PM End of Week Market Commentary - 7/11/2014

davefairtex
By davefairtex on Sat, Jul 12, 2014 - 7:26am

On Friday gold closed up +3.70 to 1340.00 on light volume, while silver was up +0.03 also on light volume.  While trading was subdued in a tight range for both metals, the bias was to the upside, and gold especially closed at its high for the day.  It was a reassuring close to an interesting week.

For the week gold was up +19.60 [+1.48%], silver +0.32 [+1.51%], GDX up +3.09% and GDXJ up +6.13%.  It was a solid bullish week across the board.  Overall, the metals have not had a down week in the past six weeks - and the mining shares especially are looking at an important breakout point that is relatively close at hand.

Miners

This week the miners broke cleanly out of their consolidation range, with both GDX and GDXJ moving higher on strong volume.  Thursday there was a high volume selloff after the breakout, but Friday saw the bulls "buy the dip" on some decent volume.

First, a look at the GDX daily chart and the state of our Wednesday breakout.  You can see Thursday's bearish engulfing candle was not confirmed by a close below 26.50 - in fact, the rally on Friday had good volume and good price movement.  This is a good sign.

Looking ahead for GDX, we can see the previous high of 28 that will act as resistance.  A breakout above 28 seems both doable if current buying patterns continue, and would be quite bullish.  We need the weekly chart to see why.  You can see in the chart below the pattern of "lower highs" dating back to early 2012.  The most recent lower high was in March of 2014, at GDX 28.

A move of GDX above 28 would invalidate the "lower highs" pattern, ending the downtrend. These sorts of things are noticed by disciplined traders who wait for other buyers to show up before tossing their money into the ring.  A break above 28 would be more evidence the longer term guys watch for - in addition to the golden cross we saw last week - and it could result in a lot of new money rotating into mining shares.

US Equities/SPX

This week, SPX was down -18 to 1968, off -0.90%.  SPX dropped three days out of five, but the losses were minor, and three different times SPX has found support on its 20 EMA.  From a chart perspective, SPX still appears quite bullish.  All 3 moving averages are rising, and price is above the top-most average, using it as support.  Regardless to the chorus of bearish talk - it is probably most prudent to wait for the chart to give off at least some bearish signals before taking any action.

The USD

The buck largely went nowhere this week, down -0.04 to 80.22.  A few months ago the buck managed to break out of its (bearish) descending triangle formation to the upside, but with only modest enthusiasm.  All three of its (weekly) moving averages are still heading lower which gives me a general feeling of bearishness for the buck - which over time should help gold & silver.

Rates & Commodities

Bonds were up sharply this week, with TLT closing up +2.62%, invalidating the lower low made a week ago.   After a few days below the 50 MA, TLT is now clearly back above it, and its 20 EMA, and all 3 moving averages are still moving up.  TLT is now pretty clearly back in a bull mode.

After a sharp rally from January-April, the commodity index has been correcting, culminating in this week's drop of -2.20%.  While the 2 longer term moving averages are still moving higher, the commodity index needs to find support soon to remain in a medium & long term uptrend.

Commodities tend to have an effect on PM prices, which is why I follow them.

Physical Supply Indicators

* Premiums in Shanghai have been tracking lower up until Friday; now Shanghai gold premiums are up +1.34, now trading at a +0.84 premium to COMEX.  Given gold's recent rise, that's bullish.

* The GLD ETF gained +3.66 tons, with 800.05 tons remaining.

* Registered gold at COMEX is up slightly, +0.25 tons to 28.65 tons.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on July 11) of 1338.80 and silver 21.49:

  OUNZ 13.37 -0.07% to NAV
  PSLV 8.81 +5.50% to NAV [up]
  PHYS 11.11 -0.21% to NAV [up]
  CEF 14.84 -4.34% to NAV [up]
  GTU 47.85 -3.32% to NAV [down]

ETF premiums were mostly up, with PSLV premiums up almost 2% this week.

Here's a chart of PSLV:SLV ratio, which shows visually the climb in PSLV premium over SLV.  Its really impressive.  However, its a bad idea for silver longs to expect PSLV to retain its premium forever - Eric Sprott always runs out and buys more silver for his fund whenever the premium rises too high.

Futures Positioning

The COT report is as of July 8th.  Silver Managed Money shorts covered -1.5k contracts, and went long by +6.2k contracts; in less than a month, Managed Money has gone from historically net short to historically net long.  This has been an incredibly large change for Managed Money over a very short period of time.  Producers have changed their position much more modestly.

Gold Managed Money shorts covered 2.3k contracts, and went long by +5.5k contracts, resulting in a net position that is right in the middle of its historical range.

The overall picture, however, is one of relatively small short covering, and larger longside buying by Managed Money.  This is exactly what we need to see to support continued movement higher in gold & silver at COMEX.

Moving Average Trends [20 EMA, 50 MA, 200 MA]

Gold: short term UP, medium term UP, long term NEUTRAL.

Silver: short term UP, medium term UP, long term NEUTRAL

Both gold and silver remain above their 20 EMA, with the short and medium term averages climbing.  The long term 200 MAs are flattening out.  Soon they will start rising, if PM can remain where it is.

Summary

After taking a rest last week, PM broke higher, miners broke higher.  The whole complex is looking quite strong.

Looking at the various ratios and averages, gold and silver 200 MA have flattened; as a result, all averages are now either pointing higher, or neutral.  The gold/silver ratio continued dropping.  GDX:$GOLD continued moving up, so has GDXJ:GDX.  Right now - it all looks quite positive.

The COT reports this week continued showing Managed Money both covering short, and increasing long exposure, with the long buying outweighing the short covering in terms of total contracts.  This ties in nicely with a continued move higher in gold and silver.

Shanghai premiums are positive again even in the face of gold's rally, GLD tonnage has continued moving up,  ETF premiums are rising (and/or discounts are falling), especially strongly in PSLV.  Physical demand seems mildly positive, especially in the West.  COMEX and western (paper) gold buying in general still looks to be providing the main impetus for the move higher.

The PM market looks strong right now.  No signs of weakness, all systems go.

 

33 Comments

Jim H's picture
Jim H
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Thank you Dave

Very thorough review.  The big question is;  Is this it?  Is this the beginning of the next bull phase in metals and miners?  Is this the expression of infinitely printable fiat currency running, once again, to the safety of non-printable metals, and their in-ground depositories?  I hope that the chartology continues to bear this out in terms of the breakout above the trendline you mention.  

In a world of paper where almost everything seems subject to bubble dynamics, the metals and miners are one area that has been beaten down... eventually, the "market" will notice this.  The PSLV premium is a good sign, although I don't know whether this is folks deciding that they need Silver exposure in their brokerage accounts and simply choosing PSLV (vs. SLV) for it's obvious benefits (audited, deliverable bars stored outside the banking system in Canada) OR simply short covering (a form of forced buying that would be premium-insensitive).  Your point about the premium collapsing at times historically is well taken... but still, PSLV is an Island of safe metal in a sea of paper (SLV).  

