Gold & Precious Metals
The USTreasury 10-year yield went below 1.4% this week. Some unenlightened celebrate the asset appreciation and point to a successful asset in performance in an otherwise dismal financial market. The Jackass said in the June 6th public article “USTBonds: Black Hole Dynamics” that such a success is a marquee billboard message of economic meltdown and systemic failure. As the rally continues, possibly the onliest rally outside of corn and soybeans in yet another disaster, people should focus on whether the systemic collapse will occur before the 10-yield hits 1.0% in my warning. Focus on four major points:
- The unspoken effect of ZIRP (0%) is the powerful ongoing destruction of capital, as the entire cost structure rises
- As equipment goes off line further, the USEconomy will weaken further, in a powerful vicious cycle
- The official Zero Percent Interest Policy is the calling card of the Gold Bull Market, powered by negative inflation adjusted returns on savings
- The USTBonds will fail from their own success, unleashing the Gold Price when the investment community and global creditors realize no further potential appreciation in the most massive asset bubble in modern history, supported by Interest Rate Swap derivative machinery. Money will eventually fly out of bonds and seek true safe haven.
Fear not. The USTBond 10-year yield (TNX) will not and cannot reach below 1.0% as all ponderings of a world with 0% on 10-year yield are divorced from reality. The Black Hole is working hard, gathering force, amplifying the gravitational field. It is happening right on schedule, no surprise here, a very easy correct forecast. The original supposed Flight to Safety in the USTBonds was totally fabricated and phony. As mentioned at least a dozen times by the Jackass, the last half of year 2010 saw the dutiful Wall Street outpost Morgan Stanley devote a fresh $8 trillion in interest rate derivatives, fully documented by the Office of the Comptroller to the Currency. Their reports never make the headlines, since they are so chock full of rancid fetid scum. As the TNX marches down the swirling pathways within the vast USGovt debt sewer-like cisterns, their energy will be derived from the massive recession that has engulfed the USEconomy. Not only is the flight to safety in the USTBond complex a total fabrication falsehood, but the USEconomic recovery is also a fiction written on political propaganda posters. The followon flight to the bubble ridden USTBond is based upon economic wreckage and broad disintegration of the entire periphery and surrounding core to the bond market. The great sucking sound can be heard, much like during the non-earthquake in Virginia in September 2011. Experienced traders are looking at each other, in full recognition that the TNX rally is indeed an endgame signal.
Gold Is The True Sanctuary
The concept of solutions for the global monetary system, the global currency system, and the global banking system, have become outright laughable and an insult to the intelligence of observers. The paper system has become weighed down by toxic assets to the point of rendering the entire system insolvent and sinking its future prospects. No new debt can repair and provide remedy for the fatally sick and current overly indebted dying system. The new trade settlement facilities are ready to put in place, based upon a Gold & Silver core. That word has come from a source directly involved in the preparation process for the Eastern Fortress. The trade notes will provide the lubrication to complete trade, which will have a hard asset core. The USDollar will gradually fade away from trade settlement, except for the United States, Canada, the United Kingdom, and possibly Southern Europe. The great tipping point approaches, whereby over half of global trade will be settled outside the domain of the crippled toxic USDollar. The foreign participants can no longer tolerate the bank bond fraud, the central bank debasement, and the usage of bank devices as weapons.
Major changes are coming. A return to a certain type of Gold Standard is right around the corner, awaiting the Western collapse that is in a late stage of pathogenesis. The jumping brush fires that the London, New York, and Western European bankers must contend with will eventually envelop them, doling out massive smoke inhalation. Worst of all, the jumps will expose new areas of corruption every few weeks, sufficient to bring down the system. After all, it is a fiat faith based system. The faith has long ago vanished. All that remains is power politics, arrogance, and corruption. The new system will force the Gold price above $5000 per ounce on a conservative basis. It is all part of the plan not yet revealed. The Gold/Silver Ratio will revert to 20:1 in time. That translates for the math impaired to a $250 per ounce Silver price. These are conservative figures.
