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Goldman Explains ‘The Road To Recovery’ In 1 Simple Chart / by Tyler Durden on 10/22/2014 19:03

In Goldman Sachs’ view, there are three very different near-term paths that economies and markets can now follow, and that imply very different outcomes for financial markets:


Barron’s Big Money Poll: More of the Same / Pater Tenebrarum / October 22, 2014 

A Fount of Originality and Contrarian Thinking …

Just pulling your leg, dear reader. The Barron’s big money poll contains about as much originality and contrarian thinking as you can find on CNBC…slightly less, actually.

So what are the big money’s big ideas this time around? They continue exhibit a huge bearish consensus on bonds, which we have in the past flagged as a big contrary indicator (you will notice that we also pointed out their bearish consensus on the Nikkei in this past article – the Nikkei promptly had an explosive rally right after the survey was published). Otherwise they are still “investing by ruler” – in other words, they are simply extrapolating what has happened in the recent past into the future, which is precisely what most Wall Street strategists and most mainstream economists do as well. Not one of these groups will ever identify a turning point in a timely manner.

The biggest bullish consensus is on US large cap stocks with 84% bulls, the biggest bearish consensus (certain to be wrong for the umpteenth year in a row) is on US treasury bonds with 91% bears (!).

Gold aficionados will be pleased to learn that there is a 76% bearish consensus on gold, which provides a nice contrast to the 69% bullish consensus that pertained in October of 2012, just as gold was getting ready to tank big.


Top bullion consumer China works on first gold forwards, options / By A. Ananthalakshmi and Fayen Wong, Reuters / Tuesday, October 21, 2014

The Shanghai Gold Exchange is working on plans for China’s first forwards and options in gold, sources say, potentially putting China ahead in the race to set an Asian pricing benchmark that might eventually rival the London gold fix.

China, which overtook India last year to become the world’s biggest consumer of gold, bans trading in commodity options and forwards at present to limit speculation.

But Beijing is setting the stage for the launch of such derivatives as it opens up its markets, and gold could be among the first commodities on the list, although it remains unclear when trading might start. …

… For the remainder of the report:…


Miles Franklin Q & A: Demand for Physical Silver Is Very Strong / Miles Franklin, Ltd / October 22nd, 2014

Q: Hi! I have a question for your Q&A day on Wednesday.  In the 1933 gold confiscation, did FDR gold confiscate silver as well – and if so, what were the limits allowed if any for an American citizen?

David Schectman’s Answer:

The answer is no.

But looking ahead, could the government take your silver?  They could – they can do whatever they want to.  The only scenario that makes sense for that to happen would be WW3.  The government sold off all of our silver many years ago and we would certainly need a LOT of silver if we were dragged into another World War.  The problem would be logistics.  Silver is bulky and heavy.  How would the average person deliver the silver to a government facility?  It could be done but it is highly unlikely and it would be a nightmare to administrate.  A bag of junk silver weighs around 55 pounds.  A mint box of American Eagles weighs close to 40 pounds.  If you owned several bags and/or several mint boxes you would have to haul 200-300 pounds of silver down to UPS or USPS.  The shipping and insurance cost would be substantial.  I’m not sure many people would comply.

I also did a little research on Google for you.  Here are some of the highlights I came up with that shed light on your question.

Will the Government Come After My Silver?

This is a subject rarely addressed. The government didn’t confiscate silver in 1933, only gold. But silver was money at that time too. In fact, the bankers had already succeeded in demonetizing silver because they didn’t like the fact that those who had bulk silver could take it down to the mint and have it coined into standard silver dollars to spend. The bankers weren’t in control of this monetary exchange, and they didn’t like it. Gold became the monetary unit most used with the further discoveries in Alaska, but silver still remained money.

After gold was confiscated in 1933, here is what Roosevelt had to say about silver in a message to congress, Jan. 15, 1934;

“The other principal precious metal— silver—has also been used from time immemorial as a metallic base for currencies as well as for actual currency itself. It is used as such by probably half the population of the world. It constitutes a very important part of our own monetary structure. It is such a crucial factor in much of the world’s international trade that it cannot be neglected.”


Is A Demand Shock In The Gold Market Coming? / by Michael Lombardi from ProfitConfidential / October 22, 2014

On November 30, Switzerland’s citizens will cast a very critical vote.

Through a referendum, they will vote for or against the Swiss National Bank increasing its gold bullion reserves to 20%, the central bank halting the selling of gold, and the storing of gold bullion in the country. (Source: Kitco News, September 30, 2014.)

