An endearing quality of a late stage bull market is that it expands the universe of what’s possible. Somehow, rising stock prices make the impossible, possible. They also push the limits of the normal into the paranormal.
This happens almost every time Bigfoot is in front of a camera. [PT]
Cartoon by Gary Larson
Last week, for instance, there was a Bigfoot sighting near Avocado Lake in Fresno County, California. But it wasn’t just one Bigfoot. According to a local farmer, there was a family of five or six Bigfoot running across his ranch in the middle of the night. Paranormal expert Jeffery Gonzalez offered the following Bigfoot sighting anecdote:
“One of them, which was extremely tall, had a pig over its shoulder. And the five scattered and the one with the pig was running so fast it didn’t see an irrigation pipe and it tripped, with the pig flying over.”
What to make of it? Bigfoot sightings, no doubt, are pro-growth. They’re bullish for stock prices. So, too, are warnings from North Korea that nuclear war “may break out at any moment.”
How do we know these two unrelated events are bullish? Because if you plot the S&P 500’s price movement since their occurrences, you’ll find that the market is up. There is a direct – albeit false – correlation.
And these days a correlation of any kind is what matters. No one cares that correlation does not imply causation. Such a pesky detail doesn’t matter to Phillips Curve adherents. Why should it matter for anything else?
Indeed, there are plenty of things that used to matter, which no longer matter. For example, stock valuations don’t matter. Profits don’t matter. Most of all, deficits don’t matter.
Occasionally, Bigfoot will allow people to make photographs of him, but there are certain conditions: for instance, the camera used for taking the picture has to be the absolutely crappiest camera in use on the entire planet at that moment. Leave your Hasselblad at home – it’s not going to work. [PT]
The Greatest Fools of All
The point is an eight-year run of rising stock market indexes has suspended, if not eradicated, the natural laws of the universe. What was once considered rash or ridiculous is now shrewd and savvy. Conversely, tried and true investment principles, including evaluating business fundamentals, are for losers who lack imagination.
The proof of the pudding is in the eating, goes the maxim. Certainly, investors are lapping up this market like boysenberry funnel cakes at the county fair. They can’t get enough of it.
They will stand in line in the hot sun for hours to buy Amazon stock at $1,000 per share at a price-to-earnings ratio above 250. Because in this late stage bull market, growth and revenue are where it’s at. That’s what today’s savvy market participants want. They don’t care if, like farming, the attainment of growth and revenue comes at a loss.
To be fair, Amazon no longer operates at a loss. Last …read more
Il n’y a rien à defender – by Vidocq
Dr. Marc Faber, author of the Gloom, Boom and Doom Report
Photo credit: Michael Wildi / RDB
Il n’y a rien à defender – There is nothing to defend
Personne n’a lu ce qui a été écrit. – Nobody read what was written.
Personne n’a pensé avant d’agir, comme la plupart des gens de nos jours. – No one thought before acting, like most people nowadays.
L’homme que tu pends est l’homme que tu as fait, pas l’homme que tu tiens. – The man you hang is the man you made, not the man you hang.
Pour ceux qui n’ont pas entièrement lu la lettre de Faber, Nous vous confrontons, Vous qui suspendez quelqu’un sans jugement, sans contexte, et parce que vous êtes égoïste et paresseux, vous, une auto-émeute.
– To those who have not fully read the Faber letter, We confront you, you who hang someone without judgment, without context, and because you are selfish and lazy, you, a self made irrational mob.
By this time anyone reading this particular article on Acting Man will know about the controversy surrounding Marc Faber these last days, when a single paragraph of many from his October 2017 newsletter was published out of context. Of the now many many comments that have been written or spoken by various people in a wide variety of media, we have found none who have actually read the entire report out of which a single paragraph was published beyond the original sent to subscribers of the Gloom Doom Boom Report.
However, what was not published, was the entire letter. We offer it here, in its entirety, which you may download now from the link further below. We urge you to read it from beginning to end.
History is factually replete with the rise and decline of lucky nations. That the favored nations of our time are now threatened by their own bad choices does not change the past, nor does it change the repeating of that past. Saying it is not so is not factual, but is wishful thinking. It is clearly debatable what of history should be remembered and serve as a useful lesson.
