Wednesday, August 28, 2013

Taper Or No Taper - Either Decision Is Bullish For Gold

A taper now would be the same mistake the Fed made back in 1929.  Please recall that it was this mistake by the 1929 Fed that Bernanke pointed to and claimed he knew exactly what to do to in order to avoid a depression and deflation. It seems unlikely that Bernanke wants to go down as the Fed Chairman who triggered the next big economic recession.  To Taper Or Not To Taper - That Is The Question
In what has become one of the most absurd rituals on Wall Street - and is really a sign of just how broken our system is - the entire financial media and all the Wall Street "Einsteins" are debating whether or not the Fed will begin to slow down its money printing when it announces its latest fatuously palaverous policy statement in September.

The golden truth is that gold doesn't care.  In fact, not only does gold not care, but either decision will be bullish for the world's oldest currency.  As it turns out, I've written thoughts on this matter, explaining why I've reached that conclusion and you can read my analysis here:  LINK

If the Fed were to announce a small "taper," it is likely that the metals will get hit hard, initially.  It is this smack-down that you need to buy with both hands, as the market will soon realize that the Fed is going to have to reverse itself and increase QE in subsequent months. 

My personal feeling is that the Fed will hold off on any decision and, ultimately, be forced to increase QE at some point.  In fact, in line with what I was thinking about Syria situation, others have come to the same conclusion as me:  Syria Is The Fed's "Out" on the Taper

Also, please note - and although I think it's a ridiculous report - the National Association of Realtors' Pending Homes Sales report for July showed a decline in "pending" home sales from June to July.  Given that the index is "seasonally adjusted," it should be registering a nice gain from June to July, unless contracts on new homes are seriously slowing down.  They are and the housing market is back in its bear tracks.


  1. michael schumacherWednesday, 28 August, 2013

    Not trying to incite alarm bells out there but
    HOLY SHIT...has anyone ever seen so many things going wrong at same time and our market goes up almost a hundy???

    BTW this all gets solved by the Saudis........they have a choice in front of them and its going to be dollars or rubles. In past I would say no way house of saud abandons Bushco but at this point the system has alot less to lose and they are sitting right in the middle of it... Petro dollar or petro ruble?

    something to think about in any case.

  2. ZeroHedge seems to think that the Fed MUST taper for various reasons???

  3. Putin is really pissed off at the Saudis right now. They issued a vailed threat at a meeting between Saudi prince Bandar Bin Sultan and Putin. At this point Putin would like to turn Saudi Arabia into a grease spot. Full article link attached.

  4. Hi Dave,

    I really enjoy reading your blog and want to thank you for your analysis. So I wanted to relay what I've been noticing in several markets. In my neck of the woods in Bellevue (Seattle), that houses generally stay on the market for a very short period of time, and then are snapped up with a cash offer.

    Also, I'm in the Bay Area for vacation and have talked to my friends and family about the real estate here. I have one family member who bought a house in Silicon Valley in 2000 for $1 million and now the house is about $1.5. Another friend who bought a short sale house for $350k saw its value drop to $270k then shoot back up to $450k. As an aside, rents here are astronomical. My cousins place which probably could have rented for $2k a couple of years back now can rent for $3k.

    Finally, I have family in Dallas as well, and from what I understand homes can be sold within a day.

    Now, what I'm wondering is if these markets are the anomaly and the function of a decent tech/job market, or are people rushing to buy before interest rates go up. Anyway, thanks for all of your insight.

    1. When you say the house is "about 1.5mm," has he been offered that amount or is that where he's being told by a broker that he can sell it.

      To be sure, California has developed a "mini-bubble" that is more extreme than any other market - just like Cali got the most extreme during the primary bubble. Ironically, all of the bubble markets in the West have experienced the biggest mini-reflation.

      Rest assured, once the Facebook fortunes are done flowing through NoCal's housing economy, it will crash again. That's why Ziff-Ochs is unloading around 80,000 properties in NoCal it had bought to rent out. They were pretty much the first to do the buy to rent trade.

      This next leg down is going to get very ugly unless the Fed goes into turbo-printing mode. But then, the hyperinflation from that will get ugly.

    2. michael schumacherThursday, 29 August, 2013

      As a long time bay area resident I can tell you that it's always been an inflated market.....think stock options....and as long as the system remains intact it will always be that way.

    3. michael schumacherThursday, 29 August, 2013

      BTW turbo-printing mode is absolutely a sure bet. The information that we are allowed to see represents the tip of iceberg IMO. The games played with metals, stocks etc. the amounts involved can only come from a few places due to sheer size. Look at oil's close today for example...only a few places could even try to do that sort of volume flow

      Larry Fucking Summers.........100% guaranteed game over if he gets in...don't get me wrong I think its over already but that would remove any doubt as to outcome. Also tells me desperation is stage they (system) are operating at.

    4. Larry Fucking Summers = LFS. I like it!!!

    5. michael schumacherThursday, 29 August, 2013

      Yea....looks like there's a new acronym for the fed to use as well.
      We will have the LFS Deposit Overbearance Usury Currency Hypothecated Exchange or....


      try the veal.....Im out! ;-)

  5. Limits on Broker Use of Client Assets Sought by Global Regulator

    Brokers face restrictions on using clients’ assets as collateral for other trades, as part of a push by global regulators to prevent the securities lending market from sparking chain reactions that could cause a crisis.

    Under recommendations published today by the Financial Stability Board, brokers wouldn’t be allowed to tap client assets for their own trading, and they would have to provide “sufficient disclosure” of plans to use the securities as collateral in other transactions. They would also have to meet minimum standards in managing liquidity risks.

    Regulators are seeking to rein in how traders use collateral in a bid to prevent any repeat of the turmoil that followed the 2008 collapse of Lehman Brothers Holdings Inc., which was driven in part by confusion over who was owed what on outstanding trades. The European Union may seek to curb the number of times a single asset can be passed on as collateral in trades, a person familiar with the plans said last week.

    “More safeguards” are needed for client assets, the FSB, which brings together regulators and central bankers from the Group of 20 nations, said in today’s proposals. Recycling the securities as collateral, a process known as re-hypothecation, “can create financial stability risks especially if clients are uncertain about the extent to which their assets have been re-hypothecated, or about the treatment in case of bankruptcy.”