Why The Fed Is Tapering And Manipulating The Gold Market.

When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain. - Napoleon

I co-authored another article with Dr. Paul Craig Roberts about the extreme and illegal manipulation of the gold market by the Federal Reserve and why the Fed is manipulating the gold market.  The key point in this is that for every US$ the price of gold rises, it takes away power from the U.S. Government.

Be patient if the article is slow to load - it seems to be getting swamped with hits from all over the world:

The Fed Taper and Gold Market Manipulation

He who controls the gold makes the rules.  Have a great weekend and Go Broncos!

Obama's State Of Disaster

And thus I clothe my naked villainy

With odd old ends stol'n out of holy writ;

And seem a saint, when most I play the devil. 

             -  "Richard III," Shakespeare

Predictably, Obama rolled another yet another of his Martin Luther King gospel speeches designed to mesmerize his dwindling supporters and admirers.  But beneath the cloud of rhapsodic rhetoric carefully orchestrated to deflect attention from the facts is the same web of insidious lies and deception that has characterized his Presidency since he took office.

Aside from the colossal failure know as "Obamacare,"  I love the way Obama avoids reviewing the facts that matter.  For instance, I must have missed this part, but total Treasury debt issued since he took office has increased by 70% from $10 trillion to $17 trillion.  And it's about to go up again.  Debt to GDP soared from below 100% to well over 100%.  And that's using the rigged GDP numbers vomited out to us by the Obama Government.  This is a State of the Union that mathematically can not persist and will result in a complete economic catastrophe for the middle class (middle class = anyone not rich enough to buy their own politician, means roughly 99.9% of the population).

How about persistent and growing long term joblessness?  This is the segment that has been out of work for a couple years and has given up looking.  These people are are not even counted as part of the labor force.  Here's what that looks like:

(click on graph to enlarge)

This shows the number of people who have dropped out of the labor force since Obama took office.  A little over 11 million.  Eliminating that 11 million from the labor force is the exact reason that the calculated unemployment rate has declined.  The unemployment rate is a deceitful statistic, not the truth. That 11 million is the number people who became dependent on Government support in one of many forms since Obama's inauguration.  I'm not sure Obama really addressed that issue other than to say that he would set up some kind of task force to try and coerce companies who are currently cutting jobs by the thousands to replace them with the untrained people who haven't worked in a couple years.   Sorry, that program will fail as badly as Obamacare has failed.

Speaking of which, anyone not asleep happen to catch Obama's order to Congress to fast track the latest global trade Bill - the Trans-Pacific Partnership (TPP) agreement?  He of course cloaked this trade agreement in promises of more jobs for Americans and a great deal for our economy. But once again it's well-crafted Obama-speak for:  "bend over America, here comes another big lie."   The ensured passage of this deal has been heavily funded by the corporations who will benefit the most from it.  You can read the sordid details and facts HERE, HERE and HERE.   The reason Obama wants to jam this through is that his corporate overlords don't want pain in the ass Congressmen diluting the massive wealth transfer from the middle class to the big corporations by attaching pork and earmarks.  It will also cost big business a lot more in political graft if they have to plunk a lot money into campaign coffers other than Obama's (yes, they are still contributing because he gets to keep any money in the campaign account that's not spent while in office - Clinton passed that law).

One of the most troubling aspects of that TPP deal is that it will enable the Too Big To Fail banks that were bailed out by Obama using taxpayer money to largely get around the financial regulations that were imposed by the Dodd Frank legislation and the so-called "Volker Rule."  Obama made a big production out of specifically telling the country a few weeks ago that our financial system is "safe" now.   Of course, like everything else he says, it's a complete lie.

Finally, Obama offered a nicely promoted plan to help the little guy not covered by a corporate or fat Government retirement plan to start his own tax-deferred savings account.  This plan is more comical than Saturday Night Live at its best in the late 1970's.  Actually, it's an outright appallingly pathetic proposal.   First, 76% of the country lives paycheck to paycheck.   The "little" guy doesn't have any money left over after buying food and paying for heating to put into savings - especially after his health insurance costs were doubled by Obamacare.

Even worse, the little guy, to the extent he might have some extra money left over for savings, is forced by Obama to buy Treasury bonds.  He doesn't get the investment choices offered to everyone lucky enough to work for a big corporation or the Government.  Who the heck wants to invest in Treasury bonds?  After inflation, the return on Treasury bonds is negative.  It's really a way to shift even more of the Government debt burden onto to the backs of the middle class.

As IF all of the above isn't enough, Obama's biggest promise is that he's going to take the Government into his own hands if Congress doesn't do what he wants them to do.  I remember very vividly when Obama was engaging in campaign debates with his opponent in 2008 that he promised vehemently to get rid of earmarks and not use Executive Orders.  Well, it turns out, Obama likes Executive Orders and he wants to keep Executive Orders.  Rest assured, unless the White House cuts Congress in on all of the big corporate graft being passed out liberally, we are going to see Obama transform the Executive Branch of Government into essentially a dictatorship.

In blowing away the rhythmically delivered smoke from Obama's teleprompter delivered speech last night, you can see that it was a carefully and methodically crafted bundle of lies and deceit.  The truth is, and this is the truth that even his marginally supportive constituents refuse to look at, is that Obama is probably the most insidiously deceitful President in the history of the country.  He heralded himself as the Great Savior of the middle class and Constitutional Government.  Ironically, he'll go down in history as the guy who led the U.S. into the abyss of totalitarianism and economic demise.

