David Schectman

Quotes of the Day

There still seems to be a disconnect between the relative holdings of metal in the leading metal Exchange Traded Funds (ETFs). While not declining at the rate of last year when 40% of the gold departed the big gold ETF, GLD; the reductions in gold ETF holdings continued this week. The amount of gold held in GLD has now slipped to levels not seen since 2008. In contrast, since 2008, metal holdings in the big silver ETF, SLV, have roughly doubled and have remained steady over the past few years. The price of silver is down substantially both on an absolute and relative to gold basis, yet appears to be held much stronger by investors than has been the case in gold. Other than price manipulation, I'm at a loss to explain how that could be, by looking at relative price performance.

- Silver analyst Ted Butler, Butler Research, November 8, 2014

I've been writing for quite some time that I sensed the presence of a big buyer in Silver Eagles and that the strong sales over the past few months and past few years have come when retail demand has been lacking. By process of elimination, the strong demand, if it wasn't coming from the retail public, had to come from a more concentrated source. Further, I speculated that JPMorgan was the Mr. Big behind the extraordinary buying of Silver Eagles. I even alleged that JPMorgan, since it knew silver prices were about to collapse in mid-summer (because it would cause prices to collapse), suddenly stopped buying Silver Eagles for three months, which created an inventory of unsold coins at the Mint.

In the October 4 Weekly Review, I laid out the case for why I thought there was a Mr. Big buying Silver Eagles and why I speculated it was JPMorgan. In the next weekly review (Oct 11) I had calculated that there may have been 4 to 5 million Silver Eagles in the U.S. Mint's inventories and that JPM had purchased 3 million (after it resumed purchases), leaving only 1 to 2 million coins in inventory. The Mint's announcement dovetails perfectly on an amount and timeline measure to my comments. The Mint's announcement proves there was a fairly sizable inventory, which didn't exist prior to JPMorgan's stepping away in summer; and when the sales resumed they resumed stronger than ever and again with no obvious retail demand. I wrote that JPM played the Mint (and U.S. taxpayers) like a fiddle in letting the Mint build up inventory that Mr. Big would soon take off THE Mint's hands, but only at much lower (and manipulated) prices. Hey, we're talking about JPMorgan and that's the way these boyz roll.

- Silver analyst Ted Butler, Butler Research, November 8, 2014

Today's Featured Articles

SRSrocco Report (PRIMARY SILVER MINERS: Losing Nearly $3.00 For Every Ounce Of Production)

Bill Bonner (Cold, Dark and Desperate)

The 10^th Man (Three Steps Forward, Two Steps Back)

Jim Sinclair (Gold will be a part of the strategy of all BRICs, not just Russia and China)

Zero Hedge ("Most Important Chart For Investors" Updated: Edwards Sees USD/JPY 145 Next And "A Tidal Wave Of Deflation Westward") (Did The BoJ Quietly Peg The Yen To Gold?)

Ed Steer (Bud Conrad: 'Paper gold' and its effect on the gold price) (Swiss Regulator: "Clear Attempt to Manipulate Precious Metals"..."Particularly Silver")

Conflict Of Interest

November 13, 2014

Today's theme is the "conflict of interest" marring essentially every aspect of the political, economic and financial world - but decidedly not Miles Franklin, and certainly not the Miles Franklin Blog. I'll get to the latter shortly; but first yes, just a week after the U.S. warned the ECB of taking its Euro devaluation "too far" - and thus, "stealing" manufacturing market share; it aggressively demanded that France and Italy rein in their budget deficits more slowly, while deeming it "critical" that Germany and Holland "open their purse strings." In other words, money printing, deficit spending and debt explosion are under the assumption the resulting "recovery" will "trickle down" to America. Clearly, the U.S. is as fearful of a collapsing Europe as a collapsing Euro, but such a conflict will only be worsened by printing more money - which contrary to Lew's hopes and dreams will only weaken the Euro further; not to mention, the European economy.

And how about the conundrum OPEC faces? Whilst global oil demand plunges, the fatally flawed U.S. shale industry is desperately overproducing to cover costs as prices plummets below the cost of production. These days, Saudi Arabia is essential the only OPEC nation with material spare capacity; and just two weeks ago, it used such leverage to initiate a price war with U.S. shale producers in reducing U.S. export prices whilst maintaining prices to the rest of the world. Unfortunately, as we highlighted in "collapsing oil prices portend unspeakable horrors," driving prices down will injure Saudi Arabia just as badly, given the nation's spending budget is based on nearly $95/bbl oil.

