Mining lower quality ore is only part of the issue. Intermediate and senior miners have made some horrific acquisitions over the past couple of years where they have taken losses from $700K to $4 BILL. There's also the issue of environmentalists and sovereign jurisdications pulling the rug out from under mining projects and operating mines (ie Kinross in Ecuador (Fruta del Norte), Barrick in Chile (Pascua Lama), Newmont in Peru (Conga), Freeport McMoran in Indonesia (Grasberg), Northern Dynasty and AngloGold Ashanti in Alaksa (Pebble project) to name a few). Then you have the issue of limited to no financing available for 90% of the junior mining sector over the past 1-2 years. This just scratches the surface on problems miners are wading through. Ore quality has been dropping for 40-50 years as well as most noticeably in the past 13 years. Kinross just walked away from their major project in Equador after 2 years of failed negotiations with the govt. They were willing to take a total loss on the mine's asset value ($700 MILL) rather than continue to throw good money after bad. Barrick has the same decision to make in Chile as they have invested around $4.5 BILL in Pascua Lama and still have about $4 BILL to go to complete the project. Can't blame sovereign govt's for asking for a bigger piece of the pie. But, in doing so a lot of projects will be handed back over to govt's. One possible thought is that China comes in to "save the day" and take over all these abandoned projects. They would probably be happy to break even on the mining costs as long as they had a steady stream of gold supply for the next 10-20 years.
Today was the beginning of a new daily trend in the downward direction. Just entered a small short gold position. Looking for this move to take us below $1300. The question is how far... There are two target areas: $1288 and $1225. This weakness should persist for 2-3 weeks and should result in a long-time low for gold. A real back-up-the-truck buying opportunity, although I don't expect the rebound to be particularly fast.
0.065 = 20,000 dow and 1300 gold. 0.065 = 18,500 dow and 1200 gold. 0.065 = 17,000 dow and 1100 gold. 0.065 = 15,400 dow and 1000 gold. 0.065 = 13,600 dow and 900 gold.
The ratio had better stay within the trend channel.
Edited to add....This is a chart of the performance of the DOW Jones Industrial Average (stocks) vs Gold. Interesting that at current levels, stocks and gold have produced the same returns since 2009. So much for gold being a superior currency or insurance policy against QE and a dollar destined for oblivion. All the talk. All the hype. All the fundamentals........
This is how RELATIVITY plays itself out. Fascinating.
My short worked out beautifully and caught the $50 slide in gold and closed it out, what a fast move! I got long at $1290 with a small position. I'm not sure if the slide is over so I'm ready to get rid of it if we are heading down to $1225.
<< <i>My short worked out beautifully and caught the $50 slide in gold and closed it out, what a fast move! I got long at $1290 with a small position. I'm not sure if the slide is over so I'm ready to get rid of it if we are heading down to $1225. >>
moved into TBT yesterday. Up 4.6% so far today. Plan on this to be a quick play.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Going long gold here as the move down in gold seems to be exhausted. I'm expecting at least a 38.2% retracement here. I'll watch to see what happens at that point and if it keeps going I'm going to hold this long term, but if it can't break the retracement, I'm going short again.
<< <i>My short worked out beautifully and caught the $50 slide in gold and closed it out, what a fast move! I got long at $1290 with a small position. I'm not sure if the slide is over so I'm ready to get rid of it if we are heading down to $1225. >>
Nice trade.
I wonder where Roadrunner is taking me to dinner. >>
Refresh my memory. I'm usually a stickler when it comes to forum bets for actual money. Don't recall anything. I've made 2 in the past 11 years....both already settled. It would have had to been a "long" time ago for me to have no recollection of it today.
Has anyone done research on silver/gold miners? I'm looking for ones that have a high cost of production and high reserves. Any recommendations? I want to add some to my portfolio and hold till there is a bubble in precious metals.
References: Too many to list. PM for details. 100% satisfaction both as buyer and seller. As a seller, I ship promptly and keep buyers updated.
<< <i>My short worked out beautifully and caught the $50 slide in gold and closed it out, what a fast move! I got long at $1290 with a small position. I'm not sure if the slide is over so I'm ready to get rid of it if we are heading down to $1225. >>
Nice trade.
I wonder where Roadrunner is taking me to dinner. >>
Refresh my memory. I'm usually a stickler when it comes to forum bets for actual money. Don't recall anything. I've made 2 in the past 11 years....both already settled. It would have had to been a "long" time ago for me to have no recollection of it today. >>
I guess it was a little while ago. Wasnt really for actual money, thats why I was looking for dinner, but I'd settle for a beer. In this thread
Saturday December 15, 2012 3:18 PM I'll take the OVER on the $1300/$20 wager. Where do I sign up?