Other than all that, Mrs. Lincoln, did you enjoy "Our American Cousin?" 

An Early Super Bowl Prediction: Denver By 10 Based On Two "X" Factors

I was looking forward to the week's trek into Sunday's Super Bowl, but I'm already fatigued and disgusted with the media spectacle this week has become.  I don't really care what Petyon Manning listens to in his car on his way to the playing field and I'm bored senseless with the anticipation of Richard Sherman uttering something absurd.

I have Denver winning by 10 again.  Jim Rome has Denver winning by three touchdowns but he's overlooking the fact that Denver's defensive coordinator, Jack Del Rio likes to take a big lead in the fourth quarter and turn it into a nail-biting race to time expiring.  In both playoff games his defense held San Diego and New England to a combined 3 total points nearly halfway through the 4th quarter of each game.  Then he switches into that moronic "prevent" defense that coaches like to use to prevent their team from putting away games or even winning.

Even though Denver will win, that defense Jack Del Rio uses in the 4th quarter leads to a victory that's the equivalent of Warren Buffet declaring "victory" when he removes his Depends and goes half a day without soiling himself.

I base my 10-point margin on two "X" factors being overlooked by every game analyst.  The first one is Champ Bailey.  Lost in the spotlight shining on Seattle's Richard Sherman is likely first-ballot Hall Of Fame inductee, Champ Bailey.   When Richard Sherman can say that he's gone to 12 Pro Bowls in 15 years, then I'll have some respect for him.

He's not the same Champ as five or six years ago, but he's missed most of the season due to a nagging foot injury and now he's back at 100% and has fresh legs.  You didn't hear his name much against New England, which is a good thing because it means he was shutting down his receiver assignment in man-to-man coverage.  "Smart" doesn't get old.  That means Denver has two "lock-down" cornerbacks - the other is Dominque Rogers-Cromartie - which enables Denver to focus on stopping the run.  They held San Diego and New England both to under 70 yards rushing. 

The other "X" factor is something that I won't reveal until after the game.  It's not a player and it's not a weather-related factor.  If anyone wants to email me with what they think it is, I'll acknowledge correct answers.  It is something that this year's team has in common with Denver's two back-to-back Super Bowl wins and it isn't John Elway...

Apple (AAPL): LOOK OUT BELOW!

                                                                              

Have an exit plan.  Tweet from Matt Drudge, The Drudge Report

Apple stock plunged $46 - 8% - in after hour trading this afternoon after releasing its 1st quarter fiscal year earnings.  It's irrelevant whether or not they beat estimates because the estimates are rigged by Wall Street analysts to be beaten anyway.  It lowered its outlook for 2014 and that was relevant.  The net-net of it is, as I've been saying ad nauseum, the consumer is dying on a vine.

There's a lot of mutual and hedge funds who are highly overweighted in AAPL stock.  Unless the Fed intervenes heavily tonight and tomorrow in the futures markets, the rest of this week could get ugly for the stock market.  In addion, the NYSE released monthly margin debt numbers for November and it showed a new all-time high for margin debt, by a considerable amount.  Historically market peaks occur when investor margin debt goes parabolic, which it has.

I have been warning anyone willing to listen that this is the most overvalued market in the history of this country, especially if you adjust earnings by using the GAAP accounting standards that were enforced 20 years ago.  My advice is to sell now and get your money out of the system as much as possible.  It won't be long before there's a stampede for the exits...foretold is forewarned.

December Existing Home Sales: The Housing Bear Roars

December existing home sales were released last week by the National Association of Realtors.  Despite the happy headline report of a 1% gain over November, when you factor in the nearly 6% downward revision of November's previous reported result and look at the 6-month trend in existing home sales, the market is clearly headed back down into the bear trend that started in mid-2005.

I wrote an article for Seeking Alpha with the numerical analysis which you can read here:  December Existing Home Sales

Two specific points of data that I found the most troubling for housing market hopefuls:   If you look at the rate of decline in homes sales for the entire 4th quarter of 2013, Q4 was down over 27% from the fourth quarter of 2012 and nearly 8% from the third quarter of 2013.  That's something you will not see reported by the media or Wall Street.  I guarantee you that Obama will not talk about that fact in his State of Disaster speech tomorrow night.

The biggest factor that everyone is overlooking is that the consumer is dead in terms of ability to spend over and above necessities.  Real disposable income is declining and people in general do not have much left over after paying for daily necessities plus the much higher than advertised cost of Obamacare.

One more point, I predicted last quarter that we would start to see a lot more "for sales" signs pop up in January despite the fact that the real listing/selling season doesn't get started until March.  Anecdotally judging from what I'm seeing everywhere I drive in Denver, my prediction is correct.  I really noticed it this past weekend.

FYI, anyone holding onto stock market positions is hereby officially forewarned to get out now.  It's going to get ugly.  The trade that drove the SPX up at a near-parabolic rate last year and drove gold lower is going to unwind.  Don't listen to Wall Street.  Wall Street's only job is to take money from your pocket and put it in their's.  Just like stocks shocked people to the upside in 2013, gold is going to shock even more people this year with its move higher.

Something Ominous May Be Coming At Us

Earlier this week 30-day/4-wk T-Bills were auctioned off a 0% rate.  Intra-day, after the auction, the rate went negative.  Negative short term rates were last observed in 2008, before the Lehman/AIG/Goldman collapse occurred.  Of course, Lehman was allowed to implode and Goldman, who's ex-CEO was the Treasury Secretary, was bailed out.  AIG was the beneficiary of that bailout because Goldman had impaled itself on AIG nuclear waste.

