The conventional view of inflation is that it’s not only low, but dangerously low and in need of aggressive encouragement.
But that view is becoming increasingly hard to defend, given all the things that are soaring in price. Consider:
The conventional view of inflation is that it’s not only low, but dangerously low and in need of aggressive encouragement.
But that view is becoming increasingly hard to defend, given all the things that are soaring in price. Consider:
Suddenly it seems that nearly all of The Banks and Bullion Banks are raising price forecasts and rallying around the precious metals. Is this a good thing or a bad thing?
That’s the question, of course. Banks like Goldman Sachs have earned a reputation for leading their clients into taking the opposite side of whichever trade the firm prefers. If you’ve forgotten the origin of this story, here’s a link from 2012:
Silver prices rose nearly 163% from its Coronavirus-panic lows of $11.30 to its peak on August 6 of $29.82. However, following that incredible rise, silver has since fallen dramatically: from its August 6 peak down to its September 23 low of $21.64 is a drop of nearly 28% in just six weeks. As this article is going to press, the precious metal is trading in the middle region of that range at $24.50.
What is ahead for silver? Is this sell-off over, or is there more downside to come?
By David Haggith – Re-Blogged From The Great Recession Blog
I mentioned in a recent article that the weird thing about this recession is that it is the only one in which personal income has gone up during a recession. That, of course, is because of government assistance, which is making it so we don’t have to feel the pain of a recession that the government, itself, caused — through its massive debt, tax breaks for the 1%, reliance on the Fed to solve government’s problems, and most currently through its forced economic shutdown as a response to COVID-19 — something that even the WHO now says was failed policy that should never have happened — even though they helped make sure it did happen!
By Alasdair MacLeod – Re-Blogged From GoldMoney
This article explains the effect of monetary inflation on GDP. Nominal GDP is directly inflated by additional money and credit, so GDP growth is simply a reflection of additional money in the economy. It gives no clue as to the underlying economic situation. Whether the monetary planners know it or not, targeting GDP growth with monetary expansion is a tautology. They only succeed in covering up a deeper recession, the cost of which will become apparent subsequently as the currency’s purchasing power declines. And despite the wealth destruction being wrought by currency debasement,
in the coming months we will see monetary expansion deployed more aggressively. An inflationary solution cannot succeed; but future GDP numbers will be artificially increased, encouraging policy makers to claim some success. But we should understand the simple relationship between increased quantities of money and the gains they impart to GDP, which will mislead macroeconomic analysts into thinking the economy is more resilient than it actually is.
The gold miners’ stocks have just been hammered, plunging to new correction lows. That shattered their indexes’ 50-day moving averages, pounding nails in the coffin of this sector’s recent high consolidation. This necessary correction probably isn’t over yet. It is still small and short compared to this bull market’s precedent, the gold stocks are nowhere near oversold, and they are heading into a seasonal-plunge month.
Seeing the gold stocks rolling over into a correction shouldn’t surprise anyone. They enjoyed a great run, as evident in their leading and dominant sector benchmark the GDX VanEck Vectors Gold Miners ETF. From mid-March’s pandemic stock-panic lows to early August, GDX rocketed 134.1% higher in just 4.8 months! That powerful and fast upleg left gold stocks seriously overbought, necessitating a correction.
Daily coronavirus cases may be down in the United States, but that is no reason to be complacent, especially given that cold and flu season is only a few weeks away, says the nation’s top doctor.
In a roundtable discussion Thursday at Harvard Medical School, Dr. Anthony Fauci warned that “we need to hunker down and get through this fall and winter, because it’s not going to be easy.” He compared the pandemic to the early days of HIV in terms of how quickly it escalated, and how it might continue to escalate, if current trends of low mask-wearing and social distancing continue. “We’ve been through this before,” he said. “Don’t ever, ever underestimate the potential of the pandemic. And don’t try and look at the rosy side of things.”
There can be little doubt that macroeconomic policies are failing around the world. The fallacies being exposed are so entrenched that there are bound to be twists and turns yet to come.
