The World Financial Report

World Financial Report – December 18th, 2015

Radio Show Newsletter





-CHART OF THE WEEK: An Economist Says He Has Proof Poloz Is Worse for the Canadian Dollar Than Carney. The Canadian dollar has lost nearly one quarter of its value against the U.S. dollar since Stephen Poloz succeeded Mark Carney as governor of the nation’s central bank. Since Poloz formerly led Export Development Canada the equivalent of the Export-Import Bank in the U.S. it was presumed that he would seek a lower loonie even before he had officially taken office. His public statements have generally tended to keep the loonie on its back foot, although he has never directly talked down the currency unlike other central bankers such as Glenn Stevens, governor of the Reserve Bank of Australia.

But Krishen Rangasamy, senior economist at National Bank of Canada,  believes there’s some truth to rumors that the governor is actively seeking to foster weakness in the Canadian dollar. “While the Bank of Canada will correctly point to oil as the major reason for the loonie’s woes, it’s also fair to say the Governor’s dovish statements haven’t helped,” the economist argued. As such, Poloz’s statement this week that the central bank could cut interest rates below zero if warranted although the need does not exist at present becomes much more reasonable in light of a presumed goal of a lower currency. Read more here-

Canada: Loonie crushed under Poloz

-CHART OF THE WEEK: Investors have spent the last 6 months piling into cash. Investors have spent the second half of this year piling into cash. In its latest update on investor flows, analysts at Bank of America Merrill Lynch noted that during the second half of 2015, money-market funds have seen $212 billion in inflows, with $48 billion coming in during just the last 4 months. Over this same period, $31 billion has moved into stocks and $27 billion has come out of bonds. Money-market funds are basically an alternative to actual cash and are often collections of short-term Treasuries or other highly liquid assets. And so what this data shows is that investors have been piling into assets that won’t earn much return but will simply preserve an investor’s capital. Read more here-

Cumulative fund flows since H2'15

-CHART OF THE WEEK: Junk Bonds Are Tanking and Icahn Says Meltdown `Just Beginning.’ A day after a prominent Wall Street firm shocked investors by freezing withdrawals from a credit mutual fund, things only got nastier in the junk-bond market. Prices on the high-risk securities sank to levels not seen in six years and, to add to the growing sense of alarm, billionaire investor Carl Icahn said the selloff is only starting. “The meltdown in High Yield is just beginning,” Icahn, who’s been betting against the high-yield market, wrote on his verified Twitter account Friday.

Icahn’s comments come as junk-bond investors, already stung by the worst losses since 2008, are the most nervous they’ve been in three years after Third Avenue Management took the rare step of freezing withdrawals from a $788 million credit mutual fund. The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, rose 36 basis points to 514.52 basis points, the highest since December 2012. BlackRock’s iShares iBoxx High Yield Corporate Bond ETF, the largest fund of its kind, fell to the lowest levels since 2009. Read more here-

Anxiety Grows

-CHART OF THE WEEK: Commodity Faithful See Some Hope Next Year After 2015 Heartbreak. After the worst commodity collapse in a generation, there may be some glimmers of hope. Gold, wheat and natural gas probably will climb in 2016, according to a Bloomberg survey of 108 traders, analysts, economists and strategists across Asia, Europe and the Americas. It won’t all be positive. For oil, mired in the longest slump since 1998, bearish respondents said prices may drop below this week’s six-year low, while the survey showed overwhelming pessimism for copper. Read more here- and

Commodity Carnage

-CHART OF THE WEEK: A bunch of OPEC members are ‘at risk for a significant crisis in 2016’. OPEC, the now 13-member oil cartel, decided to maintain production at 31.5 million barrels per day at its meeting in Vienna last Friday. But the group remained divided over its production ceiling, and failed to reach an agreement. And that’s pretty grim news for about half of the cartel’s members, who are already struggling with low prices amid a supply glut. “[The] OPEC meeting ended without a decision, putting on full display the vast divide between OPEC members,” wrote RBC Capital Markets global head of commodity strategy Helima Croft. “We believe that the current OPEC strategy or non-strategy leaves a significant portion of the cartel at risk for a significant crisis in 2016.” Read more here- and

Saudi revenues

-CHART OF THE WEEK: Credit Suisse: Investors Are More Bearish on Oil Than They Were During the Financial Crisis. Analysts at Credit Suisse channel Arnold Schwarzenegger in their latest note discussing the state of black gold, entitled: “Oil Be Back.” The seeming dissolution of the Organization of Petroleum Exporting Countries prompted oil to end this week on a poor note, and more negative catalysts proceeded to emerge. Forecasts of a milder winter, the Venezuelan elections, and the start of a five-day “contract roll” period have all combined to add to the selling pressure, according to Credit Suisse, but this rout may have nearly concluded. “It is clear to us that technically speaking we may not be that far away from a true bottom,” asserts Jan Stuart, the bank’s global energy economist. The structure of the Brent futures curve which lays out the current price of oil for a series of future dates shows just how pessimistic investors have become on oil, according to the economist. Read more here-

A lost decade at the longer end of the curve

-“We are currently projecting 2016 demand for all major metals and bulk commodities remaining well below the 10-year norms. With financial markets taking an increasingly negative view on the long-term health of the industry, pressures on metals and bulk commodity producers seem set to get worse.” Macquarie research

-“I think stocks are priced to deliver lousy returns over the next seven to 10 years. I would not be surprised to see the stock market drop sharply from this level, perhaps as much as 30% to 50% over a couple of years. None of this means for sure that the market will crash or that you should sell stocks. (Again I own stocks, and I’m not selling them.) It does mean, however, that you should be mentally prepared for the possibility of a major pullback and lousy long-term returns.” Henry Blodget

-The broad stock market today offers less than a 1% annual return over the next decade along with a large double-digit potential drawdown. It would take another major bear market, similar to the last two, for stocks to simply fall to their median valuations over the past several decades. This potential downside is also confirmed by the record level of margin debt in the market. So owning the broad stock market today is essentially risking dollars to make pennies.” Jesse Felder

-“Dealogic compiled data on the top 10 IPOs of the year as of Tuesday’s close, and it looked at the performance of each one to date. It found that seven of the top 10 companies to go public were trading lower than their offer price.”

-“Adjusted net income, adjusted sales, and adjusted Ebitda are showing up in earnings reports at hundreds of US companies. Without those adjusted numbers, “third-quarter earnings per share fell 13% for the biggest US companies,” The Wall Street Journal reports. It cites research from Deutsche Bank, which found that one in 10 major securities filings included the term “adjusted Ebidta.” Ebidta refers to adjusted earnings before interest, taxes, depreciation, and amortization. “About a quarter of earnings-related filings this year included figures that don’t comply with generally accepted accounting principles, or GAAP, as well as more standard measures,” according to an analysis by The Journal.” Wall Street Journal

-“$7.48 the difference between GAAP and non-GAAP earnings at Valeant (9 months to end September).” BNN

-“-25.38% TSX return, year to date, in U.S. dollars the worst of the major markets in the world.” BNN

-“America’s middle class has been steadily shrinking since 1971, and now this segment of the U.S. population is around the same size as the layers above and below it combined, a new analysis by Pew Research Center finds. It’s “a demographic shift that could signal a tipping point,” Pew says. In 2015, middle-income Americans (adults in a three-person household with annual income between $42,000 and $126,000) made up about half of the U.S. population, down steadily from 61 percent since 1971. In absolute numbers, this middle-income band now contains around 120 million people, which is almost the same as the total number of Americans in the other economic tiers combined (121 million).”