If the results are in favor of the referendum, it will mean Switzerland’s central bank will be forced to buy a significant amount of gold bullion.

According to the most recent data from the World Gold Council, Switzerland has 1,040 tonnes of gold bullion in its reserves, equal to only 7.8% of its total reserves. (Source: “World Official Gold Holdings,” World Gold Council web site, last accessed October 16, 2014.) To bring its gold bullion holdings to 20% of total reserves, the central bank of Switzerland will have to buy 1,600 more tonnes of gold, or about 60% of all global mine output this year. Will the gold market be able to handle this kind of demand shock? I highly doubt it.

And if the central bank of Switzerland stops selling gold, a significant amount of gold will come off the market.


Thoughts from the Frontline: The Flat Debt Society / by John Mauldin / OCTOBER 22, 2014

International Monetary Fund chief Christine Lagarde says the global economy is facing “the risk of a new mediocre, where growth is low and uneven.”…  Lagarde said Europe’s 18-nation bloc that uses the euro currency – collectively the world’s biggest economy – is facing the “not insignificant” risk of falling back into a recession. (VOA News)

Since at least the beginning of 2006, the most asked question I get after a speech is “Do you think we will have inflation or deflation?” In an attempt at humor, my answer has been “Yes.” I go on to try to explain that we are in a deflationary environment, but eventually we will see inflation. When QE1 was announced, there were many pundits (none of the Keynesian variety) who immediately said the risk was for significant inflation, and there were even those (like Peter Schiff) who talked of hyperinflation and the demise of the dollar. Interest rates would rise, and US government bonds would collapse.

My response at the time was that the Federal Reserve would print more money than any of us could possibly imagine (and who imagined $3+ trillion?), and we would not see any inflation. My reasoning was that we were in a deleveraging world where the velocity of money was clearly falling. I explained – once again – the relationship between inflation and the velocity of money.

Beginning with last week’s letter, “Sea Change,” my answer to that question for the foreseeable future will be simply, “Deflation.” In Endgame Jonathan Tepper and I described the economic environment of a deleveraging world, especially that of Europe. InCode Red we described the coming world of currency wars, with Japan having fired the first shot. Sadly, we continue to see the themes of those books play out in the real world.


Mapping China’s Bursting Real Estate Bubble / by Tyler Durden on 10/22/2014 17:55

With global growth concerns on the rise, whether a bust in the Chinese housing sector could threaten the economic activity and financial stability of the world’s largest contributor to growth is top of mind for Goldman Sachs. As Michael Pettis warns, “this story only has a few possible endings, all of which imply a significant reduction in economic growth as debt problems are addressed.” The following 3 charts suggest Pettis is right…



Chris Wattie/Reuters /  By Arthur Bright, Staff writer, Via Christian Science Monitor / 22nd October 2014

Didn’t the gunmen who perpetrated this crime know it was illegal to own and use those guns in Canada? What’s the world coming to when criminals don’t obey strict gun laws? Wouldn’t it have been crazy if an armed Canadian citizen had been there and shot the criminal? That’s crazy talk. Canada will just pass some stricter anti-terrorism laws and the government will protect you. Eh?

Ottawa parliament shooting: What are Canada’s gun laws?

An unidentified gunman has injured a soldier in Ottawa, Ontario, before running into Parliament Hall where more shots were fired.

The Canadian Broadcast Corporation reports that one of the shooters was a man with dark hair and armed with a long gun. According to witnesses, he fired four shots injuring a soldier standing guard at the Canadian War Memorial before running into the Parliament building. Televised reports say that dozens of shots were fired inside the building, though it is unclear who was firing or how many gunmen there were.

The parliament buildings are currently on lockdown. Canadian Prime Minister Stephen Harper and other top government officials are reportedly safe.

 But for those in the US, where the debate over guns continues to rage, the incident raises the question: Just what are Canada‘s gun laws?


Secret Service pressured local cops to fake a warrant and commit illegal search / by Site Staff in News / October 22, 2014

NASHVILLE, TN — The Nashville police chief has blown the whistle about how U.S. Secret Service agents pressured his officers to fake a warrant and help them commit a warrantless search of a man’s home.

Nashville Police Chief Steve Anderson recently came forth with details about his attempt to report the corrupt behavior, which was subsequently brushed aside by Secret Service officials.

The incident occurred on January 19, 2013, when two Secret Service agents showed up at a Nashville residence in an attempt to interrogate the homeowner about a suspicious Facebook posting. When the homeowner refused to speak with the agents, the agents placed a “frantic phone call” the local police dispatcher and summoned a police response.