The point here is that negative T-bill rates only occur when very big investors are concerned about the return OF their money and not the return on their money.   Think about what a negative T-bill rate means.  It means that someone is paying more for the T-bill than they get in return when it matures a few weeks later.  Why would someone do that?  It's the "safest" place to park large sums of cash.

A big institutional fund or very wealthy investor pays for a T-bill because they they see something which indicates that the risk of the Government defaulting in the next four weeks is less than the risk of  parking that money in a bank or a money market fund.  We're talking millions and tens of millions in short term money.  Bank deposits are insured only up to a small amount.  After 2008, it has been decided that money market funds will no longer be bailed out by the Government/Fed.

In other words, big big investors with cash that needs to be parked are seeing something that gives them concern about the financial system.  The negative rates on T-bills means that whatever was spooking big money in 2008 is spooking it again.  My best guess right now is that there is massive risk of derivatives default.  This would be the derivatives that blew up the system in 2008 but that the Fed/Government quickly monetized.  The problem was never fixed, contrary to Obama's recent end zone dance on the safety of the banking system.

In fact, the Fed swallowed a portion of the bad derivatives and has been using the better part of the $85+ billion per month it's been printing since early 2009 to monetize the rest.  In other words the catastrophic problems were kicked down the road.  Worse, the big banks went out and replaced the crap the Fed took off their balance sheets with even more crap.  Accounting rules were changed, and ratified by BOTH political parties plus Obama, which enabled the big banks to hide the problem.

But now the financial system is wearing the Scarlet Letter of negative T-bill rates.  The source that is lighting the fuse is emerging market problems, reflected in the currency devaluations by Argentina and Venezuela.  But the currencies of other important emerging market economies have been plunging against the dollar as well.  The cost of derivatives "insurance" on the sovereign debt of these countries has suddenly increased at a rate that would make Obamacare insurance providers blush.

What the currency plunge/derivatives blow-out implies is that sovereign bond defaults are on the horizon.  This is not just confined to "emerging" economic countries.  Spain, Portugal, Italy and France are on the ropes financially and economically as well, despite the official European story-line that Europe is in "recovery."

The issue for the U.S. here is that the Too Big To Fail banks are the ones who have underwritten most of the credit insurance derivatives associated with the sovereign debt that may be at risk to default.  They also hold a lot of it on their balance sheet.  That's why the Fed's Excess Reserve accounts of the big banks have ballooned up in correlation with amount of QE that has been printed.  The Fed has monetizing the derivatives exposure but that works only up to the point of a default event.

In other words, a big nuclear derivatives may be coming at our system.  Another interesting tidbit to think about.  While the paper price of gold was being plunged using Comex futures by the Fed-backed big banks, a major portion of the gold held in the GLD Trust was removed.  The common narrative scooped up like dog crap and tossed in our face by Wall Street analysts was that the decline of the gold in GLD was indication of a new bear market in gold.

Essentially gold bottomed in price on June 28th, with a retest of that bottom at the end of December.  Based on the $1180 bottom, gold has risen $90 since since the end of June.  But guess what?  Another 179 tonnes of gold - or 19% - of the amount of gold in the GLD trust at the end of June has disappeared.  If gold is rising again, shouldn't gold be flowing back into GLD?  The 500+ tonnes of gold that has been removed from GLD in a little over a year has disappeared down the rabbit hole.  There's no way to know for sure but I'm sure a large portion, if not all, has been shipped to China.

But maybe not all of it.  In addition to the huge ratio of paper gold to physical gold visible on the Comex, according to the latest OCC bank derivatives report the top 4 banks - JPM, Citi, Goldman, Bank of America - are long over $81 billion in gold OTC derivatives.  That's the equivalent of about 1800 tonnes of gold at current at the current price.  1800 tonnes is slightly less than than the annual amount produced globally by gold mines.  That amount dwarfs by many multiples the ratio of paper/gold on the Comex that has drawn everyone's attention.  Maybe that's why the Comex publishes as much data as it does about Comex futures positions and inventory.  It draws everyone's attention from the much bigger gold derivatives problem.

Here's a link to the OCC derivatives report for anyone interested (it's from Q3, 2013 - there always a big time lag):  Latest OCC Bank Derivatives Report

Something really ugly is coming at our system.  Have a great weekend. 

The Golden Rule

"He who owns the gold makes the rules"

Please note:  the "Golden Rule" refers to actual physical gold in one's possession and not futures contracts, GLD shares or even the gold that you have "invested" in via products marketed to wealthy bank clients that claim to have the gold sitting bank vaults (please see this:  ABN Amro Halts Gold Delivery and this:  Rabobank Halts Gold Delivery).

Based on several inquiries in response to the article I co-authored with Dr. Paul Craig Roberts - LINK - I wanted to clarify a couple points.

It is of critical importance to distinguish between paper gold and physical gold.  The majority of gold commentary generically references the trading of gold, without differentiating between "paper gold" - Comex gold futures and other paper-derived products like GLD or bank investment accounts marketed to wealthy clients - and actual physical bars.  The difference is crucial because paper gold contracts can be printed in unlimited quantities and dumped on the market.  But the seller of real gold takes the risk that his buyer on the other side might demand delivery of the physical gold.  If the seller of a futures contract or a bank investment product like the ones marketed by JP Morgan et al is selling security interest in gold that is not really in the vault, the buyer of that product does not own gold.  He does not get to make any rules.

