The Zealous Pursuit of State-Sponsored Collapse

 

When Bakers Go Fishing

Government intervention into a nation’s economy is as foolish as attempting to control the sun’s rise and fall by law or force.  But that doesn’t mean governments don’t meddle each and every day with the best – and worst – of intentions.  The United States government is no exception.

From the “When the government helps the economy” collection: Breaking a few eggs while baking the bridge to nowhere omelet. [PT]

Over the years, layers and layers of interference by various federal, state, and local agencies have built up like grime on a kitchen window.  The grease shines and smells of something fierce.  The layers of government grime also drip and ooze into every crack and crevice of the economy.

These days, for example, it is impossible to carry out a simple private transaction with your barber or barista without some form of government interference.  Has your barber obtained the required license and paid the obligatory fees to be able to legally taper your neck line?  Has your barista’s espresso bean grinder passed city health inspection?

Is the hot Cup of Joe served in a paper cup of appropriate recycled material composition?  Did the hot beverage exceed the legally accepted temperature standard?  Did state and local governments receive their tax exaction upon payment?

The licensing racket – left panel: the basic definition of the racket; middle panel: how long it takes and what it costs to obtain licenses for assorted jobs in the US; right panel: the inexorable growth of rules and regulations. One shouldn’t be surprised that the pace of real economic growth has steadily declined since peaking in the late 19th century (or if one wants to focus on the modern era, since it peaked not too long after WW2). From money supply inflation to regulatory inflation, Leviathan has undermined the economy at every turn by inflating all the stuff we definitely don’t need more of. The pretense is that this is needed to “protect” us (for instance, last year the police courageously protected the citizens of Georgia from the dangers of an unlicensed lemonade stand by arresting its 14-year old female proprietor). Let us be clear: No-one will be allowed to terrorize the community by running an unlicensed lemonade stand or engaging in the high crimes of dispensing unlicensed manicures and haircuts. [PT] – click to enlarge.

When it comes to more complicated matters, where real money’s on the line, government interference is an absolute disgrace.  Did you know that it costs 10 times more to have an appendectomy in the United States than in Mexico?  Is the procedure 10 times better?

Obviously, this is nothing new.  Governments have been regulating and impressing their fingerprints all over commerce since society first granted its leaders the opportunity.  People are so accustomed to it that they accept government intervention as necessary to better their lives.

When it comes to price fixing, wage controls, and dictating oil production, things quickly go haywire.  This is because prices, wages, and resources have their own …read more

The Santa Claus Rally is Especially Pronounced in the DAX

 

The Gift that Keeps on Giving

Every year a certain stock market phenomenon is said to recur, anticipated with excitement by investors: the Santa Claus rally. It is held that stock prices typically rise quite frequently and particularly strongly just before the turn of the year.

Unbeknown to many, Santa Claus paid a high price for enriching investors [PT]

I want to show you the Santa Claus rally in the German DAX Index as an example. Price moves are often exaggerated in the German stock market, which leads to quite pronounced – and hence profitable – seasonal trends.

Recurring trends can be discerned at a glance on a seasonal chart

The chart below is not a standard chart that depicts a price trend over a specific time period. Rather, this seasonal chart shows the typical seasonal pattern of the German DAX Index. It illustrates the average returns generated by the index in the course of a year over the past 20 years. The horizontal axis shows the time of the year, the vertical axis shows the price information indexed to 100.

DAX, seasonal pattern over the past 20 years. The Santa Claus rally lies immediately ahead

The Santa Claus rally starts in mid-December!

The positive seasonal period near the end of the year is highlighted in dark blue on the chart. The Santa Claus rally in the DAX Index begins on December 13 and typically lasts until January 02 of the next year.

A Disproportionate Gain in Stock Prices

The average return achieved in the time period from December 13 to January 02 amounted to 3.66 percent. This gain was generated in just 19 calendar days.

Thus the Santa Claus rally on average generated an annualized gain of 99.62 percent!

For comparison: in the rest of the time the annualized gain of the DAX amounted to just 1.86 percent.

In short, the seasonal trend around the Christmas holidays is quite extraordinary.

