Friday, February 28, 2014

Is Larry Yun Intentionally Making A Joke Out Of The Bad Housing Data?

But the most brilliant propagandist technique will yield no success unless one fundamental principle is borne in mind constantly and with unflagging attention. It must confine itself to a few points and repeat them over and over. Here, as so often in this world, persistence is the first and most important requirement for success.  - Adolph Hitler, "Mein Kampf"

Seriously, is National Association of Realtors chief economist, Larry Yun, trying to make a joke out of using the "bad weather" excuse for poor housing market sales?

As I have shown repeatedly, the poor housing market sales results are a direct result, for many fundamental reasons, of the demand-side of the market falling away.  In fact, RealtyTrac just released a report yesterday that showed institutional investor purchases of homes fell to its lowest level in January since March 2012:  LINK  That has nothing to do with the weather in any part of the country.

However, I have provided links in previous articles that show that, on average across the country, the weather during January was about the same as it has been over the last 10 years.  In fact, in California it was warmer than normal. 

So why is Larry Yun insistent upon shoving the "bad weather" narrative down our throats every time the NAR releases a negative housing market report.  For instance, just today, the NAR released its Pending Home Sales index for January.  It actually showed a slight uptick for January from December but was below what was expected by analysts.  So what does Larry have to say:  "Ongoing disruptive weather patterns in much of the U.S. inhibited home shopping"  (LINK).

Well, let's cut to the chase.  What really happened according the NAR data?  For sake of simplicity, here's a graphic pictorial of the distribution of the NAR data for January from Zerohedge:

(click on graph to enlarge)

Now, from what we know about the weather patterns across the country, California/the West was warmer than normal, the Northeast and the South were about average with a few extreme bad weather days  and the Midwest was also about average with some unusually cold days sprinkled in.  

So how come the biggest drop in pending home sales occurred in the area where the weather was warmer than usual and the areas that might have been affected by the weather show gains for January?

The only conclusion I can draw is one of three possibilities:   1) Larry is tragically stupid;  2) Larry is a pathological liar; or 3)  Larry is making a joke out of the fact that the housing market is beginning to collapse.

Larry, if you happen to see this, please either leave a comment or respond with your explanation to my email as to why your statement about the weather is so obviously wrong.  I encourage everyone to send this blog post to the NAR and maybe they can issue an explanation other than putting out the above blueprint from "Mein Kampf."

The Silent Scream Of The Plunging $/Yuan: A Derivatives Bomb Detonated

Anyone who denies that the Fed is engaging in unprecedented intervention in all of the markets - especially the gold and silver markets - is guilty of either ignorance or willfully intentional denial.  But the Chinese can play the intervention game as well.  We are seeing that giant footprint of intervention in the dollar/yuan relationship, as the Chinese yuan has just experienced it biggest weekly plunge ever:

Briefly, this graph (edits in white/red are mine) shows the $/yuan relationship.  It plots the amount of Chinese yuan needed to buy one U.S. dollar. When the ratio declines, it means the yuan is increasing in value vs. the dollar.  As you can see, there has been a steady decline in the $/yuan ratio, which means that Chinese Government has been letting the yuan rise in value.  That is, until about a week ago.

What most market observers tend to overlook is that there are likely $10's of billions worth of OTC derivatives that have been issued by the big Too Big To Fail banks tied to the trading relationship between the $/yuan. In fact, Morgan Stanley estimates the amount to be at least $150 billion:  $/yuan Derivatives Bomb Detonated?.  They also show a table in that link which estimates possible losses to the banks if this is the case to be well in excess of $1 billion.  Morgan Stanley should know, it was one of the biggest beneficiaries of the 2008-2009 Bush/Obama bailout of Wall Street.  MS also has one of the highest net exposures as a percent of bank capital to derivatives accidents.

In my view, that spike up in the $/yuan you see in the chart above has probably triggered a massive derivatives "explosion" because typically, in their keen foresight and wisdom, the bank rocket scientists never account for the risk of a big move like the one above in a such a short period of time.  If they were to price in this possibility, the derivatives contracts upon which they make $10's of millions in selling profits would be too expensive and the banks would miss out on that easy income.   But hey, we haven't seen a move like that in the history of the $/yuan contract so why should the banks ever expect it to happen?  And the Fed and Government has their back if they're wrong.

