Category Archives: Precious Metals

WTF Just Happened? Stock Market Ignores Escalating Trade War & Spent US Consumer

Every month Government, corporate and household debt hits a new all-time high. The entire financial system is heading down an unsustainable path of debt issuance. The delinquency rate for auto and credit card debt is already at levels last seen in late 2008. The only reason the banks are not on the ropes – yet – is because they are still sitting on most of the liquidity the Fed injected into the banking system from 2009 to 2015.

This “slush fund for a rainy day” has been declining. As this money flows into the economic system, it’s starting to ignite inflation. Even the monthly Government-generated CPI and PPI reports, which are highly manipulated to minimize the true inflation rate, are starting to show rising inflation. Of course, with wage growth stagnant, the average household disposable income level is dwindling rapidly, which is why the personal savings rate is at a historically low level and revolving credit use is at an all-time.

Consumer sentiment has been trending lower off a recent peak. While the media puppets explain that trade war headlines are weighting consumers expectation, in truth consumer sentiment is falling because the average household is suffocating from the crushing weight of debt and a diminished ability to service that debt because real disposable income is declining. In most areas, home prices are falling. In fact, the home buying sentiment component of the U of Michigan sentiment survey is at its lowest level since 2008.

In this episode of WTF Just Happened?, we discuss these issues plus whether or not gold is forming a tradable bottom here (WTF Just Happened is a produced in association with Wall St. For Main Street – Eric Dubin may be reached at  Facebook.com/EricDubin):

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I recommended Arizona Mining in May 2016 at  $1.26 to my Mining Stock Journal subscribers.  It was acquired for $1.3 billion, or $4.65/share.  My subscribers and I are making a small fortune shorting homebuilders plus this week’s issue features an idea that is the ultimate contrarian play.

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

Complete Idiocy Engulfs The U.S.

William Shakespeare at his creative pinnacle could not have written this screenplay:

The first time I watched this I thought it was a joke – product of National Lampoon. Then the reality of it hit me like a ton of bricks. Is this really a productive use of Congressional time? The entire U.S. system is hurling toward a debt-induced financial and economic apocalypse. At the same time the Deep State, using Trump as its hand-puppet, is alienating the U.S. from the EU/NATO, this country’s last remaining allies.

The “trade war” is nothing more than the Deep State’s set-up for a military war. The dollar is being removed by China as the reserve currency, which will in turn take away the power enjoyed the elitists running the U.S. since Bretton Woods. If you are unsure how this story ends, take another look at history.

The election of Trump – a narcissistic baboon with a business track record littered with bankruptcies – is the epitome of defining deviance down. J. Edgar Hoover would have salivated at the prospect of having a President with the personal background of Trump. Anyone who still believes Trump controls of the Presidential decision-making process is hopelessly naive. Rather than “draining the swamp,” the swamp monsters – aka “The Deep State” – have taken control of the Oval Office.

One can only wonder if Hillary Clinton intended for her “the Russians hacked the election” during the Presidential debates to mushroom into the full-blown DC political circus that seems to captivate the public. To be sure, it’s Deep State propaganda at its finest designed to deflect the pubic’s attention away from the fact that corporate and banking elitists are systematically sweeping the last crumbs of public wealth off the table and into their pockets.

The Real Data Show The Real Economy Hit A Wall

The economy is melting down – the only support for the Propaganda Narrative of a “booming economy” is a rising stock market. Without a doubt Trump has ordered the Working Group on Financial Markets – AKA “the Plunge Protection Team” – to push stocks higher for now so insiders can unload.

The huge jump in credit card debt reported yesterday by the Fed was received as “good news” for consumer spending. However, this is typical  technical color vomit served up through the mainstream financial media by Establishment “economists” and Wall Street. The likely explanation is that the average consumer is now forced to use revolving credit in order to maintain the current lifestyle.  This assertion is reinforced by the fact that the latest data from Transunion show that personal loans hit a record high in Q1 2018.

The homebuilder sector is in trouble. A Colorado-based credit union is now offering 0-percent down payment mortgages. Credit Union of Colorado will underwrite the 3% down payment FNM/FRE mortgage product and it will cover the remaining 3% of a home’s cost by giving the “buyer” an interest-free loan that is repayable at a future date or through a refinancing. The bank is charging 0.375% more for the mortgage than the rate for a 3% down payment conforming mortgage. The bank is betting the value of these homes will rise enough to cover the 3% down payment loan through a refinancing.  This is a de facto zero-down payment mortgage sponsored by the Government. 

I am certain that this product reflects the fact that banks are getting desperate for mortgage fees because the pool of borrowers who can qualify for FNM/FRE/FHA loans has dried up. The economy hit a wall in the last month or two and it’s going to crush the housing market. By the end of the summer it will be impossible for the NAR and the media puppets to blame low sales on low inventory.

