Tuesday, July 16, 2019

2018 Should Be Bullish For The Precious Metals Sector

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by Dave Kranzler, Investment Research Dynamics:

Usually I’m loathe to stick out price targets on the markets, especially gold and silver, because of the undeniable market intervention of the Central Banks – market manipulation which is blatant to the point at which it is now denied only by card-carrying idiots.

Gold and silver had a sharp run-up in the last two weeks of 2017. However, the abrupt move in gold was accompanied by a rapid rise in the gold futures open interest on the Comex. The “commercial” – aka “the banks” – net short position in Comex gold futures has increased by 100,000 contracts (from 120 net short to 220k net short) in just four weeks through the most recent COT report. That’s a net paper gold short of 22 million ozs, or 623 tonnes of paper sold short. As of yesterday (Tues, Jan 16), the open interest in gold futures increased another 27,000 contracts, most of which, based on the trend in the COT positions,  can be attributed to a continued increase in bank short interest.

To put this paper gold short position in perspective, the Comex reports that its warehouses “safekeep” 9.2 million ounces of gold (this number is unaudited). That’s 11 million ounces less than the bank net short position. However, only 586k ozs of gold are reported to be “registered,” or available for delivery. The ratio of the paper gold short to deliverable gold is 37:1. In other words, each ounce of deliverable gold has been “hypothecated” and re-sold 37 times.

I guess if you are a card-carrying idiot, you have every right to deny that these numbers reflect the flagrant disregard of securities laws by the banks. But of course, the very people appointed to enforce these laws are from law firms that make millions defending the banks’ legal rights to ignore Rule of Law.

On the other hand,  offsetting the attempted control of the price of gold using derivatives, the eastern hemisphere demand for physical gold continues to be immense. It looks like, based on SGE gold withdrawals, China as a whole “consumed” over 2,000 tonnes of gold in 2017. India likely imported and smuggled into the country close to or more than 1,000 tonnes. Turkey imported 370 tonnes of gold in 2017. This exceeded the previous record in 2013 by over 22%. I would note that the size of Turkey’s demand was not expected. I don’t have Russia’s import numbers off the top of my head but Russia imported more in 2017 than has been typical.

The point here is that the eastern hemisphere’s demand for gold on an annualized basis is increasing as the price of gold increases. It’s important to know that, on a seasonal basis, imports into China and India tend to slow down in late January through February before picking up again. My hunch is that the paper gold manipulators are looking to hold down the price of gold as much as possible and wait for eastern demand to subside before attacking the price. 

Read More @ InvestmentResearchDynamics.com

HODL! The Crypto Sell-off Storm Will Pass… The Data Tells The REAL Story!

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by SGT, SGT Report.com:

I just read this cogent, insightful analysis from my friend Jean-Claude (it makes me feel well traveled just to say his name), and I wanted to share it with you.  It’s GOOD news for crypto HODL’ers, so here goes…

Loved the interview with Craig. Great job! He made a really good point regarding the futures market. Even if they could take the upper hand with the futures, “They just can’t roll them out fast enough to follow the massive buying interest that can quickly move to other coins”. It is not a feasible/sustainable strategy in my opinion. Time will tell if Clif is correct about them shooting themselves in the foot. 

Ok so take a look at this technical chart for bitcoin:

Bitcoin has completed this ABC re-tracement pattern MANY times before and there was no Futures involved at the time. I am not convinced the futures are having the effect they wanted – but i’m keeping a close eye on it. As with previous instances, the ABC retracement is a buying opportunity. Once, the C is completed, we will never see those prices again. Same was true at 5k, 3k, 1k, 800$ etc.  See chart below.

But the really big story in the above technical chart is the “Massive buy volume” candle at the bottom of the chart. As Craig would say, this is not the shoeshine boy and the taxi driver buying bitcoin. This is big money coming in buying hand over fist. This is happening while exchanges and local BTMs are deliberately bottlenecking the simpletons from getting in on the dips. Coinbase and many other exchanges have limit orders in place and will not let you buy your desired quantity. Local BTMs in Ottawa are charging 45% premiums tonight as i am writing this email!!!  See snap shot below.

