Sunday, June 30, 2013

Friday, June 28, 2013

The Housing Market Is An Accident Waiting To Happen: Part 2

Builder home "sales" at risk...But now that the monthly payment has skyrocketed over the past 6 weeks [from much higher mortgage rates] now they [homebuyers] can "afford" 20% less. Thus, right now builders and mortgage lenders are scrambling to try and recover the lost "affordability" through shoving higher-risk ARMs down borrowers throats, requiring much larger cash-in at close, removing upgrades etc. Needless to say, this spike in mortgage rates from the low 3%'s to the mid-to-high 4%'s changes everything for the majority of New Home buyers several months back, which don't really "buy" the house at the time of contract.  - Mark Hanson, private housing market consultant
For the record, Hanson has been by far the most accurate of any of the housing market analysts out there (I'm talking the real ones, not the Wall Street shills plus the interminably, tragically stupid Mark Zandi).  He was a former mortgage broker who adds invaluable, truthful insight to the entire sector.  The comment above is from a note to his subscribers, but you can follow his freebie material here:   LINK

I wanted to share Part 2 of my housing market analysis, which was posted on Seeking Alpha last night.  From a couple of the comments already posted, it's apparent that the commenters did not read Part 1, which you can access HERE.

I'm just stupefied by the number of "Squawkers" that push the housing recovery idea and yet completely ignore the decline going in income and disposable income; the spike in mortgage rates; and the percentage of people who are either nominally still underwater on their house or technically underwater - meaning they don't have enough equity to cover the cost of selling, new down payment and moving.  I review that in Part 1.  I didn't put the number in there because a lot of people would not believe it, but Mark Hanson - who's work is close to impeccable - has come up with up to 66% of all current mortgaged homeowners are zombified - i.e. underwater + technically underwater.

All the evidence I look at - most of which does not make it into the media  - is telling me that the housing market is now set up for a serious decline.  In Part 2,  I review new home sales and show how the numbers are overstated and why new homes sales are about to hit the skids.  Please take the time read it, especially if you have been duped into thinking that housing is "cheap" right now:   The Coming Housing Crash Part 2

The insiders know everything I've outlined in Parts 1 and 2.  That's why they are now heavily promoting the housing "recovery" and why - per Hanson's quote above - they're now trying to shove buyers into ARMs to make sales happen.  Sound familiar?  It sure does to anyone reading this who got foreclosed out of a home with an ARM mortgage in the last 5 years.  Just for the record, KB Homes reported their numbers yesterday, reported a loss and also reported a 27% cancellation rate on contracts.  You'll see why that's relevant when you read my analysis.

Hopefully I'll get Part 3 written and published by the end of next week.  Have a great weekend.

Wednesday, June 26, 2013

The Precious Metals Sector

It might help to put what's going on right now into context.   The entire sector is in a massive price correction that is almost a mirror image of the one in 2008.  The percentage drops for gold, silver and the HUI top to bottom are almost identical to the percentage drop of each in 2008.

Whether or not this is the bottom is anyone's best guess.  But when this sector turns around, all hell will break loose on the upside.  The BIG difference between now and 2008 is that now, individuals are buying aggressively physical gold and silver bullion coins on every price drop.  Back then all individual/retail buyers of gold/silver disappeared for quite some time.  An even bigger difference is that China is now buying an amount of gold that is equal to the global monthly mining output.  Back then China was not really a factor.  When this turns, the physical shortages that are developing and will become apparent will shock most people.

What makes this whole a ordeal a complete joke is that the reason given for gold's demise is the end of QE.  Well, how come the stock market keeps going higher?  QE has created an absolute monster of a bubble in the stock and housing markets.  It will end badly.

My colleague, who has about 35 years of experience in the financial markets, commented earlier today that "you can smell desperation in these markets - desperation to beat down the metals and desperation to prop up stocks.."   He is correct.  One big problem for them is that Treasury bond market is leaking uncontrollably.  Bernanke - in a comment that absolutely floored me but received almost no acknowledgement from the spin-meisters on financial tv - admitted that he's "puzzled" by the higher interest rates since QE3 commenced.  "Puzzled?"  Hmmm - that's not a good admission for this hubristic little troll who crawled out of Princeton's ivory tower to re-write the laws of economics.

