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10.19.17 - Are Markets on the Verge of a Tumble?

Gold last traded at $1,290 an ounce. Silver at $17.25 an ounce.

NEWS SUMMARY: Precious metal prices rebounded Thursday on bargain-hunting and a weaker dollar. U.S. stocks fell led by declining tech stock giants such as; Apple, Facebook, Google, Netflix and Amazon.

Gold Will Reveal The Economic Truth - von Greyerz/Gold Switzerland
"The dollar is dead but the world doesn't know it. It has been a slow death and the final stages will be very painful for the US and for the rest of the world....The dollar is likely to fall before the Euro as they both compete in the race to the bottom. Just think about it, here we have the two richest regions in the World, North America and Europe, both on the verge of collapse, economically, financially, politically and morally. How can anyone ever believe that all the bubble assets can survive under those circumstances....For investors who don't worry about risk, the current period is absolute heaven. Stocks, bonds, property and bitcoin just goes up and up and up. You just can't lose! Whatever investors touch today turns into gold. But it isn't real gold. The winnings today are fake gold in the form of inflated and heavily leveraged paper assets. Like all bubbles this can continue further. But whenever it turns, and we are not far from that point, the move in the opposite direction will be so fast that it will be impossible to get out....Most investors will laugh at this in disbelief. We will see who has the last laugh....To avoid total wealth destruction, buy insurance in the form of physical gold and silver while there is still time."

stock market A Stock Market Panic Like 1987 Could Happen Again -Shiller/New York Times
"Oct. 19, 1987, was one of the worst days in stock market history. Thirty years later, it would be comforting to believe it couldn’t happen again....We are still at risk because fundamentally, that market crash was a mass stampede set off through viral contagion. That kind of panic can certainly happen again. I base this sobering conclusion on my own research. (I won a Nobel Memorial Prize in Economic Sciences in 2013, partly for my work on the market impact of social psychology.)....As I've said in a previous column, markets move when other investors believe they know what other investors are thinking. In short, my survey indicated that Oct. 19, 1987, was a climax of disturbing narratives. It became a day of fast reactions amid a mood of extreme crisis in which it seemed that no one knew what was going on and that you had to trust your own gut feelings....In response to the 1987 crash and the Brady Commission report, the New York Stock Exchange instituted Rule 80B, a 'circuit breaker' that, in its current amended form, shuts down trading for the day if the Standard & Poor’s 500-stock index falls 20 percent from the previous close....But 20 percent would still be a big drop. Many people believe that stock prices are already very high and if the right kinds of human interactions build in a crescendo, we could have another monumental one-day decline. One-day market drops are not the greatest danger, of course. The bear market that started during the financial crisis in 2007 was a far more consequential downturn, and it took months to wend its way toward a market bottom in March 2009."

Market pros think Black Monday can't happen again -CNBC
"Behavior in the market today has stoked comparisons to what happened on Black Monday. Rising valuations, a seemingly never-ending bull market run, a tightening Fed, rising bond yields - both eras certainly have similar components....In short, there's little fear on Wall Street now that a Black Monday-type event is coming to a market near you. 'We believe that the stock market stands on a much stronger fundamental and technical foundation today than it did in October 1987, with less euphoric sentiment, making another crash like 1987 appear unlikely,' LPL Financial said in a note....One of the principal causes of the crash was 'portfolio insurance,' which sought to protect investors by selling during market tumult. 'Stocks don't go up in a straight line. Market events don't repeat themselves, but they sometimes rhyme,' LPL's analysis said."

Are markets on the verge of another tumble? -Telegraph
"On October 19, US stocks fell more than 22pc - the biggest one-day crash ever recorded, with London's FTSE 100 plunging 11pc in a day now infamously known as Black Monday. With the worst storm to hit the UK since 1703 also battering through the country that week, it was a time few have forgotten....The exact reason for the dive has never been identified...though the finger has often been pointed at newly introduced computer trading, which is thought to have exacerbated selling and drove prices lower. Thirty years on, and market observers are scouring the landscape for red flags. Vanguard chairman Bill McNabb sounded a warning on Tuesday after US stocks closed at a new high, days after the FTSE 100 smashed another record, telling the BBC's Today program that he expects 'a decent-sized correction at some point'....'While I wouldn't predict a massive downturn I would say the risk of value bleeding over time is heightened, so people need to be more cautious.' Although there are controls in place that weren't there in 1987, many who look back on Black Monday point to the sense of blind panic that rippled through the markets. 'As long as human emotion has some place to play in setting prices there will be violent corrections in the future,' said IG Group's head of UK Ian Peacock."

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10.18.17 - The Next Crash: Worse Than 1987?

Gold last traded at $1,283 an ounce. Silver at $16.99 an ounce.

