TND Exclusive: GATA’s Bill Murphy’s Friday Newsletter
2016 has proven to be a wild ride, and we’re only half way through January.
Bill Murphy’s Friday issue was a great read. With his permission, we’re making public a big chunk of his Jan. 15th newsletter. “The Doc” and I were not able to record our Weekly Metals & Markets show but I’ll be on Dr. Dave Janda’s “Operation Freedom” this Sunday to discuss markets and geopolitics. That, combined with Bill’s newsletter will make for a good “twofer” substitute. Jason Burack and I also produced and released the latest Welcome To Dystopia, which focuses on big picture market trends and more. Click here to check out episode #14.
Bill isn’t paying us anything for this. I’m a paid-up subscriber for 15 some-odd years. Bill’s insights and the “switchboard” quality of his publishing the insights industry and market analysts send his way make for insightful reading. You can check out his newsletter via the two week free trial at LeMetropoleCafe.com (sign-up link is at the top of the page).
–Eric Dubin, Managing Editor, The News Doctors
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January 15 – Gold $1091.50 Up $17.60 – Silver $13.88 Up 14 Cents
“What THIS Is Leading To…”
“The conditions of conquest are always easy. We have but to toil awhile, endure awhile, believe always, and never turn back.” … Marcus Annaeus Seneca
(Not so sure about the easy part, but the rest is on the money about conquest.)
What a morning! With a three day weekend scheduled for our Martin Luther King holiday in the U.S. on Monday, there could not have been more action and market volatility…
*The Shanghai Composite index fell 3.55% into bear market territory (see below), leaving its 3,000 level in the dust.
*Other world stock markets were under the heaviest of pressure. The German market (the DAX) was down more than 3% this morning.
*Crude oil crashed below $30 per barrel again, this time with fervor as its price eyed taking out $29.
*The yield of our 10 yr T note took out 2% on the downside.
*Our DOW was called 400 lower. While the DOW is very oversold, market crashes occur with markets being very oversold … almost by definition.
*Walmart announced it was closing 154 stores in the US with 10,000 workers affected. Make that 16,000 worldwide.
*The dollar was a good deal lower to the tune of .59 this morning.
*Fear trades surfaced again.
*U.S. economic stats were stinko (see below).
*Gold was on fire. Yesterday’s $5 pop in the Access market following its bludgeoning on the Comex was a bit bizarre. In retrospect it is as if The Gold Cartel had an inkling what was in store for today and battered the gold price to get it off the investment radar screen. Their selling brought in hedge funds, etc. on the sell side and caused other spec longs to sell. Once that mission was accomplished, they began covering their shorts after the Comex close.
Gold was on the move in the Asian markets and then took off going into and through the Comex opening, rising to $1097, where it ran into a predictable wall of selling … most likely THEM again. Can you imagine where the price of gold would be today if THEY had not buried it yesterday?
*It will surprise no Café member that gold’s advance ran into stiff resistance when it rallied 2%.
*The silver yo-yo around $14 continues on with “the magnet” there having its effect yet again. Its price rose to $14.11, right around the level it continues to get sold.
And then The Gold Cartel reared its ugly head AGAIN. With the DOW down 350, they began an all out assault on the precious metals. For no apparent reason the price of gold was $10 off of its highs, while silver was drilled 23 cents. Huh? For the clueless out there regarding market manipulation (or disingenuous), this is a classic real time example of the relentless price suppression scheme in action.
Nothing changed in a matter of minutes regarding the fear scenario related above. NOTHING. Instead, it was all about The Gold Cartel doing all they could to take the gold/silver safe haven trade off the radar screen of investors. The message: don’t you dare go there!
THEY didn’t even wait for some sort of pretense to go after gold and silver, such as a PPT inspired DOW rally. That sort of anxious attack suggests how petrified the establishment is about what is really going on in the financial/economic world. Thus, The Gold Cartel ordered their forces to act regardless of how it looked. What the heck … the financial market press and gold/silver industry won’t say a peep anyway.
The AM Fix: $1081.10. The PM Fix rose to $1093.75. So that means the subsequent hit on gold and silver was a PLAN B operation following the physical market pricing for the day.
The gold open interest rose a steep 12,691 contracts to 414,149. This suggests indeed that the hunch that The Gold Cartel maneuvered specs into selling gold on the market rally was correct … and then they DID cover in the Access Market … leaving ammunition to attack again today.
The silver open interest rose 1003 contracts to 165,886.
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More commentary after the close, but first James Mc this morning with his thoughts of what all of this nonsense is leading to for the gold price:
Panic buying vs. panic selling
Anybody thinking oil and gold are somehow correlated should pay attention to what’s happening today. Oil is experiencing panic selling, while gold is experiencing panic buying, and rightfully so. While we’ll probably wind up with a +2% gold day (circled number says $1095.00 is limit up.) the reality is it should be going up 10%, or even 100% without official intervention. The lousy action in both the HUI and silver arenas tells me they don’t intend for gold to stick around $1100 for long. Clear interventions occurred at 8:50, 9:30, and 10:30 AM.