They're desperate alright.  This is a mirror of 2008, only the hidden catastrophe coming at us in the global financial system is going to be far worse than what hit in 2008.  China's financial system is insolvent and Italy is on the verge of a complete derivatives-fueled financial nuclear melt-down.  Comically - yes it's funny - the U.S. Too Big To Fail banks are exposed to both of those situations via off-balance-sheet derivatives.  They may be short Italy and China via off-balance-sheet OTC derivatives, but try collecting when the other side defaults.  AIG/Goldman x 10.

Please read the following commentary from Patrick Heller.  I don't often read his commentary because it reiterates a lot of what I already know.  But this particular commentary from him does the best job I've seen of summing up the current situation with the precious metals sector:   Gold Drop: An Opportunity?

Unfortunately, this cartoon embodies everything about our current state of affairs in this country vs. what it used to be like:

(sourced from, click on chart to enlarge)

Tuesday, June 25, 2013

The Housing Market Is An Accident Waiting To Happen: Part 1

The recovery in the U.S. housing market is showing a pattern far different from what followed previous downturns, experts say, suggesting that the dramatic price gains of recent months may not be sustainable... market fundamentals may not be as healthy as the headlines suggest.  - Money News (Thompson/Reuters)  LINK
Interestingly, right now I'm starting to see the same indicators that I observed all around Denver in 2007/2008 which told me the housing market was about to crash.  "For sale" signs are starting to pop up a lot faster than "sold" signs (this is all over Denver, mind you);  I'm starting to see "new price" signs placed on top of "for sale" signs (especially in high end areas - "new price");  "contract pending" signs are coming off of "for sale" signs and the home remains on the market, sometimes with a new broker listing;  and rental rates are starting to fall, with move-in deals becoming standard once again.  In addition, I'm seeing a deluge of homes for rent hit the market - a development which has occurred over the past three months.

The Federal Reserve and the Government, with well over $1 trillion of money thrown at the housing market - a lot of it taxpayer-backed money - have engineered what some call a "mini-bubble" and what I call a dead-cat bounce in the middle of a big bad bear market.

I have been collecting data, research and articles over the last three months, most of which never makes it into the mainstream media and thus goes unseen by the public .  In Part 1 of my analysis I go over the dynamics of the housing market on a macro level, detailing the massive official intervention in the market, explaining why the low inventory reported by the National Association of Realtors is nonsense and some other macro indicators.  You can read Part 1 here:   The Coming Housing Crash.  I'm working on Part 2 now.

Monday, June 24, 2013

Regarding Dennis Gartman

A colleague sent me a rhetorical question last week:  How do you turn a really large pile of money into a really small pile of money?  Answer:  Have Dennis Gartman manage it.

Horizons introduced some ETFs based on the trading calls of Dennis Gartman's daily newsletter.  For some reason Gartman is promoted by CNBC and Bloomberg, among others, as some kind of market guru.  As it turns out, the ETFs based on his trading calls were referenced several times, including once by Business Insider, as being "a disaster."

As it turns out, in March this year, Horizons liquidated the main Gartman ETF:

Comments: Effective close of business  03/19/2013, ETF will be terminated and all unitholders of the ETF will receive the proceeds from the liquidation of the assets, less all liabilities and all expenses incurred in connection with the dissolution of the ETF.

Keep that in mind the next time you see Gartman on CNBC pontification about gold.  In fact, I'm not the only one taking shots at guys like Gartman - who by the way is a seller of the newsletter he writes and has nothing to do with managing real money - Marc Faber last week issued a shot at all the so-called gold experts showing up on CNBC and Bloomberg with their bearish calls:

..there are many people out there, they never owned an ounce of gold in their lives. They were bearish about gold at $300, bearish about gold at $700, bearish about the stock market in 2009 when the S&P was at 666. Now, they are bullish about stocks and they are still bearish about gold. The commercial hedgers - these are professional miners, mining companies and people involved in gold trading. They have the lowest short exposure, since 2001 when gold was at $300. Similarly, in the silver market, the commercial hedgers, again, the professionals have the lowest short exposure since 2001. I would rather bet on the commercial miners, the commercial hedgers than on some forecaster who knows about the future of prices as little as I know. The only thing that I know is that I want to own some physical gold because I don't want all of my assets in financial assets.
Here's the link to that:  Faber on Gold etc

Regarding Dennis Gartman, he reminds me of two old but very appropriate, time-honored quotes:  "Big hat, no cattle" and "those that can, do;  those that can't, try to tell others how to and seek to get paid for it."