The issue is that historically big buyers of physical gold would leave their gold in bank and Central Bank vaults rather than paying the cost of taking delivery in their own possession for safekeeping (cost of transporation + insurance).   But China as well as other big buyers now require all purchases to be delivered to their own safekeeping because they no longer trust the western banks and Central Banks.  The Fed and its banks have been leasing and borrowing gold from all the vaults in the west in order to have enough gold to deliver to the Asian/Indian buyers.  This has kept the price down in order to support the U.S dollar and the euro. The ratio of paper gold products to actual physical gold is at least 90-100:1.  At least.

But this gold Ponzi scheme is coming to an end and all signs indicate that the Fed, BOE and ECB are out of physical gold other than some gold in the GLD Trust and scrap remnants sitting at the back of bank vaults that has to be melted and recast in order to deliver to Asia.  We know for a fact that the scant 5 tonnes of gold shipped from the NY Fed vault to the German Bundesbank had to melted and recast.  And now Germany is left holding 5 tonnes of the 1500 tonnes it gave to the U.S. after WWII for safekeeping.

The bottom line is that the Fed does not have Germany's gold and there will eventually be consequences.  This is how sacred the German public considers gold:  Imagine that Germany came to this country, took over all the Starbucks, shopping malls and reality tv production studios.  Next imagine that they shut them all down and forbid any access to them at all.  None.  Imagine the response of the U.S. public. That is what is starting to foment in Germany over the missing gold issue.

As I mentioned in the article linked above, Venezuela was able repatriate 160 tonnes of gold in four months.  Why is it going to take the U.S. 7 years to ship back 300 tonnes to Germany when it would require just two trans-Atlantic cargo shipments via air?  The cost of shipping and insurance is miniscule compared to the value of 300 tonnes.  It's because the gold is not there.  It's gone.  No public official is willing to state the obvious and mostly oblivious Americans have no clue it's even an issue.

But it is an issue and the severity of that issue will grow with time.  Already German politicians are preparing legislation that will demand the repatriation of ALL of Germany's gold from the U.S. and France.  That will be fun to watch our Government if the legislation passes.

But the bottom line is that the U.S. gold being held by the Fed - all of it - is gone.  And soon the U.S. will not be making any rules in the global geopolitical arena.

My Prediction: Broncos By 10

"The Hows And Whys Of Gold Manipulation"

We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.  - Eddie George, then Governor of the Bank of England, 1999

That quote was Eddie George in reference to the reason why he sold half of England's 800 tonne gold reserve.  Looking back, the sale was a colossal financial failure for England as the announcement of it drove the price of gold under $300 and ounce and most of the gold was sold well under $300/oz.  England will never get that gold back unless they are willing to pay a price that would be many multiples of the current market price for an ounce - or if they confiscate what remains in GLD...

The manipulation of the gold market by the U.S. Government and the Federal Reserve has been going on for decades.  It intensified after the Bretton Woods Treaty established the dollar as the global reserve currency.  Since the Fed rolled out its QE program, its manipulation of the gold market has ramped up to the point at which it has become obvious to anyone involved in the markets and who has half a brain.

Paul Craig Roberts has been working hard to write articles which expose the truth about how the Government is systematically dismantling the U.S. Constitution and Rule of Law and replacing them with a system of political and financial repression.  He invited me to write an article with him on how the Fed/Government manipulates the gold market for the purpose of defending QE and the dollar.  Here's the link:
                        The Hows and Whys of Gold Manipulation

Keep in mind that the article is read world-wide and translated into several different languages, so we had to do our best to explain securities markets concepts in a manner which would be accessible to anyone not familiar with how securities and bullion markets operate.

Just like every other instance in history of Government intervention in markets and economies, this scheme has created economic dislocations and severe adverse consequences.  When it ultimately fails, the collateral damage caused from this will impact everyone.

Faith is belief in something without evidence.  With all the evidence available, anyone who refuses to believe that the gold  market is manipulated is making a faith-based judgement.

Is There Still Any Doubt About Gold Manipulation? Germany Says Gold Is Manipulated

Germany's top financial regulator issued as statement today that said that manipulation of the precious metals and currency markets is worse than the Libor-rigging scandal.

 Here's the Bloomberg News article:  Germany: Gold Is Manipulated

There you have it.  Please send that article to the emails of the CFTC and all the other "analysts" who issue fraudulent analysis refuting that gold is manipulated:  Jeffrey Christian, Bron Suchecki, etc etc etc...

Now that there's a confirmed shortage of physical gold bars that can be delivered out of Central Bank and bullion bank vaults, any left to doubt that gold is manipulated is making a faith-based conclusion.  For the rest of us, hold on tight because the metals are in for a big move higher.

Shortage Of Gold Bars Develops In London - Follow The Money

It appears as if that old adage that a rumor can't be confirmed as being true until its been officially denied several times applies to the London gold bar market, as it was reported last night by a London Metals Exchange reporter that premiums on "good delivery" bars are now above the spot price of gold, something which is rarely observed in London:  Gold Bar Shortage In London
 
Asian and Middle Eastern Central Banks and investors are hoarding an enormous amount of the 400 ounce  LBMA "good delivery" bars that make London the largest physical gold trading market in the world. As the price of gold was aggressively manipulated lower by the Federal Reserve and its agent bullion banks since mid-2011, eastern hemisphere sovereign, Central Bank and investment buying - especially the Chinese - intensified.