Of course, this was same Nobel Prize winning wisdom that cause the Long Term Capital collapse and bailout (remember that one?) and that caused - more catastrophically - the 2008 collapse of the U.S. financial system (AIG/Goldman) and the subsequent joint Republican/Democrat 100% approved taxpayer bailout.

Many analysts are wondering why the Chinese Government, which has a tight control over the trading level of the $/yuan, has enabled the above spike up to occur.  If you think about the ramifications of what I just laid out above, it leads to one possibility (hint: think about the big blow that was just delivered to western bank balance sheets if I'm right about a behind the scenes derivatives accident having just occurred).

I see this as another big cruise missile just fired by China in the global currency war.  The first big missile being the massive accumulation of gold by the Chinese (as has been documented ad nauseum).  There's also another benefit to the Chinese.  Think about the massive size of China's dollar reserves.   The dollar has just become significantly more valuable vs. the yuan and so has the value of China's dollar reserves.  This gives China more buying power to buy gold using dollars.

One other point, and this is tied to China's ultimate goal:  to unload its massive hoard of dollar reserves while making as little noise about it as possible.  Last night, a few hours after the yuan dropped precipitously against the dollar, the US dollar index (the yuan is not part of the dollar index) plunged in cliff-dive fashion, losing 36 basis points in about 30 minutes.  While that may not sound significant, in currency trading terms that is considered to be a mini-crash.  Oh, it also dropped below key 80 line of support that has been drawn in the sand by the U.S Government, slicing through that level with ease.

I would suggest, and there's no way of telling without having access to the inside books - the books which contain the numbers for which the banks spend millions to make sure Congress helps the banks keep them hidden - that the Chinese have unloaded another truckload of dollars behind the all the smoke emanating from the holes created by the Chinese Government motivated $/yuan crash and the related derivatives explosions:

The greatest trick the devil ever pulled was convincing the world he didn't exist.

Thursday, February 27, 2014

The Deep State: Yes, Orwell's Vision Is Unfolding

Any America who doesn't watch this video clip from Moyers & Company (Bill Moyer) has no business voting.  Everyone who does watch it will understand why I have not voted since 1992.  There will be no hope for change for until the citizens of this country hold the Government accountable.
President Obama can liquidate American citizens without due processes, detain prisoners indefinitely without charge, conduct dragnet surveillance on the American people without judicial warrant and engage in unprecedented — at least since the McCarthy era — witch hunts against federal employees (the so-called “Insider Threat Program”). Within the United States, this power is characterized by massive displays of intimidating force by militarized federal, state and local law enforcement. Abroad, President Obama can start wars at will and engage in virtually any other activity whatsoever without so much as a by-your-leave from Congress, such as arranging the forced landing of a plane carrying a sovereign head of state over foreign territory.

Wednesday, February 26, 2014

The Government's New Home Sales Report For January: Either Fraud Or Incompetence

The Census Bureau released its new home sales report for January today.  It showed nearly a 10% increase in sales from December to January and an increase over January 2013.  The only problem with this report is that it has holes in the numbers that are wider than the Mariana Trench is deep.

To begin with, please keep in mind that the headline numbers reflect a seasonally adjusted annualized rate (SAAR).  This means that the numbers collected by the Census Bureau are fed into a statistical model that spits out a result and we have no idea whatsoever how the result was calculated.  This is common across all Government economic reports and results in a high degree of reporting errors and bias to the upside, especially when a rising trend is followed by declining trend, such as is the case with the current housing market.

Instead of looking at the SAAR, it's more useful for analyzing the data by looking at the unadjusted monthly data, which is included in the Govt report  - LINK - but never reported by the media or discussed by Wall Street analysts.  As I'll show, it is this aspect of the data that is an inconvenient truth and I suspect it will eventually be removed from the report, just like the Fed removed M3 from its reports.

If you look at the link, you'll see that in January a total of 34,000 homes were preliminarily estimated to have been "sold."  I say "sold" because the Census Bureau records a sale when a contract is signed - not when a home is delivered, escrow clears and title is transferred.  Currently most big homebuilders are reporting a 25% cancellation rate on homes "sold."  If we apply this rate to the 34k number, we get 26k (rounding up) as the actual number of homes that might eventually be delivered and constitute a real sale, or cash generating economic event.   If we annualize this number, we get an annualized sales rate based on January's contract signings + likely cancellations of 312,000.  Note that this varies significantly from the 468k SAAR reported by the Govt.