<< <i>Has anyone done research on silver/gold miners? I'm looking for ones that have a high cost of production and high reserves. Any recommendations? I want to add some to my portfolio and hold till there is a bubble in precious metals. >>
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Yup, 'bout time we finally got that 38% retracement.
A good exercise would be to show some graphs of other assets that have had good runs and subsequently corrected 38%. What did those charts look like 2 or 5 or 10 years later?
With $441 Trillion in interest rate derivatives out there (as reported by the Bank of International Settlements), this is the next crisis and it will dwarf the last one. If the interest rate climb is not soon brought under control, very massive amounts of money are about to be lost by some large financial institutions. Look for near term central bank policy to be directed at this threat.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Interest rate derivatives defined by Investopedia: "A financial instrument based on an underlying financial security whose value is affected by changes in interest rates."
The rate has nothing to do with it. It's the change in interest rates that is about to slaughter holders of interest rate derivatives. Let's now take a look at the yields on five year treasuries which rose 37% just last week. No doubt that holders of these derivatives are feeling their necktie tightening.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Derivatives are paper contracts. Paper gets torn, burned, coffee stained, ect. They are only insurance policies, and mostly insurance on insurance on insurance. They are not a guillotine over the neck of the American or global economy.
If things really got ugly, these derivatives would simply vanish. They are not hard, tangible assets, so why hold them in such high regard?
<< <i>If things really got ugly, these derivatives would simply vanish. They are not hard, tangible assets, so why hold them in such high regard? >>
They are a $441 Trillion dollar liability for those that hold them, particularly large banks. Last crisis showed us what a banking liquidity crisis could do the the economy. This could easily result in a much larger liquidity crisis. I hold any major threat to the US economy in high regard - you should as well.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
If things really got ugly, these derivatives would simply vanish. They are not hard, tangible assets, so why hold them in such high regard?
Do you think that Citi will be willing to tear up my mortgage papers? I don't think so. What makes you think that any winning bet derivatives would vanish? The only way that they will vanish is if someone on the winning side of the trade decides to write it off. Do you know any insurance houses or banks who are going to write off $500 billion or so? No, you don't. The reason for QE is to feed money into the corrupt banking system at the expense of the taxpaying public, so that the banks can dissolve those liabilities a little at a time, when they are scheduled to roll over. Again, the big problem with this fraud is that ALL of this new debt creation keeps being added to the national tab.
When rates go from 2% to 3%, it's not a 1% increase, it's a 50% increase over what is required to maintain the rollover payments. Add to that the fact that more people are retiring, more people are on welfare, and more people are going onto disability - all which require more payments from the kitty. Now, the talk is about less free money (less QE) to fund the stock market. Taxes are scheduled to go up as well.
The debt ceiling debate comes this fall. Corporate revenues will be dropping, personal income levels will be dropping, and tax revenues will be dropping. With less QE, the stock market might very easily be in a serious decline by then. In my opinion, there will be absolutely no choice but to inflate, and my guess is that it will be way beyond $85 billion/month. No more bailouts? Don't bet on it.
Derryb is dead on regarding another liquidity crisis. If nobody can collect their winning insurance bets, why have insurance at all? If insurance is no good, why would banks trust each other? When libor went over 4% for overnight funds in 2008, that is exactly what a liquidity crisis is. If they can't put the tab in front of the public to pay, the risk premiums will skyrocket. 2008 was the matinee' show. This could be the real liquidity crunch.
I agree with Streeter's inclination to sell any nominal assets or non-essential assets that aren't nailed down, for cash. The precious metals will come out on top when the problems are over, but in the meantime, you gotta have enough cash.
Q: Are You Printing Money? Bernanke: Not Literally
What makes you think that any winning bet derivatives would vanish?
Because of the size of the obligation. Who is on the other side of these derivatives? Would JPM owe Citi $10 trillion? Of course not. Would JPM go under? Of course not. Derivatives are assured mutual destruction. C cannot survive without JPM who cannot survive without GS who needs WFC. These contracts would be torn up, just as millions of contracts are torn up among corporations, individuals, municipalities, ect every year.
<< <i>What makes you think that any winning bet derivatives would vanish?