The October issue of the Gloom Boom Doom report was an in depth look at some of the more important economic and social questions of our day, placed in the broader framework of history. We suggest strongly that you read the full Gloom Doom Boom letter which we provide here and then decide for yourself what was really said by Marc Faber.
Equal Opportunity Offenders – What Is One “Allowed” To Say? By PT
Is Dr. Faber a racist? Perhaps one should ask his Thai wife if she thinks he hates her or considers her inferior. Or maybe one should ask his mixed-race daughter what she thinks about it. We actually happen to know her personally and although we only met her on one occasion, our educated guess is that her reaction to anyone posing such an absurd …read more
Discounting the Present Value of Future Income
Last week, we discussed the ongoing fall of dividend, and especially earnings, yields. This Report is not a stock letter, and we make no stock market predictions. We talk about this phenomenon to make a different point. The discount rate has fallen to a very low level indeed.
We add this chart to provide a slightly different perspective to the discussion that follows below (and the question raised at the end of the article). This is a very simple ratio chart, which focuses on non-financial corporate debt in particular, as neither consumer debt nor government debt can be considered “productive” by their very nature – the latter types of debt are used for consumption, which they “pull forward” (as an aside, we don’t believe there is anything wrong with consumer debt per se, but it is not “productive”). As the recommendations of Keynesians on combating economic downturns indicate, they have a slight problem with the sequencing of production and consumption. They favor measures aimed at boosting demand, i.e., they want to encourage consumption, which is tantamount to putting the cart before the horse. The chart above shows the ratio of GDP to total non-financial corporate debt – and obviously, GDP is not really an ideal measure for this purpose, as Keith also mentions below (GDP has many flaws, and its greatest flaw is the underlying idea that “spending” is what drives economic growth; not to mention that it seems not to matter what the spending actually entails – even Keynesian ditch digging or pyramid building would “add to GDP”, but would it represent economic growth? That seems a rather audacious assumption – in fact, it should be obvious that such activities would diminish rather than enhance society-wide prosperity). In that sense it would actually be more useful to compare corporate debt to gross industrial output (for the sake of completeness we add the chart in the addendum). We noticed though that it doesn’t make much of a difference in terms of the general trend, and we don’t have pre-2005 data for gross output, so we decided to go with GDP. This allows us to depict a very long-term chart of “debt productivity”. We should add that we believe this is quite a legitimate way of presenting it – Keith compares growth ratios, which seems to be very useful in highlighting business cycle fluctuations, but slighgtly less useful in showing the long term trend in the relationship between debt accumulation and economic output. [PT] – click to enlarge.
Discount in stocks is how you assess the present-day value of earnings expected to occur in the future. For example, if the discount rate is 10%, then a dollar of earnings per share at Acme Piping next year is worth $0.90 today. At a 1% discount, it’s worth $0.99. As you look forward many years, the difference between these rates is very large.
A buck of earnings at 10% discount = $1.00 + $0.90 + $0.81 …read more
A Big Reference Chart Collection
Our friends at Incrementum have created a special treat for gold aficionados, based on the 2017 “In Gold We Trust Report”. Not everybody has the time to read a 160 page report, even if it would be quite worthwhile to do so. As we always mention when it is published, it is a highly useful reference work, even if one doesn’t get around to reading all of it (and selective reading is always possible, aided by the table of contents at the beginning).