Even if I give the numbers the benefit of seasonality, there's no way a number which is based on January's contract signings and includes cancellations would come anywhere near 400k.  One more important point of note.  When a contract "sale" as reported by the Govt is cancelled, the Govt does not subtract this from previous "sales" reports.  From the Census Bureau site:  "The Census Bureau does not make adjustments to the new home sales figures to account for cancellations of sales contracts" (LINK).   You'll also note that, as I stated above, the Govt admits that when the market is declining this report and the methodology used overstates the results.  This is what is happening now.

A second source of fraud/incompetence is that the reported increase of sales for January is completely inconsistent with the mortgage purchase application data released weekly by the Mortgage Bankers Association.  Since the early fall of 2013, this report has been showing a decline almost every week.  Since 2014 began, it's been showing double digit year over year declines almost every week.  Now, we know from this data - (LINK) - that mortgages are used in close to 95% of all new home purchases.  January 2013 to January 2014 showed a double digit decline in mortgage purchase applications.  Same for December.  How is it possible that new home sales increased 10% from December to January and 2% from January this year from January 2013?

It has been suggested that perhaps investors started buying new homes to rent out.  While it is possible, that theory is entirely inconsistent with the rate of return model being used by these investors, who require the low cost basis of distressed homes to make their ROR models work.  New homes are significantly more expensive than a distressed home, or even non-distressed existing homes, and therefore it is highly improbable that investors are flocking to buy new homes.

Instead, it would appear that the Government report is seeded in fraud or incompetence.  One last point, we've have had the "bad weather" narrative shoved in our face ad nauseum with every economic report that is showing weakness during January.  However, you'll note that the Government is reporting that the northeast and the south - the two regions which were hit with several bad weather days in January - are both registering increase home "sales" for January over December.

How is it possible that consumers in both the northeast and south decided to stay home in January and not spend money on anything except a new home?  Are they buying these homes from and Ebay?  By the way, online sales tanked hard in January too.  The answer is:  fraudulent or incompetent reporting.

Tuesday, February 25, 2014

The BEST Way To Get Rich In America: Steal From The Taxpayers

If you want to get rich, don't bother inventing something to advance humanity, move to DC and go to work for a lobbying firm or Government contractor.

This is an interesting exposè of the 25 richest neighborhoods in America.  While many of the 'hoods that make the list are associated with America's former industrial wealth, three of the top five are bedroom communities of Washington, DC.

I have to say, this is outright embarrassing and tragic for this country:  Richesest 'Hoods in America

Having spent several months living in Georgetown in 2004, I can vividly recall that everywhere you went went within a 10-15 mile ring around Capitol Hill, the only thing you could "smell" was taxpayer largesse.  What a sad statement about this country...

Monday, February 24, 2014

R.I.P. Harold Ramis

Harold Ramis passed today.  Included in his epic body of a work as a writer, director, producer and actor is "Animal House," which in my view is the funniest movie ever made ("Trading Places" may share that spot for me).

"Animal House" ignited the re-birth and proliferation of frat house participation and culture on college campuses across the country, which had started to die out during the "counter-culture/social revolution" movement that swept the nation starting in the mid-1960's.

The 1970's are an important period of time for me not only because that was the period of my teen years, but also because - upon reflecting back - it was probably the last window of opportunity for the citizens and progressive politicians (Gary Hart and Tim Wirth, for instance) to save our system.

After the revelations of Watergate, there was a chance to burn the system down and rebuild it from the ground up and make the adjustments to the legal structure required to prevent the build-up of the systemic rot and decay which had accumulated over the previous 200 years.

But instead, Nixon was pardoned and the elites seized and began to implement the extreme power and control that accompanied the possession of the world's reserve currency in pure fiat form.  This enabled the business and political elites to hasten the erosion of The Bill of Rights and obliterate the check and balance system of power separation that was fundamental to our democracy. 

Notwithstanding the appalling failures of every post-Nixon President leading up to the present, currently we are stuck with a man who promised hope and change - to do his best to restore Rule of Law.   Instead, we have a President who has dedicated his first six years to advancing the despotic powers that have accumulated into the Executive Branch of Government and has shepherded our county further down the path of systemic destruction and totalitarianism.

"Animal House" is symbolic of both the rebellious spirit that had proliferated American culture during the 1970's but also of this country's transition into a system of pathological social order and behavioral control.