-“According to American-German researcher, historian, and strategic risk consultant F. William Engdahl, a gold-backed ruble and a gold-backed yuan could start a “snowball exit” from the U.S. dollar. Engdahl explains that if this happens it would “diminish America’s ability to use the reserve dollar role to finance overseas wars.” He adds that the irony here is the central banks of China, Russia, Brazil and others (that are opposed to U.S. foreign policy course), are forced to stockpile dollars in the form of “safe” U.S. treasury debt. More recent trade deals between China and Russia have specified that either the yuan or ruble would be used to settle balances and not the dollar.” Frank Holmes

-“If gold is adjusted for inflation, gold is as cheap today as it was in 2002. So gold today is as unloved and undervalued as it was in 2002. But not only will gold will go to $10,000 in today’s money, but much more importantly, physical gold will protect investors from the total wealth destruction that is coming.” Egon von Greyerz

-“There was a time when gold was money. In today’s paper dollar era, part of gold’s allure is its traditional status as a safe haven when everything from stocks to just sitting in a Paris café is considered risky. We believe the arguments for a resumption of the bull market are compelling. It is cheap in an overvalued world. There is a further twist. Consumption remains strong in Asia. The Chinese are buying 50 tonnes of physical every month as a hedge against devaluation. In addition, declining supplies can only help support higher prices. Gold is a commodity that provides an early warning of trouble. Our view is that the recent geopolitical events dictate caution and quite likely that as the world’s geopolitical temperature rises, so will gold. Next year, we believe gold will trade at $2,000 per ounce.” John Ing

-“The Fed is threatening to do something highly unusual; to begin a rate hiking cycle when the global economy is on the brink of recession. Ms. Yellen has virtually promised to raise rates on December 16 and continue to slowly hike the cost of money throughout next year. Investors should forget about the “one and done” rate hike scenario. The truth is the Fed will be very slowly tightening monetary policy until the fragile US economy officially rolls over into a contractionary phase and the meaningless U3 unemployment rate begins to move higher. This current economic expansion is now 78 months old, making it one of the longest in U.S. history.

There have been six recessions since the modern fiat currency era began in 1971. The average of those has brought the S&P 500 down a whopping 36.5%. Given that this imminent recession will begin with the stock market flirting with all-time highs, the next stock market crash should be closer to the 2001 and 2008 debacles that saw the major averages cut in half. Total U.S. public and private debt levels have climbed to the staggering level of 327% of GDP. Therefore, humongous debt levels and massive capital imbalances have set up the stock market for its third major collapse since the year 2000. Investors should proceed with extreme caution now that the warning signs have been explained.” Michael Pento

-“Many states and cities have reached a crisis situation with respect to their finances and the consumer is now seeing an explosion in subprime auto loans, much of which will never be repaid. This is in addition to the student loans, which are now in comfortably north of $1 trillion, an increasing amount of which are going into default every single day. So the U.S. dollar is backed by a catastrophic debt situation, which is probably the worst on the planet. The only antidote from a financial perspective is to own hard assets, particularly gold and silver, which are being aggressively repressed daily to keep the financial truth from the largely unsuspecting public. Time is getting short to acquire physical gold and silver and the equities of the quality companies that mine them efficiently. I can’t emphasize that enough. If readers truly understand what is going on, they had better get positioned quickly.” John Embry

-“First, the move was piddly 25 basis points off of zero. For reference, these are the average Fed Fund rates since 2005 (1.4%), 1995 (2.6%), 1990 (3%) and the past 44 years since 1971 (5.5%). The expectation for year-end 2016 at 1.375% brings the rate just to where it has averaged for the past 10 years (with that average aggravated, of course, by seven years of zero). The statement was read hawkishly (four hikes possible next year instead of three) and dovishly (gradual future hikes expected and 2017’s rate expectation was dropped by 25 bp to 1.675%). Markets, which had been positioned for disaster only a few days before, liked what they saw with jumps of 1.25% to 1.5% on the indices and the rally continues today with the U.S. equity futures in the green right now.” BNN

-Here’s Everything That Could Go Wrong in 2016. Read more here-

-Derivatives: The toxic financial instrument on par with terrorism. First, let’s look at what derivatives are in general. As you know, a share of stock represents ownership of a company. A deed to real estate represents ownership in fee simple. A bond is a debt obligation of a government or company. They represent a connection to ownership in the tangible and real world. Now, it gets tricky. When we speak of derivatives we speak of other instruments and paper that derive its worth and value from the underlying event or basis. Stated differently, a derivative. “Is a financial contract with a value that is derived from an underlying asset. Derivatives have no direct value in and of themselves their value is based on the expected future price movements of their underlying asset.” Did you catch this one piece? Derivatives have no direct value in and of themselves. And as they say on QVC, “But wait, there’s more.”

Derivatives have grown exponentially in the last 30 or so years and represent the most dangerous, toxic and potentially explosive form of speculation and, much like the putrescent subprime world, you will sooner than later hear of these minefields and will wonder again how they were allowed to fester, how no one mentioned them and how those charged with monitoring the stability and safety of the financial world looked the other way. The estimates of the notional value, defined as the total value of a leveraged position’s assets, of the world’s derivatives market ranges from $600 trillion to $4 quadrillion. Remember that the GDP of the entire world ranges between $70-75 trillion. At some point, if history is any guide, the derivatives bubble will burst and the effects worldwide will be beyond catastrophic. Every stock on the planet, the entire market capitalization is estimated at $36-60 trillion. The same process for bonds yields a market capitalization of $72-100 trillion. No matter the particular figure or range, the notional value of the world’s derivative market was $1.2 trillion in 2010 and the world’s annual gross domestic product was between $50 trillion and $60 trillion. Are you seeing this?

The very idea of a quadrillion anything is heady enough, but imagine having derivatives represent over 40 times the world’s stock market and 20 times the world GDP. Exchange traded derivatives along with futures, options and indices and every combination and permutation available are somewhat accountable and range from $700-900 trillion. But over the counter derivates and swaps are in effect private contracts and they could represent another $700-900 trillion; no one knows exactly. In most countries they’re not reportable. And nobody knows or apparently cares. Derivatives have no value, they’re in effect side bets. According to the Office of the Comptroller of Currency (OCC) and its quarterly report on trading revenue and bank derivatives activities for the first quarter of 2014 cited in 5 U.S. Banks Each Have More Than 40 Trillion Dollars In Exposure To Derivatives, the following should get your attention. Read more here-

-Fed Ends Zero-Rate Era; Signals 4 Quarter-Point Increases in 2016. The Federal Reserve raised interest rates for the first time in almost a decade in a widely telegraphed move while signaling that the pace of subsequent increases will be “gradual” and in line with previous projections. The Federal Open Market Committee unanimously voted to set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent. Policy makers separately forecast an appropriate rate of 1.375 percent at the end of 2016, the same as September, implying four quarter-point increases in the target range next year, based on the median number from 17 officials. Read more here-