This morning, OPEC reduced its 2015 "call on OPEC," given the glut of high-cost shale oil flooding the market; while ironically, maintaining its 2015 demand forecast due to "economic indicators pointing to a continued recovery in the global economy." Really? Are they referring to the same "economic indicators" that prompted the ECB's "professional panel" to reduce its 2015 European GDP growth expectations today from 1.5% to 1.2%? In other words, OPEC's "conflict of interest" was obvious in multiple forms, as it deals with a world of plunging demand and increased competition. And mark our words, as prices collapse further (Brent plunged below $80/bbl. this morning as WTI crude is on the cusp of $76/bbl.) Saudi Arabia will do exactly what the beleaguered shale oil producers are doing now, in a desperate effort to PAY THEIR BILLS. Which is dramatically increase supply into a collapsing market, no matter what propaganda they spew at the upcoming, potentially historic OPEC meeting on November 27^th.

Speaking of the self-defeating behavior catalyzed by an entire world unprepared for recession - let alone, depression; how about a desperate, flailing Wal-Mart admitting the U.S. retail industry officially abandoned "Black Friday" promotions last year in lieu of moving them up to Thanksgiving Day? Unfortunately, business has gotten so bad, its chief sales executive claimed the entire industry is moving up promotions to the beginning of Thanksgiving Week, enroute to doing so for the entirety of November. In other words, cutting prices on more items, more quickly in a "market share" war that will only destroy the retail business further.

Or how about the Federal Reserve pretending to "taper" QE in a desperate effort to "prove" the U.S. economy is "recovering," despite the fact that any such "recovery" was entirely due to QE? Anyone with a modicum of analytical ability knows they printed far more than they said this year - particularly when the fabled "Belgian buyer" arrived when China started selling Treasuries en masse. And clearly, the only two business actually boosted by QE - high-end real estate and shale oil production - are rolling over, whilst interest rates creep higher amidst the world's largest debt edifice. Thus, the Fed's terrifying "conflict of interest" in purporting a "tightening" stance; which frankly, has not a shred of credibility to start with, given ZIRP will continue for a "considerable time."

As Goldman Sachs whistleblower Nomi Prins noted yesterday, QE isn't dying but morphing; which is exactly what we have been saying for some time - i.e., like an iceberg, 95% of QE is hidden from view. In other words, the Fed has learned there's no reason to do what it says; but instead, "whatever it takes" to make sure markets paint the picture it wants painted. Which, ironically, includes periodic use of the "new Hail Mary trade" - often as the past three days, at 6:00 AM EST - to goose sagging Treasury yields higher; and thus, prevent universal realization of the "most damning proof yet of QE failure"; i.e., plunging rates amidst so-called "recovery."

To that end, we have noted how the "dead ringer" algorithm utilized to prop the "Dow Jones Propaganda Average" at 10:00 AM EST - when QE was "executed" via "open market operations" - has been visible every day since QE supposedly "ended" nearly three weeks ago, which is probably why equity "sentiment" has jumped off the rails, even compared to 2000 and 2007. Heck, even Zero Hedge picked up on the "hail mary" algorithm we have written of for years, when it noted stocks have been goosed at the close for 15 straight days; i.e., since QE "ended." And when noting government intervention, particularly at 10:00 AM EST, one can't forget the unrelenting attacks on paper precious metals, given 10:00 AM EST also marks the close of physical gold and silver trading. And how do we know such raids are paper-based - aside from the fact that here at Miles Franklin, we rarely receive sell orders at all, let alone at exactly 10:00 AM EST? Because yesterday, the physical market became more deeply backwardated than at any time in the past 15 years!

Last but not least, in the realm of "conflict of interest," we discuss the economic curse that is the imploding mining industry; which not only is amongst the world's most difficult businesses, but unlike the oil industry is subject to a Cartel intent on reducing prices. We cannot be more vocal in our assertions that not only production but the miners themselves are on the verge of collapse - particularly in silver, as discussed on last month's "Miles Franklin Silver All-Star Panel Webinar." No one has done finer work on this topic than the great Steve St. Angelo, and in his latest piece, noted how seven of the top 12 primary silver miners are underwater at current prices. Again, these are the world's lowest cost producers, operating on shoestring budgets after slashing expenses to the bone and sacrificing any remaining hope of industry sustainability. And thus, the broader industry at large is in even worse shape. Even the world's lowest cost "producer," Silver Wheaton, is writing off assets like they're going out of style; and if you think what we saw last year was dramatic, just wait until the reserve downgrades, capex reductions and production declines next year - likely, just as global demand, already at record levels explodes into the stratosphere.   

