Monday October 6, 2014

Table of Contents

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From David's Desk

David Schectman

Quotes of the Day

 

The September payroll support was greeted with open arms by investors who had been battered earlier in the week by losses. September payrolls rose by 248,000 jobs, 33,000 more than expected. August was revised (as expected - August is always revised upward) to 180,000 new jobs from 142,000 and July was also revised upward by 31,000 jobs to 243,000.  The three-month average was 224,000 monthly, slightly better than the last 12-month average of 220,000 jobs and the 2013 figure of 193,000 jobs. The private sector contributed 236,000 of the September jobs and the gains were broad-based among industries. 

 

Nonetheless, the report showed a further shrinkage in the labor participation rate to 62.7%, a new low for this economic cycle and the lowest figure since 1978. To place this report in its proper perspective - which would take much of the bloom off the rose - the civilian labor force stood at 155.9 million in September. That compares to 154.9 million in October 2008 as the financial crisis was beginning to unfold. In other words, the U.S. economy has added a paltry one million jobs over the last six years while the working age civilian population (those over 16-years old) increased by 14 million people (from 234.6 million to 248.4 million). Stated differently, the economy is failing to provide jobs for enough of the people that need them, which is why the labor participation rate is at a 36-year low. Economic policy is moribund.

 

From a headline perspective, the unemployment rate hit 5.9%, the lowest since July 2008 while the broader measure U6, which includes discouraged and underemployed workers, fell to 11.8%.  It's a good thing that the Federal Reserve abandoned its 6.5% target for raising rates because we are obviously well past that level and nowhere near the point when Janet Yellen is prepared to move. From the standpoint of preserving its credibility with financial markets, however, the 5-handle on the unemployment rate is significantly increasing the pressure on the Fed to do something. The Wall Street Journal's Jon Hilsenrath, who is believed to have the best read on Fed intentions, wrote the following after the jobs report was released on Friday morning:  "That means early interest rate increases next year - though not the Fed's expected path before today - remain on the table. In addition, officials will need to make a tough decision at their policy meeting later this month about whether to alter their guidance about the interest rate outlook, or wait until they update their economic forecasts in December before changing the guidance."

- Michael Lewitt, October 5, 2014

 

Apolitical Aphorisms

 

If God wanted us to vote, he would have

given us candidates.

~Jay Leno~

 

The problem with political jokes is they

get elected.

~Henry

Cate, VII~

 

We hang the petty thieves and appoint the great ones to public office.

~Aesop~

 

If we got one-tenth of what was promised to us in these State of the Union speeches, there wouldn't be any inducement

to go to heaven.

~Will Rogers~

 

Politicians are the same all over. They promise to build a bridge even where there is no river.

~Nikita Khrushchev~

 

When I was a boy I was told that anybodycould become President; I'm beginning to believe it.

~Clarence Darrow~

 

Why pay money to have your family tree traced; go into politics and your opponents will do it for you.

~Author unknown~

 

Politicians are people who, when they see light at the end of the tunnel, go out and buy some more tunnel.

~John Quinton~

 

Politics is the gentle art of getting votes from the poor and campaign funds from the rich, by promising to protect each from the other.

~Oscar Ameringer~

 

I offer my opponents a bargain: if they will stop telling lies about us, I will stop telling the truth about them.

~Adlai

Stevenson, campaign speech, 1952~

 

A politician is a fellow who will lay down your life for his country.

~Tex Guinan~

 

I have come to the conclusion that politics is too serious a matter to be left to the politicians.

~Charles de Gaulle~

 

Instead of giving a politician the keys to the city, it might be better to change the locks.

~Doug Larson~

 

There ought to be one day -- just one --when there is open season on Congressmen.

~Will Rogers~

____________________  

Today's Featured Articles

Jim Sinclair (Gold In The News This Week)

Le Metropole Caf� (10/3 The Way It Is)

Greg Hunter (WNW 160-ME War, Economy Sours, US Ebola Threat)

Sprott Global (Jim Grant: We're in an Era of ˜Central Bank Worship")

Zero Hedge (September Jobs: Some Numbers Bubblevision Didn't Mention) (Thousands Sign Petition To Ban Flights From Ebola Countries; Two Removed From Newark Airplane By Hazmat Crew) (Labor Participation Rate Drops To 36-Year Low; Record 92.6 Million Americans Not In Labor Force)

Dent Research (Weekly Recap for October 03, 2014)

Sincerely,

David Schectman

The Holter Report

Bill Holter

It's All A Financial Mirage

October 6, 2014

 

Friday was Non-farm payroll day with an announced 248,000 new jobs created in September, the unemployment rate dropped to 5.9%.  This is the lowest unemployment rate since 2008 so it "looks" like we have recovered and the financial crisis should only be a bad memory.  I am going to tell you we are living in a financial mirage.

