SILVERSEEK – Monthly Gold & Silver Stock Update

Jon

The U. S. Fed’s announcement in October that it was ending quantitative easing capped a tough month for precious metal producers. The news triggered another wave of selling in gold dropping under $1,200 and silver falling even more aggressively to under $16. The fall only compounds challenges for producers whose third quarter results already show stress from the metal prices.
A technical perspective shows the breach of $1,180 area, a key support level, creating more problems for gold. Unless the price can recover back and hold above, the next downside target should take the price to the $1,088 Fibonacci support area.
The renewed wave of fear has hit gold-silver stocks very hard with 2008 lows now being re-tested. If the gold-silver prices can find a bottom soon, and it could have very well put it has in this past week, then I expect that these stock prices will reverse dramatically. But until the fear of much lower gold and silver prices subsides, negative pressures will dominate and volatility will be at historic levels.
SEABRIDGE GOLD continues to expand its KSM deposit, with new drill results expanding the potential of the Iron Cap Lower Zone including an impressive 593 metre-intercept grading 1.14 g/t gold and 0.37% copper. The company has traced the zone for 750 metres and it is still open to the north and at depth. With so many results coming in Seabridge expects to have a first resource estimate out on the new zone in the first quarter of 2015.
The company has also secured early construction permits for the KSM project, including roads, camps, and some mine facilities. In addition, the company secured critical rights to build a tunnel to connect the future mine and processing facilities. November could be a big month for de-risking KSM as they are expecting a final decision on their Federal environmental assessment.

This post was published at SilverSeek on November 17, 2014.

The Great EU Farce Will End Soon

Jon

Mario Draghi once again surfaced this morning to promise to do ‘whatever it takes’ to help the Eurozone. Draghi has done this anytime the EU markets drop ever since the bottom in the summer of 2012.
It’s amazing to watch, particularly when you consider that it is now public information that Draghi actually didn’t have a plan when he first claimed this and is effectively making up policy on the fly.
Here are Draghi’s comments from this morning:
*DRAGHI SAYS ECB WILL DO WHATEVER IT TAKES, WITHIN ITS MANDATE
*DRAGHI SAYS EXPANDED PURCHASE PROGRAM COULD INCLUDE GOVT BONDS
Note, that the first statement contains the qualifier ‘within its mandate.’ Of course traders and investors won’t bother to consider that the ECB’s mandate DOESN’T ALLOW IT TO BUY SOVEREIGN BONDS.
It’s not entirely their fault. Draghi is huge liar (as in Jean-Claude Juncker’s statement that ‘when it gets serious, you have to lie.’) This is why he stated that the ECB’s expanded purchase program ‘could’ include Government bonds.
Sure… it could, but it would be illegal and would instigate an outright revolt from Germany.

This post was published at GoldSeek on 17 November 2014.

Japan Falls Into Surprise Recession

Jon

Japan will remain the dominant theme in today’s session; this prompted a big sell-off in Japan that carried into Europe and will have a bearing on our markets today as well. With not much on the economic calendar and the Q3 earnings season slowly moving into the rearview mirror, this news risks bringing back the global growth fears that had become a big headwind for the markets a month back.
The sales tax changes that the government of prime minister Shino Abe of Japan put into place early this year pushed GDP growth into the negative territory in the June quarter. But everyone expected that to happen; the long-planned sales tax increase had brought forward consumer spending at the expense of the June quarter. But the hope was that spending will get back to ‘normal’ in the September quarter and start ramping up in the final quarter of the year, which will pave the way for the next round of sales tax increases. This is the context in which makes today’s GDP numbers from that country so surprising and disappointing.

This post was published at FinancialSense on 11/17/2014.

ALERT: World’s Largest Derivative Holder…Wobbling!

