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Off the Cuff: Abnormal Times

Our institutions no longer serve our interests
Thursday, April 24, 2014, 2:47 PM

In this week's Off the Cuff podcast, Chris and Jim discuss:

  • The Dimming of US Legitimacy Abroad
    • Americans have a growing fear & distrust of our own foreign policy
  • Charity Begins at Home
    • Why are we sending $ abroad that is much needed at home?
  • Abnormal Times
    • We are so far from fundamentals that a correction is guaranteed
  • This Weekend's Seminar at Rowe
    • Kunstler will be participating
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Why Demand Will Become Even More Scarce

Prospects for disinflation in 2014
Tuesday, April 22, 2014, 1:14 PM

Executive Summary

  • Anemic employment & wages growth depresses the odds of near-term interest rate hikes
  • Why energy costs increases are experiencing a lull, keeping inflation lower than many expected
  • The demographic arguments for deflation
  • Why the US is becoming more vulnerable to a repricing of natural gas -- vs oil -- in the coming decade

If you have not yet read Part I: When Every Country Wants to Sell, Who Buys?, available free to all readers, please click here to read it first.

The most recent US jobs report was once again a disappointment, despite the headline number of 192,000 jobs created. Over the past two years, the economy has reliably created about 150,000 jobs per month. This has been just enough to keep up with population growth, but alas, not enough to put the long-term unemployed back to work. The concerning data in the report came in the details of the jobs created: as usual--and this has been a trend for several years now--mostly in the lower wage sectors. A few wrap-up tweets from Dan Alpert of Westwood Capital summed up the facts rather nicely:

Other notable observations from recent trends in US jobs reports include the fact that job creation in 2013 was no higher than in 2012. Not exactly an encouraging trend for those who would be looking for inflation risk, or strong growth in 2014.

But perhaps worst of all has been the number of workers leaving the workforce. Part of this can be explained, of course, by demographic retirements. It's no secret that the US has an aging population, and there's a bulge of retiring workers that will admittedly create some gaps in the labor market over the next decade. But the large numbers of workers exiting the workforce is also explained by discouraged workers, and that unemployment benefits for many have started running out.

What many in the public do not understand, is that workers taking unemployment checks are counted as active seekers of employment. They are added to the composition of the workforce, and when they continue to take unemployment checks but do not find work, they serve to keep the unemployment rate elevated. But when unemployment benefits expire, and workers leave the workforce, the unemployment rate may... » Read more

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Off the Cuff: The Ukraine Powderkeg

We're playing for higher stakes than make sense
Thursday, April 17, 2014, 9:22 PM

In this week's Off the Cuff podcast, Chris and Mish discuss:

  • The Ukraine Powderkeg
    • US policy is unrealistic & hypocritical
  • It's All About Resources
    • Expect more Ukraines as world powers increasingly compete
  • Government Overstep
    • At what point is too far "too far"?
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Anti-Gold Propaganda Reaches Fever Pitch

Take care to read through the 'framing'
Wednesday, April 16, 2014, 3:03 PM

There are times when the anti-gold propaganda in the western world, or at least the US, becomes just too much to let it pass by. I usually let it roll off but sometimes it needs to be illustrated for what it is.

A deliberate attempt to get people in the west to lose faith in the ability of gold to protect one's wealth, presumably with the side benefit of causing those same people to either not purchase gold at all, or to sell what they already have. » Read more

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Market Jitters

Is caution returning after a 3-year hiatus?
Sunday, April 13, 2014, 1:21 PM

The global stock markets have been trading as if risk has been entirely removed the equation. Fundamentals have had zero impact on the prices of equities as they have gone up on good news (hey, the economy is improving!) as well as bad (hey, there's more stimulus on the way!).

We saw this same level of rationalization in play in 2006 and 2007. It was as frustrating to those with an eye towards rational thinking then as it is today.

Only today is worse. A lot worse. » Read more

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China's Demand for Gold Has Trapped The West's Central Banks

Kill the banks or kill their currencies?
Wednesday, April 9, 2014, 6:12 PM

Every once in a while, an Off the Cuff interview is so important that we decide to make it available to the entire public. This is one of those occasions.

In this week's Off the Cuff podcast, Chris and Alasdair Macleod build on the insights laid out in Chris' recent mega-report last week on gold: The Screaming Fundamentals for Owning Gold. And specifically, they delve deeply into the poorly-understood topic of why Chinese demand has become such a game changer in recent years. » Read more

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Using Gold to Protect Yourself In Advance of the Greatest Wealth Transfer of Our Lifetime

A how-to guide
Friday, April 4, 2014, 9:44 AM

Executive Summary

  • The case for gold's manipulated price, and how that can be used to work to your advantage
  • Calculating the "floor" beneath which gold will likely not fall
  • The coming Great Wealth Transfer, which almost certainly will occur in our lifetime
  • How much to invest in gold
  • How to invest in gold
  • Exit strategies: when will it make sense to sell your holdings? And what should you exchange them for?

If you have not yet read The Screaming Fundamentals For Owning Gold, available free to all readers, please click here to read it first.

Market Manipulation

Before we can address the idea of storing some of your wealth in gold (and/or silver) we have to visit the topic of market manipulation. As many of you are aware this is an area of exceptional controversy, although I am not entirely sure why given the distressing laundry list of recently proven, and often grotesquely brazen, market manipulations performed by big banks in many other market areas.

