Did Bonds Just Peak?

Doubt it.

The road to a successful bond short will be littered with body bags filled by those that committed early with too much leverage. The European model of one currency and multiple debts is slowly imploding in full view. This means big money still looking for places to park (for return of capital) rather than invest (for return on capital). US Treasury bonds remain one of the few safe haven parking lots for big money fleeing the Euro zone implosion.

Headline: Did Bonds Just Peak?

Commentary: Bill Gross's mea culpa sounds like capitulation

They say the time to sell is when the last bear turns bullish.

When it comes to U.S. Treasury bonds, did that just happen?

Bill Gross, the world's most famous bond manager, has now fessed up that he made a blunder when he turned bearish on the bonds last winter. Gross says his bet against Treasurys was a "mistake" and that he had been "losing sleep" over it this summer. Read the story about Gross losing sleep on the Wall Street Journal web site.

Treasury bonds have been booming to higher and higher prices for months, as fears have grown of a new recession and a deepening financial crisis.

Source:finance.yahoo.com

Gold Investors Follow Leverage and TIME

Follow leverage, the leading edge of money flows, in respect to time-based windows of opportunity. One such example of following leverage in gold is illustrated below.

Gold 2x to Gold Ratio


The latest surge into leverage will weaken with TIME not magnitude. In short, the window of time has yet to close on gold.

Dear Extended Family,

Gold corrects $212.50, rises $50, drops $50 and today is trying to rise another $50.

That is a range of roughly $275 in just a few days. That is certainly what I call a hard chop, this time with a penchant to break out to new highs. That is exactly what I expect.

Kenny Adams points out that he feels 15 to 18 days from the first break is the fastest that this chop can resolve itself to a new high.

I have told my family, outside of myself, that there are two people who would protect them in these outrageous world markets. It would be Monty Guild for investments and Kenny Adams for speculation. Both match uncommon skill with absolute ethics.

Regards,
Jim

Source: jsmineset.com

Mailbox

Eric,

“I haven't met a rich technician” Jim Rogers

Your latest post is perfect. I can confirm the above statement from personal experience over 40 years of investing . I have finally learned that to have your money in the right long term trend is the only way to make money. But then you have to buy low and sit tight and not second guess the markets. They will shake you out at the wrong time but you will so believe what the chart is telling you: H&S tops are the perfect example. I can't tell you how many there were in the tech stocks all the way to the top.

My experience is that I can trade a market but only for so long and get it right, then the market will come along and take my money. If I had just realized the long trend and stayed with it I would have been way better off. This is so true of the monetary metals and their current bull phase as well as other areas. BUT IT IS SO HARD TO SIT.

Now I trade only 10% of what I have so I can "feed the beast within" and keep him happy without it affecting my long term welfare. Been there done that.

I like Jimmy Rogers because he is so upfront and honest. He is always saying that he is a lousy short term timer and that he doesn't think it gets in the way of riches.

It's posts like yours that remind us all of the proper attitude it takes to deal with computer and high frequency trading....it's all noise...not the real deal.

Thanks,
Denny

I Haven't Met A Rich Technician

“I haven't met a rich technician” Jim Rogers

All of the investment masters has their own version of the above lesson.

The short term game of high frequency trading must not be challenged by speed and size but rather construction of thought that anticipates long-term secular direction.

Fed Needs More Easing Until Economy Grows: Evans

I think the proper response from the urban dictionary would be no sh*t sherlock! The markets have been signaling this for months. Yet, many maintain that the Fed leads rather than follows them.

Headline: Fed Needs More Easing Until Economy Grows: Evans

The Federal Reserve may need to be even more aggressive in its easing policies than it has been so far unless the economy shows significant improvement, Chicago Fed President Charles Evans told CNBC.

A jobless rate at 9.1 percent is "consistent with recession" while inflation is far from a worry, Evans said while defending both the central bank's previous actions to stimulate conditions and his view that even more action along the lines of quantitative easing [cnbc explains] will be needed.

In his view, QE needs to stay in place until unemployment plunges to 7 percent or if inflation gets past 3 percent. Core inflation, which strips out food and transportation, is about 1.8 percent, though the number is 3.6 percent including the more volatile measures.

Source: cnbc.com

The Gold Stock Train Ready To Pick Up Speed Again

Confidence and resolve in the future potential of the gold stocks is comparable to that of a new weight watchers client ‘walking’ a junk food convention for exercise. The Street doesn’t call it climbing a wall of worry for nothing. The train has left the station and will soon pick up speed once the grade declines. The number of passengers on the train have declined into the first consolidation after the primary breakout.

S&P Gold (Formerly Precious Metals Mining)*

Euro bail-out in doubt as 'hysteria' sweeps Germany

A financial shock wave, originating in Europe, is heading for the United States. It's only a matter of time. This is why bond shorts, while correct, cannot be early.

Headline: Euro bail-out in doubt as 'hysteria' sweeps Germany

Mrs Merkel has cancelled a high-profile trip to Russia on September 7, the crucial day when the package goes to the Bundestag and the country's constitutional court rules on the legality of the EU's bail-out machinery.

If the court rules that the €440bn rescue fund (EFSF) breaches Treaty law or undermines German fiscal sovereignty, it risks setting off an instant brushfire across monetary union.

The seething discontent in Germany over Europe's debt crisis has spread to all the key institutions of the state. "Hysteria is sweeping Germany " said Klaus Regling, the EFSF's director.

German media reported that the latest tally of votes in the Bundestag shows that 23 members from Mrs Merkel's own coalition plan to vote against the package, including twelve of the 44 members of Bavaria's Social Christians (CSU). This may force the Chancellor to rely on opposition votes, risking a government collapse.

Source: telegraph.co.uk

Retailers Expect Second Half Deterioration

Private consumption represents over 70% of GDP. Any deterioration in retail sales is a major concern. As always, the message of the market leads the headlines (see chart below).

More: facebook.com

Silver The Tempest In A Teacup

Hidden in the sea of daily noise is an intuitive observation that silver has potential.

Silver London P.M Fixed and the COT Futures and Options Open Interest Stochastic Weighted Average


Silver’s moderately negative money flow setup doesn’t necessary negate its hidden potential. A controlled market tends to follow certain money flow patterns. These setups are often described as bullish and bearish on EI. Bullish and bearish setups tend to produce rallies and declines, respectively.

Silver (SLV) and the Commercial (C) Less Nonreportable (NR) Traders COT Futures And Options Stochastic Weighted Average of Net Long As A % of Open Interest


These setups, however, can unexpected outcomes when a market becomes uncontrollable. For example, a bearish setup can produce a bullish outcome when the chains of paper control have been broken, and vice versa. As long as gold exhibits clear signs of breaking its chains of paper control, the assumption that silver remains “controllable” may no longer be valid.

Silver remains a tempest in a teacup flying quietly under the world's investment radar screen.

Headline: Silver may be better bet than gold

According to Cowie, the Commitment of Traders report “says buy silver.” The fewer open positions on silver there are, the more bullish the set up because there are “loads of potential buyers out there who haven’t entered the market,” he explained.

Source: marketwatch.com

1929-1944 & 2000-Present Comparison: S&P 500 to Gold ($/oz) Ratio

Those that see the (investment) world only in terms of technical analysis (TA) tend to miss the cycles. This cycle, flagged months ago, is not done.

Source: facebook.com

Does Gold Need To Decline For Equities To Stabilize & Rally?

