Showing posts with label Eric Sprott. Show all posts
Showing posts with label Eric Sprott. Show all posts

Saturday, December 16, 2017

Bank of Canada Governor Is Right To Be Worried About The Economy

 


Bank of Canada Governor Is Right To Be Worried About The Economy


Written by Peter Diekmeyer, Sprott Money News


 


 



Stephen Poloz Right To Be Worried - Peter Diekmeyer

 


Bank of Canada governor Stephen Poloz cited numerous worries plaguing the economy during his speech to Toronto’s financial elites yesterday at the prestigious Canadian Club.





However, the title of Poloz’s presentation, “Three things keeping me awake at night” seemed odd, given positive recent Canadian employment, GDP and other data.





Poloz highlighted high personal debts, housing prices, cryptocurrencies and other causes for concern, along with actions that the BoC is taking to alleviate them. His implicit message was (as always) “We have things under control.”





But if that’s all true, then Canada’s central bank governor should be sleeping like a baby. So, what is really keeping Mr. Poloz up at night? Three possibilities come to mind.





The Poloz Bubble




Firstly, far from just a housing bubble, Canada’s economy shows signs of being in the midst of an “everything bubble.” Bitcoin, for example, hovered near CDN $23,000 this week. Stock and bond valuations are not far behind in their relative loftiness.





Worse for Poloz, who took office four years ago, his fingerprints are all over those bubble-like levels.





Canadian stock, bond and house prices were already at dizzying heights when Stephen Harper hired Poloz with the implicit expectation that he would juice up the economy, in preparation for what Canada’s then-Prime Minister knew would be a tough upcoming election.





Poloz didn’t disappoint, promptly delivering a nice Benjamin Strong-styled “coup de whiskey” to asset prices in the form of two interest rate cuts, which brought the BoC’s policy rate down to just 0.50% during the ensuing months.





Although Harper lost the election, loose BoC policy continues to provide the Canadian government with free money to borrow and spend as it wishes.





More broadly, the Poloz BoC’s current policy, like that of the US Federal Reserve, is to boost asset prices even higher in the hope that the resulting wealth effect will trickle down to spur economic activity among ordinary Canadians.






 


At the household level, the BoC’s low interest rates enticed Canadian families to borrow themselves to the hilt. Businesses haven’t been that far behind.





The upshot is that total government, private sector and personal debts are now in nosebleed territory with Canada’s economy seemingly on a knife’s edge, in danger of crumbling at the first patch of rough road.





Chained to a Ponzi




Another worry is that the Poloz BoC, by broadly mirroring the Federal Reserve’s actions, has firmly lashed Canada to a US economy which could prove to be an even bigger Ponzi than its own.





America’s “everything bubble”, like Canada’s, has been stroked by a central bank that has been pushing credit growth at a rate faster than GDP growth, a textbook Ponzi scenario.




 




 


One result, as Grant Williams, co-founder of Real Vision Television, noted in a recent presentation, is that US stock prices are currently far higher than they were during the Internet and housing bubbles. “[Central bankers] keep hoping that this time is different,” Williams warned. “But ladies and gentlemen – it’s never different.”





Refusal to ring fence Canada




Another worry for Poloz to ponder, is that although the BoC has identified financial system interconnectedness as a key concern, the central bank has done little to ring fence Canada’s economy from huge global macro threats on the horizon.





That’s particularly true of the hundreds of trillions of dollars in global derivatives books, many of which are unquantifiable, as they are trading outside of traditional exchanges. This threat is particularly acute, as it was the failure of AIG, a derivatives player, to cover its bets (not the subprime mortgage and Lehman implosions as most assume) that sparked the 2008 financial crisis.





Poloz, had he been ready to condone a recession, could have encouraged broader interest rate hikes to incentivize Canadian governments, businesses and households to pay down debts, build up savings and increase overall system stability.