Jon

All eyes are on Deutsche Bank’s $75T Derivative portfolio at the moment as they just announced they will be “scaling back” their most profitable nuclear ponzi scheme…Credit Default Swaps!
Deutsche Bank Scales Back Trading in Credit Derivatives
“The bank is exiting part of the market as trading linked to swaps protecting against the default of individual companies plunged from as much as $32 trillion before the financial crisis to less than $11 trillion, according to data from the Bank for International Settlements. Trading in the market, which was blamed for helping to exacerbate the financial crisis, has become more expensive as regulators across U. S. and Europe have stepped up scrutiny and increased balance-sheet requirements making it harder to carry out trades.”
“Earlier this month, the company announced that the co-head of its fixed-income trading business was stepping down, leaving Richard Herman to become the sole head of the department, according to the company.”
END

Remember…for every derivative written there is a counter-party taking the other side of that bet.
Keep an eye on this story as it can bring the financial markets to a halt if it starts spreading to other banks.
My advice – Stay indoors…and not just for the crappy weather!
May the Road you choose be the Right Road.
Bix Weir
www. RoadtoRoota.com

This post was published at RoadtoRoota on Today.

EU – Planning to Spend Money It Doesn’t Have

Jon

The Press Takes Notice of a Small Problem We have previously discussed the plans announced by EU commission president JC Juncker to ‘rescue’ the euro area economy by means of 300 billion of state-directed spending (see ‘Juncker’s Solution’ for details). Now the mainstream press is also beginning to wonder where the money for this ambitious spending plan is supposed to be coming from. A report by Reuters contains a few points worth commenting on:
‘New European Commission President Jean-Claude Juncker is preparing a 300 billion euro ($375 billion) investment plan he will present as a cornerstone of efforts to revive an ailing economy. But history suggests the program risks becoming an exercise in financial engineering rather than a conduit for the new money the region needs to help boost output and create jobs.
A flagship project of the new European Union executive, the investment scheme is due to be unveiled before Christmas. It is still being finalized and few details have been made public. If all the money it promises is raised and spent, it could provide the 28-nation EU with roughly an additional 0.7 percent of GDP in investment per year over three years.
‘It is significant,’ said Carsten Brzeski, economist at ING bank in Frankfurt. ‘You would expect some kind of a multiplier effect from investment on jobs and purchasing power and it would increase the growth potential. The downside is that public investment can take years before it gets started.’
But even more than ‘when?’, the big question hanging over the plan is ‘how much?’. The 300 billion euros is an overall target for both the public and private money that the Commission hopes to mobilize. The Commission itself does not have any money and is funded through annual EU budgets that must be balanced. Of the region’s 28 governments, only Germany seems to have public finances strong enough to significantly increase investment. But in its drive to have a balanced budget, Berlin is not keen to spend more.
So the Commission plans to use what little public money is available to lure bigger private funds into projects that would otherwise seem too risky or with too low a rate of return.
‘Our aim is to ‘crowd in’ private money for big infrastructure projects in the energy sector, transport, broadband or research and development. The private sector cannot take all the risks,’ Commission Vice President Jyrki Katainen told Reuters.

This post was published at Acting-Man on November 17, 2014.

Japan’s Last Stand

Jon

There is a popular American military term called a ‘last stand’, which is meant to describe a situation where a combat force attempts to hold a defensive position in the face of overwhelming odds. The defensive force usually sustains very heavy casualties or is completely destroyed, as happened at Custer’s Last Stand. General Custer, misreading his enemy’s size and ability, fought his final and fatal battle of Little Bighorn; leading to complete annihilation of both himself and his troops.
The Japanese government is now partaking in a truly incredulous measure to expand its QE program in a desperate attempt to de-value its currency and re-inflate asset bubbles around the world. In other words, Japan is constructing its own version of a ‘last stand’.
In a final attempt to grow the economy and increase inflation, Japan announced a plan to escalate its QE pace to $700 billion per year. In addition to this, Japan’s state pension fund (the GPIF), intends to dump massive amounts of Japanese government bonds (JCB’s) and to double its investment in domestic and international stocks. All this in a foolish attempt to increase inflation, which Japan mistakenly believes will spur on economic growth. But these failed policies have now caused Japan to enter into an official recession once again, as GDP fell 1.6% in Q3 after falling 7.1% in the previous quarter.
Japan is now guaranteed to be successful in the total destruction of its currency, the complete destruction of its economy and the collapse of the markets it is attempting to manipulate around the world. To fully understand its misguided reasoning, we have to explore how Japan got here in the first place.

