Gold and Gold Stocks – It Gets Even More Interesting

Submitted by Pater Tenebrarum  –  The Acting Man Blog

Technical Backdrop

If only we could get a dime for every bearish article on gold that has been published over the past two weeks…but one can’t have everything. When a market is down 83% like the HUI gold mining index is, we are generally more interested in trying to find out when it might turn around, since it is a good bet that it is “oversold”. Of course, it if makes it to 90% down, it will still be a harrowing experience in the short term.

We like these catastrophes because they usually mean “the stuff is cheap and there is probably something people don’t see”. That’s definitely the case here, since one of the things that has been routinely ignored is the improvement in costs and cash flows that is slowly but surely progressing at many gold producers.

 

MponengGoing for the gold: rock driller at the world deepest gold mine, Mponeng, 40 miles from Johannesburg. You could stack 10 Empire State buildings on top of each other to cover the distance from its deepest point to the surface. It uses as much electricity as city of 400,000 people.

Photo credit: Graeme Williams / The New York Times / Redux

 

As always we will try to focus on slightly different things than in our last update on the sector, but there is one chart we want to show the current state of, namely our “divergences watch” chart.

 

1-Divergences, completeThe HUI-gold ratio, the HUI and gold. So far, the “double divergence” remains intact – with alternating diverging lows. The support on which the HUI sits looks a bit vulnerable because it has been visited so often, but positioning and sentiment are more than ripe for a good rebound – click to enlarge. Continue reading

Global Bond Markets: Where Did All the Liquidity Go?

Submitted by Mark O’Byrne  –  GoldCore

Why does the lack of liquidity in bond markets have many of the world’s top economic opinion-makers worried?  Ben Wright writing in the Telegraph reports on the voices in “the chorus of doom” and explains why the evaporation of this liquidity in the global fixed income market signals “a warning shot across the bow”.

GoldCore: Where has all the liquidity gone?
Where did all the liquidity go? Photo: Ryan Brennecke

“Every market is a tug-of-war between buyers and sellers. Liquidity is a gauge of both the size of the market (the number of buyers and sellers) and its depth (the number of buyers and sellers of both small and large amounts of securities). Why is the depth of the market important? Because you’re sure to find plenty of willing buyers if you want to sell £10,000 of government bonds. But if you want to sell £100m-worth, it might be a touch harder.”

“The less liquidity there is, the greater the impact large trades will have. If lots of people are all trying to sell lots of stuff at once, it could get messy.”

GolfCore: Where has all the liquidity gone?Since the financial crisis, global financial regulators have rightly been attempting to make banks safer. They have done this by, for example, banning proprietary trading, making it harder to lend government bonds in the repo market and, most importantly, forcing banks to deleverage.  One of the upshots is that it is now much more expensive for banks to hold securities on their own books and therefore provide liquidity in the market. Deutsche Bank recently noted that the amount of outstanding corporate bonds has doubled since 2001 but dealer inventories of these securities have fallen 90pc over the same period. Continue reading

“One Big Shock Away from a Global Downturn…”

Submitted by William Bonner, Chairman – Bonner & Partners

Zombies vs. Cronies

DUBLIN – Most elections these days are contests between cronies and zombies. The left favors the zombies. The right favors the cronies.

In yesterday’s presidential elections in Argentina the zombies lost. It’s time for the cronies to take over.

 

Mauricio-Macri-e13547230287911New Argentine president Mauricio Macri – the era of the Kirchner dynasty is over.

Photo via diarioz.com.ar

 

More on that tomorrow …

 

Big Shock

The financial news continues to confound and confuse investors. The Fed is telling one story. The world economy is telling another.

The Fed is talking about increasing the federal funds rate – eventually getting rates back to “normal” – because the U.S. economy is so healthy. Meanwhile, the world heads toward deflation.

