Market Talk – September 9th, 2015
Asian saw some very strong gains on rumors of renewed Chinese intervention with the Nikkei producing its strongest one-day rise since 2008 (1,343 points +7.7%). The Chinese markets reacted to the news rather late yesterday. Europe walked-in to the jubilation and saw encouraging market gains in the morning session. By mid-afternoon the US market had seen futures trading over 200 points but that started to fizzle out as the day went on.
Lots of street talk of big houses changing their call on global growth, Apple stock seeing some big sellers (unwinding long term strategic positions) and the continued weakness in commodities continue to unnerve the markets. The DOW closes close to its days lows -200pts (-1.2%).
Not surprising we are seeing bids again for the VIX but what is interesting is, over the past few months, the forward curve has turned inverted from a steep positive!
Asian futures are currently down around 2.5% from their close.
The US Treasury market was again the main beneficiary but this time not the front-end. The curve recouped everything it lost yesterday and then made ground. 2/10 flatter by 6BP 10yr’s closing at 2.18% after seeing them trade at 2.25% intraday. The 10yr TY/RX spread closed 147BP.
The drift into US Dollars has returned and we saw the DXY close higher at 96.05 (+0.2%). Given the turnaround in Oil was also reflected in the Russian Rouble; closing marginally lower on the day -0.2%.
Gold has proven to be one of the most disappointing markets illustrating that it is not the safe-haven people assumed it would be as it fell nearly $20 to close $1108 on the day. Gold futures logged their lowest settlement in a month as a rise in Asian and European equities and strength in the U.S. dollar battered the precious metal. Gold’s inability to rally and hold on to gains demonstrates that there is no concern about government yet as the flight to quality unfolds.
The talk around the street is still the rout in commodities and the finger of blame is still pointing in the direction of the Chinese (currency devaluation). If you need a escape-goat they are an easy target but only if you need a escape-goat. China should simply float their currency and let the free market do the job to prevent Western politicians from trying to blame China simply because of a peg.
Gold Update Being Emailed Next Week
We will be sending out the gold update to the 2014 Precious Metals Report next week. The update will be exclusively for those who have purchased the 2014 Precious Metals report and will cover gold going into the fall.
The 2015 Precious Metals Report will be issued in November and will cover the future prospect for precious metals moving forward in the final role for the hedge against government.
Why Money Need Not Be “Tangible”
COMMENT:
You said:
“The wealth of a nation is the total productivity of its people. If I have gold and want you to fix my house, I give you the gold for your labor. Thus, your wealth is your labor, and the gold is merely a medium of exchange. So it does not matter whatever the medium of exchange might be.”
A few points:
1) The Confederacy based on slavery, according to you, was very wealthy. But true wealth is NOT based on theft, on the forced productivity of others. It’s based on the voluntary cooperation of individuals, and called free trade.
2) True, other mediums of exchange have been used — but gold and silver are considered to be the best, and the one instilling the most confidence. And confidence in a medium of exchange, as well as in government, is paramount. In addition, ALL these mediums of exchange were tangible — a concept you’ve repeatedly denied.
3) You’ve yet to explain how such a system of intangible money would work. Given the seemingly inherent weakness of individuals to corrupt government I don’t see how this could possibly work.
JC
REPLY: Most of the time I do not bother with such emails for they just illustrate the total lack of an open mind trapped in this world of thought that says money must be tangible. To begin with the extrapolation that somehow labor means the South was rich because they had slaves is really off the wall. The value of a male slave rising and falling with the business cycle demonstrates that the Civil War to them was about their “asset value” since slaves were in fact property. They were now free or worthless. They were quite valuable and reached about 75 ounces of gold in value. So a male slave was by no means unimportant economically to the South.
The South was not a manufacturing based economy, but commodity namely cotton followed by tobacco. They derived the bulk of their economic wealth from commodities, which required labor. They began buying criminals from England, which was transporting them to America, and selling them into indentured servitude for a specific number of years. Ben Franklin objected to the practice asking how would England like it if they sent them bags of rattlesnakes? To say the South was “rich” because they had slaves is a gross distortion of reality. I would suppose what you are saying is you are a worthless piece of humanity if you do not possess gold. But how do you get the gold? Do you rob others? Or do you employ your labor to earn it? Perhaps it just falls from heaven.