This post was published at Gold-Eagle on November 17, 2014.

Vacuous Blabber Association Meets in Brisbane

Jon

G-20: Governments are ‘Growth’ Magicians The G-20 met in Brisbane again this weekend for a shrimp-fest at reportedly considerable cost to tax payers (it cost more than $400 million and shut down an entire city for the best part of a week). What did the meeting achieve? According to the communique, it will achieve miracles. Not only is there going to be an intensification of the fight against the non-problem of ‘climate change’ (as if the climate cared what we do or don’t do), but governments will ‘create economic growth’ – allegedly $2 trillion worth of it over the next five years.
Since this figure refers to global GDP it can of course be achieved, mainly because GDP is a very poor measure of growth. All sorts of activities that really make us poorer are counted as ‘growth’ – all that counts for the purposes of GDP calculation is ‘spending’, no matter what the spending entails or who actually does the spending. The Soviet Union had ‘growth’ too – in fact it reported plenty of it. It even grew while millions died in famines during the collectivization drive. Western intellectuals were duly impressed by Stalin, who seemingly demonstrated the superiority of communism over capitalism in the 1930s. People in the Soviet Union were even paid in something that was called money, but there was very little they could actually buy with it.
Since governments want to fight ‘climate change’ (there is no point in fighting ‘global warming’ anymore, since it has stopped dead in its tracks more than 18 years ago), they are bound to create some of that magical growth by wasting scarce resources on alternative energy subsidies. It should be obvious that such investment is wasteful – if that were not the case, it would not need to be subsidized (Germany’s citizens have seen their electricity bills soar in the course of the rigorous implementation of the ‘green energy’ boondoggle in that country). However, it will register as growth in the GDP accounts, just as numerous housing bubbles around the world looked like growth until they blew up in 2008.
All this government intervention-induced growth should perhaps be called ‘growth at a price’ – it is a bit like buying $1 bills with $5 bills. According to the AP, the G-20 want to create more jobs specifically for women as well (by means of quotas? They didn’t say), but it is actually not necessary to plan specifically for that, at least not in the industrialized nations.

This post was published at Acting-Man on November 17, 2014.

How Much Earmarked Gold Holds The Federal Reserve?

Jon

Nick Laird at Sharelynx has recently complied historical data from multiple sources on the amount of earmarked (custodial) gold held by the US Federal Reserve Bank for other central banks. The chart below shows these stocks, in green, as well as the US’ gold reserves (in blue) and in red is an estimate by the Fed (pre confiscation) of gold held in the US by citizens and others. It provides a broad historical view of monetary gold in the US.
First feature to note is the privately held/circulating gold stocks figure in red. Up to 1915 we see that the gold held by government was stable and it was privately held gold that was growing. After this, the amount of gold in circulation as a proportion of total monetary gold reduced with the introduction of the Federal Reserve System. It ceased completely at the point holding gold was made illegal.
During the Bretton Woods period you will note that from 1950 to 1965 the total amount of gold held by the Fed was relatively stable at 25,000 tonnes.

This post was published at GoldSilverWorlds on November 17, 2014.

