Very ambient stuff.
Saturday, April 20, 2013
Mining.com - four important facts to get wrong about gold.
I'll just quickly surf through each of his points here:
1. You can’t print more gold
The Federal Reserve continues to print fresh, crisp stacks of U.S. dollars amounting to $85 billion every month, driving up the balance sheet to almost $3 trillion dollars.
Is this an argument that gold will always appreciate in value? Because you can print more gold. Between 1980 and 2000, total world gold production doubled; that's why gold went from over $800 to below $300. Also, since total world gold reserves are many times the size of yearly demand, gold can rush back into the market to collapse the price (like in 2008 where you saw the scrap gold input skyrocket).
And really? The Federal Reserve argument again? Don't goldbugs know that around 85% of US money supply is generated through fractional reserve banking?
If the Fed starts to reduce its balance sheet in the next 2 years, does that mean the price of gold will go back down? If so, now's the time to sell, no?
And if China and India are buying 50% of world gold production, then why does the Fed balance sheet have anything to do with gold? Are you saying the Fed balance sheet stimulates gold buying in Asia?
2. Gold is viewed as a currency by central bankers
No, gold is viewed as an asset without counterparty risk by central bankers, because it can be sold for money or goods in times where the other rules of finance break down.
It's not really a wrong statement in itself, since when the rules of money get broken, you can substitute money with gold more-or-less. But it's obvious Holmes is still trying to placate the goldbugs who hide a 1-gram flake of gold up their bum in preparation for the coming apocalypse. Gold is not money to you and me.
If emerging markets are building up gold reserves, then that must mean that central bank demand for gold actually a function of emerging market growth and EM generation of trade surpluses. In which case what you goldbugs should really be looking at is the success of globalization and the health of emerging markets. Hint: check out what copper and oil have been up to. It doesn't look pretty right now.
3. A lack of love from the Love Trade is affecting fundamentals
OK, so here he does suddenly acknowledge emerging markets; I guess my readership numbers must be high enough that I'm affecting the gold discourse now. Because nobody had fucking heard of India and China before I started screaming about them from the fucking rooftops.
So why did he just post that already discredited Fed-balance-sheet-and-gold chart under (1) above? Does gold correlate with emerging markets, or does it correlate with the Fed balance sheet? Which is it?
Or is he saying that expansion of the Fed balance sheet boosts emerging markets? Again, does that mean he'll immediately dump gold once the Fed starts trimming back?
China’s income growth has been shown to be highly correlated to the price of the precious metal over the past decade.
OK Frank, does this mean the price of gold is determined by supply and demand? And what does a looming China credit crash mean to the outlook for gold, hm?
I believe this is only a temporary setback. It’s only a matter of how fast China will move to stimulate the economy, since this is a key to global growth.
You "believe"? Are you saying people are supposed to trade on what you "believe"? And you're what now, a China analyst? Then what's your opinion on the mountain of bad debt in China? Or how about the fact that new debt creation is having a smaller and smaller growth effect on the Chinese economy?
And by the way: why is it that the communist party of the PRC is allowed to "print money" to stimulate the Chinese economy, while Ben Bernanke isn't allowed to stimulate the US economy the same way? Or are you in favour of balance sheet expansion now?
4. Corrections happen, but have historically offered buying opportunities
Sure, some have. Other corrections haven't - unless you were willing to buy and then hold for 18 years, which would have meant missing out on the 1990s equity bull market. Oh - the 1990s was a time when the Fed balance sheet expanded too, funny that.
we consider the yellow metal to be in an extremely oversold position on a 12-month basis. The probability that gold will move higher over the next several months is high.
That's great, Frank and the others who make up "we". But things can continue to be oversold for a very long time. You're not suggesting to your readership that they reach out and try to catch a falling knife, are you?
Friday, April 19, 2013
There's a guy with a chemistry blog who has a long-running topic titled "Things I Won't Work With".
It's fun to read his descriptions of various chemicals that are so dangerous they can
- explode violently when exposed to air,
- explode violently when touched,
- explode violently while standing there doing nothing,
- explode violently the instant they are formed,
- set asbestos firebrick on fire,
- corrode everything that exists while emitting extremely toxic gases,
- become much less dangerous when mixed with TNT.
It's especially funny to read the descriptions he supplies from the literature: for example, sad admissions that it was impossible to get any data on the thing before it exploded/combusted violently.
There are even admonitions that anyone attempting to replicate these experiments wear "breastplates of sheet iron" and use teflon equipment to minimize shrapnel. In fact, some of the less insane chemists simply say "don't even try replicating our experiment. This simply should not be allowed to exist."
So if you want to read about the fun side of chemistry class, check out Things I Won't Work With.
at 5:07 PM
And here's the rest of the news:
Bonddad - market analysis: US. He thinks the US still looks strong. By the way, it's taken its hits from the payroll tax increase and the sequester. That data is now in. So any rollover based on things that are done happening is a buy opportunity.
Krugman - the Excel depression. His take on the Rogoff debacle.
FT beyond brics - China to US: the second great rotation. With a teeny tiny video that will take you back to internet circa 1998. But a good 5-minute presentation that is worth seeing. So will there be a secular bull in the US?
BI - Jim Chanos on China. He's been bearish for a while. Of course, that means his timing isn't worth shit and the proper question to ask him is "when".
Mining.com - speculators pushed gold down, but physical demand is hot. But obviously they have the supply/demand function completely wrong, since they didn't include GLD demand (which has disappeared) or the few hundred tons of new supply coming online in the next few years.
BI - Jim Rickards agrees with Peter Tchir. The
Mineweb - demand for Krugerrands skyrockets. Great buying opportunity. Thanks, pukey hedge funds!
India Reuters - the India gold loans business is in trouble. You might see a lot of selling into the market.
Mineweb - happy Gurupushyamrut! Indians got to buy some cheap gold yesterday.
