Sell, Sell, Sell…….The Central Bank Madmen Are Raging

Jon

The global financial system has come unglued. Everywhere the real world evidence points to cooling growth, faltering investment, slowing trade, vast excess industrial capacity, peak private debt, public fiscal exhaustion, currency wars, intensified politico-military conflict and an unprecedented disconnect between debt-saturated real economies and irrationally exuberant financial markets.
Yet overnight two central banks promised what amounts to more monetary heroin and, presto, the S&P 500 index jerked up to 2070. That is, the robo-traders inflated the PE multiple for S&P’s basket of US-based global companies to a nose bleed 20X their reported LTM earnings.
And those earnings surely embody a high water mark in a world where Japan is going down for the count, China’s house of cards is truly collapsing, Europe is plunging into a triple dip and Wall Street’s spurious claim that 3% ‘escape velocity’ has finally arrived in the US is soon to be discredited for the 5th year running. So it goes without saying that if ‘price discovery’ actually existed in the Wall Street casino, the capitalization rate on these blatantly engineered earnings (i.e. inflated EPS owing to massive buybacks) would be decidedly less exuberant.
In truth, nothing has changed about the precarious state of the world since yesterday. Except….. except the Great Bloviator at the ECB made another fatuous and undeliverable promise – – this time that he would do whatever he ‘must to raise inflation and inflation expectations as fast as possible’; and, at nearly the same hour, the desperate comrades in Beijing administered another sharp poke in the eye to China’s savers by lowering the deposit rate to by 25 bps to 2.75%.
Let’s see. Can it possibly be true that European growth is faltering because it does not have enough inflation? Or that China’s fantastic borrowing and building boom is cooling rapidly because the People Bank of China (PBOC) has been too stingy?

This post was published at David Stockmans Contra Corner on November 21, 2014.

GLD and Gold’s Selloff

Jon

Gold has suffered a rough couple of months, getting pounded below major support. One driver was stock-market capital flowing out of gold again, as evidenced by renewed differential selling pressure seen in gold-ETF shares. But this was minor compared to last year’s, despite extreme bearish sentiment plaguing gold. Gold-ETF selling exhaustion has effectively been hit, paving the way for big rebound buying.
The dominant gold ETF remains the American SPDR Gold Shares, which trades as GLD. This vehicle revolutionized gold trading for stock investors, creating a quick and efficient conduit for the vast pools of stock capital to migrate into and out of gold. And since GLD just celebrated its 10th birthday this week, it’s a great time to take another look at it. Starting from humble beginnings, GLD has matured into a gold juggernaut.
If you weren’t following the precious-metals realm back in the early 2000s, it’s hard to even imagine how different the pre-gold-ETF era was. Before GLD’s introduction in mid-November 2004 kicked it off, stock traders had no easy way to prudently diversify part of their portfolios into gold. Their only options were selling stocks to buy physical gold coins, trading gold futures, or buying gold-miner stocks as a gold proxy.
But for pure stock traders, all these posed real problems. While physical gold is awesome, buying coins is an inefficient and expensive process riddled with high premiums. Gold futures are a highly-leveraged and exceptionally-dangerous game most stock traders avoid like the Black Death. Though gold stocks can be wildly profitable, they are far riskier than gold itself due to an array of serious operational risks.
The gold ETFs led by GLD gave stock traders a cheap and easy way to bypass all these alternatives to gain direct gold-price exposure. GLD held physical gold bullion in trust for its shareholders. And all it took to buy GLD shares was a mouse click and trivial trading commissions. And even with GLD’s 0.4% annual management fee, it is still far cheaper than gold coins given the high premiums they command.
GLD was created specifically for American stock investors by the World Gold Council, the industry group funded by the world’s biggest and best gold miners. It was never intended to replace physical gold for investors, but to open up gold investing to stock traders who would never or could never (due to legal restrictions like in mutual funds) buy gold coins. Despite the silly conspiracy theories, GLD has been a great success.

This post was published at ZEAL LLC on November 21, 2014.