The Minimum Wage Farce – A Case Study

Jon

Election time in America these days is definitely not a time when one should be searching the various pearls of ‘wisdom’ dumped on the airwaves, billboards, and newsprint for the truth. Such is especially the case when it comes to economics. So twisted is the entire notion that the stock market is equated to ‘economics’ as if it is some ersatz term that is used whenever someone wants to pull the wool over our eyes. That is just but one example. This election cycle is no different. There have been fabrications so colorful I’ve often felt compelled to yank out a pad and pen and write them down. However, there is one that sticks in my mind as being the ultimate in misunderstanding. It is a shame that someone could so boldly assert themselves to be right and their opponent so wrong (of course) and then go on to butcher a topic in such totality that it nearly made my head explode.
This article dovetails almost perfectly with a ‘Two Cents’ from earlier this year and rather than link it, I’m going to include it in its entirety at the conclusion of today’s commentary. The March column contains just some of the science behind the minimum wage; today’s installment is a good example of the type of fraudulent reasoning that is so prevalent in the specter of economics today.
The forum was an interview of a candidate for office here in Pennsylvania. I won’t say which office or who the candidate was, because it really doesn’t matter. This sort of ‘flat-earth’ type thinking is virtually ubiquitous in the arena of those who wish to lead.
The topic was the minimum wage. As soon as I heard the question, it piqued my interest for several reasons, mainly because the concept is grossly misunderstood and secondly, because it is often used as a weapon in class warfare. Sadly, I was not to be disappointed.
The segment starts with the interviewer introducing the minimum wage as a point of contention in the 2014 elections. The candidate agrees it is a compelling issue and goes on to present the following actual exchange she had with a small business owner in her district. The following is not verbatim, but you’ll quickly get the idea. I will admit up front to making some assumptions in creating the extensions of the example laid out by our candidate. However, based on my knowledge of a variety of business operations, the assumptions are likely conservative in nature.
The candidate asks the small business owner how a 25% increase in the minimum wage would affect him and his restaurant. He is quick to point out the obvious – that it would increase his costs. How much, she asks. Would it increase his costs by 25%? No, he says, just the labor portion of his costs. Make a note of that; we’ll get back to it later. It’s the first false assumption. Our heroic champion of government intervention then asks what percentage of his overall costs labor represents. He says about 35% for his particular business, which, again, happens to be a restaurant. She goes on to make an example of a $10 meal. $3.50 of that meal represents the business owner’s labor costs. If that goes up 25%, the $3.50 becomes $4.38, a difference of 88 cents. She then asks if he’d have to raise his prices. He says ‘yes’. She asks by how much – would he raise prices by just the 88 cents or by more. He responds that he’d probably raise them more since it would be an opportunity to raise prices with a ‘get out of jail free’ card. The price increase could be pinned on our heroes in government. Keep in mind that this is exactly the kind of answer that champions of government intervention love to hear because it then gives them an excuse to start talking about additional price controls. I say additional because the minimum wage itself is a price control; something you rarely hear in these types of discussions.
Of course the upshot of all this is that the guy is greedy and there would need to be even further government intervention to prevent him and other greedy entrepreneurs like him from gouging the public should the minimum wage be raised.

This post was published at GoldSeek on 17 November 2014.

CDS Liquidity Set To Tumble As Deutsche Bank Exits IG, HY Trading

Jon

Back in 2009, Deutsche Bank salesman J. P. Rorech was the CDS salesman who, alongside Millennium PM Renato Negrin, were the first two traders accused by the SEC of insider trading using Credit Default Swaps, a product which many then said the SEC has no jurisdiction over as it is a “security-based swap” transaction (an umbrella loophole which was subsequently revised). The insider trading charge was subsequently dropped after the SEC was unable to provide sufficient proof the two had colluded “off the record” in purchasing VNU CDS on material non-public info, but the stigma may have stuck.
And while it is not clear if that particular incident is what the bank with the world’s greatest amount of outstanding notional derivatives was concerned about, or whether the ongoing collapse in bond market liquidity was the factor but moments ago, Bloomberg released a stunning update that Europe’s largest bank is exiting the single-name, both IG and HY, CDS product line, which for years was one of its biggest revenue generators and a product in which DB was for a long time one of the best and deepest CDS trade axes.

This post was published at Zero Hedge on 11/17/2014.

Mission Accomplished: Stock market, number of homeless children, both reach all-time highs.