…read more about the Libor Scandal, Gold, Isolvent Banks, Interest Rates HERE
From THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.
Stocks down another 104 points yesterday…measured by the Dow.
What’s going on…? What’s going on?
That was a song by Marvin Gaye. It was also the question the interviewer asked. Followed by, what’s going to happen next?
But those are questions no one can answer. All we can do is guess…speculate…and wonder.
“Deflation now. Inflation later” is what we’ve been saying for the last 4 years.
The interviewer seemed happy with the answer. And the elaboration:
“Japan now…but don’t be surprised when we end up in Argentina.”
What do Japan…Argentina…and the US all have in common? They can print money. And when their backs are to the wall, that is what they will do.
But that’s later, remember. Right now, investors are lending money to governments at the lowest rates in history. They do not ask anything more than to get the money back. Eventually. And since the US and Japan can print, they are confident that they’ll paid.
But what about Argentina? Turns out, Argentina borrowed in dollars too…and pledges to repay, in dollars. So, you might think you’d get the same interest yield in an Argentine bond as an American one.
But what’s this? The yield on the ‘Boden,’ which is what they call Argentina’s dollar bonds, is over 17% — which is more than 10 times what you get from a 10-year US note. What gives? Simple. Argentina can print pesos. It can’t print dollars. So investors are afraid that when time comes for repayment, the Argentines won’t have enough dollars on hand.
No such problem in the US. And as long as this recession or ‘contained depression’ continues…investors will probably continue to treat US debt like a mattress. You put your money in. You can get it out when you want. You don’t make anything. But you don’t lose anything either.
But how long will this Japan-like slowdown continue, our interviewer wanted to know?
“Hard to say,” was the reply. In terms of private sector debt, the downturn is taking out an amount equal to about 10% of GDP every year. But there’s still the equivalent of 100% of GDP of excess debt left to go before we’re down to ’70s levels.
If that’s where it is going, we’ve got another 10 years of travel — at this rate.
Meanwhile, in the near term, it looks like the US economy is headed into another recession. That’s what usually happens when retail sales go down for 3 months in a row.
Seventy percent of the US economy is consumption. So, when the consumers stop buying, the economy goes down. Lakshman Achuthan, who runs Economic Cycle Research Institution, says he thinks a recession has already begun.
And when the economy goes down, generally, stocks go down. The little sell-off we’ve seen so far is nothing. The Dow hit 13,000 in 1999. It has gone nowhere since. And now, it should begin to sink.
As mentioned, retail sales are falling…
Corporate profit estimates are going down…
The Chinese growth rate has dropped 6 quarters in a row…
America’s corn and soybean crops have failed…
Family income is in decline; never before has it gone down over such a long period (12 years)…
US bond yields are at their lowest ever, with the 10-year at 1.39%.
Came the question: “Well, what should our viewers do?”
“Sell stocks,” was the answer.
Regards,
Bill Bonner
for The Daily Reckoning
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
Special Report: Forget QE3 – America’s Going Bust, on the Road to Bankrupt Hell- If America had a credit card, it would get mercilessly cut up and thrown back in her face. The country’s basically broke and isn’t paying its debts. Harsh, but true. All of that – and how it could affect your family and your retirement – is revealed in this urgent video report. Don’t wait, watch now.
Want to see what the Crowd thinks are the BEST companies for discovery potential?
Want to see those the Crowd thinks are the poorest potential for discovery?
This AM I am showing the top 15% of companies ranked by at least 5 independent scorers followed by the bottom 15%. These are as of yesterday’s close. Currently there are 1036 DiS registrants. Approximately 30% are active scorers of their portfolios. Portfolio average size amongst scorers is about 6 companies. As you can see rankings change. They tend to correlate quite well with forward share price performance. More analysis of performance correlation will follow in another Morning Note.
We will also be correlating changes in rank and changes in individual factor scores (there are ten Discovery factors) in addition to the rank statistic itself, with forward performance and trailing performance.