You have to wonder about the likelihood of horrific margin calls going on in crude futures. You’d think plummets of 5% or more on a regular basis would produce billions of dollars of wipeouts on spec long future accounts. From its all time high of $140 crude has now lost 80% of its dollar price. That is simply stunning. It’s funny how after 2008 nearly any wipeout by nearly any entity has been followed by deafening silence, and it’s as if it never happened. Remember Fannie and Freddie’s calamitous affairs? Zippo repercussion and it just went away. I think all along there has been a secret QE which has been making financial disasters magically disappear. I don’t believe ANY official data, and the Fed has made tracking monetary expansion virtually impossible. With (fill in the guestimated trillions of derivatives out there) it’s almost certain that secret bailouts have been the norm. If so the ostriches that claim $10K gold is some wild-eyed farce might be shocked at it not only being at $10K one day, but still undervalued at $10K.
All in all it’s a very disturbing beginning to the new year for TPTB, and also year 5 of their smoke and mirror gold suppression scheme.
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From James’s mouth to God’s ears.
While the DOW fell more than 200 points from after the obvious gold/silver intervention, gold and silver were put in the penalty box for the rest of the Comex trading session. The Gold Cartel had spoken for the day and traders were not about to take them on, no matter what the outside markets did. Both precious metals went comatose compared to other markets, which remained volatile.
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The Commitment of Traders Report
*The large specs increased their long positions by 1,476 contracts and increased their shorts by 619 contracts.
*The commercials reduced their longs by 1,990 contracts and reduced their shorts by 227 contracts.
*The small specs increased their longs by 1,642 contracts and increased their shorts by 736 contracts.
*The large specs increased their long positions by 5,123 contracts and reduced their shorts by 13,035 contracts.
*The commercials reduced their longs by 5,453 contracts and increased their shorts by 18,857 contracts.
*The small specs increased their longs by 3,931 contracts and reduced their shorts by 2,221 contracts.
Nothing to write home about here. The Gold Cartel and allies are gradually getting back on their case.
Other comments and input:
*Sign of gold/silver manipulation
At least at this moment, 11:30 EST, the financial world is RED today,
as shown by this attachment,
and yet gold and silver prices are being capped, once again.
Could there NOT be a greater example of market manipulation?
Edward Ulysses Cate
*Yes Edward, there could not be. And yet there are those, like Martin Armstrong, who refuse to go there no matter what the blatant evidence is. Mr. A was at it again yesterday:
Gold – No Time Left for Conspiracy Theories
To some, this is a religious battle. To others, it is just a time to rip off a lot of people by selling fantasies and sophistry. I have stated this many times, so here it goes again: Gold rises when people lose confidence in government. It has nothing to do with inflation. So, you start to worry about government survival or who’s going to win a war when gold rises — not before.
Short term, we still have the risk of gold going under $1,000 per ounce. It’s going to flip when everything is right — not before. It will probably max out at $5,000 per ounce or perhaps $6,000 at best. That we will not know until we have the low and the projection angle from that low. We’re dealing with a very profound event, religion aside. Such events of political-economic trend resets come around every 309.6 years. The last one was the global revolution against monarchy which began in the United States.
If you just step back and look OBJECTIVELY at what is unfolding from electronic currency to G20 demanding info on everyone and every penny that changes hands, then you can see where the future is headed. We do not have a democracy; that is total nonsense. The president appoints the heads of all departments. Nobody stands for election right down to the head of the Federal Reserve.
In Europe, you have the three-headed dragon they call the Troika — the European Commission (EC), the European Central Bank (ECB), and the International Monetary Fund (IMF). None of those three members heads have EVER stood for election. They too are undemocratic appointments. So the European population cannot even vote for their future.
eGold will respond ONLY when the majority sees the crisis unfolding. Just because you may understand it and see the logical outcome does not mean that the bulk of the population will. During the American Revolution, they actually issued currency backed by assets confiscated from “Tories” or those who supported the king against the people.
There is no time for nonsense conspiracy theories or other sophistry. This is about a major shift in political economic trend, which is far more important than the job to sell gold by people pretending to be analysts with nothing new to add to the issue other than inflation, fiat, and the theory that all paper currency is evil.
Excuse me, then please explain today. Meanwhile, without your diatribe about the sophists, you could be in the GATA camp re gold and confidence. That is EXACTLY why The Gold Cartel goes into action. Maintaining confidence in the dollar and the U.S. financial/economic system is paramount to why they do what they do.
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*Dennis Gartman very early this morning:
“We are heartened by the fact that the lows of gold in hourly US dollar terms has again been higher than the previous interim low and that the process of forging an important and longer standing bottom continues. Without the usual strong Indian buying, the “malevolent’ forces who’ve tried so hard over the past many months to push gold lower had a reasonably “enjoyable” day yesterday, but gold has rebounded nicely from that selling…. we fully expect those same “malevolent” forces to exert this usual Friday pressure.”