Vancouver Venture - Osisko a penny stock? Kinross and Encana are also heavily shorted. How long can that go on? By the way, compare the change in short position of +17M with 30M total traded from Apr 1 to April 15: that looks to me like whoever shorted Osisko is too large for the market.
India Reuters - crops seen safe from widespread drought in 2013. Basically, no el Nino effects. Other than that, the details still remain to be seen. But here's the beginning of your monsoon newsflow.
der Spargel - Germany's next top models get head lice. And of course they blame it on the Jews.
Reformed Borker (Bork Bork Bork!) - bond spread triggers risk-off signal. As in now he thinks there's a correction coming.
Bespoke - breadth drops. The market drop side of the boat is getting crowded.
Reformed Borker (Bork Bork Bork!) - this is what distribution looks like. His friend Ari Wald thinks there's a rollover coming too.
Bespoke - bullish sentiment "rebounds". But it's still low. So do you want to be a contrarian when there's no price action to be contrary to just yet?
BI - Schaueble says the ECB should reduce liquidity cos who doesn't like getting tied up and pissed on, then cut with razorblades? Seriously... in what way does German monetary policy not resemble German piss-porn? And my god, Wolfie - you really want Europe to go downhill even more? See, this is the shit you're dealing with in Europe: people who want to get tied up and pissed on, then cut with razorblades.
der Spargel - We Germans don't believe in Abenomics because what Japan's economy really needs is to get tied up and pissed on, then cut with razorblades. Germany prefers the idea of "structural reforms", which to Germans means exterminating the old and crippled, then putting everyone else in labour camps. Oh, plus killing 6 million Jews and confiscating all their property. That's the way to improve GDP!
I'm serious. They blame Weimar for hyperinflation, but therefore who would the Germans applaud for fixing Weimar's mistakes? Hm? A very special Austrian economist with a very special moustache, that's who.
Bonddad - market analysis of Brazil. GDP growth is really lagging inflation. Really I don't see how anyone can say anything positive about Brazil.
FT beyond brics - will Japanese money float the EMs? I thnk what you need to ask instead is, will Japanese money bring down EM inflation and boost their TFP limits so that they can grow again? Because if the cheap money inflow can't leverage productivity gains, all you'll get is inflation, I reckon, and both India and Brazil have already hit the wall there.
FT Alphaville - Kaminska on liquidity and gold. Re the Alhambra article from yesterday.
Mining.com - a video of the dashingly handsome Nolan Watson. If only his share price didn't suck so bad!
David Kotok has a very sensible and agnostic opinion about gold over at the Ritholtz blog. You should most definitely read it.
As he notes, it's not a currency, but it is a store of value. He recommends it as a passive investment to his clients as part of a portfolio, which is sensible and also what rich people already do.
If I had his email address, I'd want to suggest he clarify things:
1. The special nature of gold lies in the fact that when you reach limit situations where the rules break down, gold is the only asset that retains its value. The stocks, bonds, currency and real estate in your portfolio can all go to zero either due to warfare, disaster, revolution, hyperinflation, or government diktat; but as long as you have some gold in a vault somewhere, that part of your portfolio will still retain its value, more or less, as long as you store it somewhere safe. That's the purpose of gold, both for rich individuals and for governments: it has zero counterparty risk and retains value even when everything else gets broken.
2. But investing in GLD or gold futures is not investing in gold, because there is massive counterparty risk and you're still exposed to getting zeroed out by limit situations.
As Peter Tchir noted, the recent gold puke happened because people who have no clue about gold and have no reason to own gold were buying stuff that's not really gold for the wrong reason.
Anyway, Kotok's speculation about Japan and gold doesn't really pass the smell test for me; Japanese have never been a gold-accumulating culture so I've been told, and would probably be happy to own reserves in USD, AUD, CAD, won and renminbi. I also think Japan's too big for gold. It'd be neat if it happened though.
My big pondering right now is whether we've hit the end of the secular bull market in EMs and commodities.
Do the EMs simply fail at the EMA and then fall back down?
Does China simply fail at the EMs then go back down?
Freaky! Looks like India is taking off.
But at the same time the Andean countries (copper silver gold coal zinc) are swan-diving.
Is there a divergence among emerging markets, between the Ag/labour-strong India and the metals-strong Andes?
Maybe I'll go look at the weeklies and see what they say.
Do the EMs simply fail at the EMA and then fall back down?
Does China simply fail at the EMs then go back down?
Freaky! Looks like India is taking off.
But at the same time the Andean countries (copper silver gold coal zinc) are swan-diving.
Is there a divergence among emerging markets, between the Ag/labour-strong India and the metals-strong Andes?
Maybe I'll go look at the weeklies and see what they say.
Thursday, April 18, 2013
Bespoke - commodity snapshot. Metals fell off a cliff, but food and natgas didn't. That makes me wonder if this was all just Japanese bank selling.
Bloomberg - Euro car sales head for 20-year low. That's because they're in a depression. Germany in a freefall is good - if the German plutocrats start to feel the pain, they'll force their puppet Bundeskanzler to abandon the now-discredited policies of Kenneth Rogoff and the propagandist right-wing. Then maybe Europe can turn around. Til then, more of the same.
JC Parets - DAX hits 4-month lows. Again, good. Let's see the plutocrats feel pain. Then they might decide to force their puppets to enact policies that stop the collapse. After all, nobody in power gave a shit about intervening in the US banking & real estate collapse until the S&P went into freefall, right?
der Spargel - how the swarthy Mediterraneans hide their wealth. I've noticed that Spargel does a weird thing a lot of the time; they start off the first few paragraphs of an article sounding like a right-wing Nazi rag, then they bring in the reality. In this case, the ECB's finding that "the south is richer than the north" is proven to be a lie: the ECB doesn't include German pensions or child care benefits (which the south don't have) in per-capita wealth calculations, neither do they take into account the fact that Germans generally don't own houses as much as the Mediterraneans do. Also, the ECB study was based on outdated data - the ECB valued Spanish housing at 2008 levels, for example. Basically, it shows you how much institutionalized racist propaganda completely obscures the policy debate.