Asian Gold Traders Suspicious Of Recent “Turbo Steroid Moves”

Jon

It will come as no surprise to regular readers that gold (and silver) have suffered from ‘odd’ violent down-slams in the last few months but, as Bloomberg reports, those ‘sneak-attacks’ have become increasingly more prevalent during the thin illiquid hours of the Asia trading session. “It is unusual for Asia to be seeing these busy trading sessions,” notes on trader, adding that “consensus seems to be that there is a big increase in algorithmic and high-frequency trading in this time zone.” The trend began on Oct. 31, with gold futures falling $11 in a minute on nearly 9,000 lots (20x the norm) – all happening when the Chinese market is at lunch. As one Hong Kong precious metals trader remarked, “someone is utilising these thin trading volumes to get a turbo steroid move.”

This post was published at Zero Hedge on 11/21/2014.

Are You Better Off This Thanksgiving Than You Were Last Thanksgiving?

Jon

Are you in better shape financially than you were last Thanksgiving? If so, you should consider yourself to be very fortunate because most Americans are not. As you chow down on turkey, stuffing and cranberry sauce this Thursday, please remember that there are millions of Americans that simply cannot afford to eat such a meal. According to a shocking new report that was just released by the National Center on Family Homelessness, the number of homeless children in the U. S. has reached a new all-time high of 2.5 million. And right now one out of every seven Americans rely on food banks to put food on the table. Yes, life is very good at the moment for Americans at the top end of the income spectrum. The stock market has been soaring and sales of homes worth at last a million dollars are up 16 percent so far this year. But most Americans live in a very different world. The percentage of Americans that are employed is about the same as it was during the depths of the last recession, the quality of our jobs continues to go down, the rate of homeownership in America has fallen for seven years in a row, and the cost of living is rising much faster than paychecks are. As a result, the middle class is smaller this Thanksgiving than it was last Thanksgiving, and most Americans have seen their standards of living go down over the past year.
In 2014, there are tens of millions of Americans that are anonymously leading lives of quiet desperation. They are desperately trying to hold on even though things just keep getting worse. For example, just consider the plight of 49-year-old Darrell Eberhardt. Once upon a time, his job in a Chevy factory paid him $18.50 an hour, but now he only makes $10.50 an hour and he knows that he probably would not be able to make as much in a new job if he decided to leave…

This post was published at The Economic Collapse Blog on November 21st, 2014.

“We Are Living In An Aberrational World”

Jon

The editor of the influential investment newsletter ‘The High-Tech Strategist’ warns of trouble in semiconductor stocks and spots bright investment opportunities in gold miners.
It’s unchartered territory: For the first time since more than half a decade the global financial markets are supposed to live without the constant liquidity infusions of the Federal Reserve. Fred Hickey, the outspoken editor of the widely-read investing newsletter ‘The High-Tech Strategist’, says this won’t work well for long. “By the end of this year or by the start of next year, without QE, the market is going down”, says the sharply thinking contrarian. In his view, especially the outlook for semiconductor makers like Intel is gloomy. As protection against the upcoming crash he recommends investments in gold and in gold mining stocks.
Mr. Hickey, after the short setback in October the hunt for new records at the stock market is on once again. What’s your take on the current situation? We are living in an aberrational world. It’s all driven by an orgy of money printing. All the major central banks are engaged in this. From the Federal Reserve in the United States to the ECB, to the Bank of England and the National Bank of Switzerland to the Bank of Japan and the People’s Bank of China. It’s been tried ever since there was money, but in thousands of years of history it has never worked. When the Roman empire was unraveling the Caesars would shave the silver from the coins in order to be able to make a lot more of them. And in Weimar Germany, Reichsbank president Rudolf Havenstein ran the printing presses day and night, seven days a week. And here we are now, repeating the same mistake.
Yet, the markets love cheap money. The S&P 500 just climbed to another record high this Monday. I lean towards the school of Austrian economists and they tell you that you can’t get out of those things. As a reminder, I keep the following quote from the great Austrian economist Ludwig von Mises pinned to the bulletin board in my office: “The final outcome of credit expansion is general impoverishment”. Von Mises also warned that the boom can only last as long as the credit expansion progresses at an ever-accelerating pace. That’s why the Federal Reserve is unable to get out of this. Shortly after QE1 the stock market sold off 13% and the economy tanked.

