Wednesday, September 17, 2014

China, Russia, Gold & A New World Order Rising From The East

"Today an acclaimed money manager spoke with King World News about China, Russia, gold, and a New World Order that is rising in the East.  Stephen Leeb also spoke about how the Russians and the Chinese are planning to set up this new hub of power in the East.

Leeb:  “I am watching what is developing between China and Russia.  They have a shared desire to establish a region that is completely independent of the West.  China has had a persistent focus on gold...."


Rule Rule - Massive Fund Flows Pouring Into Gold & Silver

"Today one of the wealthiest people in the financial world told King World News that despite the pullback in gold and silver prices, last week saw extremely large fund flows into virtually everything gold and silver related.  Rick Rule, who is business partners with Eric Sprott, also discussed why he is so bullish going forward.

Rule:  “The last 10 days for me has been consumed by the Precious Metals Summit near Vale, and then the gathering by the Denver Gold Group.  There were 400 companies exhibiting.  Denver, in particular, had the major gold mining companies from around the world as well as many intermediates and juniors...."


The Divergence Between Debt and Gold

"There is little doubt that gold is 'money' in the de facto, if not official, sense. It has been so for at least two thousands years, if not longer.

In a policy regime in which the Western central banks wish to quietly devalue their currencies in concert, it would be awkward to allow gold to speak embarrassing truths.

I would like to think that now, unlike ten years ago before almost every market was shown to be manipulated and sometimes on a global scale, that a concerted effort to discredit the message that gold carries would not be beyond their capability. They certainly have the motive.

As you may recall, in 1985 Larry Summers and Robert Barsky wrote a paper on Gibson's Paradox showing the linkage between prices and interest rates, and more specifically the price of gold under a gold standard.  With the price of gold going higher, it would be much more difficult to manage longer term interest rates lower, he asserts. 

We are not under a gold standard at this time.  But with the turning of central bank purchasing towards gold in 2006, with a substantial boost from Asian reserves acquisitions, the fears of the Western central bankers became paramount.  Once again, they 'stared into the abyss.'

I caution that correlation is not causation.  But it is more likely where there are independent linkages, fundamental reasons that support the linkage as it were.

And I also remind the reader that divergence and convergence run in cycles. And convergence tends to return, and often does so with a vengeance.

Brace yourselves, not so much for patience while under determined financial repression, but for the time coming when the failed schemes of today's financial engineers collapse from exposure, a challenge from the East, or from sheer exhaustion.

This chart is from the data wranger Nick Laird at"


Venture Capital Risk Taking and Cash Burn Rates Unprecedented Since 1999; 47% of Nasdaq in Bear Market

"Venture capital risktaking and burn rates on cash are at levels that exceed the technology bubble in 1999. Companies that haven't made a dime, and perhaps never will, have valuations of $10 billion more.

Curiously, it' venture capitalist Bill Gurley who Sounds Alarm on Startup Investing in an interview with the Wall Street Journal. 
 WSJ: Mr. Gurley, who often voices his opinions on his blog, Above the Crowd, sat down with The Wall Street Journal as part of a Journal event series called "Tech Under the Hood." The investor in Uber, Zillow, OpenTable and other Web startups spoke on a wide range of topics. What follows is an edited excerpt of a conversation specifically about potential cracks in the tech-startup investing scene.

Mr. Gurley: Every incremental day that goes past I have this feeling a little bit more. I think that Silicon Valley as a whole or that the venture-capital community or startup community is taking on an excessive amount of risk right now. Unprecedented since ‘'99. In some ways less silly than '99 and in other ways more silly than in '99. I love the Buffett quote ["Be fearful when others are greedy and greedy when others are fearful"]  because it lays it out.

And I guarantee you two things: One, the average burn rate at the average venture-backed company in Silicon Valley is at an all-time high since '99 and maybe in many industries higher than in '99. And two, more humans in Silicon Valley are working for money-losing companies than have been in 15 years, and that's a form of discounted risk.

In '01 or '09, you just wouldn't go take a job at a company that's burning $4 million a month. Today everyone does it without thinking. 
Bubble Risk

The Guardian picks up on the story in Leading tech investors warn of bubble risk 'unprecedented since 1999'
 Two of the world’s leading tech investors have warned the new wave of tech companies and their backers are taking on risk and burning through cash at rates unseen since 1999 when the “dotcom bubble” burst..."