Then you make a conclusionary statement revealing your bias that “gold and silver are considered to be the best, and the one instilling the most confidence.” Since gold and silver have provided a form of exchange in less than 50% of societies historically, I seriously doubt that there has ever been such a sweeping conclusion. Even going back to Hammurabi, his legal code included wage and price controls that expressed the value of things in grain and silver — not just silver or gold for that matter.
Your definition of “tangible” is self-aggrandizing. Gold was NEVER money for nearly the first 3,000 years. Money was always“tangible” for that meant it had someutilitarian value such as cattle, grain, or bronze. Hello? Ever hear of the Bronze Age? Bronze ingots of trade formed the basis of the monetary system in Asia and in the West at least until 1000 BC – not silver or gold. Why? Because a “tangible”monetary unit of value did not depend upon government, it had to have somePRACTICAL value. That was exclusively bronze or food be it cattle, grain, or rice as was the case in Asia. Neither silver nor gold had any such real “usable” value in trade.
Gold was seen as the tears of god, and was reserved EXCLUSIVELY for royalty. Gold did not serve as any sort of medium of exchange until about 700 BC. Why? For anything to serve as the medium of exchange it must exist in sufficient quantity. As long as gold was rare, it was exclusively the property of kings and represented a luxury with no PRACTICAL value whatsoever.
It was not until gold was discovered in Turkey (Asia Minor) in huge quantities that it begins to be exchanged among the lower classes. It first began to trade as electrum, the natural alloy typically mixed with silver. It became desirable as a status symbol because it had been exclusively reserved for royalty. The same eventually took place with platinum until it too was discovered in sufficient quantity in Russia, which only then produced platinum coins.
The Biblical accounts of money never mentioned gold, only silver. True, gold is mentioned in Genesis: “The name of the first is the Pishon; it winds through the entire land of Havilah, where there is gold. The gold of that land is good; aromatic resin and onyx are also there.” (Genesis 2:11-12). Note that at this point in time, it mentions gold with other commodities including the traditional ox representing valuable commodities not money.
The first five books of the Bible (Torah) are generally believed to have been written after the fall of the Minoan Society and the Bronze Age between the 16th century and the 12th century BC. Recent scholars have dissected the writing style and the fact that Moses is referred to in third person; they attribute the writing to between the 8th and 5th centuries. So at the very least, we are looking at post-eruption of Thera (Santorini), which wiped out Minoan culture and saw the Greek invasions including the famous siege of Troy.
Silver entered the exchange process long before gold. The Egyptian economy was based upon the earliest form of “paper money” in history. For thousands of years, you took your grain to the government and deposited it within an effective grain bank or storage facility in return for a receipt. This was your first REPRESENTATIVE monetary system where paper money (receipt) represented some commodity and it was food – not gold or silver. It was this receipt “non-tangible” that served as money in Egypt from about 3000 BC until its conquest by Alexander the Great in 332BC, who introduced coinage to the Egyptian monetary system for the first time
So you argue that it is MY BURDEN to prove to you that “such a system of intangible money would work.” I am sorry, but you cannot possibly demonstrate that only a tangible monetary system would work when in fact the medium of exchange is solely based upon intangible human desires post-Bronze Age. Before 1650 BC, money was tangible because it was a barter system among people. Money became intangible post-1650 BC (REPRESENTATIVE) and based solely upon CONFIDENCE that others will also accept whatever the form of payment might be.
Gold is a LUXURY — it is not a TANGIBLE based monetary unit for it has no utilitarian value whatsoever. If you try to argue that TANGIBLE based monetary systems are better, that is barter and in that case, the medium of exchange must have some sort of use value such as food or bronze. Never do we see Gold forming some sort ofTANGIBLE based monetary system. Gold ONLY emerged as a medium of exchange because it was once exclusively the property of royalty, and as such, it was a luxury with no practical use as food or a weapon. Therefore, gold is not TANGIBLE but it historically also requires CONFIDENCE to exist as a medium of exchange as does paper money or receipts.
