Category Archives: Precious Metals

With Sentiment In The Gutter, Will Gold Stage A Rally?

A week ago Friday, the metals got clocked hard. It was a drive-by “paper gold” shooting on the Comex which took place after most of the rest of the world had gone home for the weekend. On Monday, the Hulbert Gold Stock Newsletter Index fell to zero. On Tuesday it dropped to negative 2.7. The HGNSI is an index that measures newsletters which make trading recommendations on mining stocks. A negative reading means, overall, the newsletters are net short in terms of position recommendations. Zero and negative readings are typically highly correlated with bottoms.

Since I’ve been following the HGNSI (since 2005), it has been a remarkably accurate contrarian signal. However, it does not offer any information on the timing of a move higher. That, of course, is always the money question. What I can say, however, is that if you have cash to put to work in the sector now is a good time start slowly buying into your favorite ideas.

There’s a growing feeling among long-time gold investors like myself that precious metals will potentially stage a surprise move higher in the near future. Note how I do not define “near future.” This is because Central Bank intervention makes it next to impossible to forecast over the “near future.” It’s this way now with all markets, not just gold and silver.

My friend and colleague, Chris Marcus of Arcadia Economics, invited me onto his podcast to discuss the precious metals market, stock market, Deutsche Bank and the general economy:

 ****************************

Visit these links to learn more about the Investment Research Dynamic’s  Mining Stock Journal and  Short Seller’s JournalThe mining stocks are historically cheap and percolating for a big move higher.  My subscribers and I are making a lot of money shorting and buying puts on homebuilders and I’ve updated my recommendations ahead of this week’s earnings reports from Lennar and KB Home.

Something Wicked Comes This Way…

Craig “Turd Ferguson” Hemke (TF Metals Report) invited me to discuss the possibility that global financial system, including and especially the U.S. financial system is heading into another black hole like 2008.   In this conversation we discuss the signs that are pointing in this direction.  (To download, right click and “save as”)

To learn more about the Short Seller’s/Mining Stock Journals, click on either link (note, subscribers to both Journals receive 50% off on the second Journal):

  SHORT SELLER’S JOURNAL    /    MINING STOCK JOURNAL

WTF Just Happened: Gold & Silver Drive-By Shooting Friday

After moving significantly higher on Wednesday and Thursday following the dovish monetary policy issued by both the Federal Reserve and the ECB, the precious metals were ambushed Friday morning by the Comex bank cartel.  Right before the Comex gold pit opened on Friday, thousands of gold and silver contract were dumped wholesale into the Comex Globex computer trading system.   The deluge continued for over an hour (click on image to enlarge):

The chart above is the July Comex paper silver. From 8-9 a.m. EST, 21,922 silver contract were dumped on the Comex. This represents 109.6 million ozs of silver – roughly 13% of the total amount of silver produced my silver mining annually. It also represents 40% of amount of physical silver allegedly held in Comex silver vaults as reported by the vault operators (primarily JP Morgan, HSBC and Brink’s). Friday was by far the largest volume day for the July contract going back to late April, when July became the “front-month” contract for silver.   The same dynamic occurred in gold on Friday.

In the latest episode of “WTF Just Happened?” we discuss how and why the precious metals were smashed on Friday, as the Comex banks printed $10’s of millions in profits covering their enormous short positions in paper gold and silver ((WTF Just Happened is a produced in association with Wall St. For Main Street – Eric Dubin may be reached at  Facebook.com/EricDubin):

****************************

 I recommended Arizona Mining in May 2016 at  $1.26 to my Mining Stock Journal subscribers.  It was acquired today for $1.3 billion, or $4.65/share.  Visit these links to learn more about the Investment Research Dynamic’s Mining Stock Journal and Short Seller’s Journal.   

Was Gold Actually “Dumped” Friday?

Sifting through Twitter, I came across a curious assertion posited as a reply to a post on “unemployment” on Steph Pomboy’s twitter feed (@spomboy).  The tweeter asked, “have you noticed that gold is being dumped?”  But was gold “dumped?”  Perhaps the tweeter should have qualified the question with the adjective, “paper,” in front of the word “gold.”

