Saturday, January 26, 2013

A Philip K. Dick documentary


Here's a documentary on mad genius Philip K. Dick.



'Splain to me again why people still have cable television?




Josh Brown on how full of shit the contrarians are right now


Weezie at BI has a good article on the impending breakout in the US stock market. It includes some prime quotes from Josh Brown, who is often a tard but still has professional trader insight that all the bloggers of blogistan quite simply don't. Basically, he has a fiduciary responsibility to make money for people, while your average blogger's job is staining his combat pants with urine while standing on a street corner screaming about the coming Obamapocalypse.

As Wiesenthal says, "The idea that we've hit a top just because people are getting bullish, and aware of the stock market isn't based in anything."

As Brown says:


"I don't get the obsession with calling the top just because stocks are becoming mainstream again."

"A lot of you guys in your 20's don't understand that it's perfectly normal for Mom & Pop to be interested in stocks. Not an automatic sell."

"The shoeshine boy indicator, magazine cover indicator are not nearly as clever as you think they are. We all understand the concept."

"Ignore the surveys, I don't think you understand just how underinvested people are. Pension funds in particular have made a huge mistake."

All true, and provided with not nearly enough snark for the pompous idiots who want to call this an automatic top.

Provide a mechanism and data. Else, shut the fuck up forever. Correlation and folk sayings can be wrong.


One and only one news piece


New Deal Democrat - predicting the next recession. Part of an ongoing discourse between him and Bill McBride.

Personally, I think the "recoveries don't last for long" argument fails to take into account that this time is different. The US has been digging itself out of a larger hole than the usual recession; this was a mini-depression, and so you get that much longer U in the data, and only in 2012 did housing start to look good. Frankly, between 2008 and 2012 the US was on life support, and so I don't think those years can even count as "recovery".

So a collapse by 2016 based on "here's how long bull markets run"? Without a mechanism and supporting data, that is an utterly specious argument.

Also I'm thinking the next crash has to come from China. Like I've kept saying.

But still, he does point out that a housing-led recovery might get strangled by rising interest rates. I find that notable, cos I'm assuming Gary Tanashian's 30Y yield chart has to flip to inflationary soon, which means Treasury yields rise, which means interest rates rise. Also, currency war should cause worldwide inflation to increase. So are we going to cycle back into an inflationary choke-collar?

So, as you see, I'm not wedded to the China collapse idea. Something else could happen. It doesn't even have to be a crash, it could just be a failed economic breakout that sinks the world back into near-zero growth.

Apparently some people like the idea that the size of inflationary reactions today will be a lot greater than they were in a lower-debt environment. Haven't thought about that in depth, but it maybe passes first reading.

I'm happy to keep all options open, and just file them away for future reference for when the market stops doing what I think it's supposed to do.

Just as long as they're sensible options, which New Deal Democrat provides.

Friday, January 25, 2013

Sorry I'm late, here's some news


Had stuff to do in the early morning, needed a nap to recouperate.

All Star Charts - metals vs. miners. Two things: one, he has a freaky chart on the metals versus miners trade which Tanashian would find interesting and which suggests the miners are fu-u-ucked; and two, he is long metals short miners, so probably the rest of the known world is too, or is at least moving in that direction, and thus the miners are diving.

Mineweb - insights from the Vancouver conference. And it's insightful - it's a world of suck™. This is the best read of the list today.

Mining.com - I!Am!Gold! craters. I guess that whole west Africa strategy's not working out for them, no? I wonder how much impact that's having on the GDX and GDXJ. After all, the dives are concurrent. Maybe we can just blame IMG's CEO, Stephen J.J. Nitwit, for the damage he's doing to the whole scene?

Mineweb - Sinclair rounds on gold manipulating bastards, bullies and devils; also, wharrgarbl. Jimmy the Sink thinks this is an orchestrated takedown before Operation To Da Moon Alice. If so, why didn't he tell his followers to sell a few days ago, so they can buy back at the low? I mean, y'know, if he knows so damn much? Also, I'm really starting to enjoy Mineweb writer Lawrence Williams.

Mining.com - stay away from iron. Massive glob of new supply coming online. But that's because you can easily fine new mine supply in iron; you can't in gold. This is a good thing for gold and the miners.

CNBC - market bears on the brink - "I can't fight it anymore!" Yup, sure sucks to be bearish and stupid, eh? I mean, where are these idiots getting their information from - Fox News and Zerohedge? Is that what's led them down the bearish path? Fuckheads, I hope we see S&P 1700 by February just to teach you fools a lesson.