*06:46 Macro Update: Oil
WTI Crude (Feb) -4.7% to $29.74 and Brent (Mar) -3.4% to $29.83 selling off this morning, giving back all of yesterday’s rally. Fears of Iranian oil returning to the market being cited for the decline as the IAEA is expected to release a report today that will pave the way for the lifting of sanctions.
Brent trailing WTI through 2017: Bloomberg reported that Brent crude is trading at a discount to WTI through October 2017 as an expected surge in Iranian production adds to global oversupply concerns, while falling US output trims the glut in America.
How to tell when oil market throws in towel: The WSJ said the futures curve shows the crude market is not ready to reverse. It noted the curve is sharply upward-sloping, but the difference between March 2015 and 2016 futures is only about $8.20. That is far too little to cover the cost of leasing a modern VLCC.
Pioneer shines thanks to hedging: Reuters noted that Pioneer Natural Resources is standing out from the pack of US shale drillers thanks to its use of hedges to lock in higher prices for this year’s production. As a result, it gets $60/barrel for a large portion of its output while many rivals are selling at the market price of around $30. The company has also managed to sell $1.4B worth of new shares to investors this month.
BHP faces writedowns on shale assets: Bloomberg reported that BHP Billiton said it expects to take a writedown of $4.9B on the value of its US shale assets due to the fall in oil prices. It said its next defense against the commodities collapse may be to abandon its decade-old pledge to maintain or raise its dividend. The company will cut its rig count in the shale unit from seven to five by April and has put investment and development plans for the remainder of this fiscal year under review.
Iran crude exports on track to hit 9-month high in Jan: Reuters noted that Iran’s crude oil exports are on target to hit a nine-month high this month as buyers prepare for the lifting of sanctions. Iran is on track to ship 1.1M bpd of crude excluding condensate. The preliminary number, 21% higher than December, is likely to add to worries over a global supply glut.
Iran tankers set to target India and Europe: Reuters reported that with sanctions set to be lifted, Iran is set to target India and oil partners in Europe with hundreds of thousands of barrels of its crude. Tehran is expected to lift exports by 500K bpd post-sanctions and gradually raise shipments by the same amount again. Iran has 22 VLCC floating off its coast, with 13 fully or almost fully loaded. A senior Iranian source said the country was targeting India as its main destination for crude. The official said Iran hopes to raise its exports to India by 200K bpd, up from the current 260K bpd shipped under sanctions’ restrictions.
Aramco IPO as sign oil age coming to end: Bloomberg noted that some see Saudi Aramco’s IPO as a sign of oil’s weakness, as Saudis know its time to start hedging their bet on fossil fuels. It said the Saudis may be capitalizing on an asset thats only going to lose value if the world gets serious about global warming. One analyst asked why the country would IPO their only valuable asset when oil is trading at its lowest point since 2003.
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*Derek checks in with:
Goldman to Pay $5.1 Billion Fine in U.S. Mortgage Probe
“Goldman Sachs Group Inc. said it agreed to settle a U.S. probe into its handling of mortgage-backed securities for about $5.1 billion, cutting fourth-quarter profit by about $1.5 billion and closing out a year of record legal and litigation costs.”
“Some lawmakers and public-interest advocates have criticized the government’s approach to holding mortgage lenders accountable. Without individual prosecutions, the settlements allow banks to pay money to atone for bad behavior, making financial penalties a cost of doing business.“
“Settlements with Goldman or Morgan Stanley would be the first since Attorney General Loretta Lynch took over the department from Eric Holder in April.“
His friend notes:
Moral to the story?
$1.1 Quadrillion in bad CDSs, MBSs and derivatives still overhanging market…
Taxpayer picks up bill…
Penalty barely puts a dent in Goldman’s 4th quarter earnings…
Nobody goes to jail…and…… last but not least…
Loretta Lynch has bigger cajones than Eric Holder could ever wish for….
Upside for average American? You get to barf…again!
*An upper for the day on longtime Café member and GATA supporter, Patrick Heller:
Honored With National
Outstanding Service Award!
Patrick A. Heller, Owner Emeritus and Communications Officer of Liberty Coin Service in Lansing, was honored during the Industry Council for Tangible Assets (ICTA) Board of Directors meeting in Tampa, Florida on January 6 as the first recipient of the newly created Diane Piret Memorial Outstanding Service Award.
*The yield of the 10 yr T note is 2.03%.
Crude oil fell $1.47 per barrel to $29.73.
The dollar fell 0.16 to 98.88. The euro rose .0052 to 1.0916. The pound lost .0155 to to 1.4256. The yen gained 1.12 to 116.94.
CARTEL CAPITULATION WATCH
From The King Report today on how today’s turmoil kicked in…
Friday’s global stock market debacle commenced during early Asian trading when China slightly devalued the yuan after four days of minimal yuan appreciation. This turned SPH from +4.00 to -6.00.
The rout began after BoJ Governor Kuroda dropped a few rhetorical bombs. Kuroda asserted that there was no need for further QQE and it has become more destructive than constructive.
Other Japanese officials have expressed this view for the past month or two, but few people wanted to believe it.