 

In September, if you look under the hood you will also see 315,000 are no longer included in the labor force bringing the total up to 92.6 million people.  Looking back to 2008, there were 78 million "not in the labor force" so we can see a nearly 15 million person increase in this category since then.  We also had an "adjustment" of a negative 26,000 jobs subtracted to arrive at the 248,000 figure, so if believable the real job growth was 274,000.  "Believable"?  Not by me, here is Paul Craig Roberts take.  My point is this, there are 15 million more people "not working" since 2008 but for "appearance sake" are categorized as "not in the workforce" or not looking for a job.  Doing some very simple math, what do these 15 million represent?  Somewhere between 4% and 5% of the entire U.S. population, that's what!  

 

So we have the "lowest" unemployment since 2008 at 5.9% and this headline will be splashed all over the headlines that say "happy times are here again!"  Before doing the very difficult math of "how much does 5.9 + four or five equal?" I would like to point something out.  We are now about 30 days away from the national midterm elections, could the unemployment rate have been "engineered" downward to paint a rosy picture so the balance of power in the Senate remains Democrat?  This was the very last employment number the public will see before they "vote early and vote often."  OK, I know you were dying to do the math, 5.9% plus either four or five percent equals either 9.9% or 10.9% ...  Of course, if unemployment was calculated the way it was back in the 1980's we would have a figure approaching 20% but that would be totally unacceptable for the financial mirage we are living.

 

Before moving on I do want to point out what Michelle Obama has been telling you herself.  She has recently been heard saying the upcoming elections for the Senate are very important ones.  She says if the "evil Republicans" take power, her husband will be impeached and all of the wonderful plans he rammed through may possibly be reversed.  I agree with her, the upcoming elections are very important and probably the last ones before martial law descend the landscape.  

 

Another "mirage" or should I say "Houdini trick" is how the elephant in the room has disappeared.  Have you ever seen old black and white photos or even movie footage of the bread lines back in the 1930's?  Do you remember thinking to yourself how bad it must have been to have lived back then?  For me personally, those images were always scary because of the despair it portrayed.  Fast forward 80 years or so to the present and we have bread lines all over again ...only you can't see them.  

 

There are now almost 47 million people on the SNAP program, this is about 14% of the population alone without counting food banks and charities that feed the homeless.  Can you imagine seeing 1 million people in your state lining up two or three times a day for a meal?  Can you imagine watching it on the news?  Or worse, can you imagine seeing people fighting for places in line, freezing in the winter or sweltering in the summer while waiting for their turn?  There are massive bread lines, you just don't see them.  You don't see them because this too is part of the financial mirage (miracle?) called the United States.

 

Not to worry though, the stock market is up.  This too is mirage like.  You have to first ask yourself, is the stock market "up" because of all the liquidity provided by the various QE's?  And since QE is now ending because the economy is "so strong" and unemployment "so low," can the stock market stay up without the extra trillions of $ floating around?  First let me point out how "up" the market is internally.  The NASDAQ now has nearly 50% of its stocks in a bear market (down 20% or more).  The Russell 2000 sports 40% of their stocks down over 20% and the average itself is now negative year over year for the first time since 2012.  New highs versus new lows on the NYSE have almost turned upside down, on a daily basis there are less new highs and more new lows than any time since August 2013.  Globally the advance/decline ratio has also broken down badly ...and all this at a time when the Fed has promised to completely shut off the excess liquidity flow of QE.  Can stocks go up further from all time high valuation levels while "free liquidity" is ended?  I can only say this, stock market crashes have always come with the internals of the market weakening while the "fa�ade" of high prices "looks" good and the fear of a crash nowhere to be found.  We are there now in my opinion.

 

This past week began with assurances Ebola could never reach the U.S., by the end of the week we knew differently.  So far Dallas and Washington DC have confirmed cases and hospitals across the country have over 100 cases where Ebola is suspected.  We also heard JP Morgan was "hacked" and 76 million customer's information was compromised, this of course was blamed on the Russians.  An epidemic would surely change the way business and commerce is conducted.  Waking up one day to see your financial institution's database and balances in shambles would also affect business and commerce.  I point at these two examples because I believe the entire financial system is a mirage yet something will need to be blamed as the "cause" for its coming down.   

 

Nothing financial is as it seems or is being portrayed.  I believe the Fed will by necessity have to reverse course and begin a new and even bigger round of QE in a desperate attempt to save the financial system again.   QE has never worked in the first place, the public "reports" have been rigged so as to paint the picture that it has.  The Fed will again use the only tool (QE) they have left.  QE only provides liquidity, not solvency and insolvency is the problem.  This can be equated to trying to build a house using only a hammer when shovels, screwdrivers, saws, etc. are also needed.   