Um... I especially like how the Germans say "oh, all our wealth was destroyed in 2 world wars, so of course we're poorer". As if the Nazis didn't destroy Rotterdam, confiscate all Jewish-owned property, force occupied countries to pay reparations and even pay the wages of the occupying soldiers, and even cause the wars to begin with. Plus... y'know... other stuff they don't even let us bring up in conversation anymore like those six million Jews that they murdered.
It's as if Germany is asserting that the value of all the capital equipment destroyed at the Battle of Kursk is a contributor to their purported lower per-capita wealth. Fuck guys, you don't even have a clue how this makes you look, do you?
Seriously, can the entire island of Sicily please go up to Germany this weekend and kick their fucking faces in for me? Take Calabria with you if you think you need some back-up. I'm sure Greece would be happy to join you but I don't want you to go too far out of the way; maybe just call them and say they can come meet up with you in Bavaria or something.
Reuters - Japan exports rise. That's good. A crash in oil will also help Japan.
WSJ China Realtime - China car lots show an inventory drawdown. I guess that's good, but I question how much of an indicator autos is for the Chinese economy. The article says the steel industry is still choked with inventory.
FT - debt threat to China's financial system. Except not imminently.
Reuters - India seeks monsoon forecast precision by 2017. Long-term, if they achieve that, it'll be net positive for growth. Because it improves farming productivity, which is 15% of their economy.
Reuters - how a student proved Rogoff is a fraud. And by the way - quit calling the paper "Herndon, Ash, Pollin". Ash and Pollin are just his advisors, and they thought he was wrong to begin with; the extent of their involvement was probably telling him to read a couple utterly fucking irrelevant books and articles that they wrote, in the hope of inflating their references count. It's obvious that Herndon gets 100% of the credit for this. If the journal gives Ash and Pollin space on the byline, it's only because the academic system is set up to make profs demand unearned credit on every paper their grads write, so they can inflate their authorship count to maintain their status in the faculty.
Economonitor - we knew Rogoff was full of shit and now we have proof. Apparently he wasn't interested in sharing his data with fellow academics who didn't share his politics? Because economics isn't a science or an academic pursuit, it's a propaganda method.
Economic Outlook - elementary misuse of a spreadsheet destroyed millions of lives. Also goes into broader mistakes by the neocon axis of economics, such as the IMF's screw-up of economic multipliers. The invalidation of the right wing is a good thing for the world's economic future, I think.
Bonddad - austerity R.I.P. April 16th 2013. Yes Hale, let's all hold our breath and wait for the neoconservatives to admit they're wrong and change their minds.
New Deal Democrat - is economics a science? Orr just philosophy with calculus? OK dude, you have made several mistakes here. #1, in philosophy we readily and happily admit that this or that argument negates the validity of our conclusion. Take Phil 1A6 sometime. #2, where is there calculus in economics? You haven't even seen calculus, bitch. And #3, Rogoff's refusal to share his raw data with people who disagreed politically with him already gives you your answer. Economics is a propaganda method; the divorce of the "politics" term from "political economics" was a shell game meant to trick people into ascribing a higher validity to the same bullshit.
Guardian - the whodunit of gold. She says, btw, that nobody puked 400 tons onto the market; she's called around and checked. She thinks the story is childish. Frankly, it probably makes little difference; you don't need one conscious person for a conspiracy when 100 people all act subconsciously for the same goal.
Zerohedge - US mint sells 63.5ktoz of gold in one day. So I guess that there are bargain hunters out there? Let's look at a chart of all the other good sales days:
Yeah.. doesn't seem to indicate anything other than a love affair with falling knives. I'll let everyone else be Jamie Lannister this week. (GoT reference)
BI - Peter Tchir on the idea of an ETF-led death spiral. He puts the gold crash blame solely on the ETF; please read this article, it comes to a very remarkable conclusion. He also has this insightful comment:
It is one thing for a commodity focused hedge fund to lose on gold. It isn’t even so bad if a global macro fund does, but the problem is when funds that really don’t have much business being in gold have added positions. As a “hedge” or as an “alternative”. Whatever the excuse was, many funds had accumulated some gold, if for no other reason than it was working and seemed like a good “hedge” to something.Now they're all trying to get out, and the underlying's market is too small to let them; so their panic outflow destroys the underlying. Which means you should get an overshoot, which means volatility that you can trade for a profit! Maybe!
Reformed Borker (Bork Bork Bork!) - analysts are no better than flipping a fucking coin. Choice quote: "I can't believe this is still an actual business." Choice chart:
Wow. Great predictions.
Wednesday, April 17, 2013
Click to embiggen.
I wonder who lives in the Vancouver area who would be even remotely interested in doing a google search on JAMES WEST LIBERTY SILVER IKN. Especially six months after the story already broke. As if they were fixated on the topic.
Actually, I don't.
Here. A newer and better conspiracy theory than the shit you read at Zerohedge.
Why I Think The Global Elite Smashed Gold to Confiscate It All For Themselves!!1!
By Billy Everyteen
I think the global elite smashed gold so they could take it all for themselves. Why do I think that?
Gold is a hedge against fat-tail risk, but not the way those dummies on Wall Street think it is! Physical gold is the only asset class that can't go to zero (unless you get robbed). The value of your portfolio's bonds can go to zero in defaults; currency can go to zero in hyperinflation; real estate can go to zero from war, natural disaster, or government confiscation; and stocks can go to zero in a revolution, or in a boring old bankruptcy.
But as long as you (well... not you, I'm talking about rich people) have some gold stored outside the country in a private vault, then even if you're affected by war or disaster or revolution or hyperinflation or any other limit situation where economy and finance break down, your total wealth won't go to zero. Because your gold can never go to zero. Or at least it hasn't in five thousand years which certainly makes it more reliable than all other asset classes in the long run.
