Category Archives: Uncategorized

New Home Sales Point To Renewed Collapse In The Housing Market

I am not even sure what to think about this horrific number, sales down 13% y/y; mo’s supply up 41% y/y. At least now we know that the demand destruction — most evident in the resale segment for several quarters — is not due to “lack of supply” or “the weather.” When a housing demand metric is 15% worse than my worse-case estimate, things are really bad out there. In fact, this is just more evidence that for the past two years housing data was buoyed by new-era, Fed-driven investor activity and the underlying, fundamental, end-user housing market is still in a serious depression…Mark Hanson, real estate and mortgage finance consultant.

It’s no secret that I’ve been bearish on the housing market for over a year.  The performance of the homebuilder stocks in that time frame vindicates my view:   the DJUSHB homebuilder index is down over 10%, with the S&P 500  index up nearly 25% in the same time period.  That fact alone should be scaring flippers away from the housing market.

But the big drop in March new home sales surprised even me.  Clearly they shocked the housing market expert I quoted at the top.  Over the last 13 years, March has been statistically the best month of the year for new home sales from a seasonal standpoint.  Not only did March new home sales decline from February, but they were down over 13% from March 2013.   Furthermore, months supply of inventory was up 42% year over year.  The “weather” and “low inventory” narrative to justify poor economic results is clearly no longer valid (which I stated back in January).

You can read my detailed analysis of the March new home sales here:   March New Home Sale Plunge.

Make no mistake, I would rather be writing about an ebullient economy and the prospect for prosperity for everyone.  I’d rather be hunting for undervalued investment opportunities.   That’s when capital can be allocated productively, it provides value-added for everyone and the risks are commensurate with the potential returns.

The reason I smelled a coming housing collapse is because I noticed in several segments of the economy that the consumer was dying on a vine.   The holiday retails sales should have been The Scarlet Letter indicator for everyone.   Currently, the average household’s income is now declining every month.  The Redbook retail chain sales report has indicated that early April retail sales declined from March.  That should never happen.  Retail sales always increase at least by the amount of inflation.

The middle class is tapped out and so is our economic system.

 

The High Risk Of “Safekeeping” Gold In A Central Bank Custodial Vault

missingGLDAlthough the western media at large, and especially the mainstream  media in the United States, remarkably never reported the event, the United States Government defaulted on Germany’s request to have some portion of its gold shipped from the Fed custodial vaults back to Germany.  That’s right – the U.S. outright defaulted.

Clearly, if the U.S. were “safekeeping” Germany’s gold in a segregated custodial account, it should have been nearly effortless to ship 300 tonnes back to Germany via two cargo flights.   After all, Venezuela received 160 tonnes of gold in about 4 months from several different Central Bank vault locations.

As it turns out, GATA.org found a Reuters article yesterday which surreptitiously reported the fact that Central Banks keep a portion of their gold outside of their own vaults and in the custody of investment bank vaults.  This enables the investment bank to “serve central banking customers with large bullion reserves to manage.”  Here’s the article link:  Central Bank gold trading operations.   The GATA link also contains a link to a policy paper from the Central Bank of France which describes Central Bank gold trading policies.

While those of us who follow the precious metals market professionally know that Central Banks actively dump their bullion on the market for the purposes of managing the price, the Reuters article stunningly acknowledges that a significant portion of Central Bank custodial gold is being held outside of Central Bank custody.

As the example of the U.S. default to Germany demonstrates, any entity that keeps its gold in a western Central Bank for “safekeeping” is at great risk of never having it returned.

 

March Existing Home Sales Data Show A Market That’s In Trouble

The National Association of Realtors reported existing home sales for March yesterday.   The report surprised everyone (except me) by showing a slight decline from February and a 7.5% decline from March 2013.   Wall Street analysts of course were expecting a big gain in March sales.

I wrote an article for Seeking Alpha which examines the data and analyzes the implications.  You can read the article here:   March Existing Home Sales Show A Deteriorating Market.

Perhaps the most troubling aspect about the March report is that the “bad weather/dog ate my homework” excuse for poor economic reports is no longer valid.  Perhaps our policy implentors should examining the policies they have put in place which are causing the middle class – the primary home buyer – to disappear.