Tuesday, June 18, 2013

Edward Snowden: "This country is worth dying for"

Bathtub falls and police officers kill more Americans than terrorism, yet we've been asked to sacrifice our most sacred rights for fear of falling victim to it.  - Edward Snowden
Since the mainstream media, as directed by the Government and corporate entities who control the flow of news, is smearing Edward Snowden as a traitor and are flooding all of the news outlets with outright lies, I wanted to publish a follow-up open Q&A held by The Guardian  and Glenn Greenwald.  I've posted some of the most "piercing" answers from Snowden, including this one about Obama, which summarizes exactly what went through my mind about Obama after his first 100 days:
 Obama's campaign promises and election gave me faith that he would lead us toward fixing the problems he outlined in his quest for votes. Many Americans felt similarly. Unfortunately, shortly after assuming power, he closed the door on investigating systemic violations of law, deepened and expanded several abusive programs, and refused to spend the political capital to end the kind of human rights violations like we see in Guantanamo, where men still sit without charge.
 Here's a sample of some other quotes from Snowden, with the link to the Q&A at the end:

"I did not reveal any US operations against legitimate military targets. I pointed out where the NSA has hacked civilian infrastructure such as universities, hospitals, and private businesses because it is dangerous. These nakedly, aggressively criminal acts are wrong no matter the target. Not only that, when NSA makes a technical mistake during an exploitation operation, critical systems crash."

[Note:  think about the potential for the abuse of private information for political purposes by the Party in the White House with access to all this information.  Think about how J. Edgar Hoover or Nixon would have abused this.  Oh wait, the IRS under Obama has been abusing this, as has the Justice Department/Eric Holder]

"Initially I was very encouraged. Unfortunately, the mainstream media now seems far more interested in what I said when I was 17 or what my girlfriend looks like rather than, say, the largest program of suspicionless surveillance in human history."

"due to the FISA Amendments Act and its section 702 authorities, Americans’ communications are collected and viewed on a daily basis on the certification of an analyst rather than a warrant. They excuse this as "incidental" collection, but at the end of the day, someone at NSA still has the content of your communications"

And his coup de grace:
it's important to bear in mind I'm being called a traitor by men like former Vice President Dick Cheney. This is a man who gave us the warrantless wiretapping scheme as a kind of atrocity warm-up on the way to deceitfully engineering a conflict that has killed over 4,400 and maimed nearly 32,000 Americans, as well as leaving over 100,000 Iraqis dead. Being called a traitor by Dick Cheney is the highest honor you can give an American, and the more panicked talk we hear from people like him, Feinstein, and King, the better off we all are. If they had taught a class on how to be the kind of citizen Dick Cheney worries about, I would have finished high school.
 Here's the article:  LINK

FYI, one of the ranking Congressional Republicans smeared Snowden as being a high school drop-out.  That's incorrect.  He does in fact have a GED. However, here's a sampling of some famous  high school dropouts:

Thomas Edison, Benjamin Franklin, Albert Einstein (later returned), John D. Rockefeller, Walt Disney, Colonel Sanders, Charles Dickens (one of my favorite authors), Ray Kroc (McDonald's).

Monday, June 17, 2013

An Orwellian Orgasm

For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realise that the privileged minority had no function, and they would sweep it away. In the long run, a hierarchical society was only possible on a basis of poverty and ignorance.  -  George Orwell, "1984"
The ability to perceive and understand the truth about Government/Federal Reserve/Industry economic reports is getting more difficult for those who only look at the headlines or take a cursory glance at the story, without delving into the details.  I'm sure eventually, if Orwell's vision plays out accurately even further than it has already, the details behind the headlines will be conveniently obfuscated -  “Yes, sometimes two plus two is four. But sometimes it’s five or even three. Sometimes it’s all of those at the same time.”  (from "1984"). 

So today the NY Fed released its monthly Empire State Manufacturing report, which showed that the general index increased from April's decline.  But the new orders index was -6.7, shipments index was -11.8%, unfilled orders -14.5%, labor index -10. I believe the source of the increase was derived from prices paid, +21, and prices received, +11.3.   There was an increase in the "outlook," a touch-feely sentiment poll, but the 6-month future outlook was negative.