Maybe that's why some rich people talk about hiding gold in their teddy bear - it's so they can get to sleep at night no matter what the market is doing. Even if Yellowstone erupts and alien cyborgs conquer Europe, I'll still have gold in a vault in Dubai.
You might think revolution can never happen! But it does! There were dozens all through the world even just after world war 2. And natural disasters always happen, and bankruptcies happen, and government bond defaults happen. Maybe not in the USA, but there are rich people all over the world you know - not just the Americans!
So a rich person should use gold to hedge against the risk of a breakdown of all the rules you depend on to make money.
The funny thing is! If you try to hedge risk with gold futures, you might find that your futures trader goes bankrupt! Like MF Global did! But if you buy GLD, you might lose everything if World Gold Trust goes under. Or BNY Mellon or HSBC.
Those things could never happen right? But those are fat-tail events! Those are precisely the events you use gold to hedge against!
So you don't hedge against fat tail risk using GLD or XAU or Comex futures. You hedge with physical gold.
We haven't seen any of those fat-tail events since the US banking collapse a few years ago. Which was solved nicely thank you Ben Bernanke.
Until, that is, Cyprus decided to confiscate everyone's bank accounts in the whole country, replacing currency with worthless shares in banks whose business model has been destroyed now that the Russians have left.
And then all the other European leaders realized they could do the same thing and not get strung up by angry mobs.
And Canada and a lot of other countries are thinking about doing this too now.
The point here is that the Cyprus solution destroyed one of the rules that rich people depend on - that their bank accounts are safe. That a bank is supposed to be restructured first by wiping out shareholders, then selling assets, then bailing in the bondholders and forcing them to take haircuts on remaining debt. The way the FDIC does it.
But they don't want to do that because Deutschebank is one of the big bondholders that would get hit. And it's no secret that Deutschebank is grossly over-leveraged.
So now they steal depositors' money instead.
Do you think rich people haven't noticed this? Do you think they don't care? Maybe they realize their bank accounts aren't safe either! They're even being hunted down now, in Switzerland and the Virgin Islands and everywhere else!
So maybe the rich want to buy up a bunch of gold.
But they don't want to buy it at $1900, do they! No because you don't get rich by paying full price!
So a bunch of them decided to take down the gold market! So they could buy up all the gold cheap! Get rid of their confiscatable dollars and Euros, and put money into gold old gold bars!
Destroy the gold market, and then spend a year buying up all the gold that the rest of the world has dumped! Before the next "bailout" comes!
I have no proof that this happened! But it sounds logical doesn't it! Who benefits from cheap gold?
People who want to buy gold!
at 3:48 PM
Here's your evening's homework. Quit whining.
AEI - Durable manufacturing, motor vehicle production reach record highs in Q1, and oil output is highest in 20 years. The headline is good enough. Now read the article. Seems the US is not collapsing.
Bloomberg - Asian stocks originally gained cos of good US housing report. Then EEM went down 1.5% and FXI puked 2% today. Sounds like fear.
BI - oil prices show flagging economy. Aaaaaaauugh! They do not! Oil prices show reduced US demand due to reduced miles driven (a secular demographic trend that's been in place for years now) and the commercial fleets moving to natural gas. Oil prices also show the Japanese jettisoning of commodities to fix their risk levels after the spike in JGB volatility. And maybe they show investor concern with flagging EM demand. Also, this:
I assume my readers are smart enough to be able to read a fucking graph.
Fuck seriously, Bonddad Blog isn't subscription-only. These people have no fucking excuse for this ignorance.
Bespoke - Euro spreads decline. Which means there is no impending crisis. Because Spain 10Y is 4.68% and Italy 10Y is 4.25%. Bond yields trump stupid fucking stocks.
FT Alphaville - China's credit-to-GDP and why it matters. I dunno... is this all just fear? Do you think the China debt fear-generation is predictive of imminent catastrophe? Or will it even cause an imminent catastrophe? Or is everyone just freaking the fuck out right now? Let's see if this chart provides an answer:
India Reuters - current account gap may drop to 3% of GDP. Which would be positive for India. Thus for gold. Um... long-term, of course. Not necessarily right now. Cos there's a few thousand tons of GLD puke to chew through first.
Mineweb - some guy you never heard of says 1/3 of all gold miners have all-in costs of $1250-$1750. Pro: oh he's heard of Lachlan Star. Con: who is this guy? Still, here's what I hope the market takes away: “While a few old mines will be lost, unfunded new projects slated for 2016 or 2017 may likely die off given the lack of gold mine equity capital. We estimate that up to 5% of current output may wither then die, but 10% of prospective 2016 or 2017 output will not arrive on time.”
Mining.com - gold price drop to be probed by market regulators - haha - ahaha - ahahaHAHAAAAHAAAAA! Next....
Mineweb - hooray, more people have opinions. Here was one I liked: “this crash is only happening on the paper markets. I’ve been talking to a lot of bullion traders in the physical market and they're saying, since the whole Cyprus thing happened, people completely lost trust in the euro and eurozone and they started buying gold again like crazy. A number of bullion traders are already running out of coins, out of big bars, so it’s really a huge gap between the physical market and the paper market at the moment.”
Screwtape uses three line break.
Seems interesting, cuts down noise, all you purportedly get is the pure trend.
So here are some TLB charts, please ignore the RSI and MACD which I don't think are supposed to work in this format.
SPY does look ominous, but it's dropped 3-4 ticks in previous corrections.
Is the Dow simply correcting?
Because $TRAN is already broken by this standard.
RUT also looks broken-ish.
IEF seems to have broken out.
US dollar seems to have finished its downtrend according to this.
I dunno, I can see why someone would look at this and think things are borken.
Why does the market all of a sudden hate lumber?
GE is heavily exposed to EMs through its financing group, apparently. Seems to be rolling over.
