frantic, volatility swung around like a Ukrainian border-patrol agent, and yet the US equity indices limped ever higher. For those who fear ‘the big one’, for those who understand market liquidity, for those who got a glimpse of what happens when large crowds meet small doors in the high-yield credit market, today’s “broken” market was a cold hard lesson that few ‘moms and pops’ would have noticed… but from the perspective of ‘ability to trade’ – today’s market was worse than the Nasdaq Blackout and the Flash Crash… Hedge accordingly.

This post was published at Zero Hedge on 08/26/2014.

China Industrial Commodities Collapse As Sentiment Tumbles To 15-Month Lows

Unlike the QE-lite-driven exuberance in Chinese stocks of the last few weeks (which faded dramatically overnight), China’s industrial commodities (with near-record inventories) and seeing prices collapse. This may shock some who espy PMIs and government-created trade data and proclaim, China is fixed. In fact, as JPMorgan’s China Sentiment Index (JSI)shows, things are anything but bright as it fell to the lowest since June last year (at 48.3 in August). Sales and margins are tumbling – despite supposedly lower input costs. Lastly, those focused on spot Yuan movements (strength in recent weeks) have suggested this also confirms China strength – inflows – but looking out 12-months shows the market is expecting a dramatic devaluation from current levels in the Chinese currency is coming.

This post was published at Zero Hedge on 08/26/2014.

Jaw-Dropping Revelation: Justice Department Confirms Lost IRS Emails Are Stored On Backup Drives

For weeks the IRS and Obama Administration told the American people a carefully crafted narrative regarding the whereabouts of emails containing information surrounding the targeting of specific groups and individuals based on their political party. The Obama administration vehemently denied that such targeting had taken place or that they had any involvement whatsoever. For their part, IRS heads testified that the thousands of emails belonging to director Lois Lerner, who headed the IRS Exempt Organizations Unit, simply disappeared when her hard drive was thrown away.
Most Americans simply couldn’t believe it. How could an agency that deals with billions of pages worth of tax returns simply lose emails, especially from a department head? Moreover, how is it possible that these emails were not backed up somewhere?
In June we opined that there must be secondary copies of these emails, simply because the government keeps records of everything. Could you imagine what would happen to the IRS if their main email or data server was destroyed by some far off event, and all of the government’s tax revenues for an entire year were lost? Of course not! It’s simply not a reasonable scenario.
It turns out, according to a new report, that the government does have backups.
The Department of Justice has confirmed it.
But there’s a catch. DOJ attorneys and the IRS are now scrambling to offer up an excuse for why they shouldn’t have to show them to the American public.


This post was published at shtfplan on August 26th, 2014.

Wall Street, ‘a Self-Licking Ice-Cream Cone’

The S&P 500 hit the milestone of 2,000 yesterday before backing off. Today, it closed at 2,000 sharp, as if by coincidence. It’s up nearly 200% since March 2009. It hasn’t seen even a run-of-the-mill nothing-to-worry-about correction of 10% in almost three years, though these corrections occur about every 12 months in normal times. ‘Buy the dips’ rules, with dips getting ever smaller and shorter as traders are motivated by the only remaining fear, the fear of being left out.
With all this enthusiasm for stocks, you’d think there’d be some volume, some serious buying, to back it up. But yesterday, the day when the S&P 500 snuggled up to 2000, it was the lightest non-holiday volume day since, gosh – someone did the math – October 2006.
This condition of mysteriously drying up volume has piqued the curiosity of Cali Money Man, a portfolio manager at a big bank and WOLF STREET contributor, who has been on the job through the last three crashes:
I asked a Street technician about the low volume advance and the pattern in recent years for the market to rise on low volume and fall on high volume. The first rule I learned about this biz in 1978 was VID: volume indicates direction. But no longer. High volume has become a ‘contrarian indicator,’ the street technician explained. It’s a ‘sign of stress or a crisis.’

This post was published at Wolf Street on August 26, 2014.