Says Ruchir Sharma, head of emerging markets and global macro at Morgan Stanley Investment Management:

 

“We are now just one big shock away from a global downturn, and the next one seems most likely to originate in China, where heavy debt, excessive investment, and population decline are combining to undermine growth…”

 

But it looks to us as though the global downturn is already here. First, the Baltic Dry Index is at a record low.

 

BDIThe Baltic has been hung out to dry – click to enlarge. Continue reading

Argentine Shock

Submitted by Jeffrey Snider  –  Alhambra Investment Partners

Argentina’s election is more complicated than simple economics, but for the first time in a very long time there will be no Peronist in office. It may have been billed as a contest between the candidate of the market and that of the state, but either would have found the same bottom opening up on the nation. As so many other places, such as Canada moving in the “opposite” direction, whoever was in office was bound to be handcuffed by the financialism driving economic circumstances.

Even the Economist, normally a visible friend to the statist helping hand, had become disenthralled by what Argentina had become and what is left of the economy.

True to her Peronist pedigree, Ms Fernández has hoarded power and suppressed dissent. She has bent the central bank to her will, muzzled the government’s statistics institute and bullied the media…
The government keeps the peso overvalued. It taxes soyabeans and other exports, thereby punishing the country’s most competitive producers. It has repelled foreign capital by defaulting on debt and refusing to settle with its creditors. To husband foreign exchange, it restricts imports. Ms Fernández distracted Argentines with lavish spending on welfare and energy subsidies. That trick will not work for much longer. The country is in danger of running out of reserves; the budget deficit this year is likely to be 6% of GDP; inflation is estimated at 25%; and growth is absent.

The country is not “in danger of running out of reserves”; it had already done so starting around March 2008. By any real count of international exchange as it is today, not what is thought to be, what Argentina possesses now is the holy rump of central banking taking to its most critical extremes. While Argentina’s neighbor Brazil tracks more closely to the global economic climate, which is already itself an alarming prospect, Argentina is simply further along that same “dollar” road.

ABOOK Nov 2015 Money Argentina Reserves

Continue reading

The Daily Debt Rattle

Submitted by Raúl Ilargi Meijer  –  The Automatic Earth

• Negative Interest, the War on Cash and the $10 Trillion Bail-In (Ellen Brown)
• Sub-Zero Debt Increases To $2 Trillion In Eurozone On Draghi (Bloomberg)
• Soaring Global Debt – The Reality Check in Numbers (O’Byrne)
• The Closing Of The Global Economy (Calhoun)
• Harmless Commodity Crash Accelerates As Dollar Soars (AEP)
• Ireland Is Backing Itself (David McWilliams)
• Greek Home Rental Costs 40% Less Since 2011 (Kath.)
• Four In 10 Greeks ‘Overburdened’ By Housing Costs (Kath.)
• Greek Shipping Currency Inflows Drop 53% In September (Kath.)
• Inadequate Dirty Money Regulation ‘Leaves UK Open To Terror Funds’ (Reuters)
• Cameron Has Guns, Bombs And A Plane – And Not One Good Idea (Hitchens)
• Scale Of Osborne’s Cuts To Police, Education, Councils ‘Unprecedented’ (Mirror)
• Austeria – A Nation Robs Its Poor To Pay For The Next Big Crash (Chakrabortty)
• Richard Russell, Publisher of Dow Theory Letters, Dies at 91 (Bloomberg)
• VW Admits Second Illegal Device In 85,000 Audi Engines (FT)
• Average House In Fort McMurray Lost $117,000, 20% Of Its Value In 1 Year (CH)
• This Is The Worst Time For Society To Go On Psychopathic Autopilot (F. Boyle)
• Varoufakis: Closing Borders To Muslim Refugees Only Fuels Terrorism (Guardian)
• Average Stay Is 17 Years: Refugee Camps Are The “Cities Of Tomorrow” (Dezeen)
• Canada To Turn Away Single Men As Part Of Syrian Refugee Resettlement Plan (AFP)
• Stranded Migrants Block Railway, Call Hunger Strike (Reuters)