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Eric Sprott: "Have We Lost Control Yet?"

Tyler Durden's picture


Authored by Eric Sprott and Etienne Bordeleau of Sprott Global Resources,

Recent comments by the Federal Reserve Chairman Ben Bernanke have shocked the world financial markets. It all started on May 22nd, 2013, at a Testimony to the US Congress Joint Economic Committee, where he first hinted at tapering the Fed’s quantitative easing (QE) program. Then, on Wednesday, June 19th, during the press conference following the FOMC meeting, the Chairman outlined the Fed’s exit strategy from QE.

Since the first allusion to tapering, volatility has been on the rise across the board (stocks, currencies and bonds) (Figure 1A). Moreover, the yield starved, hot money that had flown to emerging markets has been rushing for the exits, triggering significant declines in emerging market (EM) equity and bond markets (Figure 1B). Finally, the prospect of the end of monetary accommodation has triggered rapid and significant decreases (increases) in the price (yield) of longer dated Treasury bonds (also Figure 1B).


It has been clear to us for some time that the Fed was uncomfortable with the relative certainty (i.e. Bernanke Put) that has prevailed in the markets since the introduction of QE-infinity last fall. Officials definitely wanted the market to start thinking about a future without non-conventional monetary policy. However, we seriously doubt that the resulting chaos is what they had anticipated. This was evident in the Chairman’s response to a journalist’s question about the rapid rise in rates, saying the FOMC was “a little puzzled by that”. The genie is really out of the bottle now.

Indeed, we believe that the recent “market appeasement rhetoric” by James Bullard and Narayana Kocherlakota (Presidents of the St. Louis and Minneapolis Federal Reserve, respectively) are further proof that the Federal Reserve has realized it went too far and that it is now in damage control mode. (Update: William Dudley, President of the New York Fed mentioned in a June 27th speech that “asset purchases would continue at a higher pace for longer” if the economy was to grow slower than the FOMC’s estimate).

However, as the Bank for International Settlements (BIS) so elegantly put it in its most recent annual report, “[…] central banks continue to borrow time for others to act. But the cost-benefit balance is inexorably becoming less and less favourable.” To this they add: “expectation that monetary policy can solve these problems [deleveraging, financial stability] is a recipe for failure”. Clearly, the Federal Reserve knows this and wants to exit their QE program. But can they really?

A large portion of the current economic growth depends on housing. However, mortgage rates are closely tied to long-term treasury rates. While housing affordability is still relatively good because of low house prices, significantly higher mortgage rates might slow the housing market. Furthermore, banks are still very cautious about lending and most borrowers have difficulty accessing credit. While gentle increases in yields are good for banks (who lend long and borrow short), meteoric increases in yields (as in Figure 1B) are damaging because they are hard to hedge and create large losses on the banks securities portfolios (mostly composed of government bonds and mortgage-backed securities) as well as mark-to-market losses on their derivatives portfolios. So, the large and rapid increases in rates the talk of tapering has engendered will damage the economic growth the Fed has been working so hard to engineer, potentially requiring even more stimulus down the line.

The US government itself would also suffer from increases in yields. In its Annual Report, the BIS shows that even a small increase in interest rates would have a large impact on the projected government debt-to-GDP ratio. As shown in Figure 2, under the CBO’s base case scenario (bottom line), the US debt-to- GDP ratio would hover around 110%, whereas a 1% increase in rates would take it to 118% in 10 years (middle line). According to the Chairman’s comments, the fiscal drag that has been partly to blame for the lackluster performance of the economy should subside going forward. But, larger debt servicing costs (because of higher rates) will put more pressure on government finances, forcing it to spend an ever increasing portion of its budget on interest payments. This will have the effect of increasing the fiscal drag, going against the hopes of the Fed.


To add to all this uncertainty, the situation in the Euro Zone’s periphery is far from stabilized. Following the surprise Cyprus bail-in, international bank regulators have made a push for a democratization of this alternative to outright government bail-outs of banks. This idea is quickly gaining traction amongst central planners. We recently discussed the shortcomings of the BIS’s “Template For Recapitalising Too-Big-To- Fail Banks”. The BIS, again in its annual report, reiterated that “we need resolution regimes to make it possible for large, complex institutions to fail in an orderly way.” As uninsured depositors and bank bond holders realize that they do not benefit from government guarantee anymore, bank funding costs will rise and funding might dry up for peripheral European banks.

Conclusion: at the last FOMC meeting, by prematurely announcing the timeline and the specifics of an exit from QE, Bernanke might have lost control of rates and volatility. The current US economic growth is still feeble and hinges on housing, which would be slowed down by raising rates. Banks, while better capitalized than pre-crisis, are still not lending to most borrowers and would be dearly affected by too fast increases in rates. Moreover, European woes still threaten the stability of the international financial system and the recent rush to the exit might further exacerbate funding pressures for weak European banks. Finally, the US government (amongst others) debt load, while already unsustainable, would keep on climbing if rates were to increase only by 100bps.

The chaotic reaction by market participants and the corresponding increase in yields now risks destabilizing this very fragile equilibrium. It is yet unclear whether or not the damage control from the other Fed Presidents will put a lid on yields and market volatility, or if the damage to the Fed’s (poorly executed) exit strategy is permanent.


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Fri, 06/28/2013 - 19:16 | 3704996 kchrisc
kchrisc's picture is reporting:

Central banks sell record sums of US debt

There's a hole in the bucket dear Berstanke, dear Berstanke\there's a hole in the bucket...

Fri, 06/28/2013 - 19:56 | 3705082 James_Cole
James_Cole's picture

Eric Sprott: "Have We Lost Control Yet?"