The Depression, World War II, And What They Really Mean

"Nearly a century after the fact, the Great Depression remains THE object lesson for virtually every branch of economics. To monetarists the fact that the US money supply fell by nearly a third in the 1930s illustrates the need for a central bank to maintain steady money growth. To Keynesians the Depression’s depth and duration proved that capitalist systems are inherently unstable and need a big, powerful government to manage them. World War II, in this framework, saved the US economy from permanent 25% unemployment.
To Austrians, meanwhile, the Depression demonstrated that 1) the best way to prevent a bust is to avoid the preceding boom, which is another way of saying that the size and composition of the national balance sheet is the key to everything, and 2) the best way to get through a bust is to let market forces liquidate the bad debt as quickly as possible.
September 14 DollarCollapse column took the Austrians’ side in the debate and illustrated the point with the following chart, which depicts the massive deleveraging of the 1930s..."
Debt during depression

Monday, September 15, 2014

UK Hints At Next Reserve Currency, To Issue Chinese Yuan-Denominated Bond

"Yuanification continues around the world. As The USA attempts to corral its allies in a 'broad coalition', an increasing number of people - including domestic economic policy advisors - are shifting away from the USD as primary reserve currency. However, the move by British Chancellor of the Exchequer George Osborne, announced Friday, is likely the most notable yet in the world's de-dollarization. As Xinhua reports, the British government intend to be the first nation (ex-China) to issue Renminbi denominated bond and to use the proceeds to finance the government's reserves of foreign currency. Osborne described this dialogue outcome as "a historic moment" and a statement of British confidence in the potential of the RMB to become "the main global reserves currency".

British Chancellor of the Exchequer George Osborne announced Friday that the British government intend to issue a Renminbi denominated bond and to use the proceeds to finance the government's reserves of foreign currency.

"I can now announce that the UK government intend to be the first national government outside of China to issue a bond in China's currency. We issued bonds in U.S. dollar before, now we will be issuing a bond in RMB," said Osborne in the press release of the Sixth China-UK Economic and Financial Dialogue (EFD).

Chinese Vice Premier Ma Kai and Osborne concluded the meeting of the Sixth China-UK Economic and Financial Dialogue in London..."


It Seems The CME Is Still Rigged

"Two weeks ago, as we noted here, the CME unveiled Rule 575 - designed to put an end to 'disrputive trading practices' or "rigging." Today is the first day Rule 575 is unleashed to stop "spoofing," "quote stuffing practices," and the "disorderly execution of transactions." So, as Nanex notes, why is the CME still allowing major quote-stuffing?

Each bubble represents the relative number of quotes-per-second... and it appears, despite Rule 575, that CME is still allowing quote-stuffing and spoofing..."


The U.S. National Debt Has Grown By More Than A Trillion Dollars In The Last 12 Months

"The idea that the Obama administration has the budget deficit under control is a complete and total lie.  According to the U.S. Treasury, the federal government has officially run a deficit of 589 billion dollars for the first 11 months of fiscal year 2014.  But this number is just for public consumption and it relies on accounting tricks which massively understate how much debt is actually being accumulated.  If you want to know what the real budget deficit is, all you have to do is go to a U.S. Treasury website which calculates the U.S. national debt to the penny.  On September 30th, 2013 the U.S. national debt was sitting at $16,738,183,526,697.32.  As I write this, the U.S. national debt is sitting at $17,742,108,970,073.37.  That means that the U.S. national debt has actually grown by more than a trillion dollars in less than 12 months.  We continue to wildly run up debt as if there is no tomorrow, and by doing so we are destroying the future of this nation.
The chart that I have posted below shows the exponential growth of the U.S. national debt over the past several decades.  Anyone that would characterize this as "under control" is lying to you..."

National Debt 2014

Karl Marx oversold socialism, but he was right

"The problem is not new. Karl Marx oversold socialism, but he was right in claiming that globalization, unfettered financial capitalism, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct. As he argued, unregulated capitalism can lead to regular bouts of over-capacity, under-consumption, and the recurrence of destructive financial crises, fueled by credit bubbles and asset-price booms and busts."