So... in this new deflationary apocalypse, people are going to stop eating food? That sounds rough. Better stock up on the canned goods and automatic weaponry.
Peru looks like it's already jumped off the cliff and simply looking for some ground below to splatter itself into.
Someone is really really scared about EM growth, I think.
IKN reccied The Screwtape Files a day or two ago.
Looks pretty good to me so far.
What I like about it is that the people in the comments section seem to know what they're talking about and aren't afraid to call bullshit by its true name.
That's really hard to find on a blog... usually everyone's trying to out-agree everyone else.
UPDATE: You might have noticed that my keyboard at work is absolute shit.
Nothing to be said. Good garbage-miner with a shitty yet key smelter in Namibia, getting slaughtered.
Nothing to be said. Nice big gold mine in the Philippines or somewhere, getting slaughtered.
Nothing to be said. Nice cheap open-pit mine with a copper future, getting slaughtered.
Nothing to be said. These guys get handed free silver and gold for the next thirty years and can use the money from that to buy more silver and gold. Getting slaughtered.
Puking turned out to be a great idea.
The sad thing though is I had thought about dumping when the GDXJ tested and failed the EMA(16) last week. Instead I let someone sucker me into holding my positions for a supposed "higher low". Moral of the story? Quit listening to people's targets from now on and just fucking trade the fucking trend.
Oh well. This all looks so tasty if only gold were to come back. Even to $1600. That should give a 50% gain right there.
Bonddad - deflation returns. Well, not really; US gasoline prices are going down, and that's good for the US. Commodity prices are not necessarily inflation or deflation, as the 1990s tells us.
JC Parets - the world so far in 2013. The US market has been fantastic and everyone else sucked. Despite what the right-wing bloggers who hate America tell you. Next topic.
BI - Reinhart and Rogoff were wrong. Really? A dyed-in-the-wool Republican conservative selectively interpreted data and then went further and falsified results by diddling with Excel? Really?
Net New Deal - Yup, really. Detailed explanation of how the Republican conservative academics unsurprisingly falsified data to pursue a partisan political agenda.
FT beyond brics - Indian agriculture. If Indian farming is set to grow by $350 billion in 20 years, a lot of that money is going to go into gold. Sorry to beat a dead horse here, and India could still collapse instead, and who am I to give a shit what McKinsey says, but I do still have to bring up that whole India and gold thing.
FT beyond brics - India's workers have never had it so good. Important article on the labour situation in India. Then again, there are still caste slaves in India, and if the authors fail to mention them then I suspect what they're saying. A lot of Indians are blind to even the existence of their slaves.
FT - China local debt out of control. So says some accountant over there. “It is already out of control,” Mr Zhang said. “A crisis is possible. But since the debt is being rolled over and is long-term, the timing of its explosion is uncertain.” Is that where all the fear is coming from? Cos he didn't say it's happening now.
Sharps Pixley - gold was crushed by 400 tons of paper selling. Well, the boat was unstable and needed to be tipped over, right? So is it now a more stable boat? What with threats of supply destruction and stronger physical demand in India?
BI - Morgan Stanley changes its fucking mind about gold. Most notably, the article points out MS was calling for $2175 by end 2013... now they've changed their mind completely. So why were MS too stupid to be able to predict the changes that they now admit have occurred? Is Peter Richardson of Morgan Stanley just a dumb clown who pulls any old shit out of his ass and calls it analysis? Could we perhaps hold Peter Richardson of Morgan Stanley to account for doing a fucking 180-degree turnaround? Or should we simply accept from now on that any target coming from Peter Richardson of Morgan Stanley will be subject to a +/- 50% revision at any time over the next 6 months, because all he ever really does is make shit up?
Dear analysts: I don't fucking need you to tell me whether the trendline points up or not. I can see that for myself. I need you to tell me what I don't know and can't foresee.
Mineweb - gold at 2-year low spurs Asian jewelry demand. Never stand between an Indian and a 20% discount sale. Frankly, I think this price collapse is net positive: mines have to consider shutting down, and EM physical demand is revitalized. Isn't that what we want? Threats of supply destruction, along with stronger demand?
FT beyond brics - what does the gold price drop mean for India? Here, it says this: The drop in commodity prices, particularly in gold and crude oil, if sustained, could be a major positive driver for India. The immediate and most visible impact would be on the current account balance, which could improve by nearly 1% of GDP in FY 13-14. Too bad it won't last, and even if it does Singh's government is too stupid to take advantage of this second lease on life.
Mineweb - what will the collapsing price do to gold production? After reading this, I've noticed that the open-pitters are doing worse than the undergrounders. Might just be seeing things though.
SFGate - gold miners approaching $1300 pain threshold. How much lower can you drive gold before the miners just quit and shut down?
Zerohedge - if gold was a commodity, what would be its support price? Barclay's has also weighed in on the production cost issue. I think that's it for the gold drop and you can wade back in if you haven't yet learned your lesson. Although, on the other hand, we need to see the market sop up a pile of extra "production" in the form of ETF outflows; so maybe gold stays down for a good long while.
Oh and by the way - gold is a commodity.
BI - The stupidest gold chart of all time. You've seen it a million times - it's the one that says gold has anything the fuck at all to do with the US monetary base. Instead, why not look at $GOLD vs the holdings of GLD? That one seems to be correlating quite well right now.
Mineweb - grim realism at European Gold Forum. Someone said you can see all the presentations on video. The webcast page is here but there's nothing on it yet.
Mining.com - Resource Sector paradigm shift, part 2. A long and very brilliant writeup by Eric Coffin. Seriously, read every word, then print it out and read it again later. This analyst even knows engineering. Why can't other analysts be like that?
Mining.com - credit test of miners is grim. Notable: a guy from Fidelity says "Below $1,300 gold, about 30 to 40 percent of mine production is probably not cash-flow positive." Also, "RBC estimates the average all-in costs for North American gold producers at about $1,200 an ounce." So will we see supply taken offline?
