US Manufacturing PMI Misses By Most On Record, Lowest Since January

Jon

Recovery, we have a problem… November’s Flash US Manufacturing PMI printed a 10-month lows 54.7, missing expectation sof 56.3 by the most on record and tumbling for the third month in a row. The last 2 mnths have seen the biggest drop since June 2013 ands as Markit notes, suggests a further drop in GDP growth expectations of only 2.5% in Q4. Output is down for the 3rd straight month and Surprise!! Export market weakness is being blamed… as it seems the US cannot decouple from the rest of the world’s slump after all and is – as we have explained numerous times – merely on a lagged cycle.
10-month lows…

This post was published at Zero Hedge on 11/20/2014.

Ted Butler Quote of the Day 11-20-14

Jon 1 Comment

When I started [Wednesday's column], silver and gold were steady, only to sell off suddenly around 10:30 AM (EST). This sell-off was followed by a sharp rally, particularly in silver, only once again to sell-off as I complete this piece. Although I am adamant about reading too much into price movement to gauge what’s going on under the surface, there’s something about this volatility that is encouraging. I’m still of the mind that the COT structures in gold and silver are exceedingly bullish and it appears to me that this unusual price volatility may be due to JPMorgan and the other big commercial silver shorts shaking the tree to flush out as much outside selling as possible so that these big silver shorts can buy. I can (and have) look dumb in the very short term, but it feels to me like we can move up sharply at any moment.

The more I contemplate the four month price decline since mid-July in silver (and other commodities) increasingly it looks like the setup of all setups. There was an almost unmistakable deliberate intent to the decline and this has been proven out in the futures’ positioning changes. While unexpected by me, the recent double-crossing by the big silver shorts of the smaller raptors fits in perfectly with the mother of all setups thesis. And while the big traders on the COMEX can bomb the price at will in the short term, it’s hard for me to see what category of traders’ remains that can sell significant quantities of futures contracts. Instead, all I see are the many categories of potential big buyers.

A small excerpt from Ted Butler’s subscription letter on 11-19-14.

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Had Enough of Roller Coaster Rides Yet?

Jon

My kids love to ride those wickedly wild roller coasters, the kind that leave your stomach suspended in mid-air at the top of the track while the cart is already down at the bottom of the valley. Every now and then, against my better judgment, I will let them twist my arm enough to strap myself into one of those things just so that I can inflict on myself the same punishment that they seem to delight in inflicting on themselves.
There was one coaster we went to where they had a camera set up with a strobe light that snapped your picture as your cart went past it on a particularly treacherous portion of the ride. I recall looking through those when we finished the ride and were lingering around at the customer staging area to see what the expression on my face was out of sheer curiosity. Yep – it looked like I was the victim of one of those infamous native American Indians, the Apaches, torture of their white eye prisoners.
After watching the doings in gold and silver this AM, I could wear my kids somehow strapped me back into one of those infernal roller coasters!

This post was published at Trader Dan Norcini on Wednesday, November 19, 2014.

Retail Rapture: UK Grocery Sales Drop 1st Time In 20 Years, Dollar General To Shut 4000 Stores

Jon

For the first time since it began collecting data in 1994, Kantar Worldpanel, the market researcher, reported a decline in UK grocery sales by value, as The FT reports the biggest UK grocers were “losing market share hand over fist,” as analysts warn “there are phoney price wars, and there are real price wars. This is a real price war.” This comes on the heels of Goldman report claiming 20% of British grocers are surplus to requirements. But it’s not just Britain… in the the cleanest dirty shirt world-economic-growth supporting decoupled economy of the USA, Reuters reports Dollar General may need to divest more than 4,000 stores to win approval from the U. S. Federal Trade Commission for its acquisition of Family Dollar.
As The FT reports, Britain’s supermarkets have suffered their first fall in sales in at least 20 years as lower food prices and a vicious price war cut the amount customers spend on groceries.
For the first time since it began collecting data in 1994, Kantar Worldpanel, the market researcher, reported a decline in UK grocery sales by value. ‘There are phoney price wars, and there are real price wars. This is a real price war,’ said Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel.

