Gold and the Number of the Beast

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Here We Go Again …

Most readers probably recall the early March 2009 low in the S&P 500 Index. The state of market confidence and the extent of the bullish consensus evident at the time was essentially a mirror image of what we are seeing today. How despondent traders were is probably best illustrated by the fact that on the day the low was put in, the DSI (daily sentiment index) of futures traders had declined to just 3% bulls – the lowest reading in history. There was almost no-one left who could possibly still turn bearish at that point.

the-number-of-the-beast-is-666William Blake’s painting “The Number of the Beast is 666”.

However, numerologists were probably quite fascinated with where exactly the SPX actually bottomed. For some reason, the market picked Ἀριθμὸς τοῦ θηρίου (Arithmos tou Thēriou), a.k.a. the Number of the Beast for putting in the low (if one ignores the numbers after the decimal). This was very Babylonian of the market.

SPX, 2009 goat lowHmmm… what would make a good low? – via StockCharts, click to enlarge.

For those worried about the bestial purity of this low, so to speak, due to the numbers after the decimal point, you obviously don’t know that numerologists have an answer for everything. What is 79? If you add up 7 and 9, you get 16. Continue reading

Dealers Are Still Hoarding

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

With the state of the “dollar” being what it is, including the devastating darkening afforded by negative swap spreads everywhere, it isn’t exactly surprising to find that primary dealers continue to hoard UST collateral. By September, dealers were reporting a net positive balance of all coupon holdings of nearly $60 billion. With everyone in the world predicting higher interest rates, including the banks themselves, it seems an odd pairing for dealer inventories to suddenly surge with longer maturity bonds and notes. In early July, after all, the net position was almost exactly neutral.

Dealer activities are, like most wholesale arrangements, misunderstood from any traditional monetary standpoint. Even that isn’t very surprising given that this kind of behavior is relatively new; dealers didn’t truly depart until the 21st century, and securities lending in repo isn’t much advertised or discussed. But if we calibrate dealer activities going back to the mid-2000’s, their footprint becomes clearer as does motivations and inferences about relative changes.

ABOOK Nov 2015 Funding Dealer Coupons

Until late July 2007, with a sharp reversion early that August, dealers were persistently “short” UST coupons around $100 billion to $150 billion. Those were massive positions but wholly unrelated to actual investments or even primary market warehousing. Instead, dealer inventories were accumulated in the robust securities lending business which was a constant and steady supply of “rentable” collateral for repo. Thus, the transition starting in July 2007 makes sense under terms of suddenly suspect rehypothecation chains and counterparty risk. Like the rest of the eurodollar system, this element of “dollar” liquidity eroded in waves so that years later by the time of QE3 (and undoubtedly one reason “convincing” Bernanke to act not once but twice in late 2012) dealers were almost as likely in net holding terms to hoard collateral as they once were to submit it into the liquidity market. Continue reading

Central Banker Jabberwocky

The financial system of the world has been turned into a doomsday machine by central bankers stranded in an intellectual puzzle palace. That is, they are marching financial markets straight into another giant bubble implosion owing to their embrace of a fundamental error about why there is an apparent lack of consumer inflation in the official indices.

For example, the chief economist of the IMF, Maurice Obstfeld, recently trotted out the chart below to prove that “lowflation” is a deadly threat everywhere on the planet to growth, jobs, living standards, public finances, and even capitalist viability.

The ill of lowflation can only be remedied, he averred, by resort to “out of the box” central bank expedients designed to compensate for the purported drastic shortfall of that Keynesian ether called “aggregate demand”.

What he had in mind, of course, was negative interest rates and further massive monetization of the public debt and other existing assets in the name of QE.

Mr. Obstfeld is talking central banker jabberwocky. The above graph is actually welcome evidence that wage workers and other middle class households are finally getting some respite from the relentless upward creep of consumer prices.

Moreover, the above graph represents no problem whatsoever because better retention of the purchasing power of wages and salaries is surely not something that needs fixing. And most especially not by the very same central bankers whose misguided policies gave rise to the deflationary tides now gathering in the world economy.

In a nearby post today, Pater Tenebrarum called out exactly what these “moar inflation” seeking central bankers are really up to:

What are the basic requirements for becoming the chief economist of the IMF? Judging from what we have seen so far, the person concerned has to be a died-in-the-wool statist and fully agree with the (neo-) Keynesian faith, i.e., he or she has to support more of the same hoary inflationism that has never worked in recorded history anywhere. In other words, to qualify for that fat 100% tax-free salary (ironically paid for by assorted tax serfs), one has to be in favor of central economic planning and support policies fully in line with today’s economically illiterate orthodoxy. Meet Maurice Obstfeld, who has just taken the mantle.

BN-JL827_Obstfe_M_20150720120520New IMF chief economist Maurice Obstfeld (left) and fellow monetary crankHaruhiko “Peter Pan” Kuroda, governor of the BoJ

So trapped in their illiterate orthodoxy, Obstfeld, Kuroda, Yellen, Draghi and the rest the central bankers cartel resort to desperate monetary expedients that would have been considered crackpot economics even 15 years ago. The idea of ZIRP for 82 months running would have been considered borderline lunacy; the notion that the collective central bank balance sheets of the world could explode by 10X in two decades would have been viewed as incendiary radicalism.

But it is exactly these crackpot doctrines which have now become embedded in a relentlessly tedious central banker groupthink. Indeed, the core notion of “lowflation” and deficient “aggregate demand” is so superficial, contradictory and refutable that it amounts to little more than jabberwocky. Continue reading

The Re-enserfment of Western Peoples

Submitted by Dr. Paul Craig Roberts – Institute for Public Economy

The re-enserfment of Western peoples is taking place on several levels. One about which I have been writing for more than a decade comes from the offshoring of jobs. Americans, for example, have a shrinking participation in the production of the goods and services that are marketed to them.

