Saturday, February 29, 2020

Are You Ready For The Next Rally? – Craig Hemke

by Craig Hemke, Sprott Money:

Each of the last three years have begun with gold rallies of over 10%. The stage is set for another such move in 2018. Are you prepared?

Many folks have written about how the current selloff in gold and silver was predictable. Whether it was expected due to tax-loss selling, seasonality, CoT-washing or the expected FOMC rate hike, the majority of analysts were expecting price weakness in November and December and, this time, the majority was correct.

But if this current selloff was so easily predictable, then why can’t the coming rally to begin the year be just as foreseeable and certain?

Below is a weekly chart of Comex gold going back to this time in 2014. Note the bottoms found in December of each of the past three years and then be sure to note the January-February rallies in 2015, 2016 and 2017:

At TFMR we have an old adage that applies here: “When trading gold and silver, you must always be prepared to sell a little when things look rosiest and buy a little when things look the darkest”. I don’t think that anyone would argue that December 2017 feels like the darkest period in recent memory.

And this “darkness of sentiment” is reflected in the Relative Strength Indices for gold, silver and the shares. If you’re unfamiliar with this important technical indicator, you can read more about it here:https://www.fidelity.com/learning-center/trading-i…

Generally speaking, rallies exhaust and price begins to turn lower as the RSI exceeds 70. In selloffs, short-term capitulation is usually seen when the RSI drops below 30. For example, after 17 consecutive down days for Comex silver last spring, price turned and rallied 10% in under four weeks from an RSI extreme low of 18.

A look at the current charts only serves to reinforce the view that prices are oversold, near a bottom and ready for the usual late-December rebound and rally.

Read More @ SprottMoney.com

Long Term Patterns in Stocks, Gold and Crude

by Gary Christenson, Deviant Investor:

The green arrows are 10 years long. Peaks indicated are in 1987, 2007, and potentially 2017.

The pause in 1997 was not a top because the market rally extended into early 2000. The current peak in 2017 could also extend, but valuation and timing indicators show high risk.

When the monthly RSI (timing indicator at bottom of graph) exceeds 70, turns down, and prices fall below the red support line, a significant correction or crash is possible. Those crashes occurred in 1987, 2000, and 2008. The S&P is ready to make a similar correction or crash in 2017 or 2018. The RSI has reached its highest level in two decades.

The S&P 500 Index, DOW, NASDAQ, DAX and many other indices are excessively high, thanks to central bank “stimulus” and QE policies. The monthly chart of the S&P shows S&P prices are in a high risk danger zone.

Possible tops have occurred before, but instead of crashing, the market sometimes zoomed higher. Do you own due diligence.

Also, read “Hindenburg Omen Meets Titanic Syndrome.” However, if you want to believe the S&P is going higher, read “Stock Market Crash … Another Lie.”

The Gold Market and its 10 year pattern

 

The gold market has an approximate 10 year low to high pattern.

Gold: 2001 – 2011

The dashed green arrow shows that gold bottomed in April 2001 and peaked in August 2011, ten years later. Gold prices bottomed in late 2015 and could rally for many years.

Gold: 1970 – 1980 & 1982 – 1993

Gold sold for about $35 per ounce in 1970, although the market was controlled. In January 1980, ten years later, it sold for over $850. Gold prices crashed to a low in June 1982 and eleven years later they peaked in August 1993.

A ten year low to high pattern, beginning with the late 2015 low in gold prices, suggests a gold price high during the middle of the next decade.

The Crude Oil Market 1998 – 2008

Crude oil prices bottomed in 1998 at under $11.00 and rose to nearly $150 per barrel in 2008, ten years later.

Read More @ DeviantInvestor.com

Yellen Shrugs Off Bitcoin as “Full-Blown Financial Stability Risk.” In Other Words, No Fed Bailout when Prices “Fluctuate”

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by Wolf Richter, Wolf Street:

As long as banks are not exposed to bitcoin.

Bitcoin, after ludicrously dominating the financial media, even invaded the Federal Open Market Committee’s press conference on Wednesday. During the Q&A, Fed Chair Janet Yellen was asked about bitcoin by three different emissaries from major media operations.

Those weren’t questions about bitcoin itself but about the broader “cryptocurrency” mania – “cryptocurrency” in quotes because bitcoin doesn’t, as Yellen put it so elegantly, “constitute legal tender” – and the risk it might pose to “financial stability.”

