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WORLD FINANCIAL REPORT ON RADIO DECEMBER 31st 2015
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CHARTS OF THE WEEK-QUOTES-QUICK HITS
-CHART OF THE WEEK: Shale’s Running Out of Survival Tricks as OPEC Ramps Up Pressure. In 2015, the fracking outfits that dot America’s oil-rich plains threw everything they had at $50-a-barrel crude. To cope with the 50 percent price plunge, they laid off thousands of roughnecks, focused their rigs on the biggest gushers only and used cutting-edge technology to squeeze all the oil they could out of every well. Those efforts, to the surprise of many observers, largely succeeded. As of this month, U.S. oil output remained within 4 percent of a 43-year high. The problem? Oil’s no longer at $50. It now trades near $35. For an industry that already was pushing its cost-cutting efforts to the limits, the new declines are a devastating blow.
These drillers are “not set up to survive oil in the $30s,” said R.T. Dukes, a senior upstream analyst for Wood Mackenzie Ltd. in Houston. The Energy Information Administration now predicts that companies operating in U.S. shale formations will cut production by a record 570,000 barrels a day in 2016. That’s precisely the kind of capitulation that OPEC is seeking as it floods the world with oil, depressing prices and pressuring the world’s high-cost producers. It’s a high-risk strategy, one whose success will ultimately hinge on whether shale drillers drop out before the financial pain within OPEC nations themselves becomes too great. Read more here-http://bloom.bg/1SlH76x
-CHART OF THE WEEK: Oil-Producing States Battered as Tax-Gushing Wells Are Shut Down. In Kern County, California, one of the nation’s biggest oil producers, tumbling energy prices have wiped more than $8 billion from its property-tax base, forcing officials to tap into reserves and cut every department’s budget. It’s only getting worse. The county of 875,000 in the arid Central Valley north of Los Angeles may face another blow in January, when it reassess the oil-rich fields that line the landscape. Last year’s tax bills were based on crude selling for $54 a barrel. It finished Monday at less than $37.
“We may never go back to $99 a barrel, but we were good at $54,” said Nancy Lawson, assistant administrative officer of Kern County, which includes the city of Bakersfield. “If it keeps going down and stays down we may have to look at more cuts in the next budget.” As the price of crude falls for a second year, marking the steepest decline since the recession, the impact is cascading through the finances of states, cities and counties, in ways big and small. Once flush when production boomed, some governments in major energy producing regions are facing a new era of unwelcome austerity as wells are shut along with the tax-revenue gushers they spouted. Read more here-http://bloom.bg/1PwugM3
-CHART OF THE WEEK: Canada’s World-Beating Bonds Prove It’s All Relative in Market. With Canada’s economy struggling to rebound from recession, the nation’s government bonds were the best performers this year among major developed economies. The slowdown at home has put the country’s top-rated government debt in something of a sweet spot. The central bank’s two rate cuts, and expectations for a third, bolster the value of existing bonds. And the country’s dimming economic outlook still remains brighter than that of much of the developed world, which is dealing with a downturn in China, turmoil in the Middle East and an existential crisis in the European Union. “Canada’s debt is a source of safety, a harbor, in a time of so much uncertainty in the broader sovereign-debt market,” said Jonathan Lemco, a senior sovereign-debt analyst at Malvern, Pennsylvania-based Vanguard Group Inc., which runs the world’s biggest bond fund. “Canada’s had a slowdown, and unemployment’s going up, but it’s all relative.” Read more here-http://bloom.bg/1JfMemC
-CHART OF THE WEEK: Putin’s Bailout Bank Needs a Rescue; It’s an $18 Billion Whopper. For years, Vladimir Putin used Vnesheconombank (VEB) to pay for “special projects,” from the Sochi Olympics to covert acquisitions in Ukraine to oligarch bailouts. Now, the state bank needs a rescue of its own and it could be the Kremlin’s costliest yet. Read more here-
-CHART OF THE WEEK: The World’s Richest People Got Poorer This Year. The richest people on Earth became a bit poorer this year. The world’s 400 wealthiest individuals shed $19 billion in 2015, according to the Bloomberg Billionaires Index. Falling commodities prices and signs of a slower-growing China spooked investors around the world leading to the first annual decline for the daily wealth index since its 2012 debut.