This post was published at Zero Hedge on 11/21/2014.

And The Person Responsible For Japan’s Economic Endgame Is… Paul Krugman

Jon

There are two words that should strike fear in the hearts of any rational-thinking citizen of the world – Paul Krugman. Wondering why? As Alhambra’s Jeff Snider notes, we already know of at least one respect where Krugman (as a stand-in at least for the Keynesian perspective that is somehow still widely shared, especially in the orthodox economist class) has impacted ‘stimulus’ activity, Sweden. And now his appearance in Japan enabled what Japanese economists call a “historic meeting,” as Bloomberg reportsthat Abe met with the Nobel-prize winner for 40 minutes who “helped the prime minister make up his mind,” that delaying the fiscally-responsible tax-hikes was the right thing to do (and increasing QQE) or Japan “wouldn’t escape deflation.” Mission Accomplished… and if it fails, moar will be needed and ‘capitalism’ will be blamed.
As Bloomberg reports, with a December deadline approaching, Prime Minister Shinzo Abe was considering whether to go ahead with a 2015 boost to the consumption levy. Evidence was mounting that the world’s third-largest economy was struggling to shake off the blow from raising the rate in April, which had triggered Japan’s deepest quarterly contraction since the global credit crisis…

This post was published at Zero Hedge on 11/21/2014.

Gold Daily and Silver Weekly Charts – Comex Option Expiration Monday

Jon

Next week will be a short trading week because of the US Thanksgiving holiday.
Monday will be the last Comex option expiration for the year, for the December contract. We may wish to brace for shenanigans. We are reaching a more critical point in the markets, but do not, absolutely do not, expect this to be easy.
The big changes come when we least expect them, and then as a thief in the night. Betting on short timeframes with leveraged bets is a losing trade 99 times out of 100. And if you hit it big one time, you may chase that adrenalin high again and again, until you are exhausted by the time things really break your way.
Gold and silver continue to dribble out of the Comex warehouses. For a quiet month we saw a bit of gold taken out of New York.
There was some very interesting news today. I featured both items.
As it turns out while Germany was waiting and the Swiss are considering their decision, the Dutch managed to quietly, some say secretly, repatriate a good chunk of their gold from New York back to Amsterdam. From their glory days roaming the world the Dutch understand that possession is nine-tenths of the law.
We also heard Senator Carl Levin criticize the Federal Reserve for enabling the Banks obtrusive entry into the commodity markets, where they were faced with a candy store of opportunities to manipulate prices, obtain inside information, and to basically fill their own greedy pockets by using subsidized funds from the Fed.
Levin may as well have turned to his colleagues on the Hill and shamed them as well.
Until there is reform, there will be no recovery.

This post was published at Jesses Crossroads Cafe on 21 NOVEMBER 2014.

Against the State | Lew Rockwell

Jon

The following video was published by misesmedia on Nov 21, 2014
Recorded at the Mises Circle in Costa Mesa, California, 8 November 2014. This seminar examines the institutions of a stateless society and explore topics such as private defense, private police, privately produced money, the role of markets, and how stateless legal systems would work.

Reply From Pettis on Spain; Prisoner’s Dilemma in Reverse; EMU End Game

Jon

In response to Spain Needs to Debate Leaving the Euro; Tooth Fairy Economics I received a nice email from Michael Pettis confirming my translation was correct. He also attached the original article in English.
Michael Writes …
Thank’s Mish.
I am attaching the original, but the translations you got were basically right and covered the main points, which you understand anyway. Excessive debt impedes growth, and very few sovereign debt crises in history have been resolved by growth
The only other way to “resolve” a debt crisis is to assign the losses to one group or another It is usually workers through unemployment and middle class savers through hidden or explicit taxes who end up paying It may or may not be worthwhile to save the banks at the expense of the middle and working classes, but at the very least we should discuss it openly and make sure that this is what we have really decided is in the best interests of the Michael
Original Text in English
Spanish Government Debt is not Sustainable
Within four years of the 1837 crisis, before it was truly a united country under a central government, two-thirds of American states, including several of the richest, defaulted on their foreign debt. The US survived. If the European Union is to survive, European debt must be resolved. The longer we wait, the more likely a permanent breakup of the euro and the European Union.