Kuroda’s other pronouncement was even more meaningful. The BoJ chief opined that Japan’s GDP potential growth was 0.5% or less. This is a reluctant admission that Japan’s horrid demographics is and will continue to limit economic growth – and there is nothing QQE can do to change it.
BOJ’s Kuroda says no plan to ease policy now
“I don’t have plans for further monetary easing at the moment. But we’re ready to adjust policy without hesitation if there is any change in the broad price trend,” he added…
After making a low of 15,842, the DOW rallied somewhat to finish down 391 to 15,988. The DOG came back from a 4420 low to end at 4488.
There will be Nervous Nellies everywhere worrying about the potential of a Black Monday, which would actually be a Black Tuesday with our markets closed on Monday.
Dave from Denver:
U.S. Economic Collapse Becoming More Evident
It’s days like today that will keep the muppets invested as we keep going down. – Jim Quinn of The Burning Platform in reference to Thursday’s stock market moon-shot
Well, I was wrong. I was predicting that the Census Bureau would engineer a miraculously positive retail sales report for December. As it turns out, the CB is admitting to a .1% drop in retail sales for the month. The question begs, then, just how bad were the real numbers? They also are purporting that November retail sales rose .4% instead of the .2% originally reported. Unfortunately for the Government, all of the privately produced retail sales metrics during November showed large declines in retail sales during the month. No, Virginia, the impressive percentage gains in online sales do no offset the decline in brick/mortar sales – online sales activity is about 7% of total retail sales. The Consumer is tapped out which means the U.S. economy is tapped out. But we should blame China, right?
In addition, the NY Fed general business conditions index registered a stunning collapse toUntitled1 -19.5 (vs. -4 expected). This is the lowest reading on this index since the Great Financial Crisis Collapse in 2008/2009. This graph shows both the Philly Fed and NY Fed economic activity index readings. Does this at all look like the economy that Obama told us the other night is doing fine?
NY Fed President Bill Dudley was out today announcing that negative interest rates would be considered if the economy continues to slide. Negative interest rates are another form of QE. QE is a politically/socially correct term for money printing. “Money printing” is the code for “BAIL OUT THE BANK AGAIN.”
The price of oil is collapsing. I predicted in the fall of 2014 that the price of oil would hit the $20’s. The price of oil is collapsing because collapsing economic activity globally, especially in the United States, is causing a collapse in demand. For get “Dr. Copper.” The real barometer of economic health is oil. Copper is used in a lot of manufacturing applications, but oil/energy is used to mine and refine copper and to manufacture and deliver copper-based products. Oil is the root indicator of economic activity. Oil is the real “Dr. Copper.” Everything else is a derivative of oil. Think about that for a moment…
U.S. economic news:
08:30 Dec US Retail Sales (0.1%) vs. consensus +0.1%; Dec ex-Autos (0.1%) vs. +0.3%
Nov Retail Sales revised to +0.4% from +0.2%
Nov ex-Autos revised to +0.3% from +0.4%
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U.S. Retail Sales Fell 0.1% in December Consumers spent less on general merchandise, clothing and accessories, groceries and gasoline
Click here for story.
08:31 Dec US PPI (0.2%) vs. consensus (0.1%); Dec ex- Food & Energy +0.1% vs. +0.1%
Nov PPI unrevised from +0.3%
Nov ex-Food & Energy unrevised from +0.3%
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US producer prices fall in December on declining energy costs
U.S. producer prices fell in December as energy prices dropped sharply, a trend that could temper expectations that inflation will rise this year toward the Federal Reserve’s target.
The Labor Department said on Friday its producer price index slipped 0.2 percent after increasing 0.3 percent in November.
In the 12 months through December, the PPI declined 1.0 percent after falling 1.1 percent in November. December marked the 11th straight 12-month decrease in the index.
Producer prices fell 1.0 percent in 2015, the weakest since the series started in 2010, after rising 0.9 percent in 2014. Economists had forecast the PPI falling 0.2 percent last month and declining 1.0 percent from a year ago.
Coming on the heels of a report on Thursday showing a steep drop in import prices in December, weak producer prices suggest that an anticipated rise in inflation will probably be insufficient to breach the Fed’s 2 percent target.
Inflation, which has been tamed by a strong dollar, tepid wage growth and cheaper oil, is expected to rise this year as 2015’s weak figures fall out of the calculation. However, persistently low readings could limit the boost from the favorable so-called base effects.
The inflation outlook will likely determine the timing of further interest rate increases after the Fed last month raised its key overnight lending rate by 25 basis points to between 0.25 and 0.50 percent, the first rate hike in nearly a decade.
Last month, the cost of services edged up 0.1 percent after November’s 0.5 percent increase. Energy prices fell 3.4 percent after dropping 0.6 percent in November. Wholesale food prices fell 1.3 percent after gaining 0.3 percent the prior month.
Goods prices fell 0.7 percent, declining for a sixth straight month.
A key measure of underlying producer price pressures that excludes food, energy and trade services rose 0.2 percent last month after edging up 0.1 percent in November.