Yep you sure have, Sprott asset management ETFs are sinking like the Lusitania. 

Fri, 06/28/2013 - 20:50 | 3705216 Machine Parts
Machine Parts's picture

Hey pal, invest in US Treasuries then.

Fri, 06/28/2013 - 23:52 | 3705531 James_Cole
James_Cole's picture

US treasuries are no fun, I don't get to pay industry-high fees to Sprott to receive semi-regular updates on how much of my money his clown show has lost. 

Actual Sprott letter:

Arr Investor,

This week your investment is down 35%, but do not fear comrade! Soon we will slayeth the mighty dragon-beast JPM and chief gold manipulating wench Blythe Masters. Arrrr

But! We cannot do it without your help dear investor, send us more capital immediately and we will continue the great battle!! Comrade!! This is it! Soon we shall defeat the evil demons layeth below Chase plaza!!

Arr, join us tonight at One, no no not join us, pick up our tab and we shall whisper sweet nothings into your ear about our golden offices. Our golden chalices and our golden...letterhead!! Infact, we insist you come! Actually, perhaps right now!! Come now, bill is due!!

Comrade, we shall overcome!!

-Chief Scam Artist, Sprott Asset Management

Sat, 06/29/2013 - 01:14 | 3705596 NeverForgetSilver
NeverForgetSilver's picture

I wouldn't blame Eric Sprott for the loss. It is the work of the gangster US government, as Dr. Paul Craig Roberts put it.

Fri, 06/28/2013 - 19:57 | 3705087 SafelyGraze
SafelyGraze's picture

had lunch with the nank today

said, 'hey nank: ixnay with the apertay'

he put down his fork

jpm cufflinks gleaming

he goes, 'equities have to stand on their own. as do treasurys. as do securities. as does the economy in general. the time has come to sop up excess liquidity in light of strengthening indicaters'

and I'm like, 'nank: you're the only thing propping them up'

if you've never seen nank talk while he chews, here's the thing. he moves the bolus of cud to the right side of his mouth. you get glimpses of it during the long-O vowel sounds

anyway, he says 'you completely misunderstand our role in restoring stability to the financial landscape'

and I'm all, 'nank: it's over. your next steps are going to be deflationary, with stocks collapsing, then interest will lift off and cause systemic defaults and bail-ins, followed by exploding price inflation as dollars repatriate.'

and then he tilts his head and goes, 'I'm not following that at all'


Fri, 06/28/2013 - 20:23 | 3705167 spine001
spine001's picture

Tyler you are missing tye point. Market participants are not reacting in a chaotic way. But in a very predictable pattern. The problem 5hat you are missi g is that the system that they are interacting with responds to chaos math. The economy is c9mposed by a zillion feddback loops ruled by regulations and operated by the cognitive biases of 5he pwrticipants. When you model this it is clearly ruled by the same set of differlential equations as a high ord3r chaotic system.

Once you realize this it becom3s obvious 5hat you can not know when you have gone beyond the financial stability point with QE since you will always have to taper it at some point. The more you do the riskier it becomes. But there is no clear threshold to cross. Only increased risk as youbgobforward. Those of us that have worked controlling this type of system know that you should never approach the stability boundary if you want to be sure that you can maintain control. What we are seeing is obvious proof 5hat we went too far and that if we go further we'd be incredibly irresponsible and playing with fire. The math experts know what I am talking about. But this is extremely difficult to explain to politicians

Fri, 06/28/2013 - 21:07 | 3705252 dynomutt
dynomutt's picture

Emm Arr j0b5 wi11 c@ptur3 ewww


ph33r d3 b3333g d@@@@@yt@

Fri, 06/28/2013 - 23:47 | 3705533 knukles
knukles's picture

True.  It's not yet chaos.
There are not yet bankers hanging under Blackfriar's Bridge.

Fri, 06/28/2013 - 20:24 | 3705169 King_Julian
King_Julian's picture

+1 for the Nankerama. I could really imagine him resonding like that. "I'm not folllowing that at all." Indeed.

Sat, 06/29/2013 - 01:34 | 3705617 deKevelioc
deKevelioc's picture

This, sir, deserves a salute!  Well done.

Sat, 06/29/2013 - 01:53 | 3705626 Alexandre Stavisky
Alexandre Stavisky's picture

Physician with a presciption pad.  Patient with Stage 4 incurable.  Opiates only available at pharmacy.  Rich patient, poor physician.  Writes. Patient Takes.

Patient Likes.  Patient Pays.  Physician worries a little.  Oversight non-existent no fear of any blowback whichever path taken.  Physician weighs death of patient from disease or malpractice.  Patient crys and frowns when pain of disease manifests, Patient smiles when wave of morphine strikes his pain receptors.  Patient writes another check.  Physician writes another prescription.

Easy to see. QE to infinity.  Long term all die, even mature economies.  Especially ones founded upon growth which cannot adapt to the steady-state at best or a managed steep contraction at worst.

Stage 4 late term. Prescription Pad, just there.  Bernanke wears the white coat.  But it doesn't really matter who wears the white coat, it is perfectly predictable, the outcome.

Push the plunger, pupils dilate, patient smiles.  Dreams? Death?  Are they the same?  Dead men smiling from the gurney, emaciated but with still robust veins.  Trackmarks.  Trackmarks individually labeled, surgery ink, (1) Nihon Kanwa Ryudousei Ichi.....(20) USA QE 1, (25) 2-2-2 Abe, little too much dope, (28) Taper dopage (Oops, nearly killed patient from withdrawal) (30) QE (some interation) patient extremely happy but not eating, feeding tube, saline drip--financial cells have metastasized and forming tumour--really elephant man levels (55) more dope--toes, fingers, nose, other appendages--black, necrotic. Still smiling.

