Gold & Business Cycle Relationships

Here is a simplified graphic representation of The Business Cycle:

We can see how bonds do well during deflation, making their highs in the business cycle low. Stocks do well after the recession low passes, and commodities do best as inflation is peaking.

There is an overlap within each asset class of course. The stocks phase begins with bond-substitute defensive type stocks, which pay a dividend, highly valued during recessions. But the best performance soon rotates over to cyclical stocks, and then to growth stocks, and finally into high flyers, which tends to include some fresh paper, a surge of IPOs and then into junk as the market takes it’s percentage of loose money before it goes down.

Likewise, bonds are more or less risky depending upon the type of bond, and corporate bonds do best at a different phase of the bond bull market from eg sovereign bonds which are reputedly safer, but pay a lower rate of return.

So where is gold in all this?

I prefer to regard gold as occupying the place between “late” stocks and “early” commodities. In other words, a leading commodity. That reflects gold’s perceived function as an inflation hedge.

If only it was all so simple! But it isn’t!

For example, gold can act as “a fear indicator” rising to highs during times of conflict. At those times gold becomes regarded as the safest kind of money, and it takes over from bonds as the receptacle of risk avoiding capital flows.

So gold can move opposite to bonds and the same direction as late stocks ... a good amount of the time. But the rest of the time it can move in a different way, to reflect the cycles of war and disruption which sweep mankind.  Oil tends to rise in those times too, so at those phases gold would correlate with the price of oil more than usual. Therefore we can expect a correlation to hold at times, and break at other times, returning to "normal mode" again sometime later.

Let’s look at the same asset classes, but in real life situations.

First the rotation from bonds to stocks :

Notice the times, marked when a top of bonds preceded a following top of stocks several months later. In fact, at these times when the stock market finally made it’s high, bonds had fallen so much that their first bear market low was already visible. This seems to confirm a rotation of capital from bonds into stocks, while also admitting that it is a minority of all the highs shown which demonstrate what is happening. So bonds have about 3 highs, or which only one of the three  is an interesting high for the purposes of this discussion.

Case “E” in the chart above remains to be seen how it will work out.

How about rotation from stocks into gold?

During the 1970s the S&P (red) bottomed before gold. And at the 1987 crash it topped before gold. The 1982 low in both SPX and gold was at the same time. Other turns do not reveal anything.

How about later?

From the 90s to the 00s we see a different picture. In 1995 stocks (SPX in red) began to rise fast. This upturn decoupled from gold, which after the expected delay turned down, instead of up. In 2001 stocks topped and subsequently broke down, and a period later gold made it 2nd low, continuing the inverse correlation, but retaining the lead-lag relationship between the two.

In 2002 they recoupled, and both rise. In 2007 the SPX topped and turned down. Several months after the S&P gold made it’s high, and broke down into a decline.

And more recently – with a change from monthly to weekly timeframe in the timescale this is what we see:

The S&P made high in March 2011, continuing it’s role as “leader”, and gold went on to make following highs in August and a September 2011 high before breaking down. The gold lows in mid 2012, and the high in late 2012 were all preceded by the SPX.

But at end of 2012 the correlation reversed again, and the SPX moved up, with gold sinking. This has happened before.

The question arises as to causation and origin of these reversals in correlation between US stocks and gold measured in US dollars.

How about comparing gold to bonds?

Before getting tied up in that, it might be a good idea to first compare gold to bonds and see what is to be seen. I’ll skip to the last one and get to the point:

And it really appears that gold (green) is, in recent years, leading the TBond (blue) by about a year. This is interesting.

To sum up: a significant portion of the time, bonds lead stocks, stocks lead gold, gold leads bonds.

Occasionally the correlation between eg stocks and gold reverses direction, but the lead-lag relationship to stocks still seems to persist, though inverted. Not every turn is a significant turn for these purposes.

Right now, gold is leading the TBond downwards, and running about a year ahead of it. The TBond which leads stocks is going down (monthly basis) but stocks have gone in the opposite direction.

The implication might be that doing what it takes to support stocks is at the same time hurting the TBond.

