The lack of understanding with respect to market development is astonishing. The gold promoters keep desperately trying to argue that demand is somehow rising for physical coins so somehow the prices are not real. At the bottom of markets it is NEVER fresh buying that makes the low – it is short-covering – END OF STORY.
As we move into lower prices, mining companies are FORCED to sell gold forward (Paper Gold) to try to make ends meet. Their short positions will increase going into the lows and without real hedging models, many will go bankrupt. They will lose a fortune and contribute to the short-cover rally that even took place back at the 1985 low. Back then, there was one gold promoter who was short at the low and lost everything in a matter of days. The founder of International Gold Bullion Exchangewas sentenced to 10 years in prison for being short.with no sense of how to hedge. That is why we developed both speculative & hedging models with entirely different goals.
As commodities get killed, the smart companies are starting to wake up. I am off to Mumbai for an urgent meetings next week. Many are starting to realize you cannot trade on headlines or advice from banks who profit from the trade with their conflict of interest. Unbiased independence is the only way to survive.
French Customs officials were tipped off about alleged attempt to take painting belonging to member of banking dynasty to Switzerland. The Guardian reported that French customs officers boarded a yacht docked off the town of Calvi in northern Corsica. They precisely what they were looking for. It was a €25 million Picasso belonging to a Spanish banking tycoon that the Spanish Court said could not be sold overseas.
The Roman Emperor Maximinus I (235-238AD) declared that all wealth belonged to the state. Spies were rewarded for turning in anyone hiding assets. The IRS has also its Whistleblower – Informant Award program. History repeats because government are always the same – its just about them. Maximinus set in motion the destruction of the Roman economy. Once he began to hunt wealth, people hid it and the economy imploded. We are in the very same process and in the USA it is called FATCA.
But Europe is hunting assets everywhere and as we enter BIG BANG starting Sept 30/Oct 1st 2015.75 (365 * .75) , for the next 4 years things are going to go from bad to worse. Maybe our only hope is Donald Trump for he will at least be more prone to slow this trend than anyone else who is within the fold of the political class.
Governments are all broke and instead of realizing that they are destroying the world economy precises as Maximinus destroyed the Roman Economy, what hope do we have of stopping this destruction when we have greedy politicians with no sense of what they are doing. We have no future left if we continue to follow this path. It is illegal to mail even a $20 bill for a birthday gift. If you try to send money even to your family by wire or Western Union, they want to know where the money came from. A friend was recently divorced and his wife wanted to wire her half of the account to a different bank. The bank refused demanding to know why forcing them to bring to the bank their divorce papers. Your money is just no longer yours. It may be in your possession, but that is a reluctant circumstance they would like to remedy.
Standard & Poor’s has lowered the credit outlook for the EU as a whole toNEGATIVE. SPIEGEL Online has reported that among the reasons in addition to the new aid for Greece includes the investment plan by President Junckerwhich is to just spend more money. There is no comprehension that increased tax enforcement and raising taxes is not the way to help Europe recover.
The IMF has taken the position that it should put off any move to add the yuan to its Special Drawing Rights currency basket until September 2016. This seems to be political rather than economic. Then again, the IMF is acting far beyond what it was intended to do and is part of the Troika in Europe without any elected status whatsoever.
None of the core Asian Equity Indices managed to trade in positive territory today: Nikkei (down 0.19%), Shanghai (-1.12%), and HSI (-0.92%). We saw weakness again in Asian currencies, and this mood worked its way in Europe as well. The first trading day in the Greek stock market after its official closure saw a 17% decline. The DAX was the only exceptional performer, closing higher by 1.19%. The Euro and Cable traded lower (-0.28%) and was actually a gallant performance, all things considered!
The US$ continues to draw interest and that in turn remains a negative for commodities. Brent broke the psychological $50 level (closing at $49.63 -4.94%), obviously this contributed to the very heavy loss for the Russian Rouble (down 2.6% by the end of trading).
Other commodities suffering as well. The age of deflation continues.
The Dow closed lower on its worst intraday level but was still down 95 points (-0.6%); at one stage, it was down over 200pts.
So the benefactors in all of this were the bond markets, with all core center’s seeing yield declines. To be expected, the U.S. Treasury market was the star with benchmark 10yr closing 2.145% -5.7bp on the day. This takes the 10yr Bund (0.61%) spread to 153.3bp.
