Ultimate Contrarian Indicator: Gold Is Most-Hated Asset Class

                             
By now everyone who follows the metals pretty closely is aware of the stunning reversal the metals made today after the blatant smash in the silver market at yesterday evening's commencement of global electronic paper futures trading.  A massive number of silver contracts were sold into the Globex electronic trading system, taking the entire market by surprise and wiping out a whole series of stop-loss orders there set below the market.  The silver market was driven down $2.10 (9.5%) in less than 4 minutes.  It was without a doubt  the motivated, premeditated operation of someone who was trying to completely disrupt the silver market.  It was someone who was operating without any fear of being investigated by the market regulatory branch of the Government.

But a funny thing happened.  Once the initial shock had quickly worn off.  The market slowly moved higher the rest of the night.  By 10:00 a.m. Denver time, about 18 hours later, the price of silver was even with its Friday close.  Once that occurred, the market started to quickly run higher in frenzied short-covering.  As I write this, silver is up 2.4% from Friday's close and gold is up 2%.

So what happened?  To begin with, the enormous appetite for physical gold and silver was fueled even more by last night's lower prices.  Large premiums for gold bars, something rarely seen, are now being paid in Asia and India.  We are getting reports of up to 3-week delays for delivery.  But don't take that from me, if you go the Shanghai Gold Exchange website, you'll see for  yourself that no deliveries of gold have been reported for at least 2 weeks.  Unprecedented.  The deliveries are not being reported because the gold is not available to be delivered. Therefore there's nothing to report. This is going to end badly for anyone riding the coat tails of the manipulating banks by shorting this market, because I can guarantee you that they are covering their tracks and likely have shifted to the long side of the trade by getting long physical metal.  Certainly the net short position of the banks on the Comex is as low as its been in many years.

At any rate, I wanted to link an article written by the proprietor of the Acting-Man blog.  This guy lays out the contrarian indicator case for gold and explains why the western Central Banks are so desperate to try and discredit gold and discourage anyone from converting their fiat paper money into gold and silver: 

It is a good bet that if gold had continued to rise in the face of money printing being accelerated all over the world, the inevitable loss of faith in central banks would have happened sooner rather than later. That it will eventually happen is unavoidable – the modern monetary system was fated to self-destruct the moment it was conceived. This is so because central planning and price controls cannot work in the long run, even though central banks are socialistic institutions adrift in a capitalist sea, so to speak.

Here's the LINK.  I highly recommend taking the time to read this short, well-written and documented commentary, as it will shine a bright light on the truth for anyone who was equivocating about fact vs. fiction.

The Sell-Off In The Precious Metals and Mining Stocks Is Just Plain Silly Now

Currently, I don't think it's possible for the media reporting and investor sentiment to get any more negative toward gold. But quite frankly, given the extreme negative sentiment, in addition to the numerous other contrarian indicators I've outlined in previous articles, I have never in my life seen a market set up technically for a big bull move as gold/silver and the mining stocks are now.  - Dave Kranzler, Seeking Alpha:  LINK

Let's be clear here, if I thought the fundamentals of the global financial system were improving in a way that was negative for gold, I would go short gold and load up on stocks and junk bonds.  No question about that.  When I came out of business school in 1991, I was one of two top-10 b-school grads who went into junk bonds. That's 2 people out of about 5000 grads.  No one was interested in junk bonds in 1991.  But I had examined the fundamentals and determined that it was still a valid form of corporate finance.  Recall, Drexel had just collapsed and everyone was screaming that junk bonds were dead.  In fact, 1992 marked the start of a new bull market in junk bonds.

The key to understanding relative value is not found in charts, "technical" indicators, CNBC, Bloomberg News, any Wall Street research, Barron's, chat board, etc.  Realistic and honest assessment and study of fundamentals is nowhere to be found in any of those sources.  None.  Zero.