Miners are getting very, very interesting.  One must have the personal constitution and commitment to ride out 5-10% down days... otherwise you will go mad.  These are the ultimate bucking broncos.  I am not sure why.. but they are.  There is much, much more upside than downside at these prices.  Personally, I have given up on trying to pick individual miners based on fundamentals like their latest oz/ton ore drill, etc.  I simply watch them all and let the market tell me which ones it likes (we are kind of alike this way, right?).  Right now MUX and TGD are acting very, very well.  Over time, SA and HMY have impressed me as well with their responses to the improving underlying metal price.  The Silver miners have exploded, EXK and GPL being standouts.  I have positions now in all of them.                 

KugsCheese's picture
KugsCheese
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I keep hearing the miners are

I keep hearing the miners are unloved and cheap.  But the P/E's I checked are all elevated vs the risk.  No thanks.

davefairtex's picture
davefairtex
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unloved & cheap

Kugs-

I keep hearing the miners are unloved and cheap.  But the P/E's I checked are all elevated vs the risk.  No thanks.

You may hear that miners are unloved and cheap, but not from me.  I'm not making any claims as to what is unloved, or cheap.  I just watch and report on money flows.  Money appears to be flowing into the PM mining sector.

That said, it can sometimes be a bit of a trap to focus on P/E ratios for cyclical stocks like the miners.  The P/E ratios (and dividends) look amazing at the tops, and terrible at the bottoms.  For the more steady grower stocks, P/E ratios make a lot more sense as a fundamental analysis tool.

Miners have been serial disappointers for a long time now, overpaying for acquisitions, letting costs run wild, diluting their shareholders, and so the market ended up beating them with a stick for a few years once the price of gold started correcting.  Have the miner management taken this lesson to heart?  Hopefully they have.  My guess is, cost-cutting in the industry and some better M&A discipline may have resulted in improvement, but only time will tell.

 

davefairtex's picture
davefairtex
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blessing the messenger

JimH-

I was wondering when you'd like one of my reviews.  :-)  I feel like I've been doing the same thing every day since August 2013, and its only the market that is now behaving differently.  I'm getting a "bless the messenger for reporting good news" effect.  But hey, I'll take it!

I have no idea if "this is it"; if I knew that, I'd be rich on a beach somewhere!  Still, its much more fun to be talking about breakouts rather than breakdowns, and things do look quite strong at the moment.  I'm surprised we haven't had a correction, to me that speaks of a real sea change in some part of the market.  There is no doubt doubt the shorts and the overhead resistance are both there, but the buyers clearly outnumber them.

I have tried to link the newly resurgent PM & mining industry with some sort of fundamental change in the outside world, but there aren't really any smoking guns for me.  I mean, think about it.  Fed is tapering.  To use goldbug logic, lower printing should result in a lower gold price.  That didn't happen, so clearly, the market's aggregate money flow isn't driven by simple goldbug logic.

Is it inflation in the US?  It does seem to be starting up, at least a bit.  Loan growth too, that's restarting as well.  But commodity prices are headed lower.  Its a confusing macro picture, one that doesn't lend itself to soundbite headline analysis of why we're headed higher.

So I go back to money flow and price/volume analysis, along with the ratios, the COT report, and the premiums.  None of those are providing us with any sort of ultimate truth, but it does reveal where Big Money thinks the truth might be.  And at that point, you can make your decision to either agree or disagree with what the Big Money is thinking.

As you say, miner price action is a bit on the crazy side.  My sense is, gold is a safer trade over the long haul, because of declining ore grades and increasing energy costs will probably hose the miners at the end of the day.  But - for now - I do hold mining shares.

The trick to not overstressing is proper position sizing.  If a 10% single-day loss in a junior miner results in your overall net worth dropping by 10%, most likely your positions are too large.  :-)  I certainly don't like to see that in my portfolio, so my mining shares are outnumbered by my cash and PM positions, at least at the moment anyway.

 

KugsCheese's picture
KugsCheese
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davefairtex wrote:Kugs-I
davefairtex wrote:

Kugs-

I keep hearing the miners are unloved and cheap.  But the P/E's I checked are all elevated vs the risk.  No thanks.

You may hear that miners are unloved and cheap, but not from me.  I'm not making any claims as to what is unloved, or cheap.  I just watch and report on money flows.  Money appears to be flowing into the PM mining sector.

That said, it can sometimes be a bit of a trap to focus on P/E ratios for cyclical stocks like the miners.  The P/E ratios (and dividends) look amazing at the tops, and terrible at the bottoms.  For the more steady grower stocks, P/E ratios make a lot more sense as a fundamental analysis tool.

Miners have been serial disappointers for a long time now, overpaying for acquisitions, letting costs run wild, diluting their shareholders, and so the market ended up beating them with a stick for a few years once the price of gold started correcting.  Have the miner management taken this lesson to heart?  Hopefully they have.  My guess is, cost-cutting in the industry and some better M&A discipline may have resulted in improvement, but only time will tell.

 

The mining sector (not just PM) tanked in 2008/2009 more than the market as a whole.  Once that happens again I may buy because that will be the real reset.

Jim H's picture
Jim H
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Kugs...

Using the HUI index as a surrogate for the miners... they are presently at the level they fell to in that 2008 dump you are talking about.  

  http://finance.yahoo.com/echarts?s=^HUI+Interactive#symbol=^HUI;range=my

Everyone must do their own due diligence.. I am not going to try to convince you or anyone else to get in miners.  They can of course go down further from here.

Miners are metal in the ground.  The paper system that controls/suppresses the price of the metals will break down... and then you will have two forces unwinding at once;

A.  manipulated prices resetting to true supply:demand pricing

B.  Paper promises for Gold, unallocated, etc., being extinguished through default or cash settlement... meaning that the market will suddenly realize there is much less metal than there are promises of metal. 

The miners will eventually have their day.  Much of the action will come before the PE ratios respond.  I have been patient for the last few years.. but I am smelling blood now.  

 

Jim H's picture
Jim H
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Dave..

I am just happy that you view Gold through a lens more similar to mine how.. i.e. that paper and banks are not to be trusted generally.  Gold and Silver are trustworthy.  

Most people, even most financial people, don't understand Gold because they don't understand fiat currency.  You can't develop the correct appreciation for Gold if you don't appreciate how rotten to the core debt-based fiat currency is when it's control is placed in the hands of stateless central bankers.   

I posted on Japan last night..  and I suggest the answer to why Gold is charging ahead, even in the face of the taper, is there;

http://www.oxford-royale.co.uk/articles/japan-country-crisis-abenomics-s...

What is striking about Japan’s quantitative easing scheme is its size. In April 2013, the Bank of Japan announced a programme of $1.4trn. To give that some context, this is not only equivalent to a quarter of Japan’s annual GDP, but also sufficient to buy every single thing produced in the whole of Australia for a year. It is a staggering amount, and not even the maddest Keynesian could claim that the programme was insufficient to generate growth under their terms. The result? Two quarters of growth followed by a sharp downturn, the cost of living at a five year high and record trade deficits every month since January last year. Not only is quantitative easing not working in Japan, but the scale of the Japanese experiment is such that both market and consumer is starting to realise that it won’t work anywhere at all.