August and summer markets are notoriouslythin,but this year has the potential to be legendary.
Gold remains extremely weak. We need a daily closing above 1108 to say the low is temporarily in place and a bounce back up is possible. The 1080 level is critical support on a daily closing basis, and it remains possible that gold can break to the downside moving into September if the July low gives way.
Since the Monthly Bearish at 1155 was elected on the closing of July, typically we would see a rally back to that level to retest it before we see lower prices. Atwo-month reaction rally into September would then result in a renewed decline into the Benchmarks.
The entire commodity sector is collapsing – not just gold – which illustrates that gold is not being manipulated. China’s days of growth of 12% annually are over, and their numbers reflect an economic contraction. Demand for commodities has declined, and this is all part of theDEFLATIONARYwave underway. When you open your eyes and look beyond gold, you can see the whole trend.
Congress kicked the can down the road to precisely the ECM target date. This is when the government will go into shutdown mode. There is a greater than 50/50 chance that there will be no deal to extend the debt ceiling, which never ends. This merely reflects that there is no control over fiscal spending, foryear after year they must constantly borrow more and more. With the House already in recess until after Labor Day and the Senate about to leave town this week, all of the components are in place for Congress to fail to act before the fiscal year begins on October 1.
It is clear that a battle is brewing, as leadership admitted that they are still undecided on how to even deal with this situation. It looks like the peak in the ECM is targeting October 1, which is the precise day we may see the U.S. government shutdown.
Anyone who thinks this is about terrorism is pathetically naive. The NSA is a top-notch Tax & EconomicEspionage(TEE) organization; with terrorism so low on the agenda, it is laughable. You do not collect every phone call worldwide of billions of people to sort out even 100 terrorists. They store all that data and can input your name and wham – up pops everything. I am waiting for some smart lawyer in a divorce case to subpoena such a file to prove someone has been cheating to get a pile of money.
In theory, the existence of such files should be open to everyone just like the Nixon Tapes. They must have copies of all the emails Hillary erased to hide her dealings with foreign governments to get money for the pretend Clinton charity. They all exist. Why has someone not demanded that the NSA turn them over? Well, it would open the floodgate on everyone else. The NSA didn’t build that immense storage facility for nothing. They erase nothing – retain everything. They remembered their childhood songs of how Santa Claus knows everything and said gee, we can do that. So why is Congress or even Trump demanding the NSA turnover all her emails? Guess to they do not want to publicly admit Snowden was correct.
The NSA is a strategically aligned intelligence agency that has brought “1984” to life. The NSA has been deeply engaged in economic and industrial espionage. Combating terrorism, global money laundering, corruptions, and the fight against proliferation, are all excuses used to justify tracking every dollar. They might as well put a GPS chip in the currency. Terrorism is just a fig leaf for what they have been building. If they were interested in just terrorism, they would have no need to store every phone call, email, text, and written letter they can get their hands on.
New revelations claim that the NSA was spying on the French military industry, what they were producing, and to whom they were selling. Due to restrictive granting of export permits imposed by Germany, the German armaments industry is blocked. The French defense industry can count on the support of their government to ship to foreign lands. This is what distinguishes the French key industries from their German competitors. This has made the French military industry an interesting target for the NSA. This we can understand, but going beyond that opens Pandora’s Box.
The key to understanding the NSA’s mission profile for economic and industrial espionage began when the dividing line for “national security” expanded following 9/11. This has become a paradigm shift where everything from money flows, transport, energy, telecommunications, critical infrastructure, and the IT sector, has been designed to track and control eventually everything. The gathering of information is only one part of a much broader intelligence operation. They are operating in secret, not even Congress knows what they are really doing with the data. Snowden reported that staff created programs to collect nude photos that girls sent to their boyfriends, which certainly had nothing to do with national security.
This is especially true when it comes to long-term, strategic economic goals. The French newspaper “Libération” recently reported that around 100 major French companies, including almost all of the members of the Paris stock exchange CAC 40 index, will be affected by NSA spying activities. The NSA is probably tracking all German companies since they would be even more critical, given the German export economic model. The economic ties between German politics and economics contain politically interesting export markets, such as Russia or China, represents extremely valuable info regarding even the embargo against Russia.