That’s an interesting thought and it might be giving headaches to the-people-who-like-to-consider-themselves-in-charge. How far things can be stretched is always a tough question. But I think at CB level there might be a wakening acceptance, that they already know the answer, and every time they have new bonds to sell a reminder is served by the bond market. Playtime is coming to an end could be the message.

A last observation: while the anti-correlation is running, gold and stocks will probably retain their lead-lag relationship, inversely. We see to have gotten caught in a time warp operated by Central Bankers and it looks like we could be in the year 2000.

If the correlation was to go normal-wise for the coming year or two we could get something like this:

I have not gone into the geopolitical situations which pertained during the reverse correlation times, and that would be worth following up at a later stage. The conditions for reversal and return to normal of the correlations are also not investigated here, but worthy of looking into.

Still the clues dropped by the market are few, and always difficult to decipher, and this relationship appears to be one of them.

.

Argentus Maximus

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmNPrice.

72 Comments

arch stanton's picture

fustest

with the mostest

Louie's picture

Second

Slow day.  

Read the post and still second.  

So when does gold turn higher? 

silver66's picture

Nice post

AM , I take it that you follow K waves/cycles. If you do, do you have any thoughts on how a currency reset affects the investment cycle you describe?

Thanks

Silver66

AlienEyes's picture

3 rd

Three for me?

Hell no but I'll take foe. smiley

argentus maximus's picture

Silver66: For this piece I'm

Silver66: For this piece I'm going back 36 years In bonds there's a 23-34 year rhythm.  I took it back to the bond market lows of the 1970s, or half of a Kondratiev long wave.

There are problems in getting long bond historical prices in the dominant currency.  I really need to locate a data file for UK 2 1/2% Consols which is THE interest rate record prior to the 70s.

Louie: Sorry but this does nothing to solve that little problem! Knowing there is a sequence of events does provide some broad structural model (hopefully!!) that the smaller events will slot into in some fashion.

One thing that strikes me from the final chart was the TBond top and Gold top were timed a year+ apart from each other. But look where they are now. This could be suggesting that either: A the TBond has a lot lower to go, (or a year more to do it ) which would mess up a lot of national debt servicing plans, or B the first top of the TBond in 2011 is the main event, and TBond and gold are running together for now. I've looked at those charts long and hard, and I'm not convinced of B so far.

You could say that my essay is intended to open a discussion, by showing some sequential linkages, rather than present a final work of research. I'd be delighted if the readership and ongoing discussion leads us (or links) towards other original research in this.

And the war revaluation of assets and oil is always in the background.

Mr. Fix's picture

Thank you for the Sunday afternoon post,

I'm just catching up on some reading, but I must say, I don't think what we are experiencing is part of any known cycle. It is endgame. When the smoke clears, nothing will be as it ever was before.

Even right now, all we have is a false façade of markets that once existed, the powers that be are merely using the art of illusion to pretend that we still have free markets. We don't, and the numbers generated by official sources are specifically designed to lead investors to exactly the wrong conclusions.

But that's just my take on it,

keep stacking, it should be worth something someday soon.wink

Dagney Taggart's picture

Good

I like to see another 2000. The spectacle of loudmouth sheep thinking they're all that getting slaughtered was memorable.

PS. @Fix Good point. When there is extreme intervention, don't cycles become unpredictable? Regarding illusions: I can't remember the last time I listened to talk radio while traveling south where some comedian didn't say "recovery". It can't be repeated for 4 years straight while expecting people to believe it just because they say so. At some point people need to see it firsthand. They obviously don't otherwise it wouldn't need to be repeated.

treefrog's picture

ate

ribbit!

silver2013's picture

I've heard in 2008 end

I've heard in 2008 end game.
2009 end game.
2010 end game.
2011 end game.
2012 end game.
2013 end game.
2014 will be the end game..
..just saying some facts....so whats going to happen in 2015? Let me guess...end game.

argentus maximus's picture

I meant to add that a big

I meant to add that a big implication of all this is that the inflation in stocks is itself a forecast of future inflation in commodities.