In fact, beneath the headline number the report was down-right ugly.  You can check my ability to read and copy numbers here:  Empire State Manufacturing Survey.

The other Orwellian Orgasmic business report released today was the National Association of Homebuilders "Confidence" Index sponsored by Wells Fargo, the biggest home mortgage lender.  With Wells Fargo as the promoter of the index,  you can see how this thing gets spun around on its head with Orwellian deception.  In fact, here's how the survey is based:  "the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months"  LINK  As you can see, the questions asked are analogous to polling a classroom of kindergartners if they think they'll still like to eat candy at the end of the summer.

The truth is, that based on all the data I've been collecting and analyzing over the last 4 months, it would appear as if the housing market is getting ready to fall off of a cliff.  Here's just a flavor of the information which I will be turning into a couple of articles - this is from Mark Hanson, a private consultant who has been the most accurate housing market analyst I've observed over the past 12 years:
This morning [June 5, 2013] I was made aware that three large private mortgage bankers I follow closely for trends in mortgage finance ALL had mass layoffs last Friday and yesterday to the tune of 25% to 50% of their operations staff (intake, processing, underwriting, document drawing, funding, post-closing). This obviously means that my reports of refi apps being down 65% to 90% in the past 3 weeks are far more accurate than the lagging MBA index, which is likely on its' way to print multi-year lows in the next month.
The point here is that the entities putting up the money to finance homes are aggressively reducing their operations - i.e. that's how the big money is betting.   The new homebuilders index is reflecting sentiment.  One is hard cash, one is hot air that belies the underlying facts.

Someone asked me a little earlier if I had any thoughts on what Bernanke might say on Wednesday after the FOMC meeting breaks.  My reply was "no thoughts, barely interested."  I went on to say that "I'd be interested if they talked about why the Government has already incurred a $626 billion spending deficit 8 months into its fiscal year (end of May) when the CBO released a report three weeks earlier on May 8th that projected a full FY deficit of $649 billion...

Friday, June 14, 2013

Here's Why The "Taper" Won't Happen

The purveyors of this piece of media re-direct/distraction forgot to tell us that QE isn't intended to help the economy.  It's intended to keep the too big to fail banks - both domestic and foreign - solvent and to keep the Government outfitted with low-cost Treasury bond financing.

Skeptical?  Then spend some time reading this latest analyst I wrote and was published by Seeking Alpha:
Based on two key factors, not only will the Fed not taper, but it will be ultimately forced to up the ante on QE or risk a serious accident in the banking system and in the economy.
Here's the full article:  Tapering Risks Triggering A Stock Market Avalanche

Two more pieces of data reported today that further reinforce the argument I laid out in my article.  First, per the monthly TIC report, which details foreign cash flows in and out of our system, Treasury bond sales by foreign investors (mainly central banks and hedge funds) hit a record in April:  LINK  The Fed will actually have to print more money to replace that money or risk significantly higher rates.  And second, in another of a long string of disappointing economic reports, May's industrial production report came in flat vs. the expected up .2% and capacity utilization declined.  This further confirms that manufacturing and end-user demand is dropping.  This will give Bernanke further room to, minimally, keep QE where it is and, ultimately, justify taking it up a notch sometime this fall.

Thursday, June 13, 2013

Up Next For The Insiders Looting Our System And Destroying Our Country...

Hey, what's the big deal?  Slaughtering women and children in Afghanistan/Pakistan and the Middle East is merely inconsequential collateral damage in the noble pursuit of money


Tuesday, June 11, 2013

Obama's Heart Of Darkness

Surveillance policy of Bush 42 “puts forward a false choice btw the liberties we cherish & the security we provide.” B. Obama 2007  -  as tweeted by Bill Gross (bond king of Pimco)
Everything belonged to him--but that was a trifle. The thing was to know what he belonged to, how many powers of darkness claimed him for their own. That was the reflection that made you creepy all over. It was impossible--it was not good for one either--trying to imagine. He had taken a high seat amongst the devils of the land--I mean literally. You can't understand."  - Joseph Conrad, "Heart of Darkness"
Before I get to Obama's surveillance program, I wanted to let all you remaining Obama sympathizers and Obama-care advocates see some hard facts about just how much this abortion of a law is going to cost many in this country.  Several States have already indicated huge rate insurance rate increases, especially for individuals who have to buy their own, but here's the latest State filing from Ohio:  Sky-high insurance rates.  As you can see - if you bother to examine the facts as they stand, something which almost every Obama supporter refuses to do, insurance premiums for individuals in Ohio will go up around 88%.   Thanks Barack!