This post was published at Zero Hedge on 11/20/2014.

The Prisoner’s Dilemma

Jon

Be Civilized … Want to know the secret of success in today’s civilized world?
Be civilized. More on that in one moment …
First, we note that the Dow hit a new record high on Tuesday of 17,688, after rising 40 points. And gold was just a buck shy of the $1,200-an-ounce mark. It appears to have bottomed out. Time will tell.
Remember that gold is not an investment. It is money – the best money. You keep some on hand; you never know when you may need it.
Now, back to the secret of success …

(Via soziologie.uni-muenchen.de)
The Prisoner’s Dilemma In 1962, Robert Axelrod was still a student. But he had access to the University of Michigan’s only computer – a primitive, clunky machine. Students were just starting to figure out what to do with computers. And Axelrod’s idea was to program it to play a game.
The game was meant to resolve what is known as the prisoner’s dilemma. You and a friend get busted for drugs. If you keep your mouths shut, you will both walk away. But if one of you rats out the other, the snitch will go free and the other will do time. If you both turn on each other, both of you will do time … but probably not as much, since you have both cooperated with the prosecution.

This post was published at Acting-Man on November 20, 2014.

Why Gold And US Dollar Do Not Always Move Inversely?

Jon

The strength (or weakness) in the U. S. dollar is one of the most important drivers of price of gold. However, this is not always true and there are times when they rise or fall simultaneously. The positive correlation between U. S. dollar and gold occurred, for instance, from May through December 1993, from May until November 2005, and at the turn of the 2008 and 2009.

Trends of the U. S. dollar and gold do not always align inversely, and even when they do, the percentage moves are not very well matched. Just think of the important rally in gold from 2008 to 2013, when the dollar was back where it was in late 2008. Also, peaks and troughs do not always align. Gold was rising when the dollar hit its peak in mid-2010.

This post was published at Gold-Eagle on November 19, 2014.

Fed Downplays Inflation Worries

Jon

Going over these FOMC statements is akin to the ancient art of divining the future by the examination of animal entrails. I can see the conversation:
Demetrius: “I see what appears to be a twisted piece of gut. That is a sign from the gods that the future is twisted and unclear. Perhaps we should wait before going to war”.
Apollos: ” I see the same thing but tells me that our enemies will lie twisted and ruined on the ground. We should to war immediately”.
Lydia: ” I see a big fat worm. That tells me that this animal is so screwed up on the inside that we should not believe a single thing this entrail reading crap tells us”.
The takeaway I get however has to do with inflation. We have been saying here for some time now, much to the chagrin of some of the gold perma bulls, that the market is not the least bit worried about inflation at the moment. That sentiment has been reflected in the flat to lower TIPS spread as well as the sinking commodity indices. Also, the concern of both the ECB and the Bank of Japan as been the LACK of INFLATION and what they like to euphemistically term, ‘disinflation’.

This post was published at Trader Dan Norcini on Wednesday, November 19, 2014.

Initial Jobless Claims Hit 2-Month Highs, Continuing Claims Tumble To 14-Year Lows

Jon

It is still far too early to call a turn in the long-term trend of initial jobless claims but this is the 5th week that new lows have not been made, 4th miss in a row, and (despite last week’s upward revision) claims sit at 2-month highs. Initial claims printed 291k (against 284k expectations) down very slightly from an upwardly revised 293k last week. However, continuing claims continue to tumble to fresh cycle lows at 2.33 million (below expectations and well down from last week’s jump).
4th miss of last 5 weeks for initial claims…

This post was published at Zero Hedge on 11/20/2014.

