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Sunday, August 31, 2014

Why Central banks can never stop printing: (imagine if rates moved even a little):

Reserve Bank Credit

Why Smart Money is flowing into Hard Assets.

When you gamble at a Casino, the house always wins.

But wait!  What about poker?  There, the best player wins, right?

Not exactly.  The best player only wins in a controlled environment where everyone starts with the same amount of chips.  If you are playing with 50 chips against a player with 50 million chips, your opponent will win every time.

When you gamble in any asset class on any major exchange you are the player with only 50 chips.  There are Banks and Central Banks in those markets all armed with 50 Billion chips.  Eventually they get all your chips.  They may let you win for a while to get you to bet more chips.  But in the end they get all of them.

This is true even for players who happen to have 30 million dollars.  Or 300 million dollars.  Especially at the high end.  They know full well the markets are all rigged.  Those of them playing for Team Goldman Sachs don't care, because they can follow Goldman bets from the inside and ride the rigging.

But many others do care.  And they are buying up hard assets with a vengeance.

But won't this lead to a bubble in hard assets?

It depends on the rarity of the asset.

A Hard Asset Class that represents true rarity will continue to appreciate vis a vis currencies that can be printed ad infinitum.  And all major currencies are being printed ad infinitum - as per the policies of the major central banks.

Debt levels are so high in all major countries - from US to EEC to China to Russia, (and their central banks, and their member banks) that it is impossible for central banks to stop printing without causing an Interest Rate Event that will send the global economy into endless depression.

Everyone who has amassed enough paper currency to be forced to ponder this issue knows this.  That's why they're all piling into hard assets.

Of course, each hard asset market poses its own series of challenges.  Especially regarding Rarity and Authenticity.  And like all markets, every type of hard asset is also subject to price rigging.

But the issues of rarity and authenticity can be vetted by smart investors.  And localized price rigging in these tiny markets is much easier to overcome than the institutionalized price rigging in the major exchanges.

So choose your hard asset.  Do some homework.  And hop aboard.  It's a one way bet until the paper printing implodes.

Then it's anybody's guess.

Saturday, August 30, 2014

The link between global war and unemployment:

Germany Unemployment Jumps

Merkel is under serious pressure from two fronts. The sanctions against Russia are having a major impact upon the European economy as a whole. This has caused Merkel to bluntly state that the US cannot solve all the problems of the world. Indeed, what she is not saying is that these US policies may be causing more problems than she can handle. Europe is caught between two warring powers, US and Russia, who are still stuck in the old empire way of thinking. Putin sees the power of a nation as its size and I cannot say that the US is that much different. OK, the US does not want to own the world, just occupy it militarily for power. Obama just said The United States is and will remain the one indispensable nation in the world…“. That statement is impossible for no nation can remain on top and that is the same thinking that existed in every empire from Babylon to Britain going into World War I. The US squanders its wealth on military and Putin wrongly thinks he needs territory to gain respect and power. Europe cannot impose economic sanctions on Russia without killing it’s already weak economy and Obama is too dense to understand that.
Hollande - Fran├žois-2Then Merkel is telling France it has to reform. The French economic implosion cannot be dealt with by increasing the scope of socialism. Hollande also is in his empire building role where socialism would work if he could only stop people from leaving and transform the country into a dictatorial communistic state. He cannot see that his ideas are fundamentally flawed and have been attempted both in China and Russia with failure. France will be forced to either let go, as did China, or hand it all to an oligarchy, as did Russia.
The rising unemployment in France is becoming a contagion as the number of unemployed in Germany rose slightly more than usual in the holiday month of August. Unemployment exceeded the previous month by 30,000 reaching a total of 2.902 million unemployed according to the Federal Employment Agency (BA) as announced on Thursday in Germany. On average, in recent years, the increase was approximately 22,000. The unemployment rate increased from 6.6 to 6.7 percent and this is in the core economy of Europe. The further you move out of Germany the higher the unemployment. This trend will tear down the German economy as its exports slowly spiral down and it will go into free-fall economic decline after 2015.75.
The entire idea of the Euro was to increase trade and reduce war with one government. Yet trade is also defeated with sanctions against Russia at a time when the European economy is collapsing anyhow all because political leaders cannot grasp that the world is all connected and we now need each other far more than we did before. Brussels is only tearing Europe apart raising the risk of civil war as the economy declines that no single government can prevent. The US squanders its wealth on military and this diminishes its comparative advantage as the NSA has usurped technology that was the key to the American Internet Revolution. China is militarizing for it thinks it needs to flex its new-found muscles and Russia is still trying to relive the old dream of Empire.
European Sunset
The world economy is collapsing and war becomes inevitable for everyone blames someone other than themselves. We need serious rethinking not to mention and world revision of the global monetary system and an overhaul of global debt outlawing governments from every borrowing again at the national levels. The world will be starkly different after 2032. We better realize what we are doing to save the day. Monumental change is on the horizon.