-The Fed just raised rates, ending 7 years of crisis-era monetary policy. The wait is over. On Wednesday, the Federal Reserve raised interest rates for the first time in nine years, ending a historic era of nearly 0% interest rates that began seven years ago today. As expected, the outcome of the Federal Open Market Committee’s two-day meeting was an increase in the target range of the federal-funds rate by 25 basis points, from 0.25% to 0.50%. No FOMC member disagreed with this decision. The Fed’s era of record-low rates had been aimed at driving an economic recovery following the worst recession since the Great Depression. Read more here-

-Billionaire Sam Zell Says Recession Likely in Next 12 Months. Billionaire investor Sam Zell said the U.S. economy could go into a recession in the next year and that an expected Federal Reserve interest-rate increase is coming at least six months too late. The central bank has been too cautious and the economy would already be adjusting if it raised rates six to nine months ago, giving Chair Janet Yellen “more room if a recession is on the way,” Zell said Wednesday in an interview on Bloomberg TV. Multinational companies are laying off workers, global trade is slowing and there’s a possibility China’s economy will falter, he said. “There is a high probability that we are looking at a recession in the next 12 months,” Zell said. “The strong dollar is having a tremendous impact on U.S. production and U.S. businesses.” Read more here-

U.S. Commercial Property Prices Surge

-Puerto Rico Will Default in January or May, Governor Says. Puerto Rico will default on debt payments in January or May, Governor Alejandro Garcia Padilla said, as Congress failed to provide the Caribbean island with the help it was seeking to cope with an escalating debt crisis. The lapse will probably come on Jan. 1, when its next bond payments are due, Garcia Padilla said Wednesday during an appearance at the National Press Club in Washington. He said that’s because the island’s government may not have enough cash to pay essential services and creditors.

“If they make me choose between Puerto Ricans and creditors, I will choose Puerto Ricans, always,” he said. “There’s no money. I don’t have a printing machine.” Puerto Rico and its agencies owe $70 billion and the island faces $957 million of interest payments due Jan. 1, including $357 million on general obligations. The commonwealth this month narrowly averted a default on government-guaranteed debt for the first time, and Garcia Padilla said it’s inevitable that Puerto Rico will have to restructure debt amassed from years of borrowing to pay bills. Read more here-

Puerto Rico's New Year's Eve Bill

-The Italian banking system is in serious trouble. George Freidman’s new daily letter Reality Check (December 11) is quoted below. “The Italian banking system is in serious trouble, and the failure of these four banks is simply the tip of the iceberg. An Italian pensioner committed suicide this week. He hung himself after the Italian government’s rescue of small four banks wiped out his life savings. The bailout was carried out under the principles which governed Cyprus’ bailout. All of the stakeholders in the bank, including depositors, were at risk in the banks’ failure.

These were small banks, so the reality of what was happening did not strike home immediately. This man’s suicide did. Italian consumer protection groups, Adusbef and Codacons, have demanded a criminal investigation into the case. This suicide and subsequent reaction by consumer defense groups mark the first glimmer of growing public concern over the security of bank deposits in Italy. As tensions grow between Italy and the EU over the country’s banking system, as well as the Italian government and domestic public pressure, conditions will come closer to realizing Geopolitical Future’s 2016 forecast of a banking crisis in Italy.

The Italian banking system is in serious trouble, and the failure of these four banks is simply the tip of the iceberg. Non-performing loans, loans that debtors are not paying off as agreed, but which have not yet been written off by the banks, have been rising. At this point 18 percent of all outstanding loans in Italy are non-performing. That is an extraordinarily high level, particularly when you consider that Italy is the eighth largest economy in the world and the fourth in Europe.” Read more here-

-Banking’s ‘Uber moment’ is already happening 100,000 bankers lost their jobs in 2015. The “Uber moment” in finance that the former CEO of Barclays warned about recently is already happening 11 big banks have cut a combined 10% of their staff this year. Analysis by the Financial Times shows that almost 100,000 banking jobs were cut this year, equivalent to 10% of the combined staff of the 11 big European and US banks that announced cuts. They include HSBC, Morgan Stanley, Standard Chartered, Royal Bank of Scotland, and Credit Suisse.

Barclays and BNP Paribas are expected to add to cuts early in the new year. The analysis comes just weeks after Antony Jenkins, who until July was CEO of Barclays, warned in a speech that as much as half of banking jobs could be replaced by apps and algorithms over the next 10 years. Jenkins’ argument rests on the rise of fintech financial technology startups that do things like payments, lending, and investments in a smarter, cheaper, and often faster way. Jenkins believes fintech startups will “disrupt” financial services in the same way Uber has disrupted the taxi industry. That will squeeze profit margins, forcing banks to cut staff, and also force them to compete on technology, another change that will reduce headcount.

-Debt-to-income ratio rose to 163.7% in third quarter, Statistics Canada says. Altogether, Canadians owed $1.89 trillion at the end of September. Canadians owed almost $1.64 for every dollar of disposable income they earned in the third quarter, Canada’s national statistics agency said Monday. Statistics Canada reported that Canada’s debt-to-income ratio ticked up to 163.7 per cent in the third quarter, which ended in September. That’s up a full percentage point from the previous quarter’s level.

While the headline figure rose, beneath the surface the data is not so bleak, BMO economist Doug Porter said. “It has held more or less steady in the zone just below $165,” he said. The ratio rose, because Canadians’ debt loads went up faster than their incomes. Household debt rose 1.4 per cent in the quarter, while disposable income climbed 0.8 per cent. “Effectively, rising principal payments on higher debt tallies are being offset one-for-one by easing interest payments,” Porter noted. All in all, Canadians owed $1.89 trillion at the end of the third quarter, up 1.4 per cent from the previous quarter. Within that, consumer credit debt was $572.3 billion, while mortgage debt stood at $1,234 billion. Read more here- and

-Never Mind $35, The World’s Cheapest Oil Is Already Close to $20. As oil crashed through $35 a barrel in New York, some producers were already living with the reality of much lower prices. A mix of Mexican crudes is already valued at less than $28, an 11-year low, according to data compiled by Bloomberg. Iraq is offering its heaviest variety of oil to buyers in Asia for about $25. In western Canada, some producers are selling for less than $22 a barrel. “More than one-third of the global oil production is not economical at these prices,” Ehsan Ul-Haq, senior consultant at KBC Advanced Technologies Plc, said by e-mail. “Canadian oil producers could have difficulty in covering their operational costs.” Read more here-

Discount Crudes

-China Has Something to Tell OPEC: Oil Prices Have Fallen Too Far. The world’s biggest energy consumer may have a message for OPEC. China’s decision to suspend fuel price cuts as crude continues its decline is sending a signal to the Organization of Petroleum Exporting Countries that prices are too low, according to a report from Sanford C. Bernstein & Co. The move gives oil a price floor around $38, according to the analysis. “China’s decision to not cut refined product (gasoline, diesel) prices is a first,” analysts including Neil Beveridge wrote in the report. The move “sends a signal to OPEC that its largest customer (China) believes that oil prices are too cheap.” China, the world’s second-biggest oil consumer, said it will suspend fuel price cuts while crude continues to fall in order to slow consumption growth and trim automobile emissions. Gasoline demand in the country increased 10.4 percent in the first 10 months of the year from the same period of 2014, according to the Paris-based IEA. Read more here-

