Wednesday, October 17, 2012

Look Out Below

"I'm Dave In Denver and I approve this blog post"

Please note:  I am completely politically atheistic with regard to who might have "won" last night's debate, as well as the outcome of the election.  Regardless of who you support, for whatever ridiculous reason, last night's debate was a god damn embarrassment to our country and a complete insult to the intelligence of those who understand the extent to which our country is in a state of collapse.

First off, I want to say that Candy Crowley is grotesquely overweight.  All I could think about during the healthcare part of the scuffle was that my tax dollars under both Obamacare and medicare will be used to subsidize all of the health-related physical ailments Crowley likely suffers and will suffer as a result of her obesity.  She is emblematic of what's wrong with our Government subsidized healthcare system and our society in general.  Put to the test of nature and Darwinian forces - and believe me, that world will eventually descend on our system - she would not survive.

I have to say that I was a bit disappointed in Obama's counter-punch tactics after the thorough beating he took in round 1.  I thought he might of come out ahead at the end, but if this were only a two-round fight, Romney would be the winner by decision.  I was really hoping to see a knock-out performance by either candidate.  Furthermore, I was a bit startled by the lack of grace exhibited by Romney at several points during the whole debate, including his near-dismissal of one of the questions so that he could circle back and get in his final words on the previous topic.  He should have moved on because at that point I'm sure most viewers had gotten up to freshen up their cocktails or check their text messages.  Frankly, Romney's behavior completely belied the type of religion-derived "spirituality" and grace to which he laid claim during the debate.

But on to the more interesting topic of the U.S. dollar.  Coincidentally, I have been invited as a guest on a new a.m. radio program out of Phoenix that discusses wealth preservation this Saturday at 4 p.m. eastern standard time.  The show is sponsored by All-Pro Gold and you can tune-in on this link:  All Pro Gold and click on the link in the middle of the left side of the website.  The topic will be the future of the Petro-Dollar and how it will affect your wealth.

I was looking at a chart of the U.S. dollar a couple days ago and I had not realized that, technically, the U.S. dollar looks vulnerable to a substantial sell-off.  Since the end of April 2011, the dollar staged a 7% move higher, which is a pretty big move in currency terms.  Not coincidentally, the move up in the dollar is directly correlated with the big correction in precious metals.  What surprised me when I glanced at the chart the other day was the trouble the dollar seemed to be having in recovering from the big drop it has taken since it started pricing in the expectation of more QE at the end of July:

(Click on chart to enlarge)

From a technical standpoint, as you can see from my markings on the above chart, the U.S. dollar is forming a "bearish rising wedge."  In fact, today the dollar is down another .5% down to 79.05, which is below the bottom boundary of the "wedge" that I drew yesterday.

The fundamental factors that are likely to drive the dollar a lot lower from here include  1) the inability of the Government to reduce spending, debt accumulation and the massive spending deficit  2) the deteriorating economy - I've addressed the difference between truth and media/political fiction in several recent posts 3) the continued implementation by China of strategic currency alliances with its largest trading partners which use the yuan for trade rather than the dollar 4) QE1, QE2, QE3/to infinity 5) the approaching "Fiscal Cliff" and the Government's inability to implement any kind of fiscal programs which would address the nature of this "cliff."

There are several other fundamental factors which will undermine the value of the U.S. dollar, but the above list is the most obvious and the easiest to understand.  I would like to point out that while both candidates last night boastfully presented their "unique" programs to address 1-5 above, neither of them could explain what they would do specifically to miraculously create 12 million jobs, lower taxes for everyone, increase military spending, improve Government entitlement programs and reduce both the Government debt load and the spending deficit.  When you look at this list of promises with no actual plan of action to deliver on those promises, you can understand why the U.S. dollar is in danger of taking a precipitous drop lower soon.


  1. Mexico Bans Large Cash Transactions…

    Think about this for a second. Five years in jail for using cash. Meanwhile, banksters and oligarchs rob trillions from the public throughout the world and as punishment they generally get promoted!
    Moving along, there is a much greater reason to mock Mexico today. It has been discovered that the country holds its gold in...yep, London! What does this mean for Mexico? It means they own no gold at all. Even if the gold bars exist in London, they probably have at least a hundred separate claims on them (South Korea may want to look into their gold).

  2. Root Boy Slim, famous musician and author of "Dare to be Fat" would sure enjoy twisting up a Twinkie with "Hostess" Candy. Here's a colorful link in support of your political atheism.

  3. At the end of your last paragraph you forgot to say, "Got Gold" and let's not forget its shiny sib silver!!!

  4. Geez tHere was quite the porker in the front row. One of his legs = 2 Candys

  5. Dave,
    I watched the first few minutes, when the young college student asked about his future prospects for a job.

    Neither candidate asked him about his major. Neither candidate asked him about his work ambition or his plans for after college. And neither candidate encouraged this young man, who represents the future of this country, and whose name they didn't know (because they didn't bother to hear it) by saying:

    "[Name], if you work hard and apply your education, if you're diligent and persistent and don't give up, there's NOTHING you can't achieve in this great nation of ours, because we are a nation that rewards hard work, diligence and perseverance in your personal life and in your professional career."