Never again going to build a wall, father a child, clear an acre.  Smile and wave, boys, smile and wave away.

Sat, 06/29/2013 - 10:37 | 3705920 FeralSerf
FeralSerf's picture

Eat, drink and be merry for tomorrow we die.

This cancer that started long ago in central Europe is going to kill our "civilization"; of this there can be little doubt.  Is it better to die in extreme pain or in an opiate induced dreamlike coma?

When the host dies, the cancer dies with it.  The cancer is stupid.  There is no symbiosis.

The Nameless War

Sat, 06/29/2013 - 03:38 | 3705688 Pareto
Pareto's picture

+1 just like when he told Ron Paul that gold wasn't money - "then why are central banks buying it Ben?" za za za za zinnnnng!

Fri, 06/28/2013 - 21:22 | 3705290 Midasking
Midasking's picture

Eric - we lost control awhile ago about 1971!  If you are liberty minded you might like this

Fri, 06/28/2013 - 19:19 | 3705004 bubblemania
bubblemania's picture

Off Topic - I'm re-shuffling my self managed 401k and want to buy a Gold related fund. Looking to put 7%, anyone know about SGGDX. Any recomendations would be appreciated.



Fri, 06/28/2013 - 19:22 | 3705014 Everybodys All ...
Everybodys All American's picture

I'd be careful. I don't think the bottom is in on gold yet.

Fri, 06/28/2013 - 19:31 | 3705024 fonzannoon
fonzannoon's picture

It better not be. I've invested too much time in watching it go to zero as paper implodes. If I have to watch fast money tell me how much they made on the GLD on the way back up I will be pissed,

Fri, 06/28/2013 - 19:43 | 3705050 Everybodys All ...
Everybodys All American's picture


Take a look at how Silver traded today. That's the kind of reversal at the bottom you want to look for in gold. Silver looks like a screaming buy and I'd assume gold as it trades so closely is not that far off. But who knows. I'm hearing Paulson has essentially been selling his gld holdings and forcing the price of gold price lower.

Fri, 06/28/2013 - 19:46 | 3705055 fonzannoon
fonzannoon's picture

Thanks EA

If Paulson held on this long only to capitulate here that is hysterical.

Fri, 06/28/2013 - 19:52 | 3705070 kliguy38
kliguy38's picture

Invest in physical gold and silver.....if you have to be in paper then buy some of the miners and make sure your shares are registered to YOU before the re hypothecation of them in your brokerage

Fri, 06/28/2013 - 19:59 | 3705100 James_Cole
James_Cole's picture

Off Topic - I'm re-shuffling my self managed 401k and want to buy a Gold related fund. Looking to put 7%, anyone know about SGGDX. Any recomendations would be appreciated.

Yeah, don't get financial advice from anonymous strangers on the internet. If someone makes a really good case for a particular investment consider it, but make sure to get a second opinion and do your own research.

99% of what people write on here is bullshit.

Fri, 06/28/2013 - 20:10 | 3705136 fonzannoon
fonzannoon's picture

James, how many people on here jumped at the chance to dispense advice to this person, other than Lawsofphysics blunt analysis?

That says a lot about this place.

"99% of what people write on here is bullshit"

especially when it's you that is talkng.

Fri, 06/28/2013 - 20:12 | 3705146 akak
akak's picture

Yes, James, why don't you repeat some more half-truths and lies from the so-called "World Gold Council" misrepresenting the facts of the world gold market, casting half of it as nothing more than mere frippery and baubles for the ladies.

Fri, 06/28/2013 - 20:16 | 3705152 fonzannoon
fonzannoon's picture

"99% of what people write on here is bullshit"

and yet he spends 100% of his time here.

How odd.

Fri, 06/28/2013 - 20:22 | 3705164 James_Cole
James_Cole's picture

Out of many thousands of comments 1% success rate isn't bad. Most sites it's 99.99999% bullshit.

Fri, 06/28/2013 - 20:32 | 3705186 LetThemEatRand
LetThemEatRand's picture

100% of what I write is bullshit so that helps average down everyone else.

Sat, 06/29/2013 - 01:32 | 3705615 Totentänzerlied
Totentänzerlied's picture

I've been trolled!!

Fri, 06/28/2013 - 20:26 | 3705158 James_Cole
James_Cole's picture


"99% of what people write on here is bullshit"

especially when it's you that is talkng.

Telling him to buy physical gold is investment advice. I write a lot of nonsense, but I also don't suggest buying or selling, pretty much never anyway. And either way, my opinion shouldn't be trusted. Compare what I say to other sources.

That said, you're all welcome to click on my name and go through my past 6 months of commentary on gold to see how well what I've been theorizing matches reality VS. the sell side bullshitters and diehard goldbugs on here. 

I say 6 months specifically because before that time I was mostly pro gold still, that changed. My neg opinion will probably change later this year but atm I don't see any reason to be bullish. 

I should actually specify, bullish on phys. You can make a tonne of money in the gld / slv on this chaos, but that's a whole other thing. If gold bounces 100$ that doens't benefit phys as a short term or long term play. 

Fri, 06/28/2013 - 20:31 | 3705182 fonzannoon
fonzannoon's picture

"Unless you are buying physical, you are speculating"

Where exactly did he tell him to buy physical?