 

Fraud Runs Rampant In The Census Bureau

Like we didn’t know that already, but here’s proof:

“I can tell you that waste, falsification and fraud are rampant,” says one of my new sources, who works as a Census supervisor in the Midwest and handles a number of surveys, including those on jobs, health and crime….When this source complained, higher-ups “told me to shut my mouth.”  When that didn’t happen, the source was deprived of work.

Here’s the article link:  New York Post

The most obvious implication here is that the monthly employment report is a complete fraud.  But then, we already knew that…

The BLM Went After Bundy For The Benefit Of Harry Reid

The BLM/Bundy situation is interesting not because of the sensationalistic and misleading reporting of it by Fox News, CNN et al, but because of what Harry Reid is doing with the BLM land in Nevada.  Reid needed Bundy off the land in order to get the Gold Butte area designated as a solar energy zone.  He’s trying to become the solar energy king of Nevada because I’m sure the interests he represents, like BrightSource Energy, have somehow cut him in on the largesse. I have a feeling there’s big Federal money still available for solar energy projects.

The ONLY reason I took an interest in this situation was because of Harry Reid’s “domestic terrorist” comments. But, as it turns out, BLM/Bundy the fight was a sideshow that was methodically planted as the main stage show while the real action was happening in Reno and DC with Harry Reid and his maneuverings to control the BLM.

I wanted to revisit some issues that are still being discussed in the media and the blogosphere. As I showed yesterday, the Government has committed attempted theft when it moved to sell the cattle it had impounded. The impounding was legit, the attempted sale was not. In the process of trying to get Bundy’s cattle off the land, the BLM not only committed an attempted theft but it negligently omitted any claim to unpaid fees, the right for which has now been forfeited.  Any lawyer worth the paper his degree was printed on would have at least asked monetary damage.  That the BLM lawyers did not tells us that unpaid money due was not the motivation for suing Bundy.

However, many interested people are still asking about whether or not Bundy still owes unpaid fees and whether or not the Government is entitled to those fees. As it turns out, the answers are “no” and “no.”

I enlisted my attorney colleague. Here’s the short explanation: “The transaction here was trespass. The feds litigated that and could have obtained damages, but didn’t ask for them. Now it’s too late. The fed’s failure to plead correctly will operate as a waiver.”

My colleague dug up the original complaint, which you can read here:  U.S. v. Cliven Bundy

Here’s his explanation as to why the only right the Government had was to remove the cattle from grazing on the BLM land:

Now I now believe, having read the complaint, that the BLM doesn’t have—and never had—the right to collect grazing fees, which were voluntary: in exchange for paying fees, cattlemen received a grazing permit. See para. 21.

When Bundy refused to apply for a permit in 1993, his cattle became trespassing chattels. That means the BLM’s only remedy against Bundy was an action for trespass. The BLM exercised that right by filing a 2-count suit in court, one count for trespass and another for a judicial declaration that Bundy’s cattle are trespassing in violation of law.

But a trespass action has never—not in 800 years of property jurisprudence—included any remedy that would grant a plaintiff any rights of dominion over the trespasser. There are but two remedies available to a plaintiff complaining of trespass. One is damages, the legal remedy. The other is an injunction, an equitable remedy. The BLM was only awarded the latter; it never even sought damages in its complaint

There was never any colorable legal justification for selling the cattle. The only cause of action available to the BLM was at all times since 1993 a trespass action, which did not, does not, and cannot transfer title.

Moreover, the fact that Bundy refused to pay the grazing fees does not mean that he owes back fees. He most certainly does not. Rather, it means that he voluntarily elected to became (via his cattle) a trespasser. The BLM filed suit for exactly this reason.

Interestingly, the BLM’s complaint does not seek any monetary damages. Thus, not only does Bundy not owe the BLM any money for the unpaid fees, Bundy doesn’t owe any damages to the BLM because the BLM simply failed to ask for any damages.

In short, the BLM’s act of attempting to sell the cattle, by entering into a $1 million contract for that purpose with a party in Utah, was a willful and wanton criminal act, as there was never any legal avenue that would have granted the BLM that right. The BLM and its lawyers had to have known that they were committing serious felonies.