This is code for a distinction: When “financial stability” is at risk, when the banking system is on the verge of collapse or when credit is freezing up or some such thing, the Fed will step in; if financial stability is not at risk, the Fed will let it go. Here’s what Yellen said:

“Bitcoin at this time plays a very small role in the payment system, it’s not a stable store of value, and it doesn’t constitute legal tender.

“It’s a highly speculative asset, and the Fed doesn’t really play any role, any regulatory role with respect to bitcoin, other than assuring that banking organizations that we do supervise are attentive that they are appropriately managing any interactions they have with participants in that market, and appropriately monitoring anti-money laundering Bank Secrecy Act responsibilities that they have.”

A few minutes later came the next salvo. In response to another participant’s question about the Fed’s coming up with its own cryptocurrency, Yellen made a distinction between “digital currency” and “cryptocurrency,” with central banks only looking at digital currencies.

“There might be a central banker or two that might go in that direction. But I really want to caution that this is not something that the Federal Reserve is seriously considering at this stage.”

“While we’re looking at research on this topic, there are, I think, to my mind, limited benefits from introducing it, a limited need for it, and some substantial concerns,” she said. “So I would doubt that the Federal Reserve would soon go in that direction.”

And then, at the very end of the press conference she got badgered again, ever so gently, about “bitcoin as a potential threat to financial stability” – again that term. Was the Fed ignoring the threats from bitcoin just like the Bernanke Fed had ignored the contagion from subprime mortgages before the Financial Crisis? “So are we underestimating the risk,” the question went.

Yellen:

“I certainly agree that it’s important for the Fed to attempt to understand emerging risks to financial stability, and to be looking not just in the banking system but outside it for developments that could pose financial risks, and we are doing that….

“When you ask about bitcoin, I still see the financial stability risks from it as limited.

Read More @ WolfStreet.com

Do You Know What Is In The Tax Bill That Congress Is About To Pass?

by Michael Snyder, The Economic Collapse Blog:

A conference committee has been merging the tax bills that were passed by the House of Representatives and the Senate, and even though we could still see some minor changes, it looks like the major parameters of the final bill have now been agreed upon.  The final bill will be known as the Tax Cuts and Jobs Act, and we are being told that it will be one of the largest tax cuts in U.S. history.  Unfortunately, the impact on our tax bills will be relatively minor, but at least it is a step in the right direction.  The following summary of the major provisions in the final bill comes from AOL

  • A less generous corporate rate cut: Republicans may cut the corporate rate to 21% from the current federal rate of 35%, instead of the 20% proposed in both the house and Senate bills. The new rate would start in 2018.
  • A lower top individual tax rate: The top individual bracket would drop to 37% instead of the 38.5% proposed in the Senate bill. It would still be down from the current 39.6%.
  • Keep the estate tax, but raise the threshold to qualify: Instead of phasing out the estate tax over time, like the House bill, the compromise bill would instead simply increase the threshold for an estate to qualify — from $5.6 million to around $11 million. That aligns with the Senate bill.
  • Repeal the corporate alternative minimum tax (AMT): The corporate AMT in the Senate bill was a sore spot for many companies because it would have negated the effects of many popular deductions and credits, like the research and development credit.

The reduction in the corporate tax rate is probably the most important provision in this tax overhaul package.  For decades, the United States has had a much higher corporate tax rate than much of the rest of the world, and this has given large corporations an incentive to locate operations elsewhere.  By making the corporate tax rate more competitive with everyone else around the globe, it is hoped that this will mean more good jobs for American workers.

This bill also reduces individual tax rates, but not by that much.  So you will notice a reduction in your tax bill, but don’t expect anything “game changing” in nature.

In addition, this bill will eliminate the Obamacare individual mandate.  This is something that should have been done back in January, and I am very happy that Congress is finally getting it done.

It is anticipated that both the House and the Senate will vote on the final version of this tax bill next week.

Sadly, it is not a slam dunk that this bill will actually get through the Senate.

Senator Bob Corker voted against the original Senate bill, and he may vote against this version too.

Ron Johnson of Wisconsin and Susan Collins of Maine have also expressed reservations about this bill, and it is unclear how they will vote at this point.

And let us not forget that Senator John McCain’s health is rapidly failing.  Hopefully he would be present for any vote, but there is no guarantee that will happen.