Tuesday, August 26, 2014

First printed book in English sold for over £1m

The Recuyell of the Histories of Troye 'A watershed moment in literary history' - the first printed book in English.

Related Stories

A 540-year-old book, known as the first to be printed in the English language, has sold at auction for more than £1m.
The Recuyell of the Histories of Troye is a version of a French book written around 1463.
It was translated over a three-year period by William Caxton, who pioneered the printing press in England.
He published his version around 1474, at a time when when most books were printed in Latin, in either Ghent or Bruges, Belgium.
The story is an epic romance which portrays the heroes of Greek mythology as chivalric figures, according to Sotheby's, which auctioned it.
It was produced as a gift for the Duke of Burgundy's new wife Margaret - the sister of the English King, Edward IV.
The book was offered for auction by the Duke of Northumberland, who has been selling off dozens of family heirlooms after his estate was left with a massive bill for flood damage.
Last week, £32m of sculptures, ceramics, paintings and furniture were offloaded. A 1st Century Roman marble statue of Aphrodite - the Greek goddess of love - fetched £9.4m alone.
The sale was prompted by floods at Newburn, Newcastle, in 2012, during which a culvert collapsed and led to buildings being demolished.
Bidding war The guide price going into the auction was £600,000 for a volume that is one of only 18 surviving copies.
But a bidding war between three rivals pushed the auction up to a hammer price of £900,000, with the buyer paying £1,082,500 after the Sotheby's added its commission.
Sotheby's books specialist Gabriel Heaton said the work marked "a watershed moment in literary history when 'the father of English printing', William Caxton, embarked on the radical commercial decision to print the first book in English".
"Produced at a time when printing in the vernacular was still in its infancy, and when there was a relatively small domestic readership, this was a risky enterprise", he added.
The Recuyell of the Histories of Troye was the first book Caxton printed, and its production appeared to take its toll on a man who was a leading figure in the 15th Century English mercantile community.
In the book's epilogue, Caxton said "In the writing of the same my pen is worn, mine hand weary and not steadfast, mine eyes dimmed with overmuch looking on the white paper".

Thursday, August 21, 2014

thank god that won't effect us:

Nobel economists say policy blunders pushing Europe into depression

German Chancellor Angela Merkel defends eurozone and says it is hard to manage a currency for 18 states

Activists of the Occupy Frankfurt movement have set up a fire place near the Euro sculpture in front of the European Central Bank in Frankfurt, Germany
Professor Joseph Stiglitz said austerity policies had been a 'disastrous failure' and are directly responsible for the failed recovery Photo: AP
An array of Nobel economists have launched a blistering attack on the eurozone's economic strategy, warning that contractionary policies risk years of depression and a fresh eruption of the debt crisis.
"Historians are going to tar and feather Europe's central bankers," said Professor Peter Diamond, the world's leading expert on unemployment.
"Young people in Spain and Italy who hit the job market in this recession are going to be affected for decades. It is a terrible outcome, and it is surprising how little uproar there has been over policies that are so stunningly destructive," he told The Telegraph at a gathering of Nobel laureates at Lake Constance.
"It could be avoided with better use of stimulus, and spending on infrastructure. That would boost growth and helped the debt to GDP ratio," Mr Diamond said, echoing a widely-heard critique among the Nobel elites that Europe's policies have been self-defeating.
Professor Joseph Stiglitz said austerity policies had been a "disastrous failure" and are directly responsible for the failed recovery over the first half of this year, with Italy falling into a triple-dip recession, France registering zero growth and even Germany contracting in the second quarter.
"There is a risk of a depression lasting years, leaving even Japan's Lost Decade in the shade. The eurozone economy is 20pc below its trend growth rate," he said.
Mr Stiglitz said the eurozone authorities had massively underestimated the contractionary effects of austerity and continue to persist in error despite claims that the crisis is over. "I am very concerned about the future of monetary union, and they haven't yet felt the impact of geopolitical tensions."
He said the eurozone needs joint debt issuance to repair the structural flaws of EMU, but almost no progress has been made. "Europe suffers from fatal politics," he said.