    A presidential candidate from 1953 could credibly make this statement, but today, neither can say this because it is no longer true. We reward failure, and we punish success.

    But they cannot admit this to themselves or to the people, of course.

    And that is when I turned the canned, rehearsed tired old theatrical pack of lies off - it was not worth my time to watch another minute of it.

  6. Welcome to Economics Voodoo!

    It was not long ago in fall 2010 that I was a senior congressional staffer financial economist at the Congressional Budget Office (CBO) when I was fired after 2 ½ months for writing about the damage from the banking and financial system collapse since fall 2008. The writings included ‘robo-signing’ foreclosures as symptomatic of deeper problems in the securitization of $7 trillion mortgage bonds that CBO denied was a problem and the condition of the nation’s banks.
    I was told that CBO should take the lead in treating foreclosure problems as “the kind of event of the moment where we should be adding skepticism, not just repeating the hype in the press” and my writing about it showed “poor judgment about what is important and what isn’t.” This came from my direct report, then-CBO assistant director and chief economist, currently MIT Professor of Finance Deborah Lucas who was called by the U.S. President in 2009 to serve in a leadership role at CBO. CBO Director Douglas Elmendorf, a Harvard Ph.D. economist, agreed that such writings lacked knowledge of economics and poor communication skills for not understanding what it meant to remove them.

    For those unfamiliar, CBO is a small federal agency that scores (produces cost estimates) Congress’s bills and can make or break them with its scoring. CBO’s panel of economic advisors includes Goldman Sachs, Morgan Stanley, former Federal Reserve economists, and distinguished economists from academia who are or were former scholars of the Federal Reserve.

  7. Hi Dave, what's your view on the recent housing data? The recent housing data seem surprisingly good.

    1. Most of the data is "seasonally" adjusted. I've addressed the "good" data issue in the my last couple of blog posts. Housing is getting ready to shit the bed again.

  8. Och-Ziff Calls Top Of "REO-To-Rental", And Distressed Housing Demand, With Exit Of Landlord Business

    The primary, if not only, reason there has been a brief spike in subsidized demand for housing in recent months, has been the GSE/FHFA endorsed REO-To-Rental plan, and associated securitization conduits, in which large asset managers have been encouraged to take advantage of government funded, risk-free financing (and entirely bypassing banks who have given up on loan origination due to legacy liability issues which have every bank tied up in litigation from now until Feddom come - just see today's Bank of America results) and purchase foreclosed properties in bulk, with the intention of converting them into rental properties. Needless to say, the subsidization of this wholesale purchasing of foreclosures, coupled with the ongoing "foreclosure stuffing" pursued by the big banks (as a reminder days to foreclose in California just hit a record 1,072 per RealtyTrac as banks simply refuse to clear housing inventory faster knowing full well withheld inventory is an additional clearing price subsidy) is the main reason why the punditry has been confused into believing there is a housing rebound. That this "rebound" is merely a subsidized demand pull phenomenon a la the "cash for clunkers" auto sales program is patently clear to most. Nonetheless what little confusion is left, is finally coming to an end, thanks to none other than one of the first entrants in the REO-To-Rental space, $31 billion hedge fund Och Ziff, which a year after entering the program with hopes of quick riches, is now looking to cash out.
    As Reuters reports, "Och-Ziff Capital Management Group LLC, the $31 billion hedge fund led by Daniel Och, recently told its investment partner, 643 Capital Management, that it wants to exit from the foreclosed homes business, said several people familiar with the matter." Why is Daniel Och calling it a day: "the New York-based hedge fund is looking to sell now because the returns it is generating from rental income are less than expected and it is looking to take advantage of a recent rebound in home prices in northern California." And so yet another myth unravels. Look for all the other piggybackers and late entrants to follow promptly in Och-Ziff's steps as the primary driver of distressed housing demand goes as easily as it came.

    Reuters explains how REO-to-Rental is coming to an end:

  9. Well what ever - we still follow the Dollar Index - lovely. I find it laughable that we still even mention it and give it credence with yen, sterling, euro, swiss franc being the relative to it.

    Basically what we get to, by now please, know that all that is irrelevant to where the precious metals will be pushed to. who ever it is, and I don't think it is always just the normal cohorts, can push it where ever they want to. even irrespective what this London Trader says of Kingworldnews fame. Everytime he comes out you are sure to get hit.

    And have you noticed everyone has a buddy now, or a trader close to the sceen - it's quite amusing - the latest is Franklin and his Trader R. So now Bill Murphy has these blokes, TFMetals, Kingworldnews, Frankling, Jim Willie etc. I think old Murphy is being used as baite and many others. Is this how it's going to be - nothing concrete but we have to rely and "hope" that the invisible hand will lead the way.

    I wouldn't want to go to war with half the people in the PM community - cause I know I would be stabbed in the back.