The key to understanding value is doing your own research, which includes knowing where to look to find the best possible information available.  Since 2002, when I first really understood just how corrupted and doomed the U.S. financial and political system is, I have yet to run into anyone, and I mean anyone, who can answer this simple proposition:

Please tell me - I'm all ears and open mind - how the U.S. Government can possibly start reducing and eventually balance the amount of money of that it takes in vs. the amount of money that it spends - not just on a cash-in/cash-out basis but include the rapidly growing future liability payments connected with Federal pensions, social security and all the legacy entitlement programs.  Then tell me how it can accomplish this feat plus start to reduce the enormous load of Government debt.

Remember, back in 2002 the U.S. Treasury debt outstanding was only about $6 trillion, about 60% of GDP.   Now, it's close to $17 trillion now - about 108% of GDP -  and the economy, inflation-adjusted, has not grown at all since then, especially in relation to the amount of growth in overall debt in system and in relation to the trillions in wealth being consumed by the Government.  Furthermore, the spending deficits were measured in the low $100's of billions.  Every year since and including 2009 the deficit has been over one trillion dollars.  See any trend here?  And notwithstanding the deceptive headlines recently proclaiming that the deficit will smaller this year, the truth is - the cold hard fact - that the Treasury has issued $100 billion of new debt for the first 7 months of this fiscal year - $700 billion.  The trend is still the friend of my fundamental analysis.

Every single time I've presented anyone with that proposition, I get nothing but blank stares.  No can map a solution.  Not only that, but since 2002, the systemic predicament in the U.S. has gotten inexorably worse every single year, especially when you peel away all the deceitful reporting designed to hide the interminably growing problem.   When someone can tell me how the above proposition will not only be accomplished but will be put into definitive action, then I will sell all my gold, silver and mining stocks, go short gold and load up on real estate, stocks and risky bonds.

For this reason - the reason that the fundamentals supporting a significantly higher price of gold than the current manipulated price - gold remains not only the best store of wealth but also, because it is tremendously undervalued in relation to the fundamentals, but the best possible investment.

Have a great weekend and remember:  sit tight and be right.

Obama Is Destroying What's Left Of The First Amendment

     
No need for commentary - in reference to Obama's response to the illegal Press taps that it's his job to "balance" national security and the 1st Amendment:

"That's what every president says. Every president, whether it's Nixon with the Pentagon Papers or George W. Bush with the NSA wiretapping story, every president exerts, 'I'm doing this to keep you safe.' A lot of people in the public, they say that's enough, and they believe it, but the truth of the matter is that it's not enough of an answer in and of itself. That's why there is Congressional oversight of the executive branch. It's not enough just to say we're doing it to keep you safe, because the moment the American people cede that territory, then presidents can do whatever they want."

Here's the CNN video:  LINK

"Give me liberty or give me death"  - Patrick Henry, a Founding Father
   and signor of the Declaration of Independence

Top Constitutional Law Experts: Obama Makes Nixon Look Like An Amateur

                            
For all you die-hard Obama defenders, please note the experts cited in this article are primarily liberally oriented in their views.  Here's some golden truth:  Obama Considered Worse Than Nixon

                             

IRS Director of Tax-Exempt Organizations: "Like, Sorry Dude"

 Thank you.  I'm not good at math
- Lois Lerner, IRS Director of Tax-Exempt Organizations  LINK

Hmmm.  Sorry?  I'm not good at math.  It would seem that at least one of the qualifications for working at the IRS in a managerial position would be simple math skills.  Her comment was in response to an inquiry that included a basic 5th grade math calculation.

I know knee-jerk liberal Democrats are saying "serves the bastards right."  But then what do these same people say when the Government illegally raids the private information of the media - the same media that has protected and defended Obama?  Look people, the fact that Bush essentially lifted his leg on the Bill of Rights and let the Government trample all over our rights was bad enough.  But wasn't the guy that's in there now supposed fix all the damage Bush inflicted on our Constitution and Civil Rights?  I know he made those promises because I watched one of his speeches in person in 2008 in which he promised to clean up Capitol Hill and Wall Street.  How's his scorecard there?