And here's an open message to Steve Letwin: here's how you can transform yourself overnight from a zero into a hero! Just send out a NR that says "I!Am!Gold! refuses to sell any gold at this chickenshit price. If it doesn't go up, we're shutting down and encourage other mining companies to do the same. Fuck you guys, $1375 gold is bullshit."
If you do that, I guarantee you firesteveletwin.com will get taken down that same day and replaced with welovesteveletwin.com and steveletwinyouareourhero.com.
CCI has been badly dinged. Was this just the result of the Japanese VaR pop causing their banks to dump their commodity positions, as suggested? Or maybe the knock-on effects of the massive takedown in gold wiping out the leveraged commodity traders? Is the newly-popular narrative of a failure of confidence in EM growth just a post-facto explanation thought up by the media to fill the "because..." space on their daily form letter about the markets?
If EMs have failed, then I'd expect the entire 2010-2011 ramp to get negated. After all, we've succeeded in building out capacity in expectation for 10%/year growth; if we don't see that anymore, commodity prices should crash. (Not gold so much, unless India and China also crash, destroying world demand.)
EMs have hit inflation walls, Brazil significantly among them. A commodity collapse will also kill Russia, not that this would be bad for the world economy. But would India and China get hurt by low commodity prices, or helped?
I guess you could draw a line to connect the lows, and then when that gets broken to the downside you can start freaking out about a possible imminent disaster in China.
It has been a theory of Pettis, by the way, that if China can't sustain 7-8% growth then their financial system collapses. But while China has massive unsustainable local debts, their central government also has enough money to buy the entire Nikkei 225 and still have 25% of their cash left over. Bill Bishop isn't too worried and he knows China far better than Pettis.
India isn't looking particularly weak. Also, the smackdown in oil and gold is a tremendous boon for their current account deficit - their government now has wiggle room that they didn't have before. Also, last time I checked the winter harvest was considered a success.
Basically the India chart isn't confirming the China or EEM charts.
$VIX is freaking out. But this weekly chart shows you how little fear there is compared with last spring. Ooh ahh, a Vix of 17. How scaaary.
Is this just a May correction? Are people scared that the Japanese banks are going to have to start dumping SPY next? Are people just buying downside puts more than calls? Does the guy talking about a SPY rollover have a political/economic axe to grind?
I'm in cash almost completely (still own my NGE, which is probably enough of a jinx to ensure that Spruce Ridge's drill program hits dust this week - but if they don't, I've got me a multi-bagger). I am only watching the charts for two reasons:
1) if GLD and GDX actually repair themselves, I might want to buy back. I can't buy that the commodity cycle is done, or that at least the gold part is done - Rogers doesn't think so. But I don't see how the world's physical market can gobble up the massive extra supply that's been puked into their laps. Might take a year or two, then Oyu Tolgoi and Pascua Lama and Cobre Panama start adding to supply.
2) if GLD and GDX don't come back, I'm looking at just buying RSP and walking away from trading; but I want to watch the Spring action. There is no rush to get in; if a 15-year bull market is imminent I'll be happy to get in at any time.
But I am worried about China. Or that someone knows something that I don't, you don't, and the media doesn't.
Tuesday, April 16, 2013
In case you thought Disney wasn't going to get around to skullraping the festering corpse of Star Wars now that it's bought Lucasfilms:
Yes, I think we can count the above as a skullrape of a festering corpse.
While on the subject of campus radio, the website for my radio show should be getting shut down by Dreamhost in a few weeks. I didn't renew.
It was EBM and darkwave, but also with a large amount of dark ambient with spoken word stuff over it. Basically, I was airing weird shit from 2-5AM that was intended to either drive people insane, or freak them out that some secret Satanist cult had taken over the airwaves.
Often it resulted in complaints. The programming director was okay about it though.
Here's a link to a 64kbps stereo m3u of all the shows I recorded. And here's a link to all the playlists.
If you only want to listen to a couple, Show #12 was John Milton's Paradise Lost, and Show #21 was an absolutely exquisite Vincent Price reading of Edgar Allan Poe's "Ligeia".
Show #13 was Franz Kafka's "Metamorphosis", but with all the bits about him being a bug cut out. The story is a lot more depressing when you cut out all the stupid shit about him being a stupid bug.
Just so you know the kinda of world I come from, bitches.
Calculated Risk - gasoline prices continue decline. Very bullish for the US economy - normally it's been choked by high gasoline prices. What if that goes away?
FT The World - China won't mind slower growth.
Reuters - China to tap brakes on economy. See, the problem is that Chinese growth no longer is free of risks to their economy, so it seems. So maybe they've hit that middle-income wall.
WSJ - gold plummets to 2-year low. Only the JP Morgan analyst at the very end seems to have a clue. The rest are merely repeating what they've heard.
BI - Jim Rogers thinks it's a normal correction. He's gotten annoying recently, but until I am presented with incontrovertible evidence to the contrary, I'm still going to accept Jim Rogers as one of the great theorists of macro-economic cycles. Seriously, I feel his opinion's important. And I don't care who you are, Rogers knows more about commodities than you. Funny thing: he thinks the collapse of Bitcoin was a factor in gold's collapse, "since most of them also own gold"? Well, they do hang out on Zerohedge, and they do all worship Ayn Rand, right? Interesting theory.
Reuters - gold futures volume hits all-time high. 42% more than the previous all-tjme high. Was this just a run on all the stops there were? What about the other commodities, what were their volumes like yesterday and Friday?
Zerohedge - all GLD:JPY traders now underwater. Did someone see a very crowded boat, and decide to take advantage? I mean, if you're a multi-billion-dollar fund maybe you see this and take advantage. I'm not trying to be a conspiracy theorist, but this sort of stuff happened in the commodity market all the time during Livermore's career.