The stock market can and does act as a reservoir of accumulated inflation, storing it. But upon the realization that that stocks have no further upward movement likely, then money starts to move out of stocks towards the next table in the casino. For now the present rotation of stocks seems to me to represent the 2/3rds to 3/4s mark, with one more phase left.  I can be wrong on that.

Smart money should be moving already, and - has gold gone lower in the last 6 months? Has oil gone down in 6 months? Copper? No. They are all above their lows of mid 2013, and in some cases early 2013, but not so much as to tell a clear story. That's why the sequence of asset preference I described is important, it helps make sense out of what is going on right now.

silver2013's picture

Ooh yeah and one more

Ooh yeah and one more thing.
.this year is different.RIIIIGHTTT.

Dagney Taggart's picture

@silver2013

Along the lines of what I just said to Fix....

I've heard in 2008 recovery.
2009 recovery.
2010 recovery.
2011 recovery.
2012 recovery.
2013 recovery.
2014 will be the recovery..
..just saying some facts too....so what's going to happen in 2015? Let me guess...recovery.

I sincerely have to ask: are you really stupid enough to believe that extreme market intervention ends well?

The only people appearing to prosper now are those who have access to free CB cash and can carry a large balance sheet. These are also the people who have no value-adding skills. None. How does this end well again?

Dagney Taggart's picture

@argentus

Palladium in 2011. We're pretty happy with that stack.

argentus maximus's picture

About repeated forecasts of

About repeated forecasts of recovery, of the coming end, and so on ...

Ecclesiastes 1:9 - "What has been will be again, what has been done will be done again; there is nothing new under the sun"

Don't knock the power of cycles. When your life cycle comes to an end just try to break that one.

More superficially, try to break the daylight cycle by going to work at random times and see what clients say. Try to do your taxes at a time of your own random choice and see how that works out for you. These things are everywhere, constraining free choice to narrow possible and practical options for choice. Even for a Fed governor they constrain.

Cycles is another word for consequences.

I take it you have no problem acknowledging the inevitability of consequences for what has been and will be done?

silver2013's picture

facts:

In 2008 my 401k was down 48%.  Now, Dec/21/2013 my 401k is up over 100%.  So yes in my book this is a recovery for me.  My only concern in my 5% in metal is down 30%.  If gold gets below 800$ I'll bring my 5% to 10% just recoup some of my losses.  I dont know how this is going to end but I have recovered all of my 401k plus some.  And the game ( stock market) only works with rules and regulations and guess what . THE FEDS AND BIG BANKS make those rules and regulation.  So if you want to play the game you CAN NOT FIGHT THE FEDS AND BIG BANKS.

argentus maximus's picture

@Dagney Palladium. I began to

@Dagney

Palladium. I began to watch it too late last year to do anything but learn about wide spreads, for physical, and holding charges at Goldmoney which being a percentage of capital (like bullionvault) rise as your metal appreciates, assuming being on the right side.

Which left miners, rolling a futures position, shorting options, and a palladium ETF.  ETF seems to be the default choice. I'm curious as to which Pa vehicle you settled on .

As far as the analysis went,  I thought that a choppy rise into April might be followed by a fall in late April-May to give a good entry setup to get a new position in palladium. It's another of those "pay attention if it happens" entries in my diary!

fraxinus's picture

@ silver2013: If the bullion banks were still in control...

Why are they begging the gold miners for supply? You'd almost think the cupboard is bare, and that new and better buyers have frozen them out of the market. crying

murphy's picture

@TomM

THE REAL JOB OF THE FEDERAL RESERVE

Federal Reserve, Jim Grant, Richard Sylla, Wall Street

“New thing – it is in the business of talking up the stock market…The Fed is manipulating prices, especially on Wall Street. The Fed has presided over the decay of finance.”

Jim Grant

“The Fed seems to have, I think almost deliberately, is trying to push the stock market up. I’ve watched this stuff for 40, 50 years now and this is the first time in my memory when it seemed to be official U.S. government policy that the stock market goes up. And the Fed likes this because it thinks that when the stock market goes up, people who own stocks feel richer, they’ll go out and spend more money, and the unemployment rate will come down.”

