Archive - Oct 22, 2013

Dear World Gold Council Executives;

As you very well know, the business environment for gold producers has been extremely challenging over the past few years. While demand for physical gold remains extremely strong, prices on the COMEX have fallen precipitously. This contradictory situation is the single most important obstacle to a healthy gold mining industry.

In my opinion, the massive imbalance between supply and demand is not reflected in prices because available statistics are misleading...

The dismal news keeps coming for the Fukushima nuclear power facility. According to NHK World, TEPCO is admitting to detecting radioactive cesium about one kilometer off shore. While the level is low, it is the secoond time radioactive substances have been found that far offshore and it is believed to be from wastewater leaking out with the groundwater. The company, reassuringly, says the leak poses no environmental risk... As if that was not enough, Bloomberg reports TEPCO also found high levels of radiation in the drainage ditches and wells at the site. Of course, this will likely be met with cries of delight by Abe who will "need to build a bigger wall" to contain the leaks and thus create a Keynesian utopia from the 'broken nuclear plant fallacy' that is ongoing.

"Don't Stop Believing..."

This is probably the most painful bug report I’ve ever read, describing in glorious technicolor the steps leading to Knight Capital’s $460m trading loss due to a software bug that struck late last year, effectively bankrupting the company. The tale has all the hallmarks of technical debt in a huge, unmaintained, bit-rotten codebase (the bug itself due to code that hadn’t been used for almost 9 years), and a really poor, undisciplined dev-ops story.

Just one day after the deal in Congress was reached, the U.S. national debt rose by an astounding 328 billion dollars.  In the blink of an eye we shattered the 17 trillion dollar mark with no end in sight.  We are stealing about $100,000,000 from our children and our grandchildren every single hour of every single day.  This goes on 24 hours a day, month after month, year after year without any interruption. The U.S. national debt is now 37 times larger than it was 40 years ago, and we are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in U.S. history combined. So what will happen when the rest of the world decides that they don't need to use our dollars or buy our debt any longer? At that point the consequences of decades of incredibly foolish decisions will result in an avalanche of economic pain that the American people are not prepared for.

A mere 24 hours before the US was going to run out of money and default on its obligations (in what Jack Lew described as a "catastrophe"), Grant Williams notes the S&P 500 was trading exactly 2.30% from its all-time high. Does that sound like anybody was worried about financial Armageddon? Nope, but as Williams detail sin his latest letter, the danger was very real, as a default by the US on its debt obligations would have gone to the very heart of the "plumbing" that underlies financial markets and caused havoc in the repo market and all kinds of problems with collateral... The key clue passed most people by a week ago; but it came from, of all places, Hong Kong...

Last week Mike Maloney exposed the "biggest scam in the history of mankind" in 7 easy steps in his latest presentation. As Mike explains, most people can feel deep down that something isn't quite right with the world economy, but few know what it is. Gone are the days where a family can survive on just one paycheck...every day it seems that things are more and more out of control, yet only one in a million understand why. Here is the simple infographic to explain the grift...

Tired of reading 640 pages of "The Intelligent Investor"? Exhausted from imbibing 700 pages of "Security Analysis"? Fed up with the 400 pages of "The General Theory of Employment, Interest, and Money"? Have no fear, we have summarized the new normal's investing mantra into 14 words...

We have long discussed the 'hidden' and not-so-hidden inflations that are impacting the standard of living for all but the wealthiest in America... and it is hardly new to anyone that the USA faces a demographic dilemma as aging boomers draw down on an ever-shrinking base of entitlement provisions... However, when we saw this slide from Kimberly-Clark's latest earnings call, we were surprised at just how clearly these two trends showed up...

The fact is that the markets are significantly overpriced. And based on over 100 years worth of data, this kind of overvaluation usually precedes a market peak.

A weak economic report lifted an overbought equity market to even-loftier historic highs.   Investors and traders have become programmed to believe that QE (rather than economic growth) is enough to launch asset prices ever-higher. At the moment, there is little to refute this view.  “Melt-up” mentality is back.  However, shouldn’t a sluggish economy with slow job creation make investors question whether enough economic activity will be generated to justify prices?  Unless the economy improves materially, then today’s move is just another example of speculative excesses caused by QE.

Just as we wondered earlier in the day...

Sold block of NFLX today. Wish to thank Reed Hastings, Ted Sarandos, NFLX team, and last but not least Kevin Spacey: http://t.co/BRWpKOBfD2

— Carl Icahn (@Carl_C_Icahn) October 22, 2013

What is perhaps most worrisome for the market is the "real" sale of 2.99 million shares collapsed the market cap by around 20%...

Charts Show that U.S. Policy Has Increased Terror Attacks

European MEP Nigel Farage blasted French President Francois Hollande as leading the pack “in the modern day Pantheon of idiots who are running countries around the world…” Of course, the French president had recently introduced a ‘hate tax’ on its countries most successful people, driving out whatever few productive people remain in France. But this hate tax was just the tip of le iceberg. Just look at what they’ve done or announced just in the last month...

It’s all for play isn’t it when the French Minister of the Interior Manuel Valls summons the US Ambassador?