The so-called core PPI was up 0.3 percent in the 12 months through December
08:30 Jan US Empire Manufacturing (19.4) vs. consensus (3.0)
Dec reading was revised to (6.2) from (4.6)
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US empire manufacturing crashes to seven- year low of -19.4:
Manufacturing in the state of New York contracted sharply in January according to the Empire manufacturing report, which plummeted to -19.4 from -6.2 in December and -4 expected. This is the lowest reading since 2009 and is driven by a collapse in new orders to -23.5 from -6.2 while shipments also contracted a lot (-14.4 vs. 4.6 prior).
In other news, US retail sales inched 0.1% m/m lower in December as expected, but November was revised up to 0.4% from 0.2%. However, the core retail sales category fell 0.3% vs. an expected gain of 0.3%. This category enters into GDP calculations.
Lastly, PPI dropped 0.2% m/m (-1% y/y) expected with core PPI up 0.1% (+0.3% y/y).
9:15 Dec US Industrial Production (0.4%) vs. consensus (0.2%); Dec Capacity Utilization 76.5% vs. 76.9%
Nov Industrial Production revised to (0.9%) from (0.6%)
Nov Capacity Utilization revised to 76.9% from 77.0%
* * * * *
US Industrial Production Declined Again in December
WASHINGTON — Jan 15, 2016, 9:16 AM ET
U.S. industrial production dropped for the third straight month in December as utilities reduced output amid unusually warm weather and energy companies cut back in the face of falling oil prices.
The Federal Reserve says industrial production, which includes manufacturing, mining and utilities, contracted 0.4 percent after retreating a revised 0.9 percent the previous month. The November decline was the biggest drop since May 2009.
Full story, click here.
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18:54 Expected probability of US recession highest since 2013 – Bloomberg
A Bloomberg poll showed the median probability of a US recession in the next 12 months rose to 19% to mark the highest level since February 2013 and follows three straight months at 15%.
A median of 36% see a recession occurring in 2018, unchanged from the previous two months.
Respondents see the Chinese economy translating into a drag of an average 0.1%-pt on US growth this year, with the average US growth forecast at 2.4%.
Analysts estimate China growth of 6.5% in 2016, according to the survey.
http://www.bloomberg.com/news/articles/2016-01- 14/return-of-the-naysayers-u-s-recession-odds-highest- since- 13
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9:05 NY Fed President Dudley worried inflation expectations have become unanchored to the downside
Dudley (voting member) notes in his prepared remarks to the Economic Leadership Forum, Somerset, New Jersey”
“With respect to the risks to the inflation outlook, the most concerning is the possibility that inflation expectations become unanchored to the downside… If inflation expectations become unanchored to the downside, it would become much more difficult to push inflation back up to the central bank’s objective.”
Dudley is the latest FOMC member to voice concerns over inflation expectations.
https://www.newyorkfed.org/newsevents/speeches/2016/du d16 0115
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Here It Comes: New York Fed President Says “If Economy Weakens Further, Would Consider Negative Rates”
Tyler Durden on 01/15/2016 09:43 -0500
- DUDLEY: IF ECONOMY WEAKENED, WOULD CONSIDER NEGATIVE RATES
After today’s atrocious, recessionary data, one can be certain that the Fed is furiously considering negative rates.
Full story: Click here.
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Obama’s State of Delusion, FBI Widens Hillary Email Probe, Iran Detains US Sailors
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Fed Starts To Walk Back Its Rate Hike. Next Step: More QE, Bigger Ex
|Published : January 15th, 2016|
That didn’t take long. A month after the Fed’s dreaded quarter-point interest rate hike, the markets tank and out come the talking heads to promise that whatever is bothering traders, Daddy will make it right.
Falling Inflation Expectations Could Mean Policy Rethink: Fed’s Bullard
(Reuters) – The continued rout on global oil markets has caused a “worrisome” drop in U.S. inflation expectations that may make further rate hikes hard to justify, St. Louis Federal Reserve President James Bullard said on Thursday.
Since the dramatic fall in oil began in 2014 Fed officials have insisted the impact on U.S. price levels would be temporary, bottoming out at some point and allowing inflation to rise to the Fed’s 2 percent target.
Bullard said he has so far been willing to look beyond a slip in expectations as likely passing. But he is now worried the plunge in oil has unmoored inflation expectations as well, a fact that would make it more difficult for the Fed to lift inflation to its 2 percent target and could force officials to rethink the four quarter-point rate hikes expected this year.
“We are 18 months into this and I am starting to wonder if my story is the right one,” Bullard said. “For me inflation expectations are a key factor and if they continue to decline I would put increasing weight on that.”
He said he still thinks that continued strong job creation would “trump” weak inflation and a slowdown in the growth of gross domestic product. The outlook for four rate hikes still seems “about right,” Bullard said.
But, coming from a Fed member who argued for an earlier rate hike and who is considered to be on the hawkish end of the spectrum, Bullard’s comments reflect the depth of concern at the Fed that it may struggle to meet its inflation goal given the state of the global economy.