A Tale of Two Markets: One for Wealthy Insiders, And Another For the Rest of Us

“We run carelessly to the precipice after we have put up a faade to prevent ourselves from seeing it.’
Blaise Pascal
Here is a brief excerpt from an article today by the amazing team of Pam and Russ Martens at Wall Street On Parade titled, Are U. S. Markets Liquid and Deep or Rigged and Broken? I suggest you read the entire article when you have the opportunity as this is just a snippet.
“…the SEC which oversees stock exchanges has allowed both the New York Stock Exchange and Nasdaq to create a bifurcated market. The unsophisticated investor is given trading data on which to base trading decisions on a slow data feed called the Securities Information Processor or SIP. The SIP is not only slow in getting the data to the technology-challenged investor, but it has limited data.
For the rich and powerful on Wall Street who can afford massive fees, there is another data feed offered by the exchanges called the Direct Feed. The Direct Feed data, which has far more useful information, arrives in the hands of High Frequency Traders and Wall Street’s proprietary traders ahead of the arrival of the SIP data. This allows the Direct Feed users to buy a stock on the cheap and sell the stock back to the SIP user at a higher price…

This post was published at Jesses Crossroads Cafe on 26 AUGUST 2014.

‘The Matterhorn London Interviews – Aug 2014: Ambrose Evans-Pritchard’

‘Ironically, America has never been as powerful financially as it is now’ Video interview:
In this first of a series of London interviews that Lars Schall conducted for Matterhorn Asset Management this summer, Lars met up with Ambrose Evan-Pritchard to discuss geo-politcal tensions in the world, China’s challenges, threats to the global economy and the expectations for gold.
GoldSwitzerland is very grateful to be able to present the views of this brilliant mind. On July 25 he wrote: ‘In the 30 years or so that I have been writing about world affairs and the international economy, I have never seen a more dangerous confluence of circumstances, or more remarkable complacency’.


This post was published at GoldSwitzerland on August 26th, 2014.

Ron Paul and Mark Spitznagel Talk Freedom, Farming, and the Fed

Ron Paul and Mark Spitznagel share a passion for non-interventionism, free markets, and Austrian economics. Congressman Paul served many years as a U. S. Representative from Texas, spanning 1976 to 2013, and was a Republican presidential candidate in 2008 and 2012. He has written extensively on liberty and politics, including The Revolution: A Manifesto and End the Fed. Spitznagel is the founder of Universa Investments, an investment advisor that specializes in tail-hedging, and is the author of The Dao of Capital, for which Paul wrote the Foreword. The two friends sat down recently to discuss topics ranging from the liberty movement and agricultural policy, to the consequences of Federal Reserve monetary policy. Here is a transcript of their conversation:Mark Spitznagel: Ron, you have been the galvanizing force of a resurgent liberty movement in the United States. Yet, we find ourselves in this world where interventionism is on the rise, and much of America remains complacent about it. For instance, I think we would agree that today’s crony-capitalism and monetary-interventionism by central banks is at an unprecedented scale that will once again leave destruction in its wake. Why is America letting this happen, and moving away from its Jeffersonian ideals? Moreover, I have to ask you, has the liberty movement stalled, or even failed?Ron Paul: Mark, on the surface and in Washington it may appear that interventionism is on the rise but in reality it’s on the defensive, more so than ever. Indeed there is a lot of complacency as that is frequently the rule for the majority of people regardless of the system. Where there is little complacency is with the intellectual leaders now leading the charge against the foreign and economic interventionists who have been in charge for decades and created the major crisis that we face today. It’s never easy politically to turn off bad policies and many times we have to wait until the policies self-destruct. The philosophy of non-intervention is growing significantly and that is crucial since ideas do have consequences. The obvious failure of the current system, and the current intellectual leaders of the younger generation who are more favorably inclined toward non-intervention, provide the encouragement we need to clean up the mess. During my presidential campaigns, I was always quite pleased when students held up signs saying: ‘You cured my apathy.”A question for you, Mark: I know you and a very few others like Jimmy Rogers know about authentic non-intervention in the economy, but what are Wall Street traders and investors like? Are they helpful in exposing crony-capitalism or are they part of the problem?
Mark: Unfortunately, Wall Street can’t help but respond to monetary intervention, like puppets to the Federal Reserve puppet master. Not only has the Fed turned just about every investor into a crazed gambler desperate for any yield above today’s artificially low interest rates, for professional investors the desperation is compounded by the career risk associated with underperforming in the very next period. If you’re fired for not having played the Fed’s game in the next round, who cares about what will happen in future rounds, and who cares about the long-run implications of this crony-capitalist game?

This post was published at Ron Paul Institute on August 26, 2014.