The performance of major asset classes since gold bottomed in July of 1999. Despite the stock market outperforming gold handily since 2011, it is still lagging behind quite a bit over the past two decades. So it is clear what one should rather have owned. As far as we are concerned, for a variety of reasons we do not believe that gold’s secular bull market is over just yet, despite the steep correction from 2011 – 2015 (or 2013 in terms of most non-dollar currencies). The beginning of the new uptrend (gold is already up about 25% from its low) is in many ways reminiscent of the beginning of the bull market, as it is a halting affair with many short term setbacks, accompanied by great skepticism. The current year is particularly remarkable, because gold had every reason to decline, but up until recently had actually outperformed every other major asset class (the stock market only managed to catch up with it very recently). Gold has begun to strengthen ever since the Fed’s rate hike campaign began – regular readers may recall that we expected this to happen and asked them to “bring it on”. This is counter-intuitive and the consensus certainly expected the exact opposite outcome. In reality it is both logical and telling. As an aside: if we had added the CRB to this chart, you would see that it has actually lost 3.2% since July of 1999. We refrained from adding it because the CRB does not properly depict the price performance of commodities. Its performance includes the futures roll-over effect, which leads to huge distortions over time. A spot price index looks completely different and would show a respectable gain in commodity prices since 1999 (and it should be obvious that with crude oil trading at $50 instead of $10 and copper nearly at $3 instead of 40 cents, etc., that commodities are generally definitely not cheaper than in 1999/2000). Unfortunately we couldn’t find such an index at stockcharts, so we decided to rather leave commodities out – click to enlarge.
Taking the reference idea a step further, Ronnie and Marc have extracted all the charts presented in the report and collected them in a separate chart book, which we hereby make available as a download in PDF format (the link is at the bottom of this article).
It is probably no exaggeration to call it the most comprehensive collection of gold charts available anywhere. All kinds of …read more
The prices of the metals shot up last week, by $28 and $0.57.
Heavy metals became pricier last week, but we should point out that the stocks of gold and silver miners barely responded to this rally in the metals, which very often (not always, but a very large percentage of the time) is a sign that the rally is unlikely to continue or hold in the short term. [PT]
Last week, we said:
“One way to think of these moves is as the addition of energy into the market. Like tossing a pebble into a still pond (not quantity of water, but energy that perturbs it). Once the speculators get the idea that gold and especially silver should go up, well it becomes self-fulfilling. Statements by the Fed, the ECB, or even the fatboy who rules North Korea can all have an effect.”
That described this week perfectly, especially Friday morning. The Consumer Price Index came in below the Fed’s target. It was up 1.7%, below the 1.8% expected and 2% Fed policy target. This news ignited a 20-cent increase in the price of silver within minutes.
We have to take a moment to savor the irony. Suppose the economy is underperforming Fed targets. And therefore the Fed will do more of what it had been doing, during which time the prices of gold and silver had been falling. But this time — so the theory goes — the increase in the quantity of dollars will cause the prices of the metals to go up.
Actually, headline CPI is already above the Fed’s target, as its rate of change amounted to 2.2% y/y. However, so-called “core” CPI (excludes food and energy prices on account of their volatility) came in at slightly less than 1.7% y/y, which the markets evidently considered a “miss” in terms of achieving the Fed’s stated target rate (an utterly bizarre and quite frankly outright dangerous aim to pursue). A brief comment on Keith’s remarks below: it is true that these month-to-month data releases are essentially meaningless. However, the increase in the money supply over time does lead to a rise in prices across the economy roughly to the extent to which it exceeds the growth in the production of goods and services. But it does so in an uneven manner – not all prices increase at the same time or to the same extent – some of them will even fall (the so-called “general price level” is a mirage – in fact, it cannot be calculated, as there exists no fixed yardstick with which to “measure it”, even if one is prepared to ignore the logical fallacy of adding up the prices of disparate goods and averaging the result). Moreover, in the short to medium term an increase in the demand for money (cash balances) can overcome the effects of a surging money supply. In a well-developed economy, the demand for money usually only rises significantly during times of crisis (modern payment systems …read more
The Dow’s march onward and upward toward 30,000 continues without a pause. New all-time highs are notched practically every day. Despite Thursday’s 31-point pullback, the Dow is up over 15.5 percent year-to-date. What a remarkable time to be alive.
The DJIA keeps surging… but it is running on fumes (US money supply growth is disappearing rapidly). The president loves this and has decided to “own” the market by gushing about its record run. During his campaign he professed to worry about the “giant bubble”. We happen to think that it is probably best for a president not to talk about the stock market at all, but the Donald evidently couldn’t resist. One thing that continues to be quite satisfying is this quote by Paul Krugman on election night, when stock market futures plunged after it became clear that the Donald would beat Hillary: “It really does now look like President Donald J. Trump, and markets are plunging. […] I guess people want an answer: If the question is when markets will recover, a first-pass answer is never.” Krugman’s predictions are often devastatingly wrong, but rarely this fast. [PT] – click to enlarge.