Prices Rose in 90% of all Cases

This raises the question whether this is a robust result or if it is a statistical artifact attributable to a few outliers. Let us take a closer look at the individual years underlying the pattern.

The following bar chart shows how prices behaved in the time period from December 13 to January 02 in every year since 1997. Green bars indicate years generating gains, red bars indicate years in which losses occurred.

DAX, percentage return achieved between 13. Dec. and 02 Jan. in individual years since 1997. Most of the time the DAX rises at the end of the year.

As the breakdown illustrates, the green bars clearly dominate both in frequency and extent. The Santa Claus rally took place in 18 of the past 20 years, with the largest gain amounting to 16.13 percent (achieved in 1998). By contrast, there were just 2 years in which the Santa Claus rally failed to happen. The largest loss was recorded in 2000 and amounted to 4.99 percent.

In other words, individual outliers are not responsible for …read more

What’s the Point? Precious Metals Supply and Demand Report

Questions and Answers

A reader emailed us, to ask a few pointed questions. Paraphrasing, they are:

Who cares if dollars are calculated in gold or gold is calculated in dollars? People care only if their purchasing power has grown.
What is the basis good for? Is it just mathematical play for gold theorists? How does knowing the basis help your readers? Is it just a theoretical explanation of what has already happened?
Prove that if someone has known the basis for the last four years, he has benefited.

Tell us about your crystal ball, oh great oracle. Is it any good? Can you divine the future for us and make us all rich? Quick? [PT]

He also added:

“Most websites on gold I’ve seen I have no respect for. They are snake oil salesmen trying to sell gold. Yours is not. So in that sense you guys are honest.”

That number, again, is 1-800-GOT-GOLD!

Just kidding. Thank you, sir, for your kind words and now let’s address your questions.

First, we have a general response. It is good to know the truth, for its own sake, even if there is no immediate or obvious practical benefit. The world works a certain way and, speaking for ourselves, we want to know what that way is. As they say, knowledge is power.

This is doubly so with gold, where there is so much misinformation, disinformation, and rubbish economics. Some of it is mainstream, such as the quantity theory of money. Some of it is unique to the gold market, such as allegations of manipulation.

Irving Fisher came up with the tautological equation (incl. “velocity” fudge factor) the quantity theory of money is based on. Now, Fisher came up with a lot of nonsense in his time (we have to thank him for the consumer price index as well, for instance), much of it for the purpose of making government meddling in the economy more “scientific” (evidence amassed since then strongly suggests the endeavor failed rather spectacularly). As someone once said – we are paraphrasing, and really don’t recall who it was, but it’s a worthwhile observation: “All of US modern mainstream economics is like a thin film of dust laid atop Fisher”. When studying Fisher’s work, one soon realizes that this is sadly quite true. Nevertheless, the quantity of money, and particularly changes in its quantity, as such shouldn’t be dismissed as unimportant.  We hold with Hayek, who remarked that everyone needed to be aware of the quantity theory, and then should immediately forget about it again. As to gold manipulation, it should be mentioned that Deutsche Bank was caught manipulating the London gold and silver fix for years and paid a fine of USD 100 million to settle the case. But this was not different from the type of manipulation found in virtually all financial markets – usually very short term oriented and aimed at influencing benchmark data used as the basis for settlement of either otc or listed financial …read more

Heaven Forbid Peace Should Break Out Between the US and North Korea!

Rude Interruptions

As long as the US Empire can be funded and maintained on the backs of its taxpaying public, the chance of a deescalation of tensions not only on the Korean peninsula, but throughout the world are practically nil.  And as long as the nation’s current interventionist ideology holds sway, it will only be through a financial meltdown that the role of the US as global policeman will come to a much-needed end.