Silver powers solar

With a history that dates back more than 5,000 years, silver has been an incredibly valuable metal through the ages. It was once used as a trading currency along the Asian spice routes and was even the standard for U. S. currency for a while. However, the precious metal holds far more value than just as a currency. In fact, more than half of the world’s silver is actually used for industrial purposes as it is used in X-rays, low-e windows, and even solar panels. As it turns out, even solar energy wouldn’t work the same way if it wasn’t for silver.
Silver is a unique metal. It has the highest electrical and thermal conductivity of all metals, and it’s the most reflective. These physical properties make it a highly valued industrial metal, especially when used in solar cells.
Silver is actually a primary ingredient in photovoltaic cells, and 90% of crystalline silicon photovoltaic cells, which are the most common solar cell, use a silver paste. What happens is that when sunlight hits the silicon cell it generates electrons. The silver used in the cell works as a conductor to collect these electrons in order to form a useful electric current. The silver then transports the electricity out of the cell so it can be used. Further, the conductive nature of silver enhances the reflection of the sunlight to improve the energy that’s collected. Therefore, if it wasn’t for silver solar wouldn’t be as efficient in turning sunlight into energy.

This post was published at TruthinGold on August 25, 2014.

A Lesson in Economic Analysis from the Minimum Wage Debate

In the ebb and flow of interventionist politics, there are some issues that surface periodically regardless of how many times and how completely they are proven to be harmful to the very people they are purported to help. Currently the tide is once again carrying the minimum wage to the forefront of collective attention. Supporters of this and similar measures often use straw-man arguments, like the one in the picture below.
I discovered this ad through one of my friends who shared it on Facebook. It was originally posted on July 12, 2014 on the website of OurTime.org. I propose to deconstruct this pseudo-argument here, pointing out its major errors. I do this not to convince hard-core supporters of raising the minimum wage that it is a bad idea; I doubt that is possible by any means. Rather, this can be a short lesson for those interested in sound economic analysis in how to proceed when confronted by opposing arguments buttressed by seemingly sound statistics.

This post was published at Ludwig von Mises Institute on Tuesday, August 26, 2014.

Revolt of the Luddites: Berlin Moves Against Uber and Airbnb

Uber taxi service banned in Berlin on safety grounds… German capital follows Hamburg with vote to ban taxi app firm, saying it does not protect passengers from unlicensed drivers … Berlin has voted to ban Uber on safety grounds as the app-enabled taxi service continues to run up against resistance in Germany. Officials said the Californian company, which operates in 110 cities around the world, did not do enough to protect its passengers from unlicensed drivers. – UK Guardian
Dominant Social Theme: New kinds of commerce are dangerous.
Free-Market Analysis: Berlin is leading the way for neo-Luddites, confronting both Internet-based taxi services and lodging facilities.
Most of the sectors where the Internet is having the most dramatic effect are heavily regulated and thus inefficient and lacking in consumer choice. A prime example of this is “Uber” – an Internet-based transportation app. Another is Airbnb, a lodging facility.
Here’s more from the Guardian regarding Uber:
A senate statement said Uber – already banned in Hamburg – also failed to provide adequate insurance for its drivers or their passengers in accidents. The Berlin ruling states: “Uber is from now on no longer allowed to use a smartphone app or similar application, or offer services via this app which are in breach of the Public Transport Act.”
Uber said it would appeal against the ban, saying the senate’s decision was “anything but progressive”, and it was “seeking to limit consumer choice for all the wrong reasons”. Uber claims that it does not operate a taxi service, but merely offers a platform that mediates between drivers and customers.

This post was published at The Daily Bell on August 26, 2014.

Managing Expectations: Part III of III: Picking Mining Stocks In A Bear Market

In the first part of this three-part series, I discussed the importance of cycles such as four-year presidential elections and the life of a gold mine, and how they play into our investment strategy here at U. S. Global Investors. Part II dealt with statistical diagnostic tools, in which I strived to simplify the definitions of standard deviation and mean reversion and explain how they’re applied.
The third part of this series on managing expectations is devoted to fundamental resource stock evaluation. I’ll discuss some of the statistical tools we use to pick quality stocks during a treacherous bear market, such as what we’ve seen in gold stocks the last three years.
Let it be known, however, that, though our approach might vary slightly depending on the condition of the market, we fervently seek to pick the best stocks at the best price and execution.
How I Learned to Respect the Bear
The traditional definition of a bear market is when broad stock market indices fall more than 20 percent from a previous high – which sounds like a catastrophe, but is in fact ‘normal’ market behavior. According to self-professed ‘investing nut’ Ryan Barnes, a contributor for Investopedia, ‘bear markets… are a natural way to regulate the occasional imbalances that sprout up between corporate earnings, consumer demand and combined legislative and regulatory changes in the marketplace.’
Think of bear markets, then, as the gradual transition from warm summers into frozen winters. Trees lose their leaves, snow and ice blanket the ground, many animals – the bear the most notable – hibernate for the season. All life seems to take a breather. But just as you can always count on spring to emerge and, with it, new life, you as an investor can count on the market to rebound with fresh vigor.
As you might have known, the tail end of ‘winter’ is when you want to take part in the inevitable recovery. If the market never had a winter season, if it were perpetually trapped in an endless summer, investors would be hard-pressed to find an ideal entry point.
It’s easy to determine when winter becomes spring. But what about the end of a bear market? How do you know when it’s bottomed and the optimal buying time has been reached?
CLSA consultant Russell Napier, in his now-classic 2009 book Anatomy of the Bear, describes the determinants of the end of a bear market:
‘The bottom is preceded by a period in which the market declines on low volumes and rises on high volumes. The end of a bear market is characterized by a final slump of prices on low trading volumes. Confirmation that the bear trend is over will be rising volumes at the new higher levels after the first rebound in equity prices.’
Look at the chart below. You’ll see that, in three decades, the Philadelphia Gold & Silver Index (XAU) has never had a losing streak for more than three years.