What happens from here is anyone’s guess. In the current posture of this case, Bundy must keep his cattle off of federal land (Gold Butte, etc.). But he doesn’t owe the BLM and money and the cattle are still his and always were.

It is crystal clear once we learn the real facts of the BLM/Bundy dispute that the Government was NOT motivated to go after Bundy on behalf of the Taxpayer for unpaid cattle grazing fees. It also tells us that the only reason the BLM went after Bundy was to remove his cattle from BLM land, something for which I’m sure the average Taxpayer could care less. It stands to reason, therefore, that the sole motivation of the BLM actions against Bundy were taken on behalf of Harry Reid and his political and monetary interests.

 

Harry Reid Is The Real Domestic Terrorist

By now most if not all of you are varying degrees familiar with the stand-off between the Federal Government/Bureau of Land Management (BLM) and Cliven Bundy.  I had been observing the developments with a mixture of amusement and disgust until Harry Reid very publicly labelled the large group of citizens helping Bundy defend his cattle as “domestic terrorists.”  That’s  a pretty strong statement from someone who has a history of abusing his power for the benefit of himself and the business interests who put him in office and filled his bank account with a lot of money.

Harry Reid’s mouth told me immediately that there was something going on with this dispute that went well beyond the battle between the Federal Government trying to remove cattle that were grazing on BLM land in southeastern Nevada.  With the help of a colleague, an attorney who has been a partner in two of America’s elite litigation firms,  I discovered that the BLM’s motive to get Bundy’s cattle off its land is seeded in business development interests which have helped fund Harry Reid’s Senate seat.

Unfortunately Fox News, CNN and most, if not all, of the mainstream media has turned this whole ordeal into a grand-scale Broadway musical production replete with the standard devices of misinformation, disinformation and absurd partisan rhetoric.  Ironically, thieves like Harry Reid use this to their advantage to help deflect attention from and cover-up the real story.

The area of the dispute is the Gold Butte region in Nevada, which sits slightly northeast of Las Vegas between Lake Mead and the western border of the Grand Canyon.   While we’ve all heard about unpaid cattle grazing fees, protected turtle habitats, confiscated cattle, angry citizen “militia,” etc, the real story is derived from understanding why Harry Reid has publicly pushed his way into this Government/citizen dispute.

If you want to educate yourself on the history, timeline and events which led up to confrontation between the Government and the Bundy clan, I’ve determined that the most polemically-free information can be found  HERE and HERE.

The bottom-line on the surface is that Bundy owes several years of grazing fees and has been court-ordered to remove his cattle from the BLM land.  The court-order permitted the Feds to impound Bundy’s cattle if he did not comply.     Bundy has resisted the court order and the Feds moved to impound Bundy’s cattle.

The problem with the way in which the events have unfolded have to do with timing and Rule of Law.  To be sure, Bundy was given a court order to remove his cattle from the BLM land.  But he was never ordered to pay past-due grazing fees.  Furthermore the Government attempted to sell the cattle it impounded from Bundy, which makes the Government’s action outright theft.

I want to make one thing clear, I am not taking sides here with Bundy on the issue of cattle grazing or unpaid fees.   Bundy was clearly ordered to remove his cattle from the land, which he did not.   Bundy was not ordered to pay fees in the court-order and he has not.   The Government did try to sell the impounded cattle, a course of action for which it was not legally entitled.   I wanted to layout as succinctly as possible this situation as it is being reported by the media and then shift the focus to where the REAL story is.

The other issue has to do with, “why is this all of a sudden a big issue now?”  After all, this situation with the land and Bundy’s cattle has been going on for decades.  Why is the Government taking action now?

