Daily Digest

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Daily Digest 10/30 - We The Economy, Peak Gold Is Here to Stay

Thursday, October 30, 2014, 11:06 AM

Economy

One in four British children are living in poverty... worse than Poland and Portugal, reveals damning Unicef report (Yoxa)

Calculations are relative to average income – so Britain appears to be worse than countries where most people are poor, because average incomes in the UK are higher.

In the latest of a succession of highly critical reports about Britain by UN agencies, Unicef said child poverty in the UK increased by 1.6 percentage points between 2008 and 2012 to 25.6 per cent.

World's richest man would take 220 years to spend his wealth (jdargis)

The global report on inequality released by the charity on Wednesday, warns that the “billionaire boom is not just a rich country story”. India, which had two billionaires in the 1990s now has 65, while by March 2014 there were 16 billionaires in sub-Sharan Africa.

We The Economy (jdargis)

In the current economic climate, the need for citizens to be engaged and informed is greater than ever. Distributed digitally, across multiple platforms and in theaters, WE THE ECONOMY will do both... and best of all: it’s available everywhere, to everyone.

The Fed Has Not Stopped Trying to Stimulate the Economy (jdargis)

This number is important, because the Fed believes that it is the total stock of the securities it holds that influences long-term interest rates, not the flow of new purchases. (This perspective is sometimes called the “stock view,” and while it has been endorsed by many Fed economists, some market players remain unconvinced. I am not persuaded by their counterarguments.) Because the Fed plans to continue to hold these assets, you should expect long-term interest rates to remain low, making it cheaper for businesses and families to borrow.

Don’t Gorge on Beef Just Yet: The End Of High Beef Prices (Tyler K.)

This doesn’t just apply to steakhouses, though. Just last week, McDonald’s noted in their investor conference call that beef contributed to a 3% overall increase in the cost of meat and dairy products. The fast-food chain also noted that margin pressure will continue through the end of the year.

Other restaurants that use a lot of beef have watched their profits — and stocks — decline.

Investor Alert: Disinflation And Slower Monetary Growth (Taki T.)

The signal switched to “neutral” at the beginning of August and then very quickly it indicated “disinflation” once again. A rather dramatic move in the USD, commodities, gold and silver followed. As can be seen on the following chart, the signal works well in real-time.

Oliver Gross Says Peak Gold Is Here to Stay (Kevin J.)

The wave of zero-interest liquidity washing over the financial world could result in a short-term gold bottom of $1,000 per ounce, reports Oliver Gross of Der Rohstoff-Anleger (The Resource Investor). The good news is that Peak Gold is here to stay, which means that midtier producers will soon be desperate to buy low-cost, high-quality deposits. In this interview with The Gold Report, Gross argues that this could be the opportunity of a lifetime for contrarian investors, and suggests a half-dozen best bets to be taken out.

UK Renewables May Be Turning The Tide (Evan K.)

With the exception of geothermal energy most forms of renewable electricity generation have an intermittency to their delivery. Even hydro-electric power can fall short in periods of drought or low rain fall as the Chinese can attest to on the Three Gorges dam across the Yangtze River. Hydro, though, is generally taken as the dream power source. Usually large, sustainable for long periods of time, non-polluting - apart from the millions of tons of cement used in the construction phase - and, once built, environmentally acceptable.

Gold & Silver

Click to read the PM Daily Market Commentary: 10/29/14

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

13 Comments

thc0655's picture
thc0655
Status: Diamond Member (Offline)
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Posts: 1512
Silver down 5%

Silver is down about 5% today.  And why?  Because of a public relations statement from the Fed?  If that's all, that's ridiculous.  I've been waiting until a stock market crash before buying a bunch of silver, but I'm seriously considering buying a chunk Fri morning.

DaveF, JimH, ChrisM: do you guys have any timing insights?  Even if the price goes down again after a stock market crash (like 2008) this still looks like a good buying opportunity.  

Tom

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
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Posts: 1148
THC?

I just bought 100 ounces

Petey1's picture
Petey1
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Joined: Sep 13 2012
Posts: 58
Silver how low can it go?

Lol every time I buy it goes lower. Just picked up some at 17 dollar's. It feels right but who knows anymore.

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
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jgritter's picture
jgritter
Status: Gold Member (Offline)
Joined: Dec 13 2011
Posts: 273
100 ounces

I also just bought 100 ounces.  At these prices it seems inevitable that there's going to be an inventory squeeze at some point.  Days, weeks?  Dunno. Been buying all the way down from $35.   Call me chicken, but I'd rather have 1000 ounces in my hands at a cost average of $25/oz then hold out for 15 and miss the boat.

John G.

sand_puppy's picture
sand_puppy
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Posts: 1754
Silver coins vs rounds

I was surprised to day to find that though silver spot is $16.50, the cost of 1 oz Silver Eagles coins is $19.35 and "rounds" like the Perth Mint Saltwater Crocodile is $19.10 or so.

