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INVESTMENT RESEARCH DYNAMICS

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This Demonstrates The Irrelevancy Of Obama And Biden

The crisis in Crimea won’t keep President Barack Obama from forging ahead with a weekend getaway with his wife and daughters in the Florida Keys...The vacation is Obama’s third of the year - The Washington Post - LINK

The U.S. and Russia are inching toward a serious confrontation over the U.S.-led coup of the Ukrainian Government and Russia's move to protect its interests in Crimea, millions of people in this country struggle to make ends meet and Barack and Joe decide to take their families on a warm-water vacation.

It doesn't really matter because Obama and Biden are nothing but figureheads who represent the extremely wealthy corporate and individual interests which paid for their election.  Those are the real players behind the scenes.  They use Obama to sign the Executive Orders which enact the policies designed to make the real players even richer - at the taxpayer's expense, of course.

Notice how Biden has been mysteriously silent on the Ukraine situation?  The White House can't afford the risk that Biden says something completely stupid, or "off-teleprompter," so I'm sure he was instructed to disappear.   Obama has volunteered to stay away from Democratic incumbent campaigns because of his poor approval ratings, so he's pretty much dead weight until his term expires. 

I guess the only problem I have with letting Obama and Biden go on perma-vacation is that the wealthy elitists should be funding their vacations and not the taxpayers.

The U.S. Government Is One Big Lie

The US economy remains in recession.  And once the truth breaks out, the stock market will slip into crash mode.  The stock market is up on Fed manipulations, and the economy is up on lies and propaganda.  It’s a poisonous combination  - Richard Russell, King World News LINK

I encourage everyone to read that brief interview with Richard Russell.  

As I discussed yesterday, we know the Government is lying through its teeth to us about the Ukraine situation.  It's amazing how quickly CNN and Fox News seem to have misplaced the Victoria Nuland phone tape  discussing the $5 billion the U.S. has "invested" to foment the unrest over there.  You know, the one in which she says "F_CK the EU."  Both CNN and Fox are disseminating nothing but the lies being promoted by Obama/Kerry etc without researching or reporting on the actual facts.  Kind of ironic that CNN backs the Obama regime's backing of the neo-Nazis who have taken control of western Ukraine (I'm not surprised that Fox News supports this). 

The Government also lies about the employment situation in this country.  We saw the most recent example today with the Bureau of Labor Statistics monthly employment report claiming that the economy generated 175,000 jobs in February.   I don't want to go through a detailed analysis of the data as reported and the obvious statistical manipulation implemented on that data.  The real issue is the legitimacy of the data itself.  This requires thinking about the data as presented in the context of every other business data report that was released during February, especially the reports from the private sector.

As one example, the BLS claims that the construction industry added a total of 55,000 jobs in January and February.  Yet, we know from homebuilder reports that housing starts have been tanking.  And what about the "bad weather" narrative.  If housing starts declined over the period and bad weather prevented this, how on earth is it possible that profit-seeking businesses hired workers?  Does anyone really think that a homebuilder executive, who is trying to keep his stock price elevated so he can unload as many shares as possible (see the recent S-4 SEC stock transaction filings - homebuilder execs dumped shares in February), would spend money hiring workers who don't have to work?

That's just one line item example.  There are several.  The point here is that if you look at the numbers being reported - regardless of how they are manipulated to paint a positive picture - in the context of everything else that has been reported about the economy, there's no possible way that the economy generated job growth in February.  In fact, the ill-reputed "birth/death" model, which everyone understands is used as "plug" number the Government uses to pad the employment data, explains 125,000 of the 175,000 jobs reported. The birth/death model has been dissected and shown to be a complete fraud ad nauseum.

The smart money must understand this, because the S&P 500 futures gapped up nearly 10 points when the number hit the tape.  It's currently trading down 3 points, 13 points lower than the initial buying orgy.  The real damage was inflicted by the banks who manipulate the gold and silver market.  Instantaneously as the report hit the newswires, gold was demolished for a total of $25 before recovering some of the manipulated damage.  Right at the time the report was released, nearly 8,000 gold contracts were unloaded on the Comex..  To put this into context, in the 14 hours and 20 minutes of Comex gold futures trading that occurred from 6 p.m. the previous evening until the 8:30 a.m. Comex open today, the total volume was roughly 45 contracts per minute.  You decide if the 8,000 contracts dumped at 8:30 a.m. was legitimate selling or motivated Fed/Govt manipulation

The most frightening part about all of this the fact that the Government finds it acceptable to lie to us about everything.   The U.S. Government has become as corrupted and self-serving as was the old U.S.S.R Government that many of us grew up fearing.   The lack of fear about what has happened in our own backyard is truly stunning.