The Secret Service agents had told the dispatcher that the resident “possibly had a gun in his hand,” even though the agents couldn’t provide any further details, not even the name of the person they were attempting to investigate.


Canada Shooter Idenfitied As Canadian National Michael Abdul Zehaf Bibeau / by Tyler Durden on 10/22/2014 17:27

Moments ago CBS News reported, citing Law enforcement and U.S. Government sources, that the shooter in today’s tragic Ottawa incident was Michael Abdul Zehaf Bibeau, born in Canada in 1982. One source says he sometime dropped the name Michael and went by Abdul Zehaf Bibeau. At other times he apparently dropped the Abdul. In a report from the Muslim Issue, Zehaf-Bibeau is said to be reportedly of Algerian descent.

Zehaf-Bibeau is the alleged shooter who killed soldier at the national War Memorial before entering the Centre Block and firing off more shots. Epoch Times reporter Matthew Little says that the shooter got as far as the library before Sergeant-At-Arms shot him dead.

Earlier, a Canadian parliament official described the gunman to BBC as looking “Arabian” with “long hair and a small beard.”

According to Montreal reporter Domenic Fazioli, Bibeau was arrested five times in the city. He has three possession charges dating back to 2004 (marijuana and PCP). His two other arrests were for parole violations.

Witnesses said they saw Bibeau wearing a black coat with blue jeans, reports CBC. The same report says gun used in the attack was a double-barrel shotgun. Alberta Labor Minister Ric McIver told theOttawa Sun that Bibeau was driving a “brown Toyota Corolla with no license plate.” He added that the car “roared up the street and screeched to a halt.”


Gold Seeker Closing Report: Gold and Silver Fall With Stocks / By Chris Mullen / 22 October 2014

The Metals:

Gold edged up to $1249.35 in Asia before it dropped back to $1241.45 at about 9AM EST and then bounced back higher into midday, but it then fell back off again in the last couple of hours of trade and ended with a loss of 0.54%.  Silver slipped to as low as $17.122 and ended with a loss of 2.06%.

Euro gold remained at about €982, platinum lost $12 to $1262, and copper fell a couple of cents to about $3.01.

Gold and silver equities fell throughout most of trade and ended with about 3% losses.


There Is A Plunge Protection Team—–It’s Called The FOMC / By Howard R. Gold at MarketWatch / October 22, 2014

Things were looking grim last week, especially on Wednesday, when the Dow Jones Industrial Average was at one point down by 460.

The CBOE VIX indicator soared to the mid-20s for the first time in two years. Fear was palpable as investors had a classic panic attack.

But then, like the cavalry in those classic John Ford westerns, the Federal Reserve rode to the rescue.

James Bullard, president of the Federal Reserve Bank of St. Louis, said inflation far below its 2% target could lead the Fed to “go on pause on the taper … and wait until we see how the data shakes out into December.” The Fed is on track to finish “tapering” its extraordinary bond buying, or quantitative easing (QE3), at next week’s meeting.

‘They are afraid of the [stock] market going down and they will be blamed.’

James Bianco, president of Bianco Research 

But, he added: “If the market is right and it’s portending something more serious for the U.S. economy, then the committee would have an option of ramping up QE [in December].”

Boston Fed President Eric Rosengren later said QE3 should end next week, but he could “easily imagine” not raising rates until 2016.

Translation: We’ve got your back. Don’t fight the Fed.

Investors got the message. The S&P 500 Index advanced for three straight days and the VIX fell under 20 again.

Bullard was only the latest Fed official whose words or actions “just happened” to boost the stock market when it was down.

“They are definitely in the market-manipulation business, and nothing has changed,” said James Bianco, president of Bianco Research LLC in Chicago and a longtime student, and critic, of the Fed.

Called the “Greenspan/Bernanke put,” the Fed’s willingness to jump in when stocks fall dates back a quarter-century.

“The put option is back. If the market sells off enough, they will give us QE4,” Bianco told me.

Conspiracy theorists have pinned it on a government “Plunge Protection Team” that wants to keep stocks from crashing at all costs.


Is This Why Stocks Closed Not “Off The Lows”? / by Tyler Durden on 10/22/2014 16:53

1. October 16: Buyers beware, the bear market has begun“:

The selloff in global markets is set to continue as a bear market takes hold “for a long period of time,” according to widely followed investor Dennis Gartman, who warned investors not to go long on stocks.