NEWS SUMMARY: Precious metal prices steadied Wednesday on a flat dollar and Fed uncertainty. U.S. stocks rallied after IBM reported better-than-expected quarterly results.

Gold: Higher Highs and Lower Lows -Rickards/Daily Reckoning
"Gold could be in a long-term trend right now that spells dramatically higher prices in the years ahead. To understand why, let's first look at the long decline in gold prices from 2011 to 2015. The best explanation I’ve heard came from legendary commodities investor Jim Rogers. He personally believes that gold will end up in the $10,000 per ounce range, which I have also predicted. But Rogers makes the point that no commodity ever goes from a secular bottom to top without a 50% retracement along the way. Gold bottomed at $255 per ounce in August 1999. From there, it turned decisively higher and rose 650% until it peaked near $1,900 in September 2011....A 50% retracement of that rally put gold at $1,077 when the retracement finished. That’s almost exactly where gold ended up on Nov. 27, 2015 ($1,058 per ounce). This means the 50% retracement is behind us and gold is set for new all-time highs in the years ahead....I look for a powerful surge toward $1,400 by the end of this year based on Fed ease, geopolitical tensions and a weaker dollar. The gold rally that began on Dec. 15, 2016, looks like one that will finally break the bear pattern of lower highs and lower lows and turn it into the bullish pattern of higher highs and higher lows."

history Three reasons the next crash may be worse than 1987’s -Gold/Marketwatch
"Thirty years ago Thursday, the U.S. stock market had its worst day ever. On Oct. 19, 1987, the Dow Jones Industrial Average lost 508 points, 22.6% of its value.... 'A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History,' by Diana B. Henriques, makes a strong case that 1987 wasn’t just a temporary crash but a painful bear market that lasted three months and included a nearly 1,000-point, or 35% loss, in the Dow. It was also a near-systemic crisis that was a precursor for much that came later....In an interview, Henriques told me not much has fundamentally changed since the 1987 crash, and some things have gotten worse. So here are three reasons I think the next crash, whenever it comes, could be worse than 1987's. 1. The market is much more fragmented now....Coordinating everybody now would be like herding cats....2. Regulators are still living in their own worlds....The SEC and CFTC are like tugboats passing in the fog....3. Computerized trading is more pervasive than ever....J.P. Morgan estimates, passive and quantitative investing accounts for 60% of stock trading, double its share a decade ago....Henriques speculates that this time around, the 24/7 news cycle and social media could spread panic further and faster than in 1987. 'I think we're on a knife’s edge,' she told me."

Treasury secretary: Pass a tax bill or markets will tank -Politico
"Steven Mnuchin has a stern warning for Congress: You could blow up the stock market if you fail to cut taxes. The Treasury secretary, in the first episode of the 'POLITICO Money' podcast, said Wall Street's big runup following the election of President Donald Trump is largely based on expectations of Congress passing a major tax-relief bill, and failure to do so could have significant consequences. The Dow is now up about 25 percent since the election, a fact Trump tweets about frequently. 'There is no question that the rally in the stock market has baked into it reasonably high expectations of us getting tax cuts and tax reform done,' Mnuchin said in the interview. 'To the extent we get the tax deal done, the stock market will go up higher. But there's no question in my mind that if we don't get it done you're going to see a reversal of a significant amount of these gains.' If that sounds like a threat to Republicans - and perhaps some Democrats - to pass a tax bill, that's because it is. In fact, some analysts on Wall Street say that if a tax overhaul falters, a big correction on Wall Street could help push the legislative process back on track....Mnuchin also gave an 'absolute guarantee' that Trump would sign a major tax bill by the end of the year. The comments came before the president suggested on Monday that he might not, in fact, be able to sign a tax bill by year’s end."

North Korean Cyberpower: No Laughing Matter -New York Times
"When North Korean hackers tried to steal $1 billion from the New York Federal Reserve last year, only a spelling error stopped them. They were digitally looting an account of the Bangladesh Central Bank, when bankers grew suspicious about a withdrawal request that had misspelled 'foundation' as 'fandation.' Even so, Kim Jong-un's minions still got away with $81 million in that heist. Then only sheer luck enabled a 22-year-old British hacker to defuse the biggest North Korean cyberattack to date, a ransomware attack last May that failed to generate much cash but brought down hundreds of thousands of computers across dozens of countries - and briefly crippled Britain's National Health Service....'Cyber is a tailor-made instrument of power for them,' said Chris Inglis, a former deputy director of the National Security Agency, who now teaches about security at the United States Naval Academy....The big question is whether Mr. Kim, fearful that his nuclear program is becoming too large and obvious a target, is focusing instead on how to shut down the United States without ever lighting off a missile."

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10.17.17 - This Is How Bull Markets End...

Gold last traded at $1,287 an ounce. Silver at $17.06 an ounce.