This article explains the fallacies behind inflation, deflation, economic performance and interest rates. They arise from the modern states’ overriding determination to access the wealth of its electorate instead of being driven by a genuine and considered concern for its welfare. Monetary inflation, which has become runaway, transfers wealth to the state from producers and consumers, and is about to accelerate. Everything about macroeconomics is now with that single economically destructive objective in mind.
By Steve Goreham – Re-Blogged From WUWT
Originally published in the August edition of The American Oil & Gas Reporter.
A study published in April by the Fielding School of Public Health at the University of California Los Angeles claims residential natural gas causes dangerous indoor and outdoor air pollution, and proposes to eliminate gas from California homes. But the study, Effects of Residential Gas Appliances on Indoor and Outdoor Air Quality and Public Health in California, lacks accuracy and perspective, as discussed in my paper criticizing the study that was published in June. Natural gas is a low-cost, nonpolluting fuel for heating, cooking, industrial use, and generating electricity.
Even though the silver price has surged over the past two months, we haven’t seen anything yet. Step aside, Tesla. Watch what happens when investors begin to understand the true meaning of “STORE OF VALUE.” I can assure you; Tesla is not a store of value but rather a perfect example of the 2000 TECH-BUBBLE 2.0.
Unfortunately, the glitz, glamor, and allure of Technology will only last as long as the world is capable of supplying lots of cheap and available oil. Technology doesn’t really solve problems; it just consumes one hell of a lot more energy with the illusion of a FIX. Tesla isn’t solving our problem with fossil fuel addiction. Without the burning of one hell of a lot of oil, natural gas, and coal, Elon Musk wouldn’t be able to roll just one of his Model 3 Electric vehicles off the assembly line. This is the BAD JOKE that most “Renewable Energy Aficionados” would like you to ignore.
We’ve been publishing updates recently after days when the silver price has spiked up. Now, after Tuesday’s trading action, silver trades over $26. Its price moved up over two bucks (about 8%).
[This morning – Aug 7 – Silver is trading around $28 per ounce. –Bob]
The long pattern since the peak price hit back in 2011 has been that a rise in price accompanies rising abundance. That is, more metal comes to market at higher prices. Supply and demand, and all that stuff they taught back in Econ 101.
According to the data released by Mexico and Peru’s governmental mining data, domestic silver production continued to be depressed in May. Interestingly, the production data just released from Mexico’s INEGI shows that the country’s silver production in May was even less than what they reported for April.
I first wrote about this in my article, World’s Two Largest Silver Producers Mine Supply Cut Drastically In April. The combined silver production loss from Mexico and Peru in April was 432 metric tons or 53% versus the same month last year. Peru accounted for the largest of the decline in April at 237 metric tons (mt) compared to 195 mt for Mexico.
However, Mexico’s silver production in May dropped to 298 mt compared to 301 mt in April. Here is the combined silver production by Mexico and Peru from April 2019 to May 2020:
Silver investment demand is exploding in recent months, skyrocketing higher in wildly-unprecedented fashion! That has catapulted silver sharply higher since mid-March’s COVID-19-lockdown stock panic. Accelerating even in this usually-weak summer season, the massive capital inflows deluging into silver show no signs of abating. This is very bullish for silver, yet most traders remain unaware it is happening.
While silver prices are fairly-widely followed, the data revealing the underlying fundamentals driving this metal is sparse. The best silver global supply-and-demand data is only published once a year by the venerable Silver Institute in its outstanding World Silver Surveys. The latest covering 2019 was released in April, and is essential reading for all traders interested in silver. One key trend is very relevant to today.
Last year global silver demand edged up an ever-so-slight 0.4% to 991.8m ounces worldwide. Every demand category fell except for two, net physical investment and net investment in exchange-traded funds. The former rose a respectable 12.3% to 186.1m ounces. It makes sense investors’ interest in silver should grow with its price climbing 15.3% in 2019. That translated into far faster growth in silver ETFs.
The gold miners’ stocks are blasting higher, just achieving major new secular highs! Traders are flocking back to gold stocks as the metal they produce relentlessly advances on strong investment demand. That is atypical during market summers, but the pandemic has made for unprecedented times. This gold-stock upleg is big, but doesn’t look excessive yet. It should keep marching with investment capital flowing into gold.