Fortunately, there's a positive side to this topic, which is the decided lack of a conflict of interest at Miles Franklin. Sure, we sell Precious Metals; and thus, are inclined to be bullish in our commentaries. However, we are not a retailer but a broker; and thus, buy gold and silver as readily as we sell. Moreover, there's not a thing David Schectman, Bill Holter or myself can say or write that will influence precious metal prices - unlike those in the "paper PM investment" business who in many cases can. Yes, we are certainly "talking our book" in being bullish, but anyone who has read our work - for more than a decade - realizes we were saying the same things in 2002 as today. In fact, Bill and I were writing of such things for FREE way back then on the GATA website for the same reason we have been doing so for Miles Franklin since 2011 - also for FREE. Which is, we care about readers, aiming to empower them to protect themselves from what's coming. And by the way, how many businesses are you aware of where all the firm's principals are deeply invested personally in their product?

And thus, to the "trolls" that comment that "you guys sell precious metals; and thus, are subject to conflict of interest," we respond with our body of work over the past decade; in Bill and I's case from outside the bullion industry.

PROTECT YOURSELF, and do it NOW!

Call Miles Franklin at 800-822-8080, and talk to one of our brokers.  Through industry-leading customer service and competitive pricing, we aim to EARN your business.

On his weekly podcast, Andy Hoffman discusses that QE will never end, manipulation of all markets, the October unemployment report, retail sales, Swiss gold referendum, gold and silver.  To listen to the audio, please click below.

Revenge of the People

PRIMARY SILVER MINERS: Losing Nearly $3.00 For Every Ounce Of Production - srsroccoreport.com

November 12, 2014

With more than half of the primary silver miners financial results for the third quarter finally out, the group is now losing nearly $3.00 an ounce at the current market price of silver.  We can thank the Fed and Bullion Banks for rigging the paper silver price well below the estimated average break-even for the primary silver miners.

Before I provide my data from the silver miners in my group, I want to discuss the debate on PRECIOUS METALS MANIPULATION.  There seems to be a demarcation now between those who are more traders and the group that adheres to fundamentals.  While I admire anyone who can make a profit paper trading the precious metals, I find it quite interesting how several of the well-known names find it amusing to BASH those in the fundamental BUY & HOLD CAMP.

I look forward to hearing if either Doug Casey or Dan Norcini finally admits that MANIPULATION has and is taking place in the precious metal markets as evidence is now surfacing.  According to the Zerohedge article, A Clear Attempt To Manipulate Fixes In The Precious Metal Market:

Swiss regulator FINMA said on Wednesday that it found a "clear attempt" to manipulate precious metals benchmarks during its investigation into precious metals and foreign exchange trading at UBS.

"The behavior patterns in precious metals were somewhat similar to the behavior patterns in foreign exchange," FINMA director Mark Branson said in a conference call with journalists.

He said that as UBS has precious metals and foreign exchange desks under combined leadership, it was not surprising to find similar behavior.

"But we have also seen a clear attempt to manipulate fixes in the precious metal markets."

And then we had this just a few days ago also from ZeroHedge, Another "Conspiracy Theory" Bites The Dust: UBS Settles Over Gold Rigging, Many More Banks To Follow:

Sadly this too conspiracy theory just was crushed into the reality of conspiracy fact, when moments ago the FT reported that alongside admissions of rigging every other market, UBS - always the proverbial first rat in the coalmine, to mix and match metaphors- is about to "settle" allegations of gold and silver rigging. In other words: it admits it had rigged the gold and silver markets, without of course "admitting or denying" it did so.

Even though these banks are starting to provide evidence of precious metals manipulation, the real market rigging is the funneling of American's funds into the paper retirement market that reached $24 trillion in Q2 2014, according to the Investment Company Institute.

I spoke about this in an interview found here, The Coming Collapse of The Global Paper Ponzi Scheme:

Americans continue to funnel a percentage of their income into the biggest Financial Ponzi Scheme in history. The manipulation of the metals on the exchanges is a very small part of controlling Americans into staying into this system. Because, as you know, a Ponzi System continues to need further income, further inflows, for it to sustain itself. It's in the best interest for the Fed to keep that system going. That to me is where the majority of this bamboozling or brainwashing is taking place.

So, I highly doubt Mr. Casey or Mr. Norcini will admit that MANIPULATION is taking place in the precious metals markets, even though evidence is now coming out.  However, it doesn't need to be proven.  Why?  Because the peak and decline of unconventional oil production, will destroy the valuations of most paper assets.