To sum up, if the world stays the way it currently is, interest rates will remain zero-ish. But since the world has gotten the way it is with rates at this level, just keeping them here doesn’t seem like much of a fix. So when today’s temporary post-Bullard pop fades and the global melt-down resumes, the response will be as follows:
- Intimate that the Fed’s balance sheet has contracted enough and maybe it’s time for it to stabilize (translation: a new but modest round of QE).
- When that fails, promise to expand the existing QE program by an amount calculated (via focus groups of hedge fund managers?) to turn the market’s frown upside down.
- When that fails, begin a new experiment with a catchy name like “QE for the people” or “debt jubilee” or NIRP, featuring the helicopter money that Ben Bernanke long ago promised to use in case of full-blown deflation — along with a nice selection of capital controls to keep unruly savers, investors and other enemies of society in line.
At which point we’ll be so deeply into uncharted territory that prediction becomes pointless, except as a form of entertainment.
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Equities Tank, Dollar Down, Gold Up
Today (Friday) has seen some disturbing movements in the general equities sector with markets – led by China, which has moved into bear market territory leading the way. Will the other markets follow – they are certainly heading in that direction. Investors may have breathed a sigh of relief on Thursday when all the American indices opened lower, but then made good gains in positive territory, only to see all those gains wiped out and much morw in Friday’s trade. The Dow had fallen down below 16,000 – 3% down on the day – (it was over 18,000 only as recently as early December) while the S&P 500 had fallen to below 1,870, also down 3%, while the NASDAQ had fallen over 3.8% to below 4450. The markets are volatile and they may recover some but the trend has to be worrying – particularly those who have relied on a fed-fuelled equity boom which at one time was perhaps looking unending to the unwary. The two weeks of the year to date have certainly provided something of a reality check.
Click here for full story.
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Posted by Bron Suchecki
Three years ago tomorrow (16 January 2013), Deutsche Bundesbank announced that they would be repatriating 300 tonnes of gold from New York and 374 tonnes from Paris by 2020, which was a revision of their October 2012 promise they would transfer 150 tonnes from New York by 2015. So how have they progressed and are they meeting their schedule?
In January last year I did an analysis of the state of the German repatriation. At that time Deutsche Bundesbank said they had “transferred 120 tonnes of gold to Frankfurt am Main from storage locations abroad: 35 tonnes from Paris and 85 tonnes from New York”, which, when added to the 32t and 5t (respectively) transferred in 2013 means they had transferred 157 tonnes in total by December 2014…
Gold Bullion Retains “Key Role Of A Major Diversifier” – Dr Gurdgiev
By Mark O’Byrne January 15, 2016
– 2015 and start 2016 “worrying” for markets
– Gold’s long term performance strong in all currencies (see table)
– “Improved performance in market for gold coins”
– “Demand for U.S. Mint issued gold coins rose 45.6% y/y in weight terms”
– “2015 the third busiest year over the last ten years”
– Gold has key role of a major diversifier in portfolios
2015 was a troubling year for the financial markets. Across currencies, commodities, equities and fixed income, full year performance was lacklustre in terms of aggregate returns and worrying in terms of risk metrics. Market volatility at the outset of 2016 suggests we are likely to see more volatility in 2016.
|GLOBAL CURRENCIES||1 YEAR||3 YEAR||5 YEAR||10 YEAR|
|South African rand||+15.8||+9.7||+68.0||+392.9|
|Gold’s Performance in 15 Currencies Over Long Term
Changes in Gold Spot Prices (Percent)
Source: True Economics and GoldCore
In contrast, gold performed relatively well, compared to other commodities, coming out of 2015 with negative returns more mild than those for silver, wheat, copper, and oil (both Brent and WTI). About the only major commodity that outperformed gold in 2015 was corn, with price downside in corn controlled by poor supply due to inclement environmental factors.
In dollar terms, gold was down 10.4% y/y through December 31, 2015, with last month decline of 0.3% m/m being comparable to the performance of the Barclays US Aggregate Bond Index. This ranked gold in dollar terms as 5th worst performing asset class across 21 broader class indices in yearly terms and 7th best performing in terms of December 2015 performance.
In simple terms, gold played reasonably well its historical function as a hedge against emerging markets bonds, emerging markets equities and broad commodities indices, as well as oil.
In addition, gold continued to act as a hedge against key currencies. As the result, as shown in the table below, gold performed strongly in terms of currencies that experienced significant devaluations against the USD, JPY and Euro, while suffering against core advanced economies’ currencies, with exception of AUD and CAD.
Gold’s defensive positioning was further confirmed by its resilience to volatility. As chart above indicates, gold price volatility (based on 26 weeks rolling standard deviations) continued to decline over 2015 compared to previous years. This stands contrasted with rising volatility in a range of other asset markets, especially in fixed income, and with improving performance over the course of the year – as contrasted by the global equity markets that witnessed some 48 national stock markets indices falling into a bear market over the course of the year.