The Government violated the court-order, ignored Rule of Law and took the law into its own hands when the Feds tried to sell Bundy’s  impounded cattle.  My colleague dug up the actual Nevada District Court order and provided a superb synopsis of the legal issues, along with an explanation as to why the BLM should be criminally prosecuted for attempted grand larceny:

The federal district court opinion in the case of U.S. v. Bundy. This is the legal authority on which the rightfulness of the BLM’s actions hinge. Nowhere in the court’s order does the judge so much as mention taxes or fees. Thus, the issue of Bundy’s alleged grazing fee delinquency has never been adjudicated, and the allegations to the contrary are just so much armchair lawyering by mainstream media cue card readers, which I’ve suspected all along. What this means is that to the extent the BLM has been rationalizing its behavior on the basis of grazing fees, it has unequivocally deprived Bundy of due process. Here’s the order, which runs just 3 pages, giving the BLM the right to impound Bundy’s cattle without conveying the rights needed to sell the cattle, i.e. title:   U.S.  v.  Cliven Bundy.

But the feds went a lot farther than that by attempting to sell the cattle in Utah. That’s an act of dominion that requires a title to the cattle, which the ruling unequivocally does NOT grant the feds. This means that feds are guilty of attempted grand larceny (farm animals are a particular no-no) when it entered into a sales contract.

Furthermore, my colleague also pointed out that the court ruling is silent on the matter of the grazing fees:   “Bundy may owe them, but the Feds have not obtained any judicial ruling that would entitle them to a lien on the cattle.  By attempting to do exactly that, sell the cattle, the Feds deprived Bundy of due process.   The media’s silence on this point is as stunning as it is telling.”

The legal battle and the Government/Bundy stand-off has been the focus of the media and the politicians.  But the real issue is seeded in the reasons why Harry Reid is now pro-actively involved and is attempting to align the public on his side by associating the Bundy people with actual terrorists.  The truth is, Harry Reid is using his position and his control of the BLM to terrorize public citizens and abuse the taxpayers.

It turns out  that areas of BLM land in Nevada and 5 other western States have been designated as Solar Energy Zones (SEZs).   You can read about it here:  SEZs.  It also turns out that Harry Reid is connected with a company called BrightSource Energy, which is seeking to develop solar energy projects.

Reid became intimate with BrightSource via his connection to Nevada developer Harvey Whittemore.  Currently Wittemore is appealing a conviction for making illegal contributions to Harry Reid.   Whittemore is the developer of Coyote Springs.  Reid pro-actively arranged for land swap deals with the BLM that enabled Whittemore to start developing Coyote Springs, a Whittemore development estimated to cost $30 billion.  There’s a golf course there but the development has never gotten off the ground.  Ironically, the Coyote Springs development trampled all over a desert turtle  protected area, but that didn’t seem to bother anyone.

This map with my edits shows the area in question:

Untitled

You can see where Gold Butte is situated in relation to Las Vegas and Harvey Whittemore’s semi-defunct Coyote Springs development.

On April 9th, the Senate confirmed the appointment of Neil Kornze to head the BLM.  This is significant because Kornze – who’s 35 yrs old – was one of Harry Reid’s senior advisers.  In other words, Kornze is nothing but a puppet running the BLM for the power-abusing Harry Reid, who will turn the Solar Energy Zones into a device for his own personal gain and the gain of his financial supporters.

In fact, the area where Bundy was grazing his cattle was part of what is known as the Dry Lake North SEZ.  There is a BLM study linked on the BLM website which identified the Gold Butte area as the “Bundy  Cattle Tresspass Overview.”  As the Bundy battle moved into the national media spotlight, the BLM removed a document which identifies Bundy’s cattle as an impediment to making Gold Butte a location for solar energy development projects.   This article shows the BLM map with the Bundy Cattle Trespass Overview and a document that was removed from the BLM website which describes the cattle dilemma.

The blogosphere correctly fingered Harry Reid and his son for representing a Chinese company that wanted to develop a $5 billion solar project near Laughlin, NV.  Harry Reid applied heavy pressure to NV Energy, Nevada’s primary utility compnay, to agree to buy power from the Chinese solar project.  The Chinese scrapped the deal when NV Energy declined and Reid couldn’t find another utility company willing to buy the solar energy.

Now, with BrightSource Energy donating cash to Harry Reid’s political slush fund, and with Harry Reid in control of the BLM via Neil Korntze, it should be pretty clear why Harry Reid has pro-actively taken a public stand and unleashed verbal violence on the BLM/Bundy battle.    I have a good hunch he’s close to getting a big solar deal clinched from which he’ll stand to make a lot of money eventually and he needs the Gold Butte piece to cement the deal.