When investors realize they are holding onto increasingly worthless paper assets in a falling peak oil environment, they will be forced to move in physical assets such as gold and silver to protect wealth.  If we just had a fraction of the $trillions sitting on the sidelines head into the precious metals or the mining shares, we could see values higher than any imagined.  What would happen to the values if the PUBLIC finally got PRECIOUS METAL RELIGION??

Primary Silver Miners Now Losing Nearly $3.00 For Every Ounce Of Production

If we look at the chart below, 7 of the 12 primary silver miners in my group had an estimated break-even of $18.50 in Q3 2014.  With the current price of silver at $15.70, this would be a net loss of $2.80 an ounce... on average.

SRSRocco Report

However, we must remember, these seven miners are some of the lower cost producers.  Once we factor in the results for the remaining companies that are the more marginal producers (higher cost), this $2.80 loss per ounce will probably be higher than $3.00.

Furthermore, you will notice that only one primary silver miner is making money at the current price of silver.  This is Tahoe Resources.  Tahoe is an exception because it is mining 5+ million ounces of silver a quarter at a staggering 550+ grams per ton.  There isn't another primary silver mining company on the planet producing silver in this fashion.  Thus, Tahoe is an exception to the rule and can produce silver at a much lower cost than any company in the group.

As I mentioned above, when the remaining primary silver companies release their Q3 2014 results, I believe the estimated break-even will rise towards $19.00 (higher than the $18.50 preliminary figure from the first seven in the group).

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Here's What Central Bankers Will Do Next... - bonnerandpartners.com

By Bill Bonner, Chairman, Bonner & Partners on November 12, 2014

Cold, Dark and Desperate

Meanwhile, Europe and Japan grow cold, dark and desperate. Last week, ECB chief Mario Draghi announced the central bank would buy another €1 trillion of bonds to try to light a fire under the euro-zone economy.

And Bank of Japan governor Haruhiko Kuroda got out his matches the week before, claiming potentially unlimited tinder.

Can the US resist the worldwide slump?

Our view is it's just a matter of time before either the US economy or US stock market begins to wobble.

We could see the Dow fall 1,000 points or more... or we could hear GDP growth has gone negative... or both.

Then what?

It's a good bet that the Yellen Fed would intervene again - hoping to keep a small problem from becoming a bigger one.

Ever since the 1930s, central bankers have learned that they will scarcely ever be criticized for overreacting. But if they sit on their hands, they will be damned to hell.

And ever since Alan Greenspan's 1987 "put," the Fed has backed up the stock market with whatever policy it deemed appropriate.

Lower rates? QE? It'll do "whatever it takes."

Janet Yellen is aware that the two previous Fed chairmen were hailed for having saved the economy from destruction. She won't want to be the first to let it fail.

While we are guessing, we'll suppose each rescue effort will be more costly and less effective than the one that preceded it.

That's the way "stimulus" works. Like looking at naughty pictures, the first are exciting and titillating. Later, they are just boring and sordid.

Still, a vigorous new response from the Fed would probably produce another rise in financial asset prices. But then what?

Coaxing Stocks Higher

Central bank activism - stimulating credit creation with artificially low interest rates - only works when people see little risk of default or rising rates. But that risk cannot be ignored forever.

It's called a "credit cycle" for a reason. Rising rates come around sooner or later - often ferociously - after a long period of apparent stability, over-optimism, overpriced equities and artificially suppressed yields.

When that happens, the central banks lose their ability to coax stocks higher with lower rates.

The Fed has been interfering with the credit cycle for the last 20 years. But when it believes it can overturn the cycle for good... that is when it becomes a big loser.

At that point, and it could be months - or years - ahead, we are likely to see central banks become more creative.

What else can they do?

They will still be fully committed to "saving" the economy. When their policy tools fail, they will have to come up with something different.

What? We see three things:

1) Central banks will buy stocks. Japan, as usual, is ahead of the curve.

2) Governments will bring out large fiscal stimulus packages aimed at infrastructure "investments" that are supposed to pay for themselves.

3) Some form of Direct Monetary Funding from central banks will finance these stimulus packages. Central banks will simply "print" the needed funds.

All of these measures are either already in service or much discussed in the leading financial journals.

What will they mean to stocks? Bonds? The dollar?

Stay tuned...

Regards,

Bill

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Three Steps Forward, Two Steps Back - www.mauldineconomics.com

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In The News Today - www.jsmineset.com

Posted November 13th, 2014 at 8:33 AM (CST) by Jim Sinclair

Jim Sinclair's Commentary

Gold will be a part of the strategy of all BRICs, not just Russia and China

Putin stockpiles gold as Russia prepares for economic war

Russia's central bank added to its reserves of bullion in the third quarter, according to the latest report from the World Gold Council

By Andrew Critchlow, Commodities editor
6:00AM GMT 13 Nov 2014

Russia has taken advantage of lower gold prices to pack the vaults of its central bank with bullion as it prepares for the possibility of a long, drawn-out economic war with the West.

