Insider Buying by Gold Mining Executives Increases Further

In spite of the gold price weakening once again this week and coming dangerously close to breaking an important support zone, gold investors have actually reason to take heart. Readers may recall what we wrote in our most recent update on gold about gold mining margins:

 

“The market has not yet really given any credit to the fact that mining margins are improving due to strength in the real price of gold. Management boards of gold companies may be coming around to a different view though – after all, they are acutely aware that the real gold price is the only thing that counts with respect to their margins.”

 

 rocco fazzariImage credit: Rocco Fazzari

 

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Banks Increasingly Refuse Cash Withdrawals – Switzerland Joins the Fun

The war on cash is proliferating globally. It appears that the private members of the world’s banking cartels are increasingly joining the fun, even if it means trampling on the rights of their customers.

Yesterday we came across an article at Zerohedge, in which Dr. Salerno of the Mises Institute notes that JP Morgan Chase has apparently joined the “war on cash”, by “restricting the use of cash in selected markets, restricting borrowers from making cash payments on credit cards, mortgages, equity lines and auto loans, as well as prohibiting storage of cash in safe deposit boxes”.

This reminded us immediately that we have just come across another small article in the local European press (courtesy of Dan Popescu), in which a Swiss pension fund manager discusses his plight with the SNB’s bizarre negative interest rate policy. In Switzerland this policy has long ago led to negative deposit rates at the commercial banks as well. The difference to other jurisdictions is however that negative interest rates have become so pronounced, that it is by now worth it to simply withdraw one’s cash and put it into an insured vault.

Having realized this, said pension fund manager, after calculating that he would save at least 25,000 CHF per year on every CHF 10 m. deposit by putting the cash into a vault, told his bank that he was about to make a rather big withdrawal very soon. After all, as a pension fund manager he has a fiduciary duty to his clients, and if he can save money based on a technicality, he has to do it.

 

snb2

Swiss National Bank headquarters

Photo credit: Daniel Rohr

 

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Shocking the Markets

 

“Money is sound when it fulfills its functions as a means of payment and store of value as smoothly and reliably as possible in people’s everyday lives. Sound money retains its value and is generally accepted. It also makes an important contribution to social harmony and material prosperity. Sound money is therefore a central pillar of our [Swiss] society. The mandate of monetary policy is to ensure that money remains sound. Consequently, the Swiss National Bank (SNB) bases all of its activities on this mandate.”

Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank, Nov. 23, 2014 just before the Gold Referendum on Nov. 30, 2014

 

I expected a positive outcome in the Swiss Gold Referendum (Nov. 2014) to create a tsunami in the gold and foreign exchange markets but I didn’t expect the tsunami created by the unpegging of the Swiss franc (Jan. 2015); especially after the absolute assurances given by the Swiss National Bank (SNB) during the referendum campaign. If the negative vote in the Swiss gold initiative was not a surprise, the de-pegging of the Swiss franc only a month and a half later was.

 

nationalbank

Photo credit: Daniel Rohr

 

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Too Many Geezers

So far, we’ve proposed two reasons why the 21st century has been such a dud …

First … the developed nations are cursed with too many geezers. We have nothing against old people (especially as we hope to be one ourselves all too soon). But old people do not build a new economy; young people do. And today, there are not enough young people to power the kind of economic growth we’ve gotten used to.

Second… rules, regulations, subsidies, laws and orders now protect established financial interests against upstart competitors. Businesses get older along with the population, as government creeps over more and more of the economy.

The feds use monopoly force to prevent competition and reward today’s voters and capital owners. The baby born in 2015 finds himself subject to debts, obligations and restrictions that were meant to benefit his grandparents. Today, we give you another reason for the flop that is the 21st century. As you will see, they are all related…

 

1-2014-3_FR pages_webimage2013Pages in the Federal Register. There was a brief reprieve from over-regulation in the Reagan era, but shortly thereafter the regulatory State went into action again at full blast. Capitalism is slowly but surely asphyxiated, and with it any chance to escape the debt trap is dying with it (chart source: the George Washington University regulatory studies center) – click to enlarge.