With negative "gold forward" rates having been negative for a predominant part of the last half of 2013,  I was wondering when a shortage of London bars would be reported. A negative "gold forward" rate means that the entity (bullion bank) who is borrowing or leasing the bars today in order to deliver them into buyers will pay more today for the ability to take delivery of bars now than it would cost to buy them for delivery in the London "forward" market - i.e. anywhere from a month to a year from now.

A rare premium for deliverable bars means a shortage of bars for immediate delivery -  directly to buyers not using an intermediary like a bullion bank -  has developed (as opposed to the GOFO rate, which applies to the brokerage firm intermediaries making markets in bars and who lease gold needed for delivery from Central Banks to deliver into the buyers who are buying from them).

We know that gold being drained from Comex warehouses and the GLD Trust ETF is being used to make good on deliveries into Asia's voracious appetite for deliverable gold.  Unless the Federal Reserve (Bank of England and ECB) can tap into new sources of above-ground gold stocks, we could well begin to see delivery defaults.

Over and above the reports of gold shortages from traders and market professionals, there have been other signs of a developing gold bar shortage for several months.  Recall the stunt Goldman Sachs pulled about two months ago when it reported in the press that it had reached an agreement with Venezuela to lease Venezuela's physical gold - the gold Venezuela had repatriated in order to safekeep it under its own watch just two years ago.  That news item dropped by Goldman turned out to false.  Same for the report that Cyprus was going to sell its gold reserves to help pay for its bail-in.  That report proved to be false as well.

I always believed that these reports reflected nothing more than desperation by the big bullion banks like Goldman and JP Morgan - as agents for Fed - to get their hands on gold that could be delivered to Asian buyers who demand delivery.   Same for the fact it the U.S. refused to give Germany back its gold being held by the Fed as requested and instead agreed to a suspicious deal to ship back part of Germany's gold over seven years.

While I'm sure plenty of skeptics from Australia to New York to will issue well-crafted rebuttals to the view that there is now a shortage of physical gold in London and New York, the report last night that big buyers are paying a premium to get their hands on immediately on physical gold confirms the obvious.  Money speaks a lot louder than words in the world of finance - follow the money...
   

Just For Fun

                                        

It's easier to fool people than to convince them that they have been fooled.  - Mark Twain 

If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.  - Joseph Goebbels, Hitler's right hand man.

James Kunstler always writes informative and though-provoking commentary filled with insight and unvarnished truth.  His latest column is a must-read:

 If you care about poll numbers, they tell a simple story of contempt for the current crop of US political leaders. Congress rates a 12 percent approval rating and President Obama, at 35 percent, scores lower than Richard Nixon did in the midst of the Watergate fiasco. I’m surprised that Obama’s numbers aren’t lower (and I voted for him, twice). After all, few American lives were actually touched by the lies and shenanigans that spun off of Watergate, and money was an inconsequential part of it. But a whole lot of people were affected by Obama’s dissimulations around the Affordable Care Act, while his tragic failure to reestablish the rule of law in banking from the get-go in 2009 probably amounts to impeachable malfeasance. Add to this the NSA domestic spying operations revealed by Edward Snowden plus the troops indefinitely garrisoned in Asian countries and you have a portrait of a creeping Orwellian contagion.  (LINK)

Here's a few more charts to go along with that caption above:

(Real Median Household Income - BEFORE The Cost of Obamacare) 

(Tax Dollars and Borrowed Money Spent On The Food Stamp Program)

 

This last one should blow everyone's mind.  It shows the Labor Force Participation Rate going back to 1948 and since Obama took office.  The LFRPR is the number of peope working + looking for work divided by the total population.  As you can see, the LFRPR is back to the level where it was in 1978.  Remember, going all the way back to 1948, the demographics of our country were basically "Leave It To Beaver" - a one-worker/one-income family.  This transitioned into a 2-income household during the late 1970's, so we would expect to see the LFRPR rise.

(% of country working going back to 1948)

 

>(and since Obama took office)

 

What these charts tell us that the employment report released every month that keeps almost the entire financial world on edge of its seats on the day it is released is a complete fraud.  It also tells us that Obama, and the promises he made to reform and change the country, is a complete fraud.  I'm not blaming our country's demise on him specifically.  But there sure seem to be a lot people in this country who have let themselves be fooled.

The Economy Is Starting To Free-Fall: Housing, Autos, Retail

In the latest retail sales report for December, auto sales were nailed - down 1.8%.  The only reason overall retail sales from November to December showed a slight "gain" that November's number was revised lower.  Electronics fell off of a cliff. The housing market is about to get crushed. Feedback I'm getting from my Seeking Alpha articles and blog posts on housing from housing market professionals all around the country tells me that the housing market hit a wall at the end of 2013, as I have been forecasting.

The consumer is dead on arrival.  I love the way last week's retail sales were blamed on the cold weather that hit the country the previous week.  I guess consumers were still thawing out and decided to not restock on everything last week even though it warmed up in most of the country.  The only thing "frozen" is the real wages and disposable income of the majority of Americans.  And what's left over after the monthly of cost of Obamacare is spent won't be enough to buy a new car or a new home.