“After three great years, 2015 stock markets worry-wiggled sideways,” said billionaire Ken Fisher, the founder of Fisher Investments that manages more than $65 billion. “Fears over an oil glut, soft consumer spending and China breaking like a plate and taking commodities with it saw investors take fright.” Mexican telecommunications mogul Carlos Slim was the biggest decliner on the index at the close of trading in New York on Dec. 28, as his America Movil SAB dropped 25 percent in 2015. The world’s richest person in May 2013, Slim fell to No. 5 this year after losing almost $20 billion as regulators ratcheted up efforts to break apart the business that controls the majority of Mexico’s landlines and mobile phones. Read more here-http://bloom.bg/1kquKYZ
-“Well, we are right back at it: trying to stimulate growth through easy money. It hasn’t worked, but it’s the only tool the Fed’s got. Meanwhile, the Fed’s policies widen the wealth gap, which feeds political extremism, forcing gridlock in Washington. It seems the world is headed toward negative real interest rates on a global scale. This is toxic. Interest rates are used to price risk, and so in the current environment, the risk-pricing mechanism is broken. That is not healthy for an economy. We are building up terrific stresses in the system, and any fault lines there will certainly harm the outlook.” Michael Burry
-“Christmas is a time for giving and that is what Ontario Premier Kathleen Wynne is asking of her citizenry. With almost $300 billion in debt, and almost 1 in 10 dollars of revenue going to pay interest, and already facing the highest tax rates in North America, The Star reports that Ontario officials are asking that ‘patriots’ voluntarily donate their tax refund or write a cheque to defray the province’s massive debtload.” Zerohedge.com
-“The Dallas Fed estimates in a new report the US has lost about 70,000 oil and gas jobs since October 2014, a 14.5 percent drop in the 14 months after the domestic shale drilling boom that drew thousands to Houston’s oil hub began a steep decline.” Fuelfix.com
-“ExxonMobil, Shell, and BP can no longer hope to compete with Saudi, Iranian, or Russian companies, which now have exclusive access to reserves that can be extracted with nothing more sophisticated than nineteenth-century “nodding donkeys.” Iran, for example, claims to produce oil for only $1 a barrel. Its readily accessible reserves second only in the Middle East to Saudi Arabia’s will be rapidly developed once international economic sanctions are lifted. For comparison, it is widely believed that Saudi Arabia’s production cost is $10 to $20 a barrel.” Anatole Kaletsky
-“The world now sits beneath a mountain of debt worth an astonishing $200 trillion. That’s greater than twice the global GDP, which is currently $75 trillion. If we were to distribute this amount equally to every man, woman and child on the face of the earth, we would each owe around $28,000. More surprising is that if gold at its June 2015 price level backed total global debt 100 percent, it would be valued at $33,900 per ounce.” Frank Holmes
-“I think we are going to see some pressure on the dollar this is going to push gold higher. Nothing is real, but we have to try to capitalize on the manipulation, and that is clearly where we are right now. Nothing is real. I don’t know another way to put it.” Gregory Mannarino
-In Sweden, a Cash-Free Future Nears. Parishioners text tithes to their churches. Bills and coins now represent just 2 percent of Sweden’s economy, compared with 7.7 percent in the United States and 10 percent in the euro area. This year, only about 20 percent of all consumer payments in Sweden have been made in cash, compared with an average of 75 percent in the rest of the world, according to Euromonitor International. Cards are still king in Sweden with nearly 2.4 billion credit and debit transactions in 2013, compared with 213 million 15 years earlier. But even plastic is facing competition, as a rising number of Swedes use apps for everyday commerce. At more than half of the branches of the country’s biggest banks, including SEB, Swedbank, Nordea Bank and others, no cash is kept on hand, nor are cash deposits accepted.
They say they are saving a significant amount on security by removing the incentive for bank robberies. Last year, Swedish bank vaults held around 3.6 billion kronor in notes and coins, down from 8.7 billion in 2010, according to the Bank for International Settlements. Cash machines, which are controlled by a Swedish bank consortium, are being dismantled by the hundreds, especially in rural areas. Mr. Eriksson, who now heads the Association of Swedish Private Security Companies, a lobbying group for firms providing security for cash transfers, accuses banks and credit card companies of trying to “price cash out of the market” to make way for cards and electronic payments, which generate fee income. “I don’t think that’s something they should decide on their own,” he said. “Should they really be able to use their market force to turn Sweden into a cashless society?” The government has not sought to stem the cashless tide.