With these red-hot stock markets fueled by extreme Fed money printing, the small contrarian gold-stock sector has largely remained overlooked. But the gold miners’ gains since March’s stock panic have been awesome. The leading and dominant gold-stock benchmark is the GDX VanEck Vectors Gold Miners ETF. Its impressive $16.9b in net assets this week doubled all the rest of the US gold-stock ETFs combined!
Gold’s powerful post-stock-panic upleg hasn’t enjoyed buying support from the gold-futures speculators. These influential traders often drive and even dominate major gold-price trends. But they’ve been subtly selling into gold’s sharp recent rally. Their dogged skepticism is actually very bullish for gold in coming months. Gold-futures speculators are amassing big gold-futures-buying firepower that will be unleashed.
The maelstrom of extreme fear spawned by mid-March’s stock panic even briefly sucked in gold. It had surged to a 7.1-year secular high of $1675 during the initial weeks of that heavy stock-market selling. But once that went panic-grade, which is major stock indexes plummeting 20%+ in 2 weeks or less, even gold was dumped in the frantic dash for cash. Similar to prior panics, gold plunged 12.1% in just 8 trading days.
The doyenne of MMT, Stephanie Kelton, has published a book this week explaining modern monetary theory. This article examines the foundations of MMT which Kelton explained in an earlier video released last year.
Macroeconomics has become so far removed from reality that its practitioners cannot understand what is happening in the real economy. Never has this been more obvious than today. While they claim to be economically literate, macroeconomists are in thrall to their paymasters; a combination of government, quasi-government and financial institutions with a vested interest in not looking too closely at the full consequences of government economic and monetary policies. From this neo-Keynesian macro world, the latest spinoff is modern monetary theory, which is little more than a logical extension of Keynesianism —justifying intervention by the state and the use of fiat currency being expanded limitlessly. MMT is the end of the line for arguments based on macroeconomic fallacies that have their origin in Keynes.
Gold investment demand remains strong, buoying the yellow metal and its miners’ stocks. Investors have continued actively diversifying into gold despite soaring stock markets and weaker summer seasonals. The Fed’s extreme money printing fueling these precarious stock-market heights is perilously inflationary, making upping gold portfolio allocations essential. This ongoing capital shift is likely to keep pushing gold higher.
The dominant driver of gold’s major price trends is investment demand. While it isn’t the largest demand category, it varies greatly depending on global-financial-market conditions. The best global gold supply-and-demand data is only published quarterly by the venerable World Gold Council, in its must-read Gold Demand Trends reports. They highlight the big volatility inherent in gold investment demand in recent years.
If history is a guide, an oil price boom is coming after the pandemic-generated crash.
While the near-term demand picture is highly uncertain, as people reconsider their travel and work habits, this latest bust, the worst of them all, is unlikely to hasten the demise of oil.
“The only way to get away from the boom-bust cycle is to get off of oil,” said Bob McNally, president of Rapidan Energy Group and the author of a book on the topic called Crude Volatility. “That’s really tough because there are no scalable substitutes. As a result, we expect a thirstier world will collide into insufficient supply, and crude prices will have to rise sharply to balance the market.”
The mid-tier gold miners in the sweet spot for stock-price upside potential have enjoyed a massive run since mid-March’s stock-panic lows. They’ve already more than doubled in the couple months since! Their just-released Q1’20 operational and financial results reveal whether these huge gains are righteous fundamentally, whether this uptrend is likely to persist, and how COVID-19 shutdowns are affecting gold miners.
Interestingly the leading mid-tier gold-stock ETF is the famous GDXJ VanEck Vectors Junior Gold Miners ETF. Despite its misleading name, GDXJ is overwhelmingly dominated by mid-tier gold miners. They produce 300k to 1m ounces of gold annually, between the smaller juniors and larger majors. The mid-tiers offer an excellent mix of sizable diversified production, output-growth potential, and smaller market caps.
Rev. Jesse Jackson is bucking many of the environmentalists who believe natural gas production perpetuates a world in which climate change is disproportionately hurting black communities.