President Donald Trump is pumped! As Commander in Chief, he believes he possesses divine powers. He can will the stock market higher – and he knows it. For example, early Wednesday morning he blasted out the following Tweet:
“Stock Market has increased by 5.2 Trillion dollars since the election on November 8th, a 25% increase.”
Four minutes later, he sent out another Tweet:
“…if Congress gives us the massive tax cuts (and reform) I am asking for, those numbers will grow by leaps and bounds.”
Who knows? Maybe President Trump is right. These days even bad reforms – and just about everything else – are good for stocks. And what’s good for stocks is good for everything.
For instance, according to President Trump stock market gains reduce the national debt. He even said so this week. President Trump’s logic for how higher stock prices reduce the national debt was unclear. But it certainly sounds good to say. More importantly, it sounds bullish.
Smart and Savvy Investors
On the other hand, obvious risks and hazards no longer matter. Not the prospect of nuclear war with North Korea will stop this bull market. Not the gold backed yuan oil exchange agreements being developed between Beijing, Moscow, and Tehran, and the implications for the petrodollar’s reserve currency status. Not weak jobs numbers.
So, too, runaway government debt, consumer debt, and corporate debt haven’t fazed the stock market’s trajectory. Because everyone loves debt. Especially bankers. They want more debt so they can buy more stocks.
Nosebleed level valuations don’t matter either. Because, if you haven’t heard, high valuations are no longer high; they’re permanent. Likewise, the beginning of the Fed’s great unwind of its $4.5 trillion balance sheet has hardly elicited a flinch.
The margin-adjusted version of the Shiller P/E ratio (a.k.a. CAPE or PE-10) via …read more
Years ending in 7, such as the current year 2017, have a bad reputation among stock market participants. Large price declines tend to occur quite frequently in these years.
Sliding down the steep slope of the cursed year. [PT]
Just think of 1987, the year in which the largest one-day decline in the US stock market in history took place: the Dow Jones Industrial Average plunged by 22.61 percent in a single trading day. Or recall the year 2007, which marked the beginning of the GFC (“great financial crisis”).
Given that the current year is ending in 7 as well, is there a reason to be concerned, or is the year 7 crash pattern a myth?
The Pattern of the Dow Jones Industrial Average in the Course of a Decade
Below you can see a chart of the typical pattern of the DJIA in the course of a decade. This is not a standard chart. Instead it shows the average price pattern of the DJIA in the course of a decade since 1897.
The horizontal axis shows the years of the decade, the vertical axis the average performance of the index. Thus one can discern at a glance how the index typically performs in individual years depending on what their last digit happens to be.
DJIA, typical pattern in the course of a decade since 1897. Years ending in 7 did tend to be marked by large setbacks on average.
As you can see, in the first half of the decade, i.e. in the years ending in 0 to 4, the DJIA barely rose on average. By contrast, in years ending in 5 (highlighted in yellow above) the performance of the index tended to be particularly strong.
Alas, years ending in 7 (highlighted in red) typically saw a sharp retreat in prices in the second half of the year. Thus it appears as though the stock market is indeed generating a specific pattern in a 10-year cycle. Is this sheer coincidence, or does such a 10-year stock market cycle really exist?
In order to assess that, we will take a close look at the 19th century as well. Due to the length of the 10-year cycle pattern there are basically no other time periods one can sensibly review in this context.
The 10-year cycle in the 19th century
The next chart shows the pattern of the 10-year cycle during the 19th century.
Note: in this time period, average stock price increases were far less pronounced than thereafter. As a result the values on the vertical axis are noticeably smaller.