You need to get you definitions correct. Any form of a medium of exchange which isTANGIBLE must have some practical utilitarian based value. Gold was a luxury and required the CONFIDENCE that someone else would also desire it for if they did not, then what would you do with it since you could neither eat gold not use it as a weapon.
Paper money is the medium of exchange between two people where one offers a service or something they manufactured, which is no different than a gold or silver coin requiring CONFIDENCE and an agreed value at that moment of exchange. You can no more eat paper money to survive than you can gold or silver. All require CONFIDENCE of a third party accepting it in exchange. For the medium of exchange to be truly TANGIBLE it must have a practical utilitarian value and that historically is the distinction of a barter system vs. post-Bronze AgeREPRESENTATIVE/INTANGIBLE based monetary systems predicated upon CONFIDENCE. Gold and food are simply not the same thing.
History repeats because people respond the same way all the time. Exactly the monetary system we saw in ancient Egypt before the conquest of Alexander the Great dominated the Southern US states before the Revolution. It was not based upon gold or silver but tobacco. They too issued tobacco backedREPRESENTATIVE money.
If we head into a Mad Max event, that is the full-blown control-alt-delete which means the ONLY thing of value will be food/weapons. You can have all the gold in the world, but without food, you die. You will depend upon the other person who may want gold, or perhaps not. He may prefer a gun for protection as they once sought bronze to make swords. Your idea that ONLY gold and silver are the “recognized” mediums of exchange shows that you have been brainwashed by gold promoters and are ignoring history.
Gold will rise in “value” expressed in the medium of exchange provided we are NOT going into a Dark Age after 2032. Gold is an “asset” and it will rise in value against money as will all other assets (stocks) when people lose CONFIDENCE in government. Gold is a recognized worldwide commodity for it is the same everywhere which cannot be said for rice, wheat, or even corn. Your statement reveals you have been brainwashed. If you do not look at everything around you, you will lose everything for what you expect from gold is by no means realistic. History warns you are totally wrong for whatever is used as “money” immediately assumes the opposite side of assets within the economy. This sales-job that money must be tangible and therefore it will retain its value is delusional and has NEVER taken place even once throughout history. There is a time to buy gold and there is a time to sell gold BECAUSE that is true about absolutely EVERYTHING.
Bye Bye Hillary? Or a Fight to the Bitter End?
Hillary’s dream of becoming the first woman president is evaporating rapidly. She leads Bernie Sander by only 8 point in New Hampshire when she was supposed to be the big name and her coronation as the next Democratic candidate was claimed to be the safest bet in Washington. But her obstruction of justice has violated everything from Treason taking money from foreign government for her “charity” to dodging subpoenas which was an obstruction of justice and violating the Freedom of Information Act. Her trust rating collapsed to 28%, showing that even Jeb Bush would clean her clock. Bill will come to the rescue to try to raise more money for her, but this not about money.
As I am stated, there was NO POSSIBLE WAY that the FBI would have started an investigation into Hillary and her obstruction of justice (treason) for conducting personal business intermixed with state business from a private server. All along, those of us who understand the interworking of Capitol Hill could read between the lines that Obama supported Biden, not Hillary. I expect Biden to announce he is entering by October. Hillary seems not to fear prosecution whereas any other unwanted candidate would back off with the onset of an investigation into criminal activity. The talk of the town is when will Biden enter. Now the press is picking up saying it’s time for Joe.
Why did Ross Perot back out of running for president? There was, of course, the lame excuse that was a total lie.