German Chancellor Angela Merkel told the forum that it was hard to manage a currency for 18 states, when sovereign parliaments refuse to follow polices agreed by the EU institutions. Yet she insisted that the crisis countries had slashed current account deficits and the "first fruits" of durable recovery are in sight.

Professor Christopher Sims, a US expert on monetary policy, said EMU policy makers had not sorted out the basic design flaws in monetary union, and are driving Club Med nations into deeper trouble by imposing pro-cyclical austerity.

"If I were advising Greece, Portugal or even Spain, I would tell them to prepare contingency plans to leave the euro. There is no point being in EMU if all that happens when you are hit with a shock is that the shock gets worse," he said.

"It would be very costly to leave the euro, a form of default, but staying in the euro is also very costly for these countries. The Europeans have created a system that is worse than the Gold Standard. Countries are in the same position as Latin American states that borrowed in dollars," he said.
Mr Sims warned that the European Central Bank may not be able to carry out a mass of purchase of bonds unless the eurozone grasps the nettle on fiscal union, and might itself be engulfed by crisis. "A speculative attack could put the ECB balance sheet at risk," he said.
In the end, ECB president Mario Draghi may be forced to intervene and present Europe's political leaders with a fait accompli.

"The Germans don't want the euro to collapse, so if they really need a fiscal back-up in a crisis, they'll come up with it somehow," Mr Sims said

Tuesday, August 19, 2014

Bloomberg continues pre-Fed Meeting Weak Job Market reports: (Fantastic Job Strength reports come thursday after home sales and leading economic indicator reports)

Only Rich Know Wage Gains With No Raises for U.S Workers

Photographer: Luke Sharrett/Bloomberg
A employee stocks shelves at a Costco Wholesale Corp. store in the morning before it... Read More
Call it the no-raises recovery: Five years of economic expansion have done almost nothing to boost paychecks for typical American workers while the rich have gotten richer.
Meager improvements since 2009 have barely kept up with a similarly tepid pace of inflation, raising the real value of compensation per hour by only 0.5 percent. That marks the weakest growth since World War II, with increases averaging 9.2 percent at a similar point in past expansions, according to Bureau of Labor Statistics data compiled by Bloomberg.

Federal Reserve Chair Janet Yellen has zeroed in on faster wage growth as an important milestone for declaring the job market healed and ready to withstand policy tightening, even as other labor measures improve. Stagnant earnings also explain an economy that’s having trouble sustaining a rebound in housing and consumer spending, according to David Blanchflower, a professor of economics at Dartmouth College in Hanover, New Hampshire.

“The bottom line is, we’re a million miles from full employment,” said Blanchflower, a Bank of England policy maker from 2006 to 2009. “Workers are struggling, and they don’t see signs that things are suddenly going to change.”

Monday, August 18, 2014

Bloomberg reports: Job market is very strong so invest in the Stock Market, but Job Market is very weak so the Fed won't raise rates.

Job Market Tilts Toward U.S. Workers in Virtuous Cycle

The balance of power in the job market is shifting slowly toward employees from employers.
Bob Funk sees it firsthand from his position as chief executive officer of staffing agency Express Employment Professionals.

“We’re short of people in a number of cities,” he said.

So he’s changing the focus of his $2.5 billion, Oklahoma City-based business. Instead of concentrating on finding jobs for those who want them, Express Employment is putting more effort into finding workers for companies that need them.

“We’re back in the recruiting market again,” Funk said.