Does a recovery in equities need to coincide with a decline in gold? Or, as the media often positions it, does "uncertainty" that's driving gold higher need to go away for the equity markets to stabilize and rally? No.

The strong correlation between stocks and gold exist not only during recession/depressions (period of great uncertainty) but also economic expansions (periods of perceived certainty).

The correlation between stocks and gold has been 0.74 since 1925. While this correlation has loosened during periods of uncertainty, it has nonetheless less remained generally positive. For example, the tables below illustrate the relative stability of their correlation over time despite extended periods of what today's media would characterize as fear and "uncertainty".

1925-Present


1929-1942



1968-1980


2000-Present

Challenge to the Old Rules Underway

Any investor with unrestricted access to gold that’s still buying bonds, it’s because the concept of opportunity cost eludes them.

Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) to Gold Ratio


Big money unlike their retail counterparts is different. They must consider depth of the market as well as opportunity cost. The size of big money and ability of the bond market to accommodate it has prevented a yield explosion for years.

This is why the money flows of big money are so important to follow; they won't be holding the bag when the rules of the game change. The setup in gold and bonds imply at least a challenge to the old rules is underway.

US Treasury Bond 20YR+ (TLT) And Bond Diffusion Index (DI)


Headline: Analysis: "Safe haven" assets start to look risky

LONDON (Reuters) - This year's heady bout of risk aversion on financial markets has ratcheted up demand for gold, U.S. Treasuries and the Swiss franc to levels that suggest they may no longer be the "safe havens" they are billed as.

Some investors see all three as vulnerable to a sharp sell-off should the global economic environment improve over the coming months, or simply because prices are too high in the absence of outright financial catastrophe.

"A safe asset is something that is going to be safe across economic environments," said William De Vijlder, chief investment officer at BNP Paribas Investment Partners. "It means you'd better make sure your forecast is right."

There are already signs the demand froth is coming off, at least in gold and the Swiss franc.

All three safe havens highlighted have distinct features, so losses from renewed demand for riskier assets would not hit each equally. Gold, for one, might fare better given that underlying demand for the metal is not all based on risk aversion.

But none are "safe" in all circumstances, and their remarkable rises this year may now pose some risk for those holding them.

Source: finance.yahoo.com

Biden says U.S. needs more stimulus, business mad at S&P

QE(n) versus austerity. Either way, standard of livings across America will continue to decrease. No amount of political debate/action will change this fact. Astute readers of the market are beginning to see this message.

Headline: Biden says U.S. needs more stimulus, business mad at S&P

ON BOARD AIR FORCE TWO (Reuters) - Vice President Joe Biden said on Friday the U.S. economy needed more stimulus to get it moving, putting in a plug for government intervention shortly before the White House unveils new proposals to boost job growth.

At the end of a trip to Asia, Biden said a final decision had not been made on whether Washington would sell Lockheed Martin F-16 fighter jets to Taiwan and noted Beijing knew America viewed its one-child policy as "abhorrent."

Biden made political waves back in the United States when he said in a speech in China that he was not second-guessing the country's restrictions on parents having just one child.

Republican presidential candidates pounced.

After roughly ten days abroad in China, Mongolia and Japan, the vice president is likely to turn his attention to domestic policy as the White House prepares a major new initiative to boost job growth.

Source: finance.yahoo.com

Silver Is A Tempest In A Teacup

The counter trend move in gold to silver ratio (GSR) is quietly losing steam. Other than technical confirmation, what’s not to like here? The media’s 24/7 coverage of the troubles in Europe provide the perfect distraction. When discussions turn to precious metals, it’s all about gold. Silver is a tempest in a teacup that can only be recognized after the fact.

Chart: facebook.com

Breaking the Chains of Control In Gold

The trend controllers have been knocked to the ropes by overwhelming market forces in the leveraged paper markets. The tactic of selling (shorting) advances and buying (covering) declines to control trend has unexpectedly reversed. This suggests the chains of control have been broken in gold. If this trend continues, August 2011 could very well be viewed as an important moment in the history of this secular bull.

Gold London P.M Fixed and the Commercial (C) Less Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


Gold London P.M Fixed and Gold Diffusion Index (DI)

Moving From One Crappy Paying Job To Another Trend

Consumption expenditures as a percentage of GDP, 71.1% as of Q211, have grown steadily since the late 60's. Rising consumption and falling domestic private investment as a percentage of GDP represent money following the global shift in production from West to East. As long as capital seeks better returns from foreign production, these trends will continue. The middle class understands them as moving from one crappy paying job to another.

Personal Consumption Expenditures (PCE) As A %GDP and Personal Consumption Expenditures As A %GDP Average from 1947


Gross Domestic Private Investment (GDPI) As A %GDP and Gross Domestic Private Investment (GDPI) As A %GDP Average from 1947


Headline: Economy grew at slower 1 pct. rate this spring

The U.S. economy grew at a meager 1 percent annual pace this spring, a slower rate than previously estimated. The downward revision will likely increase fears that the economy is at risk of another recession.

Fewer exports and weaker growth in business stockpiles led the Commerce Department to lower its estimate for the April-June quarter from its previous rate of 1.3 percent growth. That means the economy expanded only 0.7 percent in the first six months of the year.

Economists note that nine of the past 11 recessions since World War II have been preceded by a period of growth of 1 percent or less. The weaker growth could rattle an already edgy stock market, which has lost 12 percent of its value since July 21.

The report shows the economy was barely expanding even before this month's stock market plunge. Economists worry that the Wall Street sell-off could cause consumers and businesses to pull back on spending and investment.

Stock futures fluctuated mildly after the report was released.

Source: finance.yahoo.com

Concentrated Spreading Activity In Gold

Spreading activity in gold has become concentrated again.

Gold London P.M Fixed And Noncommercial Spreading Activity Diffusion Index (DI)

Hi Eric

I kept this post from a while ago and was wondering if you have any further details on your spreading diffusion index. I am looking to re create it in the technical software I use.

Source: spreading-activity-helps-establish

Regards

Brendan

Buffett Tells CNBC 'This Isn't 2008' As Bank of America Gets $5B Loan at Just 6%

Déjà vu anyone? It may feel like 2008, but it's undeniably different.

Headline: Buffett Tells CNBC 'This Isn't 2008' As Bank of America Gets $5B Loan at Just 6%

Warren Buffett tells CNBC's Becky Quick "this isn't 2008" and that's why Bank of America is getting better terms for its $5 billion loan today from Berkshire Hathaway, compared to what General Electric and Goldman Sachs paid for similar loans almost three years ago at the height of the credit crisis.

Buffett is also stressing the investment was his idea, perhaps to downplay any fears that Bank of America is desperate for a cash infusion.

This morning, Bank of America announced that Berkshire will use cash to buy 50,000 shares of preferred stock with a liquidation value of $100,000 per share in a private offering.

That is, in effect, a loan to the bank, in which it will pay around $300 million in dividends each year to Berkshire. BofA can pay back that loan at any time, but it will have to make an additional 5 percent dividend payment to do so.

The interest rate on the loan is 6 percent, well below the 10 percent that Buffett got from GE and Goldman almost three years ago, but not at all bad with 10-year Treasuries just above 2.2 percent.

Source: finance.yahoo.com

Follow the Money, Not Opinions

Ramon,

Emotions prevent much of the world from seeing beyond the daily noise.

Eric

Maybe it's time for the world to review Jim's formula.

