Wednesday, 23 October 2013

Uncertainty Driving Gold Markets

With the Federal Reserve in a state of transition, with new leadership coming to the helm and the clown show we call Congress taking the country to the brink of a catastrophic default, gold prices are on a tear this week. Gold is up $48 an ounce for the week so far, completely erasing losses for the month; and the uptrend looks to finish the week out on a high note. 
Published in United States Economy

U.S. stocks advanced, erasing an earlier loss in the Standard & Poor’s 500 Index (SPX), as a rise in jobless claims was offset by better-than-estimated data on leading indicators and Philadelphia manufacturing.

Travelers Cos. gained 3.8 percent as earnings more than doubled on lower claims costs tied to natural disasters. Supervalu Inc. (SVU) jumped 3.9 percent as the grocery store chain said it has received interest from several parties amid a strategic review. Philip Morris International Inc. (PM), the world’s largest publicly traded tobacco company, dropped 2.8 percent as earnings trailed analysts’ estimates.


The S&P 500 rose 0.2 percent to 1,463.19 at 12:28 p.m. in New York, after climbing 2.3 percent during the first three trading days of the week. The Dow Jones Industrial Average gained 22.91 points, or 0.2 percent, at 13,579.91 today. Trading in S&P 500 companies was 11 percent above the 30-day average at this time of day.

“The market is digesting some strong gains earlier in the week and the disappointing jobless claims number,” Jim Russell, the Cincinnati-based chief equity strategist at U.S. Bank Wealth Management, which oversees about $113 billion, said in a phone interview. “The data cadence is two steps forward, one step back right now with a positive bias. It does appear as if things are firming up at the margin for the U.S. economy and the Philly Fed report confirms that.”

U.S. stocks slumped early in the trading day as Labor Department figures showed more Americans than forecast filed applications for unemployment benefits last week, reflecting an unwinding of adjustments for seasonal swings at the start of a quarter.

Leading Indicators

Equities pared declines as the index of U.S. leading economic indicators rose in September by the most in seven months, boosted in part by a jump in permits for home construction that’s helping underpin the expansion.

Manufacturing in the Philadelphia region expanded in October for the first time in six months, a sign the industry may be starting to stabilize. The Federal Reserve Bank of Philadelphia’s general economic index rose to 5.7 in October from minus 1.9 in September. A reading of zero is the dividing line between expansion and contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

Economic issues including jobs are central to the race for the American presidency. Gallup’s daily tracking of registered voters conducted Oct. 10 through Oct. 16 showed President Barack Obama with 46 percent and Republican challenger Mitt Romney with 48 percent support. The margin of error is two percentage points.

Policy Issues

“Everything seems paused until we get clarity on the election since there are a lot of economic policy issues that need to be resolved before the end of the year,” Thomas Nyheim, a Wilmington, Delaware-based fund manager for Christiana Trust, which oversees about $13 billion, said in a telephone interview.

The S&P 500 has rallied 16 percent so far this year as economic data topped estimates, companies posted better-than- expected earnings and the Fed announced a third round of bond purchases.

As many as 28 companies listed on the S&P 500 release results today, according to data compiled by Bloomberg. Of the 95 companies in the benchmark index that have reported since Oct. 9, 70 posted earnings that exceeded analyst estimates, while 23 missed them, the data showed

Travelers Climbs

Travelers climbed 3.8 percent to $74.10 for the biggest gain in the Dow. Chief Executive Officer Jay Fishman, 59, has bought back shares, raised rates for coverage and changed policy terms to improve shareholder returns as near record-low interest rates pressure income from the investment portfolio. Property- casualty insurers have benefited from fewer natural disasters this year after record losses in 2011.

MGM Resorts International (MGM) jumped 2.1 percent to $11.15. MGM China Holdings Ltd., a venture between Pansy Ho and MGM Resorts, won a land grant to develop a second casino resort in Macau. The approval allows MGM China to build on the city’s increasingly popular Cotai strip, where the operator doesn’t have a presence.

Supervalu increased 3.9 percent to $2.12. The third-largest U.S. grocery store chain said it has received a “number of indications of interest” as it conducts a review of strategic options. The company is in “active dialogue” with several parties, Eden Prairie, Minnesota-based Supervalu said in a statement.