Fri, 06/28/2013 - 20:43 | 3705203 James_Cole
James_Cole's picture

U: What LOP is essentially saying is, there is no substitute for the real thing. That is the essence of the problem many people will find themselves with.

GUY LOOKING FOR ADVICE: Thanks Fonz, I think it will help to allocate a portion of my 401k to this fund. It's a terrible time for investing. 

Ok fine, not saying specifically buy, it's more a semantic argument. The gold sell-side guys usually say stuff like: "Don't be left with worthless paper" "Gold will be a gazillion $ next week" "last time gold will ever be x $" "gold is the only protection against the apocalypse" "gold is the only safe investment vs. dow" etc. Which is basically what people on here are saying. 

Guy asks for advice on what to invest in, folks respond something along the lines of 'phys is the only safe investment' - to my mind that's a recommendation to buy it.

Fri, 06/28/2013 - 20:49 | 3705218 fonzannoon
fonzannoon's picture

That is total bullshit right there. See it however you want to. Neither me, nor LOP advised him to buy gold.

"Guy asks for advice on what to invest in, folks respond something along the lines of 'phys is the only safe investment' - to my mind that's a recommendation to buy it."


Guy says HE IS going to invest in something. Someone responds that if he is going to, it's best to have physical possession.

That is all that happened.

Fri, 06/28/2013 - 21:25 | 3705298 LetThemEatRand
LetThemEatRand's picture

I'm pretty sure you need a cowbell, fancy graphics and rolled up sleeves (in between massive cocaine hits) to give investment advice.

Fri, 06/28/2013 - 23:15 | 3705485 Its Only Rock N Roll
Its Only Rock N Roll's picture

don't forget it is also mandatory to yell boyyyyyyaaaaa at the top of your lungs and have some spittle fly from your mouth during that exaltation

Sat, 06/29/2013 - 00:54 | 3705582 kito
kito's picture

if i lose my shirt on the gold eagles i just suing fonz...........and BOP.....and akak.....and laws........and....and....yeah.........its their fault, not mine......because this is america....and its always somebody elses fault!!!!! dammit!!!!!!!

btw cole.......the mere fact that you have been right about something up until this point does not give you any greater predictive powers as to what will be tomorrow.......just sayin...................

Wed, 07/03/2013 - 03:32 | 3716896 Colonel Klink
Colonel Klink's picture

I find it decidedly more convenient to blame others than take responsibility for my own actions.  It's the Amurikan way! :)

Fri, 06/28/2013 - 20:58 | 3705223 akak
akak's picture

Fuck you James with your repeatedly disingenuous implication that anyone who is pro-gold is a "sell side guy".

What you adamantly refuse to acknowledge is that most of the pro-gold posters here take a LONG TERM view (as opposed to the typically myopic short-term view of the paperbugs and anti-gold trolls such as yourself), and do NOT view gold as an investment at all, but as a fundamental (and the safest) form of long-term savings.  All your harping and focus on the short-term fluctuations in the price of gold and silver are essentially only so much irrelevant noise to such people, and should be such to everyone --- that is, to everyone with some knowledge of monetary history, and what current corrupt and unsustainable financial and monetary trends presage for those who naively and ignorantly tie up their savings in governmental fiat currency.

You really are one dishonest and shitty piece of work, James.  I have said so from my first encounter with your lies and deceptions, and I still find no reason to alter that conclusion.

Fri, 06/28/2013 - 23:27 | 3705509 James_Cole
James_Cole's picture

What you adamantly refuse to acknowledge is that most of the pro-gold posters here take a LONG TERM

I've never refused to acknowledge that. If you have endless money and time who cares what happens in the short term, why would you even bother to comment?

You really are one dishonest and shitty piece of work, James.  I have said so from my first encounter with your lies and deceptions

Yeah I have noticed that trend. At 1600-1700$ I outlined why I thought gold was entering a bear market and would be in a sustained down. You said I was a disingenuous liar blah blah blah.

At 1500$ you again said I was a liar etc.

At 1400$ same thing..

Then 1300$

And now 1200$

It's a broken record from you, though if I were lying I have an uniquely truthful way of doing it. 

Meanwhile, the people you adore have been WRONG THE WHOLE FUCKING TIME, yet where's the calls of them being liars? Nope, they're all above board I guess akak?

Who's really being disengenuous here??

Sat, 06/29/2013 - 06:24 | 3705728 malikai
malikai's picture

Seriously. If you were saying that, and right, awesome work.

But don't expect everyone here to line up to suck your dick because of it.

This is a comment section. People here state opinions. There is a cute little disclaimer on this site which explains how fucking stupid you have to be to take anything here as 'investment advice'.

Are you here to learn, teach, or just fuck with people? Either one is cool, just be honest with yourself about it.

Sat, 06/29/2013 - 14:50 | 3706228 James_Cole
James_Cole's picture

But don't expect everyone here to line up to suck your dick because of it.

I'm not, akak follows me around on zh calling me a liar etc. which gets annoying so I was pointing out the record. He (and a few other commenters) have this conspiracy that I'm trying to trick people into selling their gold or something. 

This is a comment section. People here state opinions. 

Guy asked for "any recommendations" - I gave him one. People can say whatever, I don't care. 