Jackson is prodding local, state and federal officials in Illinois to okay the construction of a $8.2 million, 30-mile natural-gas pipeline built for a community, Axios noted in a report Monday addressing the reverend’s contrarian position.
The Pembroke, Illinois pipeline would shuttle natural gas into an area of the state that suffers from high energy prices, according to Jackson.
There’s a larger problem: aligning retiree spending with Social Security checks
Social Security beneficiaries might not receive much of a cost-of-living adjustment next year — and some say recipients might not get anything at all.
COLA is linked to the consumer-price index, which has suffered lately because of low oil prices. Based on the CPI data between January and April of this year, COLA for next year would be zero, according to Mary Johnson, a Social Security policy analyst for The Senior Citizens League. There are still five months until the administration announces the COLA for 2021, which occurs in October.
Civil rights leaders are criticizing a common talking point among environmentalist activists who say hydraulic fracking disproportionately hurts black people and other minority communities.
Revs. Al Sharpton and Jesse Jackson and National Urban League president Marc Morial said they oppose an abrupt move away from fracking, according to an Axios report Monday. They said the technique for producing natural gas helps black people who struggle with high energy prices.
Morial was particularly rough on activists who said their anti-fracking position is tie in with social justice matters.
So, the stock market has dropped. Every government in the world has responded to the coronavirus with drastic, if not unprecedented, violations of the rights of the people. Not to mention, extremely aggressive monetary policy. And, they are about to unleash massive fiscal stimulus as well (for example, the United States government is about to dole out over $2 trillion worth of loot).
The question on everyone’s mind is what will be the consequences?
The standard analysis is that governments will print massive amounts of money. And, this will, of course, cause massive inflation (i.e., skyrocketing consumer prices). There’s just one problem with this analysis.
The carnage in the silver miners’ stocks has been apocalyptic, fueled by the astounding COVID-19 stock panic. As terrified traders frantically dumped everything and ran for the hills, silver and its miners’ stocks crashed. That catastrophic anomaly has potentially created epic contrarian buying opportunities. The silver miners’ recently-reported Q4’19 results reveal whether their fundamentals support a massive rebound.
As long-time silver-stock traders are painfully aware, this tiny sector is no stranger to adversity. Only the most-hardened contrarians dare chasing the white metal’s occasional monster skyrocketings. Back in late February, silver was rallying nicely as gold surged over $1600 on mushrooming COVID-19 fears. But over the next 17 trading days silver collapsed 35.8%, with nearly 3/4ths of that loss in the final week alone!
The mid-tier gold miners’ stocks have been annihilated with COVID-19 fears infecting traders’ sentiment. They crashed with gold getting hammered on extreme gold-futures selling! With blood in the streets, the buy-low opportunities are phenomenal. The fundamentally-superior mid-tier gold miners have epic upside potential during gold’s next upleg. This key sector just reported outstanding Q4’19 results on higher gold.
The sheer carnage in gold-stock-land has been jaw-dropping! In late February, the gold-stock sector per its leading benchmark GDX VanEck Vectors Gold Miners ETF edged up to a 3.5-year high slightly above early September’s. That was fueled by gold’s $1600 breakout surge on COVID-19 fears. Yet as I warned in an essay the trading day before GDX’s peak, gold’s surge was peculiar and precarious lacking normal drivers.
By Associated Press- Re-Blogged From Headline Wealth
At Rosendale Dairy, each of the 9,000 cows has a microchip implanted in an ear that workers can scan with smartphones for up-to-the-minute information on how the animal is doing — everything from their nutrition to their health history to their productivity. Feed is calibrated to deliver a precise diet and machines handle the milking. In the fields, drones gather data that helps bump up yields for the row crops grown to feed the animals.
Technology has played an important role in agriculture for years but it’s become a life and death matter at dairy farms these days, as low milk prices have ratcheted up pressure on farmers to seek every possible efficiency to avoid joining the thousands of operations that have failed.