Lam Research Corp. (LRCX) rose 9.1 percent to $36.62 for the biggest gain in the S&P 500. The chip-equipment manufacturer reported first-quarter earnings that beat analyst estimates

Philip Morris

Philip Morris International dropped 2.8 percent to $89.29. The maker of Marlboro cigarettes posted third-quarter profit that trailed analysts’ estimates. European Union nations facing a debt crisis and high unemployment saw smokers cut back or switch to contraband cigarettes or roll-your-own varieties. Sales in the region slipped 15 percent in the third quarter.

Boston Scientific Corp. (BSX) fell 2.6 percent to $5.48. The heart-device maker lowered its forecast for full-year revenue to no more $7.24 billion from a previous range of $7.2 billion to $7.4 billion. Analysts on average estimated $7.26 billion in sales for the year.

Published in United States Economy
Friday, 05 October 2012

$4 gas: Get used to it

A new U.N. report says the massive bets placed on the commodities markets are the "root cause" of the volatility in oil and gas prices. And that's not about to change

President Obama may have a lot more to worry about than bombing the debate this week. Traders are starting to get particularly bullish over gasoline prices – and that is bad news for the average driver, who may also be looking to vent his spleen at the voting booth.

Reports of gas shortages along the high-demand west and east coasts may be fleeting – although deeply concerning – but they highlight a problem that's expected to persist in the U.S.: our refineries are getting old. Given that a new refinery has not been built since 1976, commodities desks on Wall Street are bracing for more refinery outages and fires just as the nation needs to gear up for the busy winter heating season.


What does that mean? Probably more weeks where we'll see U.S. crude oil inventories hovering above the upper limit of the average range for this time of year, yet gasoline inventories tunneling into the lower half of their average range, as the U.S. Energy Information Administration reported Wednesday.

Translated in dollars and cents, retail gas prices likely won't be moving off the $4 needle anytime soon. In fact, some gasoline buyers think this may even usher in a run to $5 a gallon (especially out west where gas stations are shutting down because they cannot buy gas at price levels low enough to turn a profit).

The firmness in gasoline also is giving oil prices a boost, the knock-on effects of which cannot be understated.

Oil price spikes and consumer prices have been "highly correlated" over the past decade, according to the EIA, the nonpartisan statistics branch of the U.S. Department of Energy. The upshot? Americans are increasingly grappling with unchanged paychecks in the face of higher energy prices. Their money is buying them less, the EIA says, citing the Bureau of Labor Statistics' Chained Consumer Price Index.

Meanwhile, the U.N. recently released a report stating definitively that the "financialization" of commodities markets – or "hundreds of billions of dollars of bets placed on expectations of temporarily rising prices" for energy, food and metals products – is the "root cause" of the today's price volatility.

A key highlight of the U.N. report touched on how global oil prices this past summer were 65% higher than the averages reached during the commodity price boom of 2003 to 2008 (the period of the latest Iraq war to the Bush-era high near $150 a barrel). "Investors treat commodities as an asset class, which means that they are betting on a certain price trend during the period they are invested in commodity assets," the U.N. said. "They do not trade systematically on the basis of fundamental supply and demand relationships in single markets, even if shocks in those markets may influence their behavior temporarily."

Of course, when supply shocks do happen to dovetail with bullish bets – as is happening now – that's when oil and gas prices really take off. Perhaps it's no coincidence that the first presidential debate was sponsored by ExxonMobil (XOM).

Read The Original Article Here

Published in United States Economy

“Quantitative Easing.”   It’s a very lofty-sounding phrase, isn’t it?  You may have heard it uttered by a news anchor in a special report or by Ben Bernanke in one of his most recent speeches. 

Or maybe you hit upon QE while surfing the net, and made up your mind to look into what the phrase means when you had a few minutes.  The busy person that you are though, it slipped off your radar.

Now Let’s Call It By Its Real Name

No problem.  Let us help bring you up to speed. First things first:  let’s translate Econo-speak into English.  What quantitative easing comes down to is “easy money.”  Let’s rename it just that then:  easy money.  And instead of using the secret codes QE1 and QE2 to indicate the successive phases of easy money, let’s use lettering more appropriate to our new (English) name:  EM1 and EM2. And when its new day dawns for us very soon, that phase will be known as EM3. Make no mistake though.  Easy money is exactly what we’re talking about here.  QE EM works like this.  After the Fed lowers interest rates to almost zero, if the economy doesn’t respond with robust lending to businesses and a marked decrease in unemployment, the Fed turns to Quantitative Easing Easy Money as a stimulus of last resort.  The Fed launches an ambitious bond buyback program to saturate financial institutions with liquidity.  Let’s look at the dollar figures for the first two phases of Quantitative Easing Easy Money.