Hamhung, North Korea, June 30, 1950; an example of minor collateral damage suffered by North Korea during the behavior-modification police action of the early 1950s. Let us be clear that we have no sympathy for the hereditary Stalinist dynasty/junta oppressing the people of North Korea. Nevertheless, it should be crystal clear by now why military interventionism is problematic: it usually not only fails to achieve anything remotely resembling the desired result, in most cases it actually brings about the exact opposite. It bolsters popular support for even the vilest regimes, as the focus of the population’s anger is redirected at an external enemy; instead of destabilizing  autocrats and tyrants, it often ends up fortifying their position. Anything short of a complete victory will leave an implacable enemy in place, who as we can see in the example of North Korea can end up posing a major problem for decades. Past attempts to persuade the regime to abandon nuclear weapons (usually in exchange for economic concessions) often failed because the NK regime sabotaged them; all indications are that its decisions are driven by intense paranoia. In light of this, past agreements were often ill-conceived, as they inter alia involved the transfer of nuclear technology for supposedly “peaceful” purposes. The regime’s actions are mainly informed by a desire for self-preservation – its threats and posturing have to be seen in the context of this overarching goal. Given the deep scars left by the Korean war and the examples of tinpot dictators elsewhere who surrendered their WMD capabilities only to be hunted down and killed while their fiefdoms were bombed back into the stone age, it should not be too difficult to figure out why the NK regime wants to hang on to its nuclear weapons. [PT]

Photo credit: STR/AFP/Getty Images

The most recent example of the world’s biggest bully escalating matters is its on-again, off-again badgering of North Korea.  In contrast to Western/CIA media reports, the November 28 launch of what appears to be an intercontinental ballistic missile, the Hwasong-15, was not unprovoked.

Instead, the North Korean test firing was in response to the unexpected announcement of further US/South Korean military drills to take place starting on December 4.  The exercises are, in part, to show off the latest mass murdering “product” of America’s military industrial complex, the USF-22 Raptor stealth fighter jet.

Before the latest launch, the Kim Jong Un regime had not fired a missile for two months and was in discussions with other intermediaries about how tensions  on the Korean peninsula could be lessened.

The …read more

The Party of Spend More vs. the Party of Tax Less

Eternal Spendathon

The Senate just passed a 500-page tax reform bill. Assuming it lives up to its promise, it will cut taxes on corporations and individuals. Predictably, the Left hates it and the Right loves it. I am writing to argue why the Right should hate it (no, not for the reason the Left does, a desire to get the rich).

The Federal debtberg has grown beyond all measure since Nixon’s gold default. So has the money supply and the amount of private debt. No-one expects this debt to be paid back ever. The idea that it is payable (without a massive devaluation of the currency) is a kind of illusion we have collectively decided to live with. Government spending perforce leads to capital consumption – while it disturbs the  production structure intra- rather than inter-temporally, it still results in an allocation of scarce resources that is not in line with actual consumer wants. Government bureaus cannot possibly ascertain the opportunity cost of their spending. They are not expected to make profits, economic calculation is not something they even care about. On the contrary, their incentives are often quite perverse: the more lavishly they spend, the better from their perspective, as that is often the best way to ensure they will receive the largest possible budget allocations every year. [PT] – click to enlarge.

The root of our problem is spending. The federal government spends much of our income, and an increasing amount of our wealth to the tune of over $4 trillion a year. That is over $11,000 for every man, woman, and child. But children don’t work and many adults don’t either (or they work for the government or a contractor).

Assuming 100 million work in the productive sector, the government spends $40,000 in cash for each one, not counting the promises it racks up. This is the federal government only, and of course the people also bear the burden of spending at state, county, city, and municipal water district levels.

The government spends more than it takes in tax revenues. A lot more. The federal debt today is over $700 billion more than it was a year ago. The reason is simple. The people may love spending, but they hate taxes. So the government makes it up by borrowing.

I have written a lot about this concept, borrowing. They call it borrowing, but without the means or intent to repay it, it’s really a fraud. This is my definition of inflation—counterfeit credit. It is the compromise between the party of spend more, and the party of tax less: the policy of borrow more.

Arthur Laffer next to his famous curve. While we disagree that the “optimal tax rate” that both minimizes taxation and maximizes government revenue can actually be quantified and pressed into an equation, Laffer’s idea had merit in principle. To put it bluntly: all the CBO “projections” about supposed revenue shortfalls “over the next decade” due to the tax cuts are complete nonsense with absolutely no basis in …read more

The Complete Idiot’s Guide to Being an Idiot

Style Over Substance

There are many things that could be said about the GOP tax bill.  But one thing is certain.  It has been a great show.