I replied rhetorically with, “is actual physical gold being dumped or is it Comex is it paper gold?” Let’s have a look. (click image to enlarge)

The Comex is a futures contract trading venue. While the Comex vault operators issue daily vault reports which allege the presence of 100 oz gold bars in custody, we have no idea if all of the bars are sitting physically in the vaults or whether or not there are any sort of encumbrances attached to any of them. Very few holders of gold contracts ever take delivery and very little actual physical gold moves in or out of the Comex vaults on a weekly/monthly/quarterly basis.  In short, the Comex is a paper gold trading exchange.

On Friday, after the primary physical bar trading markets – India and China – were closed for the weekend, large quantities of paper gold futures were suddenly being dumped into the CME’s Globex computer trading system, about 5 minutes before the Comex gold pit opened for the day (8:20 a.m. EST).  You can see the action narrated in the chart above.  It’s not uncommon for the price of gold to be smashed using paper gold on the Friday after an FOMC meeting, especially in the summer months when trading operations are likely only at half-staff and the rest of the world is gone for the weekend.

Over a 60 minute period from 8 a.m. – 9 a.m. EST, approximately 90,300 contracts were sold, largely indiscriminately hitting every bid in sight.   This is the equivalent of 9.03 million ozs of gold.  There’s only one problem with this:   as of Friday’s warehouse report, Comex vaults were reporting total gold stock of 9.01 million ozs – only 507,453 of which were listed as “available to be delivered.”  In other words, in just one hour, the total amount of gold allegedly held in Comex vaults was “dumped” in the form a paper derivatives.  Worse, the amount “dumped” was 17.7x the number of gold ozs currently available to deliver.

For the entire day, Globex + floor volume, 495,364 contracts were “dumped.”  This is 49,536,640 ozs of Comex paper gold.  Again, I ask the tweeter who posited that comment on twitter, was gold really “dumped” on Friday?

For those who monitor the daily gold flow into India and China, I will bet any amount of money that both of those markets will be aggressively buying more than their usual daily amount of physical gold in order to take advantage of the lower price.   Funny that Trump would enable the Chinese to buy cheap physical gold when he’s engaged in a rapidly escalating trade war with China…

WTF Just Happened: President Trump, BLS & MSM Still Lying About The US Economy

The BLS (Bureau of Labor Statistics) released its “hey man, lots of jobs open” report last week.  The problem is that the credibility of the report is only as good as the credibility of the organization that prepares the report.  In this case, the BLS and Census Bureau, both of which are notorious for highly suspect data collection and data “adjustment” techniques (true story:  sometimes Census Bureau agents just make it up if they don’t have time to keep canvassing after lunch).  Our take is that most of the job listings spit out by the BLS sausage grinder are fictitious.

In addition to this, and interpreted by the media spin-meisters and Government propagandists as evidence that “Trump’s trade war is working” and “the economy is running full bore,” the trade deficit report for April showed a large percentage drop in the trade deficit.   Indeed, the trade deficit fell month to month the most since 2008. If you buy into the narrative that the economy is strong, you don’t want the trade deficit to decline in correlation with a similar decline in 2008. In truth, the trade deficit declined because imports fell more than exports rose. Imports are falling because personal consumption spending is now contracting per the latest GDP revision. It used to be, a long time ago, that the trade report was called the “U.S. International Trade in Goods and Services” report. Now it’s simply referenced as “the trade deficit report.”

Final, we believe that the best time to accumulate a winning investment is when no one else wants to hear about it. The U.S. investor sentiment toward the precious metals and mining stock sector is almost as bad as it was in late November 2015, which is when the 5-year bear cycle – which followed an 11-year bull cycle – came to an end. We explain why the next leg in the secular precious metals bull market is about to take off this week episode of, “WTF Just Happened?“:

****************************

Visit these links to learn more about the Investment Research Dynamic’s Mining Stock Journal and Short Seller’s JournalThe mining stocks are historically cheap and percolating for a big move higher.  I recommended shorting Hovnanian at $2.88 in January  – it closed at $1.95 on Friday and has been as low as $1.70.