Gone forever is the "question authority" spirit upon which this country was founded.

R.I.P. Harold Ramis and R.I.P.  USA:

Friday, February 21, 2014

The Gold/Silver Ratio: Gold And Silver Are Going Higher

The price of gold and silver will both hit new highs in 2014. The price of gold goes north of $2,000, and silver will quickly go over $50. When it does, it will get a little crazy.  – Eric Sprott, Sprott Investment Management -
A reader the other day was inquiring about the gold/silver ratio (GSR). The GSR is an interesting metric that converts the price of gold and silver into the number of ounces of silver it would take to buy one ounce of gold.  Over the entire course of history, that I know of, the GSR has been as low as 8, which was the fixed ratio used by the Roman Empire for exchanging gold and silver.

Interestingly – at least to me – if you look at the GSR over the last 350 years, it held steady at around 15 until the middle/late 1800′s.  At that point in time it rose steadily as the gold standard was slowly eroded by United States.  President Lincoln was actually the first President to disconnect gold and silver as  the Constitutionally mandated currency when he allowed someone to use Government-issued bonds to settle a debt obligation (the action was later upheld by the Supreme Court under President Grant).

At any rate, to cut to the chase, since the Federal Reserve was founded, the GSR has ranged from 15 to 100.   The low-end of the range usually correlates with bull market tops in gold/silver and vice versa with the high-end.

Currently the GSR is 60 and I believe the recent movement in the GSR is signalling the possibility of a big move ahead for gold and an even bigger move for silver.  I have compiled my analysis in this article published by Seeking Alpha today:   The Gold/Silver Ratio: Forecasting A Big Move Higher For Silver

I don’t know if the next big move higher that I believe is coming will be the final stage of the precious metals bull market, but I do think that based on the extraordinary supply/demand fundamentals for gold that the next move will be big for gold and spectacular for silver.

Thursday, February 20, 2014

As I Suggested Would Happen - More Homes For Sale Now

Inventory rose year-over-year in 22 of the nation's 35 largest metro areas covered by Zillow, with the largest inventory gains coming in some of the areas that were hit hardest by the housing recession, including Las Vegas (up 42.8 percent), Phoenix (up 30.5 percent) and Sacramento (up 26 percent). These metros also experienced significant cooling in the pace of home value appreciation in January, as buyers had more homes to choose from and were less apt to engage in the kinds of bidding wars that helped drive prices up so quickly last year.

I have been suggesting that we would start to see a lot more homes for sale starting in January, as home buyers who are theoretically now even or "above water" on their mortgage after paying too much before the bubble popped look to sell and move on, with less debt.

I can say anecdotally that I'm seeing "for sale" signs pop up like weeds every day now, as I drive pretty much the same routes throughout central and south-central Denver regularly.  I'm also seeing more "coming soon" signs.   Back in 2007/8 when I noticed these, I assumed the was house not for sale yet.  It is, however, for sale but it is not officially listed.  The "coming soon" sign means the broker has an exclusive, albeit usually short term, selling agreement - a "hip pocket listing," as it's called.  The house is for sale but it's not listed in the MLS system and therefore does not show up in the National Association of Realtors "inventory" metric.  The latter of which actually lags the market by 2-3 months anyway.  

Let's say in any given market that maybe 5-10% of all homes sport the "coming soon" brand.  That means that at any given time the actual inventory of homes for sale is 5-10% higher than is being officially reported or being represented by your most helpful home salesman.   Just one more source of fraudulent data that has infected our entire system.

I suspect that anxious buyer demand for homes was "pulled forward" into 2013.  The anxiety stemming from the "low inventory" narrative, from the new FHA mortgage rules this year which make getting an FHA mortgage (20% of all mortgages) more restrictive/lower size limits and from fear of higher interest rates.   In other words, this rising inventory will be met by significantly reduced demand from both "organic" buyers and investment buyers.  As I pointed out in my articles over the last three months, we saw evidence of a decline in both buyer cohorts in the last quarter of 2013.

Look out below...

Wednesday, February 19, 2014

Housing: From The Trenches In Arizona

"I live in ground zero of the real estate bubble in Arizona and my wife is a real estate agent. She works with a flipper and none of their properties are moving, not even getting offers. With winter snowbirds here this is the strongest time of the year for real estate and nothing is moving. Her investors have been dumping their prices and are starting to panic. "Just get rid of it" is becoming the mantra. The MLS listings have been increasing every month for three months and sales are declining. I think its about to shit the bed again."  - from a comment posted on today's earlier post.