In the end, Republicans can only lose two votes in the Senate, and so this is going to come down to the wire.

But President Trump is quite optimistic that this bill will succeed, and he says that it will “breathe new life into the American economy”

“Our tax cuts will break down — and they’ll break it down fast — all forms of government and all forms of government barriers and breathe new life into the American economy,” Trump said.

“They will unleash the American people, they will tear down the constraints on discovery, innovation and creation, and they will restore the hopes and dreams of the American family. Millions of middle class families will win under our plan.”

Of course even if this bill passes, our tax code will still be a complete and utter nightmare.

The tax code will still be over two million words, and the regulations will still be more than seven million words.  Our system will still greatly favor those that can hire accountants and tax attorneys to find every conceivable loophole possible, and it will still be a tremendous burden on the middle class.

If I am elected to Congress, I am going to fight to completely abolish the IRS and the income tax.  As I travel around Idaho and speak to groups, many are extremely receptive to these proposals, but they wonder how we would fund the government without an income tax.

Well, the truth is that the individual income tax only accounts for about 46 percent of all federal revenue, so we could definitely eliminate the individual income tax but we would also have to dramatically reduce the size of the federal government at the same time.

And we have a historical precedent for what this would look like.

Between 1872 and 1913 there was no federal income tax, and it was the best period of economic growth in U.S. history.

Of course the Democrats are not just going to roll over and allow us to cut the size of the federal government in half, so in the short-term we can focus on some other solutions.  A flat tax or a fair tax would both be far superior to the system that we have today, and there are some very good proposals already out there that just need to be implemented.

Read More @ TheEconomicCollapseBlog.com

Fed’s Janet Yellen: Stock Market Bubble Not Seen as Major Risk Factor

by Pam Martens and Russ Martens, Wall St On Parade:

The outgoing Chair of the Federal Reserve, Janet Yellen, held her last press conference yesterday following the Federal Open Market Committee’s decision to hike the Feds Fund rate by one-quarter percentage point, bringing its target range to 1-1/4 to 1-1/2 percent.

Given the growing reports from market watchers that the stock market has entered the bubble stage and could pose a serious threat to the health of the economy should the bubble burst, CNBC’s Steve Liesman asked Yellen during the press conference if there are “concerns at the Fed about current market valuations.”

Yellen gave a response which may doom her from a respected place in history. She stated:

“So let me start Steve with the stock market generally. Of course the stock market has gone up a great deal this year and we have in recent months characterized the general level of asset valuations as elevated. What that reflects is simply the assessment that looking at price-earnings ratios and comparable metrics for other assets other than equities we see ratios that are in the high end of historical ranges. And so that’s worth pointing out.

“But economists are not great at knowing what appropriate valuations are. We don’t have a terrific record. And the fact that those valuations are high doesn’t mean that they’re necessarily overvalued.

“We are in a – I’ve mentioned this in my opening statement and we’ve talked about this repeatedly – likely a low interest rate environment, lower than we’ve had in past decades. If that turns out to be the case, that’s a factor that supports higher valuations.

“We’re enjoying solid economic growth with low inflation and the risks in the global economy look more balanced than they have in many years.

“So I think what we need to, and are trying to think through, is if there were an adjustment in asset valuations in the stock market, what impact would that have on the economy and would it provoke financial stability concerns.

“And, I think when we look at other indicators of financial stability risks, there’s nothing flashing red there or possibly even orange.

“We have a much more resilient, stronger banking system and we’re not seeing worrisome buildup in leverage or credit growth at excessive levels. So, this is something that the FOMC [Federal Open Market Committee] pays attention to, but if you ask me is this a significant factor shaping monetary policy now, while it’s on the list of risks it’s not a major factor.”

Yellen makes at least one unassailable admission in this statement: her economist predecessors at the Fed certainly “don’t have a terrific record” in calling out bubbles – Alan Greenspan being the worst offender.

After presiding over the worst subprime mortgage and derivatives bubble in history on the belief that Wall Street was fully capable of policing itself, former Fed Chair Alan Greenspan had this to say at a House Oversight Committee hearing on October 23, 2008 after his blunder had helped usher in the greatest financial collapse since the Great Depression:

“So the problem here is something which looked to be a very solid edifice. And, indeed, a critical pillar to market competition and free markets, did break down. And I think that, as I said, shocked me. I still do not fully understand why it happened and, obviously, to the extent that I figure out where it happened and why, I will change my views. If the facts change, I will change.”