The Cultural and Political Consequences of Fiat Money

Jon

It may seem unusual that an economist would talk about culture. Usually, we talk about prices and production, quantities produced, employment, the structure of production, scarce resources, and entrepreneurship.
But there are certain things that economists can say about the culture, and more precisely, that economists can say about thetransformation of the culture. So what is culture? Well, to put it simply, it is the way we do things. This can include the way we eat – whether or not we dine with family members on a regular basis, for example – how we sleep, and how we use automobiles or other modes of transportation. And of course, the way we produce, consume, or accumulate capital are important aspects of the culture as well.
Limiting Budget Is the Key to Limiting Governments Now to understand the effects of fiat money on the culture, we must first look at the relationship between financial systems and the nature of government.
A number of economists have observed that fiat money is a prerequisite for tyrannical government, and the idea that monetary interventionism paves the way for tyrannical government is very old and goes back to Nicolas Oresme in the fourteenth century. It has not been emphasized in the twentieth century, but Ludwig von Mises is among the few who has stressed the importance of this relationship.

This post was published at Ludwig von Mises Institute on Jrg Guido Hlsmann.

Plunging Energy Prices Drag Down CPI, Offseting Jumping Food Costs

Jon

For the fourth month in a row, the shale-revolution crushing plunge in crude prices managed to push energy costs down, with the BLS reporting that “the gasoline index fell for the fourth month in a row, declining 3.0 percent, and the indexes for natural gas and fuel oil also decreased.” As a result, October CPI was unchanged from a month earlier, and up 1.7% from a year ago, below the Fed’s 2.0% target. However, stripping away plunging energy prices, things were a little different, with CPI ex food and energy up 0.2%, slightly above the 0.1% expected, and up from 0.1% before. But before everyone screams deflation, here is what also happened: the shelter index, airline fares, household furnishings and operations, medical care, recreation, personal care, tobacco, and new vehicles were among the indexes that increased. And for those few who have to eat, “The index for food at home has risen 3.3 percent over the last 12 months, the largest 12-month increase since April 2012.” and “The index for nonalcoholic beverages rose 0.6 percent, its largest increase since September 2012.”

This post was published at Zero Hedge on 11/20/2014.

The Latest Scandal: Goldman, Fed Employees Busted For Illegally Sharing Confidential Information

Jon

On the morning of Friday, September 26, in addition to the shocking news of Bill Gross’ departure from Pimco, the world was just as shocked, or not as the case was for many, that a former NY Fed staffer, Carmen Segarra, who had been previously fired for suggesting that Goldman Sachs has an undue influence on the NY Fed and gets a preferential treatment (certainly as a result of NY Fed’s president Bill Dudley being working previously at Goldman Sachs), had released nearly 50 hours of tapes confirming her allegations: that the NY Fed was nothing but a branch of the bank that controls every central bank. The full details were presented in “How Goldman Controls The New York Fed: 47.5 Hours Of “The Secret Goldman Sachs Tapes” Explain.”
Ironically it was on that very day that another recent Goldman hire from the NY Fed – a classic case of, as the NY Times puts it, the “revolving door, the symbolic portal that connects financial regulators to Wall Street” – a 29-year-old former New York Fed regulator named Rohit Bansal, got into hot water after something “shocking” was revealed: he had an inside source at the NY Fed who was providing him with illegal, confidential information on a regular basis.

This post was published at Zero Hedge on 11/20/2014.

TIPS Spread Echoes FOMC Minutes

Jon

I mentioned in an earlier post today that the FOMC essentially downplayed inflation fears in the minutes released today. That seemed to be one of the big factors involved in the sharp move lower in gold after it had spiked higher and moved back not only to the unchanged level but had tacked on some mediocre gains as well. That was all abruptly reversed after the market had some time to chew over the minutes.
Along that line, here is an updated chart of the TIPS spread comparing the price of gold to the movements in the spread. I want to point out that the most recent spread fell to more than a 3 year low this week! Clearly, the market has no concerns whatsoever about any budding inflationary fears. Such a thing is not good news for gold bulls.

This post was published at Trader Dan Norcini on Wednesday, November 19, 2014.