Big banks have been proven or alleged to have manipulated energy markets, LIBOR, currency markets, the global oil market, and aluminum, among other things and all of these transgressions happened after they got caught engaging in forgery and fraud during the mortgage swindles of 2005 to 2007.

On one side of the manipulation debate, we might place the Gold Anti-Trust Action (GATA) organization alleging constant official manipulation to suppress the price of both gold and silver, and on the other we might place Jeff Christian, managing director of the metals research firm CPM, whose position is that all price movements can be explained by ordinary market forces.

I happen to be somewhere in between those views as I think both legitimate and illegitimate forces are part of the landscape. But I am heavily tilted towards market manipulation as the explanation for why gold (and silver) tend to move downwards violently from time to time and why the prices for each are not higher than they currently are.

The SEC has a clear definition of market manipulation and I’ve reproduced it here but swapped out the words ‘security’ and ‘stock’ with ‘gold’ to make it that much clearer:

Manipulation

Manipulation is intentional conduct designed to deceive investors by controlling or artificially affecting the market for gold. Manipulation can involve a number of techniques to affect the supply of, or demand for, gold. They include: spreading false or misleading information about gold; improperly limiting [or expanding] the supply of gold; or rigging quotes, prices or trades to create a false or deceptive picture of the demand for gold. Those who engage in manipulation are subject to various civil and criminal sanctions.

(Source)

I also added the two words "or expanding" because that condition also applies to commodities. 

How likely is it that some firms have been trading in gold in such a way as to create a false, rigged, or deceptive picture of gold (and silver) prices?  It’s all but proven in a court of law, but don't hold your breath waiting for that final proof, as the US court system has vigorously defended banks from such lawsuits for decades. 

I also happen to believe that gold is officially suppressed in price because it's what I would do if I were at the helm of the Fed and cared only for bolstering confidence in the dollar specifically, and fiat currencies generally, making the stock market a more attractive alternative, and also lending credence to political and monetary decisions (for the record, I am merely placing myself in the mind of the enemy here). Given that set of mandates, I would order up some hefty gold suppression because gold has a very bad habit of casting a bright light on rotten monetary and fiscal policy. 

Suppressing the price of gold just makes so much sense that I would consider it a form of derelict strategic weakness if the Fed et al. were not doing it.

One of the more important times to suppress the price of gold would be when... » Read more

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Off the Cuff: Welcoming the Uproar Over HFT

Finally(!) the world's awakening to this abuse of the system
Thursday, April 3, 2014, 1:25 PM

In this week's Off the Cuff podcast, Chris and Mish discuss:

  • HFT Hub-bub
    • Finally(!) the world is awakening to this abuse of the system
  • Poking the Russian Bear
    • Our foreign policy is looking misguided & dangerous
  • Magical Stock Price Levitation Continues
    • You can't deny today's prices, but neither can you justify them
  • HFT Uproar As The Pin That Pricks The Bubble?
    • Market tops happen when there is sentiment shift
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The Implications of a 'War of Elites'

Will we be collateral damage?
Monday, March 31, 2014, 7:14 PM

Executive Summary

  • The Deep State, and its dawning realization that Wall Street is a foe vs an ally
  • Why Wall Street's threat to the dollar hegemony is of such concern
  • History gives us many examples to predict a 'war of elites' (e.g. Wall Street vs the Deep State) is highly likely
  • Who will lose? And what implications will it have for the rest of us?

If you have not yet read Have We Reached Peak Wall Street?, available free to all readers, please click here to read it first.

In Part 1, I sketched out why the financial sector—the Fed, Wall Street and “too big to fail” banks—pose a strategic threat to the nation, as their policies threaten one key foundation of American pre-eminence, the U.S. dollar.   Should money and credit creation cause the dollar to lose its reserve status, the nation would lose the fundamental advantages that go with being able to print a reserve currency.

I then suggested that the Deep State might eventually wake up to the strategic threat posed by a self-serving financial sector, and this would lead to a showdown between the financial Elites and the Deep State.

The Systems-Level view: the S-Curve works on Wall Street, too

Long-time readers know that I often refer to systems-level dynamics, one of which is the S-Curve, which traces the rise, maturation and decline/crash of systems both natural and human-designed. An astonishing array of systems has been found to follow an s-curve, from the spread of infectious diseases to financial bubbles.

Why would Wall Street be uniquely immune to these systemic forces? I submit that Wall Street’s power has topped out and is about to decline precipitously, just like any other system which has over-reached by sucking its habitat dry.

I think we can chart Wall Street’s S-Curve thusly... » Read more

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Off the Cuff: Preparing To Ride Camels

Life at the bottom of the energy cliff
Thursday, March 27, 2014, 8:44 PM

In this week's Off the Cuff podcast, Chris and Charles discuss:

  • Preparing To Ride Camels
    • What less net energy looks like for future generations
  • Energetic Insanity
    • We're going to make more bad choices before we make good ones
  • Communicating Hard Truths
    • What works and what doesn't
  • Community As The Master Asset
    • Your best bet if you could only pick one

"My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel."

~ Rashid bin Saeed Al Maktoum

The above quote comes from a former Prime Minister of the United Arab Emirates who was also the Emir of Dubai and is credited with making that that small settlement into a regional commerce hub. Sheikh Rashid realized even back in the 1970's, that the region's massive oil supplies would last only a few generations.

In this week's Off the Cuff, Chris and Charles discuss the implications of... » Read more