BI - Krugman calls goldbugs really annoying. "Well, the inflationistas/goldbugs are really, really annoying -- all this air of having the secret wisdom when they actually haven't a clue. And they have been a real destructive factor in policy debate, standing in the way of effective policy by raising fears of Weimar and Zimbabwe. So seeing the one thing they got right -- betting on higher gold prices -- turn sour is cause for a bit of celebration."
Felix Salmon - the fear bubble bursts. A slightly different version of Kaiser's "hegemony" argument. Thing is, this narrative seems suspicious. Why, then, are oil and rubber also collapsing? It doesn't look like a collapse in the fear bubble, more like a collapse in the EM growth bubble. But the concentration on gold happens because everyone's so happy that the neo-Nazis in the goldbug community now look stupid.
Mineweb - bloodbath hits Indian gold loan companies. Yeah, that will really build Indians' confidence in this idea of using gold as collateral for loans. They will really love using the banking system now.
BI - Ron Paul's lost half his fortune on miners. There you go, there's the goldbugs' great leader, come see his fantastic economic acumen.
FT Alphaville - lay the blame at the foot of the gold miners. Utterly vicious and unforgiving criticism of the gold miners for the fake accounting they've been using for the past decade.
I told John Kaiser that we might as well compare the gold miners of the past 2 years to the Bre-X scandal; after all, more money has been lost, it was lost through terrible management and outright fraud, there has been more ineptitude among the professional geologists, more value has been destroyed, and more faith has been lost. It's just that instead of one single company causing the crisis, it's been hundreds of miners and explorers who've banded together this time to commit massive fraud on the people.
He didn't write back. Probably thinks I'm a crank.
Monday, April 15, 2013
We know GDXJ sucks.
I guess weakness in China would explain coal dropping.
So why should agribusiness drop?
Lumber for the love of god?
I think this is symptomatic of something bigger.
People are starting to get scared:
And liquidity is starting to tumble.
Something bigger than a bunch of gay miners is happening and we don't know what it is yet.
Here's some more news:
FT beyond brics - China - less bang for its credit buck. Also,
FT Alphaville - China having a credit-fueled non-recovery. Seems people think the EM boom is over.
FT beyond brics - time for EM equities to bounce back? You decide.
WSJ China Realtime - opinions on the Chinese data. Not much in the way of positive ones, by the way.
FT beyond brics - India inflation eases. Well, it might buy them some time, at least.
BI - Citi says the commodity supercycle is dead. Well, can EMs tame their inflation enough and still boost total factor productivity enough that they can boost growth enough to overcome the now-demonstrated ability of the materials sector to build out capacity to meet their demand? If not, then the commodity supercycle is dead.
And for the Schadenfreude:
Mineweb - At least Rogers and Faber still like gold. Well... that's... um... nice, guys.
BI - gold breaks 200-week moving average. Oh, and "the price of gold hasn't been below its 200-week moving average since 2001."
Market Montage - "liquidity event" happening in GLD and SLV. As he says, "Based on the volume it appeared to be a 'liquidity event' i.e. someone(s) big was purging their position. This morning the carnage in precious metals is even more severe – as I type near the 7 AM hour, you have gold down over 5% and silver nearing 10%. At times like this technical analysis is going to take a back seat to margin calls."
Ritholtz - GLD AUM > SPY AUM should have been taken as a warning. Good point; why the fuck should GLD have had more money in it than SPY? One is the ETF for the world's largest economy; the other is a metal. That makes me think there's a lot of liquidation still to come for GLD.
BI - the gold bugs are still saying this is an orchestrated collapse. Max Keiser would call it a conspiracy, of course, because he's paid by Russia, Russia is going to lose money in the smash, and of course Russia still loves blaming everything on organized international Jewry.
Reformed Borker (Bork Bork Bork!) - The ETFing of everything - PM edition. He simply posts this tweet: "They turned gold into a stock and then were shocked when it started to act like one."
Mineweb - gold miners in freefall. You knew that already, but here's an apt quote: "the broad macro picture is that gold companies have for an extended period of time been destroyers of capital for shareholders."
Oh and $1463, $23.43.
I wonder what happens when a physical gold and silver dealer has a pile of inventory at, say, $1550 and $27, and the spot price collapses to $1300 and $22.
Does he go out of business? Does he own that PM on margin? Do loans get called in?
If he goes bankrupt, then what happens to that gold and silver? I guess that gets sold into the market, eh? You have to sell assets to make whole the creditors.
That's it for today, I got a vet appointment.
Have you heard anyone chatting about a final downside target of 270 for $HUI? Or 250, maybe?
Are these guys jumping in now and buying everything, on a >10% down day? Cos hey, target hit, right?
Apparently today Gary Tanashian located some further goalposts at 100. Hey, that's possible too, eh?
Who wants chowder!?
You short the metals right now? Frankly I'm scared of the volatility (plays havoc with leveraged ETF prices) and pissed off I missed the first $150 move, so not here.
Here's some news:
Reuters - US companies may beat expectations. Possible. As they note, if companies guide lower, they usually beat the lowered guidance. Which is positive. But...
Reformed Borker (Bork Bork Bork!) - watch out for Q1 earnings. He's scared of the possible downside, based on earnings multiple.
BI - Chinese GDP misses. Negative for EM growth, negative for gold. Marginally, anyway.
India Reuters - Chidambaram to woo investors in the US. This smacks of desperation on the Indian government's part, which leaves me unimpressed about India's future growth prospects.
BI - investors can easily sell gold ETFs. Interesting point: gold is more liquid now than in the 1980s. So we could see a lot more volatility and a lot faster drop. Even an overshoot of the fundamental price, maybe?
Geez, the kids of today. I was doing this 20 years ago, and it's nice to find out that someone else in the world thought that a massive wall of guitar like this is a good idea.
Sunday, April 14, 2013
Reformed Borker (Bork Bork Bork!) - God is making gold crash to punish you for voting for Fartbongo. Some great jabs here from a professional asshole. I love it. Here are some quotes for those of you who won't click through because you prefer remaining willfully blind to what's going on around you.