Because of the size of the obligation. Who is on the other side of these derivatives? Would JPM owe Citi $10 trillion? Of course not. Would JPM go under? Of course not. Derivatives are assured mutual destruction. C cannot survive without JPM who cannot survive without GS who needs WFC. These contracts would be torn up, just as millions of contracts are torn up among corporations, individuals, municipalities, ect every year. >>
If the holders of these contracts believed any of that BS they would not be holding $441 Trillion worth of them. Contracts will not be torn up. Liable holders will be forced into bankruptcy to avoid payment, causing a financial crisis that will dwarf anything imaginable. The best possible outcome for the banks would be one surving bank that owns the others.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Going long gold at $1225. I think we could dip lower but will close out the week at $1225 or higher, and that it will be nothing but upside from here. I hope to hold this position for years. I'm calling that the bottom for gold is in this week.
<< <i>Going long gold at $1225. I think we could dip lower but will close out the week at $1225 or higher, and that it will be nothing but upside from here. I hope to hold this position for years. I'm calling that the bottom for gold is in this week. >>
Hey wait a minute I just unloaded all mine- gave it all up after years. Now if I jump back in I'll have to pay the premiums, and I just had to lose 5% under on the sell as well. And then that Coho tries to rub it in by posting his buying one minute after I post just sold it all. You guys are just killing me with a whipsaw.
What did I ever do, but trust all you guys when you said buy silver and look where it got me, maaan i'm a despairin soul, what to do, what to do !
NumbersUsa, FairUs, Alipac, CapsWeb, and TeamAmericaPac
Who is on the other side of these derivatives? Would JPM owe Citi $10 trillion? Of course not. Would JPM go under?
Why do you think they invented lawyers? What do you think those large legal departments do all day long? A few $billion pays for alot of legal. Those obligations won't be torn up.
Q: Are You Printing Money? Bernanke: Not Literally
Hey wait a minute I just unloaded all mine- gave it all up after years. Now if I jump back in I'll have to pay the premiums, and I just had to lose 5% under on the sell as well.
If you sold, why? If you want back in, why are you in such a hurry? Isn't the price lower now than when you sold?
Why do you give more credence to the "buy" side now, than you did to the "sell" side just a day or two ago?
If you sold without needing the cash for something imminent, you need a game plan, badly.
Q: Are You Printing Money? Bernanke: Not Literally
badly, yup that's a good way to describe my dire situation. I'm just gonna take a breather, I can't take it anymore. And, knowing coho's laughing his head off at my financial demise just absolutely takes away any remaining self respect I was clinging to.
NumbersUsa, FairUs, Alipac, CapsWeb, and TeamAmericaPac
<< <i>Derivatives are paper contracts. Paper gets torn, burned, coffee stained, ect. They are only insurance policies, and mostly insurance on insurance on insurance. They are not a guillotine over the neck of the American or global economy.
If things really got ugly, these derivatives would simply vanish. They are not hard, tangible assets, so why hold them in such high regard? >>
A large % of the interest rate contracts held by the too-big-to-fail banks are linked to a real USTreasury Bond. This is what makes them ultimately so deadly. These derivative contracts are as tangible and real as "paper" USTreasuries are, only leveraged from 30 to 100X. The ability to net out these contracts out with minimal harm done was lost when they flushed Lehman and AIG and allowed the winners of the contract default swaps and MBS's to be paid off. There is no feasible way to remove the $15T-$25T that was injected into the system at that time short of blowing up the world's financial system.
<< <i>Going long gold at $1225. I think we could dip lower but will close out the week at $1225 or higher, and that it will be nothing but upside from here. I hope to hold this position for years. I'm calling that the bottom for gold is in this week. >>
Really? I doubt it and believe we still have a long way to go. Hope you haven't mortgaged your house on that hunch.
"Bongo drive 1984 Lincoln that looks like old coin dug from ground."
Let me remember - isn't this about what happened in 2008 at about the same time. Platinum crashed right after the Proof Plats went onsale, and only a few hundred of each denomination were sold before the Mint took them back off. And about 5 or 6 months later, they offered them at half the original price.
This could be an interesting year for Mint stuff if the price swings remain unpredictable. Heads up!
If you have a job, i.e. some cash flow - this price drop will take some of the pressure off of the buying phase.
While we wait to see how this jawboning affects the economy, there is really no change in the money supply or debt. Nothing has changed except the rhetoric.
Q: Are You Printing Money? Bernanke: Not Literally
Actually I havent noticed any change in rhetoric. I see a few more people being vocal about further price drops, but thats usually more a sign of capitulation.
Metal futures AND dollar index both showing strength on this Friday afternoon. Paradigm shift?