Also, the GLD Puke Indicator (buy signal triggers whenever GLD tonnes
in trust drop >1% in one day) flashed two consecutive buy signals, the
23rd & 24th. It's been incredibly accurate, and the last time a double
signal happened was in September of 2008 just before gold rose from
about $750 to over $900. It coincides very nicely with your
statistical concentration studies.

Source: economicpolicyjournal.com

Cheers,
Ramon

Gold As "Ultimate Bubble" Overshadowing Bullish Technical Setup In Silver

Gold as the "ultimate bubble" has been a nice diversion from the undeniably bullish action in silver since mid July. The (manufactured) downside gap on 5/5/11 has been cleared and tested several times. RE(E), a measure of trend energy, has been tracing out a pattern of higher highs and lows since late May. While investors fret about gold as portrayed in the headlines, they ignore the bullish technical setup in silver that is certain to precede the next advance.

Silver ETF


A bullish setup in leverage money flows, i.e. statistical concentration by key players, should setup another attack of $50.

As of 8/16, the key players remain largely uncommitted. Since money tends to move behind the cover of fear, the process of concentration most likely began after yesterday’s sharp decline. I will be watching the movement of money for a definable setup in the coming weeks.

Silver London P.M Fixed and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


The following chart provides another view of concentration among the players.

Silver (SLV) and the Commercial (C) Less Nonreportable (NR) Traders COT Futures And Options Stochastic Weighted Average of Net Long As A % of Open Interest


Headline: Gold falls $200 from Tuesday's record high

Gold extended losses on Thursday to fall as much as $200 from Tuesday's record high, as investors cashed in scorching gains in the metal after the CME Group hiked trading margins for the precious metal for a second time this month.

Investment appetite for gold has cooled ahead of a widely awaited central bankers' meeting at Jackson Hole, Wyoming, as speculation grows over whether or not the Federal Reserve will signal a further round of U.S. monetary easing.

More quantitative easing -- or money printing -- for the Fed could significantly lift gold, but it could have further to correct if no additional action is signaled.

Spot gold was down 2.2 percent at $1,711.99 an ounce at 7:01 a.m. EDT, having earlier touched a low of $1,702.44.

Investors have cashed in on gold's latest rally after the yellow metal surged nearly 20 percent in early August to record highs at $1,911.46 an ounce.

"In a sense the decline is just subtracting the frothy increase (from the market)," said Mitsubishi analyst Matthew Turner. "That increase has been going on since around $1,600 an ounce, so it is hard to see where the bottom lies."

But the metal's overall uptrend, which has seen it climb more than 20 percent this year, is still intact, analysts said.

"To be convinced you'd seen the top of the market you would have to see more signs of the issues that had lifted gold being resolved, such as the euro zone crisis, and U.S. growth coming back," said Turner.

Spot prices fell 4.3 percent on Wednesday, their biggest one-day drop since December 2008, after U.S. durable goods data beat expectations. U.S. gold futures also posted their sharpest slide since 1980.

Source: reuters.com

Gold $3,000?

Gold $3,000 will not be enough. At least someone is recognizing reality, though.

Headline: Gold $3,000?

Commentary: If gold is like the Nasdaq, it could go up 60% from here

While I’ve been on leave, gold has surged from around $1,500 an ounce to nearly $1,900. And the investing world has finally started to wake up to the inconvenient facts that (a) the U.S. government is broke, (b) the U.S. political system is broken, (c) Greece is bust, (d) Portugal and Ireland may well be bust, (e) Ditto Spain, (f) Maybe ditto Italy, and (g) the European political system is broken as well.

It’s no wonder that gold bulls have been pushing at an open door. Gold is a gigantic bet against paper currencies, especially the dollar and the euro. Yes, gold is an absolutely ridiculous investment — apart from all the others.

Meanwhile, it still confronts a giant wall of skepticism. I hadn’t realized just how much skepticism was out there until I went on leave. During the summer’s financial crisis, pretty much every mainstream personal finance expert I saw on TV parroted the same line: “Gold is over,” “It’s too late to get into gold,” “Don’t buy gold at these levels,” and so on.

Source: marketwatch.com

Gold Has Not Topped

This video has been posted for future review (2012-1016) as a distinction between information and disinformation.

Here's my interview. Has gold topped? No. Total interview time would have about five seconds.

Gold Not Safe Haven: Gartman

CME: Comex Gold Futures Margin Requirements Raised 27%

Margin rates path towards all cash remains unperturbed.

Headline: CME: Comex Gold Futures Margin Requirements Raised 27%

Exchange operator CME Group Inc. (CME) raised collateral requirements for trading gold futures for the second time this month Wednesday as gold prices climb to fresh records.

CME said gold margins will be raised 27% effective close of trading Thursday, in an email announcement after trading closed Wednesday.

Speculative investors in the benchmark 100-troy-ounce gold contract now must put up $9,450 to open a position and maintain $7,000 of that to keep the position overnight.

The increase comes as gold prices plunged over $100 and traded below $1,800 for the first time in three days.

Gold for December delivery, the most actively traded contract, settled down $104.00, or 5.6%, at $1,757.30 a troy ounce on the Comex division of the New York Mercantile Exchange.

CME last raised margins on Aug. 11, spooking gold investors with a 22% hike. That day, gold prices slipped 1.8% as investors pared gold positions. But gold quickly shook off those losses, soaring a total 17.6% to an intraday record of $1,917.90 this month.

Source: wsj.com

Gold Is A Crowded Trade, And It's A Bullish Setup

Talking heads are beginning to suggest that the gold trade has become “crowded”. Crowded as defined by expanding open interest or concentration by buyers?

Open interest tends to increase as the price of gold rises (see chart below). Rising open interest, alone, is not an indication of crowded trade. Crowded trades can materialize as open interest either expands or contracts.

Gold London P.M Fixed (Gold) and the COT Futures and Options Open Interest Stochastic Weighted Average (WA)


Statistical concentration by the various players in the futures and options markets defines crowded trade. If smart and dumb money are buying and selling to the point of statistical concentration, the trade is crowded on the short side. If the money flows are reversed, it’s crowded on the long side. The most recent data show commercial traders (smart money) and noncommercial & retail traders (dumb money) as net buyers and sellers, respectively. This pattern of money flows reflects a crowded short trade and bullish setup.

This setup refutes the suggestion that gold has become “crowded” and as such needs to correct. Gold may correct, but the bullish setup already underway suggests that it will be short and sweet.

Gold London P.M Fixed and the Commercial (C) & Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest



Headline: Rosenberg on Gold: “A Crowded Trade” in the Short Term

Gluskin Sheff’s David Rosenberg is not known for his optimism. His daily scribblings often point out all of the compelling reasons for investors to be worried about the economic fundamentals festering beneath the remarkable runup in stocks since March. One area he has been bullish on though, is gold.

Of course, Rosenberg isn’t alone on that count. The latest spate of dollar weakness has juiced gold anew, with spot prices for the precious metal soaring today above $1,100 and etching new record highs.

But between with the ceaseless infomercials hawking gold bullion on T.V. and, frankly, the fact that we’re writing about gold so much, Rosenberg seems to see a yellow light flashing on the yellow metal — at least in the short term.

Source: wsj.com

Long Term Bullish, Short-Term Bearish My Arse

"Long-term bullish but short-term bearish on gold" headlines has been repeated many times since 2001. Short-term trading an accelerating trend is difficult for even the best of the best. Besides, most couldn't recognize parabolic or statistically extended even if it bite them in hind end.