So really, at 10k bitcoin, if you want to hold one in your wallet today it will still cost you 14 500$. That is the same thing that happens to silver when it flash crashes and the premiums skyrocket in the “real world” (not in the fake paper game world). You’ll remember it was impossible to buy physical silver at 12$….

Also, another thing to note is that Bitcoin, in just looking at the bitcoin/usd chart for the last 3 years, will show you that it has corrected every year between the 4th and 15th of January. This too, was happening when no futures markets were around. Follow this ling to see the charts. So again, i’m still keeping a close eye on the futures but I don’t think the have a major role to play in this current retracement. 

Knowing and understanding all this gives me the intestinal fortitude to not only HODL but to also “try” best they will let me to buy the dips and to lower my dollar cost average. 

Like Craig and you Sean, i also am a BIG fan of Silver and continue to hold physical as a hedge to my cryptos. 

Love you guys. Keep up the great work!

Jean-Claude

Stocks and Precious Metals Charts – US Dollar Index Falls To Lowest Level Since 2014

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from Jesse’s Cafe Americain:

“How removed from interactions with ordinary Americans did political elites have to be to plan the 2016 election as a return engagement between the two most famous political dynasties of late twentieth-century America: Bush versus Clinton? Yet the country’s wealthiest citizens committed hundreds of millions of dollars to secure just that outcome. Could they not foresee trouble? Apparently not…

The affluent and the secure persisted with old ways and old names in the face of the disillusionment and even the radicalization of the poorer two-thirds of American society. They invited a crisis. The only surprise was— how surprised they were when the invited crisis happened.

Donald Trump did not create the vulnerabilities he exploited. They awaited him. The irresponsibility of American elites, the arrogance of party leaders, the insularity of the wealthy: those and more were the resources Trump used on his way to power.”

David Frum, Trumpocracy

Stocks went on a tear this morning, with new highs being reached.  However, prices started falling back, in the face of some rather large bets being placed with a weighting to the short side.

Gold and silver managed to take another shot at overhead resistance.  They gave up the gains for the most part to finish largely unchanged.

The DX dollar index hit a low of 90.15, a price level not seen since 2014.

Have a pleasant evening.

Read More @ JesseCrossroadsCafe.com

Drastic Pension Cuts Will Hit California, Kentucky, Other States

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by Mish Shedlock, Mish Talk:

The CA Supreme Court will rule on pension cuts. Curiously, the court’s ruling will be irrelevant in case of bankruptcy.

Please consider California’s Brown Raises Prospect Of Pension Cuts In Downturn.

California Governor Jerry Brown said legal rulings may clear the way for making cuts to public pension benefits, which would go against long-standing assumptions and potentially provide financial relief to the state and its local governments.

Brown said he has a “hunch” the courts would “modify” the so-called California rule, which holds that benefits promised to public employees can’t be rolled back. The state’s Supreme Court is set to hear a case in which lower courts ruled that reductions to pensions are permissible if the payments remain “reasonable” for workers.

“There is more flexibility than there is currently assumed by those who discuss the California rule,” Brown said during a briefing on the budget in Sacramento. He said that in the next recession, the governor “will have the option of considering pension cutbacks for the first time.”

That would be a major shift in California, where municipal officials have long believed they couldn’t adjust the benefits even as they struggle to cover the cost. They have raised taxes and dipped into reserves to meet rising contributions. The California Public Employees’ Retirement System, the nation’s largest public pension, has about 68 percent of assets needed to cover its liabilities. For the fiscal year beginning in July, the state’s contribution to Calpers is double what it was in fiscal 2009.

“In the next downturn, when things look pretty dire, that would be one of the items on the chopping block,” Brown said.

 

Pension Cuts Are Coming

It’s refreshing to hear a politician admit the obvious: Pension cuts are coming.