NEWS SUMMARY: Precious metal prices eased back Tuesday amid hawkish Fed chair replacement speculation. U.S. stocks traded mixed as the DJIA crested 23,000 level for the first time ever.

Goldman Sachs Says Gold Is Better Than Bitcoin -Bloomberg
"Gold wins out over cryptocurrencies when assessed on the majority of the key characteristics of money, according to Goldman Sachs Group Inc., which adds that fear and wealth are the core drivers of bullion. 'Precious metals remain a relevant asset class in modern portfolios, despite their lack of yield,' analysts including Jeffrey Currie and Michael Hinds wrote. 'They are neither a historic accident or a relic.' Looking at properties such as durability and intrinsic value, they are still relevant even with new materials discovered and new assets emerging, such as cryptocurrencies, they said. Investors boost the amount of gold in their portfolio as uncertainty increases, making fear the key medium to short-run driver....There's a limited supply of gold and other precious metals in the Earth's crust, whereas in the case of cryptocurrencies, it's easy to create alternatives, meaning there's effectively no control over supply at a macroeconomic level and no intrinsic value due to rarity. Gold is better at holding its purchasing power, and has much lower daily volatility. Bitcoin/dollar volatility has averaged almost seven times that of gold in 2017, the bank said."

bull market This is how bull markets end, Bank of America strategist says -CNBC
"As investors get more confident about the latest leg of the stock market rally, one Wall Street strategist is growing more concerned. 'This is kind of how bull markets end,' Savita Subramanian, equity and quant strategist at Bank of America Merrill Lynch, told CNBC during an interview Tuesday. 'What we're in right now is this sort of euphoria around stocks that's been missing for this entire bull market.' Indeed, the run that began in March 2009 often has been declared 'the most hated bull market in history,' due largely to the lack of investor participation....'There has been no reward for earnings beats, which is a little bit weird,' Subramanian said. 'The bar's getting higher. Investors are expecting good news. When they got good news, it's already in the stocks.'....Bulls in the latest Investors Intelligence survey are up to 60.4 percent, which editor John Gray considers the 'danger zone.' Moreover, he said current patterns are starting to look a lot like 1987 as the market nears the 30th anniversary of Black Monday."

Taylor Impresses Trump for Fed Chairman -Bloomberg
"Stanford University economist John Taylor, a candidate for Federal Reserve chairman, made a favorable impression on President Donald Trump after an hour-long interview at the White House last week, several people familiar with the matter said. Former Fed board governor Kevin Warsh has meanwhile seen his star fade within the White House, three of the people said....The president has always been prone to hiring people with whom he has a good relationship. However, he told the Wall Street Journal in July that he would 'like to see rates stay low,' and Taylor is the namesake of a well-known monetary policy rule that would generally advocate higher interest rates....The Bloomberg dollar index reached its strongest point of the day, gaining as much as 0.33 percent on the report of Trump's interview with Taylor, while 10-year Treasury note prices touched the day’s weakest levels....Yellen’s first term expires in February. Trump has complimented her work and could reappoint her, but many of his aides are recommending against it."

Nobel Board Foolishly Awards Micromanaging Fake ‘Libertarian’ Its Economics Prize -The Federalist
"Last Monday, the Swedish socialists who decide who gets the Nobel Prize in economics chose another proponent of 'behavioral economics,' the University of Chicago’s Richard Thaler. It was a poor choice. Thaler might be very smart and even clever, but his contribution to economics was largely, as he put it himself, to 'make a career stealing ideas from psychologists.' Thaler and other 'behavioral economists' observe that many people do not seem to act purely rationally all the time....Sometimes we need to be 'nudged' - Thaler's most influential book, coauthored with Obama official Cass Sunstein, was titled 'Nudge'....Of course, some of this is true. Yet the core problems with behavioral economics are two-fold. First, Thaler and others stole their ideas from the wrong psychologists. Like many other academic disciplines, psychology was invaded by liberals and socialists in the 1960s and today is dominated by people who self-identify as liberals or far-left....The second problem with behavioral economics arises when its proponents claim their findings undermine or contradict the 'assumption of rationality' that 'provides the foundations for economic theories, predictions, and recommendations'....In 'Nudge,' Thaler and Sunstein called for something they labeled 'libertarian paternalism.'....Here's what they overlooked: You can't choose objectives for people and leave them free to choose among paths to reach them while considering yourself a 'libertarian.'"

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10.16.17 - Ben Bernanke Is Worried, Should You Be?

Gold last traded at $1,303 an ounce. Silver at $17.36 an ounce.

NEWS SUMMARY: Precious metal prices steadied near recent highs Monday on a flat dollar. U.S. stocks hit fresh highs amid upbeat earnings expectations.