If anything, it has benefited from more efficient tax collection, because electronic transactions leave a trail; in countries like Greece and Italy, where cash is still heavily used, tax evasion remains a big problem. Leif Trogen, an official at the Swedish Bankers’ Association, acknowledged that banks were earning substantial fee income from the cashless revolution. But because it costs money for banks and businesses to conduct commerce in cash, reducing its use makes financial sense, Mr. Trogen said. Cash is certainly not dead. The Swedish central bank, the Riksbank, predicts it will decline fast but still be circulating in 20 years. Recently, the Riksbank issued newly redesigned coins and notes. But for an increasing number of consumers, cash is no longer a habit. Read more here-http://nyti.ms/1krJp60
-Cashless future underway as Canadian consumers have more credit, debit and app options than ever. Although they all have their limitations, consumers have more ways to pay than ever before. Maureen Turner still makes a point of carrying coins and bills in her wallet but not for her own personal use. “I have four kids, and often the teenagers will say: ‘I need $20 for lunch at school,”‘ says the Georgetown, Ont., resident, whose children range in age from five to 15. “I keep cash in my wallet sometimes just for my kids. Anything else I don’t see why I would need it.” Turner, a 42-year-old account executive and social media strategist for a PR firm, relies on her debit card for purchases, and also uses mobile apps for banking and coffee runs at Starbucks.
She’s among a growing number of Canadians finding there’s no longer a real need to carry cash. An online survey of 1,000 people conducted by processing payments firm Moneris earlier this year found that 77 per cent of respondents preferred to pay for purchases by debit or credit card, and 65 per cent said they rarely buy anything with cash anymore. “I think we’re at a point where you don’t need cash for most of what you need to do today,” says Rob Cameron, chief product and marketing officer for Moneris. “I do think people will continue to use cash because it’s been around so long. But this growth in contactless (payments using credit cards or mobile apps) I think is going to lead towards that end of cash.” Read more here-http://bit.ly/1ICLSqi
-Switzerland to vote on banning banks from creating money. Referendum on radical proposal to give central banks sole money creation power will be held after petition gains 110,000 signatures. Switzerland will hold a referendum to decide whether to ban commercial banks from creating money. The Swiss federal government confirmed on Thursday that it would hold the plebiscite, after more than 110,000 people signed a petition calling for the central bank to be given sole power to create money in the financial system. The campaign led by the Swiss Sovereign Money movement and known as the Vollgeld initiative is designed to limit financial speculation by requiring private banks to hold 100pc reserves against their deposits. “Banks won’t be able to create money for themselves any more, they’ll only be able to lend money that they have from savers or other banks,” said the campaign group. Read more here-http://bit.ly/1QWXkQj
-Puerto Rico to Default on $37 Million of Payments Due Jan. 1. Puerto Rico will default on about $37 million in bond payments due Jan. 1 and divert revenue to make others, escalating a conflict with investors as Governor Alejandro Garcia Padilla seeks to restructure a $70 billion debt burden. The amount is a fraction of the almost $1 billion in interest due at the start of the year. The island will miss payments on $35.9 million of non-commonwealth guaranteed Puerto Rico Infrastructure Financing Authority debt and $1.4 million of Public Finance Corp. bonds. The money is being used to help pay investors who are owned $328.7 million of interest on general-obligation debt. Read more here-http://bloom.bg/1NSCZb1
-Saudi Arabia is killing its own economy because it won’t cut oil production. Oil prices have plunged about 60% since the summer of 2014, and it is not only hurting energy companies’ balance sheets it’s also slowly killing off oil-rich countries’ economies, the latest being that of Saudi Arabia. Saudi Arabia is arguably to blame for hurting its own economy because it is a “swing producer,” meaning it produces so much oil that it can shift prices depending on how much of the product it releases to the market. The country reported that its budget deficit the amount in which expenditures exceed revenue for 2015 hit $98 billion (£65.7 billion). Read more here-http://read.bi/1kqM1kF and http://bloom.bg/22xKN9N
-Saudis Plan Unprecedented Subsidy Cuts to Counter Oil Plunge. Confronting a drop in oil prices and mounting regional turmoil, Saudi Arabia reduced energy subsidies and allocated the biggest part of government spending in next year’s budget to defense and security. Authorities announced increases to the prices of fuel, electricity and water as part of a plan to restructure subsidies within five years. The government intends to cut spending next year and gradually privatize some state-owned entities and introduce value-added taxation as well as a levy on tobacco. The biggest shake-up of Saudi economic policy in recent history coincides with growing regional unrest, including a war in Yemen, where a Saudi-led coalition is battling pro-Iranian Shiite rebels.