Not only has Obama NOT even attempted to fix things, he's taken the baton handed to him by Bush and run laps around the crimes committed by the Bush Administration.  How can any person who voted for Obama POSSIBLY defend this guy?  And it's beyond laughable that Eric Holder has recused himself from the AP scandal - his dirty fingerprints are all over it.  He should be held accountable in a court of law.  But then again, it appears as if Obama skipped the class that covered Rule of Law at Harvard  - that is, assuming Harvard Law even bothers to teach that subject matter...

From the liberally-oriented Huffington Post today:

Tuesday also saw James Goodale, who was the lawyer for the New York Times in the Pentagon Papers case, flatly say that Obama was worse than Nixon in his dealings with the press..."Obama has all these things that he's done to the press on national security matters that Nixon never did," Goodale told the New York Observer  LINK

The golden truth of the matter is that our Government has become excessively large and omnipotent.  No wonder the Government-directed public education system no longer teaches the history of the Constitution and the Bill of Rights - it would be too dangerous to the livelihood of politicians and Governmental lifers for kids these days to learn why Thomas Jefferson and  his colleagues expressly put in the mechanisms required to prevent the kind of Government we have now.   These days Jefferson might be subjected to oppressive tactics by the IRS and the Justice Department.  And if that didn't stop Jefferson, under the guise provided by the Bush-legislated - and Obama-strengthened - Detainee Bill, Jefferson could be arrested and detained without the right to a hearing in front of a judge to determine if the detainment was warranted.

Back in 2003, I was having a conversation with a colleague and we both agreed that eventually we were going to see things happen in this country with corruption and fraud and unchecked Government oppression that would "blow our minds."  What's happened during the Bush era was bad enough.  But the fact that guy who was supposed to rescue the system from all of the above has actually enabled the problems to get worse truly blows my mind.

The B.S. Is Flying At Us Everyday Now

Two more Government propaganda agencies released extremely misleading data this morning.

First, the Census Bureau released its estimate for April retail sales.  The headlines flashed in big bright lights that retail sales increased a "seasonally adjusted" .1% over March.  The March number was originally reported at -.4% but was revised lower to -.5% - or down from February.

Now here's the interesting part:  if you go by the not seasonally adjusted estimated number, sales for April actually declined from March by 2.5%.  That's quite a bit different from the fabled headlines everyone will see or hear today.  Here's the data:  LINK  And a negative reading is more consistent with the wholesale sales number released last Thursday by the Commerce Department, which showed that wholesale sales posted their biggest drop in four years:  LINK

You would at least think that if the Government was going to paint a big lie, they could at least get their various statistical departments to cooperate with each other so that the lies are consistent across the data.

An even bigger joke is that Bloomberg News reported today that Wall Street dealers are now forecasting that the U.S. Treasury will reduce the size of upcoming Government Treasury auctions due to "soaring revenue" and based on the CBO's recent estimate that the Government will run only an $845 billion deficit for fiscal 2013. 

Now, part of the problem with this idea is that for the first 7 months of FY 2013, the Federal debt load has gone up by $700 billion.  The only reason the debt goes up is because revenues are not covering spending - i.e. a true $700 billion cash spending deficit.  In terms of the timing of cash flows, we know that the Treasury received a big balloon payment in December as wealthy people sold down taxable assets and paid the gains on them ahead of the Jan 1 tax increases.  Moreover, the first few months of the year thru April account for a disproportionate amount of tax revenues for obvious reasons.  So, is tax revenue really "soaring?"  LOL

The bigger part of this CBO joke is the incredibly poor track record that the CBO has in forecasting debt levels and spending levels.  As Zerohedge pointed out back in February, in 2001 the CBO projected that by 2011 the Treasury would have a balance sheet surplus of $2.4 trillion - i.e. no debt.   Instead, the actual number was a debt load of $10.4 trillion.  Just a slight miss there.  And a year ago, the CBO was forecasting that this year's deficit would be $585 billion.  Zerohedge Link

Obviously, going by the monthly run-rate already experienced in 2013 for the first 7 months, the Government is running roughly a $100 billion per month deficit.  Unless the Government can figure out a way to recreate the one-time surge in revenues that occurred in December and maintain income tax revenues at the same run-rate as they were thru April 15, I would expect that the Government, short of using some accounting tricks, will continue to run about $100 billion per month deficit thru the September FY-end, for a total spending deficit of $1.2 trillion.