The latest research from the World Gold Council reveals that the Kremlin snapped up 55 tonnes of the precious metal - far more than any other nation - in the three months to the end of September as prices began to weaken.

Vladimir Putin's government is understood to be hoarding vast quantities of gold, having tripled stocks to around 1,150 tonnes in the last decade. These reserves could provide the Kremlin with vital firepower to try and offset the sharp declines in the rouble.

Russia's currency has come under intense pressure since US and European sanctions and falling oil prices started to hurt the economy. Revenues from the sale of oil and gas account for about 45pc of the Russian government's budget receipts.

The biggest buyers of gold after Russia are other countries from the Commonwealth of Independent States, led by Kazakhstan and Azerbaijan.

In total, central banks around the world bought 93 tonnes of the precious metal in the third quarter, marking it the 15th consecutive quarter of net purchases. In its report, the World Gold Council said this was down to a combination of geopolitical tensions and attempts by countries to diversify their reserves away from the US dollar.

More...

"Most Important Chart For Investors" Updated: Edwards Sees USDJPY 145 Next And "A Tidal Wave Of Deflation Westward" - www.zerohedge.com

Submitted by Tyler Durden on 11/13/2014 09:38 -0500

So what happens next? Here, straight from the horse's mouth that got the first part of the rapid Yen devaluation so right, is the answer. As Edwards updates with a note from this morning, "the yen is set to follow the US dollar DXY trade-weighted index by crashing through multi-decade resistance - around �120. It seems entirely plausible to me that once we break �120, we could see a very quick �25 move to �145, forcing commensurate devaluations across the whole Asian region and sending a tidal wave of deflation westwards."

Continue reading on Zero Hedge.com.

***

Did The BoJ Quietly Peg The Yen To Gold? - www.zerohedge.com

Submitted by Tyler Durden on 11/12/2014 20:57 -0500

For 14 years, as Japan's economic demise grew more and more evident, its currency devalued relative to gold (the only non-fiat numeraire). When Abenomics began, the trend began to stabilize... but for the last year or so - as The Fed tapered - JPY and Gold have practically flatlined around 132,000 JPY per ounce. This 'odd' stability stands in strangely stark contrast to the volatility and trends in the USD, JPY, and Gold over this period. Even amid the collapse in JPY in recent weeks, it has remained firmly inside a 3% envelope of the 'peg'.

Continue reading on Zero Hedge.com.

Swiss Regulator: "Clear Attempt To Manipulate Precious Metals" ... "Particularly Silver" -www.caseyresearch.com

November 13, 2014

By Ed Steer

Critical Reads

Bud Conrad: 'Paper gold' and its effect on the gold price

"Casey Research's chief economist, Bud Conrad, reports that the gold futures market on the New York Commodity Exchange is so concentrated that 98.5 percent of the gold delivered to the market last month came from only three banks -- Barclays, Bank of Nova Scotia, and HSBC -- and 98 percent of the deliveries were taken by just one bank, Barclays."

""The opportunity for distorting the price of gold in an environment with so few players is obvious," Conrad writes. "Barclays knows 98 percent of the buyers and is supplying 35 percent of the gold.""

"Of course the opportunity for gold market rigging is not yet obvious to the founder of Casey Research, Doug Casey, who argues that all markets are manipulated, that it's no big deal, that central banks have no interest in gold, and it wouldn't matter if they did have any interest because they're all irrelevant anyway. But then Conrad does the research at Casey Research and Casey merely supplies the ideology and opinions, and if the research doesn't fit the ideology and opinions, it's irrelevant too."

The above paragraphs of introduction are what Chris Powell had to say in his GATA release regarding this commentary by Bud.  His report is headlined "'Paper Gold' and Its Effect on the Gold Price" and it's posted at the Casey Research Internet site.

Read more...

Swiss Regulator: "Clear Attempt to Manipulate Precious Metals"..."Particularly Silver"

Further proof of manipulation of gold and silver prices - if any were needed - came overnight as  Switzerland's financial regulator (FINMA) found "serious misconduct" and a "clear attempt to manipulate precious metals benchmarks" by UBS employees in precious metals trading, particularly with silver.

This commentary by Mark O'Byrne over at the goldcore.com Internet site yesterday was a must read that 'David in California' sent our way.  I stole the headline from the Zero Hedge article on this.

Read more...

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