Professor Richard Sylla

http://www.theburningplatform.com/2013/12/22/the-real-job-of-the-federal-reserve/

bullion only's picture

The end game is happening as we speak

The end game is happening as we speak. Individuals have experienced the end game. Those in the 1% are set for life as well as for generations to come in a way no one could have imagined. Those fortunate few that went from millions to billions have experienced their pwn form of end game.

Those on the other extreme have lost jobs, homes, family beyond their wildest imagination. They have seen their savings erode, pensions cut, careers ended, hopes dashed, plunged into poverty and experienced their own personal end game.

Companies are bankrupt, jobs have been outsourced, cities have been gutted, prisons are overcrowded, schools are underperforming and people are disillusioned.

So yes Virginia there is an end game coming soon to a family near you. 

What are we to do?

Keep stacking if you can otherwise you will be on the wrong side of the end game.

Happy holodays,

RT

meegoreng1's picture

100 YEARS OF DOMINATION BY GUESS WHO?

In honor of 100 years anniversary of the Federal Reserve, I present to you the real culprits:

Who Controls the Economy?

Ben S. Bernanke(Ashkenazi Jew) – Chairman, Board of Governors, Federal Reserve System

Janet L. Yellen(Ashkenazi Jew) – Vice Chairman, Board of Governors, Federal Reserve System

Gary G. Gensler(Ashkenazi Jew) – Chairman, Commodity Futures Trading Commission (CFTC)
 

Read more and be amazed...

http://thezog.wordpress.com/who-controls-the-economy/
 

AC_Doctor's picture

Silver2013

@silver2013 " you CANNOT FIGHT THE FED AND THE BIG BANKS "

The Fed and the Big Banks are also bound by the supply and demand issue.  The can create unlimited supplies of FIAT MONEY but they cannot pull physical AG and AU out of their asses!

DayStar's picture

Harvey's Up! (TFMR)