Anyone who is indifferent to, or supports, this massive Government surveillance operation is either a complete idiot or is giving the Government a green light to do ANYTHING with YOUR life.

How quickly the moronic masses and the media - and even a "distinguished" University of Chicago law professor forget:   Here is the FOURTH AMENDMENT to the BILL OF RIGHTS - number four of the first 10 Amendments of the Constitution:
The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
Read and re-read that.  I just read an editorial from the Huffington Post in which Geoffrey Stone, some distinguished law professor at the University of Chicago is calling Edward Snowden a "criminal."  Fuck you Stone and take your traitorous opinion and shove it up your ass.

Make no mistake about it:  Edward Snowden is this era's Patrick Henry - "Give me liberty of give me death."   Re-read that quote at the top from Obama's campaign in 2007.  Obama is the criminal, as is every single person connected to this widespread, all-encompassing surveillance program which Edward Snowden has risked his life to reveal.  Thank you Mr. Snowden.

Here's a quote from Snowden's interview with the Guardian UK that everyone needs to read:
"The NSA has built an infrastructure that allows it to intercept almost everything. With this capability, the vast majority of human communications are automatically ingested without targeting. If I wanted to see your emails or your wife's phone, all I have to do is use intercepts. I can get your emails, passwords, phone records, credit cards.

"I don't want to live in a society that does these sort of things … I do not want to live in a world where everything I do and say is recorded. That is not something I am willing to support or live under."
Here's the full interview:  LINK   Here's a useful commentary from England's Telegraph UK, for those of you who seem to have forgotten how sacred our original Bill of Rights were intended to be:  LINK

I vividly remember the Watergate scandal, which posed a grave danger to our Constitution, and how impassioned that the entire country was in getting the truth out and having Rule of  Law imposed on the guilty.  I remember how horrified most people were and how interested they were in getting the truth out.  Nixon should have burned at the stake, but instead was let off easy and thus opened up the gate to the slippery slope that has destroyed the Governmental system that was handed to us by the Founding Fathers.

Quite frankly, maybe in another era Obama would be run out of office.  What makes him worse than Nixon or Bush 42 is that Obama lied to everyone about his motives and his game plan.  Instead of rescinding all the Constitutional violations implemented by Bush, as he promised in every speech I heard him make including one in person, Obama has been instrumental in implementing a full-blown police-State - one that is being executed and enforced silently via the internet and cell phones, using the most sophisticated technology available.  And it's not like it's doing any good.  This system couldn't prevent two miscreants in Boston from deploying and detonating a crude bomb PLUS it took a big military force and the shutting down of nearly an entire city in order to find a weaponless kid hiding in the hull of a boat, huddled in near-death, in someone's backyard.  How's it working for you, Barack?

I know some of you get it - and that's why Orwell's "1984" has become one of the fastest selling books on  LINK

As I've written before, back in 2002 an old colleague and I both felt that eventually we would see things happen in this country that would truly blow our mind.  I'm not sure I can imagine anything more horrifying than what Obama's Government is doing to our freedom and way of life as he leads our nation down a fatalistic path and into a heart of darkness...

Sunday, June 9, 2013

This About Sums It All Up Nice and Succinctly

It just blows my mind that anyone still trusts or approves of Obama's Presidency.  That latter fact reflects exactly why this country's Constitutional-based political system is collapsing.

Friday, June 7, 2013

More Chart Porn For Friday - What Happened Today?

          (click on chart to enlarge)

The smack on the metals will quickly fade and we'll go on to new highs.  Unfortunately, I'm afraid to say - and I know I'm right about this - the only "Change" with our Government will be more CHANGE for the worse.

The Revival: Friday Chart Porn

Gold represents wealth.  It is the staple around which everything else revolves.  Alan Greenspan agreed with this in an article he wrote in 1966. But when Greenspan was chosen as Fed chief, he turned his back on gold in favor of power and prestige and Federal Reserve notes.