Sat, 06/29/2013 - 03:34 | 3705687 Pareto
Pareto's picture

+1 The only thing worse than an arrogant piece of shit, is a piece of shit that is arrogant and also dumber than a sack of fucking hammers.  He talks through his ass calling the COMEX as some kind of investment (long or short).  "oh i called it short here at 1700, and here at 1500......".  The question from above was answered by Fonz by akak, et al, with the subtle and silent and obvious disclaimer that at the end of the day, you conduct your own diligence.  And I resent any fucker who comes on here and contends that 99% of what people write on ZH is bullshit.  Fuck you (James Cole), you little prick.  There's fuckers on here that would eat your lunch on any fucking topic of economics, of politics, and of course, the always and forever elusive trade.  Its why I come here you fucking idiot, PRECISELY because the 99% is decent credible, and valuable analysis - even if it is redundant, crass, and the best, really fucking funny. And if the 401 query above ought not to seek advice from here, then I'm fucking dying to know where you think he ought to.  Becuase if you say a broker, or, a financial analyst, I'm going to fucking hunt you down and bash your peanut brain with a lead pipe for giving what can only be considered the shittiest advice you can give anyone fucking EVER.  Fucking retard.  So here, I'll give some advice to the 401k query.  if you don't want the phys - don't want to carry it, try the Canadian CEF.  Trades CEF on the NYSE.  Its value is backed by gold and silver that is physically owned and held by the Fund.  Here's the link.  Fuck you James Cole.

Sat, 06/29/2013 - 14:58 | 3706239 James_Cole
James_Cole's picture

Becuase if you say a broker, or, a financial analyst, I'm going to fucking hunt you down and bash your peanut brain with a lead pipe for giving what can only be considered the shittiest advice you can give anyone fucking EVER.  Fucking retard.  So here, I'll give some advice to the 401k query.  if you don't want the phys - don't want to carry it, try the Canadian CEF.  Trades CEF on the NYSE.  Its value is backed by gold and silver that is physically owned and held by the Fund.

Lol Eric Sprott is that you??

CEF, a real great investment!

But I can ignore past performance because you're a self-described economist, I can trust you right??

Sat, 06/29/2013 - 15:45 | 3706275 RaceToTheBottom
RaceToTheBottom's picture

I am not recomending anything to anyone but I also like CEF.  It will be interesting to watch future prices there if the Physical and the paper do separate.

Sat, 06/29/2013 - 16:47 | 3706359 SamuelMaverick
SamuelMaverick's picture

Awesome post Pareto. If there was a best of ZH I would vote for yours ( and AKAK's ) !!!  Also, double thumbs up on the CEF recommendation. CEF is a solid way to enter and exit the Gold market esp. for the average joe who is just starting to put the pieces of this puzzle together. You also get the bonus of not paying Sprott the stupid vig his products have. 

Fri, 06/28/2013 - 22:33 | 3705430 samcontrol
samcontrol's picture

ummmm¿ i have shit loads of miners , not really in a brokerage account , more like offshore... please explain for a laugh your hypo thesis.

Fri, 06/28/2013 - 20:06 | 3705120 Everybodys All ...
Everybodys All American's picture

Paulson has almost 22 million shares of GLD. Can you imagine ...

Fri, 06/28/2013 - 20:12 | 3705144 fonzannoon
fonzannoon's picture

I can only imagine that he actually has half a brain, and is scrambling for every ounce he can get his hands on.

Sat, 06/29/2013 - 03:29 | 3705685 Silversinner
Silversinner's picture

Paulsen bought gld not to make a profit.

The elite let him gain billj on subprime by insider

information,his dumping of gld is payback time to the cartel.


Fri, 06/28/2013 - 19:57 | 3705089 Harbanger
Harbanger's picture

Keep the faith and keep stacking Fonz.  The only bottom I'm watching out for is the bottom of the Comex warehouses.  They lost 32% of their physical inventory in only the past few months.  Demand is very high at these prices and they're being wiped out.  It won't be long, just a few months at this rate before they'll dry up inventory and stop setttling in physical altogether.  This is when they can no longer manipulate the price with paper and it decouples.  Because of the shortages, Physical price goes parabolic..

Fri, 06/28/2013 - 20:01 | 3705110 fonzannoon
fonzannoon's picture

Man I hope you have it nailed.

Sat, 06/29/2013 - 09:27 | 3705850 chubbyjjfong
chubbyjjfong's picture

I too have an ominous feeling that it will go lower Fonz.  If it is manipulated, and I believe it has to be, then I don't understand why they would stop it at 1200.  If I were them I would kill this paper bullshit and mop up everything, phyz, mines, .. the works.  I will be truly shocked if it reversed at 1200.  For that reason, I'm waiting longer to exchange my puny little amount of fiat that I have left for the good stuff.

Sat, 06/29/2013 - 10:21 | 3705899 Short Change
Short Change's picture

The further gold gets beat down the harder it will be to find... At some point the price will be "right to buy" but will there be anything to take possession of? The next day panic drives the price right through the roof.

Sat, 06/29/2013 - 10:47 | 3705933 FeralSerf
FeralSerf's picture

If "They" kill the goose that lays the golden eggs, what bird is there to pluck next?

Some Insiders have gotten very wealthy riding PMs up and down.

Sat, 06/29/2013 - 03:07 | 3705660 Pareto
Pareto's picture

+1.  I want to see a major beat down in the gld and slv.  An absolute fucking crushing.  So that the contradiction (spread) between paper and phys is so fucking large that not even Liesman can argue the rather blatent fact that the COMEX has now become completely irrelevant.  Its like two benefits occur at once: (1) COMEX is finally exposed for the fucking fraud that it is, and (2) we learn exactly what the floor is on G & S phys and (3) we get to watch CNBC eat their own shit.  And then all of us can finally stop yakking about a "price" that up to this point appears to have occupied ZH'ers time infinitely more than it ever fucking should have.  No offense ZH'ers.  I guess thats 3 things.