Obviously, the time for real solutions to the debt problem that’s ailing the United States came and went many decades ago.  Instead of addressing the Country’s mounting insolvency, lawmakers chose expediency without exception.  They kicked the can from yesterday to today.

The empty chairs meeting – this is slightly reminiscent of the Clint Eastwood skit in which he addressed an empty chair that was supposed to represent Barack Obama. No-one can accuse the current tax reform plan of making a lot of sense, but the problem is that any comprehensive sensible reform package would never make it past the lobbies interested in maintaining the status quo. Given that elections are advance auctions of stolen goods (h/t HL Mencken), any perceived interference with the stealing will tend to be strongly resisted. [PT]

Photo credit: Kevin Dietsch-Pool/Getty Images

Presently, there are no good options left to fix the mathematics bearing down on us all.  Hence, in the degenerate stage of an overburdened nation-state, style over substance is what counts.  Without question, Congress and President Trump played their parts to push the bill with much bravura.

On Tuesday, for example, President Trump, Senate Majority Leader Mitch McConnell, and House Speaker Paul Ryan held a White House meeting with two empty chairs.  Apparently, Senate Minority Leader Chuck Schumer and House Minority Leader Nancy Pelosi didn’t want to participate in a “show meeting.”  Thus, they made a spectacle of themselves and ditched the meeting.

Indeed, their absence was all part of the show.  Moreover, the entire episode was show; nothing more.  At the time of this writing (Thursday night), the show continues on.  Last we heard, the Senate vote had been delayed until Friday.  By the time you read this it may be a done deal – or maybe not.

Regardless, the tax bill is all quite meaningless when you have a fiat currency that’s been stretched out like silly putty.  No doubt, this has propagated immense financial speculation while outrunning actual economic growth.  The effect has manifested in strange and unexpected ways.

Decentralized Cryptocurrencies

Incidentally, following Fed Chair nominee Jay Powell’s confirmation hearing before the Senate Banking Committee on Tuesday, Senator Elizabeth “Pocahontas” Warren remarked that the Fed had the same regulatory attitude going into the crash of 2008 because they haven’t intervened in bitcoin.

Naturally, it never occurred to Warren that bitcoin could be a barometer of the Fed’s extreme intervention into credit markets.  Without artificially suppressed interest rates and Fed asset purchases, bitcoin would’ve never become the recipient of such speculative fervor.

Attempting to regulate it now is like assigning price controls by edict to address a Fed induced bout of consumer price inflation. Besides, what’s Warren’s beef anyway?

Just in case you actually need another reason to like bitcoin, consider a few members of the clueless gang of douchebags arrayed against it. Ms. Warren (left) and Fed bureaucrat …read more

An Update on Polly: She May be Coming Back to Life

 

A Twitch of a Toe

In our recent update on credit spreads we proposed to use the seemingly deceased  Monty Python parrot Polly as a stand-in for the suspicion of creditors in today’s markets.  The question was whether Polly was indeed dead or merely in a deep coma. Depending on this, one should be able to gauge how powerful a miracle will be required to resurrect her.

Meet Polly. Is she alive?

In the first half of November there was actually a small sign that Polly is perhaps not completely dead just yet. Essentially one of her toes could be seen twitching a little bit. In short, credit spreads started to widen, eventually challenged nearby resistance, but failed to overcome it.

US junk bond spreads – the red lines represent the lateral resistance area that needs to be watched. In early November it was challenged for the third time since the sideways move began. As we have discussed previously, historical data suggest that when junk bond spreads become extremely compressed, a move above nearby resistance that is sustained after a retest is all it takes to trigger an avalanche – click to enlarge.

There is no cause for alarm yet, as resistance has obviously held – but past examples of similar situations suggest that it won’t take a great many tests of resistance before a breakthrough actually happens. In other words, it is time to pay close attention.

It is worth noting that there was no obvious “reason” for the recent move. The ECB’s announcement in late October that it would run its printing press at half-speed from the beginning of next year and offset that (once again) by letting the purchase program run longer than originally planned, was seen as dovish by the markets – spreads initially tightened further. They only began widening about a week later. The way we see it is as follows: once spreads begin to move sideways at an extremely compressed level, the distribution phase is underway.

