Chart Update

     

 

 

A Rocky Road

The price of gold rose $26, and the price of silver rose $0.44. And bitcoin fell $560. Somebody should look into if the Fed and the Plunge Protection Team and the Bitcoin Banks are in cahoots to sell bitcoin naked-short…

 

No PPT for Bitcoin – after breaking a long-standing lateral support level, the cryptocurrency went into free-fall. You may notice the little remark in the annotation at the top of the chart: we believe BTC is highly likely to continue to lead the stock market, as it has done since the turn of the year. This is because both markets are under the sway of the same driver, namely rapidly weakening money supply growth. [PT]

 

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Mud Volcanoes

There are numerous explanations for just what in the heck is going on with the economy.  Some are good.  Many are bad.  Today we’ll do our part to bring clarity to disorder…

 

Two data series it is worth paying attention to at the moment: the unemployment rate (U3) and initial claims. As the chart at the top shows, when the former makes a low it is time to worry about the economy. Low points in the U3 UE rate slightly lead the beginning of recessions. Claims on the other hand are near coincident indicators of the stock market, this is to say, lows in initial claims tend to happen within a time period of four to six weeks surrounding major stock market peaks (in most cases they lead slightly, but small lags have occasionally occurred as well). Note: neither indicator confirms an imminent turning point as of yet – initial claims would e.g. have to rise to around 300k in order to do so. The same is true of other major recession indicators, their most recent readings do not yet confirm that the business cycle is about to turn down. However, there is a lot of circumstantial evidence that indicates such a downturn may soon be confirmed, including recent market moves (i.e., deteriorating stock prices and rising credit spreads). [PT]

 

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Worldwide Liquidity Drought – Money Supply Growth Slows Everywhere

This is a brief update on money supply growth trends in the most important currency areas outside the US (namely the euro area, Japan and China)  as announced in in our recent update on US money supply growth (see “Federal Punch Bowl Removal Agency” for the details).

 

Nobody likes a drought. This collage illustrates why.

 

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The Last Thing to be Left Standing – Alas, Not Yet 

The price of gold was about unchanged this week, whereas that of silver fell another nine cents. All Serious Right Thinking people agree that the world does not need gold. Indeed our monetary system produces Great Moderations that are totally unlike the incredible volatility of the gold standard era. They wish they could kill all memory of gold as money.

 

Ben Bernanke, the inventor of the “Great Moderation” fairy tale, somehow felt compelled to explain in 2012 “why the world will never see another gold standard”. One day this will probably  turn out to have been an unwise deployment of the word “never” – since is not exactly known for the accuracy of his forecasts, regardless of their time horizon. Although he dismissed gold as an unimportant residual of tradition, the very central planning agency he led at the time for some reason does keep quite a bit of gold under lock and key behind a 140 ton steel door, both for itself and similar agencies domiciled abroad. [PT]

 

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How to Blow $9 Billion

The life cycle of capital follows a wide-ranging succession. It is imagined, produced, consumed, and destroyed. How exactly this all takes place involves varying and infinite undulations.

 

The Stroh Brewery in Detroit. The company provided an example of how wealth that has been accumulated over generations can be completely destroyed due to just a handful of really bad decisions. [PT]

 

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US Money Supply and Credit Growth Continue to Slow Down

Not to belabor the obvious too much, but in light of the recent sharp rebound, the stock market “panic window” is almost certainly closed for this year.* It was interesting that an admission by Mr. Powell that the central planners have not the foggiest idea about the future which their policy is aiming to influence was taken as an “excuse” to drive up stock prices. Powell’s speech was regarded as dovish. If it actually was, then it was a really bad idea to buy stocks because of it.

 

Jerome Powell: a new species of US central banker – a seemingly normal human being in public that transforms into the dollar-dissolving vampire bat Ptenochirus Iagori Powelli when it believes it is unobserved.

 

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Battles for Civilization

A major theme of my work — and raison d’etre of Monetary Metals — is fighting to prevent collapse. Civilization is under assault on all fronts.

 

Battling the barbarians at the gate… [PT]

 

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The “Risk Asset” Dip Not Worth Buying is on its Way

The prices of the metals rose, gold by +$11 and silver by +$0.25. The question on everyone’s mind (including ours) is: what will cause a change in the gold price trend, or what will make gold go up in a large and durable way? And that leads to another way of looking at this question.

 

Here is a very good technical reason to adopt a constructive attitude toward gold despite the fact that its nominal price in USD terms is seemingly not going anywhere of late. By remaining fairly stable in recent weeks, gold is rising relative to the S&P 500 index (SPX). In other words, the purchasing power of gold is increasing – and not only relative to the stock market. Similar trend changes can be observed elsewhere (e.g. in gold vs. industrial commodities). We will soon discuss this in greater detail. [PT]

 

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Degrees of Urgency

Monday was Veterans Day, a bank holiday in the US. The prices of gold and silver dropped $23 and $0.61 respectively. “But isn’t gold supposed to go up when…?”

 

Warren Buffet and Aragorn discuss what to do with the gold. Aragorn wants it, because he knows that even if it’s not today, “that day” will come. [PT]

 

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The Mighty Gartman

Investment newsletter writer Dennis Gartman (a.k.a. “the Commodities King”) has been a target of ridicule at Zerohedge for a long time. His pompous style of writing and his uncanny ability to frequently make perfectly mistimed short term market calls have made him an easy target.* It would be quite ironic if a so far quite good recommendation he made last week were to turn into the call of a lifetime (see ZH: “Gartman: ‘We Are Officially Recommending Shorting This Rally'”).

 

A little collage devoted to the Commodity King. It is easy to see how he ended up being made fun of. Actually, by now he has garnered a quite sizable fan community at Zerohedge and other web sites that report on his frequently ill-timed flip-flops (often announced with great conviction). However, a major call on the stock market he recently made seems to have been perfectly timed.

 

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The Last to Go

Terry Goodkind wrote an epic fantasy series. The first book in the series is entitled Wizard’s First Rule. We recommend the book highly, if you’re into that sort of thing.

 

An image from the title page of Terry Goodkind’s best-selling fantasy epic “Wizard’s First Rule”. We’d be at bit wary of standing around on that stone-slab bridge to be honest. [PT]

 

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Just a Little Avalanche or an Implosion?

A few years ago, we briefly discussed the dynamics of sand piles in these pages, which are a special field of study in mathematics and physics (mathematically inclined readers can take a look at two papers on the subject here:”Driving Sandpiles to Criticality and Beyond “ (PDF) and  ‘Games on Line Graphs and Sand Piles “(PDF) – unfortunately two other studies that used to be available have in the meantime disappeared from the inter-tubes).

 

Waiting to crumble: a giant sand dune in the Namib desert.

 

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