In fact, recent reports from around the country show that home listings are soaring. This includes Seattle, where King County reported a 43% jump in single-family home listings in June, and Orange County (SoCal), which saw a 218% jump in home listings YTD. A 10% drop in contracts in Orange Country was also reported (The Orange County Register). In Denver, new rate of new listings exceeds contract signings now by a considerable amount.

The June employment report continues to show a “tight labor market.” This is utter nonsense given that over 95 million working age people are no longer consider part of the “labor force” using the methodology devised to compute unemployment by the Government. Again, “however…”

…the “tight labor market” narrative is not confirmed by help-wanted advertising. Help-wanted advertising is considered an accurate indicator of broad economy. The Conference Board has been tracking help-wanted advertising going back to 1919.  Formal tracking of help-wanted advertising shifted from tracking ads in printed media to tracking help-wanted ads online in 2005.

The Conference Board’s Help-Wanted Online Advertising for June declined 3.7% from May. May was down 2.1% from April. April was down 1.4%. The May and April declines were revised lower in the latest report from the original reports. New ads were down 4.6% in June from June 2017. The total number of ads were down 5.7% year-over-year for June.

The fact that help-wanted ads as tracked by the Conference Board are declining sharply month-to-month and year-over-year reinforces my view (and I’m not alone in this view) that the real economy – as opposed to the “fake news” economy reported in the mainstream media – is contracting.

A portion of the above commentary is an excerpt from the latest Short Seller’s Journal. My subscribers and I are making easy money shorting the home construction sector as well as other select stocks. This includes specific ideas for using put options plus market timing. You can learn more about this newsletter here:   Short Seller’s Journal information

WTF Just Happened? Gold: Buy While There’s Blood In The Street

Perhaps the best contrarian indicator for the directional movement of gold and silver is Dennis “Wrong Way” Gartman, who recently announced that he was dumping all of his gold “positions” (note:  Gartman’s “positions” are theoretical paper portfolio trades):

As for gold, we have clearly held on far, far, far too long to having owned gold…clearly we’ve been wrong to have erred bullishly of gold in any fashion whatsoever. We shall have no choice henceforth but to look upon any bounces that we get as opportunities into which to sell (The July 2, 2018 Gartman Letter, page 4).

This is true manna from heaven for precious metals investors. Dennis Gartman is one of the
best contrarian signals we have observed in over 35 years of involvement with investing and financial markets. He has a remarkable capacity to endure shame because he is almost
always wrong when he goes long or short any investment. His wrong-way calls are  becoming legendary.

But if this isn’t enough evidence that now is the time to start buying, reloading or adding to your favorite mining shares and buy more physical metal, in this episode of “WTF Just Happened?” we discuss several other market indicators that point toward a big move coming in the precious metals sector ((WTF Just Happened is a produced in association with Wall St. For Main Street – Eric Dubin may be reached at  Facebook.com/EricDubin):

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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.  My subscribers and I are making a small fortune shorting homebuilders.

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

The Yield Curve Is The Economy’s Canary In A Coal Mine

The economy has hit a wall and is now sliding down it. I don’t care what bullish propaganda may or may not be bubbling up in the headlines from the financial media and Wall Street, the hard numbers I look at everyday show accelerating economic weakness. The fact that my view is contrary to mainstream consensus and political propaganda reinforces my conviction that my view about the economy is correct.

As an example of the ongoing underlying systemic decay and collapse conveyed by this week’s title, it was announced that General Electric would be removed from the Dow Jones Industrial Average index and replaced by Walgreen’s. GE was an original member of the index starting in 1896 and was a continuous member since  1907.

GE is an original equipment manufacturer and industrial product innovator. It’s products are used in broad array of applications at all levels of the economy globally.  It is considered a “GDP company.” GE was iconic of American innovation and economic dominance. Walgreen’s is a consumer products reseller that sells pharmaceuticals and junk. Emblematic of the entire system, GE has suffocated itself with poor management which guided the company into a cess-pool of financial leverage and hidden derivatives.

As expressed in past issues (the Short Seller’s Journal), I don’t put a lot of stock in the regional Fed economic surveys, which are heavily shaded by “hope” and “expectation” metrics that are used to inflate the overall index level. These are so-called “soft” data reports. But now even the “outlook” and “expectations” measurements are falling quickly (see last week’s Philly Fed report). The Trump “hope premium” that inflated the stock market starting in November 2016 has left the building.

Something wicked this way comes:  Notwithstanding mainstream media rationalizations to the contrary, a flattening of the yield curve always always always precedes a contraction in economic activity (aka “a recession”). Always. Don’t let anyone try to convince you otherwise. An “inverted” yield curve occurs when short term yields exceed long term yields. When the yield curve inverts, it means something wicked is going to hit the financial and economic system.