That's it.  Right there.  Most of us have known from the beginning of all this central bank heroin that it would not work... because we have the Martensonian context of depleting resources and energy. But the rest of the world... they still trust that central bankers know what they are doing and that the world is infinite in the face of our plunder.  How silly.  But, as stated above... the market is starting to realize that organic growth is not ahead.  Just money growth.  Just inflation.  The turning point is now.. .it's not going to show up in your charts because it is a sea change.  It's not going to be a news story.        

Wildlife Tracker's picture
Wildlife Tracker
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Not all miners are created equal

Just a reminder, there are a lot of bad investments in the mining sector. US silver and gold is an example of a bad investment.

First Majestic (AG) and Buenaventura (BVN) are two examples of really terrific silver producer investments with a lot more upside than the physical metal. They are probably the two lowest cost producers out there which is a really important place to be going forward. Still, physical is probably the smartest place to be.

 

 

 

KugsCheese's picture
KugsCheese
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John Williams of SGS is still

John Williams of SGS is still sticking to his guns for a $ crisis this year.  If 2nd Qtr GDP with all the upside changes to the formula recently comes in negative he might hit a home run.   I will watch Rollover (movie from 1981) as the system unwinds.

davefairtex's picture
davefairtex
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hyperinflation 2008

John Williams has been projecting imminent hyperinflation for a decade now.  Eventually, just like a stopped clock, he'll be right.  But if you had traded on his specific predictions (say, bought puts with particular expiration dates), you'd be broke by now many times over.

He has provided a valuable service - raising consciousness on the problems in our current CPI - but from all I see, his predictions cannot be taken seriously.  Any more so than Ben Bernanke, who claimed subprime remained contained, and all the other crap he spewed about how things would play out that turned out to be so dreadfully wrong.

If we hold Bernanke's feet to the fire for his vast collection of failed predictions, and use those failures as a way to measure his understanding of how the world really works (clearly, its quite poor), shouldn't we apply that same criteria to John Williams as well?

davefairtex's picture
davefairtex
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that's it, right there

JimH-

I am just happy that you view Gold through a lens more similar to mine how.. i.e. that paper and banks are not to be trusted generally.  Gold and Silver are trustworthy.

Its not banks and paper I don't trust.  Its the government, and its demonstrated willingness to change the rules of the game and confiscate claims on real wealth "to keep the system alive" (i.e. to rescue favored participants at the expense of chosen losers).  I mean, we agree for sure at one level - we don't trust the digital claims, but the reason I don't trust them is because they are really easily confiscated.  And I see confiscation of digits as a big risk going forward, because "that's where the money is."  And the central authorities are going to need to confiscate a whole lot of claims once trouble strikes which, according to the Martensonian Context, is inevitable at some point in the future.  Our leaders are showing only a desire to maintain their positions and the status quo at any cost - likely confiscation - with no apparent desire to talk about what confronts our society going forward.

In my opinion, gold is not any more trustworthy than (say) a flock of chickens in the backyard - but it is just as hard to confiscate en masse, and in most cases, it stores & travels better than those chickens.  If overall price levels tank, so will gold.  But so will everything else.  And if prices rise again, so will gold.  Who knows what will happen with those computerized digits, assuming you still even have access to the ones that used to be yours.

Now then, about identifying a reason why tapering is not resulting in a declining gold price:

I posted on Japan last night..  and I suggest the answer to why Gold is charging ahead, even in the face of the taper, is there...

[Japan money printing article elided]

That's it.  Right there.... the market is starting to realize that organic growth is not ahead.  Just money growth.  Just inflation.  The turning point is now...it's not going to show up in your charts because it is a sea change.  It's not going to be a news story.

So, might you have any evidence that this claim of yours is true?  That the market overall have just recently (i.e. here in June) figured out there is no organic growth ahead?

One of my favorite things about the Martensonian Context is it has been arrived at by the Martenson Method: all its claims are evidence-based.  So when I ask you for evidence of this claimed sea change, it is an essential Martensonian requirement that there be some kind of strong correlation to back up what you say, otherwise we must admit that we are just engaging in unsubstantiated guessing.  Which is not Martensonian at all.  I can't remember Chris ever suggesting in the crash course that "Oh, it won't show up in the charts."  I wouldn't be here if he did that sort of thing.

So lets assume you are right and look for correlations that might confirm your hypothesis: this price rise in gold here in June is all about "the market figuring out organic growth isn't coming."  Were this true, if the market (those guys who buy COMEX contracts) had just realized the Martenson Context was going to be truth going forward, what other market behaviors might we expect to see?

1) ever-higher energy costs - so, oil prices rising? [no, it has been flat YTD; Brent has plummeted -2.01 to 106.66 just on Friday, down -2% in June]

2) debt more difficult to repay - bond prices dropping? [No, long term US treasury up 10% YTD, and up 2% in June]

3) earnings in real terms very difficult - stock market multiples compressing resulting in stock prices dropping?  [No, SPX up 6% YTD and +2.4% in June]

4) Japan is a Martensonian basket case - the Yen should be having some difficulty. [No, Yen up 3% YTD and up +0.8% in June]

I'm not seeing any correlations with your guess of the arrival of a sea change, which if in fact it was really occurring, would most definitely affect more markets than just gold & silver.  Perhaps you have some?

I wish it were true, I do.  I just see no evidence for it.

KennethPollinger's picture
KennethPollinger
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Martenson Method

Great insight Dave.  Martensonian Context of depleting resources and energy, along with Martenson Method of EVIDENCE-Based Methodology!!

 

As for our community:

Which 2 or4 3 of the following would you now buy and why?  OR, not? Help

 

MUX< TGD< SA< HMY>GPL<AG<BVN

 

Jim H's picture
Jim H
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Evidence of a sea change....

Dave,  I agree with your point that the Gov't needs to be counted in there too amongst the parties not to be trusted.. we could argue about who really pulls the strings of our Gov't (bankers?) but no need.  The Japan reference makes the point that the Keynesian lies are now, more than ever, standing naked for all to see.  There are others;

    http://www.zerohedge.com/news/2014-06-25/gdp-disaster-final-q1-gdp-crash...

And while a bad GDP print was largely expected, the driver wasn't: personal consumption expenditures somehow crashed from 3.1% to just 1.0%, far below the 2.4% expected, meaning that all hope of a consumer recovery is dead. Finally, as a reminder, US GDP has never fallen more than 1.5% except during or just before an NBER-defined recession since quarterly GDP records began in 1947. Good luck department of truth propaganda machine, because even assuming 3% growth every other quarter in 2014 means 2014 GDP will be 1.5% at best!

And in Germany, the bastion of economic strength..... a bunch of Detroits in the making?

http://www.zerohedge.com/news/2014-07-12/forget-puerto-rico-german-munis...