The proliferation of sub-prime quality, Government-subsidized auto loans made it a no-brainer for Americans to go out and buy a new car last year - just like no-document ARM mortgages coerced the peak of the housing bubble.  But all that did was "pull" sales forward into 2013 and set up another debt-default crisis.  The delinquency rate on sub-prime auto loans - now 28% of all auto loans - started to move a lot higher toward the end of 2013.

Even worse, the Dodd-Frank legislation that is supposed to protect America from Wall Street's monsters - which it won't as the beasts have already had their battalions of lawyers figure out ways around it - has imposed new mortgage rules which will make if more difficult for the average guy with no growth in real income to get a mortgage.  In additions, the FHA implemented a reduction in the size of the standard mortgage it will guarantee in most markets - significant reductions in some markets.  Wave good-bye to the fabled housing "recovery."

Despite the rhetoric coming from the Obama team and the endless stream of Fed officials who loudly broadcast that the economy is recovering, the truth is that the system has been set up for an epic collapse.  I have suggested that there has not been real, inflation-adjusted growth since 2006.  If you strip away the accounting fraud and non-GAAP nonsense that the Government lets the big corporations get away with now, real cash earnings from most companies has been flat to negative since 2006.  This is especially true for the big banks.  Witness today's earnings report from JP Morgan in which JPM's net income was largely comprised of non-cash add-backs and absurd accounting gimmicks.  If we did a true, independently-assessed audit of JPM's books, I can guarantee you that the bank is insolvent.

The stock market appears to be unraveling.  When the downside momentum really grips the market it will be an incredible sight to behold.  The flip-side is that gold and the mining stocks have quietly, in the background, established a bottom and a new uptrend.  What's happened over the last 2 1/2 years to the precious metals market will be reversed in equally as stunning of a move to the upside as we will see with the stock market to the downside. 

Goldcorp Offers To Buy Osisko Mining: The Bottom Is In

Goldcorp offered Osisko shareholders $2.4 billion in stock and cash to buy the shares of Osisko Mining (OSK).  In terms of proven and potential gold in the ground, OSK is one of the best ways to play a big recovery in the price of gold and the precious metals mining industry.  Goldcorp has always been the most likely buyer of Osisko so it was just a matter of time before this deal happened.  For the record, Osisko is one of the bigger stock positions in the fund I manage.  I have been waiting since 2010 for GG to takeover OSK.  This is just the beginning.

Without going into the details of actual offer put on the table (I leave that for the super-anal analysts who give themselves brain damage scrutinizing every detail of shares vs. cash etc), I will say that in the context of where the scant number of mine acquisitions have occurred in the last 18 months, the deal appears to "fair."  I also believe that Goldcorp will be forced to raise their offer if they really want to own OSK.   OSK is sitting on one the newest and largest actively mined gold deposits in the world (10 million ozs proven and probable) and it is developing a second "elephant" deposit. Although the latter is still classified as "measured and indicated," it represents 7.5 million ozs that are most likely eventually going to be elevated to "proven and probable."

Large gold deposits have become very rare.  Goldcorp knows this.  Goldcorp's resource base was starting to get depleted, like Newmont's and Barrick's.   The OSK deal offers an active 10 million ounce gold mine plus the likelihood of another 20 million ounces down the road. 

Is this a fair deal?  Yes, in the context of $1200 gold.  But what about $2,000 gold, where gold was headed until the Federal Reserve and U.S Government were staring into the abyss and put into motion the most corrupt and intensive market intervention strategy in history in order to get gold down to where it is now and save the U.S. dollar?

Goldcorp knows where the price of gold is headed and this why they are buying Osisko now.  They also probably know that the window of opportunity to buy 30 million ounces of gold in the ground at this price is quickly closing.  In other words, this deal marks the turn in the massive gold and mining stock sell-off of the last two-plus years.  While I expect Goldcorp to sweeten its offer, don't get caught up in the details of this transaction and miss the big picture:  the bottom is in and gold is back on track to resume the upward trajectory it was on in 2011.

There is an acute shortage of physical gold in the world that can be delivered into China's voracious appetite.  Last week alone 62 tonnes - a rate that greatly exceeds weekly global gold mine output - was delivered on the Shanghai Gold Exchange.  Goldcorp knows this and and is putting it's money where it's mouth is.  Stay away from the large mining companies and look for the ones that will be acquired - there a many that will yield 30-40x their current share price.

Don't let the thick smoke of disinformation and misinformation being blown by Wall Street and the media blind you.  Follow the money...

U.S. Government: If We Don't Like The Score, We'll Change The Rules Of The Game

Democracy passes into despotism - Plato, "The Republic" 

Given that Plato lived a few hundred years before the "B.C." calendar designation, it is appropriate to add "always" to his quote after "Democracy."

I'm gearing up for this weekend's NFL playoffs, especially the last game on Sunday, so I don't want to make too much of today's non-farm payroll report. Especially since, given that we know the numbers are manipulated to completely distort the truth (change the rules of the game), I hate to reinforce any possible legitimacy of the report by applying rational thought to them (I just marvel how financial media makes millions selling advertising because viewers are glued to watching so-called experts dissect and debate these fraudulent reports - it  makes a complete mockery of the truth).

Today's reported number showed 74,000 jobs created in December, well under the 200,000 expected by Wall Street's best and brightest.  Since Wall Street missed the mark this badly, you'll hear repeatedly that the numbers were affected by the cold weather.  Hmmm...I'm guess if I'm hungry and need to find a job, I'll just wait until next month to start working if it's too cold for me to go outside this month.

