The Anatomy of Brown’s Gold Bottom

As most in the gold community know, the UK Chancellor of the Exchequer Gordon Brown announced on 7 May, 1999 that HM Treasury planned to sell gold. The dollar began to rise, from about 110mg gold to 120mg on 6 July, the day of the first sale. This translates into dollarish as: gold went down, from $282 to $258. It makes sense, as the UK was selling a lot of gold… or does it?
We won’t get into the theories of his motivation. However, we note that if he wanted to – pardon the dollarish – push down gold, he was not particular effective. He squandered half of Britain’s gold to get the price to drop 8.5%. That lasted but a few months. By the end of September, the price was not only back up to $282 but rising rapidly on its way past $320. Then it came down with volatility, rose, slowly fell to just under $260 about two years later. The price bottom just about coincides with the end of his selling.
This is history, and it’s been discussed and analyzed many times. What has not been seen until now is a look at the gold basis and cobasis during this time. Was gold becoming abundant due to selling? Or did something else happen?
Here is a graph showing the continuous gold basis and cobasis, overlaid with the price of the dollar.

This post was published at GoldSeek on 12 June 2017.

Albertson’s Reveals Supermarket Meltdown as Global Deep-Discounters Promise Price War in Stagnating US Market

Aldi’s $5 billion bet at a brutal time.
Today, Albertson’s explained in an amended S-4 filing for a debt exchange offering just how tough things have gotten for traditional supermarket chains.
As is so often the case, there is a private equity angle to it. Albertson’s was acquired in a 2005 LBO by a group of PE firms led by Cerberus. In January 2015, it acquired Safeway to eliminate some competition. It then wanted to sell its shares to the public. But in October 2015, as brick-and-mortar retail began to melt down, it scrapped its IPO.
The filing’s most revealing data are same-store sales on a quarterly basis through Q4, 2016, comparing year-over-year sales growth at stores that have been open in the current and prior year. I added the red line to show the trend since Q3 2015:

This post was published at Wolf Street on Jun 12, 2017.

“The Sooner We Do It, The Better”: Congress Should Raise Debt Ceiling Before August Recess, Mnuchin Says

Treasury Secretary Steven Mnuchin reiterated his preference for the debt ceiling to be raised before lawmakers break for August recess during testimony before the House Appropriations Committee on Monday.
Here’s Bloomberg’s summary of what was said during the hearing:
Can’t imagine a scenario that the debt ceiling isn’t raised Mnuchin urges Congress to align the timing of raising the debt cap with the budget process Markets don’t want Congress to wait to raise the debt ceiling ‘The sooner we do it the better, there are events in the world that could make it more difficult to borrow’ The debt ceiling should not be a Republican or Democrat issue, it should be an acknowledgment ‘that we have spent the money, we have to fund the government’ Mnuchin did not give lawmakers a hard deadline for when the debt ceiling needed to be raised but said it could wait until after Congress’s August recess, the Hill reported.

This post was published at Zero Hedge on Jun 12, 2017.

“The Crowd Is Always Wrong” Jack Bogle Says, Urging To Invest At All Time Highs

For 88-year-old Vanguard founder Jack Bogle, there is no better place to be invested right now than the U. S. and he’s “all in” with his portfolio split between U. S. equities and bonds. In an interview with Bloomberg, Bogle makes the rather surprising argument that buying U. S. equities at record highs is a contrarian play.
‘I believe the U. S. is the best place to invest,’ Bogle said in a telephone interview. ‘We probably have the most technology oriented economy in the world. I would bet that the U. S. will do better than the rest of the world. It is a simple bet on which economy is going to be the strongest in the long run.’
‘Every single person I think I have ever talked to tells me I am wrong in this,’ Bogle said. ‘If you believe in the majority, you can just throw my opinion in the waste basket. But on the other hand, I was brought up in this business and I am saying ‘the crowd is always wrong.”
‘I don’t think in the long run [emerging markets] will do as well as the U. S.,’ he said. ‘They are more risky and more sensitive to interest rates, more sensitive to Federal Reserve statements and actions. They don’t have the diversity we have in the U. S.’

This post was published at Zero Hedge on Jun 12, 2017.

The Chinese Trilemma

The trilemma, also known as the ‘impossible trinity’ is a fundamental thesis of international economics. I’ve covered in detail previously, so this is a short overview.
It was developed by economists Robert Mundell and Marcus Fleming in the early 1960s.
In its simplest form, the Mundell-Fleming model says that a country cannot have an open capital account, a fixed exchange rate, and an independent monetary policy at the same time.
It can have any two out of three, but not all three. A country that attempts to have all three will fail in one of several ways including a reserve crisis, an exchange rate crisis or a recession.
Despite the warnings that the model provides, China is attempting to pursue the impossible trinity.
At the Daily Reckoning we’ve covered these Chinese dynamics on our extensively, reporting on the geopolitics at play in China, the global dollar shortage and the indicators of a Chinese collapse.
An Update on the Chinese Trilemma
China wants a fixed exchange rate to the dollar, in part to satisfy the Trump administration that it is not a currency manipulator. And China wants an independent monetary policy not tied to the Federal Reserve policy rate, in part to stimulate the economy and keep insolvent SOEs afloat.