I have warned that about 50% of the German municipalities are on the verge of bankruptcy. The pensions have been unfunded and are absorbing everything. As we saw in Detroit with more than 50% of current revenue going to pensions, taxes either rise, the borrow more, or they are out of business. We are in a giant bull market for taxes increases on every level. This is the real downside of Marxism – they theory that just keeps taking.

As well, the market has had it's eyes opened a bit via Portugal,

http://investmentresearchdynamics.com/black-swans/

Faber goes on to say in his comment on CNBC that you can only know what triggered a bull/bear market after the fact.  That is the definition of a “black swan.”   There has been a lot of speculation in the last year about what the black swan would be that would trigger the next market collapse.  Of course, once a candidate for the Cigno Nero is identified, that takes it out of contention, right?

The collapse of Banco Espirito Santo, Portugal’s 2nd largest bank, could well prove out to be that black swan, as it is an event that no one saw coming (except maybe the bank’s auditors).  Too be sure, I read a lot of everything and I have not seen any Oracle of Blogosphere previously mention this situation:  Espirito Santo Creditors Doubt Containment on Missed Payment (Bloomberg News).

But this is the reason the U.S. stock market is tanking hard today AND why gold, silver and mining shares are spiking higher.

So, by saying there is a sea change coming.. and we are in it.. I am agreeing with Kranzler's quote immediately above.  Am I speculating?  Of course.  Am I doing so with no evidence?  I would argue no, I have just shown you three more pieces above.  The market knows that the FED has tried to stop QE three times and failed... will this time (tapering) be different?  I think not.  The viral, mass realization that QE does not work is the turning point.  By realizing that QE does not work, the market also realizes that debt will never be extinguished by growth (see Germany story above).       

Please understand that I would not deny the possibility that TPTB will once again slam the PM complex in order to enforce the illusion that everything is OK.  The commercials (bullion banks) are very short right now, and this has historically been a sign that a slam is coming.  I don't know that they will be able to pull off a dump with any legs since dips are being bought.  This is getting very, very interesting, for sure.         

Wildlife Tracker's picture
Wildlife Tracker
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Ken

Both BVN and AG are top 20 silver producers which is good because they have investor exposure and they are established companies.

Buenaventura operates seven mines directly and four other mines through interests in other companies. It has numerous competitive advantages over competitors; it owns power generating companies that it uses to power operations at mines, its business is highly diversified with gold being the largest revenue generator but silver quickly catching up, it operates the fourth largest silver mine in the world, has low risk exposure due to strategic joint ventures with other companies and has major reserves of copper, lead and molybdenum with a couple mines capable or producing two or more different minerals.

BVN was trading at $53 in October 2010 and now is trading at $11.62.  BVN actually made money in 2013 which was rare. BVN took a small loss in the first quarter of this year which was considerable smaller %-wise compared to competition.

Buenaventura is an investment in Gold, Silver, and hydroelectric energy.

First Majestic has extremely nice assets in the silver mining capital of the world (Mexico). They have some of the highest yields in the industry and Mexico is showing little weakness so far in its ability to offer silver to the world. They are also rapidly growing having just recently made the top 20 list. Unlike their competition, they actually turned a profit this last quarter despite extremely low realized silver prices.

First Majestic was trading at around $70 in 2008 and is now trading at around $11.

First Majestic might be the strongest primary (80%+ revenue) silver producer in the market

KennethPollinger's picture
KennethPollinger
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Thanks Wildlife Tracker

This is what I had hoped for from our community.  Sharing insights in order to preserve our wealth. So, do you consider these two the BEST buys right now?  Better than the others?  Many praise HMY, especially Mish.

Any other opinions, folks?  Jim seems to like MUX best of all--why?  However, Chris and Mike Maloney seem to be in 100% cash and/or gold/silver??

 

Many thanks for sharing.  Ken

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Hrunner
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Sea Change Analyzed

Dave, Jim H,

Apologies for being a bit OPP (Off Peak Prosperity), but life duties sometimes take priority.  As usual, I find myself appreciating Dave's analysis, then the further I read, the more the proverbial analytical train comes off the rails.

Dave, you're making a fundamental error in your "Martenson Construct", due to several wrong assumptions, which is the downfall of many constructs.

First, lets level-set through some basic concepts which we seem to have wandered away from.

1.  It's not of matter of selecting whether it's the banks or the government manipulating the market for their ulterior motives.

They work together as one entity.

The government and banks are one entity, acting as divisions within a single corporation.  I don't care to speculate whether Yellen calls up Dimon three times a week, talks with him once a year at Davos, transmit policy concerns and questions via trusted intermediaries, meets with him in an underground bunker in Washington.  These are mostly irrelevant details. 

The government is not some independent entity, calmy working over there in DC, separate and watching over things impartially.  The government and the financial sector are extraordinarily tightly joined in policy making and policy execution.   Overtly and openly, and also in many ways clearly that are hidden from public scrutiny in ways that we will soon learn. 

Recall it took years of lawsuits for Bloomberg to get made public the Fed's documents, that no one knew about and very few people speculated about or reported on, and that the Fed never revealed to anyone in Congress, that showed that the Fed provided trillions in USD currency swaps to European banks.

 If you don't understand this, and continue with your consistent artificial separation of the two leads me to question whether you do understand it.  If you want evidence, let's input a few facts to illustrate the point (There are dozens and dozens of data points, but we won't do a comprehensive view for the sake of conciseness).

Data point 1:  The entire financial system that we are currently using was designed as a collusion of the government with the big banks in the financial system.  Average folks, such as store clerks, pastors, and farmers were not invited to Georgia to draw up the "rules of the game".  The book "Creature from Jekyll Island"  by G. Edwin Griffin documents this highly linked relationship elaborately (not speculation), in deep detail.

Data point 2:  The Federal Reserve (yes, you can argue not technically "government", but yes they are government because they are essentially contracted by the government according to statue to manage monetary systems) openly has a policy to manipulate the price of money.  This is not speculation.  This is published Fed policy which we have documented on this site many times. 

And how does the Fed manipulate money?  Through the banking system.  To inject new fiat currency, the Fed must buy government UST, through the banking system transmission channels to effect monetary control.  By definition they are working as a team with banks to effect monetary policy and thus control the price of money. 

The government working with the Fed decides who and who is not a Primary Dealer.   Last time I checked, neither Jim H, nor Dave, nor Hrunner was listed as Primary Dealer.  So the Fed ain't working with me, and I damn sure would like some of that free money to buy some UST directly from the government and flip it to the Fed for a risk free profitable trade. 

Data point 3:  Please recall what happened in August 2008 when the financial crisis hit.  Last time I checked, the Fed and U.S. Treasury Department did not sit in a room with a bunch of average folks, the Rotary club, or Chamber of Commerce deciding what to do about the Credit Crisis.  It was well documented that only the CEO's of the big commercial banks got called into those closed-door meetings. 

I would direct you to PBS Frontline's excellent documentary on the Financial Crisis if you don't understand the level of collusion between private banks and the U.S. Government during the crisis.  For what it's worth, some large banks were not invited (not clear why other than they were pro free market versus pro government-commercial bank fascism).