Through December 31, 2015, ex-US Emerging Markets bonds were down 5.5% y/y, repeating negative returns over 1, 3 and 5 year horizons, while ex-US corporate bonds were down 9.8%. High yield corporate bonds (ex-US) fell 9.3% while US high yield paper was down 5%. In equity markets, MSCI EAFE (index covering Advanced Economies equities ex-US) was down 0.8%, with negative returns accelerating in 4Q 2015, while Russell 3000 (broadly based US equity index) was up only 0.5% y/y, albeit down 2.1% in December compared to November. Similarly, S&P 500 managed to end the year on a weakly positive note, rising 1.4% y/y, while falling 1.6% m/m in December.
In line with other asset classes, Bloomberg Commodity index covering broad range of global commodities was down massive 24.7% y/y, with December monthly fall-off measuring 3.1%. The Index is now down 17.3% over the last 3 years and 13.5% over the last 5 years. While index components were generally in the red across all commodities, crude oil (WTI) was the general underperformer within the commodities class, falling 30.6% y/y in 2015 and down 26.1% over the 3 years through December 2015, as well as down 16.2% over the last 5 years.
The theme of defensive positioning of gold holdings in diversified portfolios was reinforced by improved performance in the markets for gold coins .
The above was driven primarily by robust demand in the advanced economies where gold coins serve as traditional store of wealth functions for longer term savers and as a vehicle for inter-generational wealth transfers by retail investors (see What Gold Coins Sales Tell Us ).
Chart below shows full year demand for American Eagle and Buffalo Gold coins. Over 2015, demand for U.S. Mint issued gold coins rose 45.6% y/y in weight terms, making 2015 the third busiest year over the last ten years. Average coin sold in 2015 contained 0.5 oz of gold, representing the lowest average since the series for Buffalo coins became available in 2006. This signals more prominent role in the market for U.S. Mint coins from smaller retail investors – a sign of continued interest by savers in Gold coins.
Hence, overall, gold prices evolution over 2015 closely tracked both global macroeconomic and markets trends, allowing gold to retain some of its core defensive and hedging properties vis-à-vis global currencies and fixed income, as well as oil and a range of other commodities.
Declining volatility trend, present from 2012 on is further reinforcing the argument that gold retains a key role of a major diversifier in well-structured retail investment and pension portfolios, despite continued pressures on spot prices.
Michael Ballanger Sends This Our Way:
Gold and Gold Miners Jan. 15th
Gold: $1,088.60 up $16.00
Silver: $13.89 up $.14
Zinc: $.6604 down $.0161
Copper: $1.9618 down $.0347
GDX: $13.08 down $.04
NUGT: $21.24 up $.26
GDXJ: $17.95 down $.15
JNUG: $24.96 down $.51
TK.V: $.11 unch’d
SRC.V: $.10 unch’d
The landscape has changed…
Remember the “BTFD” (“Buy the f**king dip!”) buzz-phrase from the 2009-2015 era when those fuzzy-cheeked, horn- rimmed-bespectacled, head-shaven “financial advisors” told us that every pullback was a “buying opportunity” because the Fed “has our backs”? I do and it made me want to throw a brick through the TV monitor. It infuriated me for two reasons: 1. Because these kids were so naïve that they actually believed that the Fed could and would prevent a market sell off; and 2. Because they were absolutely right. And from the chart below you can see clearly that Cramer has a big smile and a “thumbs up” all the way from S&P at 666 in April/09 to 2,134 in May of 2015 for a very good reason as well – he knew that the Fed was intervening in markets through its minions at the BoJ ot the ECB or the BoE all executing trades through 33 Liberty St. in NY otherwide known as the trained Rotweiller of all trading desks, the NY Fed.
However, somewhere in the middle of 2015 and perhaps just after the all-time high in May at S&P 2,134, the playing field suddenly had some very different chalklines drawn; the market started to trade sideways through the summer as Fed-talk started to prepare the markets for “lift- off” (of interest rates) which I wrote about extensively at the time and pointed to USD strength, crashing oil and CRB indexes, and massive Chinese dumping of everything into the big U.S. consumption engine. However, the first cannonball across the bow of Mr. Market came in August with the crash to 1,867 and since that time, we have had continuous jawboning over what caused the crash – was it China? Terrorism fears? Interest rate fears? Recession fears? Well it took until shortly after New Years for a former Fed governor to finally belly up to the bar and tell the patrons that “they” (the Fed, ECB, BoJ, BoE) juiced bonds, FOREX and STOCKS for six years trying to create a “wealth effect” and now acknowledge that it didn’t work (for anyone other than the 1% elite). And now it’s over, done, toast. Thanks to former Dallas Fed Governor Richard Fisher, he confirmed that the time for trading under the protection of the Greenspan/Bernanke/Yellen blanket of protection has ended. And as I have been chirping about for ages, when easy money ends, the bias remains down.
Yesterday we got the long-overdue, oversold bounce in the S&P but what was remarkable about it was arrival of the “Ooops I made a mistake!” comment of St. Louis Fed Governor James Bullard a half an hour into the trading session. Bullard was the clown whose comments back in October of 2014 triggered a massive reversal to the upside and he sure as hell tried it again yesterday. His off-the-cuff remark about how he thought that the Fed might have erred in raising rates in December based on the recent weak data immediately resulted in a Pavlovian effect of Bullard-esque proportions. However, the landscape has changed these days and overnight all of the gains were vapourized.