 

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Yet Another Delusional Bubble Blower

Canada is home to one of the most egregious housing and credit bubbles in the world – a legacy of its former central bank governor Mark Carney, who is now blowing a similarly dangerous bubble in the UK as governor of the Bank of England. For some background information on this, see:

Carney’s Legacy: Canada’s Credit and Housing Bubble

Mark Carney: If There is a Bubble, It’s Not Our Fault

A Tale of Two Bubbles

 

poloz

Stephen Poloz, the new bubble blower at the helm of the Bank of Canada. He does look a bit loopy actually.

Photo via vida.org

 

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How to Profit from the Drop in the Oil Price

Over the past three quarters, the world has watched oil prices plummet from over $100 to a recent price of approx. $51/barrel in West Texas Intermediate (WTI) grade. Due to oil’s vital role in the global economy, this massive decline naturally raises questions as to the reasons behind the decline and the durability of these lower oil prices. Below follows an analysis of what is going on in oil markets and the potential investment implications resulting from these developments.

 

oil

Photo credit: Hasan Jamali / AP

 

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The Spate of Mysterious Deaths Continues

We have previously reported on a series of mysterious “suicides” of former members of Viktor Yanukovich’s Party of the Regions in Ukraine (see “Mysterious Deaths in Ukraine” for details and the list of the dear departed as of March 26). At the time it wasn’t quite clear whether this was a falling out among thieves, or what seemed more likely, a politically motivated series of murders which the government duly neglected to investigate by declaring even quite obviously suspicious deaths suicides. After we posted the article, yet another former Party of the Regions politician died of a gunshot wound – Oleg Kalashnikov (aptly named for the occasion). Spinning this one as a suicide was difficult, but the authorities were nevertheless curiously reluctant to call it a murder, preferring to simply say nothing instead.

 

Oles BuzynaThe late Oles Buzyna: a critic of the government who didn’t want Ukraine to join the EU, misidentified as therefore “pro-Russian” in the Western mainstream press. He was gunned down in Kiev in such a manner that a suicide could definitely be ruled out.

Photo credit: Sergei Vaganov / AP

 

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Sometimes, Really Strange Stuff Happens

Voters seem to be in rebellion in a great many places. Occasionally they can really upset the apple cart, as has just happened in Greece earlier this year. The reason is easy to detect: growing economic hardship and a feeling that the wrong guys were bailed out after the 2008 crisis, tend to be good for political fringe groups. In spite of rising stock markets in many countries, the social mood seemingly remains negative. The problem is that most of these fringe groups tend to be even bigger statists and authoritarians than their political enemies (there are a few exceptions).

 

Symbol_of_jcp

 

Flag of Japan’s Communist Party – as far as we can tell, it depicts a cog wheel and an ear of wheat, representing the two classes (workers and farmers), that are usually supposed to bring communists to power, who will then proceed to show them what oppression really means. Image author: グラインドマーチャーシュ

 

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Nonsensical Reasoning is Concocted to “Explain” Day-to-Day Market Moves

We were wondering what could have triggered today’s move in the stock market that so promptly negated Friday’s sell-off. On Friday traders were allegedly worried about a) Greece (what, only now?) and b) China – where it was decided to limit margin trading somewhat and expand stock lending for short sellers in a vain attempt to slow the expansion of the world’s latest and currently strongest stock market bubble.

Neither explanation made any sense. If investors were really worried about Greece, they would have been worrying non-stop since late December at a minimum. Instead European stocks ex-Greece have experienced a near parabolic blow-off move to the upside, pushing them to the highest trailing P/E in history.

 

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All the Trappings of a State

Readers may recall that we have frequently pointed out in previous posts about ISIS that the organization really does have all the trappings of a State. It even has the typical origin of a State: it is now the force monopolist in a territory it has gained by violent conquest. This is how all States have come into being. Once upon a time, marauding bandits tended to simply slay and rob their victims, but the more intelligent of them soon realized that this had a grave disadvantage: it could only be done once. And so they began to leave their victims alive and installed themselves as their rulers. In order to make these occupations work, they ran a protection racket. They told the vanquished that they would protect them against other marauders, on the condition of being paid a share of their production. When this happened for the first time, the first proto-State had been created.

 

ISIS-militantsThey often look as if they had popped straight out of a Hollywood movie: ISIS soldiers waving the flag of the self-anointed caliphate.

Photo credit: Islamic State (IS)

 

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Nothing Against the Old

We would like to preface today’s Diary with a clarification: We don’t have anything against old people. We don’t have anything against high GDP growth rates either. But the two don’t go together.