Strange and unexpected things will happen, as long as money continues to behave strangely in gold.

Gold, London P.M. Fixed (Gold) and Z Scores of Secular Trend


Headline: Don't Buy Into 'Gold Bubble' Hype But Believe In A Correction

Gold continued to make headlines last week, reaching nearly $1,900 an ounce on Friday before resting around the $1,850 level.

Gold’s 15 percent rise to new nominal highs over the past month has rekindled “gold bubble” talk from many pundits. Long-term gold bulls have been forced to listen to these naysayers since gold reached $500 an ounce. If you would have joined their groupthink then, you would’ve missed gold’s roughly 270 percent rise since.

That said, gold is due for a correction. It would be a non-event to see a 10 percent drop in gold. This would actually be a healthy development for markets by shaking out the short-term speculators while the long-term story remains on solid ground.

Forty years ago this week, President Richard Nixon “closed the gold window,” ending the gold-backed global monetary system established at the Bretton Woods Conference in 1944 and kicking off a decade of stagflation for the U.S. economy.

At the time, $1 would buy 1/35th an ounce of gold. Today, $1 will net you about 1/1,178th an ounce of gold. Put differently, “One U.S. dollar now buys only 2 cents worth of the gold it could buy in 1971,” says Gold Stock Analyst. This means that consumers have lost roughly 98 percent of their purchasing power compared to gold over the past 40 years.

Source: forbes.com

Objectivity versus Emotional Bias

New-home sales are falling. Nominal and real prices are falling. Yet, denial of these trends remains nearly as strong as ever. The game of money demands cold objectivity despite our tendency towards emotional biases.

New Home Sales And Change YOY, SA


U.S. Median Home Price (MHP) And MHP to Gold Ratio:


Headline: New-home sales fall, 2011 could be worst year yet

Sales of new homes fell for the third straight month in July, a sign that housing remains a drag on the economy. If the current pace continues, 2011 would be the worst year for new-home sales in nearly half a century.

Sales fell nearly 1 percent in July to a seasonally adjusted annual rate of 298,000, the Commerce Department said Tuesday. That's less than half the 700,000 that economists say represent a healthy market.

Last year, 323,000 homes were sold -- the worst year on records that go back to 1963.

While new homes represent less than one-fifth of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.

Source: finance.yahoo.com

Risk On or Off?

Lots of traders, investors, and talking-head experts discuss the difference between risk on and off. These discussions, largely short-term orientated, find interpretations within trend noise. Noise-based interpretations are meaningless to big money and global capital flows. It’s been risk off since 2001.

Chart: facebook.com

All US Mint Numismatic Gold Coins Suspended

Economics 101 teaches us that shortages develop when either soft or hard price controls exist. Bottom line, the price of gold needs to push higher to alleviate the shortage and US Mint's Groundhog Day (1993)-style loop.




Headline: All US Mint Numismatic Gold Coins Suspended

This morning the US Mint has suspended sales of all remaining numismatic gold coin offerings. The move comes as the market price of gold has jump another $35 to nearly $1,890 per ounce. Prior to the suspension, products were priced based on an average gold price in the $1,750 to $1,799.99 range.

The US Mint’s pricing policy covering most numismatic gold coins allows for price changes to take place as frequently as weekly based on the average market price of gold based on the London Fix prices from the previous Thursday AM to the current Wednesday AM.

Pricing changes have generally taken place mid-morning Wednesday when all of the data points were available. The US Mint has reserved the right to suspend sales early “in the event that the selling price of United States Mint gold bullion products begin approaching the sale price of the gold numismatic products.” They invoked this option for the first time two weeks ago, and apparently for the second time today.

Source: mintnewsblog.com

Get More For Less, Yeah Right

South Dakota is not the only State pursuing painful cost cutting moves. Education increases workforce competitiveness and augments wisdom within society as a whole. It’s dangerous to think that these important goals can be achieved with less effort and money.

Headline: South Dakota schools cut costs with 4-day week

When the nearly 300 students of the Irene-Wakonda School District returned to school this week, they found a lot of old friends, teachers and familiar routines awaiting them. But one thing was missing: Friday classes.

This district in the rolling farmland of southeastern South Dakota is among the latest to adopt a four-day school week as the best option for reducing costs and dealing with state budget cuts to education.

"It got down to monetary reasons more than anything else," Superintendent Larry Johnke said. The $50,000 savings will preserve a vocational education program that otherwise would have been scrapped.

The four-school week is an increasingly visible example of the impact of state budget problems on rural education. This fall, fully one-fourth of South Dakota's districts will have moved to some form of the abbreviated schedule. Only Colorado and Wyoming have a larger proportion of schools using a shortened week. According to one study, more than 120 school districts in 20 states, most in the west, now use four-day weeks.

The schools insist that reducing class time is better than the alternatives and can be done without sacrificing academic performance. Yet not all parents are convinced.

Source: finance.yahoo.com

European Banks Must Pay Up to Borrow $100B

The vice is tightening around European debt.

Headline: European Banks Must Pay Up to Borrow $100B

European banks with more than $100 billion of cash to raise by year-end will have to pay up because investors perceive them as the worst credits they’ve ever been.

The cost of insuring the senior and junior bonds of 25 banks and insurers doubled since April to records, according to the Markit iTraxx Financial indexes of credit-default swaps. The Euribor-OIS spread, a gauge of banks’ reluctance to lend to each other, reached the widest since April 2009 this month, while the cost for European banks to fund in dollars was near a 2 1/2-year high.

“This return of generalized banking risk marks a new phase in the unfolding European drama,” said Lisa Hintz, an analyst in New York at Capital Markets Research Group, a unit of ratings firm Moody’s Investors Service. “Investors have heightened concerns about sovereign and financial institution risk.”

Source: finance.yahoo.com

Wall Street buoyed by QE3 speculation

Fed policy choices could be heavily influenced by pitchfork sales in the coming weeks/months.

Headline: Wall Street buoyed by QE3 speculation

US stocks rose in early trading on Monday as traders looked to the Federal Reserve to signal another round of quantitative easing after four weeks of sustained losses in stock markets.

Fed chairman Ben Bernanke will speak Friday at an annual retreat of central bankers in Jackson Hole, and some traders are already pricing in further stimulus.

“The market is expecting another round of asset purchases and it will come,” said Matthias Jasper, head of equities at WGZ Bank AG.

The S&P 500, which had traded close to its year-low of 1,101.54 on Friday, was up 1.9 per cent in the first minutes of trading at 1,144.46.

The rally was led by heavily traded stocks, including Goodyear , up 5.0 per cent at $11.42 in early trading and Autodesk , up 4.4 per cent at $24.45.

Source: ft.com

Shoppers will see higher prices for back-to-school shopping, but stores aim to disguise them

Sneaky reductions in quantity and quality and fancy marketing campaigns designed to misdirect from the department to grocery stores define today's shopping experience. American and global shoppers, on balance, this game as nothing more than inflation or conflation (described below).

Headline: Shoppers will see higher prices for back-to-school shopping, but stores aim to disguise them

NEW YORK — Stores are trying everything they can think of to disguise the fact that you’re going to pay more for clothes this fall.

Some are using less fabric and calling it the new look. Others are adding cheap stitching and trumpeting it as a redesign. And the buttons on that blouse? Chances are you’re not going to think it’s worth paying several dollars more for the shirt just to have them.