However, there is a significant difference between the French and German key industries: German DAX companies were listed often on the U.S. stock market, whereas a French company was not. After the investigations in the course of compliance bribery scandal against Siemens unfolded, rethinking began within German industry with respect to U.S. listings. DAX companies such as Daimler (2010), the German Telekom, and even before the Alliance, BASF, Bayer, Infineon, and E.ON have retired for good reasons from the U.S. market. Siemens followed in early 2014.
Unbeknownst to most people, the Patriot Act (2001) imposed administrative requirements. The SEC obtained new compliance powers for any company traded on the U.S. stock exchange. This has resulted in many foreign companies de-listing from the USA in a mass exodus. Listing on the U.S. exchange opened the door for the NSA and other security authorities (FBI) to engage in investigations and control beyond the U.S. borders, expanding even the FBI outside the USA all in the name of terrorism. This has led to the mass exit of foreign companies from U.S. listings.
Foreign banks exposed themselves to U.S. law, even in their home offices, by merely having an office in the USA. The U.S. authorities went after and destroyed the Swiss banks by imposing all sorts of charges. This is why UBS suddenly donated to Hillary’s charity in return for her intervening on their behalf. That is outright criminal bribery, but Hillary seems to think she walks on water.
An example of a ZDF-post on May 17, 2000, shows that the NSA spied on German companies for the benefit of American companies. “The most spectacular case is probably the case of VW, where the NSA from this station has interceptedvideo conferencingfrom VW with the later manager Lopez while then, the results in the United States General Motors and then leaked to the German subsidiary Opel.”The U.S. intelligence is abusing their power for private purposes. One must wonder what the U.S. companies gave in return for such assistance. This was just the tip of the iceberg.
Systemically, the NSA has been spying on foreign banks, looking for Americans at least since the mid-90s. This includes Switzerland, Liechtenstein, and Luxembourg. This transformed into claiming they were concerned about financing terrorism, which would not take billions of dollars. In addition, the IT used by the banks has been ineffective in blocking access by the NSA.
The NSA has developed a massive means to follow the cash flows as supported by the documents of Edward Snowden. The involvement of the NSA in tracking all capital flows is documented in the global monitoring of payments, including all banks. The documents showed also that the Belgium-based SWIFT organization was an NSA intelligence target. SWIFT standardizes the remittances of the world for more than 10,000 banks and is considered a bottleneck for international payments. Tap into that and you have everything.
This activity has contributed to the DEFLATIONARY world we live in as capital flows have reduced because of crazy regulation. FATCA has prevented Americans from operating overseas. Only prior multinational are exempt. No American citizen can possibly expand into the world economy for foreign banks will not accept Americans, be it in Asia or Europe. This is the hunt for money to document every account and movement of money. This is reducing global capital flows and threatens to unwind everything that was built since World War II. Foreign companies have been delisted in the USA because of crazy regulation hidden inside the Patriot Act, and then add FATCA, and one must wonder how much longer the world economy can stand before it topples over.
Saudi Arabia pumped a record 10.564 million barrels per day in June, showing that as prices decline, a record level of production is unfolding. Governments in the Middle East have budgets that are now in serious trouble. As oil prices decline,output is increasing beyond OPEC quotas because they need money to make up for lost revenue at higher prices. In the UAE, local gasoline prices increased almost 25% as well, which is oppositeof the trend because it is effectively taxation.
Saudi Arabia is the world’s biggest exporter of oil, but now the desert kingdom is looking to conquer the refining sector as well, and will become the 4th largest refiner in the world. This will put further pricing pressure on oil companies as they are all now posting the sharpest decline in profits in more than 10 years.
Welcome to the age ofDEFLATION. Whatever can go wrong, will go wrong for all governments everywhere. This isBIG BANG– the government funding crisis on a global scale.
German Chancellor Angela Merkel speaks during a session of Germany’s parliament, the Bundestag, in Berlin, Germany, July 17, 2015. REUTERS/Axel Schmidt
Reuters is reporting that Merkel has decided to run for election once again in 2017. The longstanding joke in Germany is that either she will have to die while in office, or someone will have to drag her out. She would not know what to do if she was not in control of Germany, and thus Europe. Anyone assuming that there will be a change in the idea of austerity within Europe better bet on something else.
