This blog will deal with large things and little things: spiritual truths, politics and economy, news, comment, food and the State of Texas. Oh, and my poetry and pictures. Enjoy.
The latest from Larry is that if gold holds above 1,278 and silver holds above 18.18 then both gold and silver are ready to move much higher. But, if these PMs drop below the cited support, then gold will drop to 1,178 and silver to 15.
Fitzwilson noted what I have noted a while back: "As investors, our primary navigation guides have been rendered nearly useless.
Markets have become very poor tools for price discovery due to the manipulation
by the central planners. The economic statistics upon which we have relied have
also become highly suspect. Methodologies for calculating important signals
such as inflation and employment have been altered to support current policies
and narratives, despite the fact that the myriad of these policies have failed
to produce the improvement in employment and overall economic activity that one
would expect after spending trillions of dollars."
Fitzwilson claims that the US is following its own version of "bail in." The banks had their cash positions improved by getting money to loan at virtually zero interest, while credit card and other loans were kept high. Thus, the public is made to finance the banks, just as they were in the case of Cyprus. Just in a different way.
The developed world is run by politicians and bankers who are irresponsible at best and insane at worst. Let's go through the coming catastrophies.
Japan.
Japan's debt service has risen to 25.3T Yen($257B), while its revenues total 45.4T Yen ($545B). Thus, half of Japan's revenues go to service its debt. The National Debt is 242% of the GDP. It will not be paid back. The Bank of Japan wants a 2% inflation (sounds familiar?). Just as in the US, the govt jury rigged the numbers so inflation is underreported: core inflation is reported as 1.3%, overall price inflation as 1.6%, while food prices have risen 13.6%. The Bank of Japan prints 70T Yen/year, which has alleviated deflation fears for now. Hyperinflation looms as Japanese Government Bonds will have to increase yield to be sold. And if the Bank of Japan becomes the sole buyer of its bonds then... Ten year bonds now earn 0.62% and if bond yields increase, it will hit the economy AND raise debt payments. This is a box from which there is no escape.
The US.
The Main Stream Media puts out the propaganda that the US economy has recovered. Not so. Total sales are down 4%, housing starts down 34%, house sales down 18% and consumer debt has increased 20% since 20010. The FED is also set on wanting a 2% inflation rate. If you shop, you may notice that coffee is up 70%, hogs are up 42% and beef is up 5% (which number is probably higher). Tapering $30B has not helped the economy and the taxes of Obamacare hand like a black cloud over us. Who buys the US Treasuries? If you can believe this: Belgium. Their ownership of Treasuries went from $170B in September to $310B at the latest reporting. Belgium????
China
China is slowing and construction companies are defaulting. Hong Kong real estate prices are diving, but Chine continues to buy all the gold it can.
Russia/Ukraine.
No telling how the "sanctions" will effect Russia economically. The Ukraine owes $72B, of which $12B comes due this year. Since, the Russians just raised the cost of gar to the Ukraine by 40%, it is doubtful that the Ukraine can survive. I mean if Russia does not forcefully incorporate them. Putin clearly believes that he can do anything he wants in the Ukraine, Moldova and Estonia without fear of Western retaliation.
Gold
The London Bouillon Metal Association Banks(LBMA) are essentially in default. That is, they do not have the gold they pretend selling. So, where do the "get" the gold they actually sell? They simply raid the gold of people who store gold with them and "sell" that. Since, a lot of people leave "their" gold at the banks for storage, the gold can be sold to several people. When the Chinese and Indians buy, they want delivery of the physical metal.
Presumably, the LBMA avoided default by getting the BIS to allow them to "sell" more paper gold. However, this can not be carried on indefinitely. So, the financial media is trying to jawbone gold down by predicting gold prices to fall to $1000/oz.
The FED meeting was accompanied by a fall of $47 in the price of gold. Next week, expect gold prices to rise and produce the "golden cross" where the 50DMA crosses above the 200 DMA. Gold miners didn't drop much and the market is ready to roll. Will it?
The Ukraine has two problems: 1. It has a population that is made up of Russians and Ukrainians and 2. The country is profoundly corrupt and mismanaged.