U.S. Labor Market Reports: Someone Is Lying

The propaganda laced with bold lies is enveloping the media. The JOLTS report (Job Openings and Labor Turnover)  released today alleges that the number of job openings in April hit a record.   Of course, the April number was based on large revisions to previous data.  The number reported is also “seasonally adjusted” and predicated on statistical inferences.   In fact, 6.7 million allegedly vacant jobs is not only an all-time high but it also exceeds the number of “unemployed” in the Government’s monthly employment “report.”

How do we know both the reported job vacancies and unemployed are an outright fabrication?  Because wages would be soaring.  It’s simple supply/demand economics.  According to the Government, the demand for employees far exceeds the supply of workers.  But if this were case, the price of workers would be rising quickly.  It’s not.

Last Friday the Government reported Friday morning that the economy added 223,000 jobs, exceeding the Wall St. estimate of 190k. I go from general indifference to outright disgust with the payroll report. But Friday’s report was jaw-dropping horrification. Early Monday before the report hit the tape, Trump – who was briefed on the numbers Thursday evening – tweeted that he was “looking forward to seeing the employment numbers at 8:30 a.m.” I assumed the day before that the report would be rigged, but that confirmed it.

Here’s the problem with the 3.8% narrative: a “tight” labor market at theoretic “full employment is not confirmed by the “price of labor” – i.e. wages.

A 4% unemployment rate is considered “full employment.” The alleged unemployment rate has been running at 4% or lower for several months. But this story-line is not confirmed by wage growth. If the economy were at full employment accompanied by a “tight labor market,” wages should be soaring. Not only is wage growth dropping toward zero, it’s lower than the average wage growth shown in the chart going back to 1998.

The numbers and narrative as presented by the Government are simply not credible. The BLS statisticians removed another 170k from the labor force. The number of working age people not counted as part of the labor rose to 95.92 million – an all-time high. The labor force participation rate is 62.7%. Outside of Sept 2015-November 2015, this is the lowest level for the labor force participation rate since February 1978. Back then most families had one wage-earner per household.

Additionally, there are 102 total working age people who are either unemployed (6.1 million) or “not in labor force” (95.9 million). That’s 31.3% of the total U.S. population (Census Bureau: 2017 U.S. population 325.7 million). Of the 155 million people reported to be employed, 27 million are part-time. This means 39.2% of the total U.S. population works full-time, assuming that number is remotely accurate. Good luck to the Government keeping the Social Security Trust funded…

As for the most glaringly fraudulent aspect of the report, the BLS reports that “retail trade” was the 2nd largest producer of jobs in May. How is that heavenly possible? Retail sales are sagging and serial bankruptcies in brick/mortar retailing are dumping retail labor onto the market. There are other glaring inconsistencies with economic reality on Main Street. One number, however, that might be realistic: Health care/social assistance is credited with providing 31.7k new jobs. That is possible because the category is primarily Government jobs.

One last point. The birth/death model – which is reported before seasonal adjustments – is credited with throwing in 215,000 jobs into the total pool, which is then statistically “adjusted.” The BLS statistical sausage grinder spit out 223k jobs, of which the Birth/Death model contributed the majority on a non-adjusted basis. It’s just not a credible statistic. As we know, the Govt uses the birth/death “model” as a “plug” to create jobs that exist only on paper.

The chart above is the employment-population ratio. It shows the number of people “employed” as a ratio of the total working-age population. Prior to the 2008 financial crisis, the current employment-population ratio is the lowest going back to 1985. The ratio appears currently to be peaking. As it turns out, the four previous peaks in this ratio were followed by an economic/financial crisis and a severe stock market sell-off. My guess is that you will not see this graphic presented on CNBC, Fox Business, Bloomberg or any of the other mainstream financial media outlets.