This post was published at Wall Street Examiner on June 12, 2017.

Federal & State Tax Receipts Are Declining Rapidly, Expect A Hard Landing- Episode 1304a

The following video was published by X22Report on Jun 12, 2017
Spain’s banking system continues to decline, the banking regulators are putting a freeze on short positions on banking stocks. Moody’s reports more retailers will be filing for bankruptcy, this is the retail apocalypse. Chain restaurants have been hit hard, people just don’t have the discretionary funds to go out to eat. The tech sector took a beating which is not a very good sign on how the market it doing. Federal and state tax receipts implode and we are reaching the crisis point back in 2008-2009. The government is now spending more than it is taking in. The global credit impulse is negative and slipped even further, the credit growth in the US is locking up, as the Fed raises rates into a weakened economy it will set off a chain reaction scenario where the entire economy will implode on itself.

Why the Tech Wreck May Be a Temporary Blip

Leadership is an important consideration in any type of market, bull or bear. When market leadership is thin and quickly changes direction, it can signal a shift in the tone of the overall market.
The rally that has unfolded in recent months has been changing in character. Originally, the thrust began as a reflation trade, as signs of disinflation/deflation began to fade and global bond yields crept higher. The timing of this coincided with the election, which brought with it hopes of tax cuts, deregulation, and infrastructure spending. This boosted the prospects (and share prices) of cyclical companies – those that need an improving economy to do well.
But then both of these narratives began to fade. Inflation and economic data weakened, and it caused bond yields to fall from their highs near 2.6% to current levels around 2.2%. At the same time, it became clear that very little on Trump’s agenda could be counted on … at least for now.
This led to another shift in leadership, as technology stocks took over the show.
Most tech firms, at least those that have been leading the way higher, are secular growth stories. This means that these firms don’t need a robust economy to do well. Instead, the products and services they sell are so unique that they’re almost always in demand.

This post was published at FinancialSense on 06/12/2017.

The Next Financial Crisis Has Already Arrived In Europe, And People Are Starting To Freak Out

Did you know that the sixth largest bank in Spain failed in spectacular fashion just a few days ago? Many are comparing the sudden implosion of Banco Popular to the collapse of Lehman Brothers in 2008, and EU regulators hastily arranged a sale of the failed bank to Santander in order to avoid a full scale financial panic. Sadly, most Americans have no idea that a new financial crisis is starting to play out over in Europe, because most Americans only care about what is going on in America. But we should be paying attention, because the EU is the second largest economy on the entire planet, and the euro is the second most used currency on the entire planet. The U. S. financial system is already teetering on the brink of disaster, and this new financial crisis in Europe could turn out to be enough to push us over the edge.
If EU regulators had not arranged a ‘forced sale’ of Banco Popular to Santander, we would probably be witnessing panic on a scale that we haven’t seen since 2008 in Europe right about now. The following comes from the Telegraph…
Spanish banking giant Santander has stepped in to the rescue ailing rival Banco Popular by taking over the failing lender for 1 in a watershed deal masterminded by EU regulators to avoid a damaging collapse.
Santander will tap its shareholders for 7bn in a rights issue to raise the capital needed to shore-up Popular’s finances in a dramatic private sector rescue of Spain’s sixth-largest lender.
It will inflict losses of approximately 3.3bn on bond investors and shareholders but crucially will avoid a taxpayer bailout.

This post was published at The Economic Collapse Blog on June 12th, 2017.


GOLD: $1266.10 down $2.40
Silver: $16.91 down 28 cent(s)
Closing access prices:
Gold $1266.20
silver: $16.95
Premium of Shanghai 2nd fix/NY:$7.63
LONDON FIRST GOLD FIX: 5:30 am est $1269.25
For comex gold:
TOTAL NOTICES SO FAR: 2180 FOR 218,000 OZ (6.5878 TONNES)
For silver:
For silver: JUNE
Total number of notices filed so far this month: 812 for 4,060,000 oz

This post was published at Harvey Organ Blog on June 12, 2017.