-Saudi Arabia Spends Billions to Get Asia Hooked on Its Crude Oil. At the heart of Korea’s Onsan Refinery lies a street called “A.I. Naimi Road,” an homage to Saudi Arabia’s oil minister. The reason: state-owned Saudi Arabian Oil Co. holds a 65 percent stake in the complex. Taking a controlling interest last year in South Korea’s third-largest refinery highlights the shifting dynamics of the oil business. With crude prices down by more than half in the past two years, the Saudis and other oil-rich countries are fighting to lock in customers. Asia, which now accounts for 70 percent of Saudi oil exports, is the primary battleground. Read more here-

-Oil Investors Are $240 Billion Poorer a Week After OPEC Call. Investors around the world have seen $240 billion wiped off the value of oil companies in the week since OPEC sent crude prices plunging to a seven-year low by abandoning its output limit. Companies producing, refining, piping and exploring for oil, along with those that provide them with services, had a market value of about $3.72 trillion as of Friday, compared with $3.96 trillion on Dec. 3, the day before the Organization of Petroleum Exporting Countries’ meeting in Vienna. Exxon Mobil Corp., the world’s biggest oil company, has lost $11 billion of its value and PetroChina Co. more than $17 billion, according to data compiled by Bloomberg. Read more here- and

The Big Slump

-Canadian Gas should be much cheaper with fall in oil prices, BMO says. Gasoline should be about 80 cents a litre if historical correlations between crude and gas held true. It’s not your imagination gasoline prices in Canada should be a lot lower than they are right now. That’s according to Benjamin Reitzes, an economist at Bank of Montreal, who said the price Canadians pay at the pump should be a lot lower than it currently is based on the plunging price of a barrel of crude. “With last week’s plunge in oil fresh in my mind as I headed into the weekend, I couldn’t help but notice how gasoline prices had ticked higher from the previous week,” he wrote in a research note on Monday evening. Despite Canada having one of the world’s largest reserves of crude oil in the world, much of the gasoline that Canadians put into their cars especially in Central Canada and on the East Coast is based on crude oil that’s been imported, most likely Brent crude from Europe. Read more here-

-Universal basic income could arrive in Europe faster than you think. Several European countries are moving to adopt universal basic income schemes in the next few years. If any of them come to fruition we could finally get an answer to one of the most exciting questions in economics: whether basic income is the best way to end poverty and the welfare state. In January 2016, the Dutch city of Utrecht will do an experiment in which its population will be divided into different groups that receive different levels of welfare, including one in the form of an unconditional basic income. Payments will range from €900 ($1,000) to €1,300 ($1,450). Later in 2016, Switzerland will hold a referendum on creating a universal basic income. (Its parliament is opposed.) In 2017, Finland will adopt an experimental scheme that pays everyone €800 ($876) a month. Read more here- and

-Spain’s ‘lost’ generation struggles to find its place. Sleeping in, hanging out in the park and slouching in front of the TV is how 18-year-old Carlos Cabilla, a member of Spain’s so-called “lost” generation, fills his days. Like nearly three in ten Spanish youths, the tattooed and pierced 18-year-old is unemployed, not studying and not seeking work, the product of an education system that experts say fails to adequately prepare students for the job market. Cabilla lives in Segunda Aguada, a working class neighbourhood in the southwestern port of Cadiz, where the unemployment rate stands at a whopping 37 percent, compared to 21 percent at the national level. For those under the age of 25, the jobless rate surpasses 60 percent. Read more here-

-This $301 Million Paris Chateau Is the World’s Priciest Home. A mansion outside Paris has fetched a world record price of more than 275 million euros ($301 million), two people with knowledge of the matter said. The newly-built Chateau Louis XIV was sold to a Middle Eastern buyer, the people said, asking not to be identified because the sale is private. Christie’s International Real Estate was involved in brokering the deal, one of the people said. Read more here-

-These 10 Artworks Alone Totaled $1 Billion at Auction This Year. The $100 million club is getting crowded. What did it take to make it into the top 10 this year? Well, it certainly helped if the lot were a painting (9 out of 10), depicting a woman (6 out of 10), and created by a white, male artist (10 out of 10). It further helped if it were sold in New York (10 out of 10), at Christie’s (7 out of 10), and at an evening sale (10 out of 10.) Finally, it greatly improved a lot’s odds to be by Pablo Picasso, who painted three of the artworks in the top 10. Add it all up and what do you get? Nine-hundred and ninety six million dollars (again: That’s $996 million) and change. Read more here-

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RARECOLOREDDIAMONDS.COM Featured Diamond of the Week. This week’s featured Diamond is a 0.45 Carat Pear Cut Fancy Intense Blue. Harold Seigel-Watch here-

0.45 Carat Pear Cut Fancy Intense Blue

-Fancy Colored Diamonds to Sparkle in 2016. Rare diamonds and gemstones will continue to fetch record prices, but there’s value in white diamonds. Hong Kong billionaire Joseph Lau paid a combined $77 million for two fancy colored diamonds at auctions in Geneva last month $48.4 million for a 12.03-carat vivid blue at Sotheby’s and $28.5 million for a 16.08 carat vivid pink at Christie’s, extraordinary prices for extraordinary stones. But Lau is not alone in pursuing fancy colored diamonds. Pink and blue and even yellow diamonds are among the hottest jewelry items this year and that’s not expected to change in 2016. “Fancy colored diamonds are probably more important today than ever before,” Graeme Thompson, Director of Jewellery, Asia, at Bonham’s said at a recent Hong Kong press event detailing results from the Knight Frank Luxury Index.

The term “fancy” speaks to the depth of color in a stone with a “fancy vivid” having the richest hue. The luxury index, which tracks colored diamonds as well as jewelry among ten asset classes, including classic cars and fine wine, rose 10% in the 12 months through September and 63% in the last five years. Prices of colored diamonds, despite eye-popping auction prices, haven’t risen in the past year, a casualty of the Chinese economic slowdown and the government’s anti-corruption crackdown. Still, the category rose 142% in the past ten years.

Most of that growth is from pink diamonds, up a soaring 315% in ten years, and blue diamonds, surging 154% in that time, the Fancy Color Research Foundation reports. Larger white diamonds have risen in value too, but much more slowly, at a growth rate of 5% a year for the last six years, says Knight Frank, citing Mercury Diamond. Why are colored diamonds popular? Well, auctions with headline-grabbing prices are one reason. A bigger one is “very, very little supply in the fancy colored diamond market” says Thompson. And, as he says, “people want rarefied things.”

All signs point for the fancy color trend to be hot into 2016 and beyond. The big reason is this lack of supply. To start, there are simply fewer color diamonds in the world only a fraction of a percent of all diamonds, says Tracey Greenstein, director of research at the Fancy Color Research Foundation. Historically, supply has constantly lagged demand in all colors, Greenstein says. The rarest sparklers of all are pink. About one in 10,000 carats of diamonds are fancy colored diamonds of gem quality, and of these, only 0.1% are pink, Bonhams says. And nearly all the supply of pink diamonds in the world comes from the Argyle Mine in Western Australia, which owner Rio Tinto is expected to close within five years. “That will have a huge, huge impact on pink diamond prices,” Thompson says. Read more here-

-Buyer Pays $137,500 per Carat for a Diamond at Christie’s Magnificent Jewels Auction. Last Thursday’s Magnificent Jewels auction by Christie’s New York saw some heavy-hitting results especially where diamonds are concerned. The entire auction yielded $59,685,125 in sales, with dozens of diamonds selling for more than a million dollars each. In fact, the top lot was the Victory Diamond ring with a D-color rectangular cut superb diamond weighing 31.34 carats.