Jon

Something is dreadfully wrong with this picture.
In a report just released today by the National Center on Family Homelessness, a team of academics has demonstrated that the number of homeless children in the Land of the Free now stands at 2.5 million.
This is far and away an all-time high and constitutes roughly one out of every 30 children in America.
The report goes on to explain that among the major causes of this problem are the continuing impacts of the Great Recession that began in 2008.
Funny thing, someone ought to tell these homeless kids that the economy is doing great. Of course, we know this to be true because the stock market is near its all-time high.
The Dow Jones Industrial Average now stands at 17,633, just off its all-time high.
Also near its all-time highs is the bond market, and coincidentally, the US debt – which is now within spitting distance of $18 trillion.
In other words, if these kids ever do manage to pick themselves up off the streets, they’ll work their entire lives to pay off a debt that they never signed up for.
And it all comes down to a completely perverse, corrupt, debt-based paper money system.
Yes, no matter what happens in the world, there are always going to be rich and poor. And as painful as it may be, there will always be homeless children. That’s not really the point.
For the most part, financial wealth used to be something that people had to work to achieve. They had to produce something valuable for consumers. They had to develop new technologies and be innovative. They had to take chances and in many cases risk it all.
That’s less and less the case today.

This post was published at Sovereign Man on November 17, 2014.

Gold Peeks Above Resistance

Jon

A Surprise Move on Friday Shortly after we posted our most recent comment on gold sentimenton Thursday evening after the NY market close, the precious metals once again tanked overnight in Asian trading. To our surprise, the move was reversed rather spectacularly later at the COMEX, with gold producing a bullish engulfing candle on the day. This is a tentatively positive development. Below is a 30 minute chart showing the most active December futures contract over the past week:
However, from a technical perspective, further developments must be awaited, specifically, there needs to be follow-through that confirms what is currently only a smallish break above resistance. Preferably we would like to see a weekly close that at a reasonable distance from the resistance line so as to indicate it will once again serve as support. Note in this context that a previous attempt to overcome lateral resistance at $1240 quickly failed in the low 1250s, shortly after the 50- day ma was touched. Overcoming this moving average is probably an additional condition that needs to be fulfilled to confirm a trend change.

This post was published at Acting-Man on November 17, 2014.

Industrial Production Drops; Auto Manufacturing Slumps 3rd Month In A Row – Worst Run In 5 Years

Jon

Driven by a combination of Mining (-0.9% – biggest drop in a year), Utilities (-0.7% led by a 3.2% plunge in Natural Gas) and most of all motor vehicle manufacturing (-1.2%), US Industrial Production slid 0.1% in October (notably missing expectations of a 0.2% rise). This is the 3rd monthly drop in motor vehicle & parts production – the worst consecutive run since Jan 2009. It seems the government-free-credit inspired subprime auto boom that provided just enough impetus to a fragilee conomy to enable the Fed narrative of “things are better” to play out… has ended… abruptly.
Industrial Production drops, missing notably.

This post was published at Zero Hedge on 11/17/2014.

SGE Withdrawals Strong, China Increases Solar Power

Jon

Another very strong week for Chinese wholesale gold demand, measured by withdrawals from the Shanghai Gold Exchange. In week 45 (November 2 – 7) physical withdrawals from the vaults accounted for 54 tonnes. My basic equation tells me more than 40 tonnes had to be imported to meet this demand. Year to date 1708 tonnes have been withdrawn from the vaults and this number will likely surpass 2,000 tonnes by year end as December and January are seasonally the strongest months.

As we can see in the chart above, the Chinese are quite eager to buy gold on the dips. SGE premiums were again pushed upwards last week by the new lows in the price of gold. The inverse relation is demonstrated in the next chart.
I would like to share a thought: The SGE premium chart illustrates the largest physical gold buyer on the planet has an increasing interest in buying gold, rising premiums, over the interest of the seller when prices decline. What we’re seeing is increasing demand from the largest physical buyer and falling prices concurrently. I wonder if this would be possible without a paper market.

This post was published at Bullion Star on 17 Nov 2014.