So we have established based on evidence, that in times of financial stress the Fed, i.e. the U.S. government, collude with banks to effect monetary policy and decide what markets should and should not do.

Data point 4:  Virtually every regulatory position of consequence is held by a former banker.  Or a future banker or banking consultant.  People like Bernanke are another breed, i.e. economic academics.  I can't decide which is worse, our financial system run by people who have no real world experience using deeply flawed models derived from isolated university departments, or run by bank executives who care only about banks and don't give a rat's ass about people or destruction of the average person's savings and earnings power.

Now I suppose you could make that argument that magically, when bankers assume governmental roles as regulators, they all of sudden switch their bias and allegiance to the average man on the street versus their former employer and colleagues.  Based on everything I know about human nature, based on my direct observations in the real world, and based on the evidence of what actual financial policy is that harms to average person at the expense of the banks, I do not make that argument.

So go ahead and trust banks as if they are separate, isolated entities just listening to Mr. Market and trying to ensure some ill-defined feature such as "liquidity" for the good of the average citizen.  That is a view that ignores the mountains of evidence and data to the contrary.

As far as the deeply misguided discussion about the "Martenson Context" and the "Martenson Method" I confess I don't even understand what you're talking about.

You said:

"So when I ask you for evidence of this claimed sea change, it is an essential Martensonian requirement that there be some kind of strong correlation to back up what you say, otherwise we must admit that we are just engaging in unsubstantiated guessing.  Which is not Martensonian at all.  I can't remember Chris ever suggesting in the crash course that "Oh, it won't show up in the charts."  I wouldn't be here if he did that sort of thing."

Dave, you seem to not have been listening to anything Chris has said for the last year.  Chris has said numerous times that A) all markets are manipulated (some recent pieces actual have this as their title), and B) all markets have lost their utility as price discovery tools due to the severe degree of manipulation, which is by design by TPTB to buy time and keep things patched as they "make it up as they go along" and C) none of the markets make any sense to him, looking at the EVIDENCE. 

Evidence means, to me at least, and I believe for Chris, is the most reliable sources of least-manipulated data available, hopefully as distant from government manipulation as possible.  These more reliable evidences (note that I did not say perfectly reliable) include corporate revenues and profits, corporate capital deployment in new capital projects versus share buybacks, retail sales, ADP jobs, labor participation rates, number of people on food stamps and disability, electricity consumption, Baltic Dry Index.

One caveat that you must understand that, yes the market and supply and demand will eventually rule, and the forces we discuss will eventually be reflected in price, but sometimes price must travel through a period of sometimes significant market distortion on the way to true price discovery.  This is one of those distortion periods.

This is one of your fundamental flaws.  You accept as informative evidence market numbers from headline markets such as SP, oil, gold, thatare highly manipulated and blithely accept that price discovery in these markets is pristine"data".  On what basis, I don't know.  Because you trust that the folks that run theComex have the ability to calmly and dutifully pass electronic digits from one entity to another?  That ain't a market, Dave, that's IT networking and computer software.

I acknowledge that somewhere in these markets are some players contributing that are likely honest buyers and sellers, though I believe that number is becoming smaller each month.  And most markets, especially the stock market, are composed of financial firms gaming the system with programmatic trading, or institutional investors that are forced into the stock market to survive.  Huge numbers of investors who have control and freedom to seek best markets are opting out of the market.  So if half the market participants are carrying out government price manipulation and half are not, how does that add up to an unmanipulated market?

As far as gold, if a commercial bank comes in and smashes price three times a week instead of seven times a week, is that your rational for markets being unmanipulated price discovery engines, and free and fair?

You also said:

"So lets assume you are right and look for correlations that might confirm your hypothesis: this price rise in gold here in June is all about "the market figuring out organic growth isn't coming."  Were this true, if the market (those guys who buy COMEX contracts) had just realized the Martenson Context was going to be truth going forward, what other market behaviors might we expect to see?

1) ever-higher energy costs - so, oil prices rising? [no, it has been flat YTD; Brent has plummeted -2.01 to 106.66 just on Friday, down -2% in June]

2) debt more difficult to repay - bond prices dropping? [No, long term US treasury up 10% YTD, and up 2% in June]

3) earnings in real terms very difficult - stock market multiples compressing resulting in stock prices dropping?  [No, SPX up 6% YTD and +2.4% in June]

4) Japan is a Martensonian basket case - the Yen should be having some difficulty. [No, Yen up 3% YTD and up +0.8% in June]"

And thus you are basing your hypothesis for non-manipulation of precious metals markets based on "evidence" from four of the most highly manipulated markets in existence- oil, bonds, SPX, Japanese yen.  ???

A market exists where honest buyers and honest sellers can place bids and offers transparently, based on simple common sense rules. 

Rules like if you offering a commodity to sell and are placing it on offer at the market, then you must have the actual commodity to sell, or a direct physical connection with the commodity.   This is the way that supply and demand can operate normally.  Supply and demand was never intended to work with unlimited fictitious supply created by the whim of a few bankers, and trading with equally unlimited fictitious demand based on a desire to make money off of trades, and not to take delivery and actually use the commodity for a downstream product needed by consumers. 

Suppliers should subject to random periodic inspection of their ability to deliver.  Translation: No naked paper. 

No one entity can possess more than a non-controlling minority position of futures in a market, say 5%. 

Margin requirements are fixed, transparent and fair, not changed at the whim of market managers.  100% margin, like 100% fractional reserve banking, would create much fairer markets and remove much of the cheating, even at the expense of that oft mentioned liquidity.  I'll exchange liquidity and explosive exponential growth for fairness and stable prices and stable markets.

You're not seeing any correlations of the arrival of the sea change because you're not looking at both sides of the force equation, you're only looking at movement.  By force equation, I mean looking at pressure for up movement versus pressure for down movement.  The massive currency and credit creation and continued exponential credit growth in the face of no parallel productivity output, debt reconciliation or aggregate demand creates a massive tectonic force, and massive currency risk, that should be signaled in the price of precious metals as a hedge for that massive risk.  No such price is present.

Think of tectonic plates of currency risk versus government need to have their currency appear stable.  You can stand on top of a piece of land and say it is not moving and consider two interpretations.  One world view is that the land is very stable and no tectonic forces are in operation.  Another view is that, if you look beyond the single variable of movement, and start to fill in the picture with other data such as pressure, historical earthquakes, etc, you would understand the view that reality is that two massive forces are pressing against each other and it is extraordinarily likely there will be a resultant huge shift when one stronger force gets the upper hand over the massive opposing force that is pushing back. 

With every billion dollars the Fed is printing, with every month that interest rates are near zero (or negative), with every quarter with real inflation increases and food prices outstrip wage growth, with every quarter that shows a contraction of the labor force resulting in fewer workers supporting more retirees, with every month that the U.S. (or any financially irresponsible country) adds to its un-payable on-balance sheet debt and off-balance sheet retirement obligations, with every month of trade deficit where the U.S. imports more goods and services than it exports, the forces on the fault line increase. 