Fateful Dates of Easy Money

  • QE1 EM1 Implemented  - January, 2009 ……………….. $500 Billion
  • QE1 EM1 Continued       - March, 2009 ………..……….. $1.25 Trillion
  • QE2 EM2 Implemented  - November, 2010 ……………..$600 Billion

Yes, you read it right.  That’s an additional $1.825 Trillion poured into circulation. Dollars grounded by absolutely no new productivity.  Just free-floating paper.  Currency that debases over time because there’s too much of it around, and because it just happens to be Easy Money.  That’s the disastrous news for all of us.

Much Better News For Gold Investors

But for those who own gold, the news is much better.  At times like this, stealthy investors move over to gold.  It’s the asset you can rely on when the value of paper money declines and prices inflate.  Want proof?  Let’s look at those QE EM figures again, this time with respect to the price of gold.

  • QE1 EM1 Announced   November, 2008 ...................................... Gold --- $820/oz                        
  • QE1 EM1 Implemented January, 2009................$500 Billion..........Gold --- $920/oz
  • QE1 EM1 Continued      March, 2009..................$1.25 Trillion........Gold --- $1,118/oz
  • QE2 EM2 Implemented   November, 2010............$600 Billion.........Gold --- $1,150/oz
  • Fed Chairman Bernanke hints at possibility of QE3 EM3..................Gold --- $1,694/oz

    August 31, 2012
  • QE3  EM3 Implemented...............................................................Gold --- $2,000+/oz ?

Make no mistake.  That $1694.40 price of gold on August 31 was neither a fluke nor a mere technical move.  It was a direct response of a wary financial market to Fed Chairman Ben Bernanke’s speech at Jackson Hole Wyoming.  According to HSBC precious metals analyst Jim Steel:

“The tone of his comments was taken as reaffirmation of the Fed’s bias towards further easing.  Mr. Bernanke also said the costs of nontraditional policies appear to be manageable.”

Clearly Mr. Bernanke feels that The Fed has a mandate – a mandate it can implement at its own discretion.  And it all comes down to our central bank’s right to issue Easy Money.  You may have no say in the matter.  But you do have the right to trade dollars for gold.  But don’t wait until The Fed turns on the printing press for QE3 EM3.

To find out how you can benefit from QE3 EM3, call (855) 848-GOLD (4659) and ask for a Goldco Direct representative.  Your financial future hangs in the balance.

Published in United States Economy

Gold spiked again today on the heels of a weaker U.S. confidence level, which in turn, boosted the anticipation levels of another Fed stimulus. However, as we know, the Feds are still going to hold off on this stimulus for as long as possible. A possible sell-off if the U.S. central bank does not commit to more monetary easing.

Published in United States Economy
Behold the bond -- the traditional safe-haven proxy for gold!  At any given moment, if an investor had thought that the price of the yellow metal was unlikely to move up or, worse, might soon decline, he was more likely to put his money in bonds.  After all, why accumulate something you felt had a dim future?  Besides, a bond pays interest; there’s a rainbow before you – in the form of a guarantee or “yield” -- when a bond matures.  Now that’s all coming to an end.
Published in From The CEO
In a bit of interesting news, the Republican Party is expected to call for a commission to look at the idea of returning the U.S. to the gold standard. This may help restore the confidence of the dollar. While interesting and perhaps a road to explore more, the fact of the matter is that to do this we would need to find a lot more gold then we currently have.
Published in United States Economy

Federal Reserve policy makers signaled readiness to boost record stimulus unless they are convinced the economy is poised to rebound. Recent signs of strength may not be enough to satisfy them.

Many members of the policy-setting Federal Open Market Committee said further action would probably be needed “fairly soon” without evidence of “substantial and sustainable” improvement in the recovery, according to minutes of the July 31-Aug. 1 meeting released yesterday in Washington.


“The burden of proof is to see a sustained pickup in growth and I don’t think we’re going to get that,” said Eric Green, a former economist at the Federal Reserve Bank of New York who is now global head of rates and foreign exchange research at TD Securities Inc. in New York.