Incredibly, the unemployment rated plunged to 6.7%.  What a fabulous headline statistic to beat everyone over the head with today and tomorrow when they turn on the news or open a newspaper.  Bravo Barack.  You've perfected the art of selling crack to children, a skill no doubt refined when you lived on the South Side of Chicago.

6.7% unemployment, down from the 7% reported in November?  Wow. If people are having an easy time finding jobs, why is Congress wasting time and money debating whether or not to extend the long-term jobless benefits.  Everyone would benefit if those lazy slouches would pick up the newspaper and look for a job - see this:  500 jobs - 1500 wait in line 3 days in freezing weather

But buried in the report is a metric that shows the number of people in this country not in the labor force.  In December the report shows that 535,000 people dropped out of the labor force.  91.8 million people in this country - roughly 29% - are not considered part of the labor force.  It's the highest percentage since 1978.  Recall back then that most households had only one bread-winner and the country was engulfed in economic problems.  In other words, despite a weak economy back then, demographically less people worked in total because the June Cleaver's of the world were busy taking care of the brood.

This is how a low "unemployment rate" is manufactured.  The metric is calculated by taking the total number people who are counted as being part of the labor force but not working - either just left a job or actively looking for a job - and divides it by the total number of people working + looking.  What the "not in labor force" statistic enables the Government math manipulators to do is reduce the numerator in that equation, which definitionally reduces the result - i.e. lowers the unemployment rate.  The parameters used to define the "labor force" have been modified over the years in a manner which is beneficial to showing a low unemployment rate.

If you don't like the score, change the rules of the game.  Have a great weekend.

Comex Gold Inventory: Do You Really Trust The Banks?

     
"The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only." - The disclaimer now posted on the Comex gold and silver daily warehouse stock report as of Monday, June 3, 2013.

How would you like to get your bank statement in the mail from JP Morgan or Bank of America and see this disclaimer added at the bottom: "The information in this account statement is taken from sources believed to be reliable; however, JP Morgan Chase & Co. disclaims all liability whatsoever with regard to its accuracy or completeness. This account statement is produced for information purposes only."  What would go through your mind if that was stamped clearly on your next account statement?

The CME "believes" the inventory reports are "reliable" but will not back up the accuracy.  Do you trust those numbers?  Before you answer that question, keep in mind that the big banks have already been accused and successfully prosecuted for reporting and business fraud in several other areas of their operations.  Also keep in mind that the numbers produced by the CME on a daily basis come from reports generated by the banks themselves.  The numbers ARE NOT subjected to the scrutiny of any regular independent physical audit.

With that said, there has been a lot of discussion lately about the amount of gold inventory on the Comex in relation to the amount of futures contracts.  The imbalance in paper vs the total amount physical gold as reported is catastrophic to the Comex should enough accounts who are long gold demand delivery.

The debate and illustration of the situation with the Comex inventory reports lately have ranged from the sublime to the absurd.  Earlier this week a blog post appeared out of Australia that tried to sound knowledgeable and authoritative in justifying and explaining why the distinction between "registered" stock and "eligible" stock is irrelevant. Well, if you know enough about the facts and are not too lazy to look up the actual CME published rules, you know that the CME gives the banks latitude deeper than the Mariana Trench in their accounting and reporting rules.  The distinction between "eligible" and "registered" is indeed irrelevant.  It's the reliability of the reports that are questionable - just ask the CME attorneys.

There's another well-known newsletter proprietor who makes a healthy living selling his analysis of the CME weekly Commitment of Traders gold and silver report.  He's willing to lash out at bank corruption and fraud openly and freely.  And yet, for purposes of his analysis, the numbers generated to produce all Comex, CME and CFTC reports - numbers, mind you, that are generated by the banks themselves - are 100% accurate and bona fide.  And he's adamant about that. Go figure.

The CME completed its acquisition of the Comex in August 2008.  Yet, that legal disclaimer above did not appear on the Comex gold and silver inventory reports until June 2012.  Everything happens for a reason and the lack of disclaimer was not an oversight - as said silver analyst has stated.  Furthermore,  the only role served by the analysis produced by said Australian blogger (who happens to work for the Perth Mint which has been scrutinized in the past for its own inventory issues) is a theoretical discussion of how the banks can play a "shell game" with the inventory that they do report.

The real discussion needs to focus on the legitimacy of the reports themselves.  Banks by design use fractional asset/liability management and there's no reason to believe that they treat their gold holdings, whether custodial or owned, any differently. What needs to happen is we need to have an accountability system in place that is based on frequent independent audits and NOT reliant on bank generated reports.

"Faith" is defined as "belief without evidence."  If you want to believe that the numbers being reported by the banks which are used to produce all public reports generated and published by the Comex, then you are doing nothing more than placing faith in the banks.  The only real evidence we have is that the CME will not legally backstop the numbers that are produced.

How much faith do you have in the banks?

Precious Metals Intervention In The Extreme - Let's Call It What It Is

Anyone who calls what is happening a "flash crash" or hedges on their assertion of "possible" direct intervention is either completely ignorant of the facts or they write their commentary in fear of public ridicule and doubt from other intellectual hedgers.  It is what it is:  a nuclear currency war rooted in the historical intervention of the gold market by the Federal Reserve and the U.S. Treasury.