As an aside, keep in mind that junk bond yields were never lower in absolute terms. It is a good bet that the “smart money” is busy selling to those who erroneously think European junk bonds shouldn’t yield more than US treasury bonds. Here is what happened with credit spreads in the euro area:

Euro area junk bond spreads tested initial resistance as well, which has also held for now – click to enlarge.

Lastly, spreads on the lowest-rated junk bonds corrected the most and actually breached initial resistance briefly. Note that they have already diverged bearishly from the rest of the junk bond universe this year on several occasions, by making higher lows concurrently with spreads on higher rated junk bonds reaching new lows for the move.

Spreads on US junk bonds rated CCC and lower – there is a subtle difference in the behavior of these spreads and those on better rated junk bonds. From experience …read more

Japan: It isn’t What the Media Tell You

 

Known for Being Terrible

For the past few decades, Japan has been known for its stagnant economy, falling stock market, and most importantly its terrible demographics.

A chart of Japan’s much-bewailed demographic horror-show. Most people consider a declining population to be a bad thing due to the implications for assorted state-run pay-as-you-go Ponzi schemes, primarily those related to retirement. It is hard to be sympathetic, since it would have been possible to do something completely different from the outset. Even with respect to existing schemes, we don’t recall that anyone forced politicians to direct funds designated for funding social security claims to alternative uses at the time when these schemes still enjoyed a surfeit of revenues. Of course one has to be sympathetic to the future victims – those who paid in during their working lives and will end up getting stiffed. However, this is a problem that could be easily resolved by simply winding up the State in orderly insolvency proceedings prior to abolishing it. Most nation states have large amounts of assets at their disposal (e.g., they are often the by far largest land owners in the territories they control), which should suffice to cover the claims of creditors and to pay out the NPV of accumulated pension claims in lump sums. There is one way in which a declining population still has to be regarded as a drawback though. The market will so to speak have to function with fewer network nodes as the population shrinks. There will inevitably be a concomitant decline in distributed knowledge. Thus fewer ideas will occur to people and will be pursued; markets will become less efficient, the division of labor in the broadest sense will suffer a setback. Consider in this context that the market is the opposite of central economic planning in every way – the larger the network of people included in it, the better it will work for everyone. [PT] – click to enlarge.

For almost three decades, Japan’s GDP growth has mostly been less than 2%, has been negative for several of these years, and has often hovered close to zero. The net result is that its GDP is almost at the same level as 25 years ago.

After the asset bubbles in Japan peaked, a long period of stagnation in economic output began. As you will see further below, this impression is slightly misleading. [PT] – click to enlarge.

The stock market index (Nikkei 225), which at the last trading day of 1989 stood at 38,960, is around 40 percent lower today, despite the fact that 27 years have passed. Malinvestments in infrastructure and cross-holdings of shares among companies and the resulting crony capitalism are getting a lot of the blame for draining away Japan’s competitiveness. Confucian culture is blamed for a lack of creativity and an environment in which wrongs done by senior officials go unchallenged.

Boom and bust in the Nikkei Index – the recent breakout actually looks …read more

Precious Metals Supply and Demand – Thanksgiving Week

Grain of Salt Required

The price of gold fell $7, and that of silver 24 cents. This was a holiday shortened week, due to Thanksgiving on Thursday in the US (and likely thin trading and poor liquidity on Wednesday and Friday). So take the numbers this week, including the basis, with a grain of that once-monetary commodity, salt. We will keep the market action commentary brief.

Relatively modern examples of salt money which was widely used in African countries until the early 20th century. The bars were clad in fibers to keep them from breaking up. The specimen at the top and in the bottom left corner were collected in Ethiopia (formerly known as Abyssinia), where they are used as a medium of exchange among nomads living in the Danakil Plains to this day. The salt-filled package made of leaves in the bottom right corner is late 19th century salt money from Angola. [PT]

Fundamental Developments

Here are the charts of the prices of gold and silver, and the gold-silver ratio.

Gold and silver priced in USD – click to enlarge.

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio rose.