Part-Time Workers a Full-Time Headache on Yellen Radar: Economy

Aug 18, 2014 10:00 AM ET

Aug. 18 (Bloomberg) -- Hans Goetti, head of investment for Asia at BIL, talks with Rishaad Salamat about his expectations for this week’s FOMC meeting and comments from Federal Reserve chair Janet Yellen at the annual Jackson Hole Conference and how they may impact the ECB and global equity markets. He speaks on “On the Move.”
Federal Reserve Chair Janet Yellen has a stubborn warning light blinking on her labor market dashboard: A group of Americans larger than Washington state’s population can find only part-time work.

As Yellen heads to this week’s Fed symposium in Jackson Hole, Wyoming, where the focus will be on the labor market, those 7.5 million part-time workers who want full-time jobs are inflating the broad measure of underemployment she watches to gauge job market health. Involuntary part-time workers have gained by 325,000 from February’s five-year low.

With employment and inflation nearing Fed goals, Yellen has consistently cautioned some labor market measures still show enough slack to warrant keeping interest rates low. In the shadow of the Teton Range of the Rocky Mountains, she’ll have a chance to highlight soft spots such as the crowded pool of part-timers as investors try to decipher the timing of the Fed’s first interest-rate increase since 2006.

Saturday, August 16, 2014

Bubbles, Bubbles Everywhere
By John Mauldin | Aug 16, 2014
The difference between genius and stupidity is that genius has its limits.
– Albert Einstein

You can almost feel it in the air. The froth and foam on markets of all shapes and sizes all over the world. It’s exhilarating, and the pundits who populate the media outlets are bubbling over. There’s nothing like a rising market to lift our moods. Unless of course, as Prof. Kindleberger famously cautioned (see below), we are not participating in that rising market. Then we feel like losers. But what if the rising market is … a bubble? Are we smart enough to ride it high and then bail out before it bursts? Research says we all think that we are, yet we rarely demonstrate the actual ability.

My friend Grant Williams thinks the biggest bubble around is in complacency. I agree that is a large one, but I think even larger bubbles, still building, are those of government debt and government promises. When these latter two burst, and probably simultaneously, that will mark the true bottom for this cycle now pushing 90 years old.

So, this week we'll think about bubbles. Specifically, we'll have a look at part of the chapter on bubbles from Code Red, my latest book, coauthored with Jonathan Tepper, which we launched late last year. I was putting this chapter together about this time last year while in Montana, and so in a lazy August it is good to remind ourselves of the problems that will face us when everyone returns to their desks in a few weeks. And note, this is not the whole chapter, but at the end of the letter is a link to the entire chapter, should you desire more.
As I wrote earlier this week, I am NOT calling a top, but I am pointing out that our risk antennae should be up. You should have a well-designed risk program for your investments. I understand you have to be in the markets to get those gains, and I encourage that, but you have to have a discipline in place for cutting your losses and getting back in after a market drop.

There is enough data out there to suggest that the market is toppy and the upside is not evenly balanced. Take a look at these four charts. I offer these updated charts and note that some charts in the letter below are from last year, but the levels have only increased. The direction is the same. What they show is that by many metrics the market is at levels that are highly risky; but as 2000 proved, high-risk markets can go higher. The graphs speak for themselves. Let’s look at the Q-ratio, corporate equities to GDP (the Buffett Indicator), the Shiller CAPE, and margin debt.

We make the case in Code Red that central banks are inflating bubbles everywhere, and that even though bubbles are unpredictable almost by definition, there are ways to benefit from them. So, without further ado, let’s look at what co-author Jonathan Tepper and I have to say about bubbles in Chapter 9.

Easy Money Will Lead to Bubbles and How to Profit from Them
Every year, the Darwin Awards are given out to honor fools who kill themselves accidentally and remove themselves from the human gene pool. The 2009 Award went to two bank robbers. The robbers figured they would use dynamite to get into a bank. They packed large quantities of dynamite by the ATM machine at a bank in Dinant, Belgium. Unhappy with merely putting dynamite in the ATM, they pumped lots of gas through the letterbox to make the explosion bigger. And then they detonated the explosives. Unfortunately for them, they were standing right next to the bank. The entire bank was blown to pieces. When police arrived, they found one robber with severe injuries. They took him to the hospital, but he died quickly. After they searched through the rubble, they found his accomplice. It reminds you a bit of the immortal line from the film The Italian Job where robbers led by Sir Michael Caine, after totally demolishing a van in a spectacular explosion, shouted at th em, “You’re only supposed to blow the bloody doors off!”

