Macro

520
Fri, Sep 16, 2011 - 9:46am

Gold is recovering today and is actually green on my screen. Wow! How unusual! Let's see if we can rally today and crawl back above 1800 before we call it a week. There's been some very interesting "news" rolling around for the last 24 hours and I wanted to take a minute to give you my non-educated opinion.

The crux of the matter is summarized quite well below:

https://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011987/china-to-liquidate-us-treasuries-not-dollars/

Between these comments and the wikileaks cables, one can quickly conclude that the Chinese are considering (if not already actively engaging in) further "diversification" of their vast U.S. treasury holdings. In the article above, Mr. Pritchard makes this sound as if there will be some happy and pleasant side effects of these moves. "Don't worry", he seems to say, "those dollars will flow into hard assets like stocks, land and gold". As if it's a zero-sum, no-big-deal event. On this point, he is dreadfully wrong.

As you know, I have long maintained that the real purpose of Quantitative Easing is not to promote economic growth. It is to promote low interest rates. Remember how rates on U.S. treausries are set...through auctions. Simply stated, if you need to borrow $50B and there are no takers at 2%, then you have to try 3%. If no one wants your bonds at 3%, then maybe they'll take them at 4%. Low or no demand means higher interest rates. Period.

With U.S. borrowing needs at all-time high levels, the rest of the world must be induced to buy treasuries. But, rates cannot be allowed to rise. As Mark Steyn points out in his new book, if long-term rates were to return to 5.7% (the average for the period 1990-2010), debt service projections for 2015 would increase from $290B to $850B! Additionally, the only "way out" of our current fiscal disaster is to magically increase tax revenues through economic growth. A return to higher rates would stifle and crush any potential "recovery".

So, what's a Boy Wonder to do? The answer: MORE QE MORE QE MORE QE.

The U.S. has managed to cover its necessary funding needs since June by managing the headlines. Have you noticed that nearly every time a treasury auction arises or the POSX moves down toward critical support, some type of intervention takes place. Whether it's a foreign central bank devaluing their currency or a rash of suddenly scary headlines out of Europe, events seem perfectly timed to keep money flowing into treasuries. This can work in the short-term and it obviously has. The yield on the 10-year note has actually declined since the end of QE2 in June. This won't and can't continue. A recent study from the University of Wisconsin showed that, by 2020, U.S. funding needs will soak up nearly 20% of the total annual global GDP! Do you really think that that is possible? There can be no world GDP when world economic growth is crushed under that type of debt burden.

But, that's in the future. What about the near term? Eventually, rates will rise when buyers (like China) disappear. Faced with an immediate funding crisis, QE will resume with vigor. Left with no other government funding option, the Federal Reserve will be forced into creating trillions of new greenback, simply to keep the social security checks flowing, the doctors paid and the military shooting. The dollar will resume its long-term decline into obscurity.

In the end, all of the central bank intervention in the world will not be able to suppress the global demand for true safe haven financial protection. Gold will rise to heights that even you, my dear reader, may currently think are unattainable. Silver will most certainly come along for the ride. Therefore, do not be fearful. If you use the time left to prepare...mentally, financially and spiritually...you will survive, and even prosper, in the days ahead.

Here are your updated charts. Unfortunately, both have taken on the appearance of range-bound markets. This can be managed as it affords us the clear opportunity to buy at the bottom of the range and sell at the top but it certainly isn't as much fun as runaway efforts to the upside. For today, don't get too excited until/unless either metal is able to firmly trade through the blue trendlines I've drawn inside the ranges.

paper_9-16amgold.jpgpaper_9-16amsilv.jpg

I'm going to be away and unavailable for most of the day today so, just as John said to Yoko, "looks like you're on your Ono". I will be monitoring things from afar, however, and will attempt to update if conditions warrant. Have a great day and a relaxing weekend! TF

p.s. Another preparatory move for the opening of PAGE:

https://www.reuters.com/article/2011/09/16/cjina-gold-idUSL3E7KG1IG20110916

About the Author

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Does Feb19 Comex gold close above $1250 on Friday?
YES
77%
NO
23%
Total votes: 179

  520 Comments

reefman · Sep 16, 2011 - 9:52am

IMHO we are going to start

IMHO we are going to start the next ascent very soon - especially since the FOMC is meeting next week. Look for higher prices SOON!