In attempting to reduce its reliance on oil, the kingdom is seeking to put an end to the population’s dependence on government handouts, a move that political analysts had considered risky after the 2011 revolts that swept parts of the Middle East. “This is the beginning of the end of the era of free money,” said Ghanem Nuseibeh, founder of London-based consulting firm Cornerstone Global Associates. “Saudi society will have to get used to a new way of working with the government. This is a wake-up call for both Saudi society and the government that things are changing.” Read more here-http://bloom.bg/1OwQS20
-OPEC says a $10 trillion investment is needed to prevent a massive spike in oil prices. The OPEC published its World Oil Outlook 2015 (WOO) in late December, which struck a much more pessimistic note on the state of oil markets than in the past. On the one hand, OPEC does not see oil prices returning to triple-digit territory within the next 25 years, a strikingly bearish conclusion. The group expects oil prices to rise by an average of about $5 per year over the course of this decade, only reaching $80 per barrel in 2020. From there, it sees oil prices rising slowly, hitting $95 per barrel in 2040. OPEC says that $10 trillion worth of investment will need to flow into oil and gas through 2040 in order to meet the world’s energy needs. Read more here-http://read.bi/1OrTBUb
-Ambrose Evans-Pritchard: OPEC faces a mortal threat from electric cars. The oil cartel is living in a time-warp, seemingly unaware that global energy politics have changed forever. OPEC remains defiant. Global reliance on oil and gas will continue unchanged for another quarter century. Fossil fuels will make up 78pc of the world’s energy in 2040, barely less than today. There will be no meaningful advances in technology. Rivals will sputter and mostly waste money. The old energy order is preserved in aspic. Emissions of CO2 will carry on rising as if nothing significant had been agreed in a solemn and binding accord by 190 countries at the Paris climate summit. OPEC’s World Oil Outlook released today is a remarkable document, the apologia of a pre-modern vested interest that refuses to see the writing on the wall. Read more here-http://bit.ly/1Pw3FQY
-Oil Bankruptcies Reach Highest Quarterly Level Since Recession. Bankruptcies among oil and gas companies have reached quarterly levels last seen in the Great Recession, according to the Federal Reserve Bank of Dallas. At least nine U.S. oil and gas companies that accounted for more than $2 billion in debt have filed for bankruptcy in the fourth quarter, the bank said Wednesday in its energy economic update for the final three months of the year. “Lower oil prices have taken a significant financial toll on U.S. oil and gas producers, in part because many face higher costs of production than their international counterparts do,” according to the note written by Navi Dhaliwal, a research assistant, and Martin Stuermer, a research economist. “If bankruptcies continue at this rate, more may follow in 2016.” Since peaking in October 2014, U.S. oil and gas employment has fallen by 70,000 jobs, the analysts wrote in the report. Read more here-http://bloom.bg/1ToIWhb
-Food prices set to rise in 2016 as weak loonie takes a bigger bite. If a trip to the grocery store seems expensive now, just wait till 2016. Executives from grocery chains have warned there’s no immediate relief in sight from increased food costs and a sinking loonie that have led to higher prices, and researchers suggest consumers will have to deal with more sticker shock in the year ahead. The University of Guelph’s Food Institute estimates the average Canadian household spent an additional $325 on food this year.
On top of that, consumers should expect an additional annual increase of about $345 in 2016. Since 81 per cent of all vegetables and fruit consumed in Canada are imported, they are highly vulnerable to currency fluctuations. They are pegged to increase in price by four to 4.5 per cent in the new year. “It means that essentially families will have to spend more on these two items without many options, unfortunately,” says Sylvain Charlebois, lead author of the university’s sixth annual Food Price Report. Read more here-http://bit.ly/1UfVYOe
-Faber Seeing Recession Clashes With Yellen, Likes Treasuries. Marc Faber recommends Treasuries and says the U.S. is at the start of an economic recession, clashing with Federal Reserve Chair Janet Yellen’s view that things are improving. “Ten-year U.S. Treasuries are quite attractive because of my outlook for a weakening economy,” Faber, the publisher of the Gloom, Boom & Doom Report, said in an interview with Bloomberg on Monday. “I believe that we’re already entering a recession in the United States” and U.S. stocks will fall in 2016, he said. Read more here-http://bloom.bg/1OZQGTf
-The Same Pill That Costs $1,000 in America Sells for $4 in India. Read more here-http://bloom.bg/1ToKxU9
-Stratfor has 11 chilling predictions for what the world will look like in 10 years. Earlier this year, private intelligence firm Strategic Forecasting, or Stratfor, published its Decade Forecast, in which it projects the next 10 years of global political and economic developments. While international analysts often try their hand at predicting the major events of the coming year, Stratfor believes that it’s identified the major trends of the next 10. In many ways, Stratfor thinks the world a decade from now will be more dangerous place, with US power waning and other prominent countries experiencing a period of chaos and decline. Read more here-http://read.bi/22xNQPa
-America’s ‘children in the basement’ won’t be moving out any time soon. Moving out of your parents’ place is a rite of passage that occurs as you come of age. When times are tough, it’s understandable that one may delay such a move. The global financial crisis was one of these tough periods that forced an increasing percentage of 18- to 34-year-olds to live with their parents. Poor job prospects and massive student-loan debts kept independent living off the table. Read more here-http://read.bi/1UfWg7F
-The most expensive apartment in Hong Kong just sold for $76.7 million. A luxury apartment in Hong Kong sold for a record HK$594.7 million ($76.7 million), days before Christmas, making it the most expensive flat in the city and possibly in Asia, reports said Friday. An unidentified buyer paid more than HK$103,700 per-square-foot for the 5,732 square-foot (532 square-metre) unit at the luxury 39 Conduit Road apartment tower in the southern Chinese city’s upmarket Mid-Levels residential area, The Apple Daily and The Standard reported.