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Going long gold at $1225. I think we could dip lower but will close out the week at $1225 or higher, and that it will be nothing but upside from here. I hope to hold this position for years. I'm calling that the bottom for gold is in this week. >>
Really? I doubt it and believe we still have a long way to go. Hope you haven't mortgaged your house on that hunch. >>
No, not a huge position, but I am ready to bail if I see things go further south. I added more at $1200. Gold is so far oversold, we should be looking at a pretty quick $100-200 retracement at some point.
And how much worse can things get for gold? As cohodk says, the increased rhetoric about gold being such a dud is a sign of capitulation. It is due. The only problem is timing, because it can be hard to know when the rebound the start... it could be several weeks out yet.
Oh Yeah..... just keep rubbing it in since I just sold my whole stack. Now Proof and Coho are dancing around my financial grave.... I'm just plain sick of it all
Folks, we could sure use all of your help on the House over the next few weeks !! All you can do is appreciated.
NumbersUsa, FairUs, Alipac, CapsWeb, and TeamAmericaPac
<< <i>Folks, we could sure use all of your help on the House over the next few weeks !! All you can do is appreciated. >>
Just painted it, all done.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Had to take most of the week off as the emotions and bearishness was just getting too thick. It was time to let the final flurry play out and then get a better view as the smoke cleared. I was a bit concerned that a spot gold gap was left behind on the bounce off $1180. But, this morning's dip to $1187 cleared it out. Not all clear though as gaps left behind again at $1197, $1227, and $1232. Those last 2 will be snap. GDX cleared out the entire Dec 2008 gap-happy range of $22.75-$26.40. Should have figured all along that this was just too weak an area not to revisit...especially after it was slightly breached on May dip. The ONLY lower GDX gap alive under this week's low is at $18.30. In the same manner gold retraced that entire Aug-Nov 2010 rally of GLD $116-$129. Got all the way down into the $114's. The next significant gap area is $108-$110 ($1120-$1140 gold). Then it's a fairly long ways to reach the next 3 lower gap areas of $102.5, $100, $93. As ILUVPMS has noted, there are enough higher gaps in GLD and GDX to feast on for years....once the market is done filling lower gaps.
Gold has a lot of gaps left behind higher on this recent drop. Numerous gaps in the $1270's where gold was broken. Another at $1252. Then also $1299 and $1328. Because the $1328 level was the most recent "push off the cliff" event much like $1422 was, I think that's a very likely retest point for a gap fill. Gaps in silver up to $21.40. Gold just probably completed its typical daily cycle (18-28 days) on day 28. Odds are decent that we have 8-12 days of upside before the next down move occurs into the next daily cycle low. Though the bulk of such a move could be completed in as little as 3-5 days. No idea if we just saw the final bottom. But as Quad said, it's very likely to at least be a ST bottom. Fair targets are the two higher gaps at $1298 and $1328 which coincide with the 38/61% fib retraces of the drop from $1488 to $1179.
Too bad we don't get to see the COT report on Tuesday because the 9K managed money short side gold swing would have told us another big gold hit was coming. But we knew that anyways with this being an OpEx week. In fact it played out brutally much like other back to back OpEx weeks, esp with the one being an end of quarter/end of half year. The FOMC, G8, and Treasury Auctions of these 2 weeks just added to the bearish headwinds that were blowing during this critical time. Maybe this isn't the final bottom, but it was very likely that this 2-3 week setup was going to lead to something nasty. Commercials once again went to all time low short to long ratios in both gold (1.21) and silver (1.06). Gold Open Interest rose to 390K...so still nowhere near those ultra low OI's of 275K to 320K seen during previous hard bottoms. I'd have to bet that managed money had to unload of lot of shorts this past week....possibly a 30K to 50K shift towards net longs. LBMA gold forwards starting declining last Wednesday. But, not fast enough to suggest the size of the hit that was coming. They fell to a lower low today though the rate of descent the past few days is minimal.
I find the continuing saga of the monthly GSR to be fascinating. This was the 3rd month of the 4 year downtrend breakout (2009-2013)....very similar to the one in 2003-2008. With June 2013 now complete we can compare it to its "fraternal twin" of October 2008 in both time and price. The April and May 2013 candles were both bullish though far shorter in size than Aug and Sept 2008. June 2013 GSR candle is an inverted hammer or a gravestone doji....very similar to October 2008 which was also a large inverted hammer. The months of Nov and Dec 2008 did allow for rebounds in GSR even if the low in gold was already in by October 24th. I suspect we'll see some final surges in July/August 2013 to match the 2008 pattern. So far, this 3 month GSR breakout is quite weak compared to 2008 where GSR ran to 83 and the dollar to 88-90. Without the GSR to help push things along, the dollar probably won't easily soar back to the upper 80's. It already has a very strong gap area back at 81.5 to fill. The dollar has already retraced a whopping 71% of the recent fall from 84 to 80. Some think the dollar still has a 5th point higher left in it (>84.4) to form a large, 4 month expanding wedge. I tend to think that wedge completed its 5th point in May. This week's high backtested the breakdown of the Feb-May rally. It's run into resistance at 83.3 on a number of levels.