Fri, 06/28/2013 - 19:39 | 3705040 LawsofPhysics
LawsofPhysics's picture

Don't be stupid.  Unless you are buying physical, you are speculating.  Remember one simple rule; when fraud is the status quo, possession is the law.  


I have never had trouble exchanging physical PMs for the value of another's labor.

If it isn't physical, it's a paper promise. (just like your 401k, good luck with that)

Fri, 06/28/2013 - 19:49 | 3705064 bubblemania
bubblemania's picture

SGGDX hold about 15% of the real shiny stuff and the 401k police wont let me buy real precious metals. Any reccomendations on a precious metal MF

Fri, 06/28/2013 - 19:53 | 3705072 fonzannoon
fonzannoon's picture

What LOP is essentially saying is, there is no substitute for the real thing. That is the essence of the problem many people will find themselves with.

Fri, 06/28/2013 - 19:56 | 3705080 bubblemania
bubblemania's picture

Thanks Fonz, I think it will help to allocate a portion of my 401k to this fund. It's a terrible time for investing. 

Fri, 06/28/2013 - 20:00 | 3705104 fonzannoon
fonzannoon's picture

many of us die hards own some miners. So just think of it as a potential lotto ticket. Good luck bubblemania

Fri, 06/28/2013 - 20:05 | 3705117 knukles
knukles's picture

I'd tell ya to buy the one I use, PHYS, but everybody's laughing at me right now for owning gold, and I'm very fragile and sensitive about the whole thing that some days I wanna just do something stupid.  Like watch CNBS and imagine Maria in a skin tight black slip. 

Fri, 06/28/2013 - 20:59 | 3705240 espirit
espirit's picture

@ knuks

Friends don't let friends watch Maria.

Enuf said?

Fri, 06/28/2013 - 22:37 | 3705438 samcontrol
samcontrol's picture

sure i am laughing, i own phys, pslv, paas,exk, ag, pzg, nem, and recently a shitloads of paper uslv.

Fri, 06/28/2013 - 21:17 | 3705278 Tulpa
Tulpa's picture

Depending on how long till you retire, it might be a good idea to get your money the hell out of 401k's before the CFPB decides to start "helping" you manage it (ie, confiscation).  If you're only a few years away it might be safe, but there's no way I'm ever letting a dime go into one of those things on the hopes that the govt will leave it alone for 40 years.

Fri, 06/28/2013 - 20:55 | 3705234 Professorlocknload
Professorlocknload's picture


I might add, to all else being speculation, physical is what one must buy/have, not sell, until the storm subsides. Price is irrelevant, it's quality of peace of mind one seeks in an insurance cover.

fonz, exciting day in the miners today, no? What's that about?

Fri, 06/28/2013 - 19:21 | 3705008 Everybodys All ...
Everybodys All American's picture

Haven't you heard the markets have misinterpreted everything the clown ass Bernanke has said of late?

Fri, 06/28/2013 - 19:39 | 3705036 knukles
knukles's picture

Butaroma:  Mr Bernak, it's so ever nice to have you here with us today. (uncrossing and recrossing legs wafting nasty cheese odor)
Bernak:  Um,   uh  (cough, wiping tear from eye, blinking rapidly)  Its nice to be here (cough)
But:  Last time we heard you speak, you said, and I quote:  "Glaachk, harrumpfht, bloft umbegraf splabhum ifninsways, hypplumph, garumph, msishaberhapt glofulum."  And many people have not qiute known how to interpret those remarks.
Bernak:  Well, that's not quite what I'd said, Butteroma, I'd... (interrupted)
But:  But we have you here on tape, let's listen.

Tape of person in Halloween outfit speaking:    "Glaachk, harrumpfht, bloft umbegraf splabhum ifninsways, hypplumph, garumph, msishaberhapt glofulum"

Ben:  Wait a minute, I never said that, that shit's been photoshopped and somebody elses' voice is on the tape.  That's a bald woman with a beard and tatoos all over her face, with only one arm (waving hands in air maddingly) see I got two arms for Christ's sakes.  Jesus H woman!  And why for fucks sake has she got poing pomg balls in her eye sockets?  You people are fucking crazy!
But:  But Ben, we have you here on another tape we got from the NotSoSureYouWantThemListeningAgency that has a lot of skin flapping sounds accompanied by heavy breathing and...

Ben ups and storms rightfully off set.

But:  And that dear viewers might just be why many of you are confused.  Now back to watch Steve try to make Rick cringe some more.

Fri, 06/28/2013 - 19:44 | 3705052 fonzannoon
fonzannoon's picture

You need a drink knuks.  You are giving them way too much credit. It goes more like this...

"But:  Last time we heard you speak, you said, and I quote:  "Glaachk, harrumpfht, bloft umbegraf splabhum ifninsways, hypplumph, garumph, msishaberhapt glofulum." 

Bernak:  Yes that's correct.

Butteroma: Well everyone on this channel is appreciative of the transparent nature of your committee, we just want you to know that. One last question, what time should Liesman be there tonight to fondle your nutsack?


Sat, 06/29/2013 - 02:24 | 3705651 Pareto
Pareto's picture

"oh i don't know Maria, I suppose any time after you get up off your knees would be's a towel."

Fri, 06/28/2013 - 19:49 | 3705059 akak
akak's picture

Actually, Knukles, "Glaachk, harrumpfht, bloft umbegraf splabhum ifninsways, hypplumph, garumph, msishaberhapt glofulum" would be correct only in Middle Greenspanish.