 

The "financial mirage" started out during the Reagan years as Social Security taxes were used as general funds to hide a bigger deficit than was being reported, it went downhill from there.  So here we are, living a daily lie because the truth is too horrible to face and our leaders believe "we can't handle the truth."

 

Andy Hoffman's Daily Thoughts

QE's Most Insidious Result

October 3, 2014

 

It's Friday morning, and I'm at the airport - enroute to the International Living Conference in Las Vegas. This year's unprecedented Cartel raids have caused me to work harder than at any time in my 12+ years following precious metals, so it's always nice to spend time with fellow CIGA's, like Miles Franklin's President Andy Schectman and Michael Spector.

 

Watching the world's equity, currency and commodity markets plunge, whilst interest rates collapse and economic data - from East to West - implodes, it's hard to believe TPTB have succeeded in strong-arming precious metal prices to such unfathomable, uneconomic levels. Care of such "Cartel Suicide," the mining industry will unquestionably retrench like the oil industry did in the last 1990s - when prices briefly fell below the cost of production; after which, E&P capex declined sharply for years to come. Fortunately, "Economic Mother Nature" always wins - and in this case, it's not just the oil industry at stake, but the entire global financial system.

 

As we wrote in yesterday's "Here comes the Physical Buying," PM demand is indeed surging - as exemplified by the U.S. Mint's October silver Eagle sales, which at 1.65 million ounces have nearly exceeded July and August's full-month totals of 1.97 million and 2.00 million, respectively, in the first two days of the month! Even September's very strong level of 4.14 million ounces has nearly been halved putting October on pace to not only exceed, but potentially shatter the Mint's monthly record. And of course, for full-year 2014 sales to exceed 2013's record totals.

 

Since the "point of no return" was reached three years ago, TPTB have been operating 24/7 to make sure such reality isn't reflected in price, by naked shorting paper to the point that global silver inventories have been reduced to fumes. Yesterday, yet again, the morning's typical "2:15 AM" raid was followed by attacks at all key attack times; and for the second straight day, with "Cartel Rule #1" in danger of being violated - i.e., "thou shalt not allow PM's to surge, whilst the Dow plunges," gold was capped at EXACTLY the 12:00 PM EST "cap of last resort" - whilst the PPT rescued the "Dow Jones Propaganda Average" with a patented "Hail Mary" rally. Even the "new Hail Mary trade" of goosing interest rates into the close was in play, all ahead of today's patently obvious strategy of "painting the tape" with the final NFP employment report before November's mid-term elections.

 

 

Regarding the latter, never forget that no matter what bogus "headline print" the BLS publishes, the internals will always slam them and even the MSM knows it. And not only that, but with the entire world economy going the opposite direction - as exemplified by this morning's horrific European service PMI numbers - it's hard to believe anyone could believe the U.S. economy, record low interest rates and all can be genuinely "recovering"...

  

  

...unless, of course, you're referring to the "1%" receiving free Fed money - who have never been richer, whilst the 99% continue to grow poorer...

  

Zero Hedge

Zero Hedge

 

 

However, the "most insidious result" of six years of relentless exponentially expanding money printing, market manipulation and propaganda is that even the slightest decline in equity markets, even from record levels, causes Wall Street and the MSM to scream "fire" - as exemplified by the unbelievable plunge in the "fear and greed index" below. In other words, TPTB have so destroyed the price discovery mechanism, investors have been trained to panic at the first sign of trouble - and subsequently, beg Central banks for more economy-destroying QE. Of course, part of said fear is the "uncomfortable feeling" that the "next 2008" is coming - which, of course, it most certainly is!

 

Zero Hedge

And thus, after a whopping 1.5% equity loss on Wednesday, the propaganda "denouement" was reached - when none other than the king investor-killers themselves, CNBC pushed the following heading into the "top story" slot of Yahoo! Finance and other MSM lackeys.

  

 

 

 

Yes, Warren Buffet, whose largest investments were bailed out in 2008, and who claims to want to pay more taxes whilst supporting "tax inversions" for his investments, bought stocks on Wednesday - near all-time high valuations, amidst the worst economic environment of our lifetimes. I, for one feel comforted. How about you?

 

Sorry so disjointed, but I have to board my plane shortly. I see that indeed the NFP indeed "beat expectations" of a 215,000 job increase by printing at 248,000. And better yet, the "unemployment rate" plunged from 6.1% to a new "Obama Administration low" of 5.9%. But guess what - CIGAs? The Labor Participation Rate plunged to a new 36-year low of 62.7% as a whopping 315,000 people departed the labor force - and wages were unchanged. In other words, the trend of fabricated jobs - the majority of which are of the part-time, minimum wage paying, no benefits receiving variety, principally for senior citizens that can't afford retirement - continues. And thus, the Fed will have to further fret about the "significant underutilization of labor resources" destined to catalyze their inevitable "Yellen reversal" to increased QE. It's only a matter of time.