This is the start of a bear market,” Gartman, the founder of the closely watched Gartman Letter, told CNBC Europe’s “Squawk Box” on Thursday. “You stay in cash and you stay in short term bonds and you don’t move out, this is a very difficult period of time and I’m afraid – and

I don’t like to think about it – but this might be the very beginnings of a bear market that could last some period of time,” he warned.


40% of Eurozone Banks Are In Bad Shape

David Myers Theatre on 9th Street. Washington, DC July 1939 / by Raúl Ilargi Meijer / October 22, 2014

Reuters has had a busy day today reporting on Europe’s banks and the stress tests the European Banking Authority is set to unveil on Sunday. And which put the EU and ECB on a see-saw like balancing act between credibility and panic.

The news bureau started off in the early morning citing a report by Spanish news agency Efe, which said 11 banks would fail the tests:

11 Banks To Fail European Stress Tests

At least 11 banks from six European countries are set to fail a region-wide financial health check this weekend, Spanish news agency Efe reported, citing several unidentified financial sources. The results of the stress tests on 130 banks by the European Central Bank are due to be unveiled on Sunday.

Four banks in Greece, three Italian lenders and two Austrian ones are among those that preliminary data showed had failed the tests, Efe said. It gave no details of how much capital the banks would have to raise and said this could yet change as numbers could be revised at the last minute. The euro fell on the report. Efe also identified a Cypriot bank and possibly one from Belgium and one from Portugal.

That’s right, the journalist lists 12 banks there, not 11. But anyway, that text is, miraculously, not available anymore, since at the same URL you now get the following article. Jean-Claude ‘When it gets serious, you lie’ Juncker’s first act in his first day in office as European Commission head may well have been to give Reuters a call. Make that a shout.


Dear Mr. President: Why is U.S. ‘Humanitarian Aid’ Going Straight to ISIS? / OCTOBER 22, 2014

21st Century Wire says…

The US State Department, led by the fumbling John Kerry, and flippant Jen Psaki and the even more flippant CIA sorority operative, Marie Harf, all seem to be Stuck on Stupidwhen it comes to Syria.

The tired old lie – that U.S. foreign assistance is spread around the world in the name of ‘peace and good will’, has finally been delivered the knock-out blow it needed to be put out of its banal misery this week…

SORORITY BRAIN TRUST: Lack-luster spin merchants Psaki and Harf fail to cover for droll Kerry’s gross incompetence.

A truly glorious effort byThe Do Goodersand NGO syndicates of Washington DC and Europe, making sure Jihadi lunatic murders of ISIS warm blankets and hot dinners at night.

According to this latest revelation out of Syria (see full article below), “Not only are foodstuffs, medical supplies – even clinics – going to ISIS, the distribution networks are paying ISIS ‘taxes’ and putting ISIS people on their payrolls.”


The Complete Robin Hood Conference Summary / by Tyler Durden on 10/22/2014 14:21

From Tepper’s “Short The Euro,” call (which he hopes does better than his “bond bull is over” call) toIcahn’s “HY credit is in a bubble… and I am short” warning, The 2-day Robin Hood conference in NYC had something for everyone. Paul Tudor Jones thinks US equities will outperform the rest of the world this year but “the piper will be paid one day,” and Larry Fink says “equities are health” after last week’s correction… and Whitney Tilson is short Lumber Liquidators (trade accordingly).

Day 1:

Greenlight’s Einhorn: reiterates long SunEdison, says long TerraForm; says he owns warrants on Greek banks Alpha Bank, Piraeus Bank SA; betting on declines in French sovereign debt

Axel Capital’s Nikolayevsky: recommends long Ezcorp (whose products include pawn and payday loans)

Kynikos’ Chanos: recommends shorting Petrobras (“The economics are just so poor at Petrobras, that we
really have called it a scheme, not a stock,”)

Tudor Jones: Paul Tudor Jones Said to See U.S. Stocks Beating Globe in 2014, Bubble in global credit, Rally in USD is over, Short JPY – “The piper will be paid one day.” Jones has been a longtime critic of the U.S. Federal Reserve’s policy of buying bonds. “If we maintain the status quo, what will be the probable outcome a decade from now? Look no further than Greece for the answer,” Jones told investors in 2010. He reiterated the reference to Greece yesterday by saying the U.S. is headed toward that country’s level of debt within the next 15 years.


