Bad Economic News Right On Cue
Just last week, we openly speculated that the "economic news" was about to turn decidedly sour, given that the yield on the 10-year note had moved significantly through 2%. So far, spot on.
Let's just take a look at today's headlines:
- http://www.adpemploymentreport.com/2013/May/NER/docs/ADP-NATIONAL-EMPLOYMENT-REPORT-May2013-Final-Press-Release.pdf & http://www.latimes.com/business/money/la-fi-mo-adp-jobs-economy-20130605,0,2964130.story
- And mortgage applications are "dropping as interest rates surge". http://www.cnbc.com/id/100790875 & http://www.zerohedge.com/news/2013-06-05/worst-month-mortgage-apps-2009-driving-mass-layoffs
- And, God forbid, what might happen to The Bernank's beloved "wealth effect" if the stock market rolls over? http://money.cnn.com/2013/06/05/investing/stocks-markets/?source=cnn_bin
I first posited that this would be the case a week ago. You can go back and re-read the full post if you'd like: http://www.tfmetalsreport.com/blog/4746/hammer-time I haven't gotten the pre-BLSBS selloff I had anticipated...but...the fact that the economic news has turned out as expected makes the post increasingly relevant. At the risk of being BulletPointMan, here's a c&p of the main thesis:
"Once again, this move in rates can be traced to the BLSBS report of Friday, May 3. Since then, the note has fallen four points and now rests near support at 130, which corresponds to a rate of about 2.15%. This level may hold but I suspect that it will not. More likely is a drop to what appears to be critical support near 127-128.
But here's the deal. There is no way, no how that The Fed is going to allow support to fail, thereby letting 10-year rates back up to 3%+. Not happening. Besides the detrimental impact higher rates would have on the U.S. budget deficit and debt, higher rates would also crush any nascent economic recovery.
Already we are seeing things slow down in the U.S. (Even that statement is nonsense because "slow down" implies that previously things had been really cooking.) Check this headline from ZH just this morning. http://www.zerohedge.com/news/2013-05-29/cash-and-tarry-mortgage-applications-plunge-fastest-rate-2009 And, as discussed last week, if the economy was booming and housing growth was robust, demand for inputs such as lumber would be soaring and soaring demand would lead to higher prices. Right? Right?? Apparently not.
So here's what's likely to happen in the weeks ahead:
- The 10-year note may fall a bit farther but then it will bounce and begin to rebound
- Signs that the U.S. economy is weakening will get more mainstream press coverage
- This will likely begin with a May NFP next Friday that comes in "weaker than expected"
- A continuation or even increase of QE will shove stocks even higher
- Gold and silver will finally stabilize and begin trending higher, the start of a summer rally"
OK, then. So what have we seen in the week since this was posted?
- The 10-year note sold off, reaching a low on Friday of about 128 1/2. It has since bounced back to near 130.
- The economic weakening is definitely getting more MSM coverage. (See above.)
- Still waiting on the BLSBS but today's ADP sure raises questions.
Yes, the BLSBS data on Friday could still leave everyone at CNBS grinning ear-to-ear. We'll just have to wait and see. However, it should be clear to everyone that the U.S. economy is not booming or growing. If anything, it simply continues to bounce along the bottom, the illusion of current and future prosperity created by the daily purchase of S&P futures by The Fed's Primary Dealers. There will be no end to QE. Not now. Not later this summer. Not in 2014. Not ever. The only escape from under this mountain of endlessly leveraged debt is currency devaluation. Physical gold and silver will continue to be your only refuge. Buy some today. (And if you do so, please do it through one of our affiliates!) http://www.tfmetalsreport.com/precious-metals-store
expected hoped that price would recover today after yesterday's CoT-related selloff. So far, so good. Check this action in gold first. Note that price continues to be centered around the recovery trendline that began back on the overnight of the 18th. It also continues to battle a declining 20-day MA that is now near $1405 but stays resilient. This is a very good sign and, if it continues, foreshadows a jump through $1420 and a move back toward the late April recovery highs just below $1490.
And I've found something interesting on the silver chart. Maybe it's nothing. Worth no more than the paper it's printed upon. However, it is not and cannot be coincidence that all of these points on a chart are connected by this declining arc. And look at how the arc was right there to shove price lower on Sunday, the 18th. The Forces of Darkness tried to make it happen. They clipped price for over 10% in a matter of minutes. But a funny thing happened on the way to the beatdown. No additional sellers emerged. Instead of an accelerating drop into the $teens, price reversed and began to recover. We've been in a sideways, $1 range ever since. This has all the earmarkings of a bottom and a trend change. Will it? Can it? The BLSBS on Friday will likely hold the key.
Finally, today, we need to double back to a story that broke just as I was publishing yesterday's post. Our pal, DenverDave, sent me an email notifying me of a very peculiar change in the daily Comex data. It's a new disclaimer which The Comex apparently hopes will shield them from legal consequence should member vaults one day be shown to hold slightly less metal than is reported. The exact verbiage, which suddenly appeared on Monday is this:
"The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only."
With all ChurchLady sincerity: Well, isn't that special? So now The Comex (which is a futures market...and futures, being paper obligations, are entirely dependent upon trust and confidence) is telling us that the information provided to them by their members is not necessarily "accurate or complete"? What???
A very succinct analysis of this can be found at Jesse's place: http://jessescrossroadscafe.blogspot.com/2013/06/caveat-emptor-another-level-of-risk.html :
"One can only wonder why the Exchange felt the need to add this statement now, after all these years. Especially when Comex eligible gold inventory levels are approaching record lows, and there is widespread mistrust of certain parties and their opaque market positions on this list.
And there are rumours of forced cash settlements in lieu of bullion delivery floating around. The Hong Kong Metals Exchange just folded, and forced cash settlements. And banks are cancelling physical delivery arrangements.
How can someone who is trading metals and storing them at the warehouse not be concerned about a declaration of force majeure without liability recourse? What is the purpose of a commodities exchange when there are no representations made that they even possess what one is trading?"
Look, the shils, disinfo agents and apologists for The Cartels can SPIN and deceive all they want. But use your eyes and your brain. There is now a mountain of individual dots just waiting for you to connect them. You can either blissfully sit and amidst the pile of shit that has been shoveled upon you for decades or you can prepare for the new paradigm. The choice is yours.
Have a great day.