Sydney to Become Renminbi Hub

"Westpac Head of Institutional Banking Rob Whitfield discusses Sydney possibly becoming the next Renminbi hub by the end of the year and why global markets could be heading for a significant correction. He speaks to Bloomberg’s Stephen Engle from the World Economic Forum in Tianjin, China."


Paul Craig Roberts Accuses US Banks Of Gold & Silver Smash

"Today former US Treasury official, Dr. Paul Craig Roberts, spoke with King World News about the gold and silver smash and what is happening with the U.S. dollar.  Below is what Dr. Roberts had to say in this riveting interview.

Eric King:  “What about what’s happening with the U.S. dollar and gold?  What do you see going on there?”

Dr. Roberts:  “In recent days, in fact for quite an extended period, there’s been an enormous amount of short in the futures market, and they’ve taken the gold and silver prices way down.  And it has sustained (at low levels)....

“So one more or less has to conclude that the Federal Reserve is worried about the dollar.  Why would it be worried about the dollar right now?  Well, we know that one effect of the sanctions on Russia has been to move Russia out of the dollar payment system.  And they (the Russians) have made these new deals with China and so forth, to transact energy without using the dollar.

But this hasn’t been in place long enough, or happened to an extent that is sufficient, in my view, to have put the dollar under immediate pressure.  So I don’t know what the cause of pressure on gold is right now that has led to this extraordinary shorting on the Comex.  I also don’t understand how something this visible and this illegal can be permitted to continue.

But my understanding is that at the Comex all the directors are all the bullion banks.  And the players on Comex are the hedge funds.  So since the bullion banks are directors of the Comex, they see precisely the positions of the hedge funds.  And when the hedge funds are most vulnerable to being looted by (naked) shorting in the (paper) futures market, (the banks manipulate the price and loot the hedge funds of a portion of their capital allocated to those markets).  This has got to be an extreme form of insider trading...."


Thursday, September 11, 2014

Deutsche Bank Just Released A 104-Page Report On What May Be The World's Last Mega-Bubble

"Deutsche Bank strategist Jim Reid and his team just released a huge 104-page study that is focused on answering one question: Are bonds in a bubble?
The answer: well, probably. 
Reid writes:
It has long been our view that over the last couple of decades the global economy has rolled from bubble to bubble with excesses never fully being allowed to unravel. Instead aggressive policy responses have encouraged them to roll into new bubbles. This has arguably kept the modern financial system as we know it a going concern. Clearly there have always been bubbles formed through history but has there been a period like the last 20 years where the bursting of one bubble has consistently led directly to the formation of the next?
It's an amazing statement — that the modern financial system doesn't just experience bubbles, but in fact needs them. You could say this makes bubbles a feature, not a bug, of the financial system (which is something many people say already).
And the latest bubble appears to have rolled into bonds, with yields tumbling around the world and government debt in Europe currently at half-millennia lows.
What we found was that bonds are where the bubble has migrated to. This is not to say that the bond market bubble is about the burst — far from it — but that it is a necessary condition for maintaining the debt ladened financial system that has been the by-product of major crisis management over the last two decades. The worry is that there is nowhere left for this bubble to go given that it is now in the hands of the lenders of last resort (governments and central banks with regulators ensuring other large captive buyers). Although we think this bubble needs to be maintained to ensure the solvency of the current financial system, the best case scenario is that it slowly pops over time via negative real returns for bondholders. The worst case scenario being future restructuring..."