  • Harvey on COT: Gold: If you believe the figures, it is bullish as the commercials go net long again by 1863 contracts...Silver: Bearish and totally opposite to gold as the commercials go net short by 1713 contracts. This is why I am having difficulty in believing the data.
  • DS: The Dodd-Frank Act of 2010 requires the FDIC to hold at least 1.35% of the value of all estimated insured deposits by 2020. Because of underfunding by the banks, it holds less than that. It has liabilities of around $2 trillion. Until 1 Jan 14 all demand deposits are fully insured. On the 1st of January 2014, the FDIC insurance limit falls to $250,000. If you have more than that in one institution, your money is at risk. Actually, all money in financial institutions is at risk, because the law says that as a depositor you are an unsecured creditor of the bank and way down the pecking order of others creditors of a bank. If many banks go bust, the FDIC only has maybe $70 billion to cover it, and other shortfalls will be covered by bank "assets", i.e. yours and mine checking accounts. Bail-ins appear to be the in vogue bank financing of the future.
  • Harvey: GOFO rates are still slightly positive, except for the negative one month rate which means backwardation for this month. The rates are mixed in the positive for the 2, 3 and 6 months, as these months seem to be also heading for backwardation. GLD: Gold in a shocker added 5.4 tonnes and stands at 814.12. SLV: Silver was unchanged at 10,139.78.
  • Mark O’Byrne: Gold rallied from its worst closing price in almost three years after the Fed's decision to marginally reduce its debt monetisation programme. Gold is on track to suffer its first decline since 2000 or first decline in 13 years. The taper is not as bearish as some suggest as debt monetisation will continue at the whopping $900 billion per annum - down from over $1 trillion per annum and the Fed will maintain near zero percent interest rates for the foreseeable future.
  • Bill Kaye: On the heels of William Kaye predicting the gold market would be smashed directly after the Fed meeting, today he told King World News that the West is now close to destroying the fraudulent paper gold scheme and the Comex itself. The reason I’m convinced we are close to an end is the demand from China continues to be immense. The smuggling into India is also significantly underreported. So the East is just taking up, at bargain basement prices, all of the available gold that they can get their hands on.
  • Art Cashin: Asia stocks were marginally better with the clear exception of China, which got clobbered. Shanghai was down the equivalent of 320 Dow points. In the last two weeks, it has dropped the equivalent of 1300 Dow points on continuing concerns about a credit crunch. 
  • Andrew Maguire: In a private closed-door meeting at BlackRock, ScotiaMocatta’s Simon Weeks, who is Chairman of the LBMA, is part of a group trying to frighten producers into forward selling by predicting gold is going to plunge ‘by another $400, to $800 in 2014'. The LBMA is being so bearish in order to frighten the producers to hedge and sell forward production at these low levels so the LBMA can repay some of these rehypothecated bullion positions. But with most producers at or below the cost of production now, this window is closing.
  • Andrew Maguire: In the real world wholesalers were the busiest in months yesterday [Thursday], and they are run off their feet again today. Looking at the charts, that’s really counterintuitive to what’s happening. There is enormous demand sub-$1,200, and these divergences cannot last much longer. This enormous leverage employed by these paper market sellers is a distortion of what’s really happening. We’re stretched so far that the unwind and the rebound higher are going to be disorderly as sovereign and central bank buyers continue to milk Comex-based leverage selling.
  • Andrew Maguire: The wholesalers are busy converting this resulting spot price into physical (gold) at the painted fixes (in London). This physical latency will catch up in a very disorderly way the moment the downside momentum wavers. And we’re reaching the point where we can see that change in behavior is beginning to become evident. The amount of synthetic gold supply that’s coming into the market is in the tens of tons, in (increments of) several tons at a time. It’s resulting in literally hundreds of tons in a week being supplied into the marketplace. Because of the latency it’s not being noticed, but the central banks, bullion banks, and the sovereigns are taking the long side of that (trade). They are taking delivery on an unleveraged basis.
  • Egon von Greyerz (via King World News): The tapering was totally cosmetic and they are aware of the problems. If all of the banks apply the Volcker Rule to mark all of the toxic debt at market, no bank would be standing today.  
  • Egon von Greyerz: That is why there will be no significant tapering in 2014, and you will even see a massive increase in QE. Home sales also had their first fall in 29 months. Housing has only been strong because of subsidies and institutional buying. So we are now developing another housing bubble in the US. Higher interest rates in the US are also increasing the cost of housing quite significantly.  If we look at China, I’ve talked about the credit explosion in China. Now the banking system is under real pressure. The PBOC had to add funds to the banking system in the last few days. The 7-day Repo Rate surged to 9%. This is the highest it has been since the June banking panic which almost crashed the system. Japan’s situation is truly frightening. The situation in southern Europe is getting a lot worse. The percentage of population at risk of poverty in southern Europe is now between 25% and 35%. There is a high risk of violent social unrest in Italy.
  • Egon von Greyerz on gold: The short sellers have already tried to push gold to new lows at under $1,178, and they were almost there yesterday, when gold hit $1,187. Although the market could get a bit weaker, we are seeing bullish divergences on the daily and weekly charts of gold. Gold priced in other currencies has already made substantial new lows since the June bottom, except priced in dollars. Gold in all currencies is now back to 2010 levels. But just look at what’s happened in the US since then: In 2010, the US debt was at $12 trillion, today it’s $17 trillion. The Fed’s balance sheet was $2 trillion, and it’s now it’s at $4 trillion. So the total debt and Fed balance sheet has gone from $14 trillion to $21 trillion since 2010. So $7 trillion has been created from money printing and a 50% rise in debt since 2010, and yet gold is somehow back at the 2010 levels.
  • Andrew Maguire on the BIS and rehypothecation: The real problem lies in these untenable, under-water rehypothecated bullion related positions that these very same banks and the BIS have built up in the over-the-counter market. Due the very fact that China and much of the East are rapidly increasing their bullion inventories in an escalating move to ‘de-Americanize their economies,’ there is a resultant scramble in the West to repay rehypothecated bullion from both unallocated and allocated LBMA bullion accounts. The BIS and the Fed are providing leased gold into the market, but, importantly, laying the liability directly upon the bullion banks who are no longer receiving any bullion, just credit ledger entries.
  • Kenneth Hoffman: Hoffman shockingly reveals that London’s gold vaults are “virtually empty“: “You could go into a vault in London a couple of years ago, and the vaults were packed to the rafters with gold, and the gold would trade from me to you to somebody else. You can walk into those vaults today, and they are virtually empty. All that gold (26 million ounces) has been transferred from London and has gone to Switzerland where it has been recast to higher grade formats and shipped off to Hong Kong and then to China, never to return.”
  • Jim Willie: Systemic failure and widespread sovereign bond default is no longer avoidable, nor is big bank failures. The breakdown failure will begin to occur in earnest, with acceleration, in year 2014. The Global Currency Reset is a euphemism for the Return of the Gold Standard, which will seethe Gold Price will rise to $3000/oz. The year 2013 will go down in history as the year of great transition, widely adopted hyper monetary inflation, exposure of hidden devices, panorama of popular awakening, and indisputable evidence of a systemic failure. 
  • Dave Hodges issues a false flag warning:  http://thecommonsenseshow.com/2013/12/21/a-devastating-false-flag-attack-event-is-coming-our-way/