Perot eventually stated the reason was that he received threats that digitally altered photographs would be released by the Bush campaign to sabotage his daughter’s wedding.[30] Regardless of the reasons for withdrawing, his reputation was badly damaged. Many of his supporters felt betrayed and public opinion polls would subsequently show a large negative view of Perot that was absent prior to his decision to end the campaign.[31]
Source: Wikipedia
There was the rumor that there were threats of investigating his airport. His airport does not handle tourists, only cargo. It was alleged that a lot of illegal things were going in and out of his hub. Yet, then there was the Clinton connection. A deal was allegedly promised to Perot that Hillary’s healthcare proposal would give his computer company the contract for the entire healthcare system she was designing. That failed to get through, but allegedly Perot was a ringer to swing the election to Clinton in 1992. This was just another one of those corruption views with the Clintons that people would say you better count your fingers after shaking hands.
Perot was in the running, but his campaign did not seem focused on winning. What did emerge was Bill Clinton, who suddenly soared from third in the polls to becoming President of the United States. Perot blamed the Republicans for creating doctored pictures of his daughter. Those claims or excuses were pretty crazy. Any doctored photo would have been detected.
Moreover, I was even asked by leading members in the Republican Party to meet with Perot. I was in Tokyo and agreed to fly to Dallas for a meeting on my way home. That meeting was scheduled for the weekend that he pulled out of the race. They wouldNEVER have asked me to fly to Texas to meet with him if they were trying to blackmail him with doctored photos nobody ever saw of his daughter. It was a total surprise to them and I landed in Dallas before I could change my flight.
Perot, claiming to be a fiscal conservative, made no sense when he suddenly blamed Republicans knowing those allegations were benefiting Clinton. Perot exited, then reentered, based upon allegation that the Clintons’ offered him a deal he could not refuse — the biggest contract in computing history. He dropped from 39% before his crazy exit to 19% after reentering, so those votes were key to getting Clinton elected.
Larry Nichols, Clinton’s key inside man who knew what was going on back then, was the a key witness for the prosecution during his impeachment. Nichols allegedly admitted that Perot was a “ringer” to win the election for Clinton.
The legacy of the Clinton’s behind the curtain has also been one of questioning everything, two, three, if not four to ten times. The lack of honesty between the words seems to be catching up. Hillary and Bill have been rather notorious for doing whatever it takes to win while lining their pockets at the same time. So it is no surprise that Hillary may fight to the end without ever fearing prosecution for anything she has ever done is in the past.
Father of Euro Warns of Brussels & Death of Democracy
The man whose idea gave life to the euro, Professor Otmar Issing, said it would be “dangerous” to transfer control over tax and spending to the EU federal level before a full political union has been established on democratic foundations. This is the problem with his idea. He only saw that the dollar was the strength of the USA and argued Europe would be a bigger economy if everyone came together to dethrone the USA. What he failed to understand was (1) debt had to be consolidated, and (2) there was no common language nor a single European culture. This is always the problem with such theories. They look at things only from one point of view.
Market Talk — September 8, 2015
Asia saw a mixed session where most markets were lower but talk of intervention in China saw a very healthy bounce in the last few minutes of trading (Nikkei -2.5% Shanghai and HSI both up around 3%). Europe started on a positive note and never looked back. Positive session for all major European Indices saw exchanges close 1%+. All major U.S. Indices closed 2%+.
Confidence was high in the bond markets, as witnessed by the peripheral performance against the core. BTP’s and SPGB’s (Italy and Spain) both government spreads tighter by roughly 2/5BP. In the U.S. Treasury market the curve flattening theme was unwound and 2/10 and 10/30’s both steepened 3bp. The TY/RX spread closed +149BP putting U.S. 10s at 2.18%.
The U.S. dollar gave back a little ground also with the U.S. Dollar Index (DXY) closing at 95.85 (GBP the main performer +0.7%).
There was more talk of the Fed delaying any possible signs of raising rates, and that was one reason for the stock market’s performance and the US$ weakness. Oil and the Russian rouble almost traded hand-in-hand with a 3.8% rally in Brent, whilst the rouble saw a solid 1.5% gain against the U.S. dollar. We had one of the quietest sessions in gold, only trading in an $8 range around Monday’s close, as people remain confused by the lackluster performance on the upside.
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