However, whether or not the cuts are “reasonable” is irrelevant in cases of bankruptcy. Bankruptcy is under federal, not state law.

Municipal Bankruptcy State Laws

The above map is from Governing.Com.

Municipalities located in states that are green, generally have a right to declare bankruptcy. Those in purple don’t. There could be bankruptcy legislation at the national level that would supersede state constitutions and I am in favor of that.

Meanwhile, despite the enormous gains in the stock market in the past decade, CALPers is still only 68% funded, and that even assumes 7-8% returns into the future.

Read More @ MishTalk.com

Peak Gold? South Africa Mines Could Be Out of Gold in 39 Years

by Peter Schiff. SchiffGold:

South Africa may run out of gold within four decades, according to the Environmental Economic Accounts Compendium published by African Statistics Day.

Analysts say that at current production levels, South Africa has only 39 years of accessible gold reserves remaining. This is significant considering South Africa ranks as the number five gold producing country in the world, and could be another sign the world is approaching, or has reached “peak gold.”

Peak gold is the point where the amount of gold mined out of the earth will begin to shrink every year, rather than increase, as it has done pretty consistently since the 1970s. During the Denver Gold Forum last September, the World Gold Council chairman said he thinks the world may have already reached that point. And he’s not the only one. Franco-Nevada chairman Pierre Lassonde also expects a significant dip in gold production in the coming years. During an interview with the  German financial newspaper Finanz und Wirtschaft last fall, Lassonde said we’re seeing a significant slowdown in the number of large deposits being discovered.

The big question is how will the industry replace the massive gold mines that have produced large amounts of the yellow metal over the last 130 years or so?

The situation is particularly acute in South Africa.

As a Business Insider article pointed out, large goldfields such as South Africa’s Witwatersrand Basin are nearing the end of their life cycles. More than 40% of all the gold mined in human history came from the Witwatersrand Basin. But annual gold output in South Africa has plummetted. In 1970, South African mines produced 1,000 tons of gold. Since then, production has steadily dropped. The country only produced 167.1 tons in 2016. That represents an 83% drop from the 1970 peak.

The fact they have already dug out most of the easy to reach gold represents one of the biggest challenges facing South African miners. As mining analyst Kobus Neil told MoneyWeb, the deeper the mines go, the further the miner has to travel, which comes with additional costs and safety concerns.

As you dig deeper into the ground, you need a higher gold price to make those resources economical, if there isn’t a favorable gold price, those resources can’t be mined economically.”

Even with gold prices rising, mining companies are having a difficult time coving the higher cost of mining the harder to reach, lower quality deposits of gold left in the earth.

“We continue to try and manage costs in order to ensure the sustainability of the operations. Given the above-inflation increases in wages (approximately 50% of operating costs) and electricity prices (approximately 20% of operating costs), this has been a challenge,” Senior vice president at Sibanye-Stillwater James Wellsted told MoneyWeb.

Read More @ SchiffGold.com

Carnage In The Cryptoverse

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by Adam Taggart, Peak Prosperity:

Wow — an UGLY day for the cryptocurrency space.

Most likely triggered by the news in recent days of Chinese and South Korean regulators’ plans to enforce much stricter restraints over crypto trading and mining, all of the major coins have experienced painful losses over the course of the day, with many down over 20% in the last 24 hours:

Two hours ago, Bitcoin (BTC) hit an intra-day low of $10,275 — nearly 50% lower than it was four weeks ago.

Ripple, which Peak Prosperity has declared little more than a scam, traded briefly at $0.93 today — a far, far cry from its high of $3.71 just a mere twelve days ago. 

Holders of Bitconnect (BCC) just learned today that BCC is shuttering part of its platform, causing folks to wonder if there will be a rationale for continuing to hold the coin. Confused/distraught/angry BCC owners are frantically casting about on the Internet for answers, but so far, few reliable ones are shortcoming.

All of this volatility and panic is little surprise to those of us in the Peak Prosperity community who have been following this space closely of late. 