Retailers are raising prices on merchandise an average of 10 percent across-the-board this fall in an effort to offset their rising costs for materials and labor. But merchants are worried that cash-strapped customers who are weighed down by economic woes will balk at price hikes. So, retailers are trying to raise prices without tipping off unsuspecting customers.

“Let the consumer trickery begin,” said Brian Sozzi, Wall Street Strategies retail analyst

Retailers have long tried to mask price hikes — for instance, jacking them up more than needed so that they can offer a “sale” on the higher price. But the new strategies come as merchants’ production and labor costs are expected to rise 10 percent to 20 percent in the second half of the year after having remained low during most of the past two decades. Costs can quickly add up: Raw materials account for 25 percent to 50 percent of the cost of producing a garment, while labor ranges from 20 percent to 40 percent, analysts estimate.

Source: washingtonpost.com

Germany's Merkel renews rejection of eurobonds

One currency, one debt, or the weaker members will forced to leave to maintain the Euro.

Headline: Germany's Merkel renews rejection of eurobonds

German Chancellor Angela Merkel insisted Sunday that eurozone-wide government bonds wouldn't solve the current debt crisis, and said she sees no sign of a new recession in her own country -- Europe's biggest economy.

Financially solid Germany's government has led opposition to "eurobonds," viewed by some as a logical solution to the debt crisis that has pushed up troubled countries' borrowing costs.

Their rejection last week by Merkel and French President Nicolas Sarkozy hasn't stopped advocates -- in Germany's opposition and elsewhere in Europe -- pushing for them. Critics say they would raise costs unfairly for solid countries and could even deepen debt troubles.

Source: finance.yahoo.com

Copper's Still Talking

Copper may need a technical trigger, but the bullish setup(s) are beginning to draw attention.

Copper (JJC) And Copper Diffusion Index (DI)

Some Like It Hot

A quick review of the COT money flows reveal that connected interests may have had their feet placed on the fire this week in terms of trend control. Connected money, populated by the infamous bullion banks, has used futures and options, i.e. paper markets, to control gold rate of appreciate for years. A typical money flow setup, referred to as paper operations here, illustrates how commercial traders use short-side concentration to contain gold rallies during speculative upside bursts.

Source: edegrootinsights.blogspot.com

Robert Palmer, Andy Taylor, and John Taylor of the Power Station once suggested that Some Like It Hot. Connected money's feet (net positions) remain on the fire; The temperature of the fire is rising.

The following chart illustrate a classic short squeeze into strength.

Gold London P.M Fixed and the Commercial (C) Less Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest


Normally, short positions are reduced into weakness (blue arrows) rather than strength (green arrows).

Gold London P.M Fixed and the Commercial Traders COT Futures and Options ZScore Weighted Average of Long & Short As A % of Open Interest

The Markets Setup the Headlines

The writing has been on the wall since early 2011. Long and intermediate divergences between nominal and real indices setup the inflections points that precede the various forms of QE(n).

S&P Banking Index (Banks) AND Banks to Gold Ratio


Headline: Bank of America Plans Big Layoffs to Cut Costs

Bank of America is set to eliminate at least 3,500 jobs in the coming months, as the beleaguered financial giant seeks to cut costs and restructure amid deepening shareholder dissatisfaction.

With its stock down more than 50 percent since January, the job cuts by Bank of America may be only the start of a broader restructuring at the company, which is the nation’s largest bank. Brian T. Moynihan, the chief executive of the bank, has said that he hopes to trim quarterly expenses by $1.5 billion. Thousands more job cuts are likely in the months ahead.

“I know it is tough to have to manage through reductions,” Mr. Moynihan wrote in a memo to the company’s senior leadership late Thursday that outlined the cuts. “But we owe it to our customers and our shareholders to remain competitive, efficient and manage our expenses carefully.”

In the memo, obtained by The New York Times, Mr. Moynihan said the company’s broader revamping effort was nearing completion of its first phase, which examines the consumer business and support functions. A third and final review is set for early September.

Source: nytimes.com

Stocks Stocks Are Capital Appreciation And Dividend (Cash) Machines

Truth often lies behind the layers of illusion. And, the world is full of illusions.

Dividends are vital but commonly ignored component of the total return provided to investors. For example, Homestake Mining was one of the largest gold miners in the United States during the secular bull market of 1924-1936. Over this period, Homestake’s stock price and dividend payout surged 864% and 800%, respectively. Gold stocks were the play of the decade not only because of capital gains but also DIVIDENDS. This cycle repeated from 1968 to 1980’s and is repeating today.

The S&P Gold (formerly Precious Metals Mining) is a capital appreciation index that completely ignores dividends. A poorly informed public, toiling within the previous investing paradigm, has no idea the cycle is repeating and/or gold stocks will resume their historical role as capital appreciation and dividend (cash) machines - at least the good ones.

Headlines and investors focused solely on price appreciation see only 'disconnect' in the gold shares. Disconnect creates fear and fear encourages selling despite one the greatest secular bull market in history.

S&P Gold (Formerly Precious Metals Mining)* to Gold Ratio:
* S&P Gold from 1945, Barron's Gold Stock Index from 1939-1945, 1922-1939 Homestake Mining


Headline: Mining Share Ratio To Gold Back At Pre-QE1 Levels

The following ratio chart says in a picture just how severely undervalued the gold stocks are in relation to the price of bullion.

You might recall that as the credit crisis erupted in the summer of 2008 with the failure of Lehman Brothers and subsequent meltdown of other large financial firms, stocks and commodities plummeted as the Yen carry trade unwound and deflationary fears escalated.

The rumors began to circulate as the crisis deepened that the Federal Reserve was getting ready to implement some unorthodox policies in an attempt to stave off the deflation and prevent a credit market lockup. That was when the phrase, “Quantitative Easing” first began making the rounds in the markets.

Source: jsmineset.com

Fallen Angels

The sharp run up in gold since the battle begins commentary reminded of an old Charlie's Angels eposide entitled Fallen Angel (1979).

Jim's price Angels (see below) are dropping fast.

Japan Urges G-7 Coordination on Markets

“Take all necessary measures to support financial stability and growth.” In other word, do whatever it takes to kick the can down the road. That is, until market forces remove or destroy the can. After that, central planners will be pushing on a string to execute those 'whatever it takes' policies.

Headline: Japan Urges G-7 Coordination on Markets

Japan called on Group of Seven nations to work closely to counter market turmoil and Asian officials sought to calm investors as stocks slumped on concern the U.S. recovery is faltering.

The G-7 needs “very close cooperation in coming weeks,” Japanese Finance Minister Yoshihiko Noda said in Tokyo, where the Topix index fell to a two-year low. Hong Kong financial official K.C. Chan urged investors to “stay calm” and not be “spooked by the market,” as the Hang Seng Index slumped 3.1 percent. In Beijing, Vice President Xi Jinping said his nation will avoid an economic hard landing.

Plunging equity markets are crushing consumer and business confidence, worsening the outlook for a global economy already hampered by the debt burdens of developed nations. Speculation that European banks may have insufficient capital and signs of weakness in the U.S. economy are helping to drive a stock rout that returned to Asia today.

“Business confidence is tailing off and global growth slowing, and Europe’s debt situation appears to be getting worse and worse without any coordinated policy response,” said Matt Riordan, who helps manage almost $6.6 billion in Sydney at Paradice Investment Management Pty. “The worst case is that you go back to a 2008-type financial crisis.”