I want to thank everyone who came to “The Forecaster” screening at the AMC Theater in Cherry Hill, NJ. It was also a special night for my family to be able to attend. I was shocked that people flew in from Texas, Ohio, Boston, and even from the South.
We are all in this together. The more we educate people of the problem and its cause, the better our chances are at avoiding a totalitarian future. We need major political reform to save the future. Government is just on a path of self-destruction. It is better to understand what is coming rather than waking up totally unprepared.
QUESTION: Thanks for the latest posts.I have 3 queries if you care to consider them.
Some years ago you used to say $5000 and $12000 when contemplating gold’s upside.Now the latter seems out of reach.Can you indicate what caused you to change your mind?
Secondly, regarding a possible Republican Presidential victory, does this correlate with a USD high and, if so, why?
Lastly, is a gold: silver ratio of 100 a possibility? (I have mislaid that portion of the 2014 Report which covers this topic).
Many thanks & Best Regards Bill
ANSWER: No, $5,000 is still the technical max based upon the patterns we have so far. Yes, that may change when the final low is in place. That depends upon the downward thrust for the steeper the decline, the greater the projection of that low materializing. The $2300 target isminimumwhereas the $5,000 is a tech target – not based upon reversals and is independent ofTIME.
We need the low to see if that projection will change from $5,000. I do not expect this target to rise above $5,000, but that is entirely possible, although certainly not beyond $12,000 which is the most extreme possibility and is probably not attainable. Such a level at $12,000 appears very unlikely because the system would likely implode long before that would ever develop. Ifgovernment was in control, they would be going door to door confiscating everything atgunpoint. The currency would most likely change and we would be measuring gold as something else by then.
The ultimate high depends upon the patterns creating the low – not fundamentals. Nobody in his or her right mind will ever step up and buy the low. So it does not matter if demand for physical coins rises or falls, it will never be enough to make the low and is more akin to propaganda disconnected from the events in all other markets. No one ever tries to catch a falling knife. We need the final low before theCOMPUTERcan provide that target, rather than my opinion.
We have been the highest paid firm in the world for decades. Clients want to know what theCOMPUTERis forecasting, not my personal opinion. So, I could be wrong. I find it primitive when people try to criticize me personally for it only shows their own ignorance. My opinion does not matter. I cannot wait for the day to retire and let them all argue against theCOMPUTER. It is similar to politicians claiming, “Votefor me because I lie less than my opponent!” They remain trapped in a primitive world and cannot see the global connections. NO ONEcan forecast the future based upon fundamentals and personal perspectives. That is in the category of a witch doctor. We need theCOMPUTER to remove the bias and prejudice. It is what it is – nothing more. You cannot be an analyst and married to a predetermined view regardless of what the instrument might be. Everythingrises, falls, and rises again withTIME.
When thelow comes into place, then theCOMPUTERwill provide the projection for the high. We will have to see what comes out. The $5,000 number was exactly what I have been saying all along. That is a projection based upon technical analysisONLY. It is not theCOMPUTER’Sforecast since we first have to achieve the low.
As far as a Republican victory, it is independent of a dollar high. We are looking at a meltdown regardless of who wins. The dollar high is simply that the debt crisis begins in Europe, manifests in Japan, and finally it hits the USA last. This is how it unfolded for the 1930s. The USA has the biggest federal debt, but the taxes are lower than Europe. The disposable income in Europe is far less than in the States, so there is less room for government to keep up this insane austerity that only support bondholders.
We will provide the silver/gold ratio update for clients. That ratio has made wild swings from 120:1 intraday to 12:1. Despite what the promoters say, there is no “fair” value to which this ratio will remain constant. It will swing back and forth. Yes, we will pay attention, for it will also help in looking for the turn.
Gold elected the Monthly Bearish at 1155 and we did so well below that level, holding the 1084 number both weekly and monthly. Our energy models are turning positive, so it does not appear that we will have major follow-through at this time. When you elect a Bearish Reversal that far from the number, you typically bounce back to retest it before proceeding further.