Warren Buffett Is Dumping Stocks out the Backdoor

Jon

Maybe Warren Buffet’s impeccable sense of timing kicked in. Or maybe he got shook up a little when IBM reported another revenue and earnings debacle in October, and in the subsequent swoon of its shares, he lost $1.3 billion. Followed a day later by a $1 billion hit on his position in Coca-Cola when it reported earnings. And all year, he has been getting hammered on his investment in British grocery chain Tesco which has lost nearly half its value, costing him around $750 million.
All this, even while stock markets have been bouncing around record highs.
‘I like buying it as it goes down, and the more it goes down, the more I like to buy,’ said the master manipulator during one of his hype interviews on his favorite and always helpful promo platform, CNBC, in early October. And true to form, filings revealed on Friday that he bought a few things here and there, such as increasing his stake in GM, and that he sold a few things too. But those were smallish amounts by his standards.
Meanwhile, he is dumping some of his big, highly profitable positions in publicly traded stocks – but not out the front door.
It was skillfully obscured by the ruckus over the tax aspects of these deals: that one of the richest guys in the world, or rather his company, Berkshire Hathaway, would be able to take advantage of a specially created tax loophole that regular folks don’t have access to, a loophole that would save the company billions in taxes.
Last week, it was Berkshire’s complex acquisition of Procter & Gamble’s Duracell unit. Everyone dutifully fell in line, laid out by Buffett, and called it an ‘acquisition,’ though the other and more important half of the transaction was the sale of a huge position of P&G shares.

This post was published at Wolf Street on November 17, 2014.

Exactly When I’ll Buy Back into US stocks

Jon

Keep it Simple We began buying gold in the late 1990s, when it was still cheap. To illustrate just how cheap it was, for a brief moment in 1980 you could buy nearly all of the 30 Dow stocks for just 1 ounce.
By 1999, the Dow had risen so high that you would have needed 43 ounces to perform the same trick. At this point, you could scarcely go wrong buying gold and selling stocks. Stocks were expensive; gold was cheap.
We are too lazy to do real stock research. And we are too inattentive for trading or meticulous timing systems. We don’t aim to beat the market. ‘Live and let live’ is one of our market mottos.
Here’s an easy way to do it – a refinement of our Simplified Trading System (STS) described in previous Diary entries. You are either in stocks. Or you are in real money – gold. You buy stocks when they are cheap. You sell them when they are dear.
And you use roundish numbers to make it easy. When the Dow components are selling for 5 ounces of gold or less, you buy the Dow. When they are worth more than 20 ounces, you sell.

This post was published at Acting-Man on November 17, 2014.

Gold Bets Cut in Fastest Exit This Year

Jon

Hedge funds extended their fastest exit from gold this year, cutting bullish gold wagers for a third week.
The net-long position in New York futures and options fell 14 percent, U. S. government data show. Holdings tumbled 49 percent over three weeks, the most since December. Assets in exchange-traded products backed by the metal dropped to the lowest since 2009, as the World Gold Council said third-quarter global demand was the weakest in almost five years.
While prices had their biggest two-day rally since June at the end of last week, gold is still down 15 percent from this year’s peak in March. Investors’ appetite for bullion has diminished as the dollar strengthened to a five-year high, the Federal Reserve moved closer to raising borrowing costs, U. S. equities reached records and inflation failed to accelerate.
‘Gold has everything working against it,’ says an Edinburgh-based global thematic strategist at Standard Life Investments Ltd., which oversees $333.6 billion, said Nov. 13. ‘The strongest influence is the strengthening dollar, and that goes against all commodities. So, you have a backdrop of falling commodity prices, a strong dollar and equities, potential disinflation and some countries already in deflation.’

This post was published at TruthinGold on November 17, 2014.

Empire Fed Manufacturing Misses 2nd Month In A Row, Workweek Plunges

Jon

Following last month’s collapse, hopes were high for the Keynesian data mean-reversion to bounce Empire Fed Manufacturing data solidly higher… it didn’t. A small bounce to 10.16 (against expectations of 12.2) is the 2nd miss in a row and below January’s mid-polar-cortex levels. Under the covers, it was even uglier as average workweek and prices received plunged to their lowest levels in 2014 (as prices paid only inched lower – sparking fears over margins). The number of employees also fell (despite a rise in new orders?) but the headline print was saved from worse by a surge in ‘hope’ yet again as the business outlook jumped by 6 points to 47.61 – its highest since Jan 2012!!
2nd miss in a row with only a small rebound

This post was published at Zero Hedge on 11/17/2014.