The Truth About The Conflict Over Ukraine

 [Secretary of State, John ] Kerry, wallowing in his arrogance, hubris, and evil, has issued direct threats to Russia. The Russian foreign minister has dismissed Kerry’s threats as “unacceptable.” The stage is set for war.  - Paul Craig Roberts

Before I elaborate on the above a quote with a few salient passages from PCR's brilliant analysis and commentary on the situation in Ukraine, I want to clarify for anyone reading this that the U.S. has funded and militarily supported a political regime in western Ukraine that has ingrained political and military roots with Hitler's Nazi Party.  This is an undisputable fact.  If you decide to fall for the Orwellian rhetoric flooding all of the U.S. news outlets, you are doing so out of complete ignorance of the facts.

Kerry has no answer to the question: “Since when does the United States government genuinely subscribe and defend the concept of sovereignty and territorial integrity?”

In working with Dr. Roberts on several collaborative articles about the U.S. Government's long term and massive intervention in the gold market, I have come to appreciate the deep insight and understanding he has for what is really happening behind "the curtain" in DC.  His ability to communicate and elucidate this reality is nothing short of brilliant.

Washington wants missile bases in Ukraine in order to degrade Russia’s nuclear deterrent, thus reducing Russia’s ability to resist US hegemony. Only three countries stand in the way of Washington’s hegemony over the world, Russia, China, and Iran.

His latest article on the truth about what is happening in Ukraine and why the U.S. has fomented political and civil chaos over there is a must-read for anyone who seeks the truth.

Everyone needs to understand that Washington is lying about Ukraine just as Washington lied about Saddam Hussein and weapons of mass destruction in Iraq, just as Washington lied about Iranian nukes, just as Washington lied about Syrian president Assad using chemical weapons, just as Washington lied about Afghanistan, Libya, NSA spying, torture. What hasn’t Washington lied about?

I encourage everyone to read Dr. Roberts' full article here:  Washington's Hubris

If you are confused about the facts, please educate yourself with this article from geopolitical and economic analyst, William Engdahal:  The [U.S.] Rape of Ukraine

Keep in mind that throughout history, the most definitive sign that a great Empire is in the latter stages of collapse is wantonly corrupted and reckless imperialism - of which we've seen many examples since Bush and Obama took office.

The London Price Fix Is Rigged - Here's Why Ross Norman Is Full Of It

                                       
In a mainstream media disclosure that took the gold investment world by surprise, Bloomberg published a report - Article Link - last week which contained data from an academic study that showed that the daily London gold price fixing has been manipulated for at least 10 years. While this is not new information to many precious metals investors, it is the first time that an establishment news outlet has exposed the truth about the widespread and blatant Government-sponsored manipulation of the precious metals market.  It should be noted that the Financial Times also published this report but then retracted and deleted the article.

The London daily gold fix is an event that has been setting the price of gold twice a day since 1919. With the advent of computerized market trading and the gold/silver futures market (1974), it would appear that the London fix is no longer necessary as a mechanism of "price discovery." As we will see, the London fix still exists because it is used by the bullion banks as an overt market manipulation mechanism.

The price "fixing" is conducted by 5 individuals who work for their respective bullion banks. These individuals jointly decide what the "spot" price of gold should be twice a day, once in the morning and once in the afternoon (London time). They committee is allowed to communicate with market participants and their respective banks are permitted to continue trading gold and gold derivatives while these individuals decide what the price of gold should be.  Theoretically this price as "fixed" is determined to be the price which will clear the market of all buy and sell orders up to that point.  Theoretically, it provides a "benchmark" price for the spot price of gold.  Incredibly, the time of fix occurs during the period of time when the Shanghai Gold Exchange, the largest physical gold market in the world, is closed for the day.