Similarly, instead of building up Canada’s gold reserves to cushion against potential external shocks, the supposedly-independent BoC (as noted above) gives the money it prints to the big banks and the Canadian government to help it finance raises for politicians and bureaucrats.





Government and academic elites would argue that Poloz’s actions are understandable as he has only limited powers. They cite key constraints on the central bank’s actions.





These range from the BoC’s agreement with the Department of Finance to target 2% inflation, the fact that the government has primary authority over foreign exchange purchases and by realpolitik which dictates that Canada has to follow US policies – or else.





Tied to discredited Keynesian econometrics




Others, such as James Rickards, author of The Road to Ruin, would argue that Poloz is plagued with the same “group think” problem that faces Fed Chairmen.





Almost all the top economists these days, despite obvious brilliance, remain trapped by Keynesian/econometrics educations they endured to get their graduate degrees, which left them with few ideas regarding how to generate growth other than to print more money.





Canada’s top central banker rarely deviates from his talking points. So, it’s almost impossible to know what he really thinks.





However, a base case scenario suggests that Poloz (who has considerable private sector experience from his days at BCA Research) knows full well the treacherous position in which the BoC has placed the Canadian economy.





If that’s true, it’s little wonder that he is having trouble sleeping.


 


 


 


Questions or comments about this article? Leave your thoughts HERE.


 


 


 


 


Bank of Canada Governor Is Right To Be Worried About The Economy




Written by Peter Diekmeyer, Sprott Money News


 


 


Check out these other articles by our contributors:




Bitcoin Proves You Cannot Have Your Digital Cake and Eat it Too - Nathan McDonald


Political Pizza - Jeff Thomas


For Clues On The Economy, Follow The Money - Dave Kranzler




Eric Sprott Talks Lows in Gold, Comex Shenanigans, and Answers Your Questions (Weekly Wrap-Up, December 15, 2017)


 

Friday, December 15, 2017

Are You Ready For The Next Rally?

 


 


Are You Ready For The Next Rally?


Written by Craig Hemke, Sprott Money News & TF Metals Report


 


 



Are You Ready For The Next Rally? - Craig Hemke

 


Each of the last three years have begun with gold rallies of over 10%. The stage is set for another such move in 2018. Are you prepared?


 


Many folks have written about how the current selloff in gold and silver was predictable. Whether it was expected due to tax-loss selling, seasonality, CoT-washing or the expected FOMC rate hike, the majority of analysts were expecting price weakness in November and December and, this time, the majority was correct.


 


But if this current selloff was so easily predictable, then why can"t the coming rally to begin the year be just as foreseeable and certain?


 


Below is a weekly chart of Comex gold going back to this time in 2014. Note the bottoms found in December of each of the past three years and then be sure to note the January-February rallies in 2015, 2016 and 2017:


 




 


At TFMR we have an old adage that applies here: "When trading gold and silver, you must always be prepared to sell a little when things look rosiest and buy a little when things look the darkest". I don"t think that anyone would argue that December 2017 feels like the darkest period in recent memory.


 


And this "darkness of sentiment" is reflected in the Relative Strength Indices for gold, silver and the shares. If you"re unfamiliar with this important technical indicator, you can read more about it here: https://www.fidelity.com/learning-center/trading-i...


 


Generally speaking, rallies exhaust and price begins to turn lower as the RSI exceeds 70. In selloffs, short-term capitulation is usually seen when the RSI drops below 30. For example, after 17 consecutive down days

for Comex silver last spring, price turned and rallied 10% in under four weeks from an RSI extreme low of 18.


 




 


A look at the current charts only serves to reinforce the view that prices are oversold, near a bottom and ready for the usual late-December rebound and rally.


 


Comex Gold is near strong support of $1220 and its 200-week moving average near $1231. Also note, however, that its current RSI is 31 and near the previous 2017 lows seen at the turns in May and July.


 




 


Comex silver is in its support zone of $15.50-$16.00 and its RSI is even lower at 26!