The condominium, on the 46th floor with a view of the iconic Victoria Harbour and a 1,754 square-feet rooftop, had a list price of HK$646.48 million on developer Henderson Land Properties’ website. The price beats the previous record HK$470 million paid for a luxury unit which takes up the entire eighth floor of the Opus Hong Kong, a 12-storey residential building designed by Pritzker Prize-winning architect Frank Gehry, in 2012. Read more here-http://read.bi/1Tof709
-Hong Kong tycoon spends millions on diamonds for daughter at Geneva auctions. A Hong Kong billionaire tycoon paid a total of US$77 million at auctions in Geneva for two large and rare colored diamonds for his 7-year-old daughter Josephine and renamed them after her, his office said Thursday. Joseph Lau was the top bidder for the 12.03-carat “Blue Moon” diamond that sold Wednesday night for a record-setting 48.6 million Swiss francs (US$48.5 million), said a spokeswoman for Lau, who declined to give her name. Sotheby’s said the buyer promptly renamed the pricier gem “The Blue Moon of Josephine,” Lau was also the buyer of a 16.08-carat vivid pink diamond that sold for 28.7 million Swiss francs (US$28.5 million) auctioned by Christie’s the night before, she said. Read more here-http://bit.ly/1Y7B0Ec
-Sean Connery’s Diamond Sale Makes Record at Sotheby’s Auction. Sean Connery sold a diamond pendant for $4 million (CHF 4.1 million), about twice its upper estimate, setting what Sotheby’s described as a record bid for a fancy orange-pink diamond. The 15.20-carat piece was sold at the auctioneer’s magnificent jewels and noble jewels tender in Geneva this week, at $266,063 per carat, It was slated to sell for $1.2 million to $2.2 million. The former James Bond movie star also sold a single 5.18-carat pear-shaped diamond in a ring, which went for $249,300, having been estimated at $145,600 to $244,300, according to the Sotheby’s website. Read more here-http://bit.ly/1MEXSXI
-The world’s most expensive diamonds have all been sold. A collection of 65 rare pink and red diamonds from the Argyle mine in the North West of Australia has been sold in a global tender. The Argyle Pink Diamonds Tender, known as the Connoisseurs Collection weighing a total of 44.14 carats and including four what are known as fancy red diamonds, went to bidders from 11 countries. Rio Tinto, the owner of Argyle, doesn’t reveal what the tender winners paid for their diamonds.
However, pink diamonds can fetch 50 times more than the more common white diamonds. They often get $1 million a carat. Based on that the 2015 Argyle collection would have brought in more than $40 million. The most expensive pink diamond sold was the Graff Pink, a 24.78 carat fancy intense pink diamond, sold at Sotheby’s in 2010 for $US46 million. Josephine Johnson, the Argyle Pink Diamonds manager, says she’s delighted with this year’s results.
She says the 2015 Argyle pink diamonds achieved the highest average price per carat since the tender began in 1984. The five heroes of the collection were sold to notable investors, collectors and retailers based in Europe, US, China and the Middle East. The most valuable diamond was Lot Number 1, called Argyle Prima, a 1.20 carat fancy red pear-shaped diamond which went to Sciens Diamond Management. Almost the entire world supply of rare pink and red diamonds comes from Rio Tinto’s Argyle diamond mine in the east Kimberley region of Western Australia. Read more here-http://bit.ly/1P0OomF
-Greg Hunter: Bill Holter Interview, 2016 Predictions-Economic Collapse Caused by Fraud & Debt. Financial writer Bill Holter says all the talk of the so-called “recovery” and reaching “escape velocity is imminent” have been total lies. Holter explains, “We have heard the word ‘recovery’ for seven years we’ve never gotten to the expansion phase. They keep talking about ‘escape velocity,’ and we have never gotten there in seven years. Now, the Fed has raised interest rates just before Christmas. This is the first time ever the Fed has raised rates right before Christmas, and they raised rates into a weak economy where credit is already tight. The only time they have done that is 1937, and we know how that worked out.”