I believe, like I think Jim H. does, and perhaps Chris, that before the "Big One" occurs, there will be small tremors and initial "slippage" that will be the sign that the Big One is moments away.  That's why we watch the precious metals closely.  Slippage looks to me like the inability to hold gold price down, the inability to control bond yields, an accelerating pace of bank and municipal defaults, and accelerating inflation. 

Or we can assume the market will go on indefinitely with gold prices defying the laws of supply and demand.

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Jim H
Status: Diamond Member (Offline)
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Posts: 2379
Miners...

Kenneth,  MUX is known for strong management.  TRX, which I believe is messed with by TPTB more than the others because it is run by Jim Sinclair, is another to consider.  May I suggest that you might want to take advantage of some of the low cost research being published by Kranzler?  Here is some of Dave's philosophy as mentioned in the comments section of his blog;

  http://investmentresearchdynamics.com/how-derivatives-will-trigger-a-bon...

http://investmentresearchdynamics.com/buy-research-reports-2/

Takes time to research and write up good quality research reports. I spent close to 20 hours working Minco Silver and management refused to return my calls. I burned a week working on it. This is my conclusion on Minco: http://seekingalpha.com/article/2311355-minco-silver-doesnt-pass-the-smell-test

FYI, if you do your research well, you should not have 20 of any stock in any portfolio. “Diversification” is a huge myth IF you know who to do the work. I went to the graduate school where modern portfolio theory was conceived and developed. Diversification diversifies away the reason you do research to gain an edge on everyone else.

I like having about 10 or so., along with some GDXJ.  I am not there yet personally.  I may very well take advantage of Wildlife Tracker's research - have owned AG in the past... have EXK and GPL right now.  

If you think of a mining investment as Gold in the ground.. and I primarily do.. then this view helps you place your bets... notice please one of the companies we have been discussing on the top of the list.  You can buy their Gold in the ground much cheaper than you can Newmont's or Barrick's.  If you believe Gold will explode.. and I do.. controlling ounces will be all that matters.    

      http://www.24hgold.com/english/listcompanies.aspx?fundamental=datas&data...

 

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Jim H
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DaveFairtex is living the seachange....

 Dave said,

I'm not seeing any correlations with your guess of the arrival of a sea change, which if in fact it was really occurring, would most definitely affect more markets than just gold & silver.  Perhaps you have some?

I wish it were true, I do.  I just see no evidence for it.

You and I have talked recently about how your view of paper (and digital) assets has changed.  That is the sea change right there... that awakening.. that dawning.  Alasdair speaks of it here;

  http://www.goldmoney.com/research/analysis/unwinding-unallocated-gold-ac...

In the past a bullion bank's risk to a rising gold price either went unhedged, or was managed through derivatives, using forwards futures and options. Therefore, so long as systemic risk is not regarded as a material factor, the bullion banking community can absorb significant gold demand from investors by expanding unallocated accounts without any physical buying required. However, the investing public's greater awareness of risk to bank deposits from bail-ins could change this in future. And it was only this week that wealthy German citizens were reminded of deposit risk when its government approved the introduction of bail-in procedures for bank insolvencies.
Increasing awareness of systemic risk by the rich and ultra-rich is likely to lead to a preference for allocated accounts or for vaulted gold held outside the banking system, over unallocated accounts. This being the case, the gold price is likely to rise more quickly for a given degree of increasing demand than it has in the past. For tangible confirmation of this conclusion we need look no further than the action of gold this week, which rose strongly at the same time as European bank shares fell sharply.

There is little evidence that dealers fully appreciate these developing dynamics. The sharp increase in the banks' net short position on Comex reflected in the current Bank Participation Report suggests not.

As more wealthy, unallocated Gold holders come to their own awakenings about the danger of fiat digits... the pressure on the physical Gold system will only build.  

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KugsCheese
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davefairtex wrote: John
davefairtex wrote:

John Williams has been projecting imminent hyperinflation for a decade now.  Eventually, just like a stopped clock, he'll be right.  But if you had traded on his specific predictions (say, bought puts with particular expiration dates), you'd be broke by now many times over.

He has provided a valuable service - raising consciousness on the problems in our current CPI - but from all I see, his predictions cannot be taken seriously.  Any more so than Ben Bernanke, who claimed subprime remained contained, and all the other crap he spewed about how things would play out that turned out to be so dreadfully wrong.

If we hold Bernanke's feet to the fire for his vast collection of failed predictions, and use those failures as a way to measure his understanding of how the world really works (clearly, its quite poor), shouldn't we apply that same criteria to John Williams as well?

JW of SGS was originally saying 2018 or so for the $ Crisis.  He moved it up to 2014 in late 2012 IIRC.   He does a lot more than just analyze CPI.

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KugsCheese
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Jim H...
Jim H wrote:

Using the HUI index as a surrogate for the miners... they are presently at the level they fell to in that 2008 dump you are talking about.  

  http://finance.yahoo.com/echarts?s=^HUI+Interactive#symbol=^HUI;range=my

Everyone must do their own due diligence.. I am not going to try to convince you or anyone else to get in miners.  They can of course go down further from here.

Miners are metal in the ground.  The paper system that controls/suppresses the price of the metals will break down... and then you will have two forces unwinding at once;

A.  manipulated prices resetting to true supply:demand pricing

B.  Paper promises for Gold, unallocated, etc., being extinguished through default or cash settlement... meaning that the market will suddenly realize there is much less metal than there are promises of metal. 

The miners will eventually have their day.  Much of the action will come before the PE ratios respond.  I have been patient for the last few years.. but I am smelling blood now.  

 

How many company changes have been made to HUI since 2007?  The problem I have with indexes is they are biased for the "here and now" and forget the losers and those who invested in them.  I also think since 2007 there has been much more Creative Accounting and using debt to pay dividends.  A good crash will sort out the frauds.

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Wildlife Tracker
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Posts: 403
I don't know about BEST buys

They are two of the most resilient producers in the world. The reality is that the U.S. and Canada are running out of silver fast. Canada stopped publicly posting their reserve estimates (economically extractable metal) in 2009 from the Canadian Geological Survey. I'm assuming this is because the numbers are so low that its best not to share, but that's speculation. Both the U.S. and Canada are producing more minted coins from maples and eagles than the amount of metal being pulled out of the ground within those countries last year. The U.S. was short 7-8 million ounces in 2013 from eagles alone.  Two years ago that wasn't the case. Sunshine's private bullion, and all the other private bullion companies were all using imported or recycled silver. Same goes for industrial demand, jewelry, etc. All imported or recycled silver.

The message is that the U.S. and Canada are pretty much dead for companies and that is why Endeavour, First Majestic, Couer, and many others operate heavily in Mexico and other places where there is still metal in the ground. 

For this reason I would stay away from Black Panther maybe? They are a low volume producer with little opportunity in front of them because of where the operate IMO.