 

 

And thus, as the Cartel pushes PM prices further into the netherworld of mining unprofitability and physical buying explodes, you are being afforded a rare opportunity to insure your portfolio at dirt cheap prices. Eventually, the sum total of QE "insidiousness" will do TPTB in; likely, sooner rather than later.

 

 

 

Interviews and Appearances

October 6, 2014

 

On Friday, October 10th, Andy Hoffman will be participating in the Rory Hall's "Internet Rodeo" podcast, featuring an all-star panel of Precious Metal experts featuring Andy, Claudio Grass of Global Gold (Miles Franklin's European storage marketing partner), Turd Ferguson of TF Metals Report, and the "Silver Doctor."  The format will entirely consist of reader questions to be submitted in the comment section underneath the below video.  The deadline for submission is Wednesday, October 8th.

 

Internet Rodeo - Just a Bunch of Bull Riders

 

______________________ 

  

Andy Hoffman on Butler on Business Show - October 2, 2014 

October 3, 2014 

 

Andy Hoffman joins Alan Butler from the Butler on Business show (39:00) to discuss money printing exploding, gold and silver, upcoming unemployment report, housing market, the stock and bond market.  To listen to the interview, please click below.

 

Andy Hoffman - Butler on Business - October 2, 2014 

 

Featured Articles

Gold In The News This Week - www.jsmineset.com

Posted October 4th, 2014 at 11:57 AM (CST) by Jim Sinclair

 

My Dear Friends,

Gold has had a historic amount of negative print and airtime this week. The Yamana and Armstrong comments seem timed perfectly to kick the legs out from under gold. The price of the US Dollar seems to have forgotten it was at .7900 only 11 weeks ago.

The dollar has risen because the Euro collapsed 1000 points from 1.3600 to below 1.2600. This collapse of the Euro is due to the serious sanction's impact on Europe which have not significantly damaged any US financial interests. On the contrary, anti Russian sanctions have tipped Europe into recession. Draghi has been trying to talk the Euro lower for trade reasons, but his power is only words as QE there is more than likely against their constitution. This will decided soon.

To declare a permanent death sentence on gold because of the dollar's mirror image up move to the sanction-injured euro is premature in rally week #12.

Gold is trading down into old lows, which by definition are major support levels while both long and short-term cyclical indicators have gone positive. Therefore probability says the decline is nearing an end both in time and price.

I am fully committed financially to gold as I was above $1900. I anticipate success.

This will drive the gold hating Internet trolls wild, but all their efforts fit nicely into the spam blocker. I do not open emails from new names during these trying times as I know the organized and strategized hate that pours out of them.

The takedown on gold is a highly organized spoofing play. It will fail to hold gold down permanently, and gold will again trade to new highs.

Sincerely,

Jim

10/3 The Way It Is - www.lemetropolecafe.com

Last evening gold was down a few dollars, while the S&P was up ... which set the tone for today. By the time morning rolled around the DOW was called up sharply and gold was $7 lower, getting another kick in the butt around the usual cabal PLAN A selling time in London. Everything was geared for the US jobs report, which came out this way...

08:30 Sep US Nonfarm Payrolls +248K vs. consensus +215K; Unemployment Rate 5.9% vs. consensus 6.1%

Aug Nonfarm Payrolls revised to +180K from +142K

Aug Unemployment Rate unrevised at 6.1%

* * * * *

With the dollar taking off, gold plunged to $1197, while silver was suffocated down to $16.55. Before it was over, gold made a low of $1189 and closed not far from it.

Veteran Caf� members know how often The Gold Cartel buried the price of gold when that jobs report was issued ... even during its 12 year run to the upside. It has been a Behavioral Finance operation most of the time and today was no exception.

There is "No Joy In Mudville," or in the gold/silver camp as the first week of October concludes and goes into the history books. Clearly The Gold Cartel has an agenda and is getting their way with little opposition. Every gold/silver rally is sold, and all rallies are held to a minimum. Small rinky-dink up days are all that are allowed. And they are followed by downdrafts such as what we got today.

The way it is:

*The constant pressure by The Gold Cartel to take the prices of gold and silver lower remains as intense as we have ever seen. That ever-present pressure has encouraged spec shorts to jump on the bandwagon, especially since the gold/silver bases evaporated and turned into tops. From a chartist standpoint the technicals have worked like a charm. So much so that oversold conditions, which normally would lead to sharp, short covering rallies, even if they were brief, aren't there. The Gold Cartel won't let that happen, so they have not occurred.