The point of all this is that the garbage coming of out of DC and NYC on a daily basis keeps getting bigger, more rotten and more foul-smelling.  And I'm sure most of you don't care - I do or I wouldn't have brought this up - but the immigration reform bill going through Congress right now contains language buried in it that mandates the establishment of a database that records and keeps biometric data on every single citizen of the U.S.:  LINK  All I can say to that is that anyone who doesn't think George Orwell's vision was accurate is an idiot.

If they wanted to eliminate illegal immigration, they should just cut back on welfare and social security disability by about 50%, because it would force people who are otherwise capable of working to do the jobs that illegal immigrants are willing to do. 

And Yet, Another Big Joke: Fed QE Tapering? Riiiiight

The Fed is thinking about cutting back on QE like I think about becoming a scratch golfer.  I do think about it.  - FACOD - Friend and colleague of Dave, who plays a lot of golf but has no hope of ever becoming even close to a scratch golfer

The Fed is now serving up rainbows, unicorns and fairy tales.  And that mindless, moronic mouthpiece of Federal Reserve intentional deceit, Jon Hilsenrath,  is more than happy to put it all in print. Our system, especially as it operates in NYC and DC has become analogous to one big New City street shell game.  Keep your eye on the ball, NOT where they want you to think the ball is so that they can fleece you of your money.

So the rumor of the Hilsenrath article about Fed QE "tapering," curiously released 20 minutes after the Comex close Thursday in order to enable the paper gold market manipulators dump a lot of paper in one of the most illiquid trading periods for paper gold in any given 24 hour period, finally hit the tape Friday afternoon.

The timing of a late day Friday release, after the stock and bond markets had closed for the weekend, is curious as well.  I'll let the readers decide why.

Having said that, I know for a fact that the Fed will not be "tapering" anytime soon.  I know a bank executive who recently met with Fed staff in DC.  To a man they admitted to this person that no one - as in "nobody" - at the Fed has any clue whatsoever how Bernanke and the Fed can possibly even begin to extract itself from QE, let alone start unloading it's massive $3 trillion portfolio of Treasuries, mortgages and insidiously toxic assets.

But why do we need inside word on that?  Play the tape forward.  Think about what happens if the Fed tries to stop, or even reduce, its rate of bond buying.  In the first 7 months of its fiscal year, the Government ran up  a deficit of $700 billion, or $100 billion per month. This includes a tax revenue windfall in December from asset selling ahead of the new tax laws that kicked in Jan 1 and it includes the big jump in tax revenues associated with the timing of tax deadline filings.  And the economy was not quite in decline, like it is now.

So with all the stars aligned, the Government was still running a $100 billion a month deficit, requiring about $80-$90 billion per month in new Treasury issuance.  The Fed was buying more than $45 billion - or more than half of this new issuance - because it is also rolling cash flow from interest into more purchases.  I'll leave it to your imaginations to decide what happens if the Fed pulls back on its Treasury purchases, but keep in mind that the economy is tanking and corporate taxable income and worker wages are in decline - all of which means lower tax revenues than planned.

How about mortgages?  See previous posts this week for my view on that.  But keep in mind that the housing market is starting to soften in most areas and the "organic," buy a home and live in it purchasers, are having to resort to using - more often than not now - subprime quality FHA financing.  That paper, my friends, is being bought by the Fed and is guaranteed by you and me.

One more point:  how quickly we all forget that just last week the FOMC issued a statement which implied that it stands ready to lower interest rates if necessary.  I guess that moron Hilsenrath doesn't get that particular information feed from his Fed source.  

Sure the Fed can start "tapering" QE, but it would also have to be willing to live with the consequences.  We know Bernanke isn't willing to live with the consequences of what he's done, which is why he's leaving in January.  And there isn't a politician alive - except may Ron Paul - who is willing to live with consequences of the Fed reducing QE.  Even more catastrophic, the Fed itself has no clue how it will unwind QE.  Keep your eye on that little red ball - not the criminal hands moving the shells around in a manner designed to rob you of your money.