 




 


And the mining shares, as measured by the GDX, are clearly near a low, too. The price level of $21 has previously held as support on several occasions, tax loss selling in Canada will be finished by the end of next week and the RSI is at a 2017 low of 27.


 




 


Again, successful investing in the metals requires the ability to buy a little when things look darkest. To that point though, these buying opportunities don"t often clearly present themselves. The only question remaining for December of 2017 is...are you prepared to take advantage this time?


 


 


Questions or comments about this article? Leave your thoughts HERE.


 


 


 


Are You Ready For The Next Rally?


Written by Craig Hemke, Sprott Money News & TF Metals Report


 


 


Check out these other articles by our contributors:




Eric Dubin: Buying Into A Collective Economic Delusion - Rory Hall


 


Bitcoin Hyper-Deflation - Keith Weiner


 


Friday’s COT Report: A WTF Moment For the Ages? - Ed Steer



Eric Sprott Forecasts Status Quo Now, But Big Rally in 2018 (Weekly Wrap-Up, December 8, 2017)

Tuesday, December 12, 2017

Finally, Gold Speculators Start To Bail, Setting Up A Big Q1 2018

 




Finally, Gold Speculators Start To Bail, Setting Up A Big Q1 2018


Posted with permission and written by John Rubino, Dollar Collapse 


 



Finally, Gold Speculators Start To Bail, Setting Up A Big Q1 2018 - John Rubino


 


It took a lot longer than it should have, but gold futures traders have finally started behaving “normally.” The speculators who were extremely, stubbornly long – and who are usually wrong when they’re this excited — had maintained their over-optimistic bets when they should have been stampeding for the exits, making the last few months both boring and depressing for gold bugs and related investors.


 


This departure from the familiar script raised questions about whether the action in futures (aka paper gold) was still relevant in the age of Chinese physical gold exchanges and cryptocurrency. The jury’s still out on that one, but for now the numbers are reassuring.


 


The following table (courtesy of GoldSeek) shows speculators cutting way back on long bets and adding to short bets, while the “commercials” – who tend to be right at sharp turns — did the opposite, going a lot less short.


 




 


Same thing only more so in silver, where another week like the last one will bring net positions into balance for both groups, which has historically been extremely bullish.


 




 


Here’s the same data depicted graphically for gold: Note how both the speculators (silver columns) and the commercials (red columns) held their positions from spring into fall, producing the previously-mentioned boredom and depression. Also note the sharp drop in the most recent reporting week.


 




 


The numbers we’re seeing here are as of Tuesday the 5th, and the final three days of last week were a bloodbath for precious metals, so it’s highly likely that the next COT numbers – due out on Friday the 15th – will show absolute panic among speculators, leading to an even bigger swing in the right direction.


 


If history is still reliable, January will be a great month to own precious metals and mining stocks.


 


 


Questions or comments about this article? Leave your thoughts HERE.


 


 


 


 


Finally, Gold Speculators Start To Bail, Setting Up A Big Q1 2018


Posted with permission and written by John Rubino, Dollar Collapse 


 


 


 


Check out these other articles by our contributors:


 



CPM Group’s Jeff Christian Responds “NEGATIVELY” To The SRSrocco Report On Silver Investment Demand - Steve St. Angelo





Eric Sprott Forecasts Status Quo Now, But Big Rally in 2018 (Weekly Wrap-Up, December 8, 2017)

Saturday, December 9, 2017

Precious Metals Experience a Sharp Decline in Demand as Bitcoin Continues to Steal The Show

 




Precious Metals Experience a Sharp Decline in Demand as Bitcoin Continues to Steal The Show


Written by Nathan McDonald, Sprott Money News




 



Precious Metals Experience a Sharp Decline in Demand as Bitcoin Continues to Steal The Show - Nathan McDonald


 


The Perth Mint, one of the largest sellers of bullion in the world, posted its results and demand is down. Big time.


 


 


Additionally, the US Mint has posted figures for its key products, all of which experienced lessened demand throughout the month of November.