The ring sold for $4,309,000 averaging about $137,500 per carat. Diamonds are graded by color (or, in colorless diamonds, by the lack of color or the whiteness of a diamond), and a color grade of D is the highest possible valuation denoting a “chemically pure and structurally perfect diamond” according to the GIA, the largest non-profit Gemological Institute for grading stones. The auction offered several D color diamonds in addition to the top seller. One D color 43.79-carat diamond, forming a cushion-cut ring, also sold for more than $4 million.

A 103.66-carat diamond pendant necklace fetched $3.749,000, while a D color diamond rectangular ring of 28.28 carats sold for $3,413,000. The 28.28-carat diamond set a new world record for being the largest purchase of a gemstone sold to an on-line bidder. Also of interest is the fact that the collection of the late New York socialite Carroll Petrie predominantly sold out by lots with one prized necklace setting a strong bidding war. While diamonds did seem to be the buyer’s best friends at yesterday’s auction, a good number of colored gemstones also fetched high prices. Read more here-

-Christie’s Magnificent Jewels Sale, Thursday Dec 10 2015, New York, Rockefeller Plaza. Diamond Auction Results Here-

-Lot 334: A COLORED DIAMOND RING. Set with a round brilliant-cut fancy intense blue diamond, weighing approximately 1.74 carats, to the plain platinum hoop, ring size 6. Accompanied by report no. 5171282289 dated 24 September 2015 from the GIA Gemological Institute of America stating that the diamond is fancy intense blue, natural color, VVS1 clarity; accompanied by a working diagram indicating that the clarity of the diamond is potentially Internally Flawless. With a supplemental letter from the Gemological Institute of America stating that the diamond has been determined to be a Type IIb diamond. Type IIb diamonds are very rare in nature and contains small amounts of boron that can give rise to a blue or gray coloration. An unusual property of type IIb diamonds is that they are semi-conductors and conduct electricity. Historically, the ancient mines of India produced occasional blue diamond’s but today the most significant source is limited to the Cullinan (formerly Premier) Mine in South Africa. Among famous gem diamonds, the 70.21 carat Idol’s Eye and the 45.52 carat Hope are examples of type IIb. Estimate $700,000-$1,000,000. Price Realized $1,925,000. See more here-

-Lot 354: A BELLE ÉPOQUE COLORED DIAMOND AND DIAMOND RING, BY J.E. CALDWELL. Set with a marquise brilliant-cut fancy to fancy intense blue diamond, to the circular and old-cut diamond surround, pierced gallery and shoulders, circa 1915, ring size 7, mounted in platinum. Signed J.E.C Co. for J.E. Caldwell, no. G 257. Accompanied by report no. 15223652 dated 29 June 2006 from the GIA Gemological Institute of America stating that the diamond is fancy to fancy intense blue, natural color. Estimate $400,000-$600,000. Price Realized $1,205,000. See more here-

-Lot 131: A COLORED DIAMOND AND DIAMOND RING. Set with a cut-cornered rectangular modified brilliant-cut fancy intense yellow diamond, weighing approximately 21.28 carats, flanked on either side by a triangular-cut diamond, ring size 6 1/4, mounted in white gold and gold. Accompanied by report no. 5171021468 dated 11 February 2015 from the GIA Gemological Institute of America stating that the diamond is fancy intense yellow, natural color, VVS1 clarity; accompanied by a working diagram indicating that the clarity of the diamond may be potentially Internally Flawless. Estimate $350,000-$500,000. Price Realized $605,000. See more here-

-Lot 120: A COLORED DIAMOND AND DIAMOND RING. Set with a cut-cornered rectangular-cut fancy intense yellow diamond, weighing approximately 17.03 carats, to the graduated baguette-cut diamond shoulders, ring size 6, mounted in platinum and 18k gold. Accompanied by report no. 5172230384 dated 9 July 2015 from the GIA Gemological Institute of America stating that the diamond is fancy intense yellow, natural color, SI1 clarity. Estimate $250,000-$350,000. Price Realized $377,000. See more here-

-Lot 476: A COLORED DIAMOND AND DIAMOND ‘MARQUESA’ RING, BY HARRY WINSTON. Set with a rectangular-cut fancy deep brown-orange diamond, weighing approximately 11.62 carats, flanked on either side by a pear-shaped and marquise-cut diamond cluster, ring size 6 1/4, mounted in platinum, in a Harry Winston navy leather case. Signed H.W. for Harry Winston. Accompanied by a copy of report no. 13676735 dated 2 September 2004 from the GIA Gemological Institute of America stating that the diamond is fancy deep brown-orange, natural color, VS1 clarity. Estimate $170,000-$250,000. Price Realized $245,000. See more here-

-Lot 410: A COLORED DIAMOND RING. Set with a pear modified brilliant-cut fancy vivid yellowish orange diamond, weighing approximately 2.22 carats, ring size 6, mounted in 18k gold. Accompanied by report no. 6173328166 dated 25 September 2015 from the GIA Gemological Institute of America stating that the diamond is fancy vivid yellowish orange, natural color, VS2 clarity. Estimate $150,000-$250,000. Price Realized $185,000. See more here-

-Lot 216: A COLORED DIAMOND AND DIAMOND RING. Set with a cushion modified brilliant-cut fancy intense yellow diamond, weighing approximately 10.01 carats, flanked on either side by a tapered baguette-cut diamond, ring size 6, mounted in platinum and 18k yellow gold. Accompanied by report no. 5161461068 dated 31 July 2014 from the GIA Gemological Institute of America stating that the diamond is fancy intense yellow, natural color, VS2 clarity. Estimate $120,000-$180,000. Price Realized $173,000. See more here-

-Lot 428: A COLORED DIAMOND AND DIAMOND RING. Set with a cut-cornered rectangular modified brilliant-cut fancy intense yellow diamond, weighing approximately 8.04 carats, flanked on either side by a triangular-cut diamond, ring size 4 1/2, mounted in 18k white and yellow gold. Accompanied by report no. 1102873233 dated 25 June 2009 from the GIA Gemological Institute of America stating that the diamond is fancy intense yellow, natural color, VS1 clarity. Estimate $120,000-$180,000. Price Realized $161,000. See more here-

-Lot 81: A COLORED DIAMOND AND DIAMOND RING. Set with a rectangular-cut fancy intense yellow diamond, weighing approximately 6.07 carats, flanked on either side by a triangular-shaped diamond, ring size 5 1/2, mounted in 18k gold and white gold. Accompanied by report no. 15654498 dated 2 November 2015 from the GIA Gemological Institute of America stating that the diamond is fancy intense yellow, natural color, VS1 clarity. Estimate $100,000-$150,000. Price Realized $125,000. See more here-