I like Endeavour. They don't have the best assets out there, but they seem to have a good team/management. They operate mostly in Mexico which is attractive, and they are mid to low cost production-wise. They also have great educational videos on Youtube about silver production that you should check out  ;)

The reality is in terms of stock price. I have no idea what is the best value because that is not where my research was focused. I think Buenaventura and First Majestic are the two best companies in terms of resiliency and they also happen to be priced way below past highs.

Volcan Compania Minera is another nice company out of Peru. Same story as Endeavour I think. Not the best assets, but a good company. If you are looking to diversify, why not consider some bigger names like Fresnillo or Pan American? Fresnillo is about 50-50 gold and silver in terms of revenue and they produce cheap metal as well. Another Mexico-focused company.

Anyways, my background is in wildlife ecology so do your own research ;)

 

 

 

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davefairtex
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evidence, markets, and what they believe

Ok, getting back to my original point - which was - what again?  Does anyone remember?

A lot of you guys said a lot of things that were true, but regrettably not on point.

Jim's original comment was:

... the market is starting to realize that organic growth is not ahead

I said - "oh really?  What's your evidence?"

I wasn't asking, "are bankers in league with the government", "is the Fed an evil institution", "is QE working", or anything else.  I was asking:

"What's your proof that the market is starting to realize that organic growth is not ahead?"

Unless one is a mind-reader and can read the minds of a large enough number of people in the market to come to a satisfactory conclusion, the only way we can tell what the market is, or is not realizing, is by observing prices and volume.

The favorite line people use to dismiss the relevance of price & volume information is, "all markets are manipulated."  Well of course, they've always been manipulated, all the time, by lots of different actors.

But, if by that you mean the government (or another actor) has complete control over prices, that's just wrong.  If governments control prices so completely and so successafully, markets will never ever drop because its the elites that have most of the stock (top 1% have 40% of the equity market), and - why on earth would they want to lose money, tell me please?  And yet what are we projecting?  A big market crash.  How could a market crash happen if the government had complete control over prices?  The whole argument just has no internal cohesiveness.

Now our friendly governments might be able to influence prices.  So again, what would be satisfactory evidence that markets were really starting to realize organic growth is not ahead?

Those markets would be shaking off the influence of our friendly bankers & government, and market prices would be starting to move in correlation with gold & silver in a way that would be aligned with the overall paradigm of the future we've described here at this site.  Kind of like the buyers of COMEX futures are doing with gold & silver right now.

So is this happening?  Not that I can see.

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davefairtex
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shadowstats & hyperinflation

Kugs-

JW of SGS was originally saying 2018 or so for the $ Crisis.  He moved it up to 2014 in late 2012 IIRC.   He does a lot more than just analyze CPI.

If you read his stuff carefully, over time, he says things like "there's a high likelihood of hyperinflation in 2010" (back in 2009) and "within the next five years" (again, back in 2009).  Now this year, its supposedly once again imminent - 2014 for sure we'll get hyperinflation.

I'm going to make a prediction of my own.  If we don't get hyperinflation this year, it will be "a high likelihood" next year - hyperinflation 2015.

Have you made money trading on his hyperinflation predictions & timeframes?  Its one thing to say that a particular situation is dangerous, its quite another to slap a timeframe on it.  Once you do that, and people follow your advice, you end up losing people money if you are wrong on the timing.

If you project timeframes, you get a lot of publicity.  But if Armageddon doesn't come to pass...repeatedly...what then?

How hyperinflation happens to the reserve currency when other places are more likely to blow up first - I don't think he takes into account non-domestic capital flows into his models.  When the eurozone confiscates its bank deposits to recap its banks, and capital in europe flees to Big Daddy US (the only market big enough to absorb such flows), he thinks the US ends up in hyperinflation?  How does that even make sense?

Hyperinflation only happens when a government is unable to borrow money from the debt markets.  Printing is the last resort for a government desperate to fund its own operations.  If it can sell debt, it won't hyperinflate.

As long as we're the reserve currency, and other places are worse off than we are, I don't see hyperinflation here in the US.  That doesn't mean bank deposits are safe - it just means we don't hyperinflate.

(Bail-ins are most definitely not hyperinflationary - FWIW)

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davefairtex
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a gold correction, finally

Of course it had to happen the day after my most Bullish Week Summary Ever (that's just how these things work - there's nobody left to buy at that point) but it looks like we're finally getting that gold correction.  Gold is down almost $40 from the highs of Friday, and at one point hit 1302 a few minutes ago on a 8,000 contract spike lower at 0900 EDT.  That's the largest single-minute spike I've seen in a long time.

Now we get to see if and when the buyers show up.  It is almost a relief for me to have this correction appear.  Its just unnatural for the market to rise day after day with nary a correction in sight.  :-)

 

 

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thc0655
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Downdraft

So, Dave and anyone else who might want to weigh in, what's to keep a central bank from SECRETLY wiring $1.5 billion to an intermediary like JPMorgan for the purpose of slamming/correcting the gold price like this?  Don't tell me law or morality.  If the intermediary ended up on the hook for big losses because the buyers show up and bid the price back to where it was, who cares?  They didn't have to work for the money, and they can electronically create and send as much as they want for whatever purpose.  Now, I realize if nefarious moves like this ever became public knowledge there'd be hell to pay.  So, is that the only thing keeping entities that want to suppress the gold price and can do so with magic money from actually doing so?  That seems like a much lower hurdle to overcome than law and morality (which are breached with impunity by TPTB).  They just have to be very careful no one finds out.  But, really, how hard can it be for the Fed or the ECB or the PBOC to electronically wire made-up money without any one finding out?  Easy-peasy would be my guess.  If something like that were happening, I can only see two ways for it to stop: 1) public discovery or 2) reaching a physical limit that can't be obscured with smoke and mirrors (eg. failure to deliver physical on a contract).

Tom

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Jim H
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TGD refuses to go down today

Biggest downdraft in a while, and the miners are not getting killed as bad as one might expect.  One miner is not down much on the day.. only 1% as of this writing;  Timmons.  Nobody selling TGD.  Nobody selling Palladium either.  My guess is that, were you able to extract out forced (blind) GDXJ-related selling (TGD about 1% of the ETF) that you would actually be up for the day.

http://www.etfchannel.com/lists/?a=stockholdings&issuer=&symbol=GDXJ&sortby=&reverse=&rpp=20&start=1 

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davefairtex
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proving negatives

Tom-

...what's to keep a central bank from SECRETLY wiring $1.5 billion to an intermediary like JPMorgan for the purpose of slamming/correcting the gold price like this?  Don't tell me law or morality...

Yes, I'm going to sign up and prove a negative.  I can prove beyond a shadow of a doubt that the Fed isn't doing something.  Oh wait - I've been told by someone really wise that its impossible to prove a negative.  So maybe I won't even try.

The fact is, corrections happen.  Its just that when they happen in the gold market, its a massive conspiracy.  In other markets, its just the way markets work.  This recent correction in oil?  A conspiracy!  Its the Fed!  Or the move higher in copper - another conspiracy.  That Fed again, wiring money to JPM!  And the drop in commodity prices overall.  Yet another conspiracy!  Maybe the Fed and the ECB have joined forces!