We are pleased with the recency of the data. You can see that the most of the companies, both top 15% and bottom 15%, have been scored quite recently. It does seem that Discovery investors are focused on the best discovery opportunities as well as those they feel have the least potential.
The final scoring statistic (the Crowd Score, also the company’s final rank) takes into account the low crowd score, high crowd score and the shape of the footprint of uncertainty (or more precisely the footprint of imprecision in our lexicon) much in the way that CAPM deals with distributional aspects of the Gaussian or normal probability model.
We are now gaining traction in terms of scoring companies. Our goal is to increase the breadth (coverage, now at 769 companies from U.S., Canadian, Aussie and HKG exchanges) and depth (number of scorings). We will only report on companies that have a minimum Crowd / scoring size of 5. We will be increasing the minimum as more users populate the system.
Some have suggested that even 5 analysts is not a sufficient Crowd size. However you must realize that these are, for the most part, micro-cap companies that have no coverage. The DiS provides a mechanism for independent Crowd coverage of these heretofore unappreciated and sometimes over-promoted companies. Finally we will provide unexpected factor change analysis as well as individual Crowd factor scores. Company executives can then ascertain how the Crowd views their companies across each factor – both positively and negatively.
Join us and score your portfolio on the DiscoveryScoreboard. It’s free, there are tutorials and we provide you with weekly statistics. You may create as many portfolios as you require. I have portfolios for total stocks, Incubator, mature, legacy and Gold.
You will be able to track the Crowd score for your portfolio of stocks.
www.DiscoveryBoard.com
Note: These ranking are not offered as a buy or sell recommendation. These are scorings by a group of independent Discovery analysts from all walks of life. You must perform your own due diligence before deciding on the accuracy of these rankings. To do this you may use the Discovery Scoreboard to rank these stocks. If so, you will be provided your score as compared to the Crowd score adjusted by your score.
If you are interested in individual factor scores login, score your stock(s) and contact Chris Berry or myself. We will provide individual company factor scores. We may own stocks referenced in these tables.
The material herein is for informational purposes only and is not intended to and does not constitute the rendering of investment advice or the solicitation of an offer to buy securities. The foregoing discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (The Act). In particular when used in the preceding discussion the words “plan,” confident that, believe, scheduled, expect, or intend to, and similar conditional expressions are intended to identify forward-looking statements subject to the safe harbor created by the ACT. Such statements are subject to certain risks and uncertainties and actual results could differ materially from those expressed in any of the forward looking statements. Such risks and uncertainties include, but are not limited to future events and financial performance of the company which are inherently uncertain and actual events and / or results may differ materially. We own shares in Goldcorp and Ucore. These companies are not necessarily recommended as investments. In addition we may review investments that are not registered in the U.S. We cannot attest to nor certify the correctness of any information in this note. Please consult your financial advisor and perform your own due diligence before considering any companies mentioned in this informational bulletin
“With senior government bonds declining to exceptionally low, or even negative, yields, the action turned to corporates and has become measurably compulsive”
INSTITUTIONAL ADVISORS
WEDNESDAY, JULY 25, 2012
BOB HOYE
PUBLISHED BY INSTITUTIONAL ADVISORS
The following is part of Pivotal Events that was
published for our subscribers July 19, 2012.
SIGNS OF THE TIMES
“China’s benchmark price for power-station coal fell for the ninth week, the longest period of losses since 2008.”
– Bloomberg, June 10
“America’s Coming Civil War: Makers Vs. Takers”
– The Washington Times, July 12
We have been writing about America’s second civil war for some years, and note that it has been a “cold” war. The main difference is that the original Civil War was fought to extend freedom; the Cold Civil War has been prosecuted to constrain freedom through the urgencies of political correctness. Political correctness has been a remarkably versatile instrument.
“Makers Vs. Takers” is a very good slogan.
“The figures that go into China’s gross domestic product are ‘man-made’ and ‘for reference only’.”
– Bloomberg, July 13
The criticism was made by Li Kegiang who was a regional Communist Party head in 2007. It was revealed by WikiLeaks in 2010.