    We just have to have the faith that this is the bull and stay on it! Reading all this bullshit about precious metals is all waste of energy. Out of all the alternative media in this sphere there is not even a handful which you can trust.

    And once again the best is a trader who isn't married to this thing. All the others talk their book. Sprott, Embry included.

  10. I really did want to watch the debate but wouldn't you know it my sock drawer needed to be cleaned out. It's all about priorities

  11. Sales Soar 900% as China Makes Grab for Aussie Gold

    By Michael Salisbury and Sarah-Jane Tasker
    The Australian, Sydney
    Thursday, October 18, 2012

    Gold has soared past coal as Australia's second most valuable physical export to China, with sales up a whopping 900 per cent for the first eight months of the year, bringing in $4.1 billion.

    Chinese buyers are hoarding the precious metal amid a slowing economy, property-buying restrictions, and uncertain financial markets as its central bank increases its holdings.

    The unprecedented jump in gold sales, along with continued acceleration of export revenues for other commodities led by coal -- up 80 per cent to $4 billion -- caused total exports to China to rise by 10.7 per cent for the year to August, according to Australian Bureau of Statistics figures.

    Local accountant Lu Qing, 38, bought a 20kg gold bar, a necklace, and a pair of earrings. "Buying gold is a stable investment," she said. "You can expect to make a profit out of it, but if nothing dramatic happens you won't lose much.

    "If you put money in a bank your savings might be eroded with inflation or low interest rates -- bank fees are getting higher too. We spend an average of 5 per cent of our annual income on gold, which we keep at home."

  12. Greg Palast: “Mitt Romney’s Bailout Bonanza: How He Made Millions From The Rescue of Detroit”
    Investigative reporter Greg Palast reveals how Republican presidential nominee Mitt Romney made some $15 million on the auto bailout and that three of Romney’s top donors made more than $4 billion for their hedge funds from the bailout. Palast’s report is part of a film-in-progress called, “Romney’s Bailout Bonanza.” Palast is the author of several books, including recently released New York Times best seller, “Billionaires & Ballot Bandits: How to Steal An Election in 9 Easy Steps.”

  13. Senators Brown and Vitter recognize that bank capital is meaningless
    The primary reason bank book capital is meaningless is because it is an accounting construct that is easily manipulated by both the banks and their regulators.

    For example, regulators can engage in forbearance which allows banks to avoid taking losses on bad loans and instead engage in extend and pretend. This overstates both common equity and assets.

    Why does ultra transparency make bank book capital more meaningful?

    With ultra transparency, market participants can independently assess the value of the bank's on and off-balance sheet exposures. They can then adjust the bank's book capital to reflect this assessment.

    Which just happens to be the outcome that Senators Brown and Vitter would like to see.

    The largest U.S. financial institutions have become remarkably complex. This complexity inhibits corporate executives or regulators from properly executing their oversight responsibilities, making management, much less calculation of the proper capital standards, next to impossible.
    For example, the six largest banks currently have a combined 14,420 subsidiaries, and the Federal Reserve Bank of Kansas City estimates that it would require 70,000,examiners to study a trillion-dollar bank with the same level of scrutiny as a community bank. It is no wonder then that former executives have admitted that it is impossible to fully understand all of the positions that trillion-dollar megabanks are taking....
    Institutional complexity has grown hand-in-hand with regulatory complexity.
    Morgan Stanley Chief Economist Vincent Reinhart told the Senate Banking Committee that "balance sheets of large firms have been splintered into a collection of special purpose vehicles, and securities have been issued with no other purpose than extracting as much value as possible from the Basel II Supervisory Accord."...
    [The Bank of England's Andrew] Haldane argues that this complexity and opacity provides limitless arbitrage opportunities. Risk-weighting can obscure banks’ true capital situations, distorting the views of markets and regulators, and undermining confidence.

    1. Yeah,yeah and didn't they just know that and discussed it in 1990 when they wrote Basel 111. Wasn't it done intentionally because it was. We haven't been clipped by a passing truck we have been systematically set up to be thrown under a bus.

      Now they are all bleating Haldane, Rheinhart and all these other criminals that is was an administrative accident not a criminal intent. Until people realise this we are bound to repeat the errors of the past.

      When Andrew Jackson dealt with the last Federal Reserve and the attempt on his life it is estimated he had 10,000 people shot. We need a solution that hands out this kind of justice to deal with the current system not just in the US but across the Western World.

  14. It seems it's really best to listen to Clive Maund and the trader cycle guy - rather than these physical metal crap stories. it's all bullshit - and no one can go against the commercials - absolutely no one. The James Turks John Embry and London traders - not a chance listen to them - the physical sceen is worthless.

    And a disconnect between the other markets will not arrive. Metals have gone thro there downturn and now will be affected by the other market downturn just like Clive Maund said. This bravado about let it tank and I will buy more physical - till when.

    Miners the most undervalued???? All bullshit

  15. anyone who listens to Clive Maund and believes him, needs their head examined..badly

    1. LOL. I agree. I read Maund for awhile back in 2002 but he has missed every single major move higher in the metals.