Ben Bernanke Is Worried, Maybe We Should Be -Samuelson/Real Clear Markets
"Ben Bernanke is worried - and perhaps we should be, too. As chairman of the Federal Reserve from 2006 to 2014, it was Bernanke, along with others, who prevented the worst recession since World War II from becoming the Great Depression 2.0. Now he fears that, should another sharp recession occur, the Fed won’t be able to contain it. Bernanke - while Fed chairman - adopted what’s called 'unconventional monetary policy.' First, the Fed flooded the economy with money by buying an estimated $3.7 trillion worth of mortgage bonds and U.S. Treasury securities...And second, the Fed gave 'forward guidance' that short-term interest rates would stay low for a long period. In a paper presented recently at the Peterson Institute for International Economics, a Washington think tank, Bernanke judged that these policies - to some extent - had helped end the Great Recession and sustain the recovery. What troubles him now is the possibility that the same policies won’t work in a severe recession or financial crisis in the future....In his paper, Bernanke makes a proposal to allow the Fed to escape this predicament. His plan is complicated and, in practice, would involve the Fed throwing more money at a faltering economy in the hope that it would recover and be stabilized....We may be reaching the limits of the Fed’s power over the economy."

neutron star Scientists discover neutron star collisions produce gold -CNBC
"Scientists have detected the collision of two neutron stars for the first time in history, yielding new insights into physics, the structure of the universe, and the origin of elements such as gold and platinum. Researchers from several institutions detected the evidence 130 million light years away on Aug. 17. They announced the discovery Monday....This is the first time researchers have detected light along with gravitational waves. This allowed them to conclude that light and gravitational waves travel at the same speed, something Albert Einstein predicted about a century ago....'This is like a cosmic-scale atom smasher of energies far beyond what humans will ever be capable of building,' said Andy Howell, a staff scientist at Las Cumbres Observatory/UC Santa Barbara. The discovery also showed that the collisions of neutron stars produce neutron-rich heavy elements, something astronomers had suspected. 'This result provides definitive evidence for the first time that elements such as platinum, gold, and uranium are actually produced in these collisions,' Reitze said. Holding up his grandfather's pocket watch, Reitze said the gold in the watch was 'very likely' produced by the collision of two neutron stars."

Obama's Nobel Prize for "Mind Control" -Pontification Blog
"Former President Barack Obama has just 'won' a second Nobel Prize, this time for the chief 'mind control' researcher whose ideas helped him get elected and reelected. Yet most people do not even know that Mr. Obama had a kind of 'Office of Thought Control' and team of mind-manipulation experts in his White House...Journalists said nothing of this when they reported in October that Richard Thaler of the University of Chicago has been awarded the Nobel Prize for his research creating the field of 'behavioral economics.'....Thaler found that most people make decisions irrationally, but predictably, and that such decisions can be 'nudged' in certain directions by outside influences....Thaler explains how to use such influences in 'Nudge,' a book he co-authored with legal scholar Cass Sunstein. Craig R. Smith and I lay out these disturbing techniques and document how the Obama Administration used them in our book The Great Withdrawal....In 2008, Sunstein and Thaler assembled a team of behavioral scientists to help elect Obama. Sunstein headed Obama’s Office of Information and Regulatory Affairs from 2009 until August 2012...Sunstein has sought to make taxpaying a 'celebration,' writing that 'You cannot be for rights and against government….There is no liberty without dependency.' This is the kind of mind-twisting Double-Think found in Big Brother’s propaganda in George Orwell’s novel Nineteen Eighty-Four." Full story

Will Dow 23,000 inspire retreat or rally on Wall St? -USA Today
"If Wall Street bulls are right, traders on the floor of the New York Stock Exchange will soon be wearing 'Dow 23,000' rally caps. Dow 23,000 - which is just 128 points away - would be more than just another impressive number. It would be a fresh reminder that U.S. stocks are at yet another all-time high. And that approaching milestone poses an age-old dilemma for investors: Is getting into the market at lofty levels a good or bad idea?....As of Friday, the Dow has appreciated 15.7% in 2017 to 22,872 - blowing past 20,000, 21,000 and 22,000 along the way....Some Wall Street pros say hold off on buying a souvenir 'Dow 23,000' cap because it likely will be out of style soon, and replaced by 'Dow 24,000' or 'Dow 25,000' hats....But not everyone is calling for the Dow to run away to the upside. 'It would be hard for me to get wildly bullish at Dow 23K,' says Bill Hornbarger, chief investment officer at St. Louis-based money-management firm Moneta Group....'This is when investors have to be on guard,' Hornbarger says, noting that stocks tend to produce lower returns when valuations are at lofty starting levels as they are now. For investors with a cautious streak, Chris Rupkey, chief financial economist at MUFG in New York, offers this advice: 'You might want to take some chips off the table. The Dow is up more than 15%, so you might want to consider locking that gain in.'"

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