Central banks are trying to make stock prices and house prices go up, but much like the winners of the 2009 Darwin Awards, they will likely get a lot more bang for their buck than they bargained for. All Code Red tools are intended to generate spillovers to other financial markets. For example, quantitative easing (QE) and large-scale asset purchases (LSAPs) are meant to boost stock prices and weaken the dollar, lower bonds yields, and chase investors into higher-risk assets. Central bankers hope they can find the right amount of dynamite to blow open the bank doors, but it is highly unlikely that they’ll be able to find just the right amount of money printing, interest rate manipulation, and currency debasement to not damage anything but the doors. We’ll likely see more booms and busts in all sorts of markets because of the Code Red policies of central banks, just as we have in the past. They don’t seem to learn the right lessons.

Targeting stock prices is par for the course in a Code Red world. Officially, the Fed receives its marching orders from Congress and has a dual mandate: stable prices and high employment. But in the past few years, by embarking on Code Red policies, Bernanke and his colleagues have unilaterally added a third mandate: higher stock prices. The chairman himself pointed out that stock markets had risen strongly since he signaled the Fed would likely do more QE during a speech in Jackson Hole, Wyoming, in 2010. “I do think that our policies have contributed to a stronger stock market, just as they did in March of 2009, when we did the last iteration [of QE]. The S&P 500 is up about 20 percent plus and the Russell 2000 is up 30 percent plus.” It is not hard to see why stock markets rally when investors believe the most powerful central banker in the world wants to print money and see stock markets go up.

Investors are thrilled. As Mohamed El-Erian, chief executive officer at Pacific Investment Management Company, said, “Central banks are our best friends not because they like markets, but because they can only get to their macro objectives by going through the markets.”

Properly reflected on, this is staggering in its implications. A supposedly neutral central bank has decided that it can engineer a recovery by inflating asset prices. The objective is to create a “wealth effect” that will make those who invest in stocks feel wealthier and then decide to spend money and invest in new projects. This will eventually be felt throughout the economy. This “trickle-down” monetary policy has been successful in creating wealth for those who were already rich (and for the banks and investment management firms who service them) but has been spectacularly a failure in creating good jobs and a high-growth economy. The latest quarter as we write this letter will be in the 1 percent gross domestic product (GDP) range.

And to listen to the speeches from the majority of members of the Federal Reserve Open Market Committee, their prescription is more of the same. Indeed, when Bernanke merely hinted this summer that QE might end at some point, something that everyone already knows, the market swooned and a half-a-dozen of his fellow committee members felt compelled to issue statements and speeches the next week, saying, “Not really, guys, we really are going to keep it up for a bit longer.”

We’ve seen this movie before. In the book When Money Dies, Adam Fergusson quotes from the diary of Anna Eisenmenger, an Austrian widow. In early 1920 Eisenmenger wrote, “Speculation on the stock exchange has spread to all ranks of the population and shares rise like air balloons to limitless heights. ... My banker congratulates me on every new rise, but he does not dispel the secret uneasiness which my growing wealth arouses in me ... it already amounts to millions.” Much like after the initial Nixon Shock in the 1970s, stock prices rise rapidly when a currency weakens and money supply grows. Not surprisingly, the 1970s led to bubbles in commodities.

Excess Liquidity Creating Bubbles

One area that stands out as particularly bubbly is the corporate bond market. Investors are barely being compensated for the risks they’re taking. In 2007, a three-month certificate of deposit yielded more than junk bonds do today. Average yields on investment-grade debt worldwide dropped to a record low 2.45 percent as we write this from 3.4 percent a year ago, according to Bank of America Merrill Lynch’s Global Corporate Index. Veteran investors in high-yield bonds and bank debt see a bubble forming. Wilbur L. Ross Jr., chairman and CEO of WL Ross & Co. has pointed to a “ticking time bomb” in the debt markets. Ross noted that one third of first-time issuers had CCC or lower credit ratings and in the past year more than 60 percent of the high-yield bonds were refinancings. None of the capital was to be used for expansion or working capital, just refinancing balance sheets. Some people think it is good there is no new leveraging, but it is much worse. This means that many companies had no cash on hand to pay off old debt and had to refinance.