In this graph, we show both bid and offer prices for the gold-silver ratio. If you were to sell gold on the bid and buy silver at the ask, that is the lower bid price. Conversely, if you sold silver on the bid and bought gold at the offer, that is the higher offer price.

Gold-silver ratio, bid and offer – click to enlarge.

For each metal, we will look at a graph of the basis and co-basis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and co-basis in red.

Here is the gold graph showing gold basis and co-basis with the price of the dollar in gold terms.

Gold basis and co-basis and the USD priced in milligrams of gold – click to enlarge.

The co-basis (our measure of scarcity) of the Feb contract rose slightly, as the price of gold fell slightly.

The Monetary Metals Gold Fundamental Price is up 8 bucks.

Now let’s look at silver.

Silver basis and co-basis and the USD priced in grams of silver – click to enlarge.

The story is the same in silver, with a bit larger rise in the co-basis.

The Monetary Metals Silver Fundamental Price is up 22 cents.

© 2017 Monetary Metals

 

Charts by: Monetary Metals

Image captions by PT

 

Dr. Keith Weiner is the president of the Gold Standard Institute USA, and CEO of Monetary Metals. Keith is a leading authority in the areas of gold, money, and credit and has made important contributions to the development of trading …read more

Bitcoin Facts

 

A Useful Infographic

When we last wrote more extensively about Bitcoin (see Parabolic Coin – evidently, it has become a lot more “parabolic” since then), we said we would soon return to the subject of Bitcoin and monetary theory in these pages. This long planned article was delayed for a number of reasons, one of which was that we realized that Keith Weiner’s series on the topic would give us a good opportunity to address some of the objections to Bitcoin’s fitness as a medium of exchange voiced by critics (we have kept the final three parts of Keith’s discussion in abeyance as well, we intend to publish these concurrently).

BTC was easily the best investment asset of 2017 (we may have overlooked some other “alt coins”, but in terms of market cap only the 6 – 10 largest cryptocurrencies look like serious contenders in this market). We should probably write more often about it, then you would e.g. have learned that we thought BCH (the post-fork younger brother of BTC) was likely to play catch-up at some point. We actually believe this particular valuation gap is likely to narrow further, and the same may well happen with DASH, another cryptocurrency with quite similar features (both BCH and DASH are lacking some of the legacy technical drawbacks of BTC). As an aside, we always had a certain minimum target for the coming gold bubble in mind which we never mentioned in public, because we felt it sounded silly. Usually we just recommend that people use their imagination, in the hope that their imagination is big enough. By now it probably sounds a lot less silly –  we will revisit this topic once gold has overcome certain technical hurdles – click to enlarge.

As time has passed, more ideas have occurred to us, which should benefit the article when we finally manage to get it ready for posting. We have recently also received an inquiry by Brian Dowd of Focus Economics about our views on certain issues related to the cryptocurrency. In short, we will move ahead now, as it looks like an opportunity to kill several birds with one stone is here (someone should perhaps come up with a slightly less fatal-sounding variation of this saying).

In the meantime, a comprehensive infographic on Bitcoin and its brief but intense history was put together and sent to us by Josh Wardini, community manager at webmastersjury.org. It contains all sorts of information, mainly a number of quite interesting trivia. Some of these milestones are probably fairly well-known, but we certainly weren’t aware of all of them. We think this information underpins something we said quite some time ago already: Bitcoin is here to stay. We decided to republish the infographic here to set the scene for our upcoming discussions of Bitcoin and related subjects.

 

This infographic was originally published at bitcoinplay.net. It is quite interesting which countries have declared bitcoin illegal – the Saudi theocracy (they probably thought it looked too much …read more

Lessons from Squanto

 

Standing In Your Way

Governments across the planet will go to any length to meddle in the lives and private affairs of their citizens.  This is what our experiences and observations have shown.  What gives?

For one, politicians have an aversion to freedom and liberty.  They want to control your behavior, choices, and decisions.  What’s more, they want to use your money to do so.