Koos Jansen: Why did European central banks sell gold?

Jon

Focusing on the Netherlands Central Bank's reduction of its gold reserves, Bullion Star market analyst and GATA consultant Koos Jansen asks why the European central banks sold (or purported to sell) so much gold from the announcement of the Washington Agreement on Gold in 1999 through 2010, when such sales stopped almost completely. Jansen cites a comment by the Dutch treasury secretary in 2011 in support of his speculation that the gold sales may have been intended to help redistribute and equalize official gold reserves around the world.
This is exactly what the U.S. economists and fund managers Paul Brodsky and Lee Quaintance speculated in 2012 — that central banks were moving their gold around so that nations would be better prepared for a complete resetting of the world financial system, in which gold would play an important part for building confidence.
Of course on a planet with actual financial journalism, mainstream news organizations would question central banks about this — and about everything else central banks do. Since we're living on Earth, Jansen's citing the Dutch parliamentary archive and posing the question it suggests will have to suffice today.

This post was published at GATA

Silver demand to fall 7% in 2014 – Thomson Reuters GFMS

Jon

Demand for silver will post a 7% decline in 2014 because of a slower pace of buying by jewellers and industrial fabricators in the first three quarters of the year, metals consultant Thomson Reuters GFMS said on Tuesday.    
Harmonized European sales tax rates that started in January have driven up retail silver investment product prices, reducing demand on the continent, the Thomson Reuters unit said in an interim market review.     
Thomson Reuters GFMS said it expected total physical demand, which includes jewellery, coins and bars, silverware and industrial fabrication, to fall 6.7% to 31,243.44 tonnes in 2014 from a record high of 33,498.44 tonnes last year.    
Silver industrial demand is forecast to drop 1.8% as the electronics sector keeps shifting to cheaper metals. Jewellery consumption should fall 4.4% because retailers are pushing more gold products to take advantage of lower bullion prices, GFMS said.     For the full year, Thomson Reuters GFMS now forecasts silver prices to average $19/oz an ounce, a 20% decline from $23.79/oz in 2013.

This post was published at Mining Weekly

Gold Rush in Ohio? Small Town Plays Big Role

Jon

Building contractor Alan Stockmeister is known around town for his stewardship of local businesses: radio stations, a movie theater and a bank, for example. But nothing has been quite like his refinery just off Main Street, which has become an outpost in the multibillion-dollar global gold trade.
Ohio Precious Metals LLC owns one of five refineries in the U.S.—there are 73 world-wide—certified to melt scrap gold and pour it into ingots that can be traded on global markets. OPM’s more than 170 workers process several billion dollars a year in gold and silver headed for banks and jewelers in New York, London and Shanghai.
“Historically, gold refineries have been near production sites, mines or the big financial centers where gold is traded,” says David Jollie, a London-based analyst at gold trader Mitsui Precious Metals. Ohio “is not really one of those places.”
OPM has been able to stay in south-central Ohio in part because gold prices, while 30% below their 2011 peak, are about triple what they were in 2004. Sales of gold to make rings, watches and electronics have increased 70% over the last 10 years, according to Thomson Reuters GFMS. Recent price declines mean that gold production at mines hasn’t kept pace, in turn fueling demand for cheaper-to-produce gold scrap.

This post was published at Wall Street Journal

Senate report criticizes Goldman and JPMorgan over their roles in commodities market

Jon

A two-year Senate-led investigation is throwing back the curtain on the outsize and sometimes hidden sway that Wall Street banks have gained over the markets for essential commodities like oil, aluminum, and coal.
The Senate's Permanent Subcommittee on Investigations found that Goldman Sachs and JPMorgan Chase assumed a role of such significance in the commodities markets that it became possible for the banks to influence the prices that consumers pay while also securing inside information about the markets that could be used by the banks' own traders.
Bankers from both firms, along with other industry executives and regulators, will testify about the allegations at hearings on Thursday and Friday.
The report provides an unprecedented level of detail about the enormous global operations the banks have built up in recent years since politicians and regulators lifted long-time curbs on banks owning physical commodities and infrastructure.