Manipulation of Gold and Silver Definitely Ends This Year-Harvey Organ

"Harvey Organ has been on a personal mission to expose the “fraudulent manipulation” of the gold and silver markets since the late 1990’s.  Organ, who studies these markets daily, contends, “It’s definitely going to happen this year.”  Why does Organ think this?  Let’s start with the gold market.  Organ says, “You are seeing a huge amount of obligations per one ounce of gold that’s available, and as the gold moves from West to East, and the bubble of paper obligations that’s left are going to blow up.  So, that is what we are basically seeing in gold.  There is a massive movement basically towards three countries . . . Russia . . . China . . . and India.  So, if you figure the world produces no more than 2,200 tons of gold per year, excluding China and Russia, more than 100% of that gold is going to those countries.”  Organ goes on to say, “I doubt very much if the United States has one ounce of gold left.”
The price suppression game has been going on for a long time.  Why does Organ think it will finally end this year?  Organ says, “There is a deficit of gold of 1,800 to 2,000 tons per year.  The leasing game started in 1988, and it starts going much higher in 1993.  So, over the last 20 or 30 years, all that gold has been leased out.  Gold that’s been leased never comes back.  Now, this is why there are huge derivatives outstanding. . . . Gold at the central banks is gone.”  Organ explains, “You can always paper over a paper problem, but you cannot paper over a physical default.  I don’t think there is any left, and this is the year they run out of gold to deliver at GLD, Comex and the LBMA (London Bullion Market Association).  How do we know it is officially over?  Organ says, “Probably, China announces to the world how much gold it has.”
Organ says when China and Russia disclose the true amount of gold they hold, there will be a price spike never before seen in the history of the world.  Organ says, “You will see that you will go to sleep at night, and you will wake up the next morning and see gold bidding at $3,000 per ounce, and there will be no offer, and it will rise by $500 a day.  It will come in 2014.  They are running out, they don’t have it.”


Despite Recent Weakness In Gold, Revaluation Spike Is Coming

"Turk: I think the following chart puts several key markets in their proper perspective, Eric.  It shows the correlation between the Fed's balance sheet, S&P 500, gold and crude oil.  This is a base-100 chart that plots the relative movement in these assets at the close of each week from March 2009, which is when the Fed announced its first QE program (see chart below).

There are several points to make about this chart....

1) When central banks print money by growing the size of their balance sheet, the currency they are printing gets debased.  Another way of saying that is that asset prices rise, which happened for gold until January 2013 and oil later in the year, but the S&P 500 kept rising.

2) The S&P 500 closed at a record high Friday for the same reason the Fed’s balance sheet is at a record high at just under $4.5 trillion - money printing.  The S&P is not rising because of good economic conditions.  Regardless of what the government central planners are saying, the economy stinks because the labor force is shrinking and is still well below the 2007 peak.

3) On a relative basis, gold and oil look very undervalued.  Both should be rising along with the S&P 500, as they did up until 2013.  But oil is weak because demand is falling because of the weak economy.  And gold is weak because its price is being manipulated by central banks.

4) Finally, look at the green line carefully on the chart above.  This line shows the growth in the Fed’s balance sheet, and growth is coming to a halt as the Fed winds down QE. 

Point #4 is particularly important.  It suggests to me one of two things will happen:  Either the stock market will tank as it did in 2011, or the Fed will renew its QE program.  The Fed will do this to foolishly keep printing in the hope that infinite money creation will jumpstart a sick, debt-laden economy that government central planners have turned into one of borrowing and spending, instead of saving and producing..."


Rule - Takedowns In Gold, Silver & Oil To End Badly For Bears

"Today one of the wealthiest people in the financial world told King World News that the takedowns in the gold, silver, oil, and uranium markets will end badly for the bears.  Rick Rule, who is business partners with Eric Sprott, also discussed why he is so incredibly bullish on the metals and energy.

Rule:  “In the near-term gold and silver have been moving down.  There is strength in the U.S. dollar. (Laughter).  Strength that, frankly, perplexes me.  There would seem to be a global belief that what you do in times of crisis is buy U.S. Treasury securities, and there is certainly a lot of crisis in the world...."


Quote Of The Week & A Chart That Will Shock KWN Readers

"“Why haven't we seen a double-digit correction since April - June of 2012?  In fact, we have not gotten anything more than a 6% pullback since November 2012.  My clients are asking, ‘Why no pullback?’  It seems unnatural.” 
-- A Raymond James advisor....

Continue reading the KWN piece below...

The spread between the bulls and bears increased and held in danger territory at 43.5%. It was 42.8% a week ago and has remained above 30% since February. Differences over 30% are a worry and they become dangerous at 40%+. The spread peak this year so far was 45.4% to start June. The last favorable spread occurred in August 2013 at 13.4%, close to the 10% (or less) reading that allows for broad buying. Bears haven't outnumbered bulls (a negative spread) since October 2011.”