Gotta say I am happy with my entries in gold. Although this rebound could just be a natural retracement, I am feeling more confident that the low could be in and I can hold this position for a long time.
Looks to me like gold has lost some steam on the rebound, but I don't think we're going to head back town to the previous lows. I'm closing my position, plan to re-buy around $1220 again. This may be ht e last good chance to load up on gold at these prices.
GLD currently playing within the last large gap zone of 120-123 ($1242-$1273). There's also a tiny gap leftover from Monday's open at around $119 ($1231 gold). Spot gold has a gap left behind at $1197 from Friday's rally. If the bottom is truly in none of these lower gaps need be filled. Higher spot futures gaps at $1264, $1277, $1298, $1328 are a decent pull to try and make this bounce go higher. After 16 days down, you'd think we'd get a little more than a 3 day bounce higher. Next week is a Treasury auction week along with FED minutes release on Wed. Then back to back OpEx weeks once again provide another higher probability hit period. The gap at $1328 corresponds nicely with a fib retrace point. It's also the level which the last sharp gold push down started from....much like the PTB did from the $1422 gap back in mid May. That gap was filled on the rebound into early June.
Comments
losses from $700K to $4 BILL. There's also the issue of environmentalists and sovereign jurisdications pulling the rug out from under mining projects and operating mines (ie
Kinross in Ecuador (Fruta del Norte), Barrick in Chile (Pascua Lama), Newmont in Peru (Conga), Freeport McMoran in Indonesia (Grasberg), Northern Dynasty and AngloGold
Ashanti in Alaksa (Pebble project) to name a few). Then you have the issue of limited to no financing available for 90% of the junior mining sector over the past 1-2 years. This just
scratches the surface on problems miners are wading through. Ore quality has been dropping for 40-50 years as well as most noticeably in the past 13 years. Kinross just walked
away from their major project in Equador after 2 years of failed negotiations with the govt. They were willing to take a total loss on the mine's asset value ($700 MILL) rather than
continue to throw good money after bad. Barrick has the same decision to make in Chile as they have invested around $4.5 BILL in Pascua Lama and still have about $4 BILL to go
to complete the project. Can't blame sovereign govt's for asking for a bigger piece of the pie. But, in doing so a lot of projects will be handed back over to govt's. One possible
thought is that China comes in to "save the day" and take over all these abandoned projects. They would probably be happy to break even on the mining costs as long as they
had a steady stream of gold supply for the next 10-20 years.
Looks like we could be getting some rotation out of metals and into grains. Watch the relative performances over coming weeks.
Knowledge is the enemy of fear
Soooo. silver is 21.15 as I type (always with 1 fanger) ........
What's everyone thinking ?
<< <i>The price of gold is not dependant on the cost to mine it.
Looks like we could be getting some rotation out of metals and into grains. Watch the relative performances over coming weeks. >>
Bad day for gold, silver, palladium, copper. Good day for corn, wheat, oats.
Knowledge is the enemy of fear
Knowledge is the enemy of fear
0.065 = 20,000 dow and 1300 gold.
0.065 = 18,500 dow and 1200 gold.
0.065 = 17,000 dow and 1100 gold.
0.065 = 15,400 dow and 1000 gold.
0.065 = 13,600 dow and 900 gold.
The ratio had better stay within the trend channel.
Edited to add....This is a chart of the performance of the DOW Jones Industrial Average (stocks) vs Gold. Interesting that at current levels, stocks and gold have produced the same returns since 2009. So much for gold being a superior currency or insurance policy against QE and a dollar destined for oblivion. All the talk. All the hype. All the fundamentals........
This is how RELATIVITY plays itself out. Fascinating.
Knowledge is the enemy of fear
Knowledge is the enemy of fear
<< <i>My short worked out beautifully and caught the $50 slide in gold and closed it out, what a fast move! I got long at $1290 with a small position. I'm not sure if the slide is over so I'm ready to get rid of it if we are heading down to $1225. >>
Nice trade.