But how can a closed system like this possibly operate objectively? The gold fix system is inherently ingrained with the conflict of interest and moral hazard the accompanies any system governed by collective "judgment." The Bloomberg News article details a study done by NYU professors which showed that between 2004 and 2013 large price moves during the afternoon "fix" were moves lower at least 66% of the time. In 2010, the large moves were negative 92% of the time.

From their work, the authors concluded that the market in all probability was manipulated by the banks whose representatives establish the price fix every day: "There’s no obvious explanation as to why the patterns began in 2004, why they were more prevalent in the afternoon fixing, and why price moves tended to be downwards" - Rosa Abrantes-Metz, one of the authors of the study.

As it turns out, Ross Norman, CEO of the well-known London-based Sharps Pixley bullion retailer issued a rebuttal to the Bloomberg article and in defense of the London fix (LINK).  Ironically, in his attempted defense of the gold fix process, Norman inadvertently exposes the system's inherent flaws, thereby showing the reader how the London fix committee can easily manipulate the market. In fact nearly every point of assertion about, and defense of, the London fix process is embedded with half-truths or outright lies.

In response to the fact that there are unusually large moves during the "fix" period, Norman explains: "the fix is a price discovery process and as such large buying and selling orders collide here - large moves are therefore to be expected. In fact, the mere fact that it does move confirms some differences in opinion over fair value between the clients dealing in the fix - actually it supports the notion of the integrity of the process."

This explanation is is patently disingenuous. Gold trades in either physical form or derivatives form (futures, forward) nearly continuously during the trading week. The "price discovery" process occurs inherently with every buy/sell transaction. To say that it is only at the time around the p.m. London fix that large orders to buy and sell constitute "price discovery" is entirely misleading. In a continuously functioning market, orders of all sizes are executed and "price discovery" occurs with each trade execution. A committee of five individuals is not needed and collective "judgment" about what the price should be is not required.

In his second point of defense of the London fix, Norman makes these comments: "the fix is used by official institutions (like Central Banks) and many major miners who all require an "objective" and published price because they need to [be] more accountable than say (sic) a proprietary trader. The spot price for example is neither of objective (sic) nor published. Selling by miners in size every day and invariably outweighs (sic) any official buying which is typically large but infrequent. Hedging or financing for the miners have will often (sic) link their financial arrangements to the gold fix."

Just as a note, it's interesting that Norman decided to put quotes around the word "objective." Clearly the London fix is anything but "objective," since by it's very nature it defies the objectivity and price discovery mechanism of a continuously functioning market. I'm not sure why a "fixed" price needs to be "published" at all.  At any given time during the 23 hour trading period of each business day gold trades in either physical or derivative form (futures, forwards). Anyone can go online and "discover" the current trading price of gold.

To be perfectly clear about this, any price which is determined in the market by a buyer and seller is inherently more objective and visible than is a price which is "fixed" by a committee of five individuals saddled with inherent conflict of interest. Mining companies and Central Banks are free to use the standard market mechanisms to execute their trades. To say that a committee operating out of view of the market can determine an official "spot" price is either unintentionally disingenuous or an outright lie. If anything, the London fix process prevents the true price discovery process of an open and free market.

Norman also claims the London fix conference call is not private and is open to clients. Do you have access to this call? Our firm does not. I don't know of anyone who has access to this call. While the price fix committee of five may have information about the large buy and sell orders that are about to "collide" - to use Norman's term - the market as a whole does not. An efficient market functions most efficiently in its price discovery process when as much information as possible about buyers, sellers and size is immediately disseminated to the entire market. The London price fix system not only prohibits the dissemination of information that might help the market achieve its price discovery goals, it leaves the discretion as to the "best" market clearing price at that point in time up to the committee of five who may or may not be on the phone with their best preferred LBMA member clients or their own banks.

Again, to reemphasize this point because it can not be emphasized enough, the price fix committee members have de facto conflict of interest by the very fact that the banks they work for have large capital positions in gold and silver. Furthermore, while detailed LBMA position data is not made available to the public, we know that these banks run large net short positions on the NY Comex. To say the least, the banks have a motivated interest to see a lower price fix every day.