One day, all the debt will come due, and it will end with a bang. “We are building a bigger time bomb” with $500 billion a year in debt coming due between 2018 and 2020, at a point in time when the bonds might not be able to be refinanced as easily as they are today, Mr. Ross said. Government bonds are not even safe because if they revert to the average yield seen between 2000 and 2010, ten year treasuries would be down 23 percent. “If there is so much downside risk in normal treasuries,” riskier high yield is even more mispriced, Mr. Ross said. “We may look back and say the real bubble is debt.”

Friday, August 15, 2014


Economists Caution: Prepare for 'Massive Wealth Destruction'

Bloomberg. Thursday, 14 Aug 2014 12:46 PM
Take immediate steps to protect your wealth . . . NOW!

That’s exactly what many well-respected economists, billionaires, and noted authors are telling you to do — experts such as Marc Faber, Peter Schiff, Donald Trump, and Robert Wiedemer. According to them, we are on the verge of another recession, and this one will be far worse than what we experienced during the last financial crisis.

Marc Faber, the noted Swiss economist and investor, has voiced his concerns for the U.S. economy numerous times during recent media appearances, stating, “I think somewhere down the line we will have a massive wealth destruction. I would say that well-to-do people may lose up to 50 percent of their total wealth.”

When he was asked what sort of odds he put on a global recession happening, the economist famous for his ominous predictions quickly answered . . . “100 percent.”

Faber points out that this bleak outlook stems directly from former Federal Reserve Chairman Ben Bernanke’s policy decisions, and the continuous printing of new money, referred to as “quantitative easing” in the media.

Faber’s pessimism is matched by well-respected economist and investor Peter Schiff, the CEO of Euro Pacific Capital. Schiff remarks that the stock market collapse we experienced in 2008 “wasn’t the real crash. The real crash is coming.”

Schiff didn’t stop there. Most alarming is his belief that daily life will get dramatically worse for U.S. citizens.

“If we keep doing this policy of stimulus and growing government, it’s just going to get worse for the average American. Our standard of living is going to fall . . . People who are expecting Social Security can’t get all that money. People expecting government pensions can’t get all their money . . . We simply can’t afford to pay them.”

Equally critical of the current government and our nation’s economy is real estate mogul and entrepreneur Donald Trump, who is warning that the United States could soon become a large-scale Spain or Greece, teetering on the edge of financial ruin.

Trump doesn’t hesitate to point out America’s unhealthy dependence on China. “When you’re not rich, you have to go out and borrow money. We’re borrowing from the Chinese and others.”

It is this massive debt that worries Trump the most.

“We are going up to $16 trillion [in debt] very soon, and it’s going to be a lot higher than that before he gets finished,” Trump says, referring to President Barack Obama. “When you have [debt] in the $21-$22 trillion [range], you are talking about a [credit] downgrade no matter how you cut it.”

Despite the overwhelming concern expressed by Faber, Schiff, and Trump, the most damning piece of evidence for immediate wealth destruction comes in the form of an ominous chart published last November that has been quietly making the rounds on Wall Street.

The chart, recently republished by Mark Hulbert on MarketWatch, shows a direct correlation between today’s stock market and the one leading up to the historic 1929 collapse.

The shocking parallel confirms what one expert says is in store for our country and economy this year.

Where Trump, Faber, and Schiff see rising debt, a falling dollar, and a plunging stock market, investment adviser and author Robert Wiedemer sees much more widespread economic destruction.

In a recent interview to talk about his New York Times best-seller Aftershock, Wiedemer says, “The data is clear, 50 percent unemployment, a 90 percent stock market drop, and 100 percent annual inflation… starting in 2013.”

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Thursday, August 14, 2014

Gee Whiz: Where are consumer's shopping?

Wal-Mart’s Sales Stagnation Reignites Concern About Economy

Wal-Mart Stores Inc. Chief Executive Officer Doug McMillon.
Wal-Mart Stores Inc. (WMT)’s latest struggles to revive U.S. sales, following a disappointing Commerce Department report earlier this week, add to evidence that the economy isn’t recovering as quickly as expected. 

The company posted stagnant same-store sales today in its second-quarter earnings report, marking the sixth straight period of no growth. The world’s largest retailer also cut its earnings forecast for the year, citing higher spending on health care and e-commerce.