Jobless Claims and Economic Turning Points

The strong positive bubble readings in tech identified by the FCO supercomputer resolved last week in a steep correction. Given the price action in various sectors, the consensus among market technicians is that last week’s move was a “risk-on rotation” as investors trimmed high-priced FANG and growth stocks to purchase undervalued names in energy, financials, and other areas, which have been underperforming.
Though general valuation levels for the US stock market argue for below-average returns over the next decade, as Ed Easterling recently explained on our program, confidence in the growth outlook will continue to provide support for stock prices until market participants switch from risk-on internal rotations to risk-off external rotations into cash and bonds.
This final turning point will likely take place once earnings growth peaks, coinciding with a protracted economic slowdown in the world’s largest economy, which is why we decided to get an update from economic “superforecaster” Jim O’Sullivan at High Frequency Economics on our program last week.

This post was published at FinancialSense on 06/12/2017.

US Oil Production Makes Waves

There’s no end in sight to slumping oil prices – good news for consumers but a dire development for major oil producers like Saudi Arabia and Russia. And now, rising US oil production and exports are contributing to the slump.
Last week, oil prices reached new lows for 2017, with Brent crude dipping below $48 per barrel and West Texas Intermediate dipping below $46. The drop has been attributed to an unexpected increase in US crude inventories, which rose by 3.3 million barrels last week (according to the US Energy Information Administration), despite expectations that it would drop by 3.5 million barrels.
The rise in production is compounded by rising US oil exports, since the US lifted a 40-year ban on these exports in 2015. This led to modest increases in oil exports in 2016 but substantial increases so far in 2017. This is a key reason prices will remain low in the long term.
Ebbs and Flows in US Exports
It is worth remembering why the United States banned oil exports in 1975 (exceptions were allowed at the discretion of the president). 1970 set a record for the highest crude oil production in the US, though this record will likely be broken in the next two years. The US was producing a lot, but it was also consuming a lot, forcing it to import more from OPEC states, which produced about 55% of the world’s oil in 1973.

This post was published at Mauldin Economics on JUNE 12, 2017.

Blockbuster 3Y Auction: Soaring Indirects And Bid to Cover Scream Fed Hike Is “Policy Error”

So much for worries about a hawkish Fed and a balance sheet “normalization” pressuring bonds yields.
Moments ago the Fed auctioned off both a 6 month Bill in a strong auction, but more importantly conducted a stellar 3 Year auction, which not only stopped through the 1.508% When Issued, printing at 1.500% (83.8% alloted at the high), the lowest yield since February, and the first non-tailing auction since the same month, but it was the internals that took the prize.

This post was published at Zero Hedge on Jun 12, 2017.

Gravity Rules: End Of The Bubble Is In Sight

‘Even the intelligent investor is likely to need considerable willpower to keep from following the crowd.’
The quote above is from Ben Graham, considered to be the father of value investing. Graham followed the crowd in 1929 and lost a small fortune for himself and his investors. Graham collected his learning experience from that disaster and eventually wrote, ‘The Intelligent Investor,’ which is considered to be the one of the best investment books ever written. Warren Buffet enrolled at Columbia to study under Graham. Graham’s teachings formed the foundation of modern money management theories. To this day it is considered the value investor’s ‘investment bible.’
Wall Street is incentivized to sell the idea that stocks only go up. When I started on the junk bond desk as a salesmen (before switching to trading), I was told my job was to ‘reach into the portfolio manager’s pocket and take as much money as you can from his pocket and put it into your pocket.’
Wall Street greed has been around as long as stocks have been trading (the NYSE was founded in 1792). But it’s hard to blame stockbrokers for the damaging effects of greed. Stock-peddlers are like well-paid psychologists. They take advantage of human greed. Without investor greed, the stock brokerage business would be considerably smaller than it is today.

This post was published at Investment Research Dynamics on June 12, 2017.

You Know It’s Bad In Spain’s Banking System When…

…The regulator bans short sales.
Following our discussion of the collapse of LiberBank’s stock and bond prices as investors quickly identify the next domino to fall in Spain’s crumbling financial system, Bloomberg reports regulators imposed an emergency ban on short selling the stock.
Spanish securities regulator CNMV, backed by the European Securities and Markets Authority, on Monday banned the sale of borrowed shares for a month.
‘Market confidence has deteriorated in relation to a part of the local banking sector,’ ESMA said, citing CNMV.

This post was published at Zero Hedge on Jun 12, 2017.