The inevitability of QE / By Clif Droke, Gold Strategies Review / 22 October 2014

A swan dive in commodity prices followed by the latest stock market correction has investors talking about the “D word” once again.  References to deflation abound in the news while economists seriously discuss the possibility of a global economic recession.  What, they ask, will it take to arrest the slowdown in the euro zone and China and prevent its coming to U.S. shores?  Why central bank intervention, of course!

One of the dominant themes of 2014 has been the unwinding of the U.S. Federal Reserve’s QE stimulus measure.  After purchasing as much as $85 billion worth of long-term Treasuries and mortgage-backed securities per month in 2013, the Fed was scheduled to end asset purchases this month.  With the revival of deflation fears, however, there has been some talk among Fed members that perhaps it would be wise to delay the end of QE.  Considering that the QE tapering process has clearly had a negative impact on stocks and commodities, as well as the real estate market, the suggestion to extend QE further is being seriously considered.

While there have been many negative headline events this month that have been blamed on the September-October stock market decline – ranging from overseas economic concerns to unrest in Hong Kong and Ukraine to Ebola – the real reason for investors’ worries can be boiled down to one major concern, namely liquidity.  (Remember the old Wall Street mantra: when it comes to the stock market it’s all about “liquidity, liquidity, liquidity”).

The selling panic started just as the Fed was putting the final touches on phasing out QE.  While economists were convinced the market would be able to stand on its own two feet without the benefit of QE, investors were far less certain.  Adding to the concerns of U.S. investors were recent actions (or inactions) by the heads of Europe’s and China’s central banks which suggested that both regions weren’t committed to pursuing further monetary stimulus.  Those concerns have recently been allayed by statements by central bank chiefs in the last couple of days.

Last week, James Bullard, head of the St. Louis Fed, said the Federal Reserve should continue with asset purchases and thus extend QE until the U.S. economy shows more strength.  “We can go on pause on the taper at this juncture and wait until we see how the data shakes out into December,” Bullard told Bloomberg Television.  “Delaying the taper is something we could do right now that could buy us a little time.”

Not everyone at the Fed agrees with Bullard, however.  Boston Fed President Eric Rosengren suggested that when the Fed meets for its Oct. 28-29 policy meeting it likely will maintain its original intention of ending QE at that time.  “The [QE3] program was really designed that once we made substantial progress on the unemployment rate and labor markets more generally that that program would end.  If it looks like we’re not going to get that kind of progress now and going forward then we’d have to reconsider it, but I would be surprised if in the next two weeks we get enough data to make us change our mind on that,” he told CNBC.


Saxo Bank CIO Jakobsen Predicts Another “Shock Drop” in Markets; Addicted to Cheap Money / Mike “Mish” Shedlock / October 22, 2014

Inquiring minds are tuned into the Saxo Bank’s 4th Trading Debate on Volatility and Performance.

Another “Shock Drop” in Markets

Saxo Bank CIO Steen Jakobsen says Another ‘Shock Drop’ is Coming and it’s Coming Soon

Steen takes the view that central bank policy is creating a ‘fantasy land’ for investors and he points out that the recent ‘day dive’ in markets was a closer reflection of reality.

Steen outlines his suggestions for trading ahead of another dip in mid November with targets for the S&P 500 around 1810 and the Dax at 8000 – 7800.

China Replicates West’s Mistakes Says Trading Panel

Martin O’Rourke, Managing Editor of Saxo’s TradingFloor.Com says China ‘Replicates’ West’s Mistakes


If You Like Your Broken Markets… Treasury Futures Edition / by Tyler Durden on 10/22/2014 15:02

“If you like your broken markets,” it would appear you can keep them… but this time in bond futures. June 2015 30Y Futures prices are surging today (up a stunningly fat-finger-esque 7.4% (or 10 points)). This, however, is being traded… there is volume being exchanged… and at 151-19/32, it implies 30Y Bond yields will be below 2.4% by the middle of next year (from 2.99% today).

30Y Futs (June 2015) are up over 10 points today…


What Could You Buy With $100 Worth of Silver or Gold if You Invested 40 Years Ago? / via Money Metals Exchange / 22nd October 2014

As the purchasing power of the U.S. dollar decreases by the year, investors are turning to precious metals. The public has not yet figured out that the dollar’s devaluation is ongoing and that holding physical precious metals rather than cash is an effective way of protecting their purchasing power over time. Grasping the concept of dollar devaluation is difficult for many. One of the most effective methods used to illuminate this concept is through illustrations. We at Money Metals Exchange decided to use a $100 gold/silver investment from 1971 and convert the value into its worth today.

Presented by: Money Metals Exchange