Let’s take a look at a few graphs of the dollar, from Feb 1, 2013 through Friday May 17, 2013. Yes, I said graphs of the dollar. I’ve priced the dollar in gold first (of course), then silver, the euro, and even the yen. The pattern is obvious. The dollar is going up. I did [...]
Meanwhile, the spread between the interest rate and the dividend yield or earnings yield makes an attractive arbitrage. If you are the CFO of a public company and your shares pay a 4% dividend and you can borrow at 2%, it is practically a “no brainer”. The problem is that incurring debt for no productive...
With all the discussion of the crash of April 12-15, I thought it would be interesting to do a little forensic analysis. Instead of looking at price graphs, let’s look at a graph of the gold basis. Contrary to the currently popular assertion that the gold price crashed due to manipulation, the evidence points to something [...]
To understand what is going on with COMEX stocks, don’t look at the stock level – it will lead you astray. You need the metric I presented at the Gold Standard Institute’s 2009 seminar; one which Professor Fekete thought was the single most important metric to determine stress in the market. The second thing you need to do [...]
I hope this essay provides some food for thought. It is not my intention to insult or belittle anyone, but using humor and cold logic, to help people understand an abstract topic with many counterintuitive principles. The ultimate goal is to protect what you have and make some more (in that order). Gold is money. [...]
Regular readers will know that most traders with a short position in the futures market are not “naked”. It is an easy trap to fall into, to assume that everyone else in the market is the same as the small trader: betting on the likely direction of price. But, this is not the case. The...
In the recent Gold Basis Report, we published a graph showing the open interest in gold and silver futures (i.e. the number of contracts held at any given time). At the time of the crash and in subsequent days, the open interest number decreased only modestly in both metals. A number of people asked me [...]
Barron’s Big Money Poll Bullish Consensus Reaches a Record High This week’s Barron’s magazine contains the latest Barron’s ‘big money’ poll. Evidently they interviewed a herd – there was once again near unanimity on a number of markets. The bullish consensus on US stocks clocked in at a new all time high for the Barron’s [...]
The big picture over the past few months is that markets are experiencing one large adjustment after another, perhaps analogous to the shifting of tectonic plates that create rolling earthquakes and various aftershocks. The first large move was the fall in the yen (rise in dollar/yen), and the change in sentiment towards Apple (AAPL) which [...]
This is a continuation of “What is Pushing Down the Gold Price: Part I” One factor is the lack of rapidly rising consumer prices. If consumer prices aren’t rising, then this eliminates the need to buy gold as a hedge. Gold speculators are like everyone else. They get frustrated waiting for a rapid price gain...
The Last Contango Basis Report
Gold:Silver Ratio spikes over 66!
Yesterday in the Gold Basis Report, we wrote: “…we reiterate that we are cautious about the price of silver (measured in grams of gold) and think the ratio is more likely to rise than to fall.” Little did we know. [...]
Latvian Deflation will Increase their Debt Burden
This article claims that falling prices will increase Latvia’s burden of debt. It is not falling prices, but falling interest rates, that increase the burden of debt (and it is not just Latvia but the whole world, which has falling interest [...]
Are Japanese Banks on the Verge of Insolvency?
“…holdings in [gold] exchange-traded funds fell to the lowest in over four years…” as this article states. But is this a real relationship? Do holdings at the ETF necessarily fall with a falling gold price and rise with a rising gold price? The [...]
Lies, Damn Lies, and Statistics
Homebuilder confidence increased in May. Lumber prices in the last two months? Not so much, down over 20%. When I was a kid, I saw many competing stereo receivers offering higher and higher wattage. It was pretty ridiculous to [...]
If there really was gold manipulation, articles like this one would do an injustice. The author uses the word “indisputable”. I do not think that word means what he thinks it means. According to this article, “Indian inflation eased to [...]
A Picture of Capital Destruction in Germany
Today, the European Central Bank announced that it was cutting interest rates. It also said that it was open to negative deposit rates. We are witnessing nothing less than the metastasis of monetary cancer. A falling interest rate causes the [...]
A flash crash occurs when the bid is either very thin or disappears altogether. Under any selling pressure, the cleared price can fall to any level at least temporarily. By definition and by nature, money is not subject to flash [...]
In the 17th century, the price of Dutch tulips ran up to incredible levels before collapsing, ruining many who participated in the first well-documented bubble. We are not knowledgable about horticulture, but we are sure that those Dutch tulips were [...]
Not too long ago, I wrote dollar backwardation. It’s happening, not in the dollar, but in the euro in Cyprus. Zero Hedge writes the following. Banks have been closed all week, the threat of loss of part of one’s deposits [...]
Bank Deposits – The Final Backstop
Put this in perspective. The government of Cyprus borrowed money it had neither means nor intent to repay. Borrowing, for a government, means selling bonds. The Cyprus banks borrowed money, which for a bank means taking in deposits (among other [...]
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