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Could Apple Buy a Third of the World’s Gold? / By Frank Holmes / 2 March 2015

Is there anything Apple can’t do?

First it revolutionized the personal computing business. Then, with the launch of the iPod in 2001, it forced the music industry to change its tune. Against initial market reservations, the company succeeded at making Star Trek-like tablets hip when it released the iPad in 2010. And in Q1 2015, a record 75 million units of its now-ubiquitous iPhone were sold around the globe. The smartphone’s operating system, iOS, currently controls a jaw-dropping 89-percent share of all systems worldwide, pushing the second-place OS, Google’s Android, down to 11 percent from 30 percent just a year ago.

As you might already know, the company that Steve Jobs built—which we own in our All American Equity Fund (GBTFX) and Holmes Macro Trends Fund (MEGAX)—is history’s largest by net capitalization. In its last quarterly report, Apple posted a record $75 billion in revenue and is now sitting pretty on a mind-boggling $180 billion in cash. Many analysts believe the company will reach a jaw-dropping $1 trillion in market cap.

So what’s Apple’s next trick?

How about moving the world’s gold market?


This April, Apple will be venturing into the latest wearable gadget market, the smartwatch, joining competitors such as Samsung, Garmin and Sony. All of the models in Apple’s stable of watches look sleek and beautifully designed—just what you’d expect from Apple—and will no doubt be capable of performing all sorts of high-tech functions such as receiving text messages, monitoring the wearer’s vitals and, of course, telling time.

But the real story here is that the company’s high-end luxury model, referred to simply as the Apple Watch Edition, will come encased in 18-karat gold.

What should make this news even more exciting to gold investors is that the company expects to produce 1 million units of this particular model per month in the second quarter of 2015 alone, according to the Wall Street Journal.

That’s a lot of gold, if true. It also proves that the Love Trade is alive and well. Apple chose to use gold in its most expensive new model because the metal is revered for its beauty and rarity.

To produce such a great quantity of units, how much of the yellow metal might be needed?


Patriot News Hour Podcast

MONDAY, MARCH 02, 2015


Silver massive undervaluation based on Mint ratio / Dave in Denver / March 3, 2015 at 12:25

Gold’s relationship with silver and the stock market seems to have changed.

The Mint ratio is the gold price divided by the silver price. Assuming supply stays reasonably stable, the Mint in recent times has tended to rise when equities fall.

When the S&P 500 hit its post-dotcom bubble low in 2003, the Mint breached 80. Just before Wall Street’s credit-crunch trough in early 2009 the Mint brushed 90.

The inverse correlation is explained by investors lowering the price of silver relative to gold as the tougher economic times hurting stocks are seen reducing demand for the grey metal. Gold has hardly any industrial uses. But since mid 2011, the Mint and the S&P 500 have rallied in tandem.


A Complete Preview Of Q€ — And Why It Will Fail / by Tyler Durden / 03/03/2015 09:14 -0500

To be sure, we’ve written quite a bit lately about the ECB’s upcoming plunge into the world of 13-figure debt monetization (or as we call it, Draghi’s Waterloo), and while we hate to beat a dead horse, the sheer lunacy of a bond buying program that is only constrained by the fact that there simply aren’t enough bonds to buy, cannot possibly be overstated.

Among the program’s many inherent absurdities are the glaring disparity between the size of the program and the amount of net euro fixed income issuance and the more nuanced fact that the effects of previous ECB easing efforts virtually ensure that Q€ cannot succeed. On the latter point, even though negative deposit rates and miniscule yields limit banks’ options for what they can do with the proceeds from any EGBs they’re willing to sell to the ECB, they could of course choose to do the unthinkable and actually make loans. ECB chief economist Peter Praet is pretty confident banks will be forced to do just that if they want to maintain margins (which have ironically been crushed by the same type of policies that the ECB is set to roll out):

“…as expected returns on securities will be compressed, maintaining net interest income will require banks to shift their portfolios away from securities and towards loans to firms and households.”


Bondholders “Bailed In” In Austria – EU Bondholders Today, U.S. Depositors Tomorrow? / By Mark O’Byrne / March 3, 2015

- Auditors find €7.6 billion hole in Austria’s “bad bank”, Heta Asset Resolution AG

- Austria’s government says it will not give Heta “a single euro”

- Emergency legislation passed last month means bondholders to be bailed in

- Risk of contagion high as other banks may hold Heta bonds

- “Bail-in is now the rule” – EU Finance Minister Noonan

- Austrian bondholders today … international depositors tomorrow …


There are signs that the debt induced banking-crisis which rocked the global economy in 2008 – only to be postponed with vast infusions of new unpayable debt courtesy of the taxpayer – may be set to resume.

Bondholders are feeling the painful impact of the EU’s new bank resolution regime and bank bail-ins for the first time after the Austrian government said it would pour no more money into its ‘bad bank’, triggering a fall of nearly 30 per cent in the value of some bonds.


Congressman Urges Protection for Power Grid: EMP Attack “Could Bring Our Civilization to a Cold, Dark Halt” / Mac Slavo / March 3rd, 2015

When it comes to an EMP attack, the question remains “when” not “if” the SHTF. Few other scenarios hold as much potential for disaster and disruption to the lives of everyone in society. At a moment’s notice, 300 million Americans could be made instantly desperate – and even likely to die in the aftermath. A single event could easily be enough to take down the power grid and render inoperable all the computers and electronic tools that individuals, businesses, banks and governments all rely upon.

Arizona Congressman Trent Franks recently reintroduced a bill intended to provide better security for critical infrastructure, with particular emphasis on the threat posed to the power grid by an EMP – which Rep. Franks points out could occur either naturally from a solar flare or by way of a targeted man-made weapon.

In reintroducing the bill this week, Franks said, “The Department of Homeland Security has the specific responsibility to secure the key resources and critical infrastructure in the United States, to include power production, generation and distribution systems. Yet thirteen years after this job description was enacted, our nation’s most critical infrastructure — and the systems that more than 300 Million Americans depend upon every day for basic activities — are still vulnerable to large scale blackouts.

“Anyone who understands how critical our power grid has become in modern America to feeding our families or keeping our children warm will understand why this act is so crucially important. The Critical Infrastructure Protection Act will enhance DHS threat assessments for geomagnetic disturbances and electromagnetic pulse blackouts which will enable practical steps to protect the vital electric grid that serves America….”


“What’s Going On” – Traders Stumped As HFTs Frontrun Last Night’s Australia “Surprise” Rate Decision / by Tyler Durden / 03/03/2015 08:46 -0500

Yesterday at 10:30pm eastern, or alternatively today at 2:30pm local time, Australia’s central bank unexpectedly did not cut its key interest rate, keeping it at 2.25% even as the majority of economists had predicted a rate cut. However, not everyone was surprised. Just a minute before the official announcement at bottom of the hour sharp, the AUD surged by 0.6%, rising from 0.7774 to 0.7822, suggesting that at least one algo and likely more, had advance knowledge of the unchanged decision, as shown in the  chart below.

As BBG further reports: “The Australian dollar was curiously bid going into the
today’s announcement, having traded as high as 78.23 cents,”
Robert Rennie, head of currency and commodity strategy in Sydney
at Westpac Banking Corp., wrote in a note to clients.


News Stream Improves, ECB Continues to Weigh on Euro / by Marc Chandler / March 3, 2015

The Reserve Bank of Australia defied expectations and left rates on hold earlier today. This has lifted the Australian dollar back to yesterday’s highs near $0.7845 were it stalled. The derivatives market had discounted nearly a 2/3 chance of a cut today. The RBA’s statement indicates the door is open to further easing, and most analysts will simply push out the expectation to April and May. We look for one cut in Q2 though some investment banks forecast two cuts.
Tomorrow Australia reports Q4 GDP, and its is expected to have expanded by 0.6% after a 0.3% pace in Q3.Stronger retail sales and better net exports are thought to be the main drivers. Earlier today, Q4 current account was released. It stood at A$9.6 bln. The consensus was for a A$11 bln shortfall after a revised A$12.1 bln (from A$12.5) deficit in Q3. Net exports were 0.7% of GDP, slightly better than consensus.
Separately Australia also reported building approvals.  They jumped 7.9% in January.  The consensus was braced for a 2% decline.   The December series was revised to -2.8% from -3.3% initially reported.  This is a volatile series, but it is the third month that the year-over-year pace has been north of 9%.


The Unnerving Thing Wells Fargo Just Said About the Auto Boom / by Wolf Richter / March 2, 2015

American consumers are borrowing like never before to buy cars. It has been the reason why the US auto industry is intoxicated with its own exuberance. Last year, 16.5 million new vehicles were sold. This year, the industry hopes to breach the sound barrier of 17 million, or even 17.5 million. The industry is already dreaming about new all-time highs.

The growth is funded with borrowed money. Total auto loan balances outstanding grew 9.3% year over year to $975 billion at the end of December, an all-time high, according to Equifax. These balances will likely exceed the $1-trillion mark soon.

Auto lending to subprime customers – people with credit scores below 640 – has been particularly booming. Through October last year, 27.4% of all auto loan balances and 31% of the total number of auto loans were to subprime borrowers. Banks and subprime-focused specialty lenders convert these loans into structures securities, many of which carry triple-A ratings. They’re are selling like hot cakes, as bond fund managers gobble them up to create some yield in a world where central banks have expunged yield.

But bank regulators are warning about the auto lending spree. They’re worried about the ballooning loan-to-value ratios where the loan exceeds the “value” of the car by large amounts. Given that a car loses a lot of value the moment it drives off the dealer lot and continues to lose value, high LTV ratios raise the losses for lenders if the car is repossessed. But high LTV ratios also make the car expensive to finance. To keep payments down, loans are stretched to ludicrously long terms. And bank regulators are worried that these risky loans are made precisely to the riskiest customers.


Hryvnia Rallies To 1-Month Highs After Ukraine Raises Benchmark Rate To 30% / by Tyler Durden / 03/03/2015 08:26 -0500

Ukraine’s infamous pink Porsche-driving central bank governor, Valeriya Gontareva, raised the nation’s refinancing rate from 19.5% to a stunning 30% (effective Wednesday) in order to “stabilize the situation in the money and lending markets,” and imposed some ‘capital controls’ on exporters holding foreign cash.


Little-Known Laws That Cripple American Trade / Gary Galles / MARCH 3, 2015

The harm that Britain’s protectionist Navigation Acts imposed on the colonies was a major impetus for the American Revolution. But the United States did not abandon those unjustifiable restrictions. Even before the Bill of Rights was adopted, Congress in 1789 enacted similar protectionist restrictions on coastal shipping. It is centuries past time to eliminate such harmful restrictions and the Jones Act that is their modern progeny.

What is the Jones Act?

The Jones Act (1920) mimics the rationale and terms of Britain’s Navigation Acts. It was meant to guarantee a merchant marine fleet “for the national defense and the development of the domestic and foreign commerce of the United States,” that was “capable of serving as a naval and military auxiliary in time of war or national emergency.” It also restricts trade between American ports to vessels built and owned by Americans, and to vessels whose crew is at least three-quarters American. Unfortunately it works against its stated goals, and does so at a steep cost.

The need for the Jones Act restrictions to strengthen our naval defense capability would make sense only if our naval defense was inadequate without such restrictions.

One might make the case that during the early days of the fledgling American government that privateers could be effective military assets. However, the US navy has grown to be the world’s premier naval superpower and has been for longer than most Americans have been alive. It was President Eisenhower in 1961, in his farewell address, that warned of the military-industrial complex that would give America more military than it needed. Despite this the Jones Act has been maintained.

Britain’s Navigation Acts were directly aimed at undermining Dutch sea power, which Adam Smith called “the only naval power which could endanger the security of England.” One could say that the burgeoning Chinese military sea power posses a similar threat today. But restricting America’s coastal trade to American ships cannot appreciably thwart Chinese sea power, military or otherwise, given the tidal wave of goods their ships carry around the world.


Jim Rickards: Why the U.S. is Letting China Accumulate Gold / Ed Steer / March 03, 2015


Monday’s trading day in gold was very similar to the trading day it had the previous Monday—February 23—where gold prices rose sharply in Far East trading—and then ran into the usual suspects that turned the gold price lower starting a couple or hours before the London open.  This Monday’s sell-off ended minutes before 4 p.m. EST in electronic trading—and after that, the price traded flat into the 5:15 p.m. close.

The high and low ticks were reported by the CME Group as $1,223.00 and $1,204.20 in the April contract.

Gold closed yesterday at $1,205.90 spot, down $7.80 from Friday’s close.  Net volume was decent at around 119,000 contracts.


US Macro Weakest Since July 2011 As Goldman Affirms Global Economy In Contraction / by Tyler Durden / 03/02/2015 22:00 -0500

Goldman’s Global Leading Indicator (GLI) final print for February affirms the global economy has entered a contraction with accelerating negative growth. Just six months after “expansion”, the Goldman Swirlogram has collapsed into “contraction” with monthly revisions notably ugly and 9 out of 10 components declining in February. Some have suggested, given US equity’s strong February (buyback-driven) performance, that the US economy will decouple from the world… or even drive it.. but that is 100% incorrect. US Macro data has fallen at its fastest pace in 3 years and is at its weakest level since July 2011 as 42 of 48 data items have missed since the start of February.

With 9 of 10 components negative in February, Goldman’s Swirlogram has collapsed from expansion to contraction within just 6 months…


China helps gold bounce as India keeps duty / Dave in Denver / March 2, 2015 at 11:38

Gold rose to its highest level in nearly two weeks on Monday, backed by firm Chinese demand after a weekend interest rate cut in China aimed at shoring up the economy, which some analysts said could also benefit bullion.

“The prospects of better growth and stronger income should boost gold-buying in China,” said Howie Lee, an investment analyst at Phillip Futures in Singapore.

Gold bounced back from a seven-week low last week following the return of Chinese buyers from the February 18-24 Lunar New Year break.

The price has since found support above $1,200. Premiums for physical gold at the Shanghai Gold Exchange stayed firm at around $4-$5 an ounce over the global spot benchmark on Monday.


Nasdaq 5000: Bubble or not?

Peter SchiffPublished on Mar 3, 2015

Hillary Clinton’s Latest Scandal: Former SecState Exclusively Used Undocumented, Personal Email Account / by Tyler Durden / 03/03/2015 07:32 -0500

While the Hillary Clinton campaign seems unperturbed by recent problematic disclosures by Politico into the Hillary Clinton Foundation, the former first lady and current democrat presidential hopeful will have a field day explaining why, as the NYT reported overnight, Hillary – in her role as Secretary of State – “exclusively used a personal email account to conduct government business” according to State Department officials in violation of “federal requirements that officials’ correspondence be retained as part of the agency’s record.”

Mrs. Clinton did not have a government email address during her four-year tenure at the State Department. Her aides took no actions to have her personal emails preserved on department servers at the time, as required by the Federal Records Act.