This post was published at Gold-Eagle on August 25, 2014.

Russia Coordinating Gold Reserve Accumulation With Ex Soviet States?

The IMF’s latest international gold reserves data, updated yesterday, shows that in July, Russia raised its official gold reserves to 5.5 million ounces (1,104 tonnes).
This confirms data released last week by the Central bank of the Russian Federation, which reported an increase of over 300,000 ounces from June’s 5.197 million ounces figure. IMF data is reported with a one month lag.
The latest IMF data also shows that in July, the National Bank of Kazakhstan added 45,000 ounces to its official gold reserves, taking its total holding to 5.1 million ounces.
According to the World Gold Council, over the last six months, Russia has now increased its gold reserves by 54 tonnes. In the same period Kazakhstan has purchased 12 tonnes.
Russia now has the world’s 6th largest gold reserves, officially higher than both Switzerland’s 1,040 tonnes and China’s 1054.1 tonnes. As a comparison, in the second quarter of 2009, Russia only had 550 tonnes of gold in its official reserves meaning that their reserves have nearly doubled in just over 5 years.
The ongoing accumulation of official gold by Russia appears to be part of a reserve diversification strategy. Gold is held by central banks as one of their reserve assets alongside foreign exchange assets including US Dollars and Euros, and also IMF Special Drawing Rights (SDRs).
Some Russian analysts point to the threat of continued western sanctions on Russia as a renewed catalyst for the Russian central bank diversifying out of dollars and euros by increasing its gold reserves. Gold now accounts for over 12% of Russian official reserves and could reach 15% by year end if the current trend continues.

This post was published at Gold Core on 26 August 2014.

Durables Goods (Ex Boeing) Suffer Biggest Drop Of 2014

The headline print of a record-breaking 22.6% gain – smashing the 8.0% expectation – hides the extremely obvious factor of the largest civilian aircraft orders (an entirely one-off non-repeatable factor). Durables ex Transportation collapsed from a 3% gain to a 0.8% drop – the biggest drop in 2014, missing expectations by the most in 8 months. Perhaps even more concerning, non-defense ex-aircraft new orders dropped 0.5% (missing expectations of a 0.2% gain).
One-off…

This post was published at Zero Hedge on 08/26/2014.

What Yellen’s Speech Means For Gold And Bitcoin

Ms. Yellen clarified the Federal Reserve’s most recent FOMC meeting minutes, as it did not divulge into the finer details underlying their decisions to keep their policy rate at 0-0.25%. They are maintaining accommodative monetary policy because the labor conditions are so nuanced, they cannot use the simple unemployment figure and inflation itself as the deciding point to raise the fed funds rate.
While a full fledged discussion of her take on labor conditions would be too onerous for this context- I will summarize. One of the primary issues is the labor force participation rate: its dynamics have changed since the great recession of 2008, such that more people are removing themselves from the available labor pool for a variety of reasons. Some are taking disabilities, others are going back to school (become more competitive to get a job), and many are retiring early(if you can’t get a job now, why not just start living off of government payments and your 401K); much of this is caused by the prevailing conditions following the recession, and will likely abate once the economy turns around substantially.
Another major issue lies in what we consider ‘employed’: after 2008, we have been continuing to count people who work part-time jobs, but who are really seeking full-time employment, as employed. In reality, someone working only a part-time job, or two of them, is not in the same boat as a person will a full-time job for reasons like reliable hours, job security, and benefits. When you have a disproportionate amount of people in the former condition, making judgments about the economy can be spurious at best.

This post was published at GoldSilverWorlds on August 26, 2014.