The benefits of a deflation of prices brought about by a combination of sound money and markets free from government intervention have been demonstrated to be the best economic environment, the denial of which in favour of inflationary financing has led to repeated monetary and systemic failures.
This article explains how this has come about and puts the record on deflation straight. The development of macroeconomic theory had to deny the benefits of a deflation of prices, unbelievably telling us we need higher prices to stimulate our consumption.
Deflation and investment funded by savings is a far better, natural economic environment than the false gods of easy debt and money printing. There can be no return to the stability of gentle price deflation without seismic shifts in economic thinking and government responsibilities.
By Megan Zogby – Re-Blogged From Headline Wealth
As college textbook prices have increased 88 percent since 2006, education reformers wonder how universities can make books more affordable. One simple thing they could do is to stop selling textbooks with absurdly high mark-ups, the difference between the cost incurred by the bookstore for textbooks and the price at which they’re sold. While some progress has been made within the UNC system, much room for improvement remains.
The University of North Carolina at Charlotte, for example, signed a contract with Barnes and Noble in 2009 to merge its university bookstore with Barnes and Noble. That conjunction promised students lower book prices, bringing down the mark-up from 23 percent to 18 percent. However, merging the bookstore has meant that students still pay higher prices than they would if they bought books from an online competitor or the book publisher. The rationale for the merger may have been affordability, but textbooks remain expensive for students who trust UNC-Charlotte’s bookstore to offer the best price.
By David Middleton – Re-Blogged From WUWT
Brookline passes bylaw banning future use of oil, gas in new buildings
BROOKLINE, Mass. — A Massachusetts town overwhelmingly voted Wednesday night to ban the future installation of oil and gas pipes in future construction projects as well as in renovations of existing buildings.
The bylaw, which passed the Brookline town meeting with 210 votes in favor and just three opposing, would be the first such prohibition in the state of Massachusetts.
Keith Weiner is a bright guy. I Re-Post his articles to my blog regularly. He has a way of clearly getting to true relationships in economics. But even bright guys make mistakes.
One recent theme of his is trying to explain why prices rise and fall. Now this is a very complex subject, and there are multiple reasons why sometimes a given good or service costs more (or less). And, causes don’t happen all at once – there may be lags of years.
Keith likes to talk about Useless Ingredients which are mandated by federal, state, and local politicians. Keith is very right on this.
The silver miners are finally enjoying higher prevailing silver prices, a great boon for this sector. Silver surged this past summer after gold’s first new bull-market highs in several years rekindled enthusiasm for precious metals. The long-neglected silver stocks rallied strongly with their metal. Their recently-reported Q3’19 results reveal whether those gains are justified, and how much fundamentals improved on higher silver.
Four times a year publicly-traded companies release treasure troves of valuable information in the form of quarterly reports. Required by the US Securities and Exchange Commission, these 10-Qs and 10-Ks contain the best fundamental data available to traders. They dispel all the sentiment distortions inevitably surrounding prevailing stock-price levels, revealing corporations’ underlying hard fundamental realities.
By Tim Benson, The Heartland Institute – Re-Blogged From WUWT
A report released in October 2019 by the White House Council of Economic Advisors (CEA) estimates increased oil and natural gas production from hydraulic fracturing (“fracking”) saves American families $203 billion annually on gasoline and electricity bills. This breaks down to $2,500 in savings per family per year.
“From 2007 to 2019, innovation in shale production brought an eight-fold increase in extraction productivity for natural gas and a nineteen-fold increase for oil,” the report states. “These productivity gains have reduced costs and spurred production to record-breaking levels. As a result, the United States has become the world’s largest producer of both commodities, surpassing Russia in 2011 (for natural gas) and Saudi Arabia and Russia in 2018 (for oil). CEA estimates that greater productivity has reduced the domestic price of natural gas by 63 percent as of 2018 and led to a 45 percent decrease in the wholesale price of electricity. Shale production has also reduced the global price of oil by 10 percent as of 2019.”
Today, we want to say two things about negative interest rates. The first is really simple. Anyone who believes in a theory of interest that says “the savers demand interest to compensate for inflation” needs to ask if this explains negative interest in Switzerland, Europe, and other countries. If not, then we need a new theory (Keith just presented his theory at the Austrian Economics conference at King Juan Carlos University in Madrid—it is radically different).