Illinois Bond Spreads Explode As Market Pukes On Latest Batch Of Bad News

On June 1, first S&P the Moody’s almost concurrently downgraded Illinois to the lowest non-Junk rating, BB+/Baa3 respectively, with both rating agencies warning that the ongoing legislative gridlock and budget crisis need to be resolved, or else Illinois will be the first ever US state downgraded to junk status.
S&P analyst Gabriel Petek explicitly warned that “the unrelenting political brinkmanship now poses a threat to the timely payment of the state’s core priority payments” and warned about Illinois’ inability to pass a budget for the past two years amid a clash between the Democrat-run legislature and Republican Governor Bruce Rauner. As we have documented previously, the ongoing confrontation has left the fifth most-populous US state with a record $14.5 billion of unpaid bills, ravaged entities like universities and social service providers that rely on state aid and undermined Illinois’s standing in the bond market, where investors have demanded higher premiums for the risk of owning its debt.
Bypassing its traditional 90-day review, a terse S&P also warned that Illinois will likely be downgraded around July 1, when the new fiscal year begins if leaders haven’t agreed on a budget that starts addressing the state’s chronic deficits.
Unfortunately for Illinois, and its bondholders, the downgrade – and the subsequent imminent “junking” – was just the tip of the iceberg.

This post was published at Zero Hedge on Jun 12, 2017.

SocGen: “This Is What Happens When The Algos All Head For The Exit At The Same Time”

After Goldman, JPM and even Dennis Gartman all opined on Friday’s “tech wreck”, in which the Nasdaq tumbled 2% as the Dow Jones hit new all time highs (the only previous time it has done that was in 1999 just as the tech bubble was ramping up), and when the Philly semiconductor index fell 4.2%, SocGen’s Andrew Lapthorne could not resist, and in a note released on Monday morning, explains that what happened on Friday was merely an episode of “systematic momentum selling“, or said otherwise, a teaser of what happens when the algos all “head for the door all at the same time.”

This post was published at Zero Hedge on Jun 12, 2017.

SWOT Analysis: Gold’s Strength Is Justified Says UBS

The best performing precious metal for the week was palladium, up 5.10 percent. Grant Sporre, an analyst at Deutsche Bank, noted there is a genuine physical tightness in the market, but the spike had all the hallmarks of someone being caught short and being squeezed. Bullionvault’s Gold Investor Index, which measures the balance of client buyers against sellers, rose the most in two years reaching a high of 55.3 in May versus 52.1 in April, reports Bloomberg. In India, gold imports jumped fourfold in May to 126 metric tons from 31.5 metric tons in the same month last year. In a report by the World Gold Council, consumption in India could climb dramatically this year as a ‘simple’ nationwide Goods Services Tax will boost the economy, making the gold industry more transparent to benefit buyers, reports Bloomberg. Amid unease over a congressional hearing on possible links between Russia and the Trump campaign, holdings in SPDR Gold Shares (the world’s largest gold-backed ETF) climbed to the highest this year on the back of safe-haven demand, reports Bloomberg. In the two weeks through the end of May, hedge funds and other large speculators boosted their bullish bets on the precious metal by 37 percent, notes another Bloomberg article, the most since 2007 according to government data. Japanese investors sold a record amount of U. S. debt in April, reports Bloomberg. ‘Political turmoil in Washington and uncertainty about French elections pushed down Treasury yields, diminishing their attractiveness,’ the article continues. Japanese investors cut holdings of U. S. debt by $33.2 billion in April, the most in data going back to 2005, according to a Ministry of Finance balance-of-payments report.

This post was published at GoldSeek on 12 June 2017.

Bank Of America, Delta Pull Out Of “Shakespeare In The Park” Over Trump Assassination Scene

Delta Air Lines and Bank of America pulled their sponsorship of New York City’s Public Theater, which hosts the popular “Shakespeare in the Park” series, after Donald Trump Jr. raised the question of whether its staging of Julius Caesar had crossed the line into political speech by depicting the violent assassination of Trump’s father, President Donald Trump.
‘I wonder how much of this ‘art’ is funded by taxpayers? Serious question, when does ‘art’ become political speech & does that change things?,” Trump said in a tweet.
Unsurprisingly, The New York Times – another sponsor, and ostensibly a politically neutral media organization – is standing by the theater.
As a reminder, CNN also called the play “a masterpiece,” and publicly recommended it to others…

This post was published at Zero Hedge on Jun 12, 2017.

Analysts Say India Tax Plan Will Boost Gold Demand in Long-Run

Analysts at the World Gold Council say they believe a new tax plan set to go into effect in India will ultimately boost demand for gold in the world’s second-largest market for the yellow metal.
On July 1, India’s current labyrinth of taxes will be replaced by a nationwide Goods & Services Tax (GST). The World Gold Council called it the ‘biggest fiscal reform since India’s liberalization in the early 1990s.’
While gold consumers will face a slightly higher tax rate, and the industry will go through a period of adjustment, we see the net impact on the gold industry as being positive. The gold supply chain should become more transparent and efficient, and the tax reform can boost economic growth, which we see as supporting gold demand.’
The government set the tax rate for gold under the GST at 3%, lower than the 5% expected. This has already sent a wave of optimism through the country’s gold and jewelry dealers.

This post was published at Schiffgold on JUNE 12, 2017.