The sluggish results followed disappointing earnings from Target Corp. (TGT) and Macy’s Inc. (M) this month, signaling that a broad swath of retailers are struggling.

The Commerce Department’s report on July retail sales was the weakest in six months, hurt by tepid wage growth. While some of Wal-Mart’s woes reflect a shift away from big-box retailers, many consumers appear to be simply keeping their wallets shut.

“It’s difficult out there,” said Brian Yarbrough, an analyst at Edward Jones in St. Louis. “I just don’t know where consumers are shopping these days.” 


Tuesday, August 12, 2014

Heritage steals the show at Chicago ANA

Ancients:Greek, Ancients: SICILY. Syracuse. Time of Dionysius I (405-367 BC). ARdecadrachm (33mm, 43.30 gm, 6h). ...     China:Republic of China, China: Republic of China. Yuan Shih-kai gold Pattern 10 Dollars1916 with L. GIORGI MS63 NGC,...

Syracuse Decadrachm                       Giorgi Pattern 10 Dollars MS63 NGC
in the Style of Euainetos                       Sold for: $282,000.00
NGC Choice AU? 5/5 - 5/5,
Fine Style.           
Sold for: $340,750.00 (includes BP

 Heritage Auctions stole the show at this year's Chicago ANA with a Platinum Night Auction devoted to High Value Ancients and World coins.  It was a relatively small auction with only 412 lots, but most were of very high quality.  

The Ancients section with anchored by a beautiful Dekadrachm in the style of Euainetos that was quite nearly perfectly centered and preserved (above.)  An NGC Gem Mint gold stater of Eukratides sold for $141,000:

Ancients:Greek, Ancients: GRECO-BACTRIAN KINGDOM. Eucratides I the Great (ca.171-145 BC). AV stater (20mm, 8.46 gm, 11h). ... while a beautiful aureus of Augustus though only in NGC XF condition, sold for $44,000, proving that American bidders are indeed able to see beyond the grade to some extent:Ancients:Roman Republic, Ancients: Octavian, as sole Imperator (31-27 BC). AV aureus (22mm,7.96 gm, 1h)....Ancients:Roman Republic, Ancients: Octavian, as sole Imperator (31-27 BC). AV aureus (22mm,7.96 gm, 1h).....  The Chinese section was filled with rarities that routinely sold in the 100,000 dollar range.

Meanwhile, out on the floor the action was once again lackluster.  With most top dealers saving their best material for auction, the selections offered were thin.  And many top dealers have stopped setting up altogether.  Noticeably absent were CNG, Freeman and Sear, Amphora, and it is to be feared that with dealers like John Kern sellng his collections at Heritage, they'll also be soon be absent from the large US shows.

On the brighter side, the auctions are drawing in ever widening circles of collector/investors as is clear from the auction prices realized.  Top material which is even thinner than most participants realize is being bid up to higher and higher levels with each successive auction season.

And for those who fear a bubble forming, consider that over in the US market Lincoln Pennies are still selling for greater prices than many of these gold Greek and Roman rarities.  And then compare the ancient art market to the modern and post-modern art markets and you realize that the ancients markets can continue to appreciate at tremendous rates before even beginning to attain commensurate values. 

Sunday, August 10, 2014

BRICS ANTI DOLLAR ALLIANCE - what does it mean for hard assets?

Is This A New Anti-Dollar Alliance?
In the last few years, we’ve seen many signs that the U.S. dollar is losing importance in the international arena. For example, over the past several years, many countries have made agreements that allow them to settle their trades in their own currencies, cutting the dollar out of the transaction completely.

 The most recent challenge to the dollar is coming from the BRICS (Brazil, Russia, India, China and South Africa) countries. And, it could have important implications for those who hold assets denominated in U.S. dollars.

China and Russia Moving Away from the Dollar

You may have heard about the historic energy deal recently made between China and Russia. In short, Russia will export about $400 billion of natural gas to China over the next 30 years. By 2018, this deal will be supplying about 25% of China’s energy need. Why should you care? Well, these transactions will be made in Chinese yuan and Russian rubles, not in U.S. dollars. In other words, this is a substantial blow to the petrodollar.