*Silver has been leading gold down for 7 months. We have been covering the silver leading indicator issue during that time. Nothing has changed, with yesterday's price action being yet another indicator of what was up for today for gold.

*During these past many months, two facts surrounding silver have been unprecedented and remain that way...

1. An increasing open interest, rising close to historic highs despite the price collapse and prices falling to well below the cost of production for many producers.
2. The ludicrous lower openings of the Access Market, which have now gone to 106 times out of the last 110. That is mindboggling and cannot happen in any free market.

*There hasn't been ONE real clue, or sign, that the relentless downward trend is going to change.

*Some time ago it dawned on me that it appeared as if The Gold Cartel was going to go all out to decimate the industry so that they might pick up the pieces ... to pick up gold on the cheap to replenish their vaults and to buy up the shares at giveaway prices to secure ownership of gold/silver in the ground. Many in our camp have been asking for years what the end game might be for The Gold Cartel. We may be watching it right now. On that score, just in...

Run on paper gold?

Mornin' Bill:

Looking at the charts, this must be what the final dumping paper gold and silver looks like,'cause I sure as hell ain't sellin' my physicals. The banksters must be wanting to close the mines so that they control what's left. Deep storage.

Respectfully,

Edward Ulysses Cate

And...

What the 1889 book said:

Here's the warning from the old book:

Great Red Dragon: Foreign Money Power In The United States (1889)Page 79-80:

The Money Power is Devouring Our Gold and Silver Mines

 

As a rule, persons having gold or silver mines to develop always go to the Money Kings or their agents for the capital to develop them. And the Money Kings never put any money into a mine without having a majority of the stock given them, so as to secure to them its absolute control.

 

They must have the lion's share in any enterprise before they will invest in it. They usually put in one of the original stockholders as their agent and manager; and generally the mine is so managed as to freeze out the other stockholders. Having full control of the mine, they are able, with their agent, to manipulate it as they please; and finally they thus get control of all valuable mines.

 

Seems there really is nothing new under the sun.

Respectfully,

Edward Ulysses Cate

 

It is difficult to really know what the real story is behind the scenes, but a Gold Cartel scorched earth policy seems fathomable. The earth is already scorched. The issue is how more is left to scorch and how far are the bad guys prepared to go to achieve their goals?

 

To say what The Gold Cartel has engineered here is demoralizing our camp is an understatement. Just received this email from a veteran Caf� member:

Complete

No win situation. I'm done.

***

There is no telling what The Gold Cartel may be able to achieve in the very short term. We have covered that for some time now. The real question is, "What is it leading to?" Outside of the terrible, orchestrated price action, nothing has changed regarding the big picture. The odds that something is very wrong behind the US financial market scene remain very real, with all the hoopla over today's jobs report a good example. This zero hedge commentary points to what the real story is...

 

"While by now everyone should know the answer, for those curious why the US unemployment rate just slid once more to a meager 5.9%, the lowest print since the summer of 2008, the answer is the same one we have shown every month since 2010: the collapse in the labor force participation rate, which in September slid from an already three decade low 62.8% to 62.7% - the lowest in over 36 years, matching the February 1978 lows. And while according to the Household Survey, 232,000 people found jobs, what is more disturbing is that the people not in the labor force, rose to a new record high, increasing by 315,000 to 92.6 million!"

 

But with the Dow up well over 100, PRICE ACTION MAKES MARKET COMMENTARY, which is what has taken hold today. Those concerned about our stock market taking a big dump are breathing a sigh of relief today. Behavioral Finance does it again. The bankers on Wall Street and incumbent politicians in the U.S, who face elections in another month, are lapping up today with smiles.

 

With gold, of course, it is the opposite, as the price plunges towards last year's lows around $1180. But, while the dollar is soaring, the US still has the biggest of problems, which is going to take hold some day, and everything will change. This problem (courtesy of JD), which is just one of many:

 

National Debt $17,875,258,091,207.08 10/01/14

National Debt $17,824,071,380,733.82

New all-time high 09/30/14

National Debt $17,787,535,095,914.11

New all-time high 09/26/14

 

None of that matters right now. But, you know the ole saying about nothing matters, until it does. Then, it is everything.

The AM Fix: $1207.50. The PM Fix dropped to $1195, back to par for the course.

 

The gold open interest fell 461 contracts to 380,012. The silver open interest only lost 323 contracts to 171,878, remaining WAY up there.

 

The Commitment of Traders Report

 

Silver

 

*The large specs increased their long positions by 3,128 contracts and increased their shorts by 5,324 contracts.

 

*The commercials increased their longs by 1,898 contracts and increased their shorts by 592 contracts.

 

*The small specs increased their longs by 824 contracts and reduced their shorts by 66 contracts.