The first graph shows the makeup of the Ukraine and the second graph shows how these regions voted in the election that brought in the Presidency of Yanukovych.
The degree of incompetence and hypocrisy that we saw exhibited in this case is nothing short of phenomenal.
1. Yanukovych wasted little time in dragging the previous president into court and jailing her for 7 years.
2. Tymoshenko's supporters then took to the streets and chased Yanukovych to Russia.
3. Russians in the Crimea rebelled and are having a referendum on joining Russia. No question on how this will turn out.
4. The US govt insists that the Crimean referendum is illegal. The US govt does not have a leg to stand on. It supported the referendum in Kosovo, South Sudan and the Falklands and has voiced no objections to the up-coming referendum this September in Scotland and Catalonia.
5. In the meantime, the EU and the US are threatening the Russian Federation with sanctions and Russia is liquidating its dollar holdings. The US even sent a destroyer to the Black Sea and the Russians shot down a US drone sent to spy on them.
6. To add insult to injury, Ukraine has sent its gold to the FED where it will be used in illegal price manipulations.
Not since the Dems had lost a Congressional by-election in California have we seen such a torturous attempt to label a defeat VICTORY as we witness re the election in Florida 13. This is how CNN put it: "David Jolly eked out a win with less than 50% of the vote over two-time loser Alex Sink." Congresswoman Debbie Schultz put it this way: "Republican special interest groups poured in millions to hold onto a Republican congressional district that they've comfortably held for nearly 60 years. Tonight, Republicans fell short of their normal margin in this district because the agenda they are offering voters has a singular focus - that a majority of voters oppose - repealing the Affordable Care Act."
We have learned that when Dems are involved (especially Debbie Schultz), it is advisable to check facts. So, what are the facts?
David Jolly was a relatively unknown candidate vs his Democrat opponent (Alex Sink) who was a previous gubernatorial candidate. Jolly fell 1.5 Million short of Sink in fundraising. The Dems spent 9 million dollars on negative advertisement against Jolly.
How about the vote? In 2010, Van Buchanan received 183K votes (68%) and in 2012, Bill Young won with 189K votes (57%). Jolly's votes (89K) amounted to 48.5% of the vote vs 85.6K votes for his Democrat opponent. After all this was a by-election.
Two more pertinent facts: 1. This is an urban district and was reapportioned to contain even more urban areas in 2012; 2. What is missing from the reporting is that during the last week or so of the campaign, the Dems accused Jolly of being a "climate change denier." The Dems figured that a lot of the recent newcomers to Pinellas County are snowbirds from the North East and the Midwest and would be susceptible to the global warming argument. This winter has been the coldest since 1912 and arguments based on the idea of global warming did not fly.
Gold has been trading in a relatively narrow range of 1,330 and 1,350. This morning it has reached 1,361.
What is notable about the chart is the flag formation during March; i.e. the higher lows and the tops at 1,350. If gold breaks through 1,360 and closes above 1,360 then the next resistance is calculated at 1,400.
Dr. Kim: Can the VGX-3100 data justify a share price in the double-digits? I gave up trying to forecast a specific share price many years ago. But here is the way I see it. The data we are looking forward to from VGX-3100 is not just about efficacy data for cervical dysplasia. Positive dysplasia data could bode well for our clinical studies for inoperable cervical cancer and head/neck cancer. Together, these indications may justify a much higher valuation.
However, equally importantly, industry players and smart investors are anticipating this data in order to hopefully see not only efficacy, but a confirmation of our best-in-class T-cell data in this much larger controlled study. If this immune response data is good, then irrespective of what the efficacy data looks like, many will be convinced that our active immunotherapy combined with an immune activator, a checkpoint inhibitor, and/or some other complementary therapeutic approach will represent a unique treatment modality with tremendous potential.
I believe that perspective is what could cause investors to attach a higher valuation to Inovio.
AJ adds: What Dr Kim is saying that an effective cancer therapy via immunology may require several agents, so even if one treatment is insufficient to do the job, it might work in combination with other things. Thus, it can be income producing even if it alone does not cure cancer.
Here is a list of definitions how some immunotherapy is thought to work:
Larry sent out an email last night (called Money and Markets). Here is a quote on gold:
Q: Gold's rally
seems to be fading, no?