One of Holter’s 2016 predictions is for a market crash a big one. “Holter contends, “I think you are going to see a closure of the system. Walmart shelves will be cleared out in a couple of days. This is like a hurricane, and it will last for a while. This is not going to be something that will last a few days and be done and gone. This is going to take a fair amount of time to clean up. If you live in the cities, well, good luck. It’s going to be complete mayhem. I can’t imagine living in a city with what’s coming. It could come for a big reason or a small reason. The background behind it is there is too much debt in a fraudulent system. It’s going to collapse.” Holter’s business partner, renowned gold expert Jim Sinclair, has written a long article called “Be Prepared.”
Long articles from Mr. Sinclair are rare. Why post this now? Holter says, “Sinclair said it was ‘necessary.’ He believes it could be any day. The unwind could be any day, and once this thing begins to unwind, it will take such a short period to unwind into closure of banks, closure of ATM’s and your credit cards, that you need to be prepared ahead of time.” You can get the “Be Prepared” article here. On gold, Holter says, “You just have to ask yourself the question. If someone counterfeited a billion shares of IBM stock and sold that into the market, what would happen to the price? It would crash. That’s what they’ve done with gold. It’s the same thing. It’s fraud. They have counterfeited gold with paper.”
The bond market is full of debt that will never be paid back. It’s one of the biggest frauds of all, and Holter says, “Go back to 1995 and our debt in the U.S began to move up like a hockey stick. Somewhere in the mid to late 1990’s was the point of no return. We didn’t really have any hope of paying it back. In 2008, it was ridiculous, and at this point, it is beyond ridiculous. They can’t pay back the $19 trillion much less the $200 trillion, which is what the real number is when you include Social Security, Fannie Mae, Freddie Mac, Medicare, loan guarantees and etcetera.” In closing, Holter says, “This is going to be a complete financial collapse. You are going to see some deflation, but it’s not going to be deflation against dollars. It will be deflation against gold.” Meaning, the value of everything will devalue against gold. Watch more here-http://bit.ly/1NVQpRi
-Michael J. Kosares: Gold a safe harbor on an ocean of excess reserves. “We had initially asked to pay interest [in 2006] on reserves for technical reasons. But in 2008, we needed the authority to solve an increasingly serious problem: the risk that our emergency lending, which had the side effect of increasing bank reserves, would lead short-term interest rates to fall below our federal funds target and thereby cause us to lose control of monetary policy.
When banks have lots of reserves, they have less need to borrow from each other, which pushes down the interest rate on that borrowing the federal funds rate.” Ben Bernanke, The Courage to Act. It has been an enduring mystery to many why the enormous amount of money created by the Federal Reserve in the wake of the 2008 crisis never translated to a general price inflation. After all, as Milton Friedman lectured us, “inflation is always and everywhere a monetary phenomena.” So why didn’t the enormous amount of money created by the Fed during its quantitative easing program some $3.5 trillion added to the bank reserve credit launch double-digit price inflation, or worse? Read more here-http://bit.ly/1NSublh
-Frank Holmes: SWOT Analysis, Number of Bearish SPDR Gold Shares Options Fall. After the losses seen in gold following the Federal Reserve’s rate hike last week, Bloomberg reports that some traders closed their bearish positions on the metal before year-end on speculation that physical purchases may pick up. Further, Bloomberg notes that the put-to-call ratio on SPDR Gold Shares has reached its lowest level since 2008, perhaps indicating that investors who were betting on further declines in gold prices are losing enthusiasm for this trade. Hedge funds reduced bets for a third week that the dollar would advance, according to Bloomberg. The currency is headed for its biggest monthly decline since April. According to Shane Oliver of AMP Capital Investors: “The bet is over for the U.S. dollar.” Read more here-http://bit.ly/1ZCz4UV
-Jim Sinclair: Getting Prepared For What Lies Ahead. Today, I would like to share with you an outline and some suggestions to consider about general emergency preparedness. We have written about getting out of the system (GOTS). Getting out of the system completely isn’t possible for most people. Getting out of the system, (and to what degree) and having precious metals isn’t going to be enough to keep you safe in an emergency situation. Being prepared for an emergency is something we all need to consider. Preparedness can be for any emergency. Preparedness can be for any crisis. It can be for a natural disaster like an earthquake in California, or a hurricane on the Eastern US, a power outage, a credit or currency crisis, or a terrorist attack, etc.