This post was published at Global Economic Analysis on November 21, 2014.

You’ve Been in This Business Too Long If…

Jon

Today we offer up a (hopefully) humorous note about the perils of a career in finance. It’s not really the day to day chores that take a toll, after all – it is how this business pervades the rest of your life. Over the years, your personal and professional decision making and communication skill sets merge into one, and it is the cold rationality of the latter that usually swallows the former. And then lets out a large burp. So if you’ve ever wondered what the stop-loss should be on a romantic relationship gone bad, or considered your emotions in terms of personal beta, this note is for you. What follows is a top 10 list of challenges only people who have tied their personal fates to Wall Street will probably understand. And for those of you who’ve managed to avoid these pitfalls, read on to see what you’ve been missing. And pat yourself on the back.
After 30 years in and around Wall Street, I feel like damaged goods. That’s not necessarily a complaint, but rather a simple and factual observation. An example to illustrate the problem: I have mental stop losses for just about everything in my life. If I have a bad meal at a restaurant, I never go back. If a personal relationship goes south, I ‘Take it off my screen’. Very few things have a second chance with me. If it doesn’t work out, well, one and done…
That’s just one example of how my professional life has somehow subsumed the personal. Any decent trader will tell you that you must decide on a stop loss level before initiating any position. After all, the market knows more than you do. You might have it right, or you might not. The asset’s price action will let you know soon enough either way. And when it does, you should listen. Setting that stop takes away any emotional attachment you might have and leaves you free to go find something else that might work better. At the same time, I know that treating people and relationships like positions on a trading pad is somehow… wrong.
My only solace is that I know I am not alone. After thousands of conversations with colleagues and friends in the business over those three decades, I am pretty sure that I am simply average. A career on Wall Street may be the only profession where the actual ‘Product’ is efficient decision-making and communication. Since those two processes are also what you use to navigate life, it is only natural that you would try to leverage them into your personal relationships and general existence. But we do so at our peril, as I will now illustrate.
Consider this ‘Top 10′ list of other examples:

This post was published at Zero Hedge on 11/21/2014.

White House Trying To Use Immigration To Postpone The Economic Collapse -Episode 524

Jon

The following video was published by X22Report on Nov 21, 2014
China and New Zealand enhance their economic commitment. Russia and China using the yuan as trade settlement increased by 800%. Obama signed his executive order allowing millions of illegals to remain in the US. The White House pushing the propaganda that this will help the economy. This will accelerate the economic collapse. ICE preparing for 100,000 illegals crossing the border. Obama in contact with Major Civil Rights Groups to push the martial law agenda. US sending military advisers to Ukraine to help with the upcoming offensive. Islamic State hording gold to create their currency, or is this gold being shipped to the central bankers.

How Would You Feel, as a Swiss or German citizen, if You’d Witnessed This?

Jon

Emergency, Unscheduled Post!
Hello, brothers, I’m sitting here writing an article, when I hadn’t intended on posting anything for several more days, yet I must!(I just can’t help myself!) Something big has just happened, and its potential ramifications are staggering, not just for the gold and silver community, but for entire world financial system.
Today comes the surprise announcement that the Dutch National Bank, has just finished repatriating 122 tonnes of gold from the New York Federal Reserve!
This is unreal, and not for the reason many are thinking.
Now, this is a fairly shocking thing, because, as we know that for several years now, Germany has been begging, ‘pretty please, can we have a few scraps of our gold back’ to the exact same group of Fed bankers, only to be told:
‘You can’t even see the gold, it isn’t safe!’
Or:
‘Wellllllll, you can have some back, I guess, so long as you give us 7 full years to return just 300 tonnes on deposit.’
Or:
‘What do you mean those aren’t the bars you deposited with us? Gold is gold, isn’t it?’
Or:
‘Why the long face, you got a whole 5 tonnes back this year, didn’t ya?’
Germany, the largest powerhouse economy in all the Olde World, has tried and tried, for several years to get the bullion back, much of it to no avail!
Yet, it turns out that all that time, others were moseying on up to the front of the line to get their gold first, incognito, like the Netherlands!
Now, shield brother, ask yourself this:
If you were a German citizen, already livid that your government couldn’t seem to get anything repatriated from the New York Fed but annoying excuses as to why you couldn’t get ahold of your sovereign gold….how would you feel if you’d been hit with that surprise announcement today that the Dutch authorities had successfully shipped in tonnage in the same ballpark as yours, virtually overnight?