This post was published at NY Times

Treasury: Global Investors Pour Record Amount Into U.S.

Jon

The U.S. posted a record inflow of long-term portfolio investments in September as the dollar strengthened and foreign buyers accumulated corporate debt, Treasurys and agency securities.
Foreigners bought a net $164.3 billion in long-term financial assets after $52.1 billion in purchases in August, the Treasury Department said in a statement Tuesday in Washington. The previous record was an inflow of $139.7 billion in March 2010.
“The U.S. is looking like the cleanest dirty shirt from a global perspective,” said Gennadiy Goldberg, U.S. strategist at TD Securities USA LLC in New York. “You had the U.S. actually lead the way in global growth, and a lot of people were attracted by that — they’re trying to keep their holdings more domestic.”

This post was published at Money News

Global Slowdown Confirmed By PMIs Missing From Japan To China To Europe; USDJPY Nears 119 Then Slides

Jon

The continuation of the two major themes witnessed over the past month continued overnight: i) the USDJPY rout accelerated, with the Yen running to within 2 pips of 119 against the dollar as Albert Edwards’ revised USDJPY target of 145 now appears just a matter of weeks not months (even though subsequent newsflow halted today’s currency decimation and the Yen has since risen 100 pips , and ii) the global economic slowdown was once again validated by global PMIs missing expectations from Japan to China (as noted earlier) and as of this morning, to Europe, where the Manufacturing, Services and Composite PMI all missed across the board, driven by a particular weakness in France (Mfg PMI down from 48.5 to 47.6, below the 48.8 expected), but mostly Germany, after Europe’s growth dynamo, which disappointed everyone after yesterday’s rebound in the Zew sentiment print, printed a PMI of only 50.0, down from 51.4 a month ago, down from 52.7 a year ago, and below the 51.5 expected.
This was driven by a tumble in New Orders from 49.8 to 47.8, which is the lowest reading since December 2012 and is the 3rd consecutive month of contraction. In other words, that Chinese import demand is just not coming back, and once again Draghi’s attempts to restart Europe’s economy by doing more of what has already failed, have failed.

This post was published at Zero Hedge on 11/20/2014.

The Abenomics Death Spiral

Jon

As Japanese Prime Minster Shinzo Abe has turned his country into a petri dish of Keynesian ideas, the trajectory of Japan’s economy has much to teach us about the wisdom of those policies. And although the warning sirens are blasting at the highest volumes imaginable, few economists can hear the alarm.
Data out this week shows the Japanese economy returning to recession by contracting for the second straight quarter (and three out of the last four quarters). The conclusion reached by the Keynesian apologists is that the benefits of inflation caused by the monetary stimulus have been counteracted, temporarily, by the negative effects of inflation caused by taxes. This tortured logic should be a clear indication that the policies were flawed from the start.
Although the Japanese economy has been in paralysis for more than 20 years, things have gotten worse since December 2012 when Abe began his radical surgery.. From the start, his primary goal has been to weaken the yen and create inflation. On that front, he has been a success. The yen has fallen 23% against the dollar and core inflation, which was running slightly negative in 2012, has now been “successfully” pushed up to 3.1% according to the Statistics Bureau of Japan.
But there is no great mystery or difficulty in creating inflation or cheapening currency. All that is needed is the ability to debase coined currency, print paper money or, as is the case of our modern age, create credit electronically. These “successes” should not come as a surprise when one considers the relative size of Abe’s QE program. For much of the past two years the Bank of Japan (BoJ) has purchased about 7 trillion yen per month of Japanese government bonds, which is the equivalent of about $65 billion U. S. [Forbes 9/24/14, Charles Sizemore] While this is smaller than the $85 billion per month that the Federal Reserve purchased during the 12-month peak of our QE program, it is much larger in relative terms.

This post was published at Gold-Eagle on November 19, 2014.