The disruption of services (utilities, transportation, commerce, etc.) we depend on can create societal conditions in which we may need to depend on ourselves and our personal resources. Our wellbeing and the wellbeing of our loved ones may depend on our preparedness in the times to come. Precious metals alone won’t be enough to keep us safe from harm. The main thing about preparedness is that regardless of the emergency, for the most part, preparedness is the basically the same.
The second thing about preparedness is that, it is better to be prepared and not need it, than to need it and not be prepared. The third thing about preparedness is that it will do no harm. Being prepared for any emergency is like insurance. You hope that you never need it, yet you acquire insurance because you prefer the protection and peace of mind it offers. In this, you prepare for the worst, but hope for the best. You get the insurance, but hope you never need it. If you do need it, it can be priceless. In hearing your concerns, we have prepared an outline of things to consider, and some suggestions to assist you in being prepared for disruptions in world conditions the future may bring. Read more here-http://bit.ly/1OlsnTf
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
-World Silver Council to set silver standard in India soon. The launch of WSC would bring a major relief for silver consumers as it would set a purity standard soon. Read more here-http://bit.ly/1mhohRQ
-India’s silver import to set a new record this year. Consumers seen shifting rapidly from imitation jewellery, see resale value in silver ornaments and other articles. Read more here-http://bit.ly/1OxJXWn
-David Morgan: There is no run like a gold run except for a silver run. Listen and read more here-http://bit.ly/1JgA5Op
-It’s sort of sick, but I tend to worry more on price rallies when significant commercial shorting appears to be taking place, despite the higher prices; than when we get selloffs, like [we did on Monday], in which it is clear that the commercials are buying. I certainly welcome higher prices, but unless those higher prices come without significant new commercial shorting, they are unlikely to last. A day like [Monday] actually increases the odds that the next rally, whenever it starts, could be the big one. It doesn’t feel that way when you tally up the daily loss in the value of one’s holdings, but one day soon, all this COMEX position is going to be resolved in a way few can contemplate today. Silver analyst Ted Butler Dec 28 via Ed Steer edsteergoldandsilver.com subscribe here-http://bit.ly/1fdAByN
-In COMEX gold futures, the total commercial net short position increased by 14,000 contracts to 22,300 contracts. This [is] still a remarkably low (bullish) historical reading, eclipsed only in very recent weeks by relatively small amounts. By commercial category, it was mostly a big 4 and raptors affair. The 4 largest shorts added 5,300 new shorts and the raptors (the smaller commercials away from the big 8) sold 10,800 long contracts. The big 5 thru 8 bought back 2,100 shorts (most likely a managed money short or two).
The managed money traders in gold bought back 10,795 short contracts and what came most close to my prediction (there was a decent price pop during the reporting week). The surprise was a further 3,638 contracts of managed money long liquidation, which put that long position to a historic new low just under 80,000 contracts. If that long liquidation is not due to year end index fund rebalancing, then I’m left with no plausible explanation. Again, this managed money long liquidation is not bearish in any way and is in complete conformity with other indications of rotten investment sentiment which, perversely, is very bullish.
In COMEX silver futures, the commercials increased their total net short position by 7,600 contracts, to 31,200 contracts, almost the exact opposite of what occurred in the prior weekly COT report. By commercial category, the big 4 added nearly 2,300 new shorts and the raptors sold out 5,200 longs, meaning that the big 5 thru 8 added a marginal 100 contracts short. I would peg JPMorgan’s short position to have increased by 2,000 contracts to 14,000 contracts this week, but would also include that additional shorting was probably bought back today.
Short covering of 8,375 contracts by the managed money technical fund silver shorts provided all the buying to which the commercials sold into. Unlike the case in gold, the managed money longs in silver sold only 357 contracts and the core non-technical fund long position remains above 50,000 contracts. One interesting observation for which I don’t have a strong explanation for yet, is that while the gold managed money longs are at six year lows, the silver managed money longs are still close to all-time highs. Silver analyst Ted Butler Dec 28 via Ed Steer edsteergoldandsilver.com subscribe here-http://bit.ly/1fdAByN
-I’m still amazed that the record sales of Silver Eagles this year from the US Mint (47 million) and for the four prior years is still largely assumed by many to be the result of strong retail investment demand. That assumption is flat-out wrong and gives real meaning to the word assume (making an ass out of u and me). This year and the four years before that have featured miserable retail demand with only a few pockets of demand surges.