US stock prices, typical pattern in the course of a decade, 1801 to 1899. In the 19th century prices declined in the second half of years ending in 7 as well. A major reason for the comparatively smaller nominal capital gains stocks generated in the 19th century was of course the use of sound money, i.e., the gold standard. In the absence of incessant money printing, perceptions of risk were markedly different as …read more
Where the Good Things Go
Many gold bugs make an implicit assumption. Gold is good, therefore it will go up. This is tempting but wrong (ignoring that gold does not go anywhere, it’s the dollar that goes down). One error is in thinking that now you have discovered a truth, everyone else will see it quickly. And there is a subtler error. The error is to think good things must go up. Sometimes they do, but why?
Since putting in a secular low at the turn of the millennium, gold is still the by far best performing major asset class, despite suffering a big correction from its 2011 peak. There is good reason to expect that the secular bull market isn’t over yet, regardless of the fact that the market is testing the patience of bulls. This is probably a case of “it will go wherever it needs to go, just not when you think it should”. [PT] – click to enlarge.
First, we think it’s a cop-out to say, “well it’s all subjective.” If it were all subjective, then there would be no way to say that gold is good, and no way to say that it “should” go up. It would be sufficient to say, “gold is $1,276.” Indeed that is all that one could say, if everything were subjective.
Why is gold trading at that price? Subjective preference, nothing more. Will it trade at $12,760? Maybe. If subjective preference changes. One might as well say “if God wills it.”
But it is not all subjective. There is something objectively wrong with the dollar and all of its derivatives such as euro, pound, yuan, etc. They are all slowly failing. Gold is the alternative to holding the dollar.
It is important to keep in mind that most people do not like to buy on speculation. This may be particularly difficult to understand if you are someone who bought gold as a bet on its price. Most people buy, not because they expect a discontinuous change, but simply because they have goals to achieve.
For example, a consumer buys food because he needs to eat. A business buys copper because it manufactures wire, or circuit boards, or chemicals to pressure-treat wood. That’s what businesses do — buy inputs, combine them into a product, and sell it for a profit.
Will copper go from $3.02 to $4.02? Maybe. But that is not why copper-using businesses buy it (at least not in the falling interest cycle — see part IV of Keith’s Theory of Interest and Prices).
Suppose Acme Piping Inc. buys copper at $3.02. It adds $1.98 worth of labor, and turns the metal into pipes. It sells a pound of pipes for $6.00. It spends $5.00 ($3.02 + $1.98). We can say that this $1 of profit is an incentive to produce plumbing.
And there is another incentive. If Acme has a debt of $1,000,000, with a monthly payment of $15,000, then it must sell at least 15,000 pounds of pipes. If not, …read more
If a world conflagration, God forbid, should break out during the Trump Administration, its genesis will not be too hard to discover: the thin-skinned, immature, shallow, doofus who currently resides in the Oval Office!
The commander-in-chief – a potential source of radiation?
This past week, the Donald has continued his bellicose talk with both veiled and explicit threats against purported American adversaries throughout the world. In a cryptic exchange with reporters during a dinner with military leaders, he quipped:
You guys know what this represents? Maybe it’s the calm before the storm. It could be the calm… before… the storm.*
A reporter asked if he meant Iran or Isis which the POTUS responded, “you’ll find out.” Instead of threatening supposed overseas foes with nuclear annihilation, none of whom have taken any concrete military action against the US, why not go after someone who has actually compromised the country’s security, namely Hillary Rodham Clinton!
While some dismissed the comments as typical Trumpian bluster, White House press secretary Sarah Sanders added further ominous overtones when questioned saying they were “extremely serious.” Later in the week, Trump continued to threaten tiny North Korea, this time in not so veiled terms:
“Presidents and their administrations have been talking to North Korea for 25 years, agreements made and massive amounts of money paid hasn’t worked, agreements violated before the ink was dry, making fools of U.S. negotiators. Sorry, but only one thing will work”.**
If war erupts either on the Korean Peninsula or in any other part of the globe that the U.S has wantonly poked its nose into, it can be safely assured that neither Trump nor any of the other “military leaders,” with whom he recently had dinner with will be in the midst of hostilities as the bombs and bullets are being cast about.