Source: finance.yahoo.com

It May Feel Like 2008, But It's Undeniably Different

Money flows in the US Treasury Bills (Tbills), US Treasury Bonds (Tbonds) and gold illustrate why this is not simply a repeat of 2008. Money surged into Tbills and Tbonds as the banking crisis was introduced to the public in the fall of 2008. The positive half parabolas (blue) from 2008.03 to 2008.12 reflect investors' safe haven preference for Tbills and Tbonds over gold.

The definition of safe haven, however, has changed in 2011. Money, seeking refuge from the evolving sovereign debt crisis since the fall of 2010, has been aggressively moving into gold. The negative half parabolas (red) illustrate this preference over Tbills and Tbonds as the crisis intensifies. Gold despite almost daily assurances from talking heads that everything remains the same has become preferred safe haven option in 2011. It may feel like 2008, but safe haven money flows suggest that it’s undeniably different.

U.S. Treasury Bonds Total Return Index (USTBTRI) AND USTBTRI to Gold Ratio


Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) to Gold Ratio


Headline: Is This Lehman Again? No, But It Sure Feels Like It

More than whether the European debt crisis is exploding, or if the US is re-entering a recession, or what the Federal Reserve's next move is, the markets want to know one thing: Is this another Lehman?

No word makes investors' blood run colder than "Lehman"-a reference, of course, to the Wall Street titan whose fall in September 2008 triggered the worst financial crisis since the Great Depression.

The short answer during the stock selloff Thursday was no, this is not a repeat of the scenario that ultimately sent the economy into a sharp recession and nearly capsized the entire global economy.

That, at least, was the view of market veterans of all stripes. On trading floors, though, the Lehman denials carried less weight, sending the major averages down as much as 4 percent just as a relief rally inspired hopes that perhaps the worst of the two-month slide was over.

Source: finance.yahoo.com

The Game of Fooling The Fools

Want to bring back $2 gas? Try selling it by the half gallon. That works for the voters, right?

Ever shrinking product size at a given price point is the preferred tactic at the grocery store. As long as prices don't rise and no bothers to think, there's no inflation. Who are we fooling other than the fools?

In the end, I might be viewed as the biggest fool of all, but at least I live in real world.

Headline: Bachmann: I'll bring back $2 gas

President Michele Bachmann has a promise: $2 gas.

"Under President Bachmann you will see gasoline come down below $2 a gallon again," Bachmann told a crowd Tuesday in South Carolina. "That will happen."

Sure, politicians promise all kinds of things on the campaign trail. But Bachmann, a leading contender for the 2012 Republican nomination, is wading into truly tricky territory.

Source: money.cnn.com

Headline: Gas, food and clothing prices are on the rise

Americans paid more for necessities like gas, food, clothing and shelter in July, as prices rose more than expected over the month.

The Consumer Price Index, the government's key inflation measure, rose 0.5% in July, led by a 4.7% increase in gas prices.

That's worrisome, said Daniel Penrod, senior industry analyst with the California Credit Union League, considering many Americans are still struggling amid high unemployment and low home prices.

"We're looking at a situation where income isn't growing, so large price jumps right now without job growth and income growth behind it, basically mean that consumers are looking at more of their money going out the door at a time when less of it's coming back in on an income side," Penrod said.

Source: money.cnn.com

Money Will Rotate Away From Bonds

Money, likely sooner rather than later, will rotate from bonds to stocks. The nominal rally in equities and its out performance of bonds will undeniable. Fear and manufactured uncertainty over the short-term means this interpretation won't find a lot of supporters today.

As I have said before, those that make money know when to stand alone.

Large Cap Total Return Index (LCSTRI) to Long-Term Government Bonds Total Return Index (LTGBTRI) Ratio and Z Score of Secular Trend

Burt Reynolds sees his Florida mansion go into foreclosure

When the bandit can't sell, the housing market must be weak.

Headline: Burt Reynolds sees his Florida mansion go into foreclosure

Yes, even Hollywood movie stars are facing foreclosure.

Burt Reynolds has been hit with a foreclosure notice on his waterfront mansion in Hobe Sound, Fla. The star of "Smokey and the Bandit" and "Boogie Nights" (for which Reynolds was nominated for an Academy Award for Best Supporting Actor ) hasn't made payments for the past year, and owes $1.2 million on the mortgage, according to a lawsuit filed by Merrill Lynch Credit Corporation.

Reynolds first put the 5-bedroom, 7-bathroom waterfront home up for sale in 2005 for $15 million. He's cut the price several times, but it hasn't sold. If you're in the market, the three-acre estate includes a screening room, billiard room, gym. and a 2,000-square foot guest house, heated pool, dock, and helipad.

Source: csmonitor.com

Coca-Cola to invest $4 billion more in China starting 2012

Investment/money flows maximizes reward relative to risk. That means it follows real economic strength.

Headline: Coca-Cola to invest $4 billion more in China starting 2012

Coca-Cola (NYSE:KO - News), the world's largest soft drinks producer said on Thursday it will invest $4 billion more in China over the next three years starting from 2012.

By the end of 2011, Coca-Cola and its China bottling partners would have invested more than $3 billion in the country over the last three years, bringing the total investment to $7 billion by the end of 2014.http://www.blogger.com/img/blank.gif

"China is one of our most important growth markets in the world," said Muhtar Kent, Coca-Cola's chief executive, in a statement.

"The new investment is a part of our long-term commitment to invest in innovation, partnerships and a portfolio that will enable us to grow our business in a sustainable and responsible way," Kent said.

Kent told Xinhua in an interview that the investment will be used to expand the company's product lines, infrastructure and distribution systems as well as invest in cold drinks equipment.

Source: finance.yahoo.com

Obama: Another year or more for housing turnaround

A couple of years from now the response will be another year or more. This game will be played for decades. A secular bottom in real estate will form when the public no longer cares about the responses to questions that public officials/leaders cannot answer.

Housing Starts And Change YOY


Headline: Obama: Another year or more for housing turnaround

President Barack Obama said Wednesday that it will likely be another year or more before the housing market picks up and home prices and sales start rising.

But he said Washington, lately the target of public ire, can't make that happen on its own. He said consumers, banks and the private sector will need to help, too.

Obama spoke at a town hall in the western Illinois town of Atkinson on the third and final day of a bus tour of politically important Midwest states. His comments were in response to a question from the owner of a local real estate company, who said she had begun to see a turnaround in late spring. But her phones stopped ringing after last month's "debt ceiling fiasco," when the government came close to defaulting on its financial obligations.

"We have no consumer confidence after what has just happened," she told the president. "I should be out working 14 hours a day and I am not."

Obama agreed that the lengthy, last-minute negotiation over lifting the debt ceiling was a "self-inflicted wound" that shouldn't have happened. "It was inexcusable," he said.

Source: finance.yahoo.com

Venezuela's Chavez: will nationalize gold industry

Good luck with that.

Gold mining is a highly specialized industry that requires not only highly specialized skills and knowledge but also massive foreign investment to find, develop, and extract potential deposits. What convinces centralized governments often unable to execute even the most basic of social services (such as timely and profitable mail delivery) that natural resource development and extraction lies within their realm of expertise? The headline might as well read that Venezuela's resources/potential will be under developed for years to come.

Headline: Venezuela's Chavez: will nationalize gold industry

Venezuelan President Hugo Chavez said on Wednesday he plans to nationalize the gold sector -- including extraction and processing -- and use the production to pad the country's international reserves. Chavez, speaking on state television, said he would carry out the nationalization through a decree in coming days.