Norman next tries to defend against the findings of the study that the price of gold at time of the p.m. fix is fixed lower a majority of the time - with the statistical evidence overwhelmingly in support of this conclusion - by explaining that if London gold dealers (i.e. the bullion banks) "had consistently shorted gold as maintained" they would have suffered massive losses.

This assertion is absurd because it assumes that the big bullion banks are always long gold. Yet, we know from over a decade of Comex data that the big bullion banks have run massive short positions in Comex gold futures. We don't know whether the big banks are net long or net short on the LBMA because the LBMA does not publish enough information about the big bank forward contract and bullion positions. In fact, from the size of the historical net short position of the big banks on the Comex, and the accompanying trading turnover of these positions, any bank with access to information about the level of the price fix before the general market sees it has the ability to net rapid and riskless trading gains on a daily basis.

Finally, Norman tries to deflect the issue entirely by opining on the "vested interest" of Bloomberg in publishing this article and ends by scolding the organization ("shame on you...for lack of journalistic discretion and judgment...and failure to ask the right questions").

As Norman tolls this bell of scorn and disdain for Bloomberg News, ironically he's ringing it at himself, as Norman's disingenuous defense of the LBMA gold price fix surreptitiously exposes the reasons why the gold fix process is highly flawed. Indeed, it is a system of price determination which is susceptible to the moral hazard and market misconduct which accompany any market system in which price level is determined by a small committee individuals, all of whom have a high level of inherent conflict of interest.

One last point, Norman is correct that Bloomberg fails to ask the right questions. Here's a small sampling of the right questions: 1) Given that the gold market trades nearly continuously during the business week, either by auction or computer, why is the London fix needed at all?  2) Why does the fix occur after the Shanghai Gold Exchange, the worlds largest physical bullion market, has closed for the day?  3) Why are the members of the price fix committee allowed to be representatives of the big bullion banks? 4) if #2 is unavoidable, shouldn't the members be from organizations which do not run capital positions in gold and silver or stand to benefit from inside knowledge about the price fix? 5) Why doesn't the LBMA publish more specific and detailed data about the forward contract and bullion positions of its member banks?

Did Russia Just Flash The Global "Trump" Card Some Countries Hold?

                                                                            
"We hold a decent amount of treasury bonds – more than $200 billion – and if the United States dares to freeze accounts of Russian businesses and citizens, we can no longer view America as a reliable partner,” he said. “We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency and leave the US market."

Many of us have been wondering when one the of the large holders of U.S. Treasuries was going to brandish a freshly sharpened sword and threaten to swing it at the Achilles' Heel of the United States.

The quote above is from an advisor to Putin in response the the threat of the U.S. implementing economic sanctions against Russia.  You can read the article from a Russian newspaper here: (sourced from Zerohedge) LINK

While I highly doubt that Russia will actually dump Treasuries as a form of financial war against the U.S. - at least this time - the Putin advisor just made it clear that several powerful countries, with interests that often conflict with U.S. imperialistic behavior, hold a weapon of defense that is the equivalent of a financial nuclear bomb.

What's most fascinating about watching the Ukraine events unfold is the shamelessness with which the U.S. attempts to impose its will on Russia for defending its own interests, and yet the U.S. wantonly goes into countries like Iraq and Libya, assassinates the leader, overthrows the Government and installs its own puppet.  It's truly amazing, if not utterly Orwellian, the way in which the major U.S. media outlets have conveniently forgotten about the Victoria Nuland tape that Russia released discussing the U.S. role in destabilizing Ukraine in the first place.

The biggest problem for the U.S. is that, despite the progressively fraudulent Government reports to the contrary, the U.S is spending far more everyday to keep the lights on than it takes in to cover those expenses.  Watch this year as the spending deficit increases dramatically.  We'll soon understand why the Obama Government pushed so hard to remove entirely the debt ceiling limit.

Unfortunately, it is becoming increasingly apparent to anyone who examines the facts which belie U.S. Government pomp and circumstance that, short of unleashing nuclear weapons, the U.S. is only capable of bringing knives to a gunfight.

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.
                                                  

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.

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 Amazon.com and Ebay?  By the way, online sales tanked hard in January too.  The answer is:  fraudulent or incompetent reporting.

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...

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:

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 - SilverDoctors.com

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.

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.

More Inventory Slows Home Value Growth

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...

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.

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...

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.

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.

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...