Why don't you guys complain about these conspiracies?  Corrections happen all the freaking time!  OMG there are conspiracies everywhere!  I know this, because I track a lot of markets.  But you guys only ever feel the ones in gold, so its like you have to invent an Organization of Evil that is single-mindedly focused on suppressing the price of your favorite commodity to explain away your pain.

Reminds me of Chris and his Shocked Rats.  The rat in the cage doesn't understand what is causing his pain, so he has to find a scapegoat and bite the crap out of said scapegoat in the hopes the pain will stop.

20 years from now we'll probably know the truth.  Maybe we'll find out the Fed was indeed responsible for a few gold poundings, and for the gold price suppression during the 1990s when they leased gold into the marketplace.  But - blaming them for every single correction?  Really?

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Jim H
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Ted Butler on the Silver manipulation conspiracy

Sing it from the rooftops.. everyone should read this.  Regardless of what DaveF says, some of us do purport to understand the source of the pain;

http://goldsilverworlds.com/physical-market/the-silver-conspiracy/

.............. 

Superimposed on the inevitable physical silver shortage and more likely to hasten rather than delay it, is the growing awareness of the conspiracy to manipulate silver prices. Yes, it may initially scare some folks off who don’t dig into the issue, but a certain number of potential investors will conclude that such a conspiracy to manipulate prices has created a phenomenal investment opportunity. A certain number of big potential investors may actually be drawn to silver if and when they become intrigued with why do JPMorgan and the CME tolerate being called crooks.

Just yesterday, I almost spilled my morning coffee on myself when I picked up the NY Times (click here). The main front page story was how virtually every investment asset in the world, from bonds to stocks and real estate, were at almost bubble valuations, given the efforts of the world’s central bankers to flood the world with excess liquidity. Investors all over the world were scouring the landscape for attractive investments. Of course, I openly asked the paper – what about silver? The newspaper didn’t respond.

Maybe I’m reading this all wrong, but sooner or later it is going to dawn on enough new investors that silver is grotesquely undervalued and that there is a verifiable explanation for the undervaluation. Because silver is truly a world investment asset, the realization that the US Government is involved, along with JPMorgan and the CME, in a conspiracy to suppress the price of silver will only serve to whet the appetite of the world’s investors as well as anger the world’s silver producers.

Ted Butler
July 9, 2014

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thc0655
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Gee, Dave

Gee, Dave, you might be getting a little hypersensitive.  I really was asking how easy would it be for a central bank to secretly use its money printing power to manipulate a market.  I didn't say today's down draft was caused by that kind of manipulation, and I am quite agnostic on that subject.  But the down draft made me think about it again.  I really was wondering.  My guess is that it would only take the active participation and knowledge of less than 10 individuals to pull off something like I bluntly described, though there might be 20-50 more who would be close enough to what was happening to be able to draw some accurate conclusions.

I have no self-esteem or personal value invested in this subject whatsoever, and I don't perceive any need to come to a conclusion about it.  I don't need to be right.  I'm not on a jury.  Of course, there are illegal and immoral things going on in markets and banking and politics, but I'm not sure about any specific incidents.  But I have come to some conclusions about the broad strokes of our future.  In that future, many evil deeds done in secret today will be exposed and those involved ruined, jailed or killed.  In that future, at least for a while before corruption sets in again, gold and silver will be much more valuable than they are now in purchasing goods and services.

Chill, bro'.

Tom

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KennethPollinger
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Posts: 653
Quite a day!

AG   -6.31%

MUX  -5,48%

CDE  -4.15%

HMY  -3.37%

Etc.  EXK, GPL, PAAS (-2.00 range)

Let's see what happens this week.  

The whole CONSPIRACY THEORIES vs. The Non-Conspiracy Theories strike me as interesting, yet not VERY revealing in terms of purchasing junior gold/silver mines.  Does your belief system determine your theory?? and your FACTS??   What's a guy to do?  Is EVERYTHING one freaking gamble???  Just "invest/speculate" with money that can be LOST quite quickly?  Maybe it should be CASH 100% right now??

What say ye?

 

DennisC's picture
DennisC
Status: Gold Member (Offline)
Joined: Mar 19 2011
Posts: 272
Downdraft

Tom, for what it's worth, your post/query made sense to me and I took it as a "what if" type scenario.  Is it within the realm of possibilities?  I think so.  Why not?  If one assumed this to be the case (you remember what they say about someone that "assumes"), it would seem to me, of your two points, number two would be the more likely outcome.  Eventually the fiat parade will consume all the primary and secondary "stuff", supply will dry up, no one will sell at any price, or sellers decide they are no longer interested in your central bank-issued  "paper du jour" or likely ask for a large discount to deal with it.

Meanwhile, back in the day (circa 1700's), from A History of Money and Banking in the United States, by Murray N. Rothbard, we have:

But Massachusetts found that the increase in the supply of money, coupled with a fall in the demand for paper because of growing lack of confidence in future redemption in specie, led to a rapid depreciation of new money in relation to specie. Indeed, within a year after the initial issue, the new paper pound had depreciated on the market by 40 percent against specie.

Ironically, then, Massachusetts’s and her sister colonies’ issue of paper money created rather than solved any “scarcity of money.” The new paper drove out the old specie. The consequent driving up of prices and depreciation of paper scarcely relieved any alleged money scarcity among the public. But since the paper was issued to finance government expenditures and pay public debts, the government, not the public, benefited from the fiat issue.

But, of course, it's different this time.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
how hard would it be?

Tom-

You could just as well ask, "what's to keep a Central Bank Chairman from wiring that same 1.5 billion dollars right into his own bank account?  He just has to be very careful no one finds out."  That's always the case with misallocation (theft) of funds.  You need to suborn the accounting system and its guardians and then their overseers for any of it to work.

Fedwire supposedly has trillions of dollars and a million transactions on it every single day.  I'd guess the safeguards on that system are pretty reasonable.  I'd guess there are people that oversee that system, and then another batch of people overseeing them as well.  Fraud liability for such a system is quite serious - I'm sure bad guys take runs at that system routinely, since that's where the money is.

"What's to stop the bank president from going down to the vault and dropping a few hundred thousand right into his pocket?"  Systems in place, that's all.  Apparently in Bulgaria, the bank president did exactly that.

Hrunner's picture
Hrunner
Status: Gold Member (Offline)
Joined: Dec 28 2010
Posts: 256
Market Realization

that organic growth is not ahead, Has been happening since 2001.

Exhibit A

Then, something happened in 2011.  Yes, I know, I know, the government and Fed fixed all our monetary and debt problems in 2011 with QE.   Total Credit Debt Obligations reversed their exponential growth.  Global GDP returned to 6% annual growth.  Real interest rates shot into the positive.  Consumers and corporation deleveraged massively.  Inflation risk collapsed.

That explains the huge correction.

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