From there, his career went downhill, he's now considered a sad joke. When Ben Bernanke was asked if gold was money, he dodged the question, and by omission he denied that gold was money.  This was the beginning of his troubles.  He was living a lie.
  - Richard Russel, King World News
I was going to pontificate and rant about the reports out yesterday which revealed the extent to which the Government has been invading our privacy and spying on us via our phones and computers.  But what's the point?  No one seems to care anyway.   What does amaze me is that Obama supporters are so willing to look the other way on this.  Obama was the one who specifically campaigned on a platform that included restoring all the civil liberties and Constitutional Bill of Rights destroyed by Bush:  LINK   But like every other politician - regardless of party affiliation - Obama is full of grandiose lies and hot air that he makes sound great with his incredible oratory skills, but he's a slave to the wealthy interests who have funded his position and who will make him wealthy when he leaves office.

I just can't stand the duplicity of the Obama supporters...By the way, for all of you idiots who cheered Obamacare, just wait until it kicks in.  I'm already seeing the deleterious affects of it with people I know who are small business owners or have to pay for health insurance themselves.  It's already being reported that individual premiums in California will go up 64-146% and here's a Congressional study outlining just how much more expensive insurance policies will be in various States:  LINK  He's your all's President, I have not voted since 1992 because I despise all politicians in BOTH parties.

Today's nonsense aside in the markets, I wanted to present a 13yr daily chart of gold that shouldn't need any explanation:

(13-yr daily gold - couldn't be any more bullish)

You'll note how similar the chart patterns are in the circles.  Those periods of time show the times when gold started to go parabolic and then endured a nasty price correction.  I don't know about you but I'm quite taken aback by how similar the patterns are.

What most might not realize is that a lot of other characteristics that marked the run-up/subsequent price wash-out/next-bull-move are also strikingly similar.  These characteristics include the build-up in Comex gold/silver open interest that accompanied the price run-up, followed by massive liquidation in open interest that accompanied the price drop;  massive reversals in sentiment all three times; and a deluge of Wall Street analysts and media outlets who were all too happy to proclaim the end of the bull market in precious metals.

Just like the previous times in 2006 and 2008, this precious metals market is now marking time before the next up-leg begins.  And it will be similar in scale to the up-legs that followed the 2006 and 2008 corrections.  The one huge difference is that in 2006 and 2008, China was not actively and aggressively accumulating physical gold.  Same with many of the Central Banks which are now buying - back then they were net sellers.  And no on except GATA was questioning the reliability of paper gold products.   Now the fear that the Comex and paper gold accounts are fraudulent is starting to seep into the mainstream thinking...

A little more patience is all that is required - i.e. "sit tight and be right."  Have a great weekend and try to do something fun.  I'm not sure how much longer life is going to pleasant for the large majority of Americans...

Thursday, June 6, 2013

The Comex Warehouse Stock Report Fraud Clarified

I realized after assessing some comments posted on my Tuesday blog post about the fraud going on at the Comex that I did not articulate a key point about the credibility of bank financial reporting.  It seems that there is still a contingency of people who are willing to believe that if a bank issues an accounting report, it must be valid.

Let me preface this clarification post by saying that given the long laundry list of charged and prosecuted high profile fraud cases against all of the big banks, I just assumed that everyone understood that banks can not be trusted at all.  Here's my Golden Rule:  banks can not be trusted at all.  Fool me once, shame on you;  fool me twice, shame on me; fool me three times, I'm a moron.  Got it?

With that in mind let me clarify how the Comex warehouse gold and silver stock reports are produced.  Each bank that operates a Comex vault is responsible for keeping and maintaining all accounting records in connection with operating their vault.  This means that all of the reports and data that the CME uses to produce its warehouse stock reports come from the banks themselves.  They are paper accounting records the bank produces and sends to the bean counters at the CME.  There is no actual independent audit of the reports OR of the bars themselves that are reported to be held in each bank vault.  Everything the CME publishes is based on what is reported from the banks.  Do you still trust these reports?  If you do, re-read my Golden Rule.

Please DO NOT CONFUSE the reliability of paper records and the reliability of any bank not acting fraudulently with regard to those paper claims with actual physical gold that is sitting in an allocated account and bars for which the rightful owner has legal entitlement. Paper is NOT to be trusted - in any form.