Shill · Sep 16, 2011 - 9:53am

Sloppy thirds :)

Sloppy thirds :)

Hoping to learn · Sep 16, 2011 - 9:57am

first

Could it be

It has been a long time reading and thinking about the wonderful and insightful advice shared on this board, and from time to time I feel like contributing only to see my views and thoughts display by a post further down the list. Sometimes I re-read my post and delete because it is not worthy, But today I at least accomplished a milestone of sorts for me......FIRST

Thank you turd for all you do and keep up the great work !

ewc58 · Sep 16, 2011 - 9:57am

I'm going Mano a Ono

Ok, for some levity, you just knew Stewart would pick up on Solyndra, right?

Jon Stewart Brings Solyndra Mainstream: "That Custom Tailored Obama Scandal You Ordered Is Finally Here"

Submitted by Tyler Durden on 09/16/2011 - 09:47 Fox News Goldman Sachs goldman sachs Jon Stewart White House

The biggest scandal to rock the White House since Bill Clinton needed a refresher on the definition of the word "the" has gone fully mainstream after Jon Stewart dedicated his segment last night to "That Custom Tailored Obama Scandal You Ordered." His summary: "Fox News call your doctor, because the erection you currently have is going to last longer than 4 hours." Spot on. One thing is missing, however: someone should advise Jon that the missing link, Goldman Sachs, is also, and quite naturally, involved.

madgstrader · Sep 16, 2011 - 9:58am
¤ · Sep 16, 2011 - 9:58am

Say Hi to Santa for us in Tanzania...

Just guessing that's where you're headed. How cool would that be?

Someday, someday.

beinki · Sep 16, 2011 - 9:58am
Shill · Sep 16, 2011 - 9:58am

9:57a September UMich

  1. 9:57a

    September UMich consumer sentiment rises to 57.8

¤ · Sep 16, 2011 - 10:01am

Obama is toast...

...if the MSM shows turn on him. It's starting by the looks of it.

Jon Stewart, Colbert, Letterma, Kimmel etc. can't be underestimated. And then we have El Rushbo starting to pound away. Love it!

Shill · Sep 16, 2011 - 10:03am

http://www.marketwatch.com/st

https://www.marketwatch.com/story/september-umich-consumer-sentiment-ris...

WASHINGTON (MarketWatch) -- A gauge of consumer sentiment rose to 57.8 in the preliminary reading for September after tumbling to a nearly three-year low 55.7 in August, according to Friday reports on the gauge from Thomson Reuters/University of Michigan. Economists polled by MarketWatch had expected a slight rise to 57.3 with stock volatility and weak employment maintaining downward pressure on consumers' sentiment. In August, sentiment had reached the lowest level since November 2008 with Washington's protracted debt-ceiling negotiations taking a toll on consumers. The sentiment reading, which covers how consumers view their personal finances as well as business and buying conditions, averaged about 87 in the year before the start of the most recent recession.

From 55.7 to 57.8...nothing to get to excited about here. NOW GO SHOPPING! :)

FriedEggs · Sep 16, 2011 - 10:05am

In other words

'they' are f**ked.

God didn't make trees to print endless bullshit fiat money from thin air... no way.

If anything, i like these pullbacks at is it gives us a chance to stack and acquire more. I don't know about other Turdites... but i jumped into the PM game just 1 year ago - and i need more time to add to my cache...

Fried(e)

Eric Original · Sep 16, 2011 - 10:06am

Perfect "Back to Basics" type

Perfect "Back to Basics" type post TF. Nice!!

Day to day chart squiggles can drive us all crazy, but if you want to keep your eye on the ball, just print out this post from TF and staple it to the wall.

¤ · Sep 16, 2011 - 10:06am
ewc58 · Sep 16, 2011 - 10:07am

I have 1 question

What does Ben Roberts have for breakfast? Not green eggs and ham I take it.

Tesla · Sep 16, 2011 - 10:08am
Eric Original · Sep 16, 2011 - 10:08am

Thanks Tom L Oh and BTW, gold

Thanks Tom L

Oh and BTW, gold just popped above 1792. I'll start the clock...

FriedEggs · Sep 16, 2011 - 10:08am

Dont forget Turdites

Even as powerful as theses POS are - 'they' are very dysfunctional. Evil = dysfunctional.

Fried(e)

¤ · Sep 16, 2011 - 10:10am

breakfast menu for inspirational thoughts

shredded wheat (haze) in a bowl. Milk optional.

Only kidding.

Good stuff Ben. Loving the passion.

Shill · Sep 16, 2011 - 10:11am

The Dallas Stars hockey team

The Dallas Stars hockey team - Chapter 11

The team listed assets and debt of $100 million to $500 million in Chapter 11 documents filed in U.S. Bankruptcy Court in Wilmington, Delaware.


cpnscarlet · Sep 16, 2011 - 10:12am

Sorry Turd, must disagree.

