The house of cards that is the massive amount of financial derivatives swilling around the financial system has never gone away (Warren Buffett’s “weapons of financial mass destruction”)…developed country government debts have gone through the roof in the past nine years, with countries such as Greece, Japan and even maybe Italy too deep in the debt hole to ever climb out…economic growth has been poor, even during the supposed “recovery” phase. Brexit may have concentrated traders’ minds, but given the pre-Brexit price moves in bank stocks over the past year it looks like there’s a lot more going on. It’s all uncertain, and I’ll be keeping an eye on developments. But for now it seems clear that a large allocation to gold remains a good idea.
Remember when the Supreme Court decided that Obamcare is legal but it's a tax? Well, the nuances were irrelevant, but when it comes to the Bureau of Economic Analysis they could not have been greater: by effectively counting a tax as part of US economic growth, Obama, the Supreme Court and the US government's beancounters assured themselves of a steady stream of "economic growth" for quarters to come, and sure enough, Q1 was no different.
As regular readers know, when it comes to the one constant source of US economic growth, nothing is more reliable than Healthcare, which is merely another name for how Obamacare figured in the bean-count reports. And, we are confident, it will come as no surprise that in Q1, when real GDP grew by $44 billion in real terms, or 1.1% annualized, from $16.471 trillion to $16.515 trillion, Healthcare was responsible for $26 billion (rising from $1,896 billion to $1,929 billion annualized) or a whopping 58.4% of the total.
That's great. So the thing that is a tax and unsustainable is the reason for growth. What a huge toxic bubble.
The economic reports continue to show an overall rate of deterioration in economic activity down to levels – in general – comparable with the 2008-2010 period. Freight transportation activity is part of the “nerve center” of the economic system. The latest data from Cass shows a rapid decline in both freight shipments and expenditures that began in mid-2014:
Although shipments ticked up from April to May 1.3% – attributable to seasonality – year over year shipments for May dropped nearly 6%:
Andrew Maguire: “When you look at gold priced in British pounds, or euros, or the yuan, we are talking about the price of gold in those currencies already reaching 2013 levels. So we are seeing big moves in gold in every currency and it’s beginning to spillover into dollar gold. It all boils down to a paradigm shift that we are witnessing in the gold market at this point. And I see a lot of…
There’s nobody looking for value out here [in the stock market] – there is none. It’s obvious the Fed is holding up the stock market. This is one of the reasons the Fed will never be audited. – Friend and colleague of Investment Research Dynamics.
The money printing by the Fed has created the most overvalued stock and bond market in history. The stock market overvaluation is even worse if you use real accounting. But it’s not just outright money printing. The supply of money includes credit creation. This is a fact that surprisingly is overlooked by most, even those I consider highly intelligent: debt behaves like money until that point in time when the debt is extinguished by repayment – not “restructuring.” Take a look at this:
(click to enlarge – source: Wolfstreet.com with IRD edits). The auto debt used to finance car purchases since 2010 hits an all-time every month. The debt issuance behaves like printed money until it’s repaid. But I would bet at least half of that $1 trillion debt will default.
To help save the economy, the Government will announce next month that the Immigration Department will start deporting seniors (instead of illegals) in order to lower Social Security and Medicare costs.
Older people are easier to catch and will not remember how to get back home.
LOL This made me laugh. But I'd add to it that before the deport them they confiscate their pensions.
You should probably make peace with this trend; it’s going to define our future into the 2020s.
Because now the market plainly sees — as I have been saying since 2012 — that the U.S. economy is a bit like Wile E. Coyote: His jerry-rigged plans to catch his prey never quite work out, because he’s not wily enough to understand that his plans are doomed from the outset. He doesn’t understand his prey.
Thirty-eight thousand jobs. That was the latest Acme anvil to smack the coyote senseless.
The cost of mining gold for the world’s top producers dropped more than 7% in the first three months of the year as most companies ignored the metal price’s spike and continued efforts to straighten out their books, a new report shows.
According to data compiled by SNL Metals & Mining, the top 17 publicly listed gold companies that reported all-in sustaining costs (AISC) produced the metal at a weighted-average cost of $833 per ounce in the first quarter of 2016. This compares to the $900 an ounce price calculated by Gold Fields Mineral Services (GFMS) for the same period last year.