Forget the "flash crash" story being widely promoted.   The "flash crash" story says that technical and algo trading caused the plunge.  Really?  In the absence of a big dose of intervention, the flash crash never happens.  Therefore, the only attributable cause by anyone who is being intellectually honest - not just with their readers but with themselves - is that INTERVENTION was culprit

In the last two days, 26+ tonnes was delivered on the Shanghai Gold Exchange.  The enormous physical off-take in China is a freight train w/out brakes.  From Standard Bank:

“In the physical market we are witnessing strong demand. Since the start of 2014, the SGE premium has jumped higher, reaching $18/oz this morning. The buying frenzy in especially China comes on the back of the seasonal demand pick-up ahead of the country’s New Year, which starts on 31 January…More broadly we have also noted an improvement in Asia demand for gold since mid-December. This is evident in the pickup of our Standard Bank Gold Physical Flow Index”

The manipulation in the gold market is getting worse by the day as the demand for physical gold from the eastern hemisphere begins to accelerate. It looks like the western Central Banks and their bullion bank market agents are going to work on silver with more focus.  SLV is starting to see physical drawdowns, as is the Comex.  The capping in silver is beyond blatant.   Turkey imported a record amount of silver last year, as did India..  India's demand for silver is the substitution of the gold that was cut off by the U.S. Government-induced Indian import controls.

Make no mistake about it.  In the face of China's moves to move away from the U.S. dollar and bolster their own currency with an historically epochal program of systemic physical gold accumulation,  the U.S Government and the Fed are waging a nuclear currency war with a war on the physical gold market at its nexus.  Anyone who asserts that it is any less than that is a complete coward.

Ben Shalom Beranke Fiddles In Front Of Congress, Under Oath

Tragedy is like strong acid: It dissolves away all but the very gold of truth.
                                                      - D. H. Lawrence

Indeed, David Herbert, when the fiat-currency-driven paper gold market collapses, exposing the giant Ponzi scheme of the western Central Banking fractional gold bullion system, it will be a tragedy for the United States that will reveal the golden truth.

Here's Ben Bernanke's testimony to Congress, in which he asserts that gold is not money and that Central Banks hold gold as part of their reserves only out of tradition  - like a Fiddler on the Roof:


 
If that's the case, then where is audit of the Federal Reserve's gold vault?  The audit that the Fed has spent hundreds of thousands, if not millions, to avoid - including hiring the former Enron lobbyist Linda Robertson in 2009 to help fight off Ron Paul's attempt to force an audit.

The Price Of Gold: The Fed's 60 Seconds Of Desperation

Forget the myths that the media's created about the Fed.  The truth is, these are not very bright guys and things got out of hand. Follow the money...just follow the money.  - My paraphrase of "Deep Throat" from "All The President's Men"

The price of gold was remarkably smashed $35 in the space of 60 seconds at 10:14 a.m. NY time this morning.  12,000 contracts hit the market almost all at once.  To put this size in context, on Friday a little over 107,000 Feb contracts traded during the entire 23 hour Globex system session.  In other words, today at 10:14 a.m., a little over 11% of Friday's total volume traded in the space of  1/1380th of the entire Globex session for a given period.

The hit came from nowhere and halted a strong rally in the price of gold that began last night in Asia.  Concurrently, the dollar was selling off hard, as was the S&P 500.  There was no apparent news or event that would have triggered the price smash:

The price of gold as write this has since recovered about 90% of the price hit.  Silver, which was giving all indications of behaving like a runaway freight train before the hit, has recovered about 2/3 of its price-ambush.

Mere manipulation by desperate criminals?  

This is the unmistakable sign of desperation.  Desperation to keep a lid on the price of gold in an attempt to make the public believe that everything is ok in this country and with the U.S. dollar.  But we all know otherwise...

I have no doubt that the hit was used by JP Morgan to get more long Comex gold futures and to induce a flood of GLD share selling.  The GLD shares will be turned into the GLD Trust either today or tomorrow and used to remove more gold.  I bet within the next couple of days, today inclusive, we'll see a large withdrawal of gold from the GLD Trust.  For the record, selling of GLD shares does not trigger the removal of gold  Gold can only be removed by the banks who exchange shares for gold.

Monday's Pending Home Sales Report: More Negative Housing Data

On Monday the National Association of Realtors (NAR) released its Pending Home Sales Index report for November.  This is a pretty good proxy for the volume of activity in the housing market because it contains a data column that shows the actual number of signed contracts, which can tell a strikingly different story than the "seasonally adjusted annualized" number that makes headline news reports.  It does not revise for cancellations, which started to rise sharply during Q3 and Q4.

While November's data showed a slight increase vs. October using the adjusted annualized calculation that Wall St. likes to promote, it missed analyst expectations by a wide margin.  In addition, if you apply real analysis to the unadjusted data, you'll find a very bearish trend emerging.

I did an article for Seeking Alpha in which I detail a real analysis of the unadjusted data.  You can read it here:  More Bearish Data For Housing.

Just for the record, I do not take delight in being right about what is happening in our system.  But the public deserves to see the truth and not the manipulated, fraudulent reports issued by the Government, Wall Street and reported by the subservient financial media.  Unfortunately, a lot of people jumped into homes they could not really afford over the last 18 months because the Government, realtor industry and media brainwashed a lot of people into thinking that there was housing recovery underway.

After several trillion of Fed and Government direct stimulus into the housing market, is THIS really how you would define a recovery?

(source:  Shadowstats.com, edits in red are mine)

If that's a recovery, what's the impending downturn going to look like?