Mineweb - why a stronger US economy would be inconvenient for gold. No, Candy, it wouldn't. Because the West doesn't buy gold. China and India buy gold, and they buy it when their wealth is growing. Which it will with a resurgent US. UBS are clowns and this bullshit argument of theirs proves it. I know you're forced to write articles like this, Candy, but maybe you should come to me to give you the other side? Y'know, the true side?

Mining.com - copper supposedly going to rally. Cos China is upbeat or something. I doubt it. The only reason I wanted to give you this article is cos it says 42% of all world copper demand is China. Holy crap! Is the rest of the world not industrializing? And what do you think will happen to the copper price when China finally tanks?

BI - more people are figuring out the fiscal multiplier is >1. So you can't cut spending without raising the debt-to-GDP ratio. It takes time to drill this shit into some heads, especially the high-strength concrete heads of the fucking Germans. And even worse, the heads of the plutocrats who see only the benefit of slashing spending - an army of poor willing to eat shit to live. But it'll get there. Either that, or it's Marxist Revolution time.

VoxEU - Information asymmetry and the cost of stocks. It's wonkish, but good for a bit of theory. Also, given you see maximum information asymmetry in the PM miners, is that why they now suck so bad? Everyone's clued in to how much they're being robbed? Maybe the only thing that will bring the miners back to healthy multiples is an industry-wide campaign against corruption and insider dealing, along with better disclosure and less outright fraud?

Something to think about, eh? You can get a better stock price by not being scum.

Friday videos: to be famous is so nice. Suck my dick, kiss my ass.


For all the people who come to my private blog and leave comments complaining about my swearing, here's Miss Kittin doing "Frank Sinatra".



To be famous is so nice. Suck my dick, kiss my ass.

You'll know when I want readership. You'll be able to tell because the blog will go subscription-only.

Thursday, January 24, 2013

Two charts from the great bottom of 2012


The May 2012 bottom was supposed to have been the worst we'd ever see for the miners.

Heh heh.



Long trendline now broken. Got some more puking to do, perhaps?



And the seniors are losing against gold too.

Thankfully, juniors don't look as bad. But god, the large miners still suck™.

Not news: gold miners suck™. News: here it is.


Gold miners puked their guts out today.

Now here's the news.

Mineweb - Royal Canadian Mint now rationing silver coins! So nobody wants silver? No? As an aside, if a PM puke can get started sometime soon, I'll have some more money with which to buy more yummy, tasty bullion.

BI - Japan's monetary policy will crush Germany. Cos if it's one thing the Germans constantly have to relearn every few decades, it's that payback is a bitch.

Mineweb - mining companies are technically incompetent. And thus they suck. As also noted earlier in that Deloitte booklet you should have seen by now, cos the rest of the market has and that's why they're puking the miners. Cos they suck™.

The Gold Report - good interview with Paolo Lostritto


Gold Report has a really good interview with Paolo Lostritto from National Bank. Do read it.

Here are some of the things that made me really sit up and take notice:

[...]we're starting to see early signs of lower deflation risk and the potential for improved velocity. We're not out of the woods yet, but there are early signs. Importantly, Basel III liquidity and capital ratios, which were expected to be enforced by the end of 2012, have now been deferred four years. This alleviates pressure off Tier 1 banks that had been hoarding cash in order to meet those capital and liquidity ratios. Now that they have more time, they are likely to loosen up the purse strings and deploy some of that capital. Mining and junior exploration equities are some of the riskiest asset classes out there and will likely be the last to benefit from that flow of funds. We're not there yet, but we're cautiously optimistic.

and

Price to cash-flow multiples have compressed over the course of 2012. Some senior gold producers are trading as low as 5–6x forward cash flow, while some junior single-asset companies are trading as low as 2.5–3x cash flow. For multiples to go back to historic levels, an element of greed has to come back into the marketplace and that will only happen if we get some margin improvement. If we're right about the flow of funds and the velocity of money, there should be an eventual benefit to the gold price and margin expansion in late 2013. 

and, very interestingly, here's his thesis on markets repeating themselves:

In the 1970s, after we went off the gold standard, the gold price increased from US$35/oz to US$200/oz. Then we went through a notable recession in 1973, which led to a deflationary scare until 1975—similar to the one we went through in 2012—which caused the gold price at the time to correct from US$200/oz to US$100/oz. It was only when the velocity of money started to pick up that the concerns regarding deflation shifted toward concerns about inflation. Central Bank Interest rates started to rise, but inflation rose at the same rate or faster. It was a controlled burn in terms of devaluing the currency. That's a better scenario for central banks than being behind the curve and pushing on the string. Once that started in 1976, we went from US$100/oz to as high as US$800/oz. Even if we used gold's average price of ~US$400/oz during the 1980s, it is a pretty impressive fourfold move.