Economic Collapse, Overvalued Stocks And The Stealth Bull Market In Gold

The narrative that the economy continues to improve is a myth, if not intentional mendacious propaganda. The economy can’t possibly improve with the average household living from paycheck to paycheck while trying to service hopeless levels of debt. In fact, the economy will continue to deteriorate from the perspective of every household below the top 1% in terms of income and wealth. The average price of gasoline has risen close to 50% over the last year (it cost me $48 to fill my tank today vs about $32 a year ago). For most households, the tax cut “windfall” will be largely absorbed by the increasing cost to fill the gas tank, which is going to continue rising. The highly promoted economic boost from the tax cuts will, instead, end up as a transfer payment to oil companies.

The rising cost of gasoline will offset, if not more than offset, the tax benefit for the average household from the Trump tax cut. But rising fuel costs will affect the cost structure of the entire economy. Furthermore, unless businesses can successfully pass-thru higher costs connected to high the er fuel costs, corporate earnings will take an unexpected hit. Rising energy costs will hit AMZN especially hard, as 25% of its cost structure is the cost of fulfillment (it’s probably higher because GAAP accounting enables AMZN to bury some of the cost in the inventory account, which then becomes part of “cost of sales”).

Gold is holding up well vs. the dollar. The dollar is at its highest since mid-November and the price of gold is trading 2% higher than it was at in November. Also, don’t overlook that the Fed began its snail-paced interest rate hike cycle at the end of 2015. Gold hit $1030 when the Fed began to tighten monetary policy. I thought gold was supposed to trade inversely with interest rates (note sarcasm). Gold is up nearly 30% since the Fed began nudging rates higher. Despite that it might currently “feel” like the price of gold is going nowhere, beneath the surface gold (and silver) have been staging a very powerful bull market pattern.

Kerry Lutz invited me onto his Financial Survival Network Podcast to discuss these issues and more. We have a good time catching up on a diverse number of topics – Click on the link below to listen or download:

Visit these links to learn more about the Investment Research Dynamic’s Mining Stock Journal and Short Seller’s Journal.

Mining Stocks Are Historically Undervalued

The mining stocks are more undervalued relative to the S&P 500 than at any time since 2005:

The mining stocks, especially the juniors, are more undervalued relative to the price of gold than at anytime in the last 18 years except late 2000 and December 2015. The poor sentiment and the constant price-capping of the sector by official entities has destroyed investor sentiment toward the sector. But the good news is that there are some incredible to be found right now. One of the stocks I recommended in my Mining Stock Journal is up 35% since May 17th, when I recommended purchasing it.

Bill Powers of MiningStockEducation.com invited me on to his insightful podcast show to discuss, among other topics, the precious metals sector and some specific mining stock ideas:

I truly believe that investing in certain stocks right now is the equivalent of buying into the internet stocks that survived the Dot.Com bubble. You can learn more about the Mining Stock Journal by following this link –   Mining Stock Journal information.

WTF Just Happened? Elites Scramble to Disable the Italian Economic Landmine

Italy is financially disintegrating.  The banking world would not care except for one small detail:  If Italy defaults in its debt obligations, it will set off a daisy-chain of OTC derivative credit default swap defaults resembling a financial nuclear holocaust.  This chart of Deutsche Bank’s stock price reflects the growing risk of this event:

Deutsche Bank has been hitting all-time lows since its listing on the NYSE in October 2001. The systemic risk posed by a financial collapse of Deutsche Bank is enormous. Yet, it should be allowed to occur to prevent the continued transfer of U.S. and European taxpayer money to fund DB’s payroll and large bonuses. The schizophrenic volatility of the stock markets is further reflection of the underlying financial volcano in danger of erupting.