As we wrote about just two weeks ago, the price of virtually every crypto coin was displaying evidence of extreme bubble mania. We warned folks not to jump in at these prices, predicting a serious correction was highly likely to happen in the near future.

At the same time, our resident crypto expert Mark Rees publicly shared that he had been unloading his holdings given how nuts prices had become in such a short period of time.

He’s also on record predicting that 95% or more of the current coins will be gone (i.e., worth $0) in just a few years — Ripple and Bitconnect appear to be vying hard to be among the first to prove him right.

Those who listened to us/Mark now have the opportunity to buy coins at huge discounts today vs just a week or two ago. Of course, the carnage may have a lot further to fall, so we’re not calling a bottom or advising folks to jump in and buy wantonly at this time.

Our main advice to those who think there is long-term merit to the blockchain and related technologies (and we do), is to get educated.

Read More @ PeakProsperity.com

Will The Coming Big Oil Price Drop Cause The Next Stock Market Crash?

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by Steve St Angelo, SRSrocco:

The oil market price is setting up for one heck of a fall.  Now, could this large oil correction cause the next stock market crash?  Time will tell.  However, the indicators in the oil market are showing the largest net commercial short positions in history.  The current net commercial short positions in the oil market are even higher by 174,000 contracts than the level when the oil price fell from $105 in mid-2014 to a low of $30 at the beginning of 2016.

Furthermore, there was a previous trend in the 1980’s that suggests we are setting up for a MAJOR stock market crash.  I discuss the details of the current record net commercial short positions and the similar setup that took place during the 1980’s in my newest video, Will The Coming Big Oil Price Drop Cause The Next Stock Market Crash?

Here is one of the charts discussed in the video presentation above:

As we can see in this COT Report (Commitment Of Traders), the commercial net short positions jumped from 648,000 to 674,000 in the past week.  However, this chart only shows the change traders’ positions over one year.  To see how large the present commercial net short positions, please check out the short 12-minute video.

I believe the oil and stock markets are setting up for one large correction or even a market crash.  Thus, as the stock markets crack, we will likely see a huge move by retail investors into Gold ETF’s as well as precious metals investors tremendously increase their demand for physical gold and silver investment.

HOW TO SUPPORT THE SRSROCCO REPORT SITE:

My goal is to reach 500 PATRON SUPPORTERS.  Currently, the SRSrocco Report has 180 Patrons now!   Thank you very much for those who became new members and new Patrons of the SRSrocco Report site.

So please consider supporting my work on Patron by clicking the image below:

Read More @ SRSrocco.com

So That’s What Volatility Looks Like

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by John Rubino, Dollar Collapse:

2017 was literally the smoothest stretch of highway that US stocks have ever traveled. Rising almost every day and seldom falling hard, they made it virtually impossible for investors to lose money. Here’s the Dow Jones Industrial Average over the past two years. Note how unnaturally smooth the recent action was.

As a result, measures of volatility (i.e., fear) like the Vix fell to all-time lows. Note how the index’s wild swings of the past gradually give way to a steady decline that mirrors the steady ascent of share prices in the previous chart.

Rising prices and declining volatility convinced individual investors (sigh) that stocks will always behave this way. Retail money began pouring into both equities and call options. The following chart is compiled by CNN, and shows the put/call ratio (lower means more bullish) plunging to a record low, which the chart labels “Extreme Greed.”

But today something different happened. Stocks opened massively higher, riding the momentum of last week’s record close. The Dow pierced 26,000 for the first time ever, making all those tech stock positions and call options look like strokes of genius. Then those gains evaporated in a 282 point reversal, one of the biggest of the past few years.

Read More @ DollarCollapse.com

The Bubble That Could Break the World

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by James Rickards,  Daily Reckoning:

The key to bubble analysis is to look at what’s causing the bubble. If you get the hidden dynamics right, your ability to collect huge profits or avoid losses is greatly improved.