No, these laptop bombers will be in safe quarters far away from enemy lines, giving orders, making speeches, and praising the troops, while Congress will be hurriedly passing more “defense” funding legislation further lining the pockets of the military industrial complex.
Too far removed from the battlefield…
Curtailing the Warmongers
The Warmonger-in-Chief, who has repeatedly bragged about America’s military prowess, had a chance to become a part of the organization he constantly gushes over during his youth at the time of the Vietnam War. Yet, he escaped military service, due to the machinations of his father, because of a mysterious foot/toe malady.
All those who avoided being conscripted into America’s disastrous imperial exercise in Southeast Asia during those years, whether it was from phony medical conditions, escaping to Canada or beyond, or going to jail, they did so for justifiable reasons.
The war was immoral, since Vietnam had taken no hostile action against the US and what made it worse, the government drafted thousands of America’s youth to fight it. It is reprehensible that those who got out of military service then are now at the forefront in advocating mass murder (war).
One resolution that would certainly …read more
The True Believer
How is it that seemingly intelligent people, of apparent sound mind and rational thought, can stray so far off the beam? How come there are certain professions that reward their practitioners for their failures? The central banking and monetary policy vocation rings the bell on both accounts. Today we offer a brief case study in this regard.
Minneapolis Fed president Neel Kashkari attacking a block of wood with great zeal. [PT]
Photo credit: Linda Davidson / The Washington Post
Minneapolis Federal Reserve President Neel Kashkari is a man with strong convictions. He is what the late Eric Hoffer would have classified as “the true believer.” According to Hoffer:
“It is the true believer’s ability to ‘shut his eyes and stop his ears’ to facts that do not deserve to be either seen or heard which is the source of his unequaled fortitude and constancy. He cannot be frightened by danger nor disheartened by obstacle nor baffled by contradictions because he denies their existence.”
For starters, Kashkari believes the Federal Reserve, an unelected board of bureaucrats, can crunch economic data into pie graphs and bar charts and draw conclusions as to what they should fix the price of credit at. Moreover, he believes that by fixing credit at the “correct” price, the Fed can somehow “optimize” the economy.
This idea is patently false. Remember, the economy is comprised of billions of people with ever changing interactions. Activities and exchanges are always adapting.
What may be the correct price of credit at one time is precisely the wrong price of credit at another. Only a free market for credit, where rates are agreed to by willing borrowers and lenders, and unobstructed by government decree, can self-correct in real time to properly meet changing supply and demand.
Well Considered Conclusions
But even if it were true that economic data could be used by the Fed to properly fix the price of credit, there is an even greater leap of faith that Kashkari takes with unequaled fortitude. Specifically, Kashkari wholeheartedly accepts data contrived by federal bureaucrats as if it were the gospel truth.
“Inflation breakeven rates” are an attempt to measure the inflation expectations of market participants by comparing two sets of market-derived bond yields (see explanation in the annotation above). As you can see, the market tends to change its mind frequently, and occasionally to a very large extent. As we point out in the annotation, the idea that it is “bad” for the economy if the central bank fails to constantly debase the money it issues has no basis in fact. No other shibboleth held as sacrosanct by the central planners is as utterly bereft of theoretical and empirical evidence as this one. One could essentially call the Fed a faith-based printing company. [PT] – click to enlarge.
These fabricated abstractions are what Kashkari and his cohorts use as the basis for fixing the price of credit to their liking. No doubt, the methodology of using economic data to identify …read more
A Vulnerable System
Parliamentary democracy is vulnerable to the extremely dangerous possibility that someone with very little voter support can rise to the top layer of government. All one apparently has to do is to be enough of a populist to get elected by ghetto dwellers.