On another level we are experiencing the financialization of the Western economy about which Michael Hudson is the leading expert (Killing The Host). Financialization is the process of removing any public presence in the economy and converting the economic surplus into interest payments to the financial sector.

These two developments deprive people of economic prospects. A third development deprives them of political rights. The Trans-Pacific and Trans-Atlantic Partnerships eliminate political sovereignty and turn governance over to global corporations.

These so called “trade partnerships” have nothing to do with trade. These agreements negotiated in secrecy grant immunity to corporations from the laws of the countries in which they do business. This is achieved by declaring any interference by existing and prospective laws and regulations on corporate profits as restraints on trade for which corporations can sue and fine “sovereign” governments. For example, the ban in France and other counries on GMO products would be negated by the Trans-Atlantic Partnership. Democracy is simply replaced by corporate rule.

I have been meaning to write about this at length. However, others, such as Chris Hedges, are doing a good job of explaining the power grab that eliminates representative government. Continue reading

Gold and Gold Stocks – Back to Tricky, but Interesting Signals Emerge

Submitted by Pater Tenebrarum  –  The Acting Man Blog

A Relentless Short Term Decline

When we last discussed the gold sector, we noted that with gold approaching its 200 day moving average, a pullback had to be expected soon. In the meantime, a bit more than just a pullback has happened, as a severe sell-off started after the October FOMC announcement.

goldmine-700x360Photo via

However, as you will see below, this has most likely merely reset the clock a bit in terms of anticipating a medium term trend change (even if some more near term weakness, or a short term up-down sequence retesting whatever low is put in seems possible, see discussion further below).

1-Gold and HUI-Gold RatioGold and the HUI-gold ratio. At the most recent lows, gold diverged positively from gold stocks. It appears as though the opposite kind of divergence, with gold stocks holding up slightly better then the metal, is about to occur at the upcoming low – click to enlarge. Continue reading

One of America’s Largest Online Retailers Is Stockpiling Gold and Silver Coins to Pay Employees In Coming Crisis

Submitted by Mark O’Byrne  –  GoldCore

One of America’s largest companies is preparing for problems in the banking and financial system and another financial crisis.

Online retail giant (OSTK), publicly stated that the company has stockpiled gold and silver coins in preparation for another U.S. financial crisis. Patrick Byrne, its founder and chief executive, is a libertarian who champions crypto currencies, bitcoin and gold and silver bullion as financial insurance against risk in the financial and monetary system.

GoldCore: Patrick Byrne, CEO Overstock
Patrick Byrne, CEO of e-commerce giant

Overstock Chairman, Jonathan Johnson recently told an audience at the United Precious Metals Association (via Casey Research):

We are not big fans of Wall Street and we don’t trust them. We foresaw the financial crisis, we fought against the financial crisis that happened in 2008; we don’t trust the banks still and we foresee that with QE3, and QE4 and QE n that at some point there is going to be another significant financial crisis.”

Quantitative easing (QE) is when central banks create billions and trillions worth of fiat currency out of thin air and inject it into the financial system rising currency debasement and inflation in the long term.

Johnson went on to explain the company’s preparations:

So what do we do as a business so that we would be prepared when that happens? One thing that we do that is fairly unique: we have about $10 million in gold, mostly the small button-sized coins, that we keep outside of the banking system. We expect that when there is a financial crisis there will be a banking holiday. I don’t know if it will be two days, or two weeks, or two months. We have $10 million in gold and silver in denominations small enough that we can use for payroll. We want to be able to keep our employees paid, safe, and our site up and running during a financial crisis.

We also happen to have three months of food supply for every employee that we can live on.”

Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• Moody’s Warns Of Global Shockwaves From China Slowdown (CityAM)
• OECD Rings Alarm Bell Over Threat Of Global Growth Recession (Ind.)
• China Deflation Pressures Persist As Producer Prices Fall 44th Month (Bloomberg)
• Copper Sinks to Six-Year Low as Chinese Demand Slumps (WSJ)
• Emerging Economies See Half Trillion In Capital Flight in 6 Months (Zero Hedge)
• EU Leaders Vow Measures To Halt Cheap Chinese Steel Imports (Guardian)
• Volkswagen Moves To Appease Angry Customers, Workers (Reuters)
• World’s Largest Banks to Be Forced to Hold Big Capital Cushions (WSJ)
• Banking Giants Learn Cost of Preventing Another Lehman Moment (Bloomberg)
• Saudi Arabia To Tap Global Bond Markets As Oil Fall Hits Finances (FT)
• Germany Loses Key Ally In Portugal As Austerity Regime Crumbles (AEP)
• Catalonia Votes To Start Breakaway Process From Spain (Reuters)
• Eurozone Finance Ministers Press Greece to Move Forward With Overhauls (WSJ)
• Greece Wants Political Solution On Bad Debt Dispute Blocking Review (Reuters)
• Hedge Funds Give Politicians Cover To Short-Change Pension Plans (Ritholtz)
• Housing Next Target In Cameron’s Dismantling Of The Welfare State (Guardian)
• The Leviathan (Jim Kunstler)
• Court Again Blocks Obama’s Plan To Protect Undocumented Migrants (Reuters)
• EU Plans New Refugee Centers as Influx Overwhelms Greece (Bloomberg)
• Major Aid Agencies Are Deceiving The General Public on Refugees (Kempson)