 

Gold

 

*The large specs increased their long positions by 693 contracts and reduced their shorts by 293 contracts.

 

*The commercials reduced their longs by 3,219 contracts and reduced their shorts by 6,809 contracts.

 

*The small specs decreased their longs by 653 contracts and increased their shorts by 3,923 contracts.

 

Inputs and comments

What a dream

Hello Bill What Bill Holter wrote about 'Mr. Magoo" - 'By what he wrote all the way back in 1966, it is clear to me that Alan "Mr. Magoo" Greenspan was and is a really smart guy who knew exactly what would ultimately happen (but I don't think he thought it would happen in his lifetime).' made me think back to my essay on Greenspan that was published at LeMet in 2005 when something Bix Weir wrote made me realize that I had never submitted it to you. I rectified this and it was published at Le Met as:http://www.lemetropolecafe.com/Pfv1.cfm?pfvID=6849&SearchParam=the%20dreamThat is now almost 10 years ago and perhaps some of the newer subscribers would enjoy reading something from long ago. The essence of this is that I agree with Bill Holter - all that Greenspan did had a hidden agenda.

Kind regards

Daan

To read the full article, please subscribe to Le Metropole Cafe.com.

WNW 160-ME War, Economy Sours, US Ebola Threat - usawatchdog.com

By Greg Hunter On October 3, 2014

 

By Greg Hunter's USAWatchdog.com

 

USAWatchdog.com

We are headed for a much wider war in the Middle East, and headlines like this one are forecasting it. Speaker of the House John Boehner lays out a case that "Airstrikes Not Enough" to defeat ISIS. Boehner said, "At some point, somebody's boots have to be on the ground." ISIS has half of Bagdad surrounded, and I predict the U.S. will send ground troops sooner than later. The coalition is building with countries such as the UK, Belgium and France, but they will not bomb in Syria-only Iraq. I suspect they are afraid of making Russia angry. This is much more than just Iraq and Syria because I think this is a clash of cultures, and the ISIS message has gone global to the more than 1 billion Muslims. This article talks about ISIS getting recognition because of the airstrikes. It also talks about how ISIS wants payback for treatment of Muslims and how it is projecting the idea that it will be the winning team. ISIS is popping up in places such as Europe, the U.S., India and Australia. Countries such as Turkey and Saudi Arabia are all in for bombing Syria and Iraq. This is just shaping up to be the warm up act for a global war.

 

The financial war has been going on for a while and it is not abating. Notice those cheap oil prices? There is speculation that oil could hit $60 a barrel! Sure, part of that is declining demand, but part of it is Saudi Arabia who continues to pump oil instead of cutting back production. Why? Saudi Arabia wants to lower oil prices to hurt Russia, and it's willing to cut prices and take a hit to do it. Also, is this Saudi Arabia helping out Obama and Democrats for the bombing campaign in Iraq and Syria? Who knows, but the Dems love the price drop in oil just before Mid-term elections. Don't expect cheap oil to be a long trend.

Meanwhile, Russia is brushing off the pain sanctions are causing. Putin is not worried about 8% inflation and a record low ruble. Putin says it will just make relations with China and other BRIC countries all that much stronger. Meaning, there will be less use of the U.S. dollar in international trade. Please don't forget the oil and natural gas card Putin is holding over Europe this winter. The colder it gets, the uglier the EU economy will get.

Speaking of the economy, it is not looking good, at least to IMF Managing Director Christine Lagarde. She is "quite worried" that the market is disconnecting to the real economy, and former Fed Head Ben Bernanke agrees. So does Mario Draghi of the ECB. He wants to print euros to buy bonds from insolvent banks. Germany wants to stop that because it is illegal in the Eurozone. If you are printing money to prop up an economy, how good can things be? They keep touting this bogus 4.6% GDP number for the second quarter here in the U.S., but housing, manufacturing and consumer confidence are all down. Gregory Mannarino of TradersChoice.net says the "world economy is on life support, and they can't tell you the truth." Of all the people I talk to on the economy, one consensus point pops out. We are headed for another financial crash, and the next one will be the granddaddy of them all. Big changes are coming, like it or not.

A Missouri doctor says the CDC is "lying" or is "grossly incompetent" about the Ebola threat. Dr. Gill Mobley, who is a microbiologist and trauma doctor, boarded a plane in Atlanta with a full hazmat suit on complete with goggles, gloves and mask. He had written on his hazmat suit "CDC is lying." He did this as a protest of the handling of the Ebola threat. We were told that the chance of having Ebola here was extremely small. Now, it's reported 100 people came into contact with an infected man who flew into Dallas Texas.

Join Greg Hunter as he analyzes these stories and more in the Weekly News Wrap-Up.