In the latest episode of WTF Just Happened, Eric Dubin and Dave Kranzler discuss ongoing financial collapse of Italy and the likely method employed by the Fed, ECB, and BIS to keep the banking system corpse on life support (WTF Just Happened is a produced in association with Wall St. For Main Street – Eric Dubin may be reached at  Facebook.com/EricDubin):

**********************

Visit these links to learn more about the Investment Research Dynamic’s Mining Stock Journal and Short Seller’s Journal.  I recommended Almadex Minerals at 28 cents in April 2016 – it closed Friday at $1.13.  I recommended shorting Hovnanian at $2.88 in January  – it closed at $1.89 on Friday and has been as low as $1.70.

Is Emerging Market Turmoil Deutsche Bank’s “Black Swan?”

Rising energy prices and collapsing emerging currencies are two developments that are not receiving much attention in the mainstream propaganda narrative. But either development which could end up “pulling the rug” out from underneath the markets.

I pieced together the graphic to the right from an article on Zerohedge about the developing currency and debt crisis in emerging markets and, specifically, Latin America. This topic is not receiving much attention from the mainstream financial media. I guess facts that undermine the “strong economy” narrative go unreported. If it’s not reported, it doesn’t exist, right?

The top chart shows the abrupt plunge in an index of emerging market currencies. But most
of that decline is attributable to the plunging currencies in Latin America. Currently the Brazilian real is in free-fall, followed closely by the Mexican peso.

The bottom chart shows an index of emerging market debt prices. The index has plunged over 6 points, or nearly 7% since mid-April. In terms of bond prices, that’s a mini-crash. And that’s an index. Individual bond issues are getting massacred.

I was trading junk bonds in 1994 when the emerging market debt crisis hit hard in late January. Prior to that, emerging market debt issuance had just been through a mini-bubble. The money pumped into the system by Greenspan to “save the markets” from the collapse of Drexel Burnham and the related S&L collapse, plus to save the markets from the blow-back from the collapse of Russia, precipitated a mini-boom in high yield and emerging market debt.

The crisis started with a loss of confidence in the Mexican banking system and quickly spread like the flu throughout Latin America. The effects soon spilled-over into the U.S. markets. Between January and the end of March 1994, the Dow plunged 10.6%. The credit markets were a mess, especially the junk bond market. A friend of mine on the EM desk at BT was worried about losing his job.

It’s impossible to know the extent to which Central banks are working to prevent the current EM crisis from spreading, but at some point there will be a spillover effect in our markets.

As everyone knows, Deutsche Bank has resumed the collapse that started in 2008 before the Fed, ECB and Bundesbank combined to keep DB from collapsing.  Why was DB saved? Because DB’s balance sheet likely represents the largest systemic risk to the global financial system.   It has been burning furniture for years and now the bank is unloading more than 10% of its workforce as well as dismantling its North American and Investment Banking operation.  25% of the equity sales and trading personnel are being elimated.

No one outside of DB has any possibility of understanding DB’s OTC derivatives book. It’s highly probably that DB insiders do not understand the scale of counter-party risk exposure.   When DB acquired Bankers Trust, Anshu Jain took the emerging market derivatives business and injected it with steroids. Why? Because the fees were enormous.

On top of this, DB has enormous exposure via credit default swaps to the risky southern European financial systems.   A good friend of mine has reason to believe that if Italy goes into a tail-spin, it could take DB down with it.

In truth, we don’t know how bad the situation is inside DB because the financial reporting requirements imposed on banks have been substantially rolled-back over the last several years.   However, really bad news began to leak out on DB about the time the LIBOR-OIS spread began to rise and the dollar began to rise quickly.   The misdirection propaganda attributed this to corporate dollar repatriation connected to the Trump tax cuts.   Now the cost to buy credit protection on DB debt is starting to soar.  Credit default swaps have become the financial’s new “smoke alarm.”

DB’s stock is down nearly 39% since December 18, 2017. Since mid-January 2014, DB stock is down 78%.  Not sure why this fact doesn’t get coverage from the mainstream financial media other than the fact that it throws a wet blanket on the warm and fuzzy “synchronized global recovery” fairytale.