Thursday, June 30, 2016

Silver Surges To 21-Month Highs, Gold-Ratio Crashes

I've posted ad nauseum that silver is more volatile than gold.  When precious metals are in a bear market, gold prices drop, while silver prices drop even more.  When precious metals are in a bull market, gold prices rise, while silver prices rise even more.  Traders call silver's higher volatility as having a higher "beta."

I also follow the gold/silver ratio, which is simply the price of spot gold divided by the price of spot silver.  Historically, the ratio is around 15, as that is the approximate ratio of the respective metals in the ground--silver is 15 times more plentiful than gold in the earth's crust (irrespective of above-ground supplies for both).  Hence, the price of gold should be 15 times higher.  Recently, the gold/silver ratio has been hovering as high as 90, which means both gold and silver have been suffering through a brutal bear market, which normally means they are near their secular bottoms.  This should have been viewed as a tail wind, because as the ratio shrinks, that means silver prices are rising faster than gold prices.

Note that the ratio tends to overshoot both high and low.  For example, as the ratio drops toward 15, it most likely will drop below 15 on its way down.  That's extremely bullish for silver.  I calculated a gold price of $6300 and silver of $400 in this 2010 post here.

This is an understandable rationale, as both metals have been under-appreciated, and under-owned, especially by western institutions (they are certainly appreciated by Asian households).

As 2016 has unfolded, especially recently with Brexit, this exact scenario has materialized.  Gold has surged since the December 2015 lows, while silver has performed even better.

In conclusion, and for the math-challenged, if one believes the precious metals sector is in the early innings of a major advance (bull market), one wants to buy gold.  And one should buy even more silver.  Just make sure you have the stomach to ride out the roller coaster, because markets don't go up or down in a straight line.  Be confident you are on the right side of the trade, and continue to accumulate on the price dips.  As long as governments borrow and spend paper currencies they can never repay, you want to hold money that has no liability attached to it.

Report to Supporters: The British Woke UP — Can The Americans?

Imports Collapse At East Coast Ports

Imports are collapsing--just another side of an "improving economy".  Sarcasm intended.

Bill Clinton Holds 'Private' Meeting With Loretta Lynch As FBI Probes Hillary

Friday, June 24, 2016

Goldman Tells Clients To Start Buying Gold; Raises Price Target By $100

ALERT: Banks Had Largest Gold Short Positions In History Heading Into Brexit As “Leave” Vote Sent Gold Skyrocketing

Gold Surges $100 And Dow Futures Plunge 723 Points As Britain Votes To Leave EU

Italy's Northern League To Launch EU Referendum Campaign Next

And so it begins, as one domino falls after another in the euro zone.   The Euro experiment was doomed from the beginning.

A New Balance Of Power In The Gold Market

"Tired Of The Expense Of Living Here" - Californians Continue To Leave State In Droves

When, not if, this most recent tech bubble bursts, one-way moving vans will be in huge demand.

Art Cashin Just Warned Central Banks Desperately Trying To Avoid Global Meltdown As Brexit Earthquake Shakes The World

After Brexit Shocker There Is Trouble At The Comex And The Global Financial System Is On The Brink

Here's a big FU to the EU.  lol

Monday, June 20, 2016

Seventy-two killed resisting gun confiscation in Boston!
Samuel Adams, Paul Revere, and John Hancock, who have been identified as “ringleaders” of the extremist faction, remain at large.
And this fellow Americans, is how the American Revolution began, April 20, 1775.
On July 4th, 1776 these same extremists signed the Declaration of Independence, pledging to each other and their countrymen their lives, fortunes, and sacred honor. Many of them lost everything, including their families and their lives over the course of the next few years.
Lest we forget…

Saturday, June 18, 2016

The Shockingly Corrupt Oakland Police Department Destroyed In 16 Tweets

This Is What The Coming "Bond Shock" Will Look Like

The pertinent message is if bond yields rise 1%, the debt load in the US alone increases $2.4 trillion.  Globally, bond losses would be $8 trillion.

So despite raising rates being the right thing to prevent a bond shock and global market bubbles from melting down, the Fed and other central banks cannot afford to "normalize" yields back to 5-6%.

The Fed is trapped, and it's merely a waiting game for some black swan(2) to roil all markets.

Thursday, June 16, 2016

US Treasury Macroeconomic Report Everyone Should Read

Here's the quiz:  where did these words come from?  Gold bugs, anarchists, scare-mongers, preppers, chicken little bloggers, right-wing nuts?  Guess again.
Bold-face emphasis is mine.

The United States has never defaulted on its
obligations, and the U. S. dollar and Treasury
securities are at the center of the international
financial system. A default would be
unprecedented and has the potential to be
catastrophic: credit markets could freeze, the
value of the dollar could plummet, U.S.
interest rates could skyrocket
, the negative
spillovers could reverberate around the world,
and there might be a financial crisis and
recession that could echo the events of 2008
or worse.