Housing Is In Big Trouble

A lie told often enough becomes truth  - Vladmir Lenin 

When you look at the quote - and the source of that quote - it's amazing how similar the political, banking and media machinery in this country has assimilated the characteristics of the old Russia that we were taught to despise in the 1970's U.S. educational system.  I guess time is a flat circle.  Everything ever done in this world will be done again, over and over. 

The big lie being told to the public right now is that the housing market is in a miraculous recovery,  that inventories are extremely tight and that now is the best time to "invest" in a new home.   Of course, if that were true, why are homebuilder insiders unloading their company shares in epic quantities?

January home sales in Southern California were their slowest in three years:  LINK   The "bad weather" lies do not work there because SoCal was warmer than normal in January.  How about the truth:  the housing market is back in its bear market trend.

The narrative that has been carefully spun around the housing fairy tale is full of lies.  Sure, the way the National Association of Realtors reports inventory makes it appear as if listings are low right now. Look around your area and make note of the number of "coming soon" signs you see.  They're all over Denver.  A couple homes in my immediate area have been "coming soon" since before Christmas.  Did you know that a "coming soon" home is actually on the market but not officially listed in the MLS.  That "coming soon" home is thus not counted in the NAR's inventory.  But it's for sale.

And the big banks have been withholding a large portion of homes they have foreclosed on over the past 4 years.  They can do this because the Fed's QE has injected $2.5 trillion in cash onto their balance sheets.  The homes will soon hit the market, as foreclosures are spiking up again.  If you scan through enough homebuilder 10-Q's, you'll see that homebuilder inventories have seriously ballooned over the last year. inventory is significantly higher than propaganda is reporting.  And if you read my series of articles on the housing market over the past 3-4 months, you'll see the real data showing sales falling at an accelerating rate month the month and that prices are quickly dropping.

We saw even more evidence that the housing market is starting to fall apart today.  Housing starts - which in and of itself is a dubious indicator of housing market vitality - once again spiked lower and was well below the expectations of Wall Street's "brain trust" aka snake oil salesmen.  And the weekly index of mortgage purchase application took another big tumble this week, falling to 19 year lows and down 17% year over year.  Mortgages, by the way, are the life blood of home sales. If applications to purchase homes are plummeting, so is true demand.

As I outline in this article published this morning, the housing market is in big trouble:  Look out below!

If you are thinking about buying a home because you think the time is right, wait for 6 months.  Not only will you have a huge selection of choices but prices will be significantly lower.  If you want to sell your house because you understand the nature of the big lie being told, get it listed now and price it to move.

Tuesday, February 18, 2014

The SH*T Is Starting To Hit The Fan

First, a little humor for the day.  The Hong Kong Gold Exchange is going to build a 1500 tonne vault in China:  LINK   The rumor in my office is that Janet Yellen has decided that because of all of the bad weather in New York this year, she is going to use that vault to move Germnay's 1500 tonnes into a more weather-friendly environment...

Homebuilder sentiment collapses the most on record in one month, mortgage applications drop to a 19yr low (reported last Wed).

Then there's this string of reports:

- the TIC report shows China reduced its U.S. Treasury holdings in December by the 2nd largest
  amount ever
- Student loans hit a record $1.08 trillion in December, delinquencies on this debt hit all time high
- social unrest in Venezuela, violence and deployment of military in Ukraine, bank runs in Thailand
- well-paid bankers, especially JPM bankers, dropping dead with no explanation

Reminds me of the "coup de gras" systemic collapse chapter in "Atlas Shrugged."  It's going to get ugly this year...

Friday, February 14, 2014

Gold's Message To The Market

Let’s put this into perspective.  When did anyone in the mainstream media say gold was a great investment?  What you are hearing is a huge bias not borne out by the facts.  - Robert Wiedemer, "100% Fake Recovery"  LINK

Gold has been the best performing asset since the Fed tapering began on December 18th, 2013.  Most analysts were, and many still are, calling for gold to hit $875 this year.  How they arrived at that conclusion is beyond rational comprehension, given that if gold stayed below $1200 for any length of time most gold mines would be shuttered.  Moreover, almost every bearish Wall Street analyst never even considers the enormous amount of gold being accumulated by China.  I don't understand how these people can call themselves professionals when they are ignoring two obviously fundamental variables affecting the price of gold.