Economist and philosopher Hans-Hermann Hoppe dissects democracy in his book Democracy, the God that Failed, which shines a light on the system’s grave deficiencies with respect to guarding liberty. As Hoppe puts it: “Democracy has nothing to do with freedom. Democracy is a soft variant of communism, and rarely in the history of ideas has it been taken for anything else.” At first glance this may strike many people as an exaggeration, but considering the trends that have emerged over the past several decades, it seems difficult to refute this assertion. Particularly since the beginning of the so-called “war on terrorism”, individual liberty has suffered numerous setbacks in Western democracies, while the power of the State has grown to almost unheard of proportions. In a democracy everybody is in theory free to join the psychopathic competition for power (in contrast to the largely rigid power structures prevailing in feudal societies), but all things considered, that is a highly questionable advantage. In fact, in many ways it isn’t an advantage at all. [PT]
Thereafter, political correctness and a belief in multiculturalism in the larger society are helpful. One doesn’t have to be very good in political strategizing, or have strong organizational abilities, or even be intelligent. By jumping through a few hoops, anyone can end up as prime minister in a parliamentary democracy, a major risk currently staring Canada in the face.
Harjit Singh Sajjan is currently Canada’s minister of defense. He was elected in Vancouver South, which is one of the districts with the largest immigrant populations: about 75% of its inhabitants are either first or second generation immigrants. Sajjan received 21,773 votes in the 2015 election. He is new to politics, and it recently turned out he lied about his contribution as a military officer in Afghanistan.
Harjit Singh Sajjan, the defense minister of Canada. How can you represent a country when you are elected by a ghetto? Should society-at-large not have a direct say in who ends up in the top layers of government? In a homogeneous, non-ghettoized society in which most people have similar values, a small community can be seen as a microcosm of the larger society. However, this is not the case in the increasingly multicultural and diverse societies of the West, in which people often have extremely disparate values. Should parliamentary democracies in these cases not move toward a presidential system?
Photo via intoday.in
The Indian community in Vancouver South and the nearby town of Surrey are among the most crime prone in Canada, ridden with gang violence, drug-related crimes, etc. Grooming starts very early on already, with kids nudged into joining criminal gangs in schools.
Sikhs in Surrey and Vancouver South are a collective force. …read more
Too Big to Fail?
Dear Mr. Butler, in your article of 2 October, entitled Thoughtful Disagreement, you say:
“Someone will come up with the thoughtful disagreement that makes the body of my premise invalid or the price of silver will validate the premise by exploding.”
Ted Butler – we first became aware of Mr. Butler in 1998, and as far as we know, he has been making the bullish case for silver ever since. Back in the late 90s this was actually a fairly well-timed case, as silver eventually rose from a low of around $4 in 2000/2001 to a high of almost $50 in 2011, but we neither bought into the “shortage” story (note: one of the reasons why gold and silver are monetary metals is precisely that their above-ground stock is so large that shortages are extremely unlikely to ever develop), nor the idea that nefarious forces kept prices from rising. This is not to say that nefarious forces as such don’t exist, only that they probably have better (and more profitable) things to do. Also, since silver was the best-performing commodity from 2000-2011, they would have to be considered pretty inept. [PT]
I will take you up on your request. You state your case in this paragraph:
“Here are the issues. Silver (and gold) prices are set by paper dealings on the COMEX by a few large speculators (banks and managed money traders), to the exclusion of input from real producers and consumers, making the price discovery process and the resultant price artificial. For the past nearly ten years, CFTC data have indicated that JPMorgan has been the dominant paper silver short seller, along with a few other large banks and as a result of that dominance and control none have ever taken a loss when adding short positions. In addition, for the past six and a half years, JPMorgan has accumulated a massive amount of actual silver (650 million oz) at rock-bottom and self-created depressed prices, all while never taking a loss while shorting silver on the COMEX.”
Silver was in a very strong bull market from 2001 to 2011; the correction since the peak, even though it was quite sizable could well turn out to be part of a longer term bull market. Nothing argues against this idea from a technical perspective. Note the interesting way in which monthly MACD has developed in this context.[PT] – click to enlarge.
In other words, the four issues are:
the price of silver is set exclusively in the futures market (throughout my article, I will refer to silver but what I say is equally applicable to gold also)
JP Morgan and the banks are speculators
the largest speculator has never taken a loss
JP Morgan has accumulated a large amount of metal, as opposed to paper.
Let me first address #3. The others are all integral and I will respond to them at length below.
When I was about 12, I spent every waking moment teaching myself to program computers. …read more