If market
participants were to lose confidence in the
United States’ willingness to repay its debts,
the adverse effects seen in 2011 could
reappear, and even push up yields on Treasury
securities. Such a rise in Treasury yields
would also raise the cost of financing the
government’s debt and worsen the fiscal
position of the government.
In the event that a debt limit impasse were to
lead to a default, it could have a catastrophic
effect on not just financial markets but also
on job creation, consumer spending and
economic growth
—with many private-sector
analysts believing that it would lead to events
of the magnitude of late 2008 or worse, and
the result then was a recession more severe
than any seen since the Great Depression.
Considering the experience of countries
around that world that have defaulted on their
debt, not only might the economic
consequences of default be profound, those
consequences, including high interest rates,
reduced investment, higher debt payments,
and slow economic growth, could last for
more than a generation.

Here's your answer to who authored this report to Congress:  the US Treasury.  The report was summarily ignored by Congress.  Markets won't.

Wednesday, June 15, 2016

The EU Wants to Impose a Tax for Sharing Links on the Internet

NATO Begins Encirclement of Russia

Hussein didn't have weapons of mass destruction, and Assad wasn't on the brink of killing his own people with chemical weapons.

Russia's Putin is not the aggressor either.  NATO agreed a long time ago they could not encircle Russia.  It's exactly what the US and NATO have done.

Orlando Shooting — Paul Craig Roberts

Sunday, June 5, 2016

Marcus: We Couldn’t Start Home Depot Today

Despite rhetoric from both sides of the aisle, the US is already a socialist country.  The economy is suffering because of an over-regulating, over-taxing, over-reaching government.

Forget politics.  Forget right wing / left wing rhetoric.  Forget the conservative / liberal paradigm.  Let's all agree that Home Depot is a great American institution who played a major role in building up our real estate enterprise.  Today, the regulatory and business climate is so burdensome, that the founder of Home Depot said he couldn't have started Home Depot today.

Friday, June 3, 2016

312K Full-Time Jobs Were Lost In Last Two Months, Offset By 118K Part-Time Hires

At this rate, according to official government employment statistics, by the time we reach an unemployment rate of 0%, there will be 320 million Americans without jobs.  The calculation methodology is corrupt.

Friday Job Reports And Its Impact On Gold And Silver Prices

I like to report anomalies because they are sometimes more insightful than status quo trends.  In the past, the monthly Friday job reports were rose-colored, and thus falsely indicating economic growth.  This was a perfect event-driven storm to enable the precious metals "big shorts" to collusively and (illegally) artificially suppress paper gold futures exchanges, instigating a waterfall in gold and silver prices.

The false rationale would be "the economy is growing, so the Fed should start reversing 'zero interest rate policies' and raise interest rates.  This, would in turn, remove the appeal for precious metals since bonds would offer a higher yield.  And sure enough, about 80-90% of the time, government jobs reports on Friday of every month would induce a sharp decline in gold and silver prices approximately 10:30 am New York time on those Fridays.

The fact that this trade was so predictably profitable is a huge red flag that gold and silver markets are hugely manipulated, which the class action lawsuits are now confirming that these are no longer conspiracy theories, but conspiratorial fact.

The usual suspects were the bullion banks operating (surreptitiously as agents for central banks) in London and New York, and the prima facie evidence was the build up of huge short interest on the COMEX futures exchange, in anticipation of said price declines.

I would thus report to you--my friends and clients, to "buy the dip."  More recently, however, the anomalies would occur, where the opposite has occurred:  prices would spike up on jobs report Friday.  Today, that anomaly occurred again.

This may indicate a few points:
1) the big shorts, aka the paper gold and silver price manipulators, may be losing their grip, and the shortage in the (Asian) physical markets are starting to usurp the crooked paper markets.
2) related to point (1), the former big shorts may now be going long to cover their shorts, as they anticipate a growing scarcity in physical markets
3) the "hot money" hedge funds, which are typically "wrong-way Corrigans", are leaning the wrong way again, looking to secure 2016 profits and even going short--just when the precious metals sector is poised to climb again after a correction, which was preceded by the big rally in 2016.  They zig when markets are about to zag--and vice versa.

Cliff Notes version:  despite the normal zigzagging of precious metals, the bottom of December 2015 is in place, and the bullish trend is up, after a brutal 5 year washing out.  Precious metals look poised to continue their secular bull market, whether your time frame is since 2008, 2001, 1971, 1933, or since ancient Egyptian empires dating back 5000-6000 years.

Buying the dips is still a sound strategy, even if the entry points (i.e. jobs report Fridays) are less predictable.  The take away message is if/when the big shorts lose control, the prices of (physical) gold and silver are likely to be unleashed much higher, as they rise to their natural valuation against a sea of endless money printing and debt creation.

See attached charts on the prices of gold and silver this morning.