As yet another indicator that Asian demand for gold so far this year has been slipping significantly, May gold deliveries out of the Shanghai Gold Exchange (SGE) in May came in at only 147.3 tonnes – down from 171.4 tonnes in April. The year to date figure is thus 834.6 tonnes – a very significant 17.7% fall on last year’s total at the end of May of 982.7 tonnes. Admittedly 2015 was a huge record year for SGE gold withdrawals, and the current levels, if the average to date continues for the remainder of the year, would put the year-end figure at just over 2,000 tonnes – still a huge amount in terms of global demand.
Gold is currently trading in excess of $1300 an ounce. This is well above the 1980 all-time high. However, this is an incomplete representation of what gold is trading at relative to US dollars. When you look at the gold price relative to US currency in existence (US Monetary Base), then it is close to the lowest value it has ever been. This in itself is a major warning regarding the sustainability of the current monetary system. In other words, the monetary system is the most debased it has ever been. Furthermore, not only is the monetary system at an all-time high stress-point, but also, this comes at the worst possible time relative to other key conditions. Together, these factors will ensure that the outcome of the current monetary distress, will be much worse than any previous ones. There were previous significant monetary stress-points in the early 1930s and 1971. Although, the outcomes from those events were very bad, it did not lead to a complete loss of confidence in the system itself.
I’m figuring that is what investors were saying on Wednesday after financial markets around the world regained more than half of the losses caused by Britain’s shocking decision to leave the European Union.
And if you include the hokey rally the day before the British voted to Brexit — as Britain’s abandonment of the EU is being called — stocks barely budged.
I say the decision was “shocking” only because the powers that be were pretty sure voters wouldn’t dare escape the EU.
Do not believe the mainstream media that the Brexit vote crashed the global markets. The real reason why all markets tanked is record debt levels around the world that will never be paid back. Fantasy has just met reality in the global markets, and the carnage is far from over. The fantasy of unpayable debt expanding forever is now beginning to be realized by the central banks that have been propping up the global economy since the 2008 meltdown. The central banks cannot and will not be able to stop this unfolding crash. If you are not prepared, there is little time left. ...
Click through for the rest and video. Debt is the key and people, those on the main street, are trying to survive it.
The entire financial world is a cartoon drawn by can kickers who are called experts. The thieves of our future should be rounded up and made permanent parties on “Naked and Afraid.” Clearly they are scared to death as to what is contained here. Their actions are so transparent they are naked. The visual of this is really awful. Worst is what they do knowing their short term actions, will without any doubt, bring on the long term return to the New Normal Dark Ages. These experts and self-proclaimed elites are truly the Four Horsemen of the End of Days Economic. From MOPE to QE to EDE and the end.
If I was young or a strong 75, I would get out of here while I still could going to the best location of nobody in the middle of nowhere. Watch the documentary “Last Alaskans” to see the lifestyle of the survivors and their families. For that life you have to be young or have the strength of an ox. Preppers know the problem but Preppers will all run out of their carefully selected but limited preparations. The elite are fairy like fops, all of them. The old European families are so bad there is no description. They only mingled with their own kind or people so they are more inbred than the aboriginal.
These manic liberals, one world government and 1% have killed us all, including themselves. I wish I had an easy solution but there is none. You must be self-sufficient among self-sufficient others in the most rural of areas. Now who can do that?
There is one sign of hope. That is Heimo in this documentary. He is the northern most Jew on the planet, and thus the TV name, Heimo North. If Heimo can do it and be so happy, there is a chance, but not in Manhattan or Los Angeles.
Heimo may never know it happened or care. So who wins, Heimo or the 1%, Kim Kardashian, or Edna North?
What's left unsaid is much of the upper middle class is prospering due to privileged positions that are increasingly at risk of disruption. What does it take to be upper middle class? According to one analyst, the answer is: at least $100,000 a year for a family of three. The Growing Size and Incomes of the Upper Middle Class (Urban Institute).
The paper claims the upper middle class has grown from 12.9% of the population in 1979 to 29.4% in 2014--in essence, the shrinkage of the "middle class" is not just from households dropping down the ladder but millions of households climbing up to the upper middle class. Not Just the 1%: The Upper Middle Class Is Larger and Richer Than Ever (WSJ.com)
“When it becomes serious, you have to lie.” — Jean-Claude Junker, President of the European Commission.
Normally, I would not bring a European politician into a discussion about the U.S. economy. But in this case, European Commission President Jean-Claude Junker has “let the cat out of the bag.” In an unguarded moment, Junker let slip the working principle that guides politicians everywhere.