I wonder where Roadrunner is taking me to dinner.
Knowledge is the enemy of fear
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>My short worked out beautifully and caught the $50 slide in gold and closed it out, what a fast move! I got long at $1290 with a small position. I'm not sure if the slide is over so I'm ready to get rid of it if we are heading down to $1225. >>
Nice trade.
I wonder where Roadrunner is taking me to dinner. >>
Refresh my memory. I'm usually a stickler when it comes to forum bets for actual money. Don't recall anything. I've made 2 in the past 11 years....both already settled.
It would have had to been a "long" time ago for me to have no recollection of it today.
<< <i>
<< <i>
<< <i>My short worked out beautifully and caught the $50 slide in gold and closed it out, what a fast move! I got long at $1290 with a small position. I'm not sure if the slide is over so I'm ready to get rid of it if we are heading down to $1225. >>
Nice trade.
I wonder where Roadrunner is taking me to dinner. >>
Refresh my memory. I'm usually a stickler when it comes to forum bets for actual money. Don't recall anything. I've made 2 in the past 11 years....both already settled.
It would have had to been a "long" time ago for me to have no recollection of it today. >>
I guess it was a little while ago. Wasnt really for actual money, thats why I was looking for dinner, but I'd settle for a beer.
Saturday December 15, 2012 3:18 PM I'll take the OVER on the $1300/$20 wager. Where do I sign up?
Knowledge is the enemy of fear
<< <i>Has anyone done research on silver/gold miners? I'm looking for ones that have a high cost of production and high reserves. Any recommendations? I want to add some to my portfolio and hold till there is a bubble in precious metals. >>
You might consider ETFs GDX or GDXJ (junior miners)
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Which retracement level will it be?
A good exercise would be to show some graphs of other assets that have had good runs and subsequently corrected 38%. What did those charts look like 2 or 5 or 10 years later?
Knowledge is the enemy of fear
With $441 Trillion in interest rate derivatives out there (as reported by the Bank of International Settlements), this is the next crisis and it will dwarf the last one. If the interest rate climb is not soon brought under control, very massive amounts of money are about to be lost by some large financial institutions. Look for near term central bank policy to be directed at this threat.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Knowledge is the enemy of fear
<< <i>Interest rates are not high. >>
Interest rate derivatives defined by Investopedia: "A financial instrument based on an underlying financial security whose value is affected by changes in interest rates."
The rate has nothing to do with it. It's the change in interest rates that is about to slaughter holders of interest rate derivatives. Let's now take a look at the yields on five year treasuries which rose 37% just last week. No doubt that holders of these derivatives are feeling their necktie tightening.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
If things really got ugly, these derivatives would simply vanish. They are not hard, tangible assets, so why hold them in such high regard?
Knowledge is the enemy of fear
<< <i>If things really got ugly, these derivatives would simply vanish. They are not hard, tangible assets, so why hold them in such high regard? >>
They are a $441 Trillion dollar liability for those that hold them, particularly large banks. Last crisis showed us what a banking liquidity crisis could do the the economy. This could easily result in a much larger liquidity crisis. I hold any major threat to the US economy in high regard - you should as well.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Do you think that Citi will be willing to tear up my mortgage papers? I don't think so. What makes you think that any winning bet derivatives would vanish? The only way that they will vanish is if someone on the winning side of the trade decides to write it off. Do you know any insurance houses or banks who are going to write off $500 billion or so? No, you don't. The reason for QE is to feed money into the corrupt banking system at the expense of the taxpaying public, so that the banks can dissolve those liabilities a little at a time, when they are scheduled to roll over. Again, the big problem with this fraud is that ALL of this new debt creation keeps being added to the national tab.
When rates go from 2% to 3%, it's not a 1% increase, it's a 50% increase over what is required to maintain the rollover payments. Add to that the fact that more people are retiring, more people are on welfare, and more people are going onto disability - all which require more payments from the kitty. Now, the talk is about less free money (less QE) to fund the stock market. Taxes are scheduled to go up as well.
The debt ceiling debate comes this fall. Corporate revenues will be dropping, personal income levels will be dropping, and tax revenues will be dropping. With less QE, the stock market might very easily be in a serious decline by then. In my opinion, there will be absolutely no choice but to inflate, and my guess is that it will be way beyond $85 billion/month. No more bailouts? Don't bet on it.
Derryb is dead on regarding another liquidity crisis. If nobody can collect their winning insurance bets, why have insurance at all? If insurance is no good, why would banks trust each other? When libor went over 4% for overnight funds in 2008, that is exactly what a liquidity crisis is. If they can't put the tab in front of the public to pay, the risk premiums will skyrocket. 2008 was the matinee' show. This could be the real liquidity crunch.