-Lot 415: A PAIR OF COLORED DIAMOND AND DIAMOND EAR PENDANTS. Each suspending a cut-cornered square modified brilliant-cut fancy intense yellow diamond, weighing approximately 4.27 and 4.25 carats, from a diamond link chain and square modified brilliant-cut diamond surmounts, weighing approximately 1.20 carats each, 1 5/8 ins., mounted in white and yellow gold. Accompanied by report nos. 2131194546 and 1136442194 dated 17 March 2011 and 26 May 2011 from the GIA Gemological Institute of America stating the square modified brilliant-cut diamonds, each weighing approximately 1.20 carats, are F color, VVS2 clarity. With report no. 5121894651 and 2135055390 dated 17 December 2010 and 9 February 2011 from the GIA Gemological Institute of America stating the cut-cornered square modified brilliant-cut diamonds, weighing approximately 4.27 and 4.25 carats, are fancy intense yellow, VS1 clarity. Estimate $100,000-$150,000. Price Realized $112,500. See more here-

-Lot 184: A COLORED DIAMOND AND DIAMOND RING, BY CARVIN FRENCH. Set with a cut-cornered rectangular modified brilliant-cut fancy vivid yellow diamond, weighing approximately 2.77 carats, flanked on either side by a baguette-cut diamond, ring size 7 1/4 ins., mounted in platinum. With maker’s mark for Carvin French. Accompanied by report no. 5172369715 dated 29 October 2015 from the GIA Gemological Institute of America stating that the diamond is fancy vivid yellow, natural color, Internally Flawless clarity. Estimate $40,000- $60,000. Price Realized $62,500. See more here-

-Lot 86: A COLORED DIAMOND AND DIAMOND TWO-STONE RING, BY BULGARI. Set with an oval-cut fancy intense orangy yellow diamond, weighing approximately 1.05 carats, and an oval-cut diamond, weighing approximately 1.00 carat, ring size 5 1/2, mounted in platinum and gold. Signed Bulgari (partially indistinct), no. 1750. Accompanied by report no. 2105200090 dated 10 October 2008 from the GIA Gemological Institute of America stating that the diamond, weighing approximately 1.05 carats, is fancy intense orangy yellow, natural color, SI2 clarity. With report no. 2105236845 dated 29 September 2008, from the GIA Gemological Institute of America stating that the diamond, weighing approximately 1.00 carat, is D color, VVS2 clarity. Estimate $8,000- $12,000. Price Realized $21,250. See more here-

-Lot 418: A COLORED DIAMOND AND DIAMOND TWO-STONE RING, BY CARVIN FRENCH. Of crossover design, set with a pear brilliant-cut diamond, weighing approximately 1.49 carats, and a pear brilliant-cut fancy vivid yellow diamond, weighing approximately 1.35 carats, to the circular-cut diamond shoulders, ring size 5, mounted in platinum. With maker’s mark for Carvin French. Accompanied by report no. 2165615169 dated 16 September 2014 from the GIA Gemological Institute of America stating that the diamond is G color, VVS2 clarity. With report no. 2165618886 dated 18 September 2014 from the GIA Gemological Institute of America stating that the diamond is fancy vivid yellow, natural color, VS2 clarity. Estimate $15,000-$20,000. Price Realized $18,750. See more here-

-Elizabeth Taylor’s $8.8 million ‘Taj Mahal’ heart-shaped diamond gifted to the star by Richard Burton on her 40th birthday to hit auction block again after her estate and Christie’s settle dispute. New court documents obtained by Daily Mail Online show that earlier this week the two parties reached a deal to dismiss all claims against each other and the Taj Mahal diamond will be put up for auction, fetching, it is hoped at least $8.8 million, the auction price last time around. Read more here-

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-CHART OF THE WEEK: Gold to Breach $1,000 as Fed Lifts Rates in ’16, SocGen Says. Gold is going to be a casualty of the Federal Reserve, according to Societe Generale SA. Bullion will probably drop to $955 an ounce by the end of 2016 as the U.S. central bank raises borrowing costs this week and follows that with three further hikes next year, Head of Global Asset Allocation Alain Bokobza said in an interview. The target suggests prices may sink about 10 percent to the lowest since September 2009. Read more here-

Gold Drops on Stronger Dollar

-Rob McEwen on gold, silver and investing in precious metals stocks. The Gold Report: For the last five years, you’ve been predicting $5,000/ounce ($5,000/oz) gold. Are you still predicting that and what would drive it there?

Rob McEwen: Yes, and the reasons are even more pressing and relevant. The industrialized world has never before increased the money supply as fast and as large as it is today and government debt is at unimaginable and unsustainable levels. The central bankers’ objective was to get the global economy back up and running, but so far it hasn’t worked. Interest rates are dragging along the floor and have forced investors and savers to desert their prudent ways and seek riskier investments in a frantic search for yield.

Our governments want us to spend, to consume believing this will keep the economy afloat. But they are wrong and pushing the wrong levers. What we need urgently is capital investment that creates jobs and expands the tax base. Unfortunately, this is not happening. On top of this setting, there appears to be a number of powerful countries that want to remove the U.S. dollar from its role as the reserve currency of the world. These players have been strategically moving to reduce the role of the dollar in their economies and lessen the need to buy dollars to buy oil, food and other essential commodities.

TGR: But if all that money printing hasn’t taken the price of gold up in the last five years, why would it do that at a later date?

RM: At some point soon, people are going to question the value of the dollar. Too many people believe the government can control interest rates and inflation. People are going to realize that the government is not telling us the truth about the economy, about inflation, about having the economy under control. When that happens investors will rush to diversify and put funds into gold and silver. Right now is an appropriate time to start buying gold. It is cheap and gold shares are even cheaper.

What most investors don’t appreciate is the fact that gold has been going up significantly in the past year and a half in many currencies other than the dollar. Soon it will also climb in dollar terms. How high will it go? Here’s some simple math to show what is possible. From 1970 to 1980 gold went from $40/oz to $800/oz, an increase of 20 times. The low in this cycle has been $250/oz. If you apply the same factor of 20, you’re at $5,000/oz.

TGR: What’s the time frame for your prediction?

RM: Four years out, in that time the dollar will have given up its premium position in the currency world and many more investors will be buying gold. The combination of crowd psychology and instantaneous communication are going to propel the price of gold to new heights that most people can’t imagine today.

TGR: If that’s the case for gold, what are the prospects for silver?

RM: Silver will follow gold’s upward climb and the gold/silver exchange ratio will compress in the future. It will go from the current high of 75:1 to potentially as low as 16:1. Read more here-

-Adam Hamilton: Gold Thrives in Rate-Hike Cycles. The bottom line is contrary to American futures speculators’ fervent belief, gold thrives during Fed-rate-hike cycles historically. Rising rates are very damaging to conventional stocks and bonds, which leads investors to return to counter-cyclical gold. The lower gold’s price levels entering Fed-rate-hike cycles, and the more gradual their hiking pace is, the better gold performs as the Fed forces interest rates higher. History overwhelmingly proves this, with gold rallying in the majority of Fed-rate-hike cycles to enjoy very large average gains. And given the radical underinvestment in gold today and record extreme gold-futures shorting by speculators on the false premise that Fed rates hikes are gold’s nemesis, gold’s upleg in this next Fed-rate-hike cycle should prove exceptionally large. Frenzied short covering will initially fuel it. Read more here-

Federal-Funds Rate and Gold 1970-1989

Federal-Funds Rate and Gold 1990-2015

-Austria says it has repatriated 15 tonnes of gold from London. Dec 11 Austria has repatriated 15 tonnes of its gold reserves as part of a plan to hold half its stock of the precious metal within the country’s borders, the Austrian National Bank (OeNB) said on Friday. The OeNB, which administers Austria’s 280 tonnes of gold reserves, said in May that by 2020 50 percent of the reserves would be kept in Austria, 30 percent in London and 20 percent in Switzerland. Most of its stock is now in Britain.