In the same hearing, Henry Waxman, the Chair of the Committee, had no problem understanding “why it happened.” It was, plain and simple, regulatory capture. Waxman explained:

“In each case, corporate excess and greed enriched company executives at enormous cost to shareholders and our economy. In each case, these abuses could have been prevented if Federal regulators had paid more attention and intervened with responsible regulations…

“For too long, the prevailing attitude in Washington has been that the market always knows best. The Federal Reserve had the authority to stop the irresponsible lending practices that fueled the subprime mortgage market, but its long-time chairman, Alan Greenspan, rejected pleas that he intervene. The SEC had the authority to insist on tighter standards for credit rating agencies, but it did nothing, despite urging from Congress.

“The Treasury Department could have led the charge for responsible oversight of financial derivatives. Instead, it joined the opposition. The list of regulatory mistakes and misjudgments is long, and the cost to taxpayers and our economy is staggering.

Read More @ WallStOnParade.com

Nobel Laureate ‘Discovers’ Cause Of Opioid Crisis: Complete Economic Destruction Of The “White Working Class”

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from Zero Hedge:

For several decades now the American Midwest has suffered from unprecedented economic decay courtesy of a persistent outsourcing of manufacturing jobs in the automotive and steel industries, among others. As we’ve noted frequently, that economic decay has resulted in a devastating surge in opioid overdoses that claim the lives of 100s of people each year.

Of course, many attribute Trump’s staggering victories in states like Michigan, Wisconsin, Ohio and Pennsylvania to his efforts to tap into the frustration of the dispossessed Midwest masses by promising a rebirth of the manufacturing economy that once provided them a solid middle-class lifestyle.

That said, no economic crisis is truly “discovered” until an Ivy League, Nobel-prize-winning economist says it is.  As such, we present to you the intriguing findings of Nobel Laureate Angus Deaton who said he was “looking for something else” when he noticed a staggering increase in white mortality rates for people aged 50-54.  Per Market Watch:

That was the case with landmark research undertaken by Nobel Prize winning economist Angus Deaton. The Princeton economist, working with his wife Anne Case, stumbled on the fact that mortality rates were rising for working-age white Americans since 1999.

We were really looking for something else and then we discovered that, at least among people between 45-54, and even more between 50-54, a decline in mortality, particularly white mortality that had been established for about 100 years had actually stopped or even reversed itself. Whether it has reversed itself or not depends on a bit on your starting point and end point, but the century-long decline in mortality rates that had gone on since the beginning of the 20th century had just stopped and was starting to rise.

For mortality rates to rise instead of fall is extremely rare. It typically takes a war or epidemic for death rates to jump.

Of course, from there it wasn’t much of a stretch for Deaton and Case to ‘discover’ that these deaths are tied to “deaths of despair” from alcohol, suicide and opioids.

Then comes the far more difficult question of ‘why’ the mortality rates are surging for middle-aged, white men…something Deaton attributes to a bleak job market and stagnant wages…

As to the more difficult question of “why” these deaths are taking pace, Deaton hypothesized that they are tied to a destruction of a way of life for working class Americans that used to exist.

 

“I’ve been using the analogy of the plains Indians, they had had a life which you might have liked or might not have liked before Europeans came to America and that life was destroyed and was never put back together again. I think we’re seeing that for the American working class over the last 40 or 50 years,” he said in a recent speech.

 

So we trace this back sort of a long way, and if you look at birth cohorts it is like each successive birth cohort is doing worse. They are more susceptible to these deaths throughout life, and the deaths rise with age more rapidly for younger cohorts, so we’re attracted by this idea that there is a cumulative process going on which is steadily getting worse over time. And, you know, the destruction of the way of life of the white working class is maybe a good way of thinking about this.

 

One story is just that there has been this slow loss of the white working class life. There has been stagnation in wages for 50 years. If you don’t have a university degree, median wages for those people have actually been going down. So it is just like that model, whereby American capitalism really delivered to people who were not particularly well-educated, seems to be broken.

Of course, pretty much anyone with a grade school education who has lived in Detroit for an extended period of time could have told you everything that Deaton has apparently ‘discovered’…but it does sound very official coming from a Princeton economist.

Read More @ ZeroHedge.com