As we know, belief without evidence is nothing but faith.  It would seem to me that Wall Street is exercising bad faith in their assessment of the gold market.

At any rate, the fact and evidence stands that gold has been outperforming everything since mid-December.  One reason for this is that the Fed and the bullion banks have been forced by the sheer size of the demand from Asia to "retreat" from the unprecedented manipulation of the price of gold over the last 2 years.  The reason for the "retreat" is to let the price of gold rise in an attempt to slow down the massive demand for physical gold.

But there are several fundamental reasons that investors now perceive gold to be undervalued, especially relative to the U.S. stock market.  First, there's no question now that the U.S. economy is rapidly slowing down.  Auto, retail and home sales are declining and it's becoming clear that the cold weather/dog ate my homework excuse is not cutting it.  Again, when you look at data available that Wall Street and CNBC conveniently overlook, it's pretty obvious that the majority of  Americans are cash strapped, have piled on new debt and are living from hand to mouth.  I doubt 99%'ers are going to be rushing out this year to buy a new Lennar home and a shiny BMW for the driveway.

Because of this, it is probable that Janet Yellen will have to reverse the taper and start printing even more money than the $65 billion/month being printed after the first two tapers.  Let's not forget, taper or not, the Fed is still printing at a rate of $780 billion per year.  In addition, assuming Stanley Fisher is confirmed as Yellen's partner in crime, we can expect to see them implement a negative Fed funds rate policy.  Most people are unaware of this, but Fisher is a huge academic proponent of negative interest rates as a means to try and stimulate economic growth (Israeli-born, he was an economics professor at the University of Chicago and at MIT before going on to try and destroy the world with his ideas).  Furthermore, Janet Yellen launched her bid to replace Bernanke with a speech in early 2012 advocating negative rates to stimulate employment.

For the record, negative interest rates are gold's rocket fuel.

Finally, I find it curious that very little attention has been paid to the fact that the Government is now operating until March 15, 2015 without any debt ceiling limit.  Quite frankly, there should be outrage from both the media and the public.  No one seemed to even notice.  But letting the Government go for a year without ANY spending restraints is the equivalent of letting a multi-convicted pedophile operate a daycare center that has a sleepover option for parents who travel a lot.

In my view, unlike most mainstream investors, the smart money buying gold did happen to take notice of the unlimited credit card that Congress just gave the Obama Government.  It actually became obvious last Friday to those few of us who do follow the news that affects our system that Boehner's House would pass a "clean" debt issuance extension.  Since last Friday gold is up $57, or 4.5%.  The GDXJ junior mining stock index is up 14%.  In comparison, the S&P 500 is up 2.6%.

Things are going to start to really unravel in our economic and political system this year.  As the underlying conditions deteriorate expect the Orwellian "things are getting better" lies to intensify.  Try to enjoy what you can, while you can because life will likely become a lot more difficult for most of us this year.

Thursday, February 13, 2014

China's Huge Gold Demand Opens The Gate For The Gold Bull

Based on analysis derived from physical gold delivery data on the Shanghai Gold Exchange - the world's biggest physical gold exchange - in January, a record amount of gold was imported and purchased/delivered in China last month:  Chinese Gold Demand At All-Time High

Because the Comex can't print up physical gold and deliver it the way it prints up Comex gold futures contracts, the Fed/bullion banks are having trouble right now containing the price of gold.  Rest assured, China will not buy Comex futures and wait for delivery OR leave its gold in U.S. vaults for safekeeping - just ask Germany how that has worked:  U.S. Defaults On German Gold Deliveries

I wrote an article reviewing the Chinese gold demand data and why it will override the blatant U.S. manipulation of the gold market and push gold significantly higher this year:  The Gold Bulls Are Starting To Run

When you factor in that the Indian Government may be forced politically to ease the gold import restrictions put in place last summer which severely limited the amount of gold India imported in the second half of the year, it makes my $2,000 price forecast for 2014 even more compelling.

The rest of the world outside of the zombified U.S. public is starting to understand the paper gold Ponzi scheme that the U.S. Fed/Govt has been operating for the better part of the last two decades in order to contain the price of gold,  to support the reserve currency status of the dollar and to prevent a higher price of gold from signalling to the market that U.S. monetary and fiscal policy has failed - badly.