 


 


The Perth Mint sold 23,901 ounces of gold throughout last month, a drastic drop from October, which saw steady gains. In fact, it was down by 46.4% from October, and 56.3% from November 2016 - a stunning reversal from the previously seen strong demand.


 


 


But why is this happening? Have precious metals suddenly lost their luster - has their 10,000 year history as a store of value suddenly evaporated within the matter of a month? Of course not. This is absurd and ludicrous and sounds like a copy and pasted line from any MSM financial outlet.


 


 


What is happening is simple. Bitcoin is stealing the show. Bitcoin is decimating the demand for precious metals and will continue to do so until it experiences a massive correction, or becomes out of vogue.


 


 


The miraculous rise in the price of Bitcoin has contrarian investors backing up in horror while the cryptocurrency enthusiasts continue to HODL at all cost, forgoing the huge gains they have already experienced in the hope that they will continue to see parabolic gains.


 


 


Perhaps they are correct, as the price of Bitcoin has blown through first the $10,000 dollar mark, then $11,000, then $12,000, then $13,000, then $14,000, and then the $15,000 price point. Yes, this all occurred in one week. You can"t make this up!


 


 


This is one of the greatest wealth transfers we have seen in centuries, and for those who are ringing the register, you can"t blame them, as long-term holders are likely experiencing gains that they will never again see in their lives.


 


 


Still, some in the industry continue to "clutch" their digital coins, as they state Bitcoin could reach $40,000 by the end of this month. This is a wild prediction and one that if proven correct, is truly historic.


 


 


I have no idea how much higher Bitcoin is going, nor do I believe anyone else does. This is a totally new asset and one that is impossible to evaluate, especially given its very brief history.


 


 


What I am more certain of, with each growing day, is my prediction that precious metals are going to experience a dramatic and sharp reversal. This is a move that is going to be propelled forward throughout the duration of 2018 and one that will eventually see the "barbarous relics" test and break their old highs - a move that is going to be propelled by the eventual top in Bitcoin.


 


 


Take heart, gold bugs - better days are coming, and take some advice from your cryptocurrency cousins. HODL!


 


 


 


 


Questions or comments about this article? Leave your thoughts HERE.


 


 


 


 


Precious Metals Experience a Sharp Decline in Demand as Bitcoin Continues to Steal The Show




Written by Nathan McDonald, Sprott Money News

 


 


 


Check out these other articles by our contributors:









Saturday, December 2, 2017

We Give Up! Government Spending And Deficits Soar Pretty Much Everywhere

 




We Give Up! Government Spending And Deficits Soar Pretty Much Everywhere


Posted with permission and written by John Rubino, Dollar Collapse


 



We Give Up! Government Spending And Deficits Soar Pretty Much Everywhere - John Rubino

 



A recurring pattern of the past few decades involves governments promising to limit their borrowing, only to discover that hardly anyone cares. So target dates slip, bonds are issued, and the debts keep

rising.


 


This time around the timing is especially notable, since eight years of global growth ought to be producing tax revenues sufficient to at least moderate the tide of red ink. But apparently not.


 


In Japan, for instance, government debt is now 250% of GDP, a figure which economists from, say, the 1990s, would have thought impossible.


 




 


Over the past decade the country’s leaders have proposed a series of plans for balancing the budget, and actually did manage to shrink debt/GDP slightly in 2016. But now they seem to have given up, and are looking for excuses to keep spending:


 








Japan plans extra budget of $24-26 billion for fiscal 2017









(Hellenic Shipping News) – Japan’s government is set to compile an extra budget worth around 2.7-2.9 trillion yen ($24-26 billion) for the fiscal year to March 2018, with additional bond issuance of around 1 trillion yen to help fund the spending, government sources told Reuters.

Following October’s big election win, Prime Minister Shinzo Abe’s cabinet has made plans to beef up childcare support, boost productivity at small and medium-sized companies, and strengthen competitiveness of the farm, fishery and forestry industries.