The approximate hour Janet Yellen spent wandering in circles and spewing double talk during her presser yesterday was time well spent. When the painful ordeal of her semi-coherent babbling was finally over, she had essentially proved that the Fed is attempting an impossible task.
And better still, that the FOMC should be abolished.
The alternative is real simple. It’s called price discovery on the free market; it’s the essence of capitalism.
It was fun playing Masters of the Universe when expectations were low. Ah, the good old days, when a simple, completely empty promise to do whatever it takes could move the world. It was fun being a central banker back in the good old days--back then playing Master of the Universe was wondrously good fun. Now--not so fun. Now that interest rates are drifting below zero, there's not much room for fun left in that sandbox. As for mortgage rates: they're so low, some countries are effectively paying people to take out a mortgage, and the resulting bubbles and market distortions are no fun.
For more than three years we have watched the COMEX very closely. The initial clue to begin watching were the waterfall events where the amounts of paper gold and silver sold simply dwarfed what was being mined. I have said many times after the smackdowns, “first, no one has this much (gold or silver), second, no trader would ever sell in this fashion and destroy the price he will receive for the sale. Clearly the sales were done to affect price downward”. Each time I have written on this topic and suggested it would ultimately end with a delivery default I have been trolled. It looks very much like we will soon find out a default of delivery is not only possible but highly probable.
Starting with gold, last month (May) saw 221,000 ounces stand for delivery. This amount actually grew during the month which is highly unusual as the amount standing has ALWAYS dropped during delivery periods, this is the first time to my knowledge that the amount standing actually increased. For comparison, May 2015 delivered only 2,500 ounces. Looking back at June of 2015, the amount standing on first notice day was 509,000 ounces. The final amount delivered was 295,000. As I have written and questioned before, who would fully fund their account 100% to take delivery …and then “go away”? The answer of course is someone willing to accept a “premium” as a bribe to not take delivery.
The media is doing it’s part to cover up the unexpectedly bullish trading action in gold and silver. It’s a given that the Fed is making an all-out effort to keep a lid on the price gold. But we found this headline from Investing.com to be a head-scratcher: “Gold pulls back from 3-week highs on U.S. jobless claims data.” Here’s the truth:
As you can see, the price of gold shot up $9 right after today’s jobless claims data was released (it’s a useless statistic anyway). If the headline said: Gold price hit on London a.m. fix, that would have been the truth.
This decline is inevitable in fast-expanding economies that depended on export growth and investment booms. The fundamental context of China's economy is that it has traced out an S-Curve--as did previous fast-developing nations such as Japan and South Korea. Gordon Long and I discuss why there's no easy fix to the S-Curve in our new video discussion Bull in the China Shop (35:25).
Two months ago, there was a referendum in Holland about an association agreement between the EU and Ukraine. A relatively new Dutch law states that with an X amount of signatures a referendum can be ‘forced’ by anyone. Before, during and -especially- after the vote, its importance was -and is actively being- pooh-poohed by both the Dutch government and the EU. That in itself paints the issue better than anything else. Both the call and the subsequent support for the referendum stem from resistance against exactly that attitude.
The Dutch voted No to the EU/Ukraine agreement. It was with a turnout not much above the validity threshold, but a large majority of those who did vote agreed they want no part of the deal. This puts Dutch PM Rutte in an awkward position, he can’t be seen ignoring the population. Well, at least not openly.
The Fed traditionally embarks on an interest rate tightening cycle when inflation has started to run hot. This decline in the purchasing power of the dollar will nearly always manifest itself in: above trend nominal GDP, rising long-term interest rates and a positively sloping yield curve. These prevailing conditions are all indications of a market that is battling inflation; and thus prompts the Fed to start playing catch up with the inflation curve. For example, the last time the Fed began a rate tightening cycle was back on June 30, 2004, when the Fed moved the Overnight Funds rate from 1% to 1 ¼%. At the time, the Ten-year Note yield was 4.62%, and the Two-year Note was 2.7%, creating a 1.92% spread between the Two and the Ten-year Note. To illustrate the fact that the long end of the yield curve was pricing in future inflation, the Ten-year yield climbed to 5.14% two years into the Fed's rate hiking cycle. And perhaps more importantly, real GDP was 3% and rising, while nominal GDP posted an impressive 6.6% in the second quarter of June 2004. To reiterate, the last time the Fed began to raise rates it did so on the back of higher than normal nominal GDP, rising long-term interest rates and a positively sloping yield curve. With this in mind, let's take a look at the environment for the current tightening cycle.
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