Archive - Jul 2014

Silver Up 10.3% YTD - Should Continue To Outperform Gold And Other Assets  - Silver’s Unique Properties  - Silver: Increasing Technological, Industrial and Medical Demand  - Increasing Investment Demand  - Silver Undervalued Versus Gold - Conclusion

With EURUSD hardly budging, constantly disappointing economic data (from periphery to the core now), and central bank transmission mechanisms that are entirely clogged and useless for anything but stuffing the pockets of bloated bank balance-sheets with domestic sovereign debt, it is no wonder Germany's Bundesbank has said 'enough'. "If we pursued our own monetary policy... it would look different," explained Bundesbank chief Jens Weidmann. As Reuters reports, Weidmann noted that many savers in Germany were irritated by low interest rates and property prices were overvalued in some big city areas in Germany; implicitly threatening the ECB's chatter-box that "this phase of low interest rates, this phase of expansive monetary policy, should not last longer than is absolutely necessary."

Israel's bombing campaign of Gaza shows no signs of abating: as WaPo reports "Israel widened its air assault against the Gaza Strip’s Hamas rulers on Saturday, hitting a mosque it said was hiding rockets" as well as a school which it said was used by Hamas as a cover, "as Palestinians said their death toll from the five-day offensive rose to over 125." The military said it has struck more than 1,100 targets, including Hamas rocket launchers, command centers and weapon manufacturing and storage facilities, in a bid to stop relentless rocket fire coming Gaza. Officials in the territory said that besides the mosque, the strikes also hit Hamas-affiliated charities and banks, as well as a home for the disabled, killing two women.

This is it! The holy grail of forecasting, Jeffrey Kleintop has discovered it. You'll never have to worry about actual earnings reports, a massive bubble in junk debt, the sluggishness of the economy, new record levels in sentiment measures and margin debt, record low mutual fund cash reserves, the pace of money supply growth, or anything else again. Just watch the yield curve! Unfortunately, as we showed here in the US, this advice could turn out to be extremely dangerous for one's financial health - and has been across many nations throughout time.  People remain desperate for excuses as to why the latest bit of asset boom insanity will never end

Overview of the price action in the forward exchange market and a look ahead.  

The Atlantic City casino industry implosion continues. Following the second, and final, bankruptcy of AC's "state of the art" Revel Casino a month ago, as well as the shuttering of Atlantic Club hotel Casino and the Showboat hotel casino, the grim corporate reaper has come for one of the most prominent boardwalk casinos of all: Trump Plaza.  "Trump Plaza Hotel & Casino will shut its doors for good in mid-September, according to state officials who were briefed Friday by lawyers for the casino."

Meet Bill Binney, one of the earliest NSA whistleblowers (well before anyone had ever heard of Edward Snowden). He worked for the NSA for 30 years before resigning because of concerns he had regarding illegal spying on U.S. citizens in 2001. Mr. Binney thankfully has never stopped fighting for The Constitution that he swore to defend, unlike most other government officials who happily stomp all over the basic civil liberties enshrined in our founding document. He had some very choice words recently and it would be wise for all of us on planet earth to pay very close attention - Binney recently told the German NSA inquiry committee that his former employer had a “totalitarian mentality” that was the “greatest threat” to US society since that country’s US Civil War in the 19th century.

We previously noted the "miracle" of China's PMI, and the lack of statistical validity and consistency in the government's survey; but this simple graphical illustration exposes exactly why the widely-celebrated China PMI number upon which so much current optimism is being grounded may be entirely misplaced...

The first big wave of embracing a liberal international economic order - relatively free trade, rising international capital flows and rapidly growing global economic integration - resulted in something remarkable. Between 1870 and 1914, there was a 45-year span of rising living standards, stable prices, massive capital investment and prolific technological progress. In terms of overall progress, these four-plus decades have never been equaled — either before or since. Then came the Great War. It involved a scale of total industrial mobilization and financial mayhem that was unlike any that had gone before. In the case of Great Britain, for example, its national debt increased 14-fold.

“The fundamental problems are not solved and everybody knows it,” Maximilian Zimmerer, CEO of Allianz, said at Bloomberg LP’s London office. The “euro crisis is not over,” he said.  “There is only one country where the debt level last year was lower than 2012 and this is a signal the debt crisis can’t be over, only a recognition of the debt crisis has changed,” Zimmerer said on July 9. “If the debt levels are not going down in the end we will have a problem, that is for sure.”

Having already warned that looming political uncertainty is not at all priced-in to US equities, Goldman's Alec Phillips points out that legislation was introduced earlier this week (July 7) in the US House that would attempt to revamp the FOMC's monetary policy process. The bill would require the FOMC to justify to Congress each policy decision relative to a Taylor rule specified in the legislation. While Goldman, do not expect the bill to get very far, but the issue does appear to be a growing focus for some lawmakers and we expect further action on it in the near term.

It’s time to think like a contrarian. Why? Because capital markets seem as bulletproof as one of those up-armored military personnel carriers you see in war zones. So what could really rattle stock, bond and commodity markets over the next 3-6 months? The go-to answer, steeped in history, is geopolitical crisis, where the logical hedges are precious metals, volatility plays, and possibly crude oil. Look deeper, however, and other answers emerge.

Brent Johnson, of Santiago Capital, provides a brief but broad overview of the state of the state in the world's precious metals markets (and monetary policy implications). Often accused of "waiting for armageddon", Johnson is quick to note that he would love to be wrong... "If I thought it possible to carry out the next 40 years the same as the last - by sticking to the status quo - I'd do it." But it's not... and no matter how many "say it isn't so" you hear from the mainstream, it is inevitable (when not if). Simply put, he warns, if you do have to have capital markets exposure - make sure you have insurance - you need it now more than ever.

"The state-controlled fiat money system is the main cause of the international financial and economic crisis." This system, Thorsten Polleit warns, is based on the ability of banks to create money literally out of nothing. It is, in principle, a “large-scale fraud system” because today’s money is “intrinsically worthless and not redeemable”. This has damaging consequences for the overall economic development.

Consumers are “straining against rising prices on daily essentials” and are cutting back on things they want to buy.