Source: reuters.com

Swiss Ponder Unthinkable as World Turns Economy Upside Down

Can an economic war against movement of capital (market forces) be won? No. The fine line between economic and physical warfare and the urge to compete, i.e. win, rather than cooperate ensures more turbulent times ahead.

Headline: Swiss Ponder Unthinkable as World Turns Economy Upside Down

Switzerland, the nation that hasn’t gone to war with a foreign power since Napoleon, is reluctantly debating a generational taboo: ceding monetary independence to win a battle over its runaway currency.

Swiss National Bank Vice President Thomas Jordan said the central bank is assessing “a whole range of options” to prevent the franc, which reached a record against the euro this month, from making Swiss goods prohibitively expensive. Even a cup of coffee at Cafe St. Gotthard in Zurich costs $8.30, with one Swiss franc buying $1.2816 at today’s exchange rate.

Billionaire entrepreneur Christoph Blocher, one of the politicians who called on SNB President Philipp Hildebrand to resign after the bank lost $21 billion last year in a vain attempt to restrain the currency, now supports a franc target.

“The franc is catastrophically overvalued,” said Blocher, a former justice minister for the People’s Party, Switzerland’s largest. “It’s almost like economic warfare -- to wage a war, you must use all measures at your disposal, and you must win.”

Source: bloomberg.com

You Haven’t Seen Anything Yet

Anything is possible over the very short-term, but subtle market hints imply a trend transition in gold. Jim's market observations and instincts are correct. The reality show called gold is about to get interesting. Stay tuned.

Headline: You Haven’t Seen Anything Yet

My Dear Extended Family,

We have to admit $1764 is a significant level for gold. Above that level and the $1800 plus recent high comes into focus. Above that level the hyperbolic potential of the gold price comes into focus.

Some of the finest minds in gold anticipate a very short but brutal reaction in price. The dollar market seems to not agree with a gold correction here.

Market wise, the Fed has thrown the US dollar into the wind. Under .7400 the dollar denies a reaction in gold at these levels.

When gold broke out above $524.90 I asked you to please cease trading as gold had moved from phase 1 into a runaway price phase 2. It is this phase that has given you prices in excess of $1650. $1764 has the same significance http://www.blogger.com/img/blank.gifas $524.90 because it represents phase 3, the point when a runaway price market for gold would gain exponential properties. Because $1764 is such a significant number, you can expect one of the more serious price battles before the price departs to Alf Fields’ and Armstrong’s predictions.

To sum up the situation, you haven’t seen anything yet.

Regards,
Jim

Source: jsmineset.com

Three Horsemen Maintaining Demand - Increasing Back Door Influence?

The charts below illustrate two important trends. First, foreigners were selling well in advance of the market’s recent turmoil. This is illustrated by the well-defined down tick in the thick red line.

Second, the three horsemen of China, Japan, and United Kingdom continue to be big buyers of US Treasury securities. Their slow and steady accumulation from 49% to 54% of all Treasury debt held by foreigners since the onset of crisis represents their importance in maintaining demand.

Concentration by horsemen, however, doesn’t come without concerns. As concentration by specific sovereign nations rises, who really controls the US policies and global intentions? It won’t be long before this setup is recognized a legitimate threat to national security.

FOREIGN PURCHASES AND SALES OF LONG-TERM DOMESTIC AND FOREIGN SECURITIES BY TYPE


Major Foreigner Holders of US Treasury Securities: The Three Horsemen


Headline: Treasurys Dip On Cautious Optimism; TIC Shows Foreign Selling

NEW YORK (Dow Jones)--Data released Monday show the first monthly decline in foreign investors' Treasurys holding in more than two years, but a subset of the numbers prove that some major countries, including China and the U.K, are still net buyers of U.S. paper. This hints at the fact that even though U.S. government debt isn't completely impervious to the country's political drama, it's still the world's safe-haven.

Treasurys were under water throughout Monday's light-volume session as investors tiptoed into riskier assets. Benchmark 10-year notes shed 20/32 in price to yield 2.308%, by late-afternoon trading, while 30-year bonds lost 1 7/32 to yield 3.770%. Bond prices and yields move inversely.

The latest Treasury International Capital (TIC) report shows private foreign investors cut $18.3 billion worth of their U.S. Treasurys holdings in June--that's the most shedding since June 2000. The selling came as U.S. lawmakers tussled for weeks over a deficit-reduction plan, escalating fears that the world's largest economy might default on its debt and lose its top credit rating.

"It certainly showed that events in Washington really took a toll on investor sentiment," said Millan Mulraine, senior strategist at TD Securities.

Source: online.wsj.com

The Scramble To Hold Cash Assets

Banks are still scrambling to hold cash assets. Unfortunately, the trends scream warning since early to mid 2011 remain unperturbed in August

A break down of bank credit at commercial banks reflects lackluster business loan creation, a struggling real estate market, a slow decay in consumer spending, a surprising scramble to hold cash assets. The scramble to hold cash assets in excess of the 1980-1981 and 2008 crisis levels screams

The spike in cash assets is most noticeable.

Cash Assets 12-Month Change (CASH12LN) And Percentage of Total Bank Credit (%TBC)


Real estate and consumer loans are contracting. This is a major concern for a consumption-driven and housing-dependent economy.

Real Estate (RE) and Home Equity (HE) Loans Year-over-Year Change For All Commercial Banks


Consumer (CL) and Credit Card (CC) Loans Loans Year-over-Year Change For All Commercial Banks


Business and commercial loans (BL loans) have been slowly recovering since 2010. Unfortunately, they represent less than 14% of total credit creation in 2011. BL Loan accounted for nearly 17% total credit creation as the debt crisis unfolded in 2008.

Business & Commercial, Real Estate, and Consumer Loans Year-over-Year Change For All Commercial Banks


Source: federalreserve.gov

Italy calls for euro bonds, UK backs fiscal union

Tremonti returned to proposals for jointly-issued bonds that would effectively make individual governments' debt a common burden, saying they were the "master solution" to the euro zone debt crisis. Getting the haves to share the burden with the have nots will be easier said than done.

Headline: Italy calls for euro bonds, UK backs fiscal union

Italian Economy Minister Giulio Tremonti stepped up calls for a more coordinated response to the euro zone debt crisis, including the creation of euro bonds, ahead of a crucial Franco-German summit next week.

Tremonti returned to proposals for jointly-issued bonds that would effectively make individual governments' debt a common burden, saying they were the "master solution" to the euro zone debt crisis.

"We would not have arrived where we are if we had had the euro bond," he said on Saturday.

However the idea was immediately rejected by German Finance Minister Wolfgang Schaeuble, who said such bonds would undermine the basis for the single currency by weakening fiscal discipline among member states.

"I rule out euro bonds for as long as member states conducthttp://www.blogger.com/img/blank.gif their own financial policies, and we need differing interest rates so that there are possibilities of incentives and sanctions to force fiscal solidity," he told Der Spiegel weekly.

"Without that kind of solidity, there is no foundation for a joint currency," he added, according to extracts of an interview released ahead of publication.

The comments underline the sharp divisions hampering efforts to coordinate a response to the euro zone debt crisis, which escalated dramatically last month as markets turned their fire on Italy, one of the bloc's most heavily indebted countries.

Source: reuters.com

Sales of Safes Soar Amid Market Turmoil

Demand for safes, whiskey, and handguns are soaring? I assumed the last two. Perhaps prayers for sanity and calm leadership should be number one.