Prior to the financial crisis in 2008, the yield curve was inverted for short periods of time during 2007. The most simple explanation for why inversion occurs is that performance-driven capital flows from riskier investments into the the longer end of the Treasury curve, driving the yield on the long end below the short end. The expectation is that the Fed will be forced to cut short term rates drastically – thereby driving the short-end lower, which in turn pulls the entire yield curve lower (the yield curve “shifts” down). This gives investors in the long-end a better rate-of-return performance on their capital than holding short term Treasuries for safety. The Fed’s dilemma will be complicated by the fact that it does not have much room to cut rates in order to combat a deep recession.

Studies have shown that curve inversions precede a recession anywhere from 6 months to 2 years. I would argue that, stripping away the affects of inflation and data manipulation, real economic activity has been somewhat recessionary for several years. The massive intervention in the Treasury market by the Fed, ECB and Bank of Japan has muted the true price discovery mechanism of the Treasury curve. The curve has been barely upward sloping for quite some time relative to history.  This could indeed be history’s equivalent of an inverted curve. That being the case, if an inversion occurs despite the Fed’s attempts to prevent it, it means that whatever is going to hit the U.S. and global financial and economic system is going to be worse than what occurred in 2008.

A note on gold and silver: The massive take-down in the price of gold and silver, which is occurring primarily during the trading hours of the LBMA and the Comex – both of which are paper derivative markets – is quite similar to the take-down that occurred in the metals preceding the collapse of Bear and Lehman in 2008. It is imperative that the price of gold’s function as a warning signal is de-fused in order to keep the public wallowing in ignorance – just like in 2008.  But keep an eye on the stock prices of Deutsche Bank, Goldman and Morgan Stanley – as well as the Treasury yield curve…

Paul Craig Roberts: “How Long Can The Federal Reserve Stave Off the Inevitable?”

IRD Note: The average household is bloated with debt, housing prices have peaked, many public pensions are on the verge of collapse in spite of 9-years of rising stock, bond and alternative asset values. But all of this was built on a foundation of debt, fraud and corruption. Dr. Paul Craig Roberts asks, “does the Fed have another ‘rabbit’ to pull out its hat?…

When are America’s global corporations and Wall Street going to sit down with President Trump and explain to him that his trade war is not with China but with them? The biggest chunk of America’s trade deficit with China is the offshored production of America’s global corporations. When the corporations bring the products that they produce in China to the US consumer market, the products are classified as imports from China.

Six years ago when I was writing The Failure of Laissez Faire Capitalism, I concluded on the evidence that half of US imports from China consist of the offshored production of US corporations. Offshoring is a substantial benefit to US corporations because of much lower labor and compliance costs. Profits, executive bonuses, and shareholders’ capital gains receive a large boost from offshoring. The costs of these benefits for a few fall on the many—the former American employees who formerly had a middle class income and expectations for their children.

In my book, I cited evidence that during the first decade of the 21st century “the US lost 54,621 factories, and manufacturing employment fell by 5 million employees. Over the decade, the number of larger factories (those employing 1,000 or more employees) declined by 40 percent. US factories employing 500-1,000 workers declined by 44 percent; those employing between 250-500 workers declined by 37 percent, and those employing between 100-250 workers shrunk by 30 percent. These losses are net of new start-ups. Not all the losses are due to offshoring. Some are the result of business failures” (p. 100).

In other words, to put it in the most simple and clear terms, millions of Americans lost their middle class jobs not because China played unfairly, but because American corporations betrayed the American people and exported their jobs. “Making America great again” means dealing with these corporations, not with China. When Trump learns this, assuming anyone will tell him, will he back off China and take on the American global corporations?

The loss of middle class jobs has had a dire effect on the hopes and expectations of Americans, on the American economy, on the finances of cities and states and, thereby, on their ability to meet pension obligations and provide public services, and on the tax base for Social Security and Medicare, thus threatening these important elements of the American consensus. In short, the greedy corporate elite have benefitted themselves at enormous cost to the American people and to the economic and social stability of the United States.

The job loss from offshoring also has had a huge and dire impact on Federal Reserve policy. With the decline in income growth, the US economy stalled. The Federal Reserve under Alan Greenspan substituted an expansion in consumer credit for the missing growth in consumer income in order to maintain aggregate consumer demand. Instead of wage increases, Greenspan relied on an increase in consumer debt to fuel the economy.

The credit expansion and consequent rise in real estate prices, together with the deregulation of the banking system, especially the repeal of the Glass-Steagall Act, produced the real estate bubble and the fraud and mortgage-backed derivatives that gave us the 2007-08 financial crash.

The Federal Reserve responded to the crash not by bailing out consumer debt but by bailing out the debt of its only constituency—the big banks.

Click here to read the rest: Paul Craig Roberts/Fed

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:

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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):

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 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…