Is this kind of mark-up the norm?

jgritter's picture
jgritter
Status: Gold Member (Offline)
Joined: Dec 13 2011
Posts: 273
Yes

The premium is just part of the price.  It will be interesting to see if, as the spot price goes down,  the premiums go up.  $16.50 spot with a $3.50 premium, $20.00.  $15.00 spot with a $5.00 premium, $20.00.  $12.50 spot with a $7.50 premium $20.00.  Whatever TPTB may say the paper price is, the physical price is $20.00.  More interesting than that will be if spot is $15.00 with a $10.00 premium and buyers balk, "What!  $10 over spot!  Outrageous!  I won't pay it!"  "Fine" says I, "I will", knowing that at some point in the future I will have a 50, 100, perhaps 150 dollar or more piece of silver and Mr. Balky will still have $25 of fiat, if he hasn't blown it on lottery tickets.

John G

 

 

Montana Native's picture
Montana Native
Status: Silver Member (Offline)
Joined: Mar 17 2009
Posts: 162
Metal Purchase

My comments keep getting sent to moderation , so I tried a new subject line. Anyways, metals look they will have a great purchase point this weekend.

Arthur2014's picture
Arthur2014
Status: Bronze Member (Offline)
Joined: Jul 17 2014
Posts: 56
probabilities versus risk and chance
thc0655 wrote:

Silver is down about 5% today.  And why?  Because of a public relations statement from the Fed?  If that's all, that's ridiculous.  I've been waiting until a stock market crash before buying a bunch of silver, but I'm seriously considering buying a chunk Fri morning.

Dear Tom,

Yes. That sounds indeed bizarre / strange. But as always there are already approaches to explain the phenomenon:

John Casti wrote about the importance of social moods:

Mood Matters: From Rising Skirt Lengths to the Collapse of World Powers

Hardcover: 210 pages

Publisher: Copernicus; 2010 edition (July 7, 2010)

ISBN-10: 364204834X

ISBN-13: 978-3642048340

Any single news, any piece of information, any statement and utterance can be interpreted and must be interpreted. They must be put in a context and weighted relative to other information. According to Casti the dominant mood in a society can influence or even direct the interpretation of trivial events and utterances.

If the silver price is in a solid downtrend then any event and non-issue could be taken as an occasion for further selling. In an uptrend it would be the opposite.

 

I can’t teach anyone and I don’t want to teach anyone by the following. I have no personal experiences, I don’t trade any good at the stock markets and I am only interested in a general understanding of strategies in handling risks.

Of course, buying physical silver coins is not trading at the stock market or futures market. It is only for long-term investors. Nevertheless I could learn something from a few remarks by a professional trader in Europe.

As far as I understood there are at least two independent parameters they take into account before opening a trading position:

1.) The probability for gain respectively loss: That is the probability (quantified by a value in the range between 0% and 100%) that the market price will take the very direction (upward or downward) the trader expects it to take. The probabilities are derived from past data.

2.) Risk versus chance: That is the amount of the potential maximal gain respectively the amount of the potential maximal loss as percentage relative to the invested money if the price movement exhausts its expected potential..

One must not mix up both. Further one should never be blinded by looking only at one of the parameters and disregarding / overlooking the other.

In many cases both parameters are antagonists: If one is higher the other is lower. But in the worst cases the probabilities for the price moving in the opposite direction are high and the losses are much higher than the expected gains in the winning cases.

At least that European trader does not open a position if and when the current market price is near to an important horizontal support level. He simply stays outside the market.

His practice / rule of thumb seems at least not so uncommon among professional traders.

He does not even try to catch a bottom or the bottom. Since opening a position near to an important horizontal support level means that any such trade would at least have an unfavorable risk versus chance ratio:

If the price falls below the support level then the price will rapidly fall much deeper because falling below the support level will trigger the liquidation of many further short positions placed directly beneath the support level precipitating / releasing a veritable crash.

If the support level holds and the trend turns then the upward steps won’t normally be so considerable as the downward jumps would be in the opposite case.

It has to do with the empirical fact that stock market prices somehow jump (3 $ higher, then 7 $ lower, then one $ higher, then 5 $ lower, …). They don’t move steadily (one $ higher, and then another $ higher, and then another $ higher, …).

The mathematician Benoit Mandelbrot wrote about that:

The Misbehavior of Markets: A Fractal View of Financial Turbulenc

Paperback: 368 pages

Publisher: Basic Books; annotated edition edition (March 7, 2006)

ISBN-10: 0465043577

ISBN-13: 978-0465043576

 

At specific levels there are stop losses are placed with considerably more volume than at other levels. At least some professional agents have legally access to these data. They know in advance the marks and volumes of decisive stop losses. Perhaps davefairtex could help us explaining more about it.

That trader in Europe follows more or less the inverse strategy by waiting until the price history is more unambiguous. Whether the price recovers at the support level turning into a new upward trend or the price falls below, he waits until the probabilities for a stable trend are higher. So he lowers the dangers related to 1.). It is the very simple strategy of trend following.