All this and more on...

The Harvey Report! sad

http://www.tfmetalsreport.com/comment/372743#comment-372743

DayStar

SS121's picture

The Market/Econ 'Cycles' Environment

The World's Fiat Currencies have temporarily displaced Silver and Gold from there monetary role.

In other words, the bankers put their fake money between the people and real Money.

All markets and economies were built, and cycle, within this fiat environment. 

Multiple Paper Markets, financial systems, and fiat-based Economies grew and cycled within our World Fiat Currency environment.   (Like multiple cancer cells and tumors growing in an anaerobic 'cancerous' environment)

All of our numerous market and economic cycles, have all occurred within our single Moneatary Cycle, (within the Fiat Currency environment)

The more delicate markets and systems will die before the end of the world's fiat currencies, and in fact are dying now.   

In line with Mr. Fix's early point,... whether or not the paper markets ever were legitimate-  now they are not.  

We are now very near the end of the Monetary Cycle, and the World's Fiat Currencies are set to go the way of the hundreds and hundreds of fiat currencies before them.  Accordingly, Silver and Gold are returning to their monetary roles.

At this point, the fake silver and gold MARKET charts are being used primarily, if not exclusively, for MONETARY reasons.

The silver and gold charts do not reflect actual (MARKET) trading.  Instead, the charts are programmed price control devices that are being used to try and keep people away from Silver and Gold (MONETARY)

The silver and gold markets/charts are fake and dying.  The study of market and economic data or cycles is likely pointless, at least to whatever degree that everything is now being driven by the Monetary Level.  

Silver and Gold are returning to their Monetary role.

To AM's question-  "So where is gold in all this?"  In the Fiat-based market/econ environment... it really isn't.   Only paper gold exists in this environment and it is never really allowed to function as real Money even in it's paper form.

boomer sooner's picture

The calming of the waters.

http://uk.mobile.reuters.com/article/idUKL2N0JZ1Y920131222?irpc=932

"With the Fed out of the way now, the market is going to move back to making more rational decisions and focus on what really matters in the economy," said Scott Clemons, chief investment strategist at Brown Brothers Harriman Wealth Management in New York.

buzlightening's picture

YES! The end game.