U.S. stocks reversed losses yesterday and gold rose to a 16-week high on expectations of further easing by the central bank. Attention now turns to Fed Chairman Ben S. Bernanke’s Aug. 31 speech in Jackson Hole, Wyoming, where he may clarify his thinking on the need for stimulus in view of recent reports showing gains in retail sales and housing.

Many participants at the Fed’s meeting said a new large- scale asset-purchase program “could provide additional support for the economic recovery,” according to the minutes. Policy makers said in a statement after the meeting that they will step up record stimulus if needed to spur growth and cut a jobless rate stuck above 8 percent since February 2009.
Yield Tumbles

The Standard & Poor’s 500 Index (SPX) erased losses, adding less than 0.1 percent to 1,413.49 at the close of trading in New York after falling as much as 0.5 percent before the release of the minutes. The yield on the 10-year Treasury note tumbled 11 basis points, or 0.11 percentage point, to 1.69 percent in the biggest decline since June 1. Gold futures for December delivery rose to $1,656.20 an ounce.

“They’re closer to doing QE3 than I would have guessed,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, referring to a third round of bond purchases known as quantitative easing. Fed officials next meet on Sept. 12-13.

Policy makers around the world are confronted with the choice of adding stimulus measures now as global growth slows, or holding fire should Europe’s crisis deepen. Federal Reserve Bank of Chicago President Charles Evans told reporters today in Beijing that “I certainly would applaud anybody who takes action in order to strengthen their economies” around the world, including China.
Global Uncertainty

“There’s an awful lot of uncertainty when I talk to business people about the global economy, European situation, the fiscal-cliff risk,” Evans said at the U.S. embassy in Beijing. Fiscal cliff is a term for higher taxes and spending cuts in the U.S. that will take effect at year-end unless Congress and the president approve a new deficit-reduction plan.

Some U.S. economic reports have exceeded expectations since the last FOMC meeting, with retail sales increasing 0.8 percent in July and companies hiring 163,000 workers in the same month, the most in five months. That’s helped push the S&P 500 to six straight weekly gains and to almost a four-year high.

Sales of existing homes climbed in July from an eight-month low, according to data yesterday from the National Association of Realtors, showing the cheapest mortgage rates on record are helping to boost the housing market.

Some economists said the reports give policy makers reason to hold off from additional stimulus.
‘Some Incentive’

“The Fed has some incentive to stay on the sidelines,” said Michael Dueker, a former St. Louis Fed economist who is now chief economist at Russell Investments, which oversees $152 billion in Seattle. “I wouldn’t be expecting a third round of quantitative easing until December or early 2013 given what we are seeing in the economy.”

While some data has improved, the unemployment rate in July climbed back to the same level as February. It rose to 8.3 percent and hasn’t fallen below 8 percent since February 2009.

Policy makers, who said in their Aug. 1 statement that economic conditions “warrant exceptionally low levels for the federal funds rate at least through late 2014,” discussed extending the duration for how long they will keep the main interest rate low, the minutes showed.
Policy Stance

“It was noted that such an extension might be particularly effective if done in conjunction with a statement indicating that a highly accommodative stance of monetary policy was likely to be maintained even as the recovery progressed,” according to the minutes. The Fed reduced the rate almost to zero in December 2008.

Bernanke is set to deliver a speech on monetary policy to the Kansas City Fed’s annual symposium of central bankers and economists at Jackson Hole. Global stocks and commodities soared after the Fed chief signaled a second round of bond buying on Aug. 27, 2010. The Fed decided in November 2010 to buy $600 billion of Treasuries through June 2011.

The 2010 speech drove up the S&P 500 26 percent through the end of June 2011, while the MSCI All-Country World Index jumped 23 percent during the same period.

The U.S. economy will probably expand at a 1.8 percent annual rate in the third quarter and 2.1 percent in the fourth, according to the median of 75 estimates in a Bloomberg survey. Gross domestic product slowed to a 1.5 percent pace in second quarter from 2 percent in the first three months of the year.

The improving data since the last FOMC meeting probably aren’t enough to indicate a substantial strengthening of the economic recovery, according to Jeremy Lawson, a senior U.S. economist at BNP Paribas SA in New York.

“You’d need to see a further improvement to dissuade the committee members that further accommodation isn’t necessary,” Lawson said. “Everything is consistent with a move to quantitative easing in the near term. The question is when and whether the chairman is ready to pull the trigger.”