In Modern Greenspanish, a.k.a. Bernankish, the appropriate translation would be ""Glaachk, harrumpfht, animal spiriti, bloft umbegraf splabhum ifninsways, tradition, hypplumph, threaten von deflation, garumph, taperendo, msishaberhapt glofulum", which loosely translated means "In case of emergency press red button".

Fri, 06/28/2013 - 21:01 | 3705248 espirit
espirit's picture

You guys owe me a new keyboard.

Fri, 06/28/2013 - 19:21 | 3705009 fonzannoon
fonzannoon's picture

Tell a crackhead that you may take away his crack in 6 months and watch him throw a tantrum. Then spend the next week telling the crackhead that you are not going to take it away and I am pretty sure he will just go back to being a crackhead and stop throwing a tantrum.

Fri, 06/28/2013 - 19:50 | 3705066 akak
akak's picture


I wish I had the talent to so perfectly distill the essence of a complex (and completely obfuscated) major financial and economic situation into so few words.

Fri, 06/28/2013 - 19:53 | 3705071 Tinky
Tinky's picture

Actually, tell a crack head that you may take away his crack in six months, and he'll ignore you. Tell him that you're cutting him off tomorrow, and you'll get your tantrum.

Fri, 06/28/2013 - 20:08 | 3705130 Raynja
Raynja's picture

it's not telling a crackhead that you are taking away their crack, it is telling a crackhead that you are going to start charging them for all the free crack that they got addicted to. the results will be unpredictable, but volatility is guaranteed.

Fri, 06/28/2013 - 21:00 | 3705242 JFKFC
JFKFC's picture

If only Benji was from Compton.

Fri, 06/28/2013 - 19:23 | 3705020 knukles
knukles's picture

Oh yeah, first they take your income away, then they batter your principle, raise taxes, ever creating an uncertain financial environment.  Why not just call a debt jubilee and re-denominate the currency while imposing wage, price and employment controls on everybody and everything.
That'll get the old animal spirits rising, entrepreneurial juices flowing to give the tubercular economy the absent boost it needs.
Not complaining', just sayin'....
Somebody's gonna get blamed for a lotta shit some where down the road...
And it ain't gonna be Bush's Fault, either.

Fri, 06/28/2013 - 21:01 | 3705245 Professorlocknload
Professorlocknload's picture

Why not just call a debt jubilee and re-denominate the currency while imposing wage, price and employment controls on everybody and everything.

  Not yet, it would spoil the plot. That's planned as the last act of this production.

Fri, 06/28/2013 - 19:37 | 3705035 LetThemEatRand
LetThemEatRand's picture

I didn't get a chance to order any hold-it-in-my-hand physical today so I did the next best thing and bought some shares of PSLV and PHYS.  I know, but thanks Sprott for giving me a Plan B.

Fri, 06/28/2013 - 21:08 | 3705255 JFKFC
JFKFC's picture

Coulda made a fortune on the GLD $17 calls that expired today.
Opened at $0.05 & hit $2.23 today.

If you would've spent one gold ounce worth of fiat on that at open & sold at the high, you could've bought 2.5lbs of phyz.

Fri, 06/28/2013 - 21:11 | 3705259 LetThemEatRand
LetThemEatRand's picture

If I traded options I'd have been broke years ago and I'd be writing this from my Obamaphone.  A man's gotta know his limitations.

Fri, 06/28/2013 - 22:02 | 3705377 JFKFC
JFKFC's picture

I only caught that in hindsight. No way I woulda dropped $1200 on a one day contract when gold's been getting monkey hammered.

Though, if I woulda had half brain when I heard earlier this week that Blackberry would be reporting their earnings today, I would've realized that I haven't seen a Blackberry in public for over year & I woulda shorted the shiz outta that bitch.

Fri, 06/28/2013 - 19:40 | 3705042 bond trader
bond trader's picture

Eric sprott sounds like Bill Gross. Stop whining if the Fed make even a feeble attempt to do the right thing. If things prove out there was a gold bubble also that is the breaks. There is no right time to stop doing the wrong thing.

Fri, 06/28/2013 - 20:00 | 3705099 knukles
knukles's picture

Like man, that is so.... righteous, good and noble.
I'm astounded that somebody else besides me has any ethics or morals left.


Pssst what's the answer to question 2

Fri, 06/28/2013 - 20:01 | 3705106 involuntarilybirthed
involuntarilybirthed's picture

There is an equal chance that you could be destroyed by a natural diasaster, car wreck, plane crash, lawnmower blade, electrical shock, astroid, drive-by, a break-in, a disease, terrorist attack, heart attack and many other possibilities.  We could spend our whole life preparing for the worse instead of just setting back and letting it hit us squarely in the head and killing us.  We should live for the moment but I'm not sure we have that much time to waste.   What, me worry?

Fri, 06/28/2013 - 21:10 | 3705258 Professorlocknload
Professorlocknload's picture

Long Personal Safety Equipment?

Fri, 06/28/2013 - 20:10 | 3705128 eddiebe
eddiebe's picture

I say bullshit. The US economic recovery does not hinge on housing. It hinges on confidence in the wholesomness and uprighness and fairness of our government and corporations along with production of markeatable and useful goods. 

Sadly all of the above is mostly lacking and the deliberate misallocations, excesses and warmongering have squandered the resources and goodwill of the participants willing and unwilling in this experiment.

Sat, 06/29/2013 - 18:46 | 3706565 Mark Urbo
Mark Urbo's picture hinges on JOBS !

Fri, 06/28/2013 - 20:10 | 3705137 disabledvet
disabledvet's picture

"many will suffer. some will be rewarded beyond the dreams of avarice." obviously North Dakota is going to do just fine. We'll see about the rest of America...let alone the whole planet.