Bombing Islamic State Not Enough, Financial War Increasing Economy Falling, CDC Ebola Lies

Jim Grant: We're in an Era of 'Central Bank Worship' - sprottglobal.com

Friday, October 3, 2014

Henry Bonner

 

Jim Grant is the publisher and editor of Grant's Interest Rate Observer, a bi-monthly newsletter that he founded in 1983, around the time when bonds were considered some of the worst investments - when they yielded 13 to 15 percent.

Rick Rule, Chairman of Sprott US Holdings Inc., often quotes Jim Grant's description of government bonds as 'return-free risk.' (Rick sees US Treasuries as the 'anti-gold').

Mr. Grant took my questions on interest rates and the bond market - including Bill Gross' recent departure from PIMCO - via phone from his Manhattan office.    

Mr. Grant, you argue that companies whose share prices are rising should be becoming more efficient - hence driving down the costs of consumer goods and services.

The Fed is succeeding in keeping both stock market prices and consumer goods prices moving higher - which look like contradictory goals. Do you think this situation is sustainable going forward?

Many years ago, falling prices were a sign of improved efficiency and expanding wealth, and of widening consumer choice. Thanks to the spread of electricity and other such wonders in the final quarter of the 19^th century, prices dwindled year by year at a rate of 1.5% to 2% per year. People didn't call it deflation - they called it progress. Similarly, in the 1920's there were advances in production techniques. The prices didn't decline and didn't rise. They were stable. Looking back on the 20's from the vantage point of the 30's, many people wondered why prices had not fallen. They concluded that it was because the central banks were emitting too much credit, and that credit had served to inflate asset values. It had also pushed the world into a very imbalanced credit and monetary situation towards the close of the 20's.

Fast-forward many generations and here we are today with a worldwide labor market linked through digital technology. We are the beneficiaries of Moore's law. Nearly every day we see new, wonderful, labor-enhancing machinery coming into the workplace - including new software. And yet, prices don't fall. They tend to rise, albeit by 1% or 2% per year. Central banks seem to want more than that. You do wonder - I wonder - what would be wrong with what Wall Mart calls 'everyday low and lower prices.' People seem to rather relish that - certainly when shopping on the weekends. Central banks want no part of it. So, I see that as a contradiction. What central banking policy has done is to inflate consumer prices that, if the laws of supply and demand were properly functioning, would have tended to fall. At the same time, central bank policy has tended to inflate the prices of stocks, bonds, and income-producing real estate. Why it is that these immense emissions of new credit by the central banks have not been inflationary? Well, it seems to me that they have been inflationary, because prices are rising not falling.

Do you think that the situation will continue going forward - rising consumer prices along with rising stock prices?

What I don't know about the future, we don't have the time to go into. I dare say that stock prices will not continue to rise uninterrupted at the same pace. That's not a very interesting prediction, but the stock market is certainly a cyclical thing. Stock prices will pull back in the fullness of time, whether it starts 5 minutes, 5 months, or 5 years from now. I think it's fair to observe that today's ultra-low interest rates flatter stock market valuations. Stock prices are partly valued based on a discounted flow of dividend income. To the extent that the discount rate you use to value that stream of dividend income, which depends on interest rates, is artificially low, stock prices are artificially high. I think that the burden of proof is on anyone who would assert that we are in a new age of persistently and steadily rising stock prices.

On the subject of bond markets, you've said: "does it not seem incongruous to chase low-yielding fixed-income securities denominated in a currency that the central bank is vowing to inflate?" Why do you think that investors go into bonds despite the Fed's intention to devalue them over time?

Well, I can't explain it. I can try to piece together what might be driving people to do that, but, to me, it's a mystery. One thing to bear in mind is that bond prices have been rising and yields have been falling since fall of 1981. That's a long time and there's something in financial markets that we might call 'muscle memory.' Long-running trends tend to gather force, just as a rock rolling down a hill tends to pick up speed. There's something about the persistence and age of this bull market that leads more people to think that it will continue. That said, fixed-income investors are intelligent and reasoning people. That can't be the entire explanation. I see that in Europe money market interest rates are trending below zero. You have to search long and hard over the globe to find government securities in developed countries yielding more than 2%. In Ireland, some short-term securities are yielding less than 0%. Why would people buy them? I simply don't know - I can't fathom it --, but they certainly are, hand over fist.

You've also said that Treasury investors may 'repent at their leisure' for buying US Securities, and that corporate investors will one day wish they had not invested so heavily in corporate bonds. Do you see a bear market coming imminently for bonds?

Yes - starting about 2002...

Henry, now, that's meant to be a laugh line.