China and Russia have also set up swap facilities that exclude the greenback from other transactions. And, recent sanctions on Russia by the U.S. are accelerating that trend. Many Russian companies are quickly switching contracts from dollars to other currencies, partly to escape Western sanctions.
Gazprom, the famous Russian natural gas giant, provides a good example. It has signed agreements with consumers to switch from dollars to euros for payments. Alexander Dyukov, the company’s CEO, said: “Practically all — 95% of our customers — confirmed their willingness to move to settlement in euros.”1

And, it’s not just Russia and China. Brazil, India and South Africa are also joining this anti-dollar trend.

The BRICS’ New World Order

Last June, Sergey Glaziev, Vladimir Putin's economy advisor, published an article outlining the need to establish an international alliance of countries willing to get rid of the dollar in international trade and refrain from using dollars in their currency reserves.
It looks like that alliance is taking shape.

Recently, the BRICS countries announced that they are “seeking alternatives to the existing world order.”2 The five countries unveiled a $100 billion fund to fight financial crises. This fund will be their version of the International Monetary Fund (IMF). They will also launch the New Development Bank (NDB), which will be their alternative to the World Bank. It’s a new bank that will make loans for infrastructure projects across the developing world.

The BRICS’ version of the IMF will function around a currency reserve pool. Each country will contribute to the fund according to the size of their economies. It’s expected that contributions to the currency reserve pool will be as follows: China, $41 billion; Brazil, India, and Russia, $18 billion each, and South Africa, $5 billion.

The punchline, however, is that the dollar will play no role in that currency reserve pool. Currency swaps between the BRICS central banks will facilitate trade financing while completely bypassing the dollar. With these two new institutions, the five countries are taking steps to effectively reduce their dependence on the dollar and other American institutions, such as the Fed and the IMF. As Brazilian President Dilma Rousseff told reporters, the five countries “are among the largest in the world and cannot content themselves in the middle of the 21st century with any kind of dependency.”3

To be clear, we don’t expect this BRICS anti-dollar alliance will destroy the dollar’s global reserve currency status overnight. But, the trend is clearly moving against the dollar. And, if this trend continues, most of the significant global economies will gradually abandon the greenback.
These countries are essentially taking steps to move away from a dollar-based global trade system. This is a big deal because the BRICS countries are all expected to be future financial powerhouses. If they continue to kick the dollar out of their economic relations, this could seriously hurt the buck.
This means that an increasing amount of global trade will be done in other currencies, weakening the demand for dollars. As the buck continues to lose status in the international area, there could be consequences for every dollar-based investment.

This process could take several years…or it could happen relatively quickly, with a sudden dollar crisis. Under that scenario, U.S. dollar-based assets could suffer a significant loss of value. U.S. investors could potentially protect their portfolios against the risk of a sudden crisis simply by keeping a portion of their assets in gold, silver and other hard assets.

Saturday, August 9, 2014

Hard Assets: the Antithesis of paper gambling.



Buying paper assets has become a form of gambling.  From the stock market to junk bonds to bit coins to options courses to   fantasy football to outright online gambling industries.

We are a nation addicted to gambling.  It's fun to rip off the greater fool.  It means you're sharper than the moron who followed you into the pool.   Gambling is a zero sum game.  The only problem is the house always wins in the end.


Meanwhile, if you're lucky enough to win for a while you can take that to mean you're shrewd, sharp: a winner.  Which has become the modern substitute for being studious and knowledgeable: two modern American words for "sucker."



The antithesis of gambling is the Hard Asset Market.  This is a market of Real Things whose value is based on Historical Importance and Beauty.   You have to study quite a bit to recognize either.

Sure, there are scammers, frauds, counterfeiters in these markets too.  But all these can be avoided with study.  And when you buy, you are investing, not gambling.

You are investing in what the Greeks called Techne: Excellence that is the apex of Human Achievement.  You are investing in what is interesting and valuable about being a human being.


Extremes in Risk Appetite and “Risk-On” Asset Allocation

One measure of risk appetite is junk bond yields, which as Lance Roberts shows in this chart, have reached multi-year lows:
Junk Bonds - CHS
Money managers’ appetite for the “risk-on” asset class of equities is similarly lofty:
Previous readings near the current level preceded major stock market declines—though high readings have been the norm for the past few years without presaging a major drop.