As this by now famous cartoon implies, the State is essentially a gang of criminals waving a flag. We realize that most people have a far more romantic and naïve view of the nature of the State. Some have even swallowed the propaganda slogan asserting that ”we” are the State (hint: no, “we” are not). The misguided belief that it can be reformed if only the right people come to power (you just have to elect them!) is as widespread as is the erroneous notion that it is a “necessary evil” that protects us from the imminent outbreak of uncontrollable chaos its absence would provoke. Think of the children! States were originally established when gangs of thieving, raping and murdering marauders realized that killing their victims after a raid was actually not the most economic decision; it was far better to enslave them by instituting a protection racket. Essentially the deal went: you let us rule over you and pay us protection money, and in exchange we will protect you against all those gangs of marauders out there greedily eying your possessions, including ourselves. This basic structure of the State has never changed, but it has of course become a lot more sophisticated. This increased sophistication has made the State more tolerable to the average serf, but that is not its main aim – rather the aim is to ensure its survival. [PT]

Here in the United States, bureaucrats, flush with authority, will stand in the way of a fellow who’s striving to find his own way by his own means.  Licenses, permits, fees, employer identification numbers, state board of equalization registrations, workers compensation insurance… you name it.  All this – and more – is needed prior to hanging out your shingle and making your first sale.

Many cities in the land of the free require school kids to get a permit just to operate a lemonade stand.  And don’t even think of opening an auto shop, let alone a medical practice.  You’ll spend your first year’s profits getting your hazardous materials business plan approved by the fire department.

What a waste of time and resources so you can store a couple tanks of oil and gas and keep a couple waste drums to put the dirty rags in.  Does all this rigmarole make you safer?

After that, your time will be spent keeping up the requisite documentation and reporting.  Actually acquiring and serving customers will be secondary.  Then, after paying federal, state, and local taxes, you’ll be left with less money than if you’d just kept your day job.  Why bother with the risk if there’s no reward?

The US …read more

The Precious Metals Bears’ Fear of Fridays

 

Peculiar Behavior

In the last issue of Seasonal Insights I have shown that the gold price behaves quite peculiarly in the course of the trading week. On average, prices rise almost exclusively on Friday. It is as though investors in this market were mired in deep sleep for most of the week.

The title of this blog post is a play of words on the title of an early Wim Wender movie, The Goalkeeper’s Fear of the Penalty, which in turn is based on a famous novel by Peter Handke (sometimes the title is also translated as “The Goalie’s Anxiety at the Penalty Kick”) [PT]

Upon this I received a plethora of inquiries from readers regarding the corresponding moves in silver.  In response  examine the behavior of the silver market on individual days of the week in this issue of Seasonal Insights.

The Pattern in Silver by Days of the Week

First let us explore the performance of silver by days of the week. The black bar in the illustration below shows the annualized performance of silver in USD since 2000, the blue bars show its annualized performance on individual days of the week over the same time period.

I have measured the daily returns from one daily closing price to the next during COMEX trading hours; e.g. the Tuesday performance shows the average percentage change from the close on Monday to the close on Tuesday.

Silver, performance by days of the week, 2000 to 2017. In the silver market, Friday is an outstandingly strong day as well – it positively glitters.

 

As you can see, Friday stands out quite positively in silver as well. It achieved an average annualized gain of 7.32%, which was even stronger than the corresponding 6.83% gain in gold!

In contrast to the gold market, the average moves in the remaining days of the week were greater as well, especially on Tuesdays, which generated an average decline of 4.69%.

In short, anomalies related to individual days of the week are quite pronounced in the silver market as well.  These patterns were measured over a span of 4,585 trading days, which suggests that they are not random occurrences.

The Days of the Week Under the Magnifying Glass

How exactly did these patterns evolve over time? The next chart shows the indexed returns on silver since the turn of the millennium in gray, and the cumulative returns achieved on specific days of the week in other colors.

Silver, cumulative performance by days of the week, 2000 – 2017.  Overall, a steady uptrend was in evidence on Fridays – click to enlarge.

 

As the chart illustrates, the blue line that depicts the cumulative performance on Fridays has risen quite steadily over almost the entire 17 year span. By contrast, the remaining days of the week were a mixed bag, generating sizable losses in quite a few years. The main conclusion is that a potentially exploitable intra-week pattern exists in the silver market as well.

It is worth noting in this context …read more