Second, negative interest perversely incentivizes some very perverse behaviors.
For example, suppose you could borrow at -1% and just hold the cash. Your asset stays the same, while your liability is going down. You are making a positive return for doing nothing productive! It should be obvious to an 8th grader, though perhaps not a PhD economist, that there is something wrong with this. Grossly, monstrously wrong.
“On my first day as president, I will sign an executive order that puts a total moratorium on all new fossil fuel leases for drilling offshore and on public lands. And I will ban fracking—everywhere.” So tweeted Elizabeth Warren, the likely Democratic presidential nominee. (Fracking combines horizontal drilling and hydraulically-fracturing shale rock with high-pressure liquids to force open existing fissures and extract “unconventional” oil and gas.) In the intention to ban all fracking in the US, she joins Senators Bernie Sanders and Kamala Harris, her fellow presidential candidate hopefuls. In the demonization of fossil fuels and support for some variant of the multi-trillion dollar “Green New Deal”, Warren is not alone among the candidates running in the Democratic presidential primary. Nearly every nominee for the Democratic primary, including the other leading contender Joe Biden, has signed on to Alexandria Ocasio-Cortez’s grand plan to save the planet from a 12-year deadline to global extinction.
Growing evidence of an economic downturn despite unprecedented monetary inflation since Lehman means a new credit and systemic crisis is becoming increasingly certain. In an attempt to prevent a new crisis developing, this time the scale of monetary inflation by the authorities will have to be even greater. The rise in the price of gold since December 2015 and its break-out from a three-year consolidation period earlier this year confirms that the risks of a credit and systemic crisis undermining fiat currencies have been increasing for some time.
It is now likely that in future portfolio managers will increase their investment allocations in favour of gold and actively consider investing in silver and platinum as well. It is in this context that this article looks at the price relationships between the three precious metals and their relevant monetary and investment characteristics.
This article posits that there is an unpleasant conjunction of events beginning to undermine government finances in advanced nations. They combine the arrival of a long-term trend of rising welfare commitments with an increasing certainty of a global-scale credit crisis, in turn the outcome of a combination of the peak of the credit cycle and increasing trade protectionism. We see the latter already undermining the global economy, catching both governments and investors unexpectedly.
Few observers seem aware that an economic and systemic crisis will occur at a time when government finances are already precarious. However, the consequences are unthinkable for the authorities, and for this reason it is certain such a downturn will lead to a substantial increase in monetary inflation. The scale of the problem needs to be grasped in order to assess how destructive it will be for government finances and ultimately state-issued currencies.
Explosions at the Philadelphia Energy Solutions (PES) refinery, the largest refinery on the East Coast, sent gasoline futures soaring, but experts say it’s still too early to know the full effects of the incident.
“It is too early to know the full impact the fire at the PES facility will have on summer gas prices and for how long for East coast motorists,” Jeanette Casselano, spokeswoman for the American Automobile Association (AAA), told the Daily Caller News Foundation in an email.
The fire, which started in a butane vat around 4 a.m., set off a series of explosions that rocked neighborhoods miles away. Emergency responders had the fire under control by 7 a.m. and no injuries have been reported.
Market participants are also concerned about the G-20 summit this weekend where it is hoped that President Donald Trump and China’s Premier Xi Jinping will meet to discuss the deepening trade war.
Gold has closed above $1400 for first time since 2013 as investors diversify into safe haven gold to hedge the growing global risks including the risk of much looser monetary policies again and of zero percent and negative interest rates.
Christopher Whalen wrote “Trump is Right to Blow Up the Fed.” He stated:
“Anybody who cares to read the 1978 Humphrey Hawkins law will know that the Fed is directed by Congress to seek full employment and then zero inflation. Not 2 percent, but zero. Yet going back a decade or more, the Fed, led by luminaries such as Janet Yellen and Ben Bernanke, has advanced a policy of actively embracing inflation.”