We have a Directional Change back to back for August, September, and July. So, we may see a reaction to the upside to flush out the shorts since we have excessive bearishness building in the press, as the WSJ commented that gold is the“pet rock”.
A reaction rally at this pointBEFOREnew lows will relieve the shortpositions,but this is not likely to last beyond September.Therefore,we are more likely than not going to see the final decline stage into the Benchmarks. Gold is within the channel so the resistance is forming at the 1155 level followed by 1225-1300. Support will remain at 1084 on a closing basis with key support at 900.
The asset class within tangible assets in theimmovable category is none other than real estate. This greatly varies from one location to the next. We face two main problems with real estate because we are facing a major Sovereign Debt Crisis.
First is the fact we have a problem with leverage reflected within interest rates. While many tout derivatives and fiat money are the reason for a crisis on the horizon, of greater concern is the leverage within real estate. The 30-year mortgage was part of Roosevelt’s New Deal. Real estate prices collapsed along with massive bank failures. There was no credit available, so real estate collapsed to about 10 cents on the dollar.
Real estate was auctioned, andland that had sold for $2-$3 during themid-1800s brought 10 to 30 cents an acre. FDR created Fannie Mae to revitalize the real estate market by providing30-year mortgages to allow people to buy property. Sales were taking place at auctions and on a purely cash and carry basis, which obviously limited the buyers.
We have to be concerned about the results of shutting down these agencies, which can result in reduced leverage within the system; if you add to that a banking crisis, then we will see a return to the atmosphere of the 1930s. The amount of leverage within the entire system based upon real estate is astronomical. This has been a major factor in creating thelong-depression in Japan, for at the top mortgages became 150-years withseveral generations responsible. Everyone was doing it so it became the NORM. As property collapsed with banks, everything changed in Japan.
Derivatives and fiat scenarios pale in comparison to the deleveraging of real estate for this is also a direct hit upon the people. Many have built their lives around the assumption that the value in their home will be there for retirement. This is part of the massiveDEFLATIONARYwave we are in, and is why we have to restructure. The entire future will be lost and there are no political candidates willing to tackle a subject they do not understand. They will never accept the fact that government is responsible for this economic nightmare.
Secondly, the negative impact upon real estate will also come fromtaxation, just as Chicago is looking to raise property taxes by 30%. The 2007 peak in real estate was the low-end leveraged out by the banks in their speculative bubble. We warned there would then be a bounce back into 2015.75, but this would be the higher-end. This was aided by the inflow of foreign capital from both Europe and China. Astaxationrises, this asset class will be hit dramatically. The high-end, which is peaking here in 2015.75, hasNOTbeen financed for much of this has been paid for with cash by people trying to get off the grid. These are not the same locations or sectors that peaked in 2007, they were the low-end leveraged pools based upon unsound speculation. That hurt the majority of home owners, whereas this peak in 2015.75 has been in completely different sectors of the market.
We face these problems in real estate. With state and local governments going broke and property taxes rising sharply, put this in the cauldron and stir it with the decline in capital lending for mortgages, closure of Fannie Mae, and the collapse in long-term lending (transactional banking), and the potion created is a very toxic witches brew.
The stock market or monetary issues do not create depressions. You have to destroy the bond market for that is where capital resides typically at least 10:1. Once you take out the bond market, that deleverages to the real estate market and now you have undermined not just the investors, but you wipe out the savings of the population as a whole. People just begin to walk away from property as taxes rise. This is how Rome collapsed; the city of Rome fell from its peak of about 1 million inhabitants to just 15,000, and in the process, real estate became worthless.
It is critical for us to understand how civilizations self-destruct. They are ALWAYS at the hand of government. Their self-interests are always at the expense of the people. There have been few exceptions in 6,000 years of recorded history. The Paradox of Solution is always the solution as today’s crisis sets the stage for the next crisis. We live in a cycle, so indeed, what comes around goes around.
Nothing is ever constant and no solution will create a permanent result. Whatever we “think” today may not be true tomorrow, which is why we need a computer to avoid that human error factor to which there is no exception. We are all wrong about something at some point. That is how we evolve and learn. No human being is perfect because we cannot foresee the future. What I have seen inresearch is straightforward: if they have done it before, they will do it again. Why? Because similar situations produce the same series of human responses. History is a map to the future; there is nothing new under the sun.