Recall that Obama has recently reiterated his mandate for the development of alternative energy and I would bet good money that there’s plenty of Federal money available to subsidize this, despite the legacy of Obama’s colossal waste of taxpayer money in this arena. Everyone knows there are loads of easy money to be made getting Federal contracts and Federal grants.  Obama has made a several billion in funds available to alternative energy deals.

This explains why the BLM/Bundy battle came to head now and why Harry Reid has taken an active role in trying to get Bundy’s cattle out of the Gold Butte BLM land.  In other words, the real story is about high-level political corruption and powerful politicians using the avenues made available to them by their position for enormous personal gain.

That truth is, given Harry Reid’s history of abusing the power of his Senate seat – see this article, for instance – Reid is the one who is the terrorist.

Several Factors Suggest A Big Move Is Coming For Gold

Thank God for the manipulation. Could be collateral stress? We get to buy at lower prices.  I just wish they manipulated the price of food, clothing and shelter lower as well. – Comment from a reader

There’s no question about it – the Fed and the Government’s taxpayer-funded Exchange Stabilization Fund have all of the markets under “lock-down” control right now.  The real economic data plus the geopolitical risk becomes worse by the day.  And yet, just when it looks like the stock market is going to drop off a cliff, out of nowhere the S&P 500 futures take off straight up as if launched from an anti-aircraft missile launcher.   Similarly, every time the precious metals start to make a serious move higher, HFT-driven mini-flash crashes start to occur repetitively during the least active periods of overnight trading and always after the Shanghai Gold Exchange closes.  The engineered flash crashes serve the purpose of triggering an avalanche of selling from large hedge fund “black box” computer programs.

But the oppressive and illegal manipulation of the gold market is starting to show unintended consequences again.  At the beginning of April the LBMA (London) gold forward rate (GOFO) turned negative again.  It’s been getting more negative every day this month.  The GOFO is the interest paid on dollar/gold swap transaction.  Ordinarily, it involves a party who pays interest to borrow dollars, using gold as collateral.  But when there’s a shortage of physical bullion, it means that one party needs to borrow gold and will pay interest plus put up dollars for collateral. It means that, at the current moment in time, it is perceived to be riskier to hold dollars than to hold gold.   

Because there is a shortage of physical gold, the lender of the gold is being  given the market value of the gold in dollars as collateral plus a rate of interest to compensate him for the risk that he might not get his gold back.  Think about that for a moment.

I just published an article on Seeking Alpha which discusses the GOFO and two other significant factors which suggest the possibility of big move coming for gold something this spring/summer.  You can read it it here:  GOFO, India and China.

With respect to the frequency of a negative GOFO:   From January 1, 1989 – July 7, 2013, there were only seven days in which a negative GOFO was observed.   But since 7/7/2103, GOFO has been negative more than 55% of the time.  In other words, the market for physical gold that can be delivered into the custody of the buyer has never been tighter.

 

Today’s Gold Price Take-down Operation Has The Smell Of Desperation

I had a feeling that gold and silver were being put on the “down” elevator by the bullion banks when I checked prices late in the evening  last night and saw that gold had been hit for about $8 right at the open of trading in Australia.  A quick drive-by hit when Australia opens has become almost as common an occurrence as the near-daily price take-down at the opening of the Comex floor trading in New York.

Then Bloomberg, Reuters and the Wall Street Journal each published conspicuously negative news articles which predicted a big drop in the price of gold during 2014.   All three articles were based on a recent report published by the World Gold Council which contained highly questionable estimated data on China’s YTD demand for gold and an even more highly questionable forecast for China’s full-year gold demand in 2014.  It was clear that none of the reporters who wrote these articles had vetted the WGC’s data, which has been shown to be remarkably unreliable in the past.  See this report, for example:  Chinese Gold Demand and the WGC’s Estimates.

Furthermore, the Wall Street Journal’s article highlighted a comment  about the gold market from some money manager in Miami.  It was a name I had never come across in nearly 14 years of studying, researching and trading the gold market.   The money manager’s commentary was riddled with incorrect statements and nonsensical assertions.