From the Federal Reserve’s web site:
“The Congress established the statutory objectives for monetary policy—maximum employment, stable prices, and moderate long-term interest rates—in the Federal Reserve Act.”
Oil price is melting down like there’s no tomorrow. How else could we describe the bloodbath? Fresh monthly lows being hit on a daily basis. Slicing through important supports. With such a weak close to the trading week, how will black gold fare the next one? Clearly, the most recent Mexico tariff announcement hasn’t helped and it’s widely felt in the markets, including this one. Better news on the horizon?
Let’s take a closer look at the chart below (charts courtesy of http://stockcharts.com
We generally chart the regular NASDAQ — the NDX, QQQ, and the futures — but when you consider that a mere five momentum names, affectionately given the acronym “FAANG,” comprise nearly 40% of the weighting of the entire index, a glance at the Equal Weight version is not a bad idea. I prefer the First Trust (QQEW) to the Direxion (QQQE) as it seems to chart slightly cleaner and the “EW” is easier to remember.
Watching for nuanced differentiation in the patterns between the QQEW and NDX, it is possible to see the potential for the former to lead a bit. For example, back in August/September of 2018, QQEW marked a divergent high. More recently, the QQEW began to count more like the blue 5th wave extension of (5) of Primary Wave 3 before the NDX shifted from it’s “(B)” wave.
More importantly, though, is that fact that the Equal Weight does not get pulled to such price extremes by the disproportionate momentum of a scant few stocks. The Primary Wave 3 in NDX has stretched all the way to the 223.6% Fibonacci extension as measured in log-scale off the July 2010 low for Primary 2. By contrast, the QQEW hit a more perfect 161.8% Fibonacci extension for it’s Primary wave 3 top.
The disproportionate extension, though, also appears to affect the downside corrective moves.
Over the past several weeks, we have debunked the idea that purchasing power—i.e. what a dollar can buy—is intrinsic to the currency itself. We have discussed a large non-monetary force that drives up prices. Governments at every level force producers to add useless ingredients, via regulation, taxation, labor law, environmentalism, etc. These are ingredients that the consumer does not value, and often does not even know are included in the production process. However, these useless ingredients can get quite expensive, especially in industries that are heavily regulated such as health care.
There is another non-monetary force, and this one is pushing prices down. Producers are constantly finding useless ingredients that they can remove. In the research for his Forbes article on falling wages, Keith discovered that dairy producers found ways to eliminate 90% of the ingredients that go into producing milk between 1965 and 2012. For example, they reduced by two thirds the labor hours that support each cow.
We have a postscript to last week’s article. We said that rising prices today are not due to the dollar going down. It’s not that the dollar buys less. It’s that producers are forced to include more and more ingredients, which are not only useless to the consumer. But even invisible to the consumer. For example, dairy producers must provide ADA-compliant bathrooms to their employees. The producer may give you less milk for your dollar, but now they’re giving you ADA-bathroom’ed-employees. You may not value it, but it’s in the milk.
On Twitter, one guy defended the Quantity Theory of Money this way: inflation (i.e. monetary debasement) is offset by going to China, where they don’t have an Environmental Protection Agency. In other words, the Chinese government does not force manufacturers to put so many useless ingredients into their products as the US government does.
– 3.8% fall y/y in Q1, the seventh straight decline in values – Nationwide
– Nationally, U.K. real-estate market remains ‘subdued’
– Some of the weakness relates to Brexit as economic uncertainty impacts sentiment
London continued to lead the U.K.’s weakening property market at the start of 2019, with prices falling the most since the financial crisis a decade ago.
By Keith Weiner – Re-Blogged From Gold Eagle
Last week, in Part I of this essay, we discussed why a central planner cannot know the right interest rate. Central planner’s macroeconomic aggregate measures like GDP are blind to the problem of capital consumption, including especially capital consumption caused by the central plan itself. GDP has an intrinsic bias towards consumption, and makes no distinction between consumption of the yield on capital, and consumption of the capital per se…between selling the golden egg, and cooking the goose that lays golden eggs.