This post was published at The Wealth Watchman on NOVEMBER 21, 2014.

Cracked Firewalls and State Legitimacy

Jon

In an article about the Chinese government’s massive firewall to restrict social media in China, the following statistic was reported: there are 1.4 billion Chinese, and 632 million of them are online.
I would not place too much credence in the specificity of these figures, but the general estimates are probably correct. Something in the range of half of all the people in China now have access to the Internet. Over the next 10 years, this is likely to increase to at least three-quarters.
The Internet is the most powerful communications tool in the history of mankind. It is spreading at such a pace, and with such magnitude in terms of its audience, that we have never seen anything like this in the history of man. Gutenberg’s development of moving type was nothing compared to what is happening with the Internet. Neither was radio. Neither was television. The Internet is extending its tentacles into the lives of almost everybody on earth. Almost everybody will soon have essentially equal access to the information that is contained on the Internet.
There is no possibility that the Chinese oligarchs are going to be able to protect themselves against the corrosive effects of information that is attainable at close to zero monetary cost. They can put up all the firewalls they want. There are kids out there who are skilled at defeating every attempt of the Chinese government to block out sections of the Internet from them. These young men are highly motivated. Their self-interest is at stake, and their self-image is also at stake. They want to gain a reputation within their inside group of hackers that they can beat the system. There is no question that they can beat the system. The only question is this: what percentage of the population is going to beat the system with them?
The Chinese system of economics is essentially Keynesianism. It involves central bank funding, and it involves state banks funding various enterprises. There is so much money in the hands of the planners, and so many opportunities to make money, that there is no way that this is not going to transform Chinese society. We already know this. We have never seen this rate of economic change inside the boundaries of a large nation. (South Korea, 1950-90, was faster, but it was smaller.)
The oligarchs at the top of the Chinese pyramid of power issue statements that reinforce the government’s official view of the necessity for controlling access to information on the Internet. But the press releases in no way change the facts. I am reminded of the RIAA’s press releases on the organization’s success in limiting the spread of unpaid exchanges of copyrighted music. This is whistling past the graveyard.

This post was published at Gary North on November 21, 2014.

Stocks Close At Recordest Highs As All Central Banks Go All In

Jon

Despite the knee-trembling awesomeness of a double-whammy promise of liquidity, US equity markets ended the week on a decidedly down note. The realization that Draghi’s all talk (no impact on US stocks) and PBOC’s move is not a liquidity surge and has limited impact on the economy left stocks tumbling once the opening OPEX levels had printed. The USD rose notably on the day after EUR plunged under 1.24 on Draghi (USD 0.9% on the week). Despite USD strength, gold rose 1% (as did Silver) on the week, rising for the 3rd week in a row for the first time in 4 months (and the 3rd Friday surge in a row). Oil rose 1% on the week, breaking an 8-week losing streak but Copper prices fell around 0.3% on the week, having given back the kneejerk gains post-PBOC today. Treasury yields dropped after kneejerking higher on PBOC. 30Y at 3.01% had its 2nd lowest weekly close since May 2013. VIX melted down into the close to 13.01. Late-day buying panic lifts stocks off their lows leaving Dow & S&P at all-time recordest highs of all-time ever in history (as small caps closed red).

This post was published at Zero Hedge on 11/21/2014.