Based on data going back to the 1929 crash, this current bubble looks like a particular kind that can produce large, sudden losses for investors.

The market right now is especially susceptible to a sharp correction, or worse.

Before diving into the best way to play the current bubble dynamics to your advantage, let’s look at the evidence for whether a bubble exists in the first place…

My preferred metric is the Shiller Cyclically Adjusted PE Ratio or CAPE. This particular PE ratio was invented by Nobel Prize-winning economist Robert Shiller of Yale University.

CAPE has several design features that set it apart from the PE ratios touted on Wall Street. The first is that it uses a rolling ten-year earnings period. This smooths out fluctuations based on temporary psychological, geopolitical, and commodity-linked factors that should not bear on fundamental valuation.

The second feature is that it is backward-looking only. This eliminates the rosy scenario forward-looking earnings projections favored by Wall Street.

The third feature is that that relevant data is available back to 1870, which allows for robust historical comparisons.

The chart below shows the CAPE from 1870 to 2017. Two conclusions emerge immediately. The CAPE today is at the same level as in 1929 just before the crash that started the Great Depression. The second is that the CAPE is higher today than it was just before the Panic of 2008.

Neither data point is definitive proof of a bubble. CAPE was much higher in 2000 when the dot.com bubble burst. Neither data point means that the market will crash tomorrow.

But today’s CAPE ratio is 182% of the median ratio of the past 137-years.

Given the mean-reverting nature of stock prices, the ratio is sending up storm warnings even if we cannot be sure exactly where and when the hurricane will come ashore.

  This chart shows the Shiller Cyclically Adjusted PE Ratio (CAPE) from 1880-2017. Over this 137-year period, the mean ratio is 16.75, media ratio is 16.12, low is 4.78 (Dec 1920) and high is 44.19 (Dec 1999). Right now the 33.68 ratio is above the level of the Panic of 2008, and above the level of the market crash that started the Great Depression.
This chart shows the Shiller Cyclically Adjusted PE Ratio (CAPE) from 1880-2017. Over this 137-year period, the mean ratio is 16.75, media ratio is 16.12, low is 4.78 (Dec 1920) and high is 44.19 (Dec 1999). Right now the 33.68 ratio is above the level of the Panic of 2008, and above the level of the market crash that started the Great Depression.

With the likelihood of a bubble clear, we can now turn to bubble dynamics. The analysis begins with the fact that there are two distinct types of bubbles.

Some bubbles are driven by narrative, and others by cheap credit. Narrative bubbles and credit bubbles burst for different reasons at different times. The difference is critical in knowing what to look for when you time bubbles, and for understanding who gets hurt when they burst.

A narrative-driven bubble is based on a story, or new paradigm, that justifies abandoning traditional valuation metrics. The most famous case of a narrative bubble is the late 1960s, early 1970s “Nifty Fifty” list of fifty stocks that were considered high growth with nowhere to go but up.

The Nifty Fifty were often referred to as “one decision” stocks because you would just buy them and never sell. No further thought was required. Of course, the Nifty Fifty crashed with the overall market in 1974 and remained in an eight-year bear market until a new bull market began in 1982.

The dot.com bubble of the late 1990s is another famous example of a narrative bubble. Investors bid up stock prices without regard to earnings, PE ratios, profits, discounted cash flow or healthy balance sheets.

All that mattered were “eyeballs,” “clicks,” and other superficial internet metrics. The dot.com bubble crashed and burned in 2000. The NASDAQ fell from over 5,000 to around 2,000, then took sixteen years to regain that lost ground before recently making new highs.

Of course, many dot.com companies did not recover their bubble valuations because they went bankrupt, never to be heard from again.

The credit-driven bubble has a different dynamic than a narrative-bubble. If professional investors and brokers can borrow money at 3%, invest in stocks earning 5%, and leverage 3-to-1, they can earn 6% returns on equity plus healthy capital gains that can boost the total return to 10% or higher. Even greater returns are possible using off-balance sheet derivatives.

Read More @ DailyReckoning.com