One could quibble with this and say that, well, really, the central planners should use a different metric. This is not satisfying. It demands the retort, “if there is a better metric than GDP, then why aren’t they using it now?” GDP is, itself, supposed to be that better metric! Nominal GDP targeting is the darling central plan proposal of the Right, supposedly better than consumer price index and unemployment (as Modern Monetary Theory is the darling of the Left).
By Adam Hamilton, CPA – Re-Blogged From Gold Eagle
Gold stocks’ young upleg is gathering steam, marching steadily to higher lows and higher highs. These bullish technicals are gradually improving sentiment, fueling mounting interest in this contrarian sector. That’s helping the gold stocks regain lost ground relative to gold, the driver of their profits. Fundamentals are growing more favorable as gold itself powers higher. All this portends much-bigger gold-stock gains coming.
Despite a strong rebound upleg in recent months, the gold miners’ stocks are still flying under the radars of most speculators and investors. They aren’t aware the gold stocks are running again, and likely don’t realize how massive gold-stock uplegs can grow. That’s unfortunate, because the biggest gains are won early in young uplegs before they are universally recognized. Buying low early on is the key to multiplying wealth.
By Keith Weiner -Re-Blogged From Gold Eagle
On January 6, we wrote the Surest Way to Overthrow Capitalism. We said:
“In a future article, we will expand on why these two statements are true principles: (1) there is no way a central planner could set the right rate, even if he knew and (2) only a free market can know the right rate.”
Today’s article is part I that promised article.
Let’s consider how to know the right rate, first. It should not be controversial to say that if the government sets a price cap, say on a loaf of bread, that this harms bakers. So the bakers will seek every possible way out of it. First, they may try shrinking the loaf. But, gotcha! The government regulator anticipated that, and there is a heap of rules dictating the minimum size of a loaf, weight, length, width, depth, density, etc. Next, the bakery industry changes the name. They don’t sell loaves of bread any more, they call them bread cakes. And so on.
By Adam Hamilton – Re-Blogged From Silver Phoenix
Silver recently started outperforming gold again, a watershed event. For long years this white metal has mostly lagged the yellow one, relentlessly battering silver sentiment. But gold surging into year-end 2018 finally sparked some life into moribund silver. This is a bullish sign, as silver has soared in the past once rising prices reach critical mass in attracting new investment capital. Silver looks to be nearing that point again.
Despite a good finish, 2018 was a rough year for silver. Its price slumped 8.6%, way worse than gold’s -1.6% performance. And that still masks miserable intra-year action. At worst in mid-November, silver had plunged 17.3% year-to-date. That was 2.2x gold’s comparable loss, and at $13.99 silver languished at a major 2.8-year low. A soul-crushing 96% of its early-2016 bull market had been reversed and lost!
By Alasdair Macleod – Re-Blogged From Silver Phoenix
For decades, Western governments have been pursuing a policy of transferring wealth from the public to themselves, their licensed banks and the banks’ favoured customers by means of interest rate suppression and monetary inflation. Consequently, inflation of financial asset prices has benefited the financial sector to the detriment of those employed in the productive economy. Over time, this has badly weakened productive capacity and the long-term ability of the market economy to fund future government spending.
It is a situation which seems bound to eventually lead to major economic and monetary problems. Additionally, global economic prospects have worsened considerably as a result of President Trump’s tariff wars against China and others. Empirical evidence from the 1930s as well as economic analysis illustrate how trade tariffs have a devastating effect on domestic economic activity, a prospect wholly unexpected by today’s economists.
Re-Blogged From Newsmax
The U.S. currency is at its strongest level in 30 years, according to the Economist newspaper’s January 2019 “Big Mac Index.”
The newspaper’s “lighthearted guide to exchange rates” measures the purchasing power of currencies against each other. The gauge also compares the prices of McDonald’s flagship hamburger, the Big Mac, in different countries with the actual exchange rate between the currencies to determine whether a currency is over- or undervalued.
For example, “a Big Mac costs 3.19 pounds in Britain and $5.58 in the United States. The implied exchange rate is 0.57 [pound per dollar]. The difference between this and the actual exchange rate, 0.78, which suggests the British pound is 27% undervalued,” the Economist said.