The gold miners were under attack yesterday once again as gold broke back below $1,080 with the HUI fully-reversed from last week’s dynamic action. I’d love to suggest that it was the Dollar-Yen or Chinese liquidation or USD strength but the reality is that the Commercials are simply not ready to let the Large Specs off the hook yet. This afternoon we will get yet another COT report and I doubt seriously whether the number gets worse as price was pretty much unchanged from Tuesday the 5th until the 12th but it did included that spike to the 100-dma around $1,112. You can bet that the Commercials sold that spike and that the Large Specs were covering but since we were $41 off the top from one week ago, I would think that the Commercials are ready to spring the trap any second and judging from today’s $16 rebound and challenge of the $1,100 level (again), that enormous Large Spec short position could get very nervous going into the U.S. long weekend. Now with the S&P off nearly 60 points at noon, the stock market is rapidly resembling a “MELTDOWN” and margin clerks are going to be putting pressure on a lot of accounts and that includes the hedge funds (Large Specs) that are short gold. Ironic as it may seem, this blow-off in stocks might be forcing short-covering rather than long liquidation. However, the miners are still stocks so even though gold bullion is higher, if this turns into an ’87-style crash, everything will get smoked which was my fear back in December and it is why I am overweight GLD calls versus the GDXJ/NUGT positions.
While I wish I had gone 100% short with the SPY March $180 puts instead of 25% short, I am going to cover them this afternoon on the (perhaps foolish) assumption that over the next three days the Fed, the U.S. Treasury including the Exchange Stabilization Fund, the BoE, BoJ, and the ECB will be burning up the airwaves trying to concoct a battle plan to save their precious stock market next week. My bet is that the Fed governors receive their scripts by Sunday night and that Tuesday through Friday we get massive jawboning of “moar QE” or “1-and-done” or “new stimulus” setting the drumroll for Janet Yellen to come out and shock everyone with an emergency rate cut and liquidity injection plan that will crush the USD and goose stocks AND GOLD by late next week. And that is just how cynical I have become after thirty-eight years in the “chair”…
The increase in the Commercial short position from last Tuesday’s close is no surprise because gold rallied $50 off the lows at $1,062 so it’s obvious that they sold the spike to $1,113. At 43,585 net shorts, it is still a far more bullish number than the 166,000 net short seen at $1,190 in mid-October.
So off we go for a three-day weekend in the U.S. giving the NY and Washington boys an extra day to figure out how they will save the stock markets. I will do my best to figure out how I am going to save my sanity given the volatility in these markets.
Wish me luck.
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The shares were blah. The XAU was down .10 to 41.42 and the HUI lost .54 to 106.70.
As many of you know, James Mc is a conservative CEO of a lumber company who knows the futures markets as well as anyone. He also was a speaker at GATA’s London conference at the Savoy Hotel in August of 2011.
When James speaks of $10,000 gold, it is paying attention time. In his article at The Toulouse-Lautrec Table Keith Barron speaks of hyperinflation in other assets. Think about what the veteran Art Cashin said today on CNBC about QE.
Those readers of this column know how a number of very sharp contributors have pointed out how our economic strength in the U.S. has been overstated by the establishment for some time … and that many of the economic numbers put out by our government are just bogus.
At the same time a number of us have continued to point out how the gold and silver markets have been rigged to camouflage the seriousness of our economic situation and the delicate state of our financial markets. The Gold Cartel and PPT are household names to all of us.
The PPT has its hands full. As omnipresent as they can be, the PPT needs the support of Wall Street to pull off their market support operations. If various Wall Street firms are getting besieged by client selling, it hampers greatly what they are able to do. They do not want to get buried in the process. Thus, they are forced to back off at times in order to preserve their own capital and trading fuel.
AND, with the price oil collapse and trillions of derivatives injected into our financial markets, there is no telling what sort Lehman Brothers type of event is lurking out there … one in which the insiders on Wall Street are very aware of. Perhaps there are a number of them.
Gold and silver are peanut markets by comparison. Thus, The Gold Cartel has an easier go of it by comparison. There really is no comparison EXCEPT they have an Achilles Heel … and that is the ability to secure enough physical supply to carry out their operations. When that dries up, they are done for.
We have no idea when that will be, but their aggressive nature these days suggests it may not be far off. We can see what they are doing and their price suppression Tipping Point could be reached at any time.
When that Tipping Point is finally reached, the prices of gold and silver will go bonkers as The Gold Cartel is completely overrun, swamped by soaring demand all over the world for the real deal, physical precious metals … as the prices of the precious metals do a mega catch up with other asset classes.
It will be beyond stunning. James Mc will most likely be taking a super bow someday for his prescient thinking some day down the road. And if that thinking is correct, all the aggravation we are dealing with at the moment will be so worth it and a distant memory.
GATA BE IN IT TO WIN IT!