A large portion of the gold that is being reported by the Comex vault operators is likely not really there to be reported. Now, "not being there" could well mean that there is a lease-claim attached to it or some other form of hypothecation. Just because bars are sitting physically in "registered" or "eligible" accounts does not mean that the  intended owner of that bar has a legal entitlement to that bar.

Review the laws connected with short-selling and hypothecation. When an asset is sold short or  hypothecated, the original holder of that asset unknowingly loses legal title to it.  The fact that the legal department at the CME now requires a disclaimer about the bank reports that are used to produce the Comex warehouse gold and silver stock should tell us all we need to know about the nature of those bank reports, especially when considered in the context of all of the other fraud that banks have been involved in over the last couple decades. 

Now, I also believe - per the recent 35% drain of gold inventory from the Comex - that a lot of the bars have been physically removed upon demand by entitled owners. By "entitled," I mean the party who possess the legal title to the bars. The disclaimer was added to the inventory report as an attempt to exonerate the CME from the legal liability of fraudulent reporting by the vault operators, who are responsible for the record-keeping and accounting and reporting of the bar inventory that is supposed to be in their vaults.  Moreover, a high percentage of the gold that remains in the Comex vaults has likely been leased out or hypothecated.  In other words, the financial reports from the banks do not legally present the actual amount of gold or silver in Comex vaults that can be immediately removed upon demand by the original intended owner.  Think this is far-fetched?  Explain why the Bundesbank demanded some of Germany's gold to be shipped back to Germany and the Fed requires 7 years to ship back just 300 tonnes of Germany's 1800 tonnes supposedly sitting in the Fed's NY vault? (Please note that Venezuela was able to have 200 tonnes of its gold shipped back to Venezuela within about 4 months).

This is the same kind of situation with GLD. Same wine, different bottle.

Now as far as Comex bar quality standards, not only am I well aware of the criterion and rules, but we have taken delivery of both gold and silver bars FROM the Comex. I am experienced in the entire process from start to finish.

This is also why I DO NOT trust the Comex reports. Back in April 2010, we took delivery and were given notice by HSBC for several silver bars. BY THE RULES, HSBC was required to deliver the bars to our possession by April 30, the last delivery day. They are given 3 days of leeway. Not only did we NOT receive the bars within the legal time frame, it took 7 full weeks for HSBC to make good on the delivery.  If our fund was a lot bigger and we could have reasonably afforded the litigation, we would have gone after HSBC for breach and damages.

Moreover, during 2010, HSBC changed its delivery policy for off-Comex deliveries, making it more cumbersome and more expensive to get bars delivered to your possession from their vault.

Need I remind you that HSBC has recently been charged in several fraudulent banking activities AND convicted on a couple. They are connected to the recent HKMex gold scandal in Honk Kong, as well.

This clarification is to explain exactly why bank-produced paper reports at the Comex are more than likely riddled with fraud and it clarifies the difference between owning physical gold in your own possession vs. owning a paper claim on gold sitting somewhere else and a claim which can be hypothecated such that you actually lose legal entitlement to that underlying asset. The Comex is just as fraudulent as Enron, Refco, Amaranth, AIG, etc.  Capito?

Wednesday, June 5, 2013

The Stock Market May Be In Trouble: A Very Ominous Signal

I believe that the junk bond market is starting to price in the deteriorating economic fundamentals and has begun a price correction to reflect the expectations of higher credit risk for companies which require cash flow growth to service their debt. It is my view that the stock market will soon "catch up" to the junk bond market in a big sell-off that will be triggered soon by something - perhaps even a bad employment report this Friday  - Dave in Denver
The Seeking Alpha article from which that quote is derived was actually written by me on Monday night and published yesterday mid-day by SA.  So my call that the stock market could incur a significant sell-off should be measured based on Monday's close of 1640 on the S&P 500 (SPX) and 15,254 on the Dow.  As I write this, the SPX is trading at 1612 (-1.7% from Monday) and the Dow at 14,991 (also -1.7% from Monday).

The reason I believe the stock market is vulnerable to a big sell-off here has to do with a signal that is being emitted by the junk bond market.  I lay out my entire case in this article:  Ominous Signals  As you will see, I discuss the sell-off going on in the junk bond market and what it could imply for the stock market.