Monday, February 10, 2014

Go Figure! Since "Tapering" Started In December, Gold Has Been Best Asset To Own

The only theory I can think of to explain this is that the smart money in the market is anticipating that the Fed will have to soon reverse itself and pump even more money into the banking system.

Although I was wrong that gold would fly when QE3 started - primarily due to the the Fed's price containment of gold (see today's earlier post) - I did say late last year that if the Fed did start to taper I would not be surprised to see gold start to chew threw the market obstacles being thrown at it by the Fed/bullion banks and move higher in anticipation of an eventual reversal of the taper.  Janet Yellen is just person for that task given her stance on interest rates and "deflation fighting."

source:  Zerohedge, with a few of my edits to clarify

A good friend/colleague called today wondering why the mining stocks were going nuts the past few days.  Again, given that mining stocks are leveraged to the price of gold, market theory explains that stocks move ahead of the growth in their underlying source of profit - gold/silver in this case.  I also averred that there's a massive short interest in mining stocks by hedge funds and that they are aggressively covering ahead of a possible upward explosion in the miners.

In fact, in the fund I manage, we had several holdings where were up double digits, with some of them outperforming the triple-leveraged mining stock ETFs:  AAU +14.5%, Wildcat Silver up 17.9%, Exeter Resources (XRA) up 13%  and ATAC Resources up 13.8%.   Some of our holdings have more than doubled since early December.

I have suggested to a few colleagues that properly selected junior miners could end up returning 20-30x your investment at these levels.   We've seen that occur in the past and now the big mining companies like Newmont and Goldcorp are starving to replace their reserves.    A couple of the ones mentioned above have monster reserves and will eventually be swallowed up by the bigs.

There's no rush like a gold rush...

Comex Gold Manipulation Is Getting More Blatant/Desperate - It Will Fail

Of course the gold and silver markets are manipulated. You have to be either blind or a Harvard Graduate with doctorate in Economics to ignore the fact.  The purpose of the manipulation is the same as the purpose of the French Revolutionaries in attacking gold when they were printing their “Assignats” paper money like crazy; to try to suppress the indicator which showed the destruction they were carrying out with unlimited printing of fiat money. Gold tells the Truth and so it is an enemy of those who wish to deceive their populations.   - Hugo Salinas Price, Mexican Billionaire and crusader for sound Government financial policy
Here's my latest article, co-authored with Dr. Paul Craig Roberts - detailing how the Fed/banks manipulate the price of gold using Comex paper gold futures as their conduit:  Market Manipulations Become More Desperate

The outright lies and absurd propaganda streaming from the Government, the Fed and Wall Street are now reminiscent of the old Soviet Politburo and Pravda during the Cold War days.  Remember that?  You have to wonder exactly just how badly the system is collapsing behind the Capitol Hill "curtain" given the extent to which those in charge of the financial system are doing everything they can to prevent the markets from freely determining gold's free market price...

Thursday, February 6, 2014

Just How Much Money IS Eric Holder Getting Paid Under The Table To Look The Other Way?

Many of you probably do not recognize the name, Eric Holder.  He's the Obama-appointed head of the Justice - or rather, "Justice" - Department.   He's the scoundrel who penned the Marc Rich pardon letter signed by Clinton on his way out of the White House for the last time (and on his way to Denise Rich's 5th Avenue apartment for his "fee" to sign the letter).  Marc Rich was the wealthy commodities trader who didn't think he should pay taxes so he fled to Switzerland to avoid enforcement of the law.  I guess Eric Holder didn't think so either.

Most of you do know that, despite a rapid acceleration in Wall Street criminality and fraud, the Eric Holder/Obama Justice Department has seen a precipitous drop in financial crime prosecutions compared to the Bush years.  Hard to believe this is the same presidential candidate who promised to clean up Wall Street and Capitol Hill.

This one may well take the gold medal for examples of just how corrupt system has become:

I guess instead of "hope and change," if Obama were running for a 3rd term his new marquee campaign slogan would be:  "Pay us to commit the crime and don't do any time."  I stand by my prediction in 2008 that Obama's presidency would go down in history as being even more despised by the public than his predecessor's.  Judging from his approval ratings my call is looking pretty solid.