I agree with Streeter's inclination to sell any nominal assets or non-essential assets that aren't nailed down, for cash. The precious metals will come out on top when the problems are over, but in the meantime, you gotta have enough cash.
I knew it would happen.
Because of the size of the obligation. Who is on the other side of these derivatives? Would JPM owe Citi $10 trillion? Of course not. Would JPM go under? Of course not. Derivatives are assured mutual destruction. C cannot survive without JPM who cannot survive without GS who needs WFC. These contracts would be torn up, just as millions of contracts are torn up among corporations, individuals, municipalities, ect every year.
Knowledge is the enemy of fear
<< <i>What makes you think that any winning bet derivatives would vanish?
Because of the size of the obligation. Who is on the other side of these derivatives? Would JPM owe Citi $10 trillion? Of course not. Would JPM go under? Of course not. Derivatives are assured mutual destruction. C cannot survive without JPM who cannot survive without GS who needs WFC. These contracts would be torn up, just as millions of contracts are torn up among corporations, individuals, municipalities, ect every year. >>
If the holders of these contracts believed any of that BS they would not be holding $441 Trillion worth of them. Contracts will not be torn up. Liable holders will be forced into bankruptcy to avoid payment, causing a financial crisis that will dwarf anything imaginable. The best possible outcome for the banks would be one surving bank that owns the others.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Thats exactly why it wont happen.
Knowledge is the enemy of fear
<< <i>Going long gold at $1225. I think we could dip lower but will close out the week at $1225 or higher, and that it will be nothing but upside from here. I hope to hold this position for years. I'm calling that the bottom for gold is in this week. >>
Hey wait a minute I just unloaded all mine- gave it all up after years. Now if I jump back in I'll have to pay the premiums, and I just had to lose 5% under on the sell as well.
And then that Coho tries to rub it in by posting his buying one minute after I post just sold it all. You guys are just killing me with a whipsaw.
What did I ever do, but trust all you guys when you said buy silver and look where it got me, maaan i'm a despairin soul, what to do, what to do !
Why do you think they invented lawyers? What do you think those large legal departments do all day long? A few $billion pays for alot of legal. Those obligations won't be torn up.
I knew it would happen.
If you sold, why? If you want back in, why are you in such a hurry? Isn't the price lower now than when you sold?
Why do you give more credence to the "buy" side now, than you did to the "sell" side just a day or two ago?
If you sold without needing the cash for something imminent, you need a game plan, badly.
I knew it would happen.
Knowledge is the enemy of fear
<< <i>Derivatives are paper contracts. Paper gets torn, burned, coffee stained, ect. They are only insurance policies, and mostly insurance on insurance on insurance. They are not a guillotine over the neck of the American or global economy.
If things really got ugly, these derivatives would simply vanish. They are not hard, tangible assets, so why hold them in such high regard? >>
A large % of the interest rate contracts held by the too-big-to-fail banks are linked to a real USTreasury Bond. This is what makes them ultimately so deadly. These derivative contracts
are as tangible and real as "paper" USTreasuries are, only leveraged from 30 to 100X. The ability to net out these contracts out with minimal harm done was lost when they flushed
Lehman and AIG and allowed the winners of the contract default swaps and MBS's to be paid off. There is no feasible way to remove the $15T-$25T that was injected into the system at
that time short of blowing up the world's financial system.
<< <i>Going long gold at $1225. I think we could dip lower but will close out the week at $1225 or higher, and that it will be nothing but upside from here. I hope to hold this position for years. I'm calling that the bottom for gold is in this week. >>
Really? I doubt it and believe we still have a long way to go. Hope you haven't mortgaged your house on that hunch.
RR, while it's obvious the Treasury has huge liabilities, I still think US treasuries are much more "real" in the real world, than derivatives.
I think if the derivatives market collapsed, it would again be very deflationary, similar to 2008. Which actually would likely benefit treasuries.
This could be an interesting year for Mint stuff if the price swings remain unpredictable. Heads up!
If you have a job, i.e. some cash flow - this price drop will take some of the pressure off of the buying phase.
While we wait to see how this jawboning affects the economy, there is really no change in the money supply or debt. Nothing has changed except the rhetoric.
I knew it would happen.
Actually I havent noticed any change in rhetoric. I see a few more people being vocal about further price drops, but thats usually more a sign of capitulation.