A: Yes, it seems to be. There is very
tough overhead resistance scaled in from $1,360 to $1,400. A test of $1,360
remains possible but it's becoming more and more doubtful. Gold remains in a
three-year bear trend that has not yet bottomed. Ditto for silver and for
mining shares as well.
So, what is happening to gold today? Up $30/oz. Miners are up, too.
Weiss Research no longer headlines Larry, but Charles Goyette. He recommends silver and silver miners.
Anyone who is entrusted to deal with Russia must be well-versed in three things: 1. history; 2. Poetry and 3. chess. The need for these skills is obvious: they influence greatly how Russians think and act.
Let's start with poetry. There is a poetic saying that Russia without the Ukraine is a Country, but with the Ukraine, Russia is an Empire. Then there is chess. The game requires that one thinks through the permutation of moves and counter moves needed to achieve one's aims. Finally, knowledge of history is necessary to understand what happened, because often actions are determined by what happened in the past.
Forget about bemoaning the fate of Crimea. It WILL BECOME part of the Russian Federation. It was part of Russia for a long time until Khruschov decided to gift it to the Ukraine. The political mechanism is already there for annexation and the facts on the ground are being prepared. So, why aren't the Russians acting on it now?
The publicly stated rationale is that the re-annexation of Crimea is necessary to protect the Russian population and the naval base at Sevastopol. The Russians are waiting for the Ukrainians to attack. That might give them the excuse to overrun the rest of Ukraine.
What should the US do? sacrifice the Crimea for a treaty for Russia to stay out of the Ukraine. And give up on the idea of making the Ukraine a part of NATO. The US has little leverage other than becoming a supplier of oil and gas to Europe. But that is in the future. Right now it's ZIP, nichevo, nada.
Firms declare how many bars of gold they want to buy or sell at the current spot price,... Read More
Firms declare how many bars of gold they want to buy or sell at the current spot price, based on orders from clients and themselves. The price is increased or reduced until the buy and sell amounts are within 50 bars, or about 620 kilograms, of each other, at which point the fix is set. Close
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Photographer: Chris Ratcliffe/Bloomberg Firms declare how many bars of gold they want to buy or sell at the current spot price, based on orders from clients and themselves. The price is increased or reduced until the buy and sell amounts are within 50 bars, or about 620 kilograms, of each other, at which point the fix is set.
The London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say.
Unusual trading patterns around 3 p.m. in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behavior and should be investigated, New York University’s Stern School of Business Professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody’s Investors Service, wrote in a draft research paper.
“The structure of the benchmark is certainly conducive to collusion and manipulation, and the empirical data are consistent with price artificiality,” they say in the report, which hasn’t yet been submitted for publication. “It is likely that co-operation between participants may be occurring.”
The paper is the first to raise the possibility that the five banks overseeing the century-old rate -- Barclays Plc, Deutsche Bank AG (DBK), Bank of Nova Scotia (BNS), HSBC Holdings Plc (HSBA) and Societe Generale SA (GLE) -- may have been actively working together to manipulate the benchmark. It also adds to pressure on the firms to overhaul the way the rate is calculated. Authorities around the world, already investigating the manipulation of benchmarks from interest rates to foreign exchange, are examining the $20 trillion gold market for signs of wrongdoing. Photographer: Dhiraj Singh/Bloomberg
A jewelry store in Nashik, India, on Feb. 03, 2014.
A jewelry store in Nashik, India, on Feb. 03, 2014. Close
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Photographer: Dhiraj Singh/Bloomberg A jewelry store in Nashik, India, on Feb. 03, 2014.
Union Jacks
The paper “is not a Moody’s research report,” Michael Adler, a spokesman for the firm, said in an e-mail. “The co-author of the paper was writing independent of his position at Moody’s and was representing his own research findings and viewpoint.”
Officials at London Gold Market Fixing Ltd., the company owned by the banks that administer the rate, referred requests for comment to Societe Generale, which holds the rotating chairmanship of the group. Officials at Barclays, Deutsche Bank, HSBC and Societe Generale declined to comment on the report and the future of the benchmark. Joe Konecny, a spokesman for Bank of Nova Scotia, didn’t respond to requests for comment.