Wednesday, February 5, 2014

January Auto Sales Did A "Step-Function" Decline

The distortion and perversion of the truth has reached new levels.  What's going on right now is right out of Animal Farm.  - The Golden Truth
 Winston worked in the RECORDS DEPARTMENT (a single branch of the Ministry of Truth) editing and writing for The Times. He dictated into a machine called a speakwrite. Winston would receive articles or news-items which for one reason or another it was thought necessary to alter, or, in Newspeak, rectify. If, for example, the Ministry of Plenty forecast a surplus, and in reality the result was grossly less, Winston's job was to change previous versions so the old version would agree with the new one.  "1984,"  George Orwell

Blame it on the weather!  January auto sales released on Monday showed a precipitous decline in auto sales in January compared to January 2013.  Of course the first words out of every analysts' mouth was "bad weather."

As it turns out; in order to seek the facts, I did some research on weather patterns across the country in January.  Looking at just the facts, the average daily temperature in January for the top 10 cities by population was about same as the historical average.  In fact, on the west coast (i.e. San Diego and L.A.) the weather was warmer than average.

Furthermore, just because there's a couple days of snow and cold weather in the northeast, that would not prevent someone who wants to buy a new car from waiting until a warmer day to shop ("aw gee, it's cold today and the roads are snowy so I'll wait til next month to buy a new car...").

If you look at the year over drop in car sales for December 2013/2012 and compare it to the year over drop for January 2014/2013, the decline was roughly 7x more for January than December.  December had bad its fair share of bad weather days as well.  Even if the weather affected sales a little, the huge relative decline for January reinforces my theme that the economy hit a wall in November and 2014 will see economic contraction.

You can read my brief article on car sales here:  January Auto Sales: Another Big Drop  Please note that January is one of the lowest seasonal months for car sales, but that's why the January 2014/2013 comparison is so significant - it washes away seasonality.

Just for the record, expect an insanely absurd jobs report on Friday.  It seems that the Government's attempt to cover up the truth varies inversely with the degree to which the U.S. economy is collapsing.

Monday, February 3, 2014

Bad Weather And The Economy: Wall Street's Version Of "The Dog Ate My Homework"

 We can ignore reality, but we cannot ignore the consequences of ignoring reality
         - Ayn Rand

I would be remiss if I didn't acknowledge my humiliation over Denver's thorough beating yesterday by the Seattle Seahawks.  My congrats to the team and its fans.  They outplayed the Broncos in every phase of the game.  It looked like the dog ate [coach] John Fox's homework on Seattle because he certainly can't blame Denver's demise on bad weather.

The economic data that's been released for December and January now appear to be confirming my view that the economy hit a wall in November.  As I suggested here:  Expect A Decline In Auto Sales Going Forward, auto sales would start to plummet this year.  Based on today's auto sales report for January, I may be on the right track.  Ford's sales were down 7.5%, GM down 12% and Chrysler was up 8%.  Note that Chrysler's sells the least number of cars of those three.  Toyota's sales dropped 7.2% and Volkswagon's fell 19%. 

The bad weather excuse just does not hold water.  What makes it even more absurd is the fact that private construction spending - i.e. housing and commercial real estate - increased a little in January.  Wall Street analysts and financial media reporters want me to believe that the same weather across the entire country that didn't prevent outdoor construction spending prevented people from looking for new cars?  Really?   Just for the record, I bought a new (used Subaru WRX) in January and I was test-driving in 20 degree weather right after a big snow storm. 

And what about the plummet in manufacturing?  The ISM manufacturing index registered its biggest miss of expectations on record for January and the new order index plummeted the most since 1980:  Bad Weather Inside?   Is Wall Street going to explain to us that leaky factor roofs and broken heating systems prevented factories from operating during bad weather days in January?  Well the Purchasing Managers manufacturing index also missed expectations and the sub-indices for new export orders and order backlogs slipped below 50, indicating a contraction.  Hmmm...did bad weather prevent purchasing managers from picking up their office phone and placing new orders?

The truth is that the consumer is done.  According to reports from insiders at Dell, they are getting ready to cut 15,000 from the workforce.  Several major retailers are chopping heads and closing stores.  JC Penny and Sears are fighting off bankruptcy.   The economy is in big trouble and Wall Street wants us to believe that bad weather is the culprit.  George Orwell is looking down on us from somewhere in the heavens with a giant grin on his face.