In the UK, a balanced budget has been pushed back from 2025 to 2031:


 








Britain in the red until 2031: Bid to balance the books pushed back yet again









(Daily Mail) – Philip Hammond’s ambition to get Britain’s finances back into the black receded further last night – as the Treasury watchdog said he would struggle to eliminate the deficit before 2031.















The Chancellor had promised to balance the books by 2025. The target has been pushed back twice already, after George Osborne’s pledge in his 2010 Budget to balance the books ‘within five years’, before he revised the figure to 2020.








In its assessment to accompany the Budget, the Office for Budget Responsibility said it was now ‘unlikely’ that the Chancellor would balance the books by 2025 as he had hoped.








It said the Government was on course to wipe out the deficit in 2030-31, 30 years after the country was last in surplus.








That would be the longest period of consecutive deficits on record – eclipsing the 25-year borrowing binge between 1793 and 1817 that included the Napoleonic Wars.









 


In the US, “tax reform” – the alteration of the tax code to make it simpler and more fair – has morphed into tax cutting, which is of course a lot easier:


 








Donald Trump is going to build a big, beautiful deficit and rely on China to help pay for it









(Washinton Post) – Assuming they pass, Republican tax plans are forecast to increase the federal debt by about $1.3 trillion to $1.6 trillion over the coming decade, though scoring and specifics vary. This is the same debt that, campaigning in Ohio, Trump called “a weight around the future of every young person in this country.”















But now that it’s time to pass a tax plan that nonpartisan observers agree will require deficit spending, Republicans are on board with growing the federal debt. Large-scale borrowing will help make up the gap in lower tax revenue while avoiding some painful cuts to government programs.








To cover that shortfall, Trump’s government and its successors will be issuing additional Treasury bonds for decades to come, with Eric Toder, co-director of the Tax Policy Center, posting that one version of the bill would grow the debt as a share of the economy by 10.1 percentage points by 2037. About half of those bonds will end up being

held abroad, according to Joseph Gagnon, senior fellow at the Peterson Institute for International Economics.








Treasury data compiled by the St. Louis Fed shows that foreign central banks, investors and corporations already own $6.17 trillion in Treasury bonds in the second quarter, compared with $5.73 trillion for private domestic investors. More than a third of those international investors are based in two countries: China and Japan.
















China, meanwhile, is taking a different path. Instead of financing big government deficits by issuing bonds, Beijing borrows relatively little but encourages its businesses, local governments and “state-owned companies” to borrow like crazy. So its total debt is soaring:


 








China’s debt grew in September at fastest pace in four years









(Asia Times) – A Reuters analysis of more than 2,000 China-listed firms showed total debt at the end of September jumping by 23% from a year ago, according to a report Sunday.















The increase, which comes amid an ongoing deleveraging campaign, represented the fastest pace of growth since 2013.

The analysis shows the degree to which de-risking and deleveraging efforts have been concentrated within financial sector so far, with real estate and industrial sectors leading the way in debt growth.








According to the report, debt servicing costs have accounted for close to a quarter of state-owned companies’ revenue. That ratio rose to 27% in the second quarter before falling to just below 25% in the third quarter on increased revenue.









To put the above in visual terms, here’s an infographic from Howmuch.com that shows per-capita government debt for the world’s major countries. Note that a Japanese family of five’s share of its government’s debt is close to $450,000 while in the US a similar family owes $300,000. That’s in addition to their mortgages, car loans, credit cards, etc.


 




 


Obviously debts of this magnitude can’t and therefore won’t be repaid. Which means the coming decade will be defined by how — and how quickly — we end up defaulting.


 


 


 


 


Questions or comments about this article? Leave your thoughts HERE.