On another note, I've been seeing the decibel level in the media being turned up loudly about the rising the probability that the Fed could "taper" QE.  What amazes me about this nonsense is that before QE2 and QE3, the same chorus of Fed heads and writers/bloggers were promoting the same crap - about three or four months prior to the Fed actually pulling the trigger on even more QE.  I recall specifically that Phoenix Capital and Bill King of the King Report were adamant that QE2 was the last of the printing.  They should be eating a lot of humble pie for their intransigent insistence that QE would stop at QE2 but King is now certain that tapering is imminent.  Amazing how tragically ephemeral most people's memories seem to be.

The fact of the matter is that 1) the economy is going into a tail-spin, especially the housing market (more on that soon with hard data as evidence) and 2) QE was never intended to prop up the economy.  Huh?  Ya, that's right.  QE is 75% about keeping the banking system from collapsing and 25% about keeping the Government funded at low interest rates.   If you look at the change in the Fed balance sheet since QE began, it has gone up so far by about $2.4 trillion.  Well guess what, and not coincidentally?  The Excess Reserve Account at the Fed of the Too Big To Fail banks has gone up in the same time period by $1.8 trillion.  Wow.  That math works - that's 75% of the QE.  The rest of the QE has funded the Government and the housing market.

My point here is that QE is not going to "taper," although the Fed will jawbone and tap dance as if they are going to taper until it becomes obvious to everyone that they're going to have to increase QE.  IF for some reason the Fed were to "taper," it will make my prediction of a huge stock market decline look even more prescient.

Tuesday, June 4, 2013

The Comex Confirms That Its Gold and Silver Inventory Reports Are Fraudulent

"The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness.  This report is produced for information purposes only." - disclaimer now posted on the Comex gold and silver daily warehouse stock report as of Monday, June 3, 2013.
Well now.  How would you like to get your bank statement in the mail from JP Morgan or Bank of America and see this disclaimer added at the bottom:
"The information in this account statement is taken from sources believed to be reliable; however, JP Morgan Chase & Co. disclaims all liability whatsoever with regard to its accuracy or completeness. This account statement is produced for information purposes only."
How would feel about that?  That's pretty much the equivalent of what the attorneys for the CME/Comex have done by adding the statement at the top to their daily gold and silver warehouse stock reports.  That disclaimer was not in Friday's warehouse stock report, it was on yesterday's (kudos to the commenter "anonymous" who discovered this).

The common reaction would be to ask "why now?"  But we already know the answer to that question.  I've suspected for a long time that the Comex vault operators lease out a substantial portion of the gold and silver bars that they keep in both the "registered" and "eligible" account designations.  It would be easy income for JP Morgan, a bullion bank who actively engages in gold leasing, to lease out the majority of the bars it stores for delivery - "registered" - and for investors who have taken delivery but keep their gold/silver in JPM's Comex vault - "eligible."  After all, in any given delivery month, less than 1-2% of the open interest ever stand for delivery, making it very easy for a Comex vault operator to earn extra income by leasing out gold and silver that it knows it will never be required to produce for delivery.

I am willing to bet a very large amount of money that this disclaimer was put on the warehouse reports starting yesterday as a result of the large amount of gold bars that has been physically removed from Comex vaults, and specifically from JP Morgan's "eligible" account, since the beginning of the year.  This means that it is highly likely that a significant portion of the remaining gold and silver sitting in Comex precious metals vaults - especially JPM's -  has been been hypothecated in some form.

For anyone who has witnessed what happened with MF Global and the illegal hypothecation of customer assets, a situation in which JP Morgan is/was inextricably tied, if  you believe that Wall Street is willing to hypothecate the sacred customer accounts but would not hypothecate or lease out Comex gold, then you are either tragically naive or terminally ignorant.

To make matters even worse, I just looked up the Comex warehouse rules with regard to storage and guarantee requirements, and there is not any requirement that Comex vault operators establish "allocated" accounts for the individual customers who have taken delivery - theoretically - of gold or silver from the Comex and chose to "safekeep" it in a Comex vault.  Here's the link the to rules:  Comex Storage Rules

Yes, insurance is required, but there will come a time - likely sooner than most think - when there will be a rush by Comex vault customers to take delivery of the metal they have been ambivalently assured is sitting in a Comex vault.  Unfortunately for them, they will receive a notice that will say "see the disclaimer on our website, check's in the mail."