“By the end of November, the Austrian National Bank brought 15 tonnes of its gold back into its own vaults,” the OeNB said in a statement. A spokesman for the central bank said it had begun repatriating the gold from London in October. After the repatriation, Austria held roughly 65 tonnes of gold, or about 23 percent of its reserves, on its territory, the spokesman said. Around three quarters, 209 tonnes, were in London, he said, and six tonnes were in Switzerland. Read more here-

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Gold to silver ratio at 80 to 1 with gold at $2,000 the silver price would be $25.00

Gold to silver ratio at 70 to 1 with gold at $2,000 the silver price would be $28.57

Gold to silver ratio at 60 to 1 with gold at $2,000 the silver price would be $33.33

Gold to silver ratio at 50 to 1 with gold at $2,000 the silver price would be $40.00

Gold to silver ratio at 40 to 1 with gold at $2,000 the silver price would be $50.00

Gold to silver ratio at 30 to 1 with gold at $2,000 the silver price would be $66.67

Gold to silver ratio at 20 to 1 with gold at $2,000 the silver price would be $100.00

Gold to silver ratio at 15 to 1 with gold at $2,000 the silver price would be $133.33

-Ted Butler: An Unprecedented Circumstance. Today, I will speak of a completely unprecedented situation that has evolved over the past seven years. I define “unprecedented” as something that was never done or known before. The unprecedented circumstance is my seven year documented history of labeling the giant financial institution, JPMorgan Chase, as being engaged in an illegal price manipulation of the silver market. To my knowledge, never has it occurred that open allegations of serious criminal wrongdoing have ever been made about any financial institution with those allegations going unchallenged.

No one would dare label any large financial institution of being crooked and expect that institution to turn the other cheek. Yet JPMorgan has remained silent in the face of what most would consider to be statements damaging to its reputation. It’s one thing to label a government agency or congress as being a bunch of crooks; in fact, it’s common practice by many. But calling a publicly owned bank crooked is very different. The government turns its back on critics but call a big bank crooked and expect to get your heart ripped out. Therein lies the mystery. Why would JPMorgan allow allegations of serious wrongdoing to go unchallenged? It can’t be that the allegations aren’t serious enough, as price manipulation is the most serious market crime possible, damaging just about everyone, including the market itself.

It can’t be because my allegations aren’t specific enough, as I’ve detailed what the bank has done in silver twice a week for seven years; down to the number of short COMEX silver contracts JPMorgan has held weekly. It can’t be because I am relying on false data to back up my allegations because I rely exclusively on government and exchange statistics. It can’t be that my market structure analysis is wrong, because it has now come to be more copied than any other approach. Then what the heck is preventing JPMorgan from denying that it is the crook I allege it to be? Read more here-

-Gary Christenson: Silver Until Paper Currencies Stop Losing Value. Read more here-

-In developments since Saturday’s review, the U.S. Mint continues to pump out Silver Eagles and each new update from the Mint establishes a new record for annual sales over the near three-decade existence of the program. Tuesday’s update indicated that 47 million Silver Eagles have been sold in 2015. I don’t know if more Silver Eagle sales will be reported this year, but it looks like the Mint won’t be selling any more Gold Eagles, since sales updates have apparently ceased. The stand out in Gold Eagles, of course, was the sudden burst of buying of more than 300,000 oz over what sales had been running at for the year. That the additional Gold Eagles were sold in only a few month period had all the hallmarks of being the work of a big buyer (JPMorgan). It appears clear to me now that if such an amount of gold was demanded in COMEX deliveries over the past few months, there would have been a much greater impact on price and this is the reason the big buyer chose the Gold Eagle route instead.

The standout features in Silver Eagles is the astronomical amount of metal absorbed this year relative to total silver production. Not only does the amount of metal used in Silver Eagles represent more than the U.S. mines annually, it appears to be the largest single world silver demand factor of all. While Silver Eagles account for nearly 6% of world mine production, sales of Gold Eagles, despite being up 60% from 2014 levels, only amount to less than 1% of global gold mine production. That’s not a knock on gold, just a relative comparison in a highly objective relevant measurement. Between Silver Eagles and Canadian Maple Leafs, more than 75 million oz of silver was consumed this year, nearly 10% of total annual world mine production. Most remarkable of all is that overall retail demand stinks, making the only possible explanation is that someone big has been buying silver coins.

JPMorgan continues to dominate COMEX silver and gold deliveries in its own house or proprietary trading account. Through Tuesday, JPM has taken 727 of the 761 total gold contracts issued this delivery month, or more than 95%. [And you can add the 183 contracts posted Wednesday to that list as well. Ed] While not large in contract terms, it’s hard to imagine any one trader taking a greater percentage. In COMEX silver deliveries, JPM is up to 1,273 contracts taken and it will be nip and tuck to see if they get to the 1,500 delivery limit. The limit is 3,000 contracts in gold and I’m convinced JPM held that number of contracts going into the delivery period, but backed off and liquidated many of those open contracts because it knew there would be a squeeze if it insisted on all 3,000 gold contracts being delivered. Silver analyst Ted Butler Dec 16 via Ed Steer subscribe here-

-One thing I haven’t mentioned recently, but that I have written about in the past, is that when we get to extremes in managed money selling and commercial buying like we’ve gotten to now, the historical record indicates it’s not long thereafter before prices rally. In other words, on a historical basis, after the commercials lure as many managed money technical fund traders to the sell side, it’s not long before the commercials rig prices higher. At least over the past year or two, more time transpires as the commercials trick the tech funds into selling longs and going short, than in the time the commercials allow the technical funds to buy.

I mention this because this last sell-off from the end of October in which the managed money traders were tricked into selling record levels of gold contracts and near record amounts of silver contracts, because it occurred in a much shorter time frame than usually, sets the stage for any even quicker and more powerful rally should past patterns prevail. At least, that’s the recent historical pattern. In summary, silver and gold look prime to rally sharply, as does copper, platinum and palladium based upon current COT market structures. And while the actual supply/demand fundamentals in crude oil continue to look bearish, the near record managed money short position has undoubtedly contributed to the dramatic decline in price. I don’t want to start handicapping oil prices, but I will say that any rallies will likely be fully explained by technical fund buying and short covering. Silver analyst Ted Butler Dec 12 via Ed Steer subscribe here-

-When you drill down to current specifics in silver and gold, all the evidence points to tight physical conditions and the expectation of higher prices. The turnover or physical movement of metal brought into or taken out from the COMEX-approved silver warehouses surged late in the week after two days of little movement. Total movement was nearly 4.8 million oz [last] week, the highest turnover in 5 weeks, as total inventories rose 1.2 million oz to 159.1 million oz.

The standout in COMEX silver inventories [last] week was that the JPMorgan warehouse was at the center of attention as it accounted for half of the total turnover and saw a net inflow of nearly 2 million oz. This is not surprising since JPMorgan has stopped (accepted) more than 6 million oz in silver deliveries in the active December contract so far this month and as it has done previously this year, it has physically moved all the silver it has taken in COMEX deliveries (25+ million oz) into its own COMEX warehouse. All this strictly for the bank’s own personal trading account. So far this month JPMorgan has taken delivery on 1,272 silver contracts, inching ever closer to the 1,500 contract delivery limit. With more than 350 contracts still remaining open for delivery and JPM owning the lion’s share of those remaining contracts, the silver delivery process still looks tight. If the pattern of this year plays out, it should be expected that another 4 million oz of silver should be brought into the JPM COMEX silver warehouse.