Abrantes-Metz advises the European Union and the International Organization of Securities Commissions on financial benchmarks. Her 2008 paper “Libor Manipulation?” helped uncover the rigging of the London interbank offered rate, which has led financial firms including Barclays Plc (BARC) and UBS AG to be fined about $6 billion in total. She is a paid expert witness to lawyers, providing economic analysis for litigation. Metz heads credit policy research at ratings company Moody’s.
Unregulated Process
The rate-setting ritual dates back to 1919. Dealers in the early years met in a wood-paneled room in Rothschild’s office in the City of London and raised little Union Jacks to indicate interest. Now the fix is calculated twice a day on telephone conferences at 10:30 a.m. and 3 p.m. London time. The calls usually last 10 minutes, though they can run more than an hour.
Firms declare how many bars of gold they want to buy or sell at the current spot price, based on orders from clients and themselves. The price is increased or reduced until the buy and sell amounts are within 50 bars, or about 620 kilograms, of each other, at which point the fix is set.
Traders relay shifts in supply and demand to clients during the call and take fresh orders to buy or sell as the price changes, according to the website of London Gold Market Fixing, where the results are published. At 3 p.m. yesterday, the price was $1,332.25 an ounce. The process is unregulated and the five banks can trade gold and its derivatives throughout the call.
All Down
Bloomberg News reported in November concerns among traders and economists that the fixing banks and their clients had an unfair advantage because information gleaned from the calls provided an insight into the future direction of prices and banks can bet on spot and derivatives markets during the call.
Abrantes-Metz and Metz screened intraday trading in the spot gold market from 2001 to 2013 for sudden, unexplained moves that may indicate illegal behavior. From 2004, they observed frequent spikes in spot gold prices during the afternoon call. The moves weren’t replicated during the morning call and hadn’t happened before 2004, they found.
Large price moves during the afternoon call were also overwhelmingly in the same direction: down. On days when the authors identified large price moves during the fix, they were downwards at least two-thirds of the time in six different years between 2004 and 2013. In 2010, large moves during the fix were negative 92 percent of the time, the authors found.
There’s no obvious explanation as to why the patterns began in 2004, why they were more prevalent in the afternoon fixing, and why price moves tended to be downwards, Abrantes-Metz said in a telephone interview this week.
Bafin, FCA
“This is a first attempt to uncover potentially manipulative behavior and the results are concerning,” she said. “It’s down to regulators to establish why there are such striking patterns but banks have the means, motive and opportunity to manipulate the fixing. The results are consistent with the possibility of collusion.”
Deutsche Bank, Germany’s largest lender, said in January that it will withdraw from the panels setting the gold and silver fixings. German financial markets regulator Bafin interviewed the Frankfurt-based bank’s employees as part of a probe into the potential manipulation of gold and silver prices.
“In general, research that finds certain price patterns does not as such constitute evidence of manipulation,” said Thorsten Polleit, chief economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former Barclays economist. “However, it might encourage interest in finding out more about the sources of these price patterns.”
‘Appropriate Oversight’
The five banks that oversee the fixing set up a steering committee and will appoint external advisers to consider reforms before EU legislation on financial benchmarks’ regulation and oversight comes into force, Bloomberg reported last month.
Britain’s Financial Conduct Authority is also scrutinizing how prices are calculated. The regulator published a report this week outlining its remit for regulating commodities including gold, saying that while it’s responsible for commodities derivatives, it doesn’t regulate physical commodities.
“Abusive behavior can occur in the physical commodity markets which in turn can have an impact on, or be directly linked with, financial market activity and prices,” the FCA said in the report. “The regulatory regime -- both in the U.K. and internationally -- needs to be adapted to ensure robust and appropriate oversight.”
To contact the reporter on this story: Liam Vaughan in London at lvaughan6@bloomberg.net
To contact the editors responsible for this story: Heather Smith at hsmith26@bloomberg.net; Edward Evans at eevans3@bloomberg.net
AJ adds: The study by Abrantes Mets has weight, because she has official capacity. Her study on LIBOR manipulation led to unmasking of other illegal activity.