It's a series of events happening through the years, decades if you like where black magic illusion keeps peeps MOPING. The management of perception economics has peeps looking for some switch to be hit for the economic lights to go out; fiat debt based currencies to collapse.  It's the light bulbs in the economic chain going out which folks can't read.  Why throw a switch into off when the light bulbs of all the economic black magic illusionists are out.  Same stuff done before not working to mope the populous peeps.  You can't read the signs of the time and how dark it's getting than too bad I'm so sad.  You'll likely not be prepared with any light for when it goes completely dark.  Gotta come from within and being prepared doesn't mean buying fire insurance when the house burns down.  Getting your economic life boat prepared before the debt based tsunami hits and sweeps many masses away.  Peoples heart failing.  Fill your lamps with oil now so you can light your way and others way when needed in the darkest days ahead.  Now lets get back to Sunday night football.  I mean, well being human, which gets in our way and keeps us from hearing and seeing because of our choices.  Our ears are dull of hearing but doesn't mean because we're deaf we need be going around poking out the eyes of those with some credibility in seeing.  In this day of great darkness, mid-night coming on fast there are nocturnal people who share their vision.  Seek and find.  Knock and it's opened.  Same promises for all as has been from the beginning.  Don't give up your hopes; keep on keeping on. Evil may have its day but lets not forget truth prevails.  It always has and will in seeming insurmountable days of darkness.  Climb every mountain.  It's true, as in the climbing we have greater vision from what we experience in getting there.  When you get there; your high.  Don't look down on others struggling but lift them up in the coming New Year!  Joy to the world.  buz

DeaconBenjamin's picture

Broken Markets, State Capitalism & Eroding Liberty

Dagney Taggart's picture

@argentus

Our palladium portfolio has no paper and consists of a little more than 1000 maples

This may change depending on how it reacts to the rotation out of equities but as of now we are not buying. Silver is too cheap.

@silver2013: Good for you. Our gold and silver puts (now closed) were up over 1000% for 2013. Profits used to buy a lot more silver this year than in any since 2005. And this will continue as long as the thieves keep playing games. This doesn't make me proud and gives me no reason to call this a recovery. It isn't. A recovery will require a systemic change that hasn't happened yet.

@frax: Just wait until the CBs start subsidizing the mines ie. using our own currency to make it appear that production cost is less than it truly is.

boomer sooner's picture

EU loses AAA Rating

Where have I been?  Haven't seen this promoted anywhere.

http://mobile.bloomberg.com/news/2013-12-20/european-union-loses-aaa-credit-rating-at-s-p-on-weaker-cohesion.html

The European Union lost its top credit rating from Standard & Poor’s, which cited the deteriorating creditworthiness of the bloc’s 28 member nations.

S&P cut its long-term rating on the EU to AA+, with a stable outlook, from AAA and maintained its short-term rating at A-1+. The downgrade came after S&P last month lowered its AAA rating on the Netherlands.

http://uk.mobile.reuters.com/article/businessNews/idUKBRE9920LO20131220

NEW YORK (Reuters) - U.S. stocks jumped on Friday after the U.S. government said the economy grew at its briskest pace in nearly two years, while the euro held steady, paring early losses after Standard & Poor's stripped the European Union of its triple-A credit rating.

Add- How does this not negatively affect the cost of borrowing, especially in the bottom tier of the group? 

AlienEyes's picture

Things to come...

If you are wondering where all of this financial bamboozling is heading, rent "Elysium". It's not perfect, but is is close enough to give one an excellent idea of where it could all go considering the elements now in play. 

The uber rich have been seeking separation from the rest of us for sometime. Take a look at Dubai. Buy a place there and your neighbors might be less than civilized but they will be well healed and they won't be from an Ohio trailer park. Dubai is not perfect. You can pull time for kissing in public.

Dubai is no less than a concrete, steel and glass monument to conspicuous consumption and exclusivity. If you don't care for Jews or gays, Dubai could be your Valhalla. The only Jews in Dubai are Mossad hit teams on a mission and they won't be wearing any little caps on their bald spots. They are there for a funeral....or to make one necessary. Richard Simmons won't be exercising a class of plump ladies either. Because of that, Dubai is in many ways, an anti-New York City.

Elysium is only one or two steps beyond Dubai. The super wealthy are there so they won't be bothered by the poor. To make thing super realistic in the movie, there is no middle class left on earth whatsoever and I believe that is exactly where we are headed.

Dagney Taggart's picture

PS. Argentus

Just checked and I lied. Our US equities portfolio has a bit of Stillwater Mining in it.

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