QE's first symptom, when used to buy bad debt (and I include UST in that category), is low interest rates. But the primary purpose for QE is simple currency devaluation. Inflate the currency and PAY BACK debt with dollars that are worth much less than they were when the loan was made. This is being done to, perhaps, slightly reduce public debt, but directly to get rid of private debt as soon as possible so that consumption can resume. Once consumption ramps up again, tax revenues return to normal, and the public and reduced private debt can be serviced again without QE. If along the way, some of the public debt can be reduced (OH stop it! You're killing me, you joker!), by paying it back with devalued dollars, so much the better. This is how my parents had a $150 mortgage payment into the 1980s.

O don't believe this is born from sympathy for the debt-strapped consumer, I think it's just the current method being used to keep the beast (Fed and FED) fed. 

Long John · Sep 16, 2011 - 10:13am

How To Run A Central Bank With A Gold Standard

https://www.forbes.com/sites/nathanlewis/2011/09/15/how-to-run-a-central-bank-with-a-gold-standard/

Interesting article. Although it does not speak the whole 'truth' as many here understand it...what makes it interesting is that it's from F'in' Forbes. Are the prepping the common folk and Main Street for what is to come?

Tom L · Sep 16, 2011 - 10:14am

@Eric:

You are welcome, sir. And I go to the boy's room and come back to be greeted by a whole buncha 'yellows' on my Scottrader screen, in the 'new high' column, not 'new low'. Now, that's what I call a pleasant surprise.

But, let's see if they can hold it.

https://stockcharts.com/h-sc/ui?s=$HUI&p=60&yr=0&mn=1&dy=0&id=p22628478546&a=243610011

Through the 20 hour MA, MACD cross, RSI back to 50 and the gap from yesterday filled. 

Ta,

JoeKa ewc58 · Sep 16, 2011 - 10:16am
ericplatham · Sep 16, 2011 - 10:16am

For what it is worth...

Spot Gold, 5 minute

cpnscarlet Shill · Sep 16, 2011 - 10:16am

@Shill - They filed in

@Shill - They filed in Wilmington?? They must have been keeping the whole shabang going on credit cards for the past five years!

Tom L · Sep 16, 2011 - 10:18am

@Shill: Dallas Stars

Yeah, that's been coming for a while. Declaring bankruptcy was necessary apparently to get in owners that aren't in over their necks. Tom Hicks has wanted out for a while and the NHL has been running the team for the past year. It's a shame too, b/c there's a lot of support/infrastructure for hockey in Texas now. Sustainable? Dunno. But much better than Florida or Arizona.

We'll see 10 Canadian Teams in the NHL before this is over.

(Former semi-pro hockey blogger as well, guys)

Ta,

ewc58 · Sep 16, 2011 - 10:18am

No hockey in Texas??? Say it ain't so!

I'm sure there are at least 5 people who care. Maybe why they need Chapter 11? Ya think?

Say it again slowly: hockey, in Texas. Where ice skating just noses out Calf Ropin' in popularity.

¤ · Sep 16, 2011 - 10:18am

Fried eggs

Your right.

They're one fatal flaw will be the egocentric sens eof invincibility they must feel or enjoy for now. A false set of security will lead to even more risk taking and it's only a matter of time before they push it too far.

The more desperate they get the more risk they take. I sense them f'ing up at some point here soon. It's getting wayyy too ponzi-like and they are stretching this whole thing out pretty thin.

I think China's going to call them all out on it in public/private by just dumping treasuries and watching the EU/U.S. squirm.

If I were them that's what I would do. Then I would announce at a later date that my currency is going to be backed by gold and silver and then establish a price. That would set them up psychologically in the MSM/public eye for it to be a reasonable and rational thing to do. It would also shed a spotlight onto their PAGE sysytem. It makes sense if you connect the potential dots.

I think we're closer to that then maybe we realize. I'm sensing something very dramatic within a month, end of October to be more precise.

Shill · Sep 16, 2011 - 10:19am

Consumer sentiment is up, and

Consumer sentiment is up, and then I read this

Capital One U.S. credit-card delinquencies rise

https://www.marketwatch.com/Story/story/?guid=11E86B78-83D4-4939-A1AE-D1...

Boardwalk · Sep 16, 2011 - 10:20am

The Vet

I'm trying my OTC BB trade again today.

I put the order in via the internet, but knowing from your experience that it would be routed to the TSX, I called and asked them to reroute the order to the OTC. They complied with my request. I can see the killed TSX order and I see my ask on the OTC.

Here's hoping I get filled today so that I don't have a repeat of this hassle.

For others who use TDAM and hold shares listed on the OTC BB, take heed of these issues I'm having selling. 

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