His strategy is to avoid respectively to constrain losses. Waiting until the trend has clearly turned upside after bottoming out diminishes his potential for gains (= upside potential) a bit but considerably diminishes his downside potential (=losses). The aim is not to become very wealthy, let alone by a single stock market trade. The aim is to survive (financially) by avoiding bankruptcy.

According to him a common mistake committed by small savers is to show up / to buy / to invest when prices are around important support levels and even after breaking through them thinking that the worst is already over whereas the real crash just starts.

As he said, that apparently happened in April 2013 when gold really crashed. The volume of the sell-off at the (futures?) markets was allegedly / reportedly enormous. But at the same time the physical demand by small savers in the retail seller shops soared – at least in Western Europe. They took the prices mistakenly for a lifetime chance. But the downturn continued.

As far as I read in davefairtex’s comments an important support level for gold seems to be around 1,180 US$. Concerning silver I don’t remember relevant horizontal support levels.

Even if one wants to hold one’s physical precious metals for life or wants to hand them down to one’s children, one has to make sure that one has not to sell them involuntarily in distress.

 

I beg everyone’s pardon if my style of writing appears somehow schoolmasterly.

Best regards

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1148
why i buy

Hard as it may seem to believe, we, my family, needs nothing. our lifestyle has always been one of resilience. we don't need alotta cash, so i buy PM's as a store of wealth/labor. our livestocks and lands are the largest part 80% of net worth, but the rest is...whatever.

robie,husband,father,farmer,optometrist

ps. i bought another 100ozs

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1148
of little note

 one 450# calve will buy a bit more than an oz. of gold delivered to the door. our last load brought 270.00$/100lb.  live weight. i'm interested in how long beef prices will remain this high. i guess we're gonna keep selling beef and "eat more chick'n".

robie

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1512
Silver down almost 2.75% again today

Thanks for all your comments.  I had to wait until this morning to get assets moved around, and I was rewarded with another 2.75% drop in silver.  Me and a co-worker went in on an order together (Texas Precious Metals). We got in at $1166 gold and $15.85 silver.  And I'm not out of dry powder.  Still hoping for a brief period of lower prices after a stock market plunge.

Could part of the drop have been caused by Alan Greenspan whose remarks indicating there is going to be trouble in the economy as the Fed tries to exit and saying that this is a good time to buy gold hit the media the last couple of days?  For the conspiracy minded, maybe the TPTB saw Greenspan's remarks and slammed the precious metals down to discourage would-be investors.  Then the "great" 3.5% US GDP print might have added fuel to the fire.  Are people that dumb?  Most of the GDP was accounted for in increased government spending for weapons and military!  And overnight Japan announces a huge money printing flood will now begin.  They may actually be printing the money to buy nearly 100% of the government's bonds each month (100% monetization) from this point on!!  Well, there's a laboratory experiment in real time we can all watch with baited breath.  So, if the US GDP print and Japan's money printing announcement caused the PM's to collapse, I'm thrilled.  I know how that is going to end.  And if Japan blows up before we do, that will create a "teachable moment" for us and the rest of the world.  Will we pay attention?  We can always hope we will pay attention (and that it won't be too late for us, which it probably already is).

Tom

"Welcome to the Hunger Games. And may the odds be ever in your favor."

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
why silver dropped

Tom-

Silver is down about 5% today.  And why?  Because of a public relations statement from the Fed?  If that's all, that's ridiculous.  I've been waiting until a stock market crash before buying a bunch of silver, but I'm seriously considering buying a chunk Fri morning.

From the timing of the intraday moves, I didn't see silver drop for any particular reason - i.e. it wasn't tied to any report release.  The move started in asia, and it just had a waterfall move lower all day long.

To me, the story is not about the selling.  The timing of this particular move is probably just a short that thought they could push prices lower and make money.  (Turns out they were right).

The story to me is about the lack of buying.  Nobody saw these fantastic low prices and backed up the truck.  When buyers show up, you know it.  But that's not what happened.  Sentiment is still horrible, every inflation number shows "no inflation", and my sense is, prices just aren't low enough to bring in the buyers off the fence regardless of inflation.

Will this happen at silver 14?  At 10?  At 5?  Who knows.  At some point, the price will be so low, they'll come pouring in, and the bottom will be unmistakeable.   Volume will be huge, the shorts will get their faces ripped off, and we'll all say afterwards "yep, that was the bottom" and momentum will reverse and crazy things will happen on the way up and we'll ask "boy, what caused that move higher?" and nobody will know but Bloomberg will pretend to have the answer.

But we aren't there yet.  In a downtrend, stuff like this just happens.  Which snowflake caused the avalanche?  Its hard to say.  The six failed rally days in October were one clue from the market that silver was weak, and we saw those long before the breakdown.

FWIW, the buck jumping +1.00 today (a massive move) making new highs at 87.24 is definitely not helping either.

One other factor: SPX is looking quite strong.  It has been an almost straight-line move higher since the 1820 lows.  That is sucking money away from everything else, including PM.  And the rally in SPX started Oct 20 which ties in with the weakness in PM on or about that date.  Might SPX strength result in PM weakness?  Its possible.

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