Knowledge is the enemy of fear
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>Going long gold at $1225. I think we could dip lower but will close out the week at $1225 or higher, and that it will be nothing but upside from here. I hope to hold this position for years. I'm calling that the bottom for gold is in this week. >>
Really? I doubt it and believe we still have a long way to go. Hope you haven't mortgaged your house on that hunch. >>
No, not a huge position, but I am ready to bail if I see things go further south. I added more at $1200. Gold is so far oversold, we should be looking at a pretty quick $100-200 retracement at some point.
And how much worse can things get for gold? As cohodk says, the increased rhetoric about gold being such a dud is a sign of capitulation. It is due. The only problem is timing, because it can be hard to know when the rebound the start... it could be several weeks out yet.
Folks, we could sure use all of your help on the House over the next few weeks !! All you can do is appreciated.
<< <i>Folks, we could sure use all of your help on the House over the next few weeks !! All you can do is appreciated. >>
Just painted it, all done.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Gold has a lot of gaps left behind higher on this recent drop. Numerous gaps in the $1270's where gold was broken. Another at $1252. Then also $1299 and $1328. Because the $1328 level was the most recent "push off the cliff" event much like $1422 was, I think that's a very likely retest point for a gap fill. Gaps in silver up to $21.40. Gold just probably completed its typical daily cycle (18-28 days) on day 28. Odds are decent that we have 8-12 days of upside before the next down move occurs into the next daily cycle low. Though the bulk of such a move could be completed in as little as 3-5 days. No idea if we just saw the final bottom. But as Quad said, it's very likely to at least be a ST bottom. Fair targets are the two higher gaps at $1298 and $1328 which coincide with the 38/61% fib retraces of the drop from $1488 to $1179.
Too bad we don't get to see the COT report on Tuesday because the 9K managed money short side gold swing would have told us another big gold hit was coming. But we knew that anyways with this being an OpEx week. In fact it played out brutally much like other back to back OpEx weeks, esp with the one being an end of quarter/end of half year. The FOMC, G8, and Treasury Auctions of these 2 weeks just added to the bearish headwinds that were blowing during this critical time. Maybe this isn't the final bottom, but it was very likely that this 2-3 week setup was going to lead to something nasty. Commercials once again went to all time low short to long ratios in both gold (1.21) and silver (1.06). Gold Open Interest rose to 390K...so still nowhere near those ultra low OI's of 275K to 320K seen during previous hard bottoms. I'd have to bet that managed money had to unload of lot of shorts this past week....possibly a 30K to 50K shift towards net longs. LBMA gold forwards starting declining last Wednesday. But, not fast enough to suggest the size of the hit that was coming. They fell to a lower low today though the rate of descent the past few days is minimal.
I find the continuing saga of the monthly GSR to be fascinating. This was the 3rd month of the 4 year downtrend breakout (2009-2013)....very similar to the one in 2003-2008. With June 2013 now complete we can compare it to its "fraternal twin" of October 2008 in both time and price. The April and May 2013 candles were both bullish though far shorter in size than Aug and Sept 2008. June 2013 GSR candle is an inverted hammer or a gravestone doji....very similar to October 2008 which was also a large inverted hammer. The months of Nov and Dec 2008 did allow for rebounds in GSR even if the low in gold was already in by October 24th. I suspect we'll see some final surges in July/August 2013 to match the 2008 pattern. So far, this 3 month GSR breakout is quite weak compared to 2008 where GSR ran to 83 and the dollar to 88-90. Without the GSR to help push things along, the dollar probably won't easily soar back to the upper 80's. It already has a very strong gap area back at 81.5 to fill. The dollar has already retraced a whopping 71% of the recent fall from 84 to 80. Some think the dollar still has a 5th point higher left in it (>84.4) to form a large, 4 month expanding wedge. I tend to think that wedge completed its 5th point in May. This week's high backtested the breakdown of the Feb-May rally. It's run into resistance at 83.3 on a number of levels.
Spot gold has a gap left behind at $1197 from Friday's rally. If the bottom is truly in none of these lower gaps need be filled. Higher spot futures gaps at $1264, $1277, $1298, $1328
are a decent pull to try and make this bounce go higher. After 16 days down, you'd think we'd get a little more than a 3 day bounce higher. Next week is a Treasury auction week
along with FED minutes release on Wed. Then back to back OpEx weeks once again provide another higher probability hit period. The gap at $1328 corresponds nicely with a fib
retrace point. It's also the level which the last sharp gold push down started from....much like the PTB did from the $1422 gap back in mid May. That gap was filled on the rebound into
early June.