Headline: Sales of Safes Soar Amid Market Turmoil

Amid the market turmoil, sales of security safes and vaults have spiked. While some shoppers sought to protect whatever valuables they had left, others needed a place to stash their newly-acquired safe haven assets such as gold and cash.

Port Charlotte, Fla.-based Value Safes said it sold an average of $13,000 in safes a day in the past week, more than tripling its daily average of $3,500 from the previous week. On Amazon.com (AMZN, Fortune 500), SentrySafe's $170 1.2-cubic foot combination safe was among the site's biggest "movers and shakers" Friday, with sales rising 44% over the past 24 hours.

Source: money.cnn.com

The Blind Leading The Blind

Ignore the funds (see headline below) unless the investment strategies based on the blind leading the blind work well for you. Money flow analysis reveals that connected interests are buying the dip in copper.

Copper (JJC) And Copper Diffusion Index (DI)


Headline: Funds Slash Commodity Bets by Most in 18 Months on Economic-Growth Concern

Funds reduced bets on rising commodity prices by the most in any week since February 2010 on mounting concern that a weakening global economy will slow demand for raw materials.

In the week ended Aug. 9, speculators cut their net-long positions in 18 commodities by 19 percent to 989,110 futures and options contracts, government data compiled by Bloomberg show. Copper holdings plunged 61 percent, the most since June 2010, and bullish gold bets fell to a five-week low.

The Standard & Poor’s 500 Index slumped 13 percent in the three weeks ended Aug. 11. About $2.3 trillion was erased from U.S. equity values over the period amid Europe’s debt crisis, speculation that the economy is slowing and S&P’s downgrade of the government’s AAA credit rating. The benchmark gauge for U.S. shares dropped to within 11 points of a bear market.

Source: bloomberg.com

Lead, Follow, Or Get Run Over

Thanks Jac. It's probably not coincidence that the shop has disappeared. Those on the sidelines with "scrap gold" in hand have been emboldened by rising prices to drag their feet.

In the game of money it’s lead, follow, or get run over. Leadership requires the skill of anticipation. Few ever acquire this skill. While following the leaders is easier than easier than anticipation, it demands the discipline and ability to adapt. These can be difficult skills to acquire as well. Unfortunately, this means the vast majority of people get run over.

Dear Eric,

Firstly, thank you for your posts. They are truly world class. In fact, yourself, Jim & Dan's posts are all truly world class, and I thank you all for them. I have been a reader of all your posts since 2005, and they have all helped me & my immediate family, in 'practical' ways, since that time. Thank you.

Secondly, I'd like to comment about your observation of the Reuters article: edegrootinsights.blogspot.com, of waning eagerness by retail, to sell their gold jewellery for cash in the US & Mexico.

In live in an inner city suburb of Sydney, Australia, and for the past 3 years, our local shopping centre has had the 'Gold X-Change' Cash for Gold stand, setup in front of the Woolworths (Australian Safeway equivalent) supermarket there. As of late July, this stand no longer graces its presence at that location in front of Woolworths in our local shopping centre, and it was not there this weekend, nor last weekend. It is gone, never to come back I believe.

I noted this back on the 30th July, when the Gold X-Change stand was not there for the first time, and thought at the time whether or not retail was no longer selling to these cash for gold people, since their stand was no longer there. And that observation coincided with your posts at the time about an acceleration in the trend for the gold price in USD's. Coincidence?

Thanks again for posting.

Kind regards.
Jacq.

Italian union threatens general strike

Follow the demonstrations, strikes, and riots across the globe as country after country adopts attempts to adopt austerity and tax programs to close their budget gaps. This solution is similar to replacing fire trucks with squirt guns as a cost-saving measure to battle fires. While the move will save money, it is also certain to slowly burn down the city.

Headline: Italian union threatens general strike

The head of Italy’s biggest union is warning of a general strike to protest austerity measures pushed through by Premier Silvio Berlusconi’s government, according to reports published Sunday.

Susanna Camusso, leader of the CGIL labor union, told the La Repubblica newspaper that union officials would meet Aug. 23 to schedule a strike date, the Associated Press reported.

A work stoppage would be one way to “change the inequity of this package,” the AP quoted Camusso as saying.

The strike threat follows the passage Friday of a $64.8 billion package of spending cuts and tax increases intended to balance Italy’s budget by 2013.

Critics of the measures, which came in response to demands by the European Central Bank, say they would unfairly burden the middle class and do nothing about Italy’s trouble with large-scale tax evasion.

Source: marketwatch.com

As gold prices surge, cash-for-gold frenzy fades

Perhaps the cash for gold customers have no more gold to sell. The seller and sidelines sitters without a doubt will return as buyers during the mania phase of gold's secular bull market.

Headline: ANALYSIS-As gold prices surge, cash-for-gold frenzy fades

Handing out flyers at the corner of 47th Street and Fifth Avenue in New York City's Diamond District, Mariabi Peenya is having trouble finding passersby eager to sell their gold jewelry for cash.

In Mexico City, Paulino Luna says fewer customers are coming to his small storefront in a colonial-era building, where he's been buying bullion for 25 years. And in Chennai, India, Daman Prakash Rathod finds the once-heaving crowd of local gold scrap sellers have all but disappeared.

Across the globe, the latest surge in gold prices -- up as much as 20 percent since June as investors seek refuge from stock market turmoil and sovereign debt crises -- is failing to lure as many people into selling their gilt mementos, heirlooms and dusty family jewels as during the 2008 financial crisis.

The success of massive cash-for-gold industry over the past three years, urging people to sell their gold, means there are fewer and fewer people with any "old gold" left.

Source: reuters.com

Gold Shorts Had Feet Placed On The Fire

A quick review of the COT money flows reveals that connected interests may have had their feet placed on the fire this week in terms of trend control. Connected money, populated by the infamous bullion banks, has used futures and options, i.e. paper markets, to control gold rate of appreciate for years. A typical money flow setup, referred to as paper operations here, illustrates how commercial traders use short-side concentration to contain gold rallies during speculative upside bursts.

The sharp rise in the weighted stochastic for open interest, bounded between -100% and 100%, during illustrates the numerous upside bursts since 2001. See chart below

Gold London P.M Fixed (Gold) and the COT Futures and Options Open Interest Stochastic Weighted Average (WA):


In general, speculative surges, i.e. gold rallies, are met with short-side concentration by commercial traders to absorb the incoming demand. Sharp decline in the C-NR weighted stochastic (circled red) illustrates several of the previous concentrations. Last week’s unexpected increase in C-NR during an upside burst (circled green) could easily be construed as connected money getting their feet placed to the fire by the speculative and retail traders.

Gold London P.M Fixed and the Commercial (C) Less Nonreportables (NR) Traders COT Futures and Options Stochastic Weighted Average of Net Long As A % of Open Interest:


Are connected interests finally losing control of the trend? As always the most obvious interpretation doesn’t necessarily reflect reality in the money game. Perhaps, big money, rarely moving in plain sight, is finally adequately positioned to capitalized from a massive upside breakout?

Could the above control inversion and collapse in consumer expectation (confidence) be subtle warnings that the largely slow-and-steady, linear appreciation of gold is about to go parabolic? As always, only time can answer this question. This outcome, nevertheless, would most certainly be considered "shock and awe" even for hardened gold traders and investors.

The quiet scramble to accumulate key commodities and commodity related currencies into weakness raises the eyebrow of suspicion only higher.

COT Money Flow Table: