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10.24.16 - 2017's Ticking Time Bomb

Gold last traded at $1,263 an ounce. Silver at $17.60 an ounce.

NEWS SUMMARY: Precious metal prices traded mixed Monday amid rising uncertainty and a firmer dollar. U.S. stocks traded higher, getting a lift from merger announcements including AT&T’s planned acquisition of Time Warner.

Mobius Says Gold Will Gain in 2017 as Fed Goes Slow on Hikes -Bloomberg
"Gold is set to advance by as much as 15 percent before the end of next year as the Federal Reserve goes slow on increasing interest rates and the dollar remains subdued, buoying bullion demand, according to Templeton Emerging Markets Group. 'The Fed is going to increase the rates by a little bit but not excessively and there is no guarantee that a rise in interest rates will put people off,' Executive Chairman Mark Mobius said in an interview at a Bloomberg event in Mumbai....Bullion has rallied 19 percent in 2016 as concern over the health of the global economy, loose monetary policies and the U.K.’s vote to leave the European Union fanned demand....'The U.S. dollar is not that strong and may even decline,' said Mobius, who also highlighted prospects for increased central bank buying of bullion. 'So if that happens, gold gets more expensive.'"

inflation Inflation: next year's ticking time bomb -Evans-Pritchard/Telegraph
"The last time sterling fell off a cliff we were in the midst of global financial crisis from 2007 to 2008. The currency shock sent inflation shooting up to 5.2%, abruptly squeezing on real living standards....This time the most vulnerable families will take the brunt as the cost of imported food, clothes, and fuel suddenly jump. A parting gift of the last Government was to freeze benefits for 11.5 million households until 2020....This is a political time bomb that will detonate next year when the inflation ‘pass-through’ from imports bites in earnest. It threatens to poison the already fractious national debate unless steps are taken to mitigate the damage....For central bankers, inflation is not the terrible specter it used to be. Most of the developed world is fighting secular deflation, the opposite and more dangerous enemy....Is it possible the UK will face rising inflation and recession at the same time? Unfortunately it is."

According to a growing number of astute economists, stagflation (slowing economy with rising inflation) is about to rear its ugly head in 2017. The truth is governments and central banks have had a very long love affair with inflation - especially the type of hidden inflation which we've seen in the U.S. over the last decade - thanks to the Fed's policy of "financial repression". But a day of reckoning always arrives. Now is the time to prepare your portfolio for an inflation spike next year. Read more in our 2016 Gold Report - World Edition

Major banks mark first-ever international trade using blockchain tech -Reuters/Yahoo
"The first cross-border transaction between banks using multiple blockchain applications has taken place, Commonwealth Bank of Australia and Wells Fargo & Co said on Monday, resulting in a shipment of cotton to China from the United States....Blockchain is a web-based transaction-processing and settlement system whose efficiency banks say could slash costs....Led by a consortium of over 70 of the world's biggest financial institutions - called R3 - the banking industry has been researching ways to harness the speed, accuracy and efficiency afforded by blockchain....Wells Fargo's head of international trade services, Chris Lewis, said in the statement that his bank was committed to new technology. He also said 'significant regulatory, legal and other concerns remain to be addressed.'"

"We are witnessing the beginning of the end of money as we know it," says monetary expert Craig Smith. In his new book Money, Morality & The Machine, Smith explains why 'bad money drives out good money' as well as why bad money drives out good values in society. (Amazing free book offer!)

What The Media Missed About The $85 Billion AT&T-Time Warner Deal -Hedge Eye
"The headline news in mainstream media today is AT&T's offer to buy Time Warner for $85 billion over the weekend. Contextualizing the why behind the deal unlocks actual investing implications for investors. On that point, the media was decidedly silent. In this morning's Early Look, Hedgeye CEO Keith McCullough compares the combining of two 'legacy telcos' to 'tying two rocks together and seeing if they float.' AT&T missed inflated Wall Street earnings expectations last Thursday. The stock is down about 7% since then, as investors were unimpressed by the deal and fled an industry in secular decline. Investors were right to head for the hills. At end of the cycle, there is always a flurry of mergers and acquisitions as companies buy other companies to pad their slowing financial results (see Q2 2007). Then the cycle falls off a cliff and the economy dips into recession. In other words, M&A is a classic late cycle indicator....In short, the AT&T/Time Warner is yet another example of past peak M&A and confirmation that the U.S. economy continues the trend of down, down, down."

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10.21.16 - Can Gold Make America Great Again?

Gold last traded at $1,267 an ounce. Silver at $17.49 an ounce.

NEWS SUMMARY: Precious metal prices held firm Friday, despite a higher dollar on technical buying and bargain hunting. U.S. equities fell again, pressured by a strong dollar and disappointing telecommunications earnings.

Gold Bug Jim Grant Says The Fed Is Bluffing -Kitco
"The Fed is bluffing, and no matter what happens with interest rates, it might be best for investors to stick with gold, this according to widely known Fed critic and Wall Street pundit Jim Grant. Speaking with Kitco News, he argued that the gold price will not be driven by the next move by the Federal Reserve, although most recent gold price fluctuations have been the result of shifting rate hike expectations. Instead, 'it’s the revelation that we’re walking – or running – down the wrong path, and that we must regroup and formulate a monetary policy that’s based upon a lasting standard of value,' the popular newsletter publisher said. 'I think a bet on gold, to me, is actually an investment in monetary disorder. It’s not a hedge against it because we have monetary disorder; I think what us, gold bugs are waiting for is the spreading perception that we have monetary disorder.' To Grant, central bankers’ policies around the world will make investors either 'end in tears' or 'laughter,' depending on how people position themselves."

gold liberty Memo to President Trump or President Clinton: The Gold Standard Made America Both Good and Great - The Pulse 2016
"Marc Levinson writing recently in The Wall Street Journal provides a very pessimistic view for the American Dream, 'Why the Economy Doesn’t Roar Anymore: The long boom after World War II left Americans with unrealistic expectations, but there’s no going back to that unusual Golden Age:...Ever since the Golden Age vanished amid the gasoline lines of 1973, political leaders in every wealthy country have insisted that the right policies will bring back those heady days. Voters who have been trained to expect that their leaders can deliver something more than ordinary are likely to find reality disappointing.' Levinson, whose column uses 'Golden Age' as its leitmotif, strangely fails to make the connection, or even explore, the fact that the era he calls the Golden Age correlated precisely with America (and the world) being on a form of gold standard, particularly the modified gold standard known as the Bretton Woods System. Bretton Woods was finally, formally, ended in 1973, the very year that Levinson points to as the end of the Golden Age....Whether Trump or Clinton wins, America’s economic success over the next four years — and their chance of re-election — will depend in large measure on 'It’s the economy, Smarty,' getting job growth and upward income mobility going for workers. To achieve equitable prosperity, the next president will need to be really smart about, rather than neglecting, monetary policy."

Wynn: Printing Money Degrades Living Standard, Causes Anger; Healthcare Goes Up, Product Doesn't Get Better -Real Clear Politics
"Casino magnate Steve Wynn expresses his disappointment at the lack of discussion of the economy during the course of the presidential election in an interview on Thursday's Hannity....Wynn said the printing of money by the U.S. Treasury under the guidance from the U.S. Federal Reserve and the national debt have not been properly addressed albeit a short segment at the final debate....'Our government is printing money and it's degrading the living standard of every person in America. It's the cause of frustration, anger and confusion.'....Wynn on healthcare: WYNN: 'I can tell you, after speaking to my 12 or 13,000 employees, that there is tremendous confusion and dissatisfaction with the cost of health care, all of my employees increased health care costs in spite of the fact the company picked up most of the increases but yet they have the same policy that they had before. They paid more money but did not get more coverage.'"

“Cheapening our dollar has been very expensive,” says Lowell Ponte, a former Roving Editor at Reader's Digest and co-author of the new book Money, Morality & The Machine: Smith's Law in an Unethical, Over-Governed Age. “This Great Debasement of our currency has replaced the American Dream of our Founders with a society based on political cronyism, European-like socialist welfare dependency on government, class and race warfare and violence, a decline in religious faith and moral values, a fading work ethic, soaring taxes, a $19.5 Trillion national debt, and a dollar worth only about 2 pennies of the purchasing power of a 1912 dollar.” (Amazing free book offer!)

Obamacare Premiums Up 30% In TX, MS, KS; 50% In IL, AZ, PA; 93% In NM: When Does The Death Spiral Blow Up? -Zero Hedge
"Congratulations are in order for those living in a handful of states whose premiums only rose 20%. The Wall Street Journal reports 'Rate Increases for Health Plans Pose Serious Test for Obama’s Signature Law'. Approved Hikes Just Under 20%: Colorado, Florida and Idaho, Approved Hikes 20% to 29%: Connecticut, Georgia, Indiana, Kentucky, Maine, Maryland,Approved Hikes 30% to 49%: Alabama, Delaware, Hawaii, Kansas, Mississippi, Texas, Approved Hikes 50% to 92%: Arizona, Illinois, Montana, Oklahoma, Pennsylvania, Tennessee, Approved hikes 93%: New Mexico....Rep. Michael Burgess M.D., Rep. Tom Price M.D., and Rep. Phil Roe M.D., all doctors, say ObamaCare is About to Collapse."

Global Markets Stumble into a High-Debt, Low-Investment 2017 -Bloomberg
"There’s a scene in the 2004 movie Sideways where a sloppy, depressed Paul Giamatti gulps from the spit bucket at a wine-tasting bar. That’s probably worse than what International Monetary Fund chief economist Maurice Obstfeld had in mind when he said in October, while presenting the fund’s 2017 outlook, that ‘taken as a whole, the world economy is moving sideways.’....Describing where the rich countries stand almost a decade after the worst financial blowup since the Great Depression, Obstfeld said: ‘The crisis has left a cocktail of interacting legacies — high debt overhangs, nonperforming loans on banks’ books, deflationary pressures, low investment, and eroded human capital — that continue to depress potential investment levels.’ The problem? Years of disappointing growth have caused the public to worry that this is the new normal and that governments and central bankers have no clue how to make it better. Pessimistic consumers are holding back on spending, while businesses aren’t putting money into buildings, equipment, or software. Their reticence slows things down even more. Disappointment breeds more disappointment."

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10.20.16 - The Cost of a Democratic Landslide

Gold last traded at $1,267 an ounce. Silver at $17.54 an ounce.

NEWS SUMMARY: Precious metal prices steadied Thursday as the U.S. dollar was lifted by EU bank inaction. Stocks end lower as oil prices shed over 2%, consumer confidence fell and the European Central Bank stood pat on interest rates.

Fed risks repeating Lehman blunder as US recession storm gathers -Evans-Pritchard/Telegraph
"The risk of a US recession next year is rising fast. The Federal Reserve has no margin for error. Liquidity is suddenly drying up. Early warning indicators from US 'flow of funds' data point to an incipent squeeze, the long-feared capitulation after five successive quarters of declining corporate profits. 'We are seeing a serious deterioration on a monthly basis,' said Michael Howell from CrossBorder Capital, specialists in global liquidity. The signals lead the economic cycle by six to nine months. 'We think the US is heading for recession by the Spring of 2017. It is absolutely bonkers for the Fed to even think about raising rates right now,' he said....Stanley Fischer, the Fed's vice-chairman, conceded in a grim speech this week that the Fed has now run out of ammunition and that this 'could therefore lead to longer and deeper recessions when the economy is hit by negative shocks.'....A President Hillary Clinton could and certainly would flood the economy with fiscal stimulus if need be. Yet this takes time. There are few 'shovel-ready' projects, and Washington is a fractious place."

Senate Democratic Landslide? What It Means For Investors -Hedge Eye
"Investors don't fully appreciate what could happen when the next president is sworn in on Inauguration Day, January 20, 2017. With all eyes on Trump versus Clinton, pundits, politicians, and the investing public are sleeping on the ramifications of 2016 Congressional races. Whether it be raising the minimum wage, taxation, infrastructure spending or regulation, Democrats and Republicans differ radically on these issues....Hedgeye Director of Research Daryl Jones what this means in today's Early Look. Did you know, Jones writes, that which way the Senate tips will impact whether firebrand Vermont Senator Bernie Sanders becomes the ranking member on the Senate Budget Committee (in the minority) or the Senate Budget Committee Chairperson? In other words, based on current polling, it's likely that the man who once described himself as a 'socialist' will oversee the drafting of Congress's annual budget. While it's interesting that Democratic candidate Hillary Clinton currently leads the GOP's Donald Trump by +6.4% in Real Clear Politics polling, and gives Clinton an 85% probability of winning the election. The Congressional races are what we should actually be watching."

Hello Inflation, Central Banks Salute You -The Street
"Just like Caesar's gladiators, central banks might be in danger of meeting their end in the service of their master: inflation. And as the master has just joined the arena, the show can begin. Ever since the financial crisis, central banks all over the world have cut interest rates, bought increasingly risky securities and cooed in all the dovish tonalities available in order to push prices up again. This is because the world economy is creaking under the burden of huge debts, and the only way out of it other than straightforward debt forgiveness is massive inflation to erode it....In the Eurozone, inflation expectations are at their highest since early June; in the U.S., consumer prices saw their biggest rise in five months in September; in the U.K., inflation has already exceeded expectations, printing 1% for September vs. 0.9% forecast. This is where it becomes really dangerous for central banks."

Deutsche Bank to pay $38 million in U.S. silver price-fixing case -Reuters
"Deutsche Bank AG has agreed to pay $38 million to settle U.S. litigation over allegations it illegally conspired with other banks to fix silver prices at the expense of investors, according to court papers filed on Monday....The settlement had been expected since April, though terms had yet to be disclosed. In court papers, lawyers for the investors say the deal will likely be an 'ice breaker' that will serve as a catalyst for other banks to settle....The alleged conspiracy started by 1999, suppressed prices on roughly $30 billion of silver and silver financial instruments traded each year, and enabled the banks to pocket returns that could top 100 percent annualized, the investors said."

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10.19.16 - Books Foretell Death of Paper Money

Gold last traded at $1,269 an ounce. Silver at $17.66 an ounce.

NEWS SUMMARY: Precious metal prices rose Wednesday on technical buying and bargain hunting. Stocks traded mixed, helped by rising oil prices and cheery Fed data showing "moderate" economic growth.

Why gold will rise no matter who becomes the next U.S. president -Marketwatch
"Gold prices have enjoyed a hefty climb so far this year as the market continues to guess the pace and timing of the next U.S. interest-rate hike, but the battle for the U.S. presidency is set to take center stage as Election Day nears. And it doesn’t matter if Republican Party nominee Donald Trump or Democratic Party nominee Hillary Clinton moves on to be the next president of the United States - gold is likely to come out a winner, George Milling-Stanley, head of gold investment strategy at State Street Global Advisors, told MarketWatch....'There can be little doubt that a Trump victory would be disruptive in both political and economic terms, given that this is what the candidate has promised,' he said. 'I would expect gold prices to head higher on increased safe-haven buying in the event of a Trump victory.'....Gold probably wouldn’t see quite as dramatic a rise in the event of a Clinton win, compared with Trump, but Clinton as president is expected to have inflationary implications, which would imply higher gold prices as well, he said."

An Ominous Signal For U.S. Small Businesses -Hedge Eye
"As the U.S. economy continues to slow, the nation's banks are turning off the liquidity spigot on small businesses. An ominous factoid: The last time loan volumes to small businesses turned this negative (on a year-over-year basis) it was December 2007, the exact month the U.S. economy tipped into recession. Here are the key Chart of The Day takeaways from the Thomson Reuters/PayNet small business data via Hedgeye CEO Keith McCullough in this morning's Early Look: 'Small Business Loan Volumes have gone decisively NEGATIVE on a y/y (year-over-year) basis'. The most recent print is down over -1.5% year-over-year and has been negative y/y in each of the last 3 months. The last time this index looked like this was DEC 2007'. If you run a small business look out. If you're an investor getting long equities into this economic slowdown, go look at returns from October and November of 2007. Those returns might scare some sense into you."

home loans chart

Apple's Next Goal Is Killing Paper Money Once and For All -Fortune
"Who needs cash, anyway? Apple CEO Tim Cook has an idea for the future - eliminating cash. Apple Pay could be the 'catalyst' that ultimately gets the world to switch from cash to digital payments, he told the Japanese news service Nikkei in an interview published on Monday. 'We would like to be a catalyst for taking cash out of the system,' Cook said. 'We don’t think the consumer particularly likes cash.'....It’s unclear how Apple could achieve Cook’s goal of eliminating cash. Apple Pay must be linked to plastic to work, and while smartphones and payment terminals are ubiquitous in the U.S., that’s not the case in most other countries. And even then, Apple Pay is only compatible with Apple’s own products, leaving the more than a billion people worldwide who use Android-based handsets out of luck."

In their 2016 book Money, Morality & The Machine: Smith's Law in an Unethical, Over-Governed Age, Craig R. Smith and Lowell Ponte begin Chapter Four, "The Money Changers" (page 91), by quoting Apple's Tim Cook saying “Your kids will not know what money is.” In their 2012 book, The Great Debasement: The 100-Year Dying of the Dollar and How to Get America's Money Back, Smith and Ponte explain (on page 218) Google Chairman Eric Schmidt's abandoned idea for “Google Bucks” as an alternative to government currencies controlled by central banks. In several other Special Reports Smith and Ponte discuss the government push for a “cashless” society. (Find out more with this amazing free book offer!)

The Fed’s Rate-Hike Dilemma: Damned if It Does, Damned if It Doesn't -Fiscal Times
"For the first time since the financial crisis, the Federal Reserve's luxury of time is running out.For years, a weak jobs market, tepid demand and low inflation allowed the Fed to drag its feet on ending its long experiment with ultra-easy monetary policy. That's changing now, and it's going to considerably increase the difficulty of setting policy through the rest of 2016 and into 2017. Adding to the pressure: The stakes could hardly be higher, with just 1-in-3 Americans satisfied with the state of the country, 58 percent saying that economic conditions are getting worse and heightened political divisions resulting in violent protests and fire bombings. But a Fed decision to continue to wait could unearth a terrible threat: Stagflation, the combination of economic stagnation and high inflation....While no one knows what the Fed will do at its December policy meeting, the realities on the ground suggest no matter the decision, it's going to be painful."

China Holdings of U.S. Treasuries Drop to Almost Four-Year Low -Bloomberg
"China’s holdings of U.S. Treasuries fell to the lowest level since November 2012, as the world’s second-largest economy draws down its foreign reserves to prop up the yuan. The biggest foreign holder of U.S. government debt had $1.19 trillion in bonds, notes and bills in August, down $33.7 billion from the prior month, the biggest drop since 2013, according to U.S. Treasury Department data released Tuesday in Washington and previous figures compiled by Bloomberg....China sold an estimated $570 billion in foreign-exchange assets from August 2015 to August 2016 in an effort to keep the currency from plunging, according to an estimate by the U.S. Treasury released last week."

Craig Smith comment: The liquidity crunch is building steam. Keep in mind the Chinese are selling U.S. government debt and instead buying U.S. stocks as well as U.S. corporate and agency debt. Sounds like they want an actually piece of America, not just its government.

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10.18.16 - 5 Urgent Warnings from Big Banks

Gold last traded at $1,262 an ounce. Silver at $17.63 an ounce.

NEWS SUMMARY: Precious metal prices rose again Tuesday amid rising inflation and a falling dollar. U.S. equities also rose as investors parsed through better-than-expected quarterly reports and inflation data.

This Expert Is Sticking to $1,900 Gold Call, $25 Silver -The Street
"Although gold prices have come under pressure the past few weeks, Monty Guild, founder of L.A.-based Guild Investment Management says he remains bullish, and is still calling for the metal to climb up to $1,900 an ounce within a two- to four-year time frame....'Technically, gold is at the end of its corrective phase; it could have one more wave down, maybe by a few bucks,' Guild said. He is forecasting the Federal Reserve to hike interest rates by 25 basis points in December and then says, gold should hit $1,400 an ounce. Guild sees inflationary trends developing outside the U.S. and tensions in the Middle East as bullish factors for the yellow metal."

Craig Smith Comment: Gold is setting up for what appears to be a major move. The buying power of the U.S. dollar may be set to resume its long-term downward trend. Our 35-year position: gold is a long-term insurance policy against domestic and international economic uncertainty and devaluation of currencies. For the first time since Brexit, gold and silver prices are at attractive levels. (Read more in our 2016 Gold Report - World Edition)

MMM book How Debasing The Dollar "Devalues" Us -PR Buzz
"For thousands of years, governments have tried to get something for nothing by debasing their nations' money – by minting coins with less precious metal than before, or by printing paper money unbacked by gold, silver or productivity. Giving politicians the power to conjure such easy money out of thin air like this, said P.J. O'Rourke, is like giving whiskey, car keys and an unlimited credit card to teenage boys. It cannot end well. This is one big reason why the United States is in decline, writes monetary expert Craig R. Smith in his new book Money, Morality & The Machine: Smith's Law in an Unethical, Over-Governed Age. Bad money drives out good, wrote economist Sir Thomas Gresham in 1558 after King Henry VIII stole three-quarters of the silver in England's coins. People would pocket the old coins with more silver and spend the re-minted, less valuable coins. Gresham's Law points to another truth that Craig R. Smith, a frequent guest on Fox Business and other business media, recognized more than 450 years later – that bad money drives out good values in society." (Amazing free book offer! )

The crazy world of negative interest rates -Grant/National Review
"Why all the fuss about interest rates? Here’s Grant’s unanswerable answer: 'Interest rates are prices. They impart information. They tell a business person whether or not to undertake a certain capital investment. They measure financial risk. They translate the value of future cash flows into present-day dollars. Manipulate those prices - as central banks the world over compulsively do - and you distort information, therefore perception and judgment....GRANT: 'A negative rate of interest means that the lender pays the borrower and it would seem to defy common sense. You can think of interest as the reward for waiting - for laying aside something for tomorrow. Alternatively, you can view negative interest as the cost of impetuousness. Negative rates penalize thrift and reward consumption....FREEMAN: How long can that go on? GRANT: Until the world comes to doubt the creditworthiness of the U.S., or the integrity of the U.S. dollar....George Gilder correctly asks: Is money a measuring stick or a magic wand? The former is the correct answer."

5 Urgent Warnings From Big Banks That the “Economy Has Gone Suicidal” -Shtfplan
"The economy has gone suicidal....While the general population is obsessed with the details of the world’s most entertaining and bizarre election in American history, the big banks are gearing up for a deadly serious economic collapse....1. HSBC Issues 'Red Alert' Over Imminent Sell-Off of Stocks. The U.S. stock market is artificially propped up by the Federal Reserve, but their ability to stimulate the economy has worn off....2. I.M.F. Issues 'Stability Warning' Over Deutsche Bank. Germany’s – and Europe’s – largest investment bank is in the midst of a terrible crisis with its balance sheets, overloaded with toxic debt that is big enough to topple several continents....3. Bank of America Warns That a Recession is Imminent, and Unavoidable....4. Macquarie Group’s Leading Investor Warns That the Private Sector Will Never Recover From QE3… and the Age of Human Jobs Is Over....5. The Bank of International Settlements – the Central Bank of Central Banks – Warns of Chinese Economy Meltdown."

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