I don’t have any reason to misrepresent retail demand and in more ways than not would prefer that retail demand was as strong as many conclude. But that’s not the case, nor has it been and for the life of me I don’t understand how so many commentators are missing this. To be sure, there can be no doubt that the U.S. Mint did produce and sell more than 207 million Silver Eagles over the last five years the only question is who the heck bought all 207 million oz?
Admittedly, it took me a while to figure out this conundrum record sales in the face of punk retail demand but it eventually became clear that the only possible (forget plausible) explanation was the presence of a big buyer. And if JPMorgan was not the big buyer (also of coins from the Canadian Mint), then there are two big crooks in silver and not just one. I would remind you that JPMorgan turns up as the biggest factor in silver (and, increasingly, in gold) in every way possible and it would be unnatural and unusual if the bank wasn’t the big buyer in Silver Eagles. Silver analyst Ted Butler Dec 26 via Ed Steer edsteergoldandsilver.com subscribe here-http://bit.ly/1fdAByN
-In the case of gold, the standout feature this month has to be the lack of deliveries early on and the continuing slow pace of deliveries. Therefore, the most plausible explanation is that the shorts in December gold are more reluctant to part with metal and that the longs (JPM) are more interested in getting delivery. Combined with a continuing tightening of the inter-month spread differentials, gold looks tight on a physical basis, just as silver does, but not to the same extent of tightness.
On Thursday, metal holdings in the big silver ETF, SLV, fell by 1.5 million oz, bringing the total reduction in silver holdings in the trust to 4.7 million oz over the past two weeks. This is quite counterintuitive, since silver prices have been steady to somewhat higher over this time, with the biggest volume days being on up days and it would be most reasonable to expect metal holdings to be steady or even higher. Remember, the general rule of thumb is for metal to be withdrawn on obvious investor liquidation which occurs on pronounced price declines; and for metal to be deposited (or at least not be removed) on the net buying that typifies steady to increasing prices.
So if plain vanilla investor liquidation doesn’t appear to be behind the withdrawal of silver from SLV, then what else could it be? The two most plausible explanations I can come up with is that buyers of shares of SLV immediately converted newly purchased shares into metal to avoid SEC reporting requirements or holders of shares converted shares into metal because the metal was needed more urgently elsewhere. These are certainly not new ideas on my part, but that doesn’t make them less plausible. It also points to tightness in physical silver supplies, along with the other signs of tightness I’ve reviewed to this point. Silver analyst Ted Butler Dec 26 via Ed Steer edsteergoldandsilver.com subscribe here-http://bit.ly/1fdAByN
-The whole issue is very much black and white. If JPMorgan and the other big COMEX commercials add notably and measurably to existing silver short positions, the coming rally will most likely be of the type of the increasingly disappointing rallies of the past two years $1 to $2 or so ($100+ in gold). I suppose such a rally will be greeted in some circles as an achievement of some note; but you’ll forgive me if I don’t high-five in advance. Moreover, if the next rally does involve heavy new short selling by JPMorgan and other big commercial shorts, most likely it won’t be long before we must confront the next manipulative sell-off.
But if JPMorgan doesn’t add aggressively to short positions in COMEX silver on the coming certain price rally, then that rally will likely be one for the ages. Every manipulation needs a manipulator-in-charge to maintain the fraudulent price scheme and every manipulation in history ends when the chief manipulator pulls back from rigging prices. Therefore, should JPMorgan and other big COMEX commercials refrain from adding new short positions on the coming rally, the extent of the price rally will shock many. Just to throw out numbers, if JPMorgan doesn’t squash the next rally like it has squashed every silver rally over the past seven years, we could be over $20 or $30 in a relative flash and onward and upward to much higher silver prices.
Admittedly, JPMorgan has added to its short position on every silver rally over the past seven years, so why would I expect it not to do so once again? A good number of things have changed over that time period, not the least of which has been the success of the bank in accumulating a truly massive amount of actual silver over the past 4 years, some 400 million oz. Therefore, JPMorgan has never been in a better position to let silver prices explode than currently. And even if it is short a relatively small 12,000 to 13,000 contracts now, that’s a 60 to 65 million oz paper short position against a 400 million oz physical long position meaning a net long position of 340 million oz. Silver analyst Ted Butler Dec 23 via Ed Steer edsteergoldandsilver.com subscribe here-http://bit.ly/1fdAByN