It seems that most countries have a Ministry of Truth.
* * * * *
PERSPECTIVE
On Friday the Dollar Index stalled out at the overhead resistance level of 83.5, and has slipped to 82.8. This has refreshed stocks, corporate bonds and commodities. Or, perhaps it’s the other way around as strength in the orthodox trio has forced the dollar down.
Friday’s ChartWorks noted that the DX was poised for a pause in its long-term uptrend.
Positive vibes could run for a few weeks.
BONDS, BONDS, BONDS
Intended consequences often become unintended consequences – particularly when it comes to intrusive policymaking. One might ask if there is any other kind. Fiduciary responsibility hasn’t been seen or heard of since the late 1900s, which recorded the height of Nineteenth Century Liberalism. One consequence is a highly speculative bond market.
The purpose of the initial stimulus with the Bear Stearns problem that began in June 2007 was to fix one problem and restore the “prosperity” of the boom. Mind, there was a faction that was working to keep the “sup-prime” problem “contained”. Neither worked out because the feature of every great financial mania has been that most banks get reckless and overexposed at the same time. So “fixing” one bank was improbable, as was the notion about “containing” the sub-prime-housing disaster.
But, the combination of naivety and ambition propelled policymakers to ridiculous attempts to make bad things go away by hoping a new wave of speculators would start to bid up house prices. But the stimulus had to go through the banks, which means Wall Street, and savvy traders (the ones left) positioned for a technical rebound. This turned into the first business recovery out of a crash. It was likely to be weak.
But the action became outstanding enough to set up the next wave of losers.
Essentially, this began with commodities when our Momentum Peak Forecaster called for a speculative surge to complete around March 2011. The high for the CRB, which was likely to be a cyclical high, was 370 at the end of that April. Technically, the CRB and within this, base metals are in a bear market. Grains have been outstanding lately due to the worst heat and drought in decades.
The next big play to culminate was the compelling action in US Treasuries. This registered huge Upside Exhaustions in May, as Ross described the chart as an “Eiffel Tower”. The peak of intense speculation is being tested and, technically, a significant price-decline is possible.
With senior government bonds declining to exceptionally low, or even negative, yields, the action turned to corporates and has become measurably compulsive. The following chart (below titled “Raptured Corporate Bonds” shows a set of daily Upside Exhaustions that usually anticipate an approaching top within a couple of weeks. Also noteworthy is that the index is reaching for the upper channel trend line at 122.
Technically, an impressive price drop is possible.
What would be the fundamentals of such a decline in price and rise in yields?
In as few words as possible the reasoning is Post-Bubble Contraction. During any financial mania the world compulsively takes on more debt than the global economy can service. That’s even if the economy remained “normal”, but the pattern has been that the worst recession since the last bubble occurs. This has been followed by an unusually weak business cycle.
The only way out of the condition is a lengthy process of liquidation of all debt. “All”?
Yes, because the process can be called a great bond revulsion whereby all classes of bonds are shunned or avoided. Outstanding speculation in long-dated treasuries in May and in investment-grade corporates now suggests the best is virtually in. A turn for the worse could live up to the full meaning of the word.
Much is being written about negative yields. This is an exceptional condition, but negative real rates adjusted for inflation are part of any great bubble. We will review this more thoroughly, but for this week’s piece we will note that real long interest rates in the senior currency have increased by some 12 percentage points during the great bond revulsions.
Link to July 20, 2012 ‘Bob and Phil Show’on TalkDigitalNetwork.com:
http://talkdigitalnetwork.com/2012/07/corn-pops-markets-slump/
RAPTURED CORPORATE BONDS
- Typically, the Upside Exhaustions anticipate the actual top by up to a couple of weeks.
- The action is approaching the top channel line at around 122.
- Note the technical “buys”.
BOB HOYE, INSTITUTIONAL ADVISORS
E-MAIL bhoye.institutionaladvisors@telus.net“>bhoye.institutionaladvisors@telus.net
WEBSITE: www.institutionaladvisors.com
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