Some of this opinion comes from looking in the mirror: New products? New technology? New businesses? The older we get the less interest we have. When we learn a “new” song on the guitar, for example, it is likely to be one written half a century ago.

When we sit down to watch a movie, we’re as likely to pick out something from Leslie Nielsen’s Naked Gun series as a new Hollywood release. There are different stages in life… with different interests. One dear reader explains it:

 

In India there is a concept of Vrana ashram. In it, a person’s life is divided in four parts. From birth until 25, it is Brahmacharya – a person should gain knowledge by reading scriptures. From 25 to 50, it is Grihastha ashram – to live married life. From 50 to 75, it Vanaprastha – away from society in the forest seeking god. From 75 to 100, it is Sannays – complete renouncing of the world.”

 

We guess we are in the Vanaprastha stage. Maybe that’s what we’re really doing out on this remote ranch high in the Argentine Andes: seeking god.

 

Saiva_Swami_Sangam_2011Vanaprastha activities in the temple.

Photo credit: Kauai’s Hindu Monastery

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One Bad Idea After Another

Ben Bernanke is frequently in the news these days. The latest occasion concerns his opinion on the Fed’s “inflation” target, i.e., the target for the speed at which money should be debased relative to consumer goods in order to finally attain centrally planned economic nirvana.

Price inflation is currently deemed to be “too low” by our bien pensants, in spite of the fact that the broad US money supply TMS-2 has more than doubled since 2008 (as of March, it is very close to $11 trillion, up from $5.3 trn. in early 2008). If recent CPI data are to be believed (which requires a bit of a leap of faith), consumers may actually get slightly more goods and services for their money henceforth. What an unimaginable horror!

 

CPICPI dips ever so slightly into negative territory year-on-year – the nightmare of central planners around the world – click to enlarge.

 

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Ben “I Didn’t See It Coming” Bernanke Hired by Big Hedge Fund

Ben Bernanke is not only blogging now and thereby making an unwelcome contribution to lowering the citizenry’s aggregate economic intelligence, he has also decided to once again follow in the footsteps of his predecessor, “Maestro” Alan Greenspan, by joining a hedge fund. Bernanke is calling in some markers and is about to cash in by becoming an advisor to the Citadel Group, the world’s most highly leveraged large hedge fund and HFT shop.

 

 

citlogo

 

 

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Industrious Hands

In politics and economics, most people believe what isn’t true: that the common folk select their leaders … and that these leaders are wiser than God.

We recall an early experiment. The pilgrims washed up in the wrong place … and then proceeded to almost exterminate themselves with clumsy central planning.

Their system discouraged work and encouraged zombies. Wrote Plymouth County governor William Bradford:

 

[The system of] taking away of property and bringing [it] into a commonwealth [caused] confusion and discontent [and] retarded much employment that would have been to benefit and comfort [of the settlers].

 

Some went to work for the Indians, cutting wood and fetching water in exchange for a “capful of corn.” Others starved.

Finally, the colonists abandoned central financial planning and collective production. Families were given individual plots of land, which they were able to cultivate for themselves. The colony was saved.

“This had very good success,” Bradford wrote, “for it made all hands very industrious.”

 

BradfordCity fathers hewn in stone, sternly gaze across the lawn …William Bradford, governor of Plymout County, 1590-1657

Photo credit: cataloft  / flickr

 

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Gold and Gold Stocks Beginning to Look Better Again

Gold isn’t doing much in dollar terms – apart from the fact that it apparently still doesn’t really want to stay below the $1,200 level – but it remains quite strong in euro terms. In yen terms it isn’t really doing much lately, but remains well above the lows seen in the past two years. Obviously, the people who either buy gold as insurance or refuse to sell it at current prices (=high reservation demand) remain at work. The source of demand at the margin represented by today’s gold buyers has much to do with concerns that the central bank policy induced party in “risk” will inevitably end. This is to say, these buyers look beyond fundamentals in the here and now toward the day when it insurance may actually be needed (we have first mentioned this last year as it were, and believe it continues to be true). It is a case of better having insurance and not needing it, than one day realizing that one needs it but doesn’t have it.

 

18K Picasso Gold Brooch,Tiffany & Co

Image credit: Tiffany & Co

 

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