Fri, 06/28/2013 - 20:11 | 3705139 Yes_Questions
Yes_Questions's picture



"Low" house prices?

Sat, 06/29/2013 - 01:40 | 3705620 Totentänzerlied
Totentänzerlied's picture

Overvalued dollars.

Fri, 06/28/2013 - 20:22 | 3705165 monopoly
monopoly's picture

They may fluctuate a bit but i say the bottom in gold and silver are defintely in. Now it is our turn. Although it will be a bumpy ride.

Fri, 06/28/2013 - 20:45 | 3705206 spine001
spine001's picture

Guys you dont believe me. Please read about the cell automata. And this is 100000000 times more complex. It is impossible. Absolutely impossible to predict what will happen at a given time. Gold could go up or down to 300 or less. Dont want to see good people hurt. Just doubt yourself. if you think you can predict anything ,not rigged of course, then be sure that you are becoming delusional and stay away from any decision making until you start doubting everything again.

Fri, 06/28/2013 - 21:27 | 3705308 Tulpa
Tulpa's picture

If you're investing for the long term it doesn't matter what the price does in the short term.  You don't make any profit on gold until you sell it, which I hope no one here is planning to do soon after they buy it.  Bears make money, bulls make money, pigs get slaughtered.

And the only thing that would prevent gold from doubling or tripling in the next few years would be a ginormous global economic collapse coupled with the Fed refraining from printing like crazy.  Not very good odds of those two events happening together.  Which is why it's odd to see people wringing their hands over buying at $1200 an ounce vs. at $1300 an ounce.

Sat, 06/29/2013 - 01:49 | 3705630 Non Passaran
Non Passaran's picture

Although I agree I have to admit I'm saddened by the mini lift off in PM prices just as I was getting ready to use part of my June paycheck...

Sat, 06/29/2013 - 02:16 | 3705647 Pareto
Pareto's picture

It will come back.  There will be at least one test of 1180.  The full fib is around 1125 and i see no reason why it won't get there.  But for sure the spike, i don't think anyone was expecting.  Some of the juniors went bat shit crazy too - up anywheres between 8 and 12%.

Fri, 06/28/2013 - 20:27 | 3705168 buzzsaw99
buzzsaw99's picture

A nice read. I would add that mortgage refis are the bread and butter of banks because they get the origination and servicing fees. Even an incremental rise in rates will dry up refis. Also, the bernank must be scared out of his mind seeing how dependent everything has become on the fed. Even the mere mention of tapering sends the bond market into a tailspin. They say things are stronger but what markets remain outside the fed are terribly feeble and totally unsustainable without insane (low cost financing) gubbermint spending. Everyone is all in betting on the bernank to qe 4 evah.

Fri, 06/28/2013 - 21:18 | 3705283 Professorlocknload
Professorlocknload's picture

++ Yup. The Fed owns it now. And when they hit the wall, they're definitely going to knock some bricks loose.

Fri, 06/28/2013 - 21:33 | 3705319 Tulpa
Tulpa's picture

While I generally assume incompetence rather than malice, I have a very hard time believing that BB couldn't have seen this development coming from an astronomical unit away.  They've been paying lip service to concerns about moral hazard in the FOMC for five friggin years.

Sat, 06/29/2013 - 00:29 | 3705570 RaceToTheBottom
RaceToTheBottom's picture

I bet you the Bernank is thinking that the WS financial sector needs some time, and this was an attempt to say eventually I awill be gone....

Fri, 06/28/2013 - 22:23 | 3705415 JFKFC
JFKFC's picture

That's why I went long FAZ (3x inverse financial sector ETF), just before the last FOMC wrapped. Quoting the great Poet Laureate, Mike Tyson, "everybody has a plan until they get punched in the face."
Bernanke may or may not have had a plan before his press conference, but once he saw yields spiking- that's the momet that he got punched in the face.... And he doesn't have a Chuck Norris beard.

Fri, 06/28/2013 - 21:39 | 3705331 Terminus C
Terminus C's picture

Drinkin' some fantastic beer ATM, Chimay White, Pilsner Urquell and Maredsous 10. I am about to break into the St. Bernardus. Enjoy life and... Fuck you Bernanke!

Fri, 06/28/2013 - 23:51 | 3705536 tony bonn
tony bonn's picture

the fed is not going to taper - the effects on its massive portfolio of sewage would be devastating...qe taper talk is ignorant tripe...

and then, as noted here, the interest costs would be enormous....of course spying, droning, and war mongering would never be cut back - only food and necessities would be ended to keep the perrier-jouet flowing to bankster nazis....

Sat, 06/29/2013 - 01:26 | 3705611 q99x2
q99x2's picture

My most essential Art Appreciation class does not get out until August so the FED better put a lid on it until then.

Sat, 06/29/2013 - 09:39 | 3705866 cooperbry
cooperbry's picture

Watching a slow motion train wreck !

Sat, 06/29/2013 - 11:19 | 3705970 moneybots
moneybots's picture

Bernanke shocked the markets when he started QE3.  The horse always comes before the cart.

Creating a parabolic causes its collapse.  It is unsustainable.  When it starts, you absolutely know how it is going to end, as 100% of them FAIL.


Oh, but The FED is inept or shocking in its announcement of a taper.  NOPE.  100% of parabolics fail.  It does not matter what the FED says or when it says it.  Parabolics collapse, just like Ponzi schemes.

Taper isn't the problem, QE3 is the problem.  If there was no QE3, there would be no taper for Ben to talk about.

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