Shortly after the Shanghai gold market closed last night, the market manipulators went to work on the gold price.    Gold was taken down another $20 during the morning trading in London, primarily in three HFT trading induced “mini flash crashes.”  There were not any related news reports or events that would have triggered the relentless selling of paper gold (Comex futures via the Globex system and LBMA forward contracts).

As soon as the Comex floor trading opened at 8:20 a.m. EST, nearly 4,000 contracts were dropped instantaneously onto the floor and into the Globex system.  This is over a half a billion dollars worth of gold – over 10 tonnes of paper gold – in a nano-second.    This amount represents 47% of the amount of actual physical gold that was reported to be available for delivery by the Comex yesterday.   The sudden burst in volume halted the Comex computer system for 10 seconds.   The contract bomb caused an immediate $16 plunge in the price of gold.   Over a period of 7 minutes from the time the Comex opened, over 14,000 contracts traded.   This represented over 18% of the total volume in Comex contracts that had traded in the previous 14 hours of trading starting at 6 p.m. EST the night before.

Obviously this is was intentional and determined selling  of paper gold for the purposes of driving the price a lot lower.  The news reported over the last 24 hours, if anything, should have caused the price of gold to move higher.   This includes the re-escalation of the events in Ukraine, an inflation report released this morning which showed that the rate of inflation in March was double the rate that was expected by Wall Street forecasters and a report of manufacturing activity in the northeast which was significantly  lower than expected.

It is no coincidence that today is the anniversary date of last year’s $200 price plunge in gold.  In fact, about a week prior to last year’s intervention operation, a series of bearish articles and Wall Street analyst reports started hitting the newswires, similar to the flurry of news reports that were released last night.   It is painfully obvious to anyone paying attention that there is a serious effort being conducted by the Fed, the U.S. Government and the big banks to hold down the price of gold.

The reason for this is that the U.S. Government is growing more desperate by the day to prop up the stock market and the U.S. dollar.  Russia and China have been announcing a series of deals between each other and with several other large trading partners to begin conducting oil and gas trade using their respective currencies, thereby completely bypassing the use of the U.S. dollar.  It is clear that far and middle eastern countries are working to systematically scale down and phase out the world’s reliance on the U.S. dollar and the catastrophic political and economic policies it represents.

Welcome To My New Site

Welcome to my new website, Investment Research Dynamics – Home of The Golden Truth Blog.  Please remember to bookmark this website.  If you would like an email alert whenever I post something new, please fill out the form to the right.   The site is still being developed and enhanced.  I am going to continue to post my usual truth-seeking – and hopefully informative – rants about the U.S. financial/economic/political system.  At least if they are not informative, they certainly save me the expense of “couch time” with a therapist.

In response to an overwhelming number of requests and inquiries for mining stock ideas and more in-depth market research, I am also in the process of developing and introducing a feature which will offer the best of my investment research for a small fee.  I will start off by offering my work per report but, if the response merits it, I will roll-out a low-fee subscription service.   The fee is to cover the amount of work and time required to thoroughly and properly research and write what I believe is unique and valuable insight on investment ideas that is superior to the sell-side garbage produced by Wall Street.  Most of my reports will focus on junior mining stocks.  I will also write reports on “special situations” outside of the mining sector.

Please feel free to email me stock ideas.  Use the “contact” button at the top of the site.   I will look at every idea sent to me but I can’t promise I’ll report on every suggestion.  If I do produce a report based on reader inquiry, that person will receive a free copy.

An Interview With Kerry Lutz/Financial Survival Network

I did an interview with Kerry Lutz of the Financial Survival Network a little over a week.  We covered the condition of the housing market and the precious metals market.

It’s no secret that I believe the housing market is getting ready to collapse again, barring some sort of extraordinary push to reopen the floodgates of subprime mortgage lending.  Although I think the probability is low that will occur, it would not be inconsistent for the U.S. Government to underwrite something that stupid.

We also covered some topics in the precious metals sector.  At the end of that segment Kerry was able to squeeze two mining stock ideas out of me.  In the spirit of full disclosure, we do own these two stocks in the investment fund I manage with two partners.

Here’s the link to the audio podcast:   Is The Real Estate Recovery Over?