Published in United States Economy

Former money manager Ann Barnhardt, who in November of 2011 made the decision to cease operations of her brokerage firm and return funds to her customers citing “systemic” problems within the entire financial industry, has issued a new warning about the stability of US banks and the safety of individual deposit accounts.

The warning, stemming from a recent federal appeals court ruling surrounding customer funds lost during the 2007 collapse of Chicago futures broker Sentinel, indicates that individuals who lose deposited funds because a financial institution improperly manages that money, even if those funds are supposed to be “segregated” from other operations of the firm, are essentially left with no recourse if the firm goes belly-up. According to the court, a misallocation of those customer funds, “is not, on its own, sufficient to rule as a matter of law that Sentinel acted ‘with actual intent to hinder, delay, or defraud’ its customers.”


The implications of the ruling, according to Barnhardt, will affect the monies of all private individuals who have seen their deposit accounts wiped out in the collapse of firms like John Corzine’s MF Global and put all deposit account holders in the country at risk should their bank be faced with a financial windstorm:

The NFA in collusion with the banksters, government and judiciary have achieved their goal. The entire concept of “customer segregated funds” is officially, completely, legally dead.

Guys, it is OVER. I know that many of you are still cowering in normalcy bias, unable to deal with reality, unable to face the world as it is, but you have GOT to snap out of it. The marketplace is DESTROYED. You CANNOT be in these markets. All legal protections are now officially gone.

The federal appeals court ruled yesterday that not only does BNYM stay at the front of the line, but that using customer segregated funds as collateral is NOT a crime, and that co-mingling customer segregated funds with proprietary funds is NOT fraud.

What this means is that even if Jon Corzine is somehow dragged into court by private citizens, because you know damn good and well that the Justice Department will never, ever touch him, Corzine now has a legal precedent, likely from a bribed or otherwise coerced Federal Appeals Court, explicitly stating that an FCM can use customer deposits to pay its debts, and that the customers themselves are subjugated and have basically no legal right to their own monies, no matter what the law says, or what legal assurances, claims or guarantees are made to that customer about their funds held with an FCM or any other brokerage or depository institution. The “secured” party at the front of the line will always be the mega-bank who made the fraudulent loan using the stolen customer funds as collateral.

In other words, all customer funds in the United States are now the legal property of JP Morgan, Goldman Sachs, BNYM, or whichever megabank is the counterparty on the loans the FCM or depository institution takes out in order to fund its mega-levered proprietary in-house trading desks.

The ruling is specifically designed to protect large financial institutions that have (purposefully) mismanaged customer funds and used the hard-earned life savings of Americans to gamble on equities, commodities and bond markets. If those firms happen to make the wrong bet, as MF Global, Sentinel and a handful of others have recently done, depositors who have placed funds with the banks under the belief that their bank account is securely protected from trading liabilities are now completely exposed and liable for the incompetence and negligence of those who engage in market trading.

This latest ruling combined with recent actions by the Federal Reserve and other government regulators suggests a massive fraud has taken place and the financial system itself is under extreme strain with the potential to make the financial collapse of 2007/2008 look like just a training exercise.

In recent days, for example, it’s come to light that the government has secretly called on the country’s five major banks to prepare themselves for collapse by creating stress recovery plans to be used in the event of worst case scenarios.

A few weeks ago, the Federal Reserve also implemented a new policy for money market funds held by financial institutions. Per the new policy, money market funds, which account for some $2.7 trillion in deposits across the United States, can be frozen in the event of an emergency or financial panic. This means that if and when the system does go into a tailspin, at exactly the time people will want to pull their money out of their bank account, they will be restricted from doing so.

These latest actions by government regulators, judges and financial institutions point to one thing: that we have an unprecedented financial collapse in the making. If such a financial crisis comes to pass it is clear that the policies and procedures now in place will transfer the legally owned deposits and money market savings of individual Americans into the hands of the banks at which those funds are kept.

Get Your Money Out.

Original Article:

Published in United States Economy
Tuesday, 31 July 2012

Summer Fed Antics

As I write this, the Federal Reserve has just wrapped up the second day of its Federal Open Market Committee (FMOC) meeting.  Only God and Ben Bernanke knew how the carnival would ultimately shake out.  Depending on which pundit you consulted this morning, you were likely to get a different take on things. 

Published in From The CEO
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