Sentiment Chart

Monday, September 8, 2014

Art Cashin Warns Of Another Disastrous Global Lehman Event

"Today 50-year veteran Art Cashin warned King World News that the world is going to see another disastrous Lehman moment.  Cashin, who is Director of Floor Operations at UBS ($650 billion under management), also discussed the gold market and the world stumbling headlong into a global currency war.  Below is what Cashin had to say in this powerful interview.

Eric King:  “You’ve been warning for some time that the global markets discount everything geopolitical and that may come back to bite us.”

Cashin:  “I absolutely still feel that way.  And I am concerned that there is inbred opinion that geopolitical events tend to be short-lived and therefore, in many cases, buying opportunities when you get them.  I fear mightily that somewhere people might miscalculate and one of these things could turn into the equivalent of a Lehman moment in which everyone assuming that the worst will not happen discovers that the worst has happened and are ill-prepared for it.”


Legend Warns World Headed For Financial Chaos & Contagion

"Today a legend in the gold world warned King World News that the world is headed for financial chaos and contagion.  John Ing, who has been in the business for 43 years,  also discussed the role that gold will play as the global chaos unfolds and the contagion spreads.

The Money Printers vs Gold

China has pushed for a bigger role in the international theatre and even pariah Russia has attempted to use alternatives to the dollar calling for the usage of other currencies in exchange for oil. Russia last defaulted in 1998 and sanctions are not soon forgotten. Ironically, the US will need the cooperation of its allies and financial partners to execute its foreign policy and the politicization of the world’s financial infrastructure simply undermines that role. Without this system of partners and cooperation, the financial world will descend into chaos...."


Friday, September 5, 2014

New Study Confirms Staggering $1 Trillion Mineral Deposits In Afghanistan

"Despite being one of the poorest nations in the world, Afghanistan may be sitting on one of the richest troves of minerals in the world, valued at nearly $1 trillion, according to U.S. scientists.
Afghanistan, a country nearly the size of Texas, is loaded with minerals deposited by the violent collision of the Indian subcontinent with Asia. The U.S. Geological Survey (USGS) began inspecting what mineral resources Afghanistan had after U.S.-led forces drove the Taliban from power in the country in 2004. As it turns out, the Afghanistan Geological Survey staff had kept Soviet geological maps and reports up to 50 years old or more that hinted at a geological gold mine.
In 2006, U.S. researchers flew airborne missions to conduct magnetic, gravity and hyperspectral surveys over Afghanistan. The magnetic surveys probed for iron-bearing minerals up to 6 miles (10 kilometers) below the surface, while the gravity surveys tried to identify sediment-filled basins potentially rich in oil and gas. The hyperspectral survey looked at the spectrum of light reflected off rocks to identify the light signatures unique to each mineral. More than 70 percent of the country was mapped in just two months. [Facts About Rare Earth Minerals (Infographic)]
The surveys verified all the major Soviet finds. Afghanistan may hold 60 million tons of copper, 2.2 billion tons of iron ore, 1.4 million tons of rare earth elements such as lanthanum, cerium and neodymium, and lodes of aluminumgold, silver, zinc, mercury and lithium. For instance, the Khanneshin carbonatite deposit in Afghanistan's Helmand province is valued at $89 billion, full as it is with rare earth elements.
"Afghanistan is a country that is very, very rich in mineral resources," Jack Medlin, a geologist and program manager of the U.S. Geological Survey's Afghanistan project, told Live Science. "We've identified the potential for at least 24 world-class mineral deposits." The scientists' work was detailed in the Aug. 15 issue of the journal Science..."

Afghanistan mineral map


Most People Don’t Believe It, But We Are Right On Schedule For The Next Financial Crash

"People have such short memories.  Even though we are repeating so many of the same patterns that we witnessed in 2000-2001 and 2007-2008, most people do not think that another financial crash is coming.  In fact, with the stock market setting record high after record high lately, I have been taking quite a bit of criticism for my relentless warnings about the coming financial storm.  Many of the comments go something like this: "Snyder you are a moron!  Nothing you say ever comes true.  The stock market is going to keep on rocking and Obama is going to lead this country back to greatness.  I hope that you choke on all of your doom and gloom."  Of course these critics never offer any hard evidence that I have been wrong about anything.  They just assume that since the stock market has soared to unprecedented heights that all of us "bears" must have been wrong..."