Why is this a deeply troubling breach of protocol, not to say a substantial threat to national security by America’s former top diplomat? For starter, using Hotmail or Aol instead of a protected, encrypted government address leaves little to the hacker’s imagination.  But what’s worse is that as a result of exclusive reliance on non-government platforms, which have no document retention policy and in fact have a “straight to trash” policy, any and all emails regarding the Benghazi scandal, many of which were FOIAed, could have been and were simply deleted without ever leaving a trace. Or as NSA Nate summarized:


Bill Gross: Too Much Debt, Too Many Zombie Corporations, Low Interest Rates Destroy Pension System / Mike “Mish” Shedlock / Monday, March 02, 2015 8:54 PM

In an Bloomberg Television interview Bill Gross of Janus Capital spoke with Bloomberg Television’s Trish Regan about the outlook for Federal Reserve policy, the U.S. economy and his objectives at Janus Capital.

Key Quotes

  • “Not even thin gruel is being offered to our modern-day Oliver Twist investors. You have to pay to come to the dinner table and then sit there staring at an empty plate.”
  • “The interest rate can’t be raised substantially even over the next two to three years.”
  • “The US has escaped the liquidity trap that euroland and Japan are in. But, not necessarily for all time.”
  • “[Low interest rates] keeps zombie corporations alive because they can borrow at 3 and 4 percent, as opposed to the 8 or 9 percent. It destroys business models. It’s destroying the pension industry and in the insurance industry.”
  • “ultimately, [low interest rates] destroy the capitalistic model at the margin. Instead of investing in the real economy, [corporations] can now simply borrow at close to 0 percent and buy their own stocks, which yield 2 or 3 percent on a dividend basis and provide a return of 6 or 7 percent on an earnings to price ratio basis.”


US Gov Can’t Stop Illicit Trade In Oil In Libya, Ready To Mount An Offensive – Episode 605

X22ReportPublished on Mar 2, 2015

US manufacturing slows and construction spending declines as the real estate industry starts to collapse. People are taken advantage of the lower gas prices, spending less and saving more. The auto sub-prime market is starting to burst. Russia could ease up on the food ban for Greece and Hungary. The FCC ruling will censor sites on the internet. Poland, US sending troops to Ukraine. US Government/Central Bankers can not stop the sale of oil not using the US dollar so get ready for a major offensive.

Silver Update 2/26/15 Failed FED

Market Wrap: Futures Decline; Treasurys Weak On Actavis Mega-Deal, Dollar At 12 Year High / by Tyler Durden / 03/03/2015 06:58 -0500

With little newsflow out of Europe, and just as little on deck out of the US (just NY ISM and auto sales later today), the main overnight events were out of Asia where first the RBA decided to leave rates unchanged (despite the majority calling for a rate cut) when as Bloomberg’s Richard Breslow noted, in the RBA communique the central bank “changed their reference to China from “China’s growth was in line with expectations” to “China’s growth will slow a little from last year’s outcome.” Whatever may be happening with China, one thing is clear – either the RBA announcement was leaked a minute early, or HFT algos took a huge gamble and soared higher up to a minute earlier (more shortly).

Speaking of China, the rate-cut euphoria lasted just one day, and after a feeble 0.8% bounce on Monday, the SHCOMP was down 2.2% this morning over fears the PBOC is doing too little, too late to halt what is now perceived by many as a massive “tightening” capital flight out of China. Finally, Japan made the newsflow, after it JGBs continued to slide following a weak auction, fears that the BOJ is done easing after Abe advisor Etsuro Honda warned against overheating, and after the biggest jump in base pay in over a decade led some to think the BOJ may soon have to halt easing altogether, especially if real wages proceed to rise.

Another notable development is the ongoing weakness in US rates even as the ECB-buying backstop has made selling of rates in Europe virtually illegal. The weakness in the US 10Y however can be almost entirely attributed to the “mammoth” Actavis-Allergan issue, which is now said to be more than 4x oversubscribed, with nearly $90 billion in orders for just over $20 billion in paper. The result is weakness for matched Treasurys due to rate locks: as InTouch David Fuller’s writes watch for “late rate lock unwinds into/out of pricing” though it depends on how big rate lock was Feb. 26 and “whether end-users buy it outright or vs USTs.” Once this latest mega issue is absorbed expect the convergence trade to resume.