The December COMEX gold delivery still looks tight as well, based upon the small number of total deliveries issued so far and a still large 1,800 contracts remaining open. Another tip off to JPMorgan’s dominance, is that of the 310 total gold deliveries issued so far this month, JPM has taken 278 or nearly 90% of total gold deliveries, all in its personal trading account. [Plus the 184 additional contracts they’re taking delivery of tomorrow Ed] I have the distinct impression that JPM has been liquidating its open December contracts because it knows that demanding delivery for as many as it held at the beginning of the month, would stress gold issuers. It doesn’t get much tighter than that. Silver analyst Ted Butler Dec 12 via Ed Steer subscribe here-

-What has changed is the mechanics of the market. No longer does it matter how investors behave collectively, as that has little to do with price change; all that matters are the mechanics of the market. You know where I’m going with this nothing has mattered to the price of gold and silver for many years than what a few managed money and commercial traders are doing on the COMEX.

I don’t say that can or will continue indefinitely and I, for one, expect it to change and change quickly, particularly in silver; but I am saying the market mechanics of COMEX positioning has represented a paradigm shift in gold and silver (and other commodity) pricing.

And I don’t think I’m exaggerating at all when I say no other factors have exerted any influence on pricing, to the point of completely perplexing anyone paying attention to gold or silver but not being aware of the COMEX mechanics. For just one example, it has had absolutely no impact on the price of gold whatsoever, but every day I read anew how much gold was withdrawn from the Shanghai Gold Exchange and how much metal is flowing from the West to the East. I’m not doubting that the withdrawals or the flow didn’t occur or that someday these withdrawals won’t impact the price of gold; I’m just stating that up until this moment, these withdrawals and the flow have had zero impact on price.

After all, record withdrawals (said to represent Chinese demand) couldn’t have had much impact on price, as the price of gold had slipped to multi-year lows just as the withdrawals have reached an apex. In no way am I singling out this one factor, as it’s just one example of what I’m talking about. Even I have been guilty of this in my discussions of COMEX silver warehouse movements and sales of Silver Eagles; as clearly unprecedented COMEX silver warehouse movements and record sales of Silver Eagles have done absolutely nothing for the price of silver. But at least I have always provided the explanation for why silver prices weren’t responding to circumstances that should have sent prices higher.

The explanation is that the paradigm shift is the ongoing COMEX manipulation. When it came to be that a handful of large managed money technical funds and a handful of crooked commercials trading in extraordinarily massive paper contracts came to control the price of gold and silver, every other factor that formerly had a big impact on price was made irrelevant. That’s why it’s silly to expect prices to react to the news as in the old days. In these new days, the big traders don’t care about the news, just whether prices have penetrated moving averages. Silver analyst Ted Butler Dec 9 via Ed Steer subscribe here-

-No doubt both metals have been manipulated lower in price due to COMEX positioning, but if that manipulative positioning ends (as would be the case if JPMorgan and the big commercials don’t add to short positions), some other forces must come to dictate prices that are related to how much real metal exists in the world. Gold will move higher, probably more sharply than most people imagine, but it is already collectively valued in the trillions of dollars. The law of numbers suggests that the larger the collective value of an investment asset and the more of it that is held by the world’s investors, the more contained price rallies and sell offs tend to be.

That would seem to explain why gold’s price performance over the years has been more subdued than silver’s, both up and down. The total investment stock of silver is measured in the very low tens of billions of dollars, a pitifully small amount given the total investment sums in the world today. In addition, being a vital and indispensable industrial commodity, silver could and should be driven into a physical shortage by investors and industrial consumers alike. As a result, the baked-in consequences of the too low price in silver are more profound than most everyone realizes, as hard as that is to focus on when price action is dismal. Silver analyst Ted Butler Dec 9 via Ed Steer subscribe here-

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Investing In Fancy Colored Diamonds

Investing in rare colored diamonds is a long-term investment. The economic cycles of the past 15 years have seen colored diamonds reach new heights in value as price records were broken.

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The Investor Learning Center was created to provide investors with the tools to make the right decision when it comes to investing in Rare Colored Diamonds.
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1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 1980
  • Total Price: $50,000
  • Price per Carat: $50,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 1990
  • Total Price: $150,000
  • Price per Carat: $150,000
  • Source: Auction

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 2000
  • Total Price: $500,000
  • Price per Carat: $500,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 2008
  • Total Price: $1,000,000
  • Price per Carat: $1,000,000
  • Source: Auction

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 2009
  • Total Price: $1,090,500
  • Price per Carat: $1,090,500
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 2020
  • Total Price: $2,828,187*
  • Price per Carat: $2,828,187*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Vivid Pink

  • Year: 2025
  • Total Price: $4,361,506*
  • Price per Carat: $4,361,506*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 1980
  • Total Price: $1,000
  • Price per Carat: $1,000
  • Source: Auction

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 1990
  • Total Price: $3,000
  • Price per Carat: $3,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2000
  • Total Price: $9,000
  • Price per Carat: $9,000
  • Source: Auction

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2008
  • Total Price: $23,500
  • Price per Carat: $23,500
  • Source: Private Sale

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2009
  • Total Price: $26,300
  • Price per Carat: $26,300
  • Source: Auction

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2012
  • Total Price: $32,000
  • Price per Carat: $32,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2020
  • Total Price: $53,993*
  • Price per Carat: $53,993*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Intense Yellow

  • Year: 2025
  • Total Price: $74,873*
  • Price per Carat: $74,873*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 1980
  • Total Price: $60,000
  • Price per Carat: $60,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 1990
  • Total Price: $200,000
  • Price per Carat: $200,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 2000
  • Total Price: $600,000
  • Price per Carat: $600,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 2008
  • Total Price: $1,350,000
  • Price per Carat: $1,350,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 2009
  • Total Price: $1,494,000
  • Price per Carat: $1,494,000
  • Source: Auction

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 2020
  • Total Price: $4,555,497*
  • Price per Carat: $4,555,497*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Vivid Blue

  • Year: 2025
  • Total Price: $7,561,708*
  • Price per Carat: $7,561,708*

*Estimated value based on current market trend

1 Carat Radiant Cut Fancy Red

  • Year: 1950
  • Total Price: $13,800
  • Price per Carat: $13,800
  • Source: Private Sale

1 Carat Radiant Cut Fancy Red

  • Year: 1987
  • Total Price: $927,000
  • Price per Carat: $927,000
  • Source: Auction

1 Carat Radiant Cut Fancy Red

  • Year: 2008
  • Total Price: $2,000,000
  • Price per Carat: $2,000,000
  • Source: Private Sale

1 Carat Radiant Cut Fancy Red

  • Year: 2009
  • Total Price: $2,074,600
  • Price per Carat: $2,074,600
  • Source: Private Sale

1 Carat Radiant Cut Fancy Red

  • Year: 2020
  • Total Price: $3,103,720*
  • Price per Carat: $3,103,720*

*Estimated value based on current market trend