 


 


 


 




We Give Up! Government Spending And Deficits Soar Pretty Much Everywhere


Posted with permission and written by John Rubino, Dollar Collapse

 


 


 


Check out these other articles by our contributors:




Stewart Dougherty -  The War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat (Part 1)


Stewart Dougherty - The War on Gold Intensifies: It Betrays the Elitists’ Panic and Augurs Their Coming Defeat (Part 2)


Steve St. Angelo - THE BLIND CONSPIRACY: The Gold Market Is Heading Towards A Big Fundamental Change


Eric Sprott and Craig Hemke - Eric Sprott Talks Global Demand for Metals, Impact in 2018 (Weekly Wrap-Up, December 1, 2017)


Wednesday, October 18, 2017

Under The Thumb Of The Banks

Editor"s Note:  



While we are disappointed to hear of Marc Faber"s recent comments and the fallout from them, Sprott Money is not affiliated with Sprott Inc. and have had no bearing in Mr. Faber"s resignation from the board. We are a private company held by Eric Sprott. Thanks. 






Written by Craig Hemke, Sprott Money News



Under The Thumb Of The Banks - Craig Hemke


The price of Comex Digital Gold continues to be held hostage by the major Bullion Banks which operate on the Comex in New York. Though some "improvement" in their collective position was noted in the latest bank Participation Report, it is very important to note that The Banks are still as heavily net short as they were at the price peak in the summer of 2016.


 


We wrote about this recent surge in Bank shorting last month and the article can be found here: https://www.tfmetalsreport.com/blog/8554/guard-aga...


 


In the article, we wrote that the 24 Bank short position in Comex gold had nearly doubled in just two months from 104,788 contracts net short to 213,746 contracts net short. The significance and speed of this rise rivaled what was observed in the first half of 2016 and we all know what followed in the second half of 2016. Namely, a smash in price that flushed the Spec longs back out of the Comex paper gold market and allowed these Banks to buy back and cover many of their short positions.


 


Specifically, the 24 Bank position, as divulged through the CFTC-generated Bank Participation Report, rose from just 45,259 contracts net short on 1/5/16 to a high of 195,262 contracts net short on 5/3/16. After falling back in June of 2016, this position again hit 191,834 contracts net short on 7/5/16.


 


From there, as price fell from $1375 to $1175, the 24 Bank position contracted back to just 73,722 contracts net short on 1/3/17.


 


As price rose again in 2017, The Banks resumed their profitable game of initiating Comex contracts on the sell side and taking the opposite position of hedge and trading fund speculators on the buy side. As price rose once more from $1175 to the early September peak near $1360, the 24 Bank position rose again to the aforementioned 213,746 net short.


 


Our concern in September was that all of this Bank shorting would soon lead to another fall in price and, unfortunately, we were proven correct as price fell to $1275 by the time the latest survey was taken on October 3. However, even though price fell by nearly $75 between report surveys, the latest Bank Participation Report showed that the total Bank position had only declined by about 30,000 with a new net short position of 182,197 contracts.


 


Therefore, there are several important items to note at this point:


 


1. As of October 3, the 24 Bank net position was nearly as heavily net short was it was at the price peak in July of 2016.


 


2. While doubling the size of their net short position on the $150 price rally of July and August, The Banks were only able to trim their position by 15% on the $75 pullback in September.


 


3. The Speculators have obviously held firm despite the recent pullback in price. They have not been quick to turn tail and run from Comex gold, choosing instead to remain steadfastly long.


So now the battle begins for the fourth quarter. Will price rise as emboldened Specs demand even greater long positions from the market-making Banks, forcing The Banks to retreat? Or will The Banks once again seize control of price and send it plunging down through the 100-day and 200-day moving averages, which in turn would finally lead to the Spec liquidation The Banks seek?


 


Since January, we have forecasted at TF Metals Report to expect the highest prices for calendar year 2017 to be seen during this fourth quarter. The only "fly in the ointment" of this forecast is this current historically large, Bank position. Can price move higher again even though The Banks are already net short 182,917 contracts for about 570 metric tonnes of paper gold?


 


We"re likely not going to have to wait long to find out.


 


 


Questions or comments about this article? Leave your thoughts HERE.


 


 


 


 



Written by Craig Hemke, Sprott Money News