I promise, should a torrent of plague and genocide wash across the land on a roaring floodtide of blood and economic catastrophe, your stupid-ass "stock market gold" shan't be left unscathed.
I agree. That goes to Soros' comment that people have been let down that paper gold hasn't responded to fat-tail risk - because they don't understand that we haven't had the types of fat tails that gold responds to or that paper gold is not a hedge because it still carries counterparty risk.
The money printing is endless and central banks aren't even pretending they'll stop. Japan is daring you to look away, they'll denude every single forest in the eastern hemisphere before they stop making baby yens. So where is the inflation fear?
Where the fuck is your Gold Messiah now?
He's probably a little fucking annoyed at all the clowns who have calling for inflation. The clowns who called for it forever. The clowns who fail to realize that >80% of M2 is generated by fractional reserve lending and not the Fed, and all Bernanke did was expand his balance sheet to make up for the collapse in banking's M2. Where indeed is your inflation now? These clowns can't even give a timeline: rule one of predicting the apocalypse is never give a timeline.
But the Believers will conveniently fail to point out that stocks and real estate are also an inflation hedge - and a more productive one at that.
Again, don't bother with a counter-argument. Cos you haven't given one before, or if you did you mixed up "inflation" with an Argentina-style hyperinflationary collapse. Which, again, timeline or STFU.
with the old trend broken to bits, there's nothing left to discuss.
Gold is fucked right now. And therefore the miners are fucked. I'm going to be curious which newsletter writers pick up on this before Monday.
Cue Forrest Gump.
Oh, and by the way... explorecos actually look really good right now. Um... as long as you can find one who actually has something other than moose pasture, of course....
Some weekend news, with commentary:
New Deal Democrat - indicators whipsaw back into positive territory. Judging by the people who have a clue, and not the goldbug idiots, the forward momentum in the S&P can continue with a fundamental underpinning.
Bespoke - key earnings reports next week. It seems to me that there's 3 points where earnings matter: in the first thick of reporting, then about the halfway point when the trend of beats & misses supposedly has developed, then at the end when you can sum up how it all worked out. Any one of those 3 points is where you can develop a rollover.
Ritholtz - 15,000 point round trip. Barry thinks the US remains robust, and I've not seen any negativity gain traction for more than a day or two, so I think the S&P looks positive. It could just peak and churn for a while, though.
BI - the Japanese carry. An apparently intelligent article on what to expect Abenomics to do to world markets, and what not to expect.
India Reuters - Indian economy struggling for momentum. Don't expect to get bailed out by India til they're well turned around. Which might require the end of Manmohan Singh.
I've slept on this for a couple days, and now that someone in the comments prodded me, here's my first take on gold:
Like I said before, gold has a fundamental price (where supply and demand get balanced) and a speculative premium. So here are my ideas.
Regarding the fundamental price and physical supply and demand:
1. A few sources (the Aussies I linked to, for one) are calling for increased supply in the next 2 years as a few new mines come on line (Pascua Llama, Oyu Tolgoi, and some Chinese and Russian mines that Brent Cook apparently doesn't know anything about cos he hasn't been talking about production from China and Russia).
2. India's economy is weak and is a notoriously difficult ship to turn around.
3. China continues to fight kleptocracy.
4. EMs have hit a brick wall in inflation. They are now struggling to maintain growth.
5. GLD's going to continue bleeding into the physical market. Prices dropping are always a signal to sell.
6. Who knows, maybe this also brings more scrap to market. It's possible.
Regarding the speculative premium and paper demand:
1. The argument for Friday's puke in the commods is that Japanese banks have to liquidate positions to maintain their VaR. It's entirely a paper move I think, since a recovering US and the prospect of a recovering Japan should be ultra-bullish for commodities; but paper is paper.
2. GLD is seeing continued selling and has a lot of supposed gold left in its vaults still to puke.
3. Comex gold is disappearing, because nobody wants to trade it anymore.
4. Now that $1500 is broken, gravity takes over, and everyone can see this. If a trader didn't get out of paper gold before, he's getting out now.
So now I have to ask, what's the speculative premium on gold? What's the fundamental price? Ignoring temporary effects like GLD liquidation and just looking at the steady state, if there's been a decrease in demand and increase in supply, maybe we're looking at $1300.
"Cash costs" can go fuck themselves: Chinese and Russian mines will continue to expand to create oversupply, like we've seen in other metals already. The dinosaurs like Barrick will get squeezed til they have to shut down mines, and supply will continue from where it's cheapest. Your marginal cash cost to meet the lowered demand might be around $1200.
Now if you also factor in the temporary effects, like more GLD liquidation and paper forcing down the physical price, maybe we see gold temporarily overshoot the marginal cost line? Where does it end then, maybe $1000?
That would be a bottom in gold. Eventually, I would expect the collapse in commodity prices could maybe re-ignite EMs and we get a strong turn-around; also, a stronger US and a resurgent Japan would also drag up the EMs by their coat-tails; unless that's not how it works? I'm starting to doubt that now, because you seem to need a weak US for strong EMs.
Also, long-term, there's nothing in the gold pipelines. Unless it's all in Russia and China. Ask your analyst if he knows what's going on over there.
Also, like Rogers says, either you have an EM/commodity bull or you have a US equity bull.
If you want to argue against this with timing arguments, or TA, don't bother. Seriously, keep it to yourself. Things are different this time:
1. We have a globalized marketplace now. That drastically changes money flows and relative economic performances.
2. We have the Bernanke/Abe monetary policy now. You were supposed to see a worldwide depression, and it was avoided; this changes things.
Does that even mean that Rogers' theory won't work anymore? Possibly. We'll have to see.
In any case, gold is broken til it bottoms. So can I go one step further and give you a timeline, not just stupid opinion that is always right once in a century?
Sure. I want to see gold mines shut down. Big ones. Lots of them.
When that happens you're at a bottom. Not before.