I have wholly been way out of step with the bond market for a long time, and everything that I say with regards to the future of interest rates deserves to be written in something like invisible ink. You know, in a work entitled 'Security Analysis,' a work about value investing written by Benjamin Graham and David Dodd, this approximate phrase appears: "bond selection is a negative art." Well, what Graham and Dodd meant by that is that, because the buyer of a bond at par can do no better than getting his money back and earning some interest along the way, the prospect for gain is inherently limited. Risk ought to be at the front of the mind of the creditor. There are no 2 or 3-baggers in investment-grade bond investing. You have to be mindful of what can go wrong, and it seems that the world over, thanks to these policies by central banks, bond investors are not looking at risk, or feel they can't afford to look at risk. Rather, they are grasping at the few straws of yield that remain and I think that posterity will look back at this with wonder.

"Think of it" - I'm now putting words in posterity's mouth. "Think of it, people were buying as if the supply were limited. They were buying government securities, which yielded practically nothing. They were buying bonds denominated in currencies that the central banks explicitly vowed to depreciate. Why did they do that?"

So, I think posterity will ask that question. Certainly I am asking that question now, and I can't come up with a really persuasive answer.

What would a bear market in bonds look like? Would it be accompanied by a bear market in the stocks?

Continue reading on Sprott Global.com.

September Jobs: Some Numbers Bubblevision Didn't Mention - www.zerohedge.com

Submitted by Tyler Durden on 10/04/2014 - 09:05 - 0400

 

What is really embodied in today's report is more evidence that America's dependency ratio is still rising and that the already crushing burden of the welfare state will weigh ever more heavily on an economy that is visibly failing as measured by any of the fundamental trends of performance. Indeed, it is well to recall that even today-after what the clueless occupant of the White House claims as 10 million new jobs when 90% of that number, in fact, represents "born again" jobs relative to the 2007 peak--there are 110 million Americans living in households receiving means-tested benefits and 158 million in households that receive transfer payments of all types.

Yet as the burden of taxation and public debt resulting from these trends weigh ever more heavily, it leaves the mad money printers resident in the Eccles Building stranded in an impossible corner.

Continue reading on Zero Hedge.com.

***

 

Thousands Sign Petition To Ban Flights From Ebola Countries; Two Removed From Newark Airplane By Hazmat Crew - www.zerohedge.com

Submitted by Tyler Durden on 10/05/2014 14:22 -0400

 

Whether it is due to the sheer deferred Ebola panic (we warned in June it was only a matter of time before the "world's worst Ebola epidemic" made it to US shores, which promptly got us branded as fear mongers as usual), or the administration's bumbled attempt at damage control with a very confused and mostly pointless press conference on Friday afternoon, but three days ago, a petition was launched on the White House website demanding that the "FAA ban all incoming and outgoing flights to Ebola-stricken countries until the Ebola outbreak is contained." As of this moment, over 4,000 people have already signed it.

***

Labor Participation Rate Drops To 36-Year Low; Record 92.6 Million Americans Not In Labor Force - www.zerohedge.com

Submitted by Tyler Durden on 10/03/2014 15:55 -0400

 

While by now everyone should know the answer, for those curious why the US unemployment rate just slid once more to a meager 5.9%, the lowest print since the summer of 2008, the answer is the same one we have shown every month since 2010: the collapse in the labor force participation rate, which in September slide from an already three decade low 62.8% to 62.7% - the lowest in over 36 years, matching the February 1978 lows. And while according to the Household Survey, 232K people found jobs, what is more disturbing is that the people not in the labor force, rose to a new record high, increasing by 315,000 to 92.6 million!

Continue reading on Zero Hedge.com.

Weekly Recap for October 03, 2014 - www.dentresearch.com

Bankruptcy Judge Says California City Pension Obligations No Different Than Other Debt... Speaking from the bench in the Stockton, CA bankruptcy case, Judge Klein stated that the California Public Employees' Retirement System (CalPERS) doesn't have any better claim to assets than other creditors, like bondholders.

What it means - The significance of this ruling cannot be overstated - it's the detonation of the nuclear bomb in pensions.

It is no secret that hundreds if not thousands of cities and states across America have no way of paying their pension obligations. But current and future retirees in states like California believed they had an ace in the hole - a state constitutional right to their pensions with no reductions, period. This led previous cities that went bankrupt in California to avoid confrontation with CalPERS, giving the pension system 100% of what they were owed while stiffing other creditors by more than 90%.

Judge Klein's musings from the bench throw cold water on the state constitution argument, specifically because once a city enters bankruptcy its finances are regulated by federal bankruptcy code, which supersedes state law. This line of reasoning from the bench of a federal bankruptcy court will reverberate across the country.

Cities like Chicago as well as the state of Illinois will take notice. These two entities are woefully underfunded in their pensions. It won't happen tomorrow, but down the line there will be major breakdowns in public pensions.

Continue reading on Dent Research.com.

Market Recap

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