I don't often come across someone who I can really learn from - especially at an interview site. But this guy's thesis on the gold price intrigues me. He's talking about velocity of money, he's picked up on the deflation/inflation dynamic, he understands Basel III's importance, he notes that central bank interest rates are only important in terms of real interest rates, and he's got a sensible thesis about the miners.

Then again he likes Kinross.

Still, good job Gold Report! Please continue to interview fewer incompetent delusional fruitcakes with no grasp of economics, and more guys like this, please!

Bloomberg on corporate tax evasion


Here's a nice Bloomberg article on how corporations are avoiding taxes entirely by routing profits through a bedsit in Almelo.

It's nice that this is getting a bit of play in the press, considering (as the article notes) millions of people are getting their faces ground into the muck by the jackboot of corporate-supported austerity while megacorps are rolling in the money because of legal tax avoidance.

Sorry, proletarian scum - the money is there. The money is there for everything. You're just not allowed to have it.

But I sincerely doubt anything will happen. Like the 70s, what will have to happen is a new Baader-Meinhof and Red Brigade to show the elite kleptocrats that the people have had enough.

Winnipeg 1, sissy Ritholtz 0


Here's Ritholtz telling the story about his recent trip to Winnipeg.

Apparently nobody told him that Winnipeg is cold in the winter. Or maybe he thought "aw, can't be any worse than New York".

Anyway, he goes out in -27°F, with a windchill of -45°F, and after five minutes of walking on a warm Winnipeg winter's day in the noontime sun he's frozen into a puddle of his own whinge.

I say "warm" cos Winnipeg can get to -40°F. That's without a windchill - once it gets that cold, they just give up talking about windchill.

I guess I shouldn't make too much fun of him - he's not from the cold central wastes, so he simply was unprepared. Like I'd be unprepared to deal with the heat, humidity and disease of the jungles of Panama.

So here's your guide to not fucking freezing yourself to death - in the Canadian prairie, the US northern plains, or central eastern Europe or Russia:

1. When it's below -20 windchill you wear longjohns, period. Freezing the skin on your thighs is no big deal, but if you walk any appreciable distance you can rip your own leg muscles apart without noticing it, because the cold numbs pain. That will hurt for weeks and you will find yourself begging for the pleasant release of death.

2. Always wear a fucking toque, idiot. No little queerboy "fleece earband". Srsly the people in Winnipeg thought you looked gay, and that's especially sad considering Winnipeg is a gay city of civil servants and opera types. In Saskatoon they'd have beaten you to death and made gayburgers out of your gay corpse to feed to gay grizzles. In a gay manner. While singing a gay song by Paul Lekakis or Right Said Fred.

3. Below -20 you also use a hoodie. Trust me, this works wonders. You want to keep the cold off your neck and the sides of your face.

4. Below -30 windchill, the only way to survive is with a balaclava. This isn't the US, you won't get mistaken for a murderer or rapist - you'll get mistaken for someone with a lot of sense.

5. More advanced advice - if you're out in a survival condition, throw out all these rules if you start sweating. Sweat will kill you when you stop moving and it freezes your clothes, and the only thing you can do is strip down as much as possible and let the moisture evaporate. Really, this is serious advice for when you're outside with no shelter - it separates the real survival experts like Les Stroud and Ray Mears from the big-mouthed ignorant pretenders like Bear Grylls and Chris Ryan.

6. Do not wear glasses below zero!

7. The Germans were destroyed on the Eastern Front cos Hitler was a fucking moron. Not because of the cold. There's several million people living in shitty coldzones like Winnipeg, and they haven't all died.

8. Now go visit Winnipeg in the summer when it's 100°F.

Otto is on walkabout, Post #2


Hey, Golden Predator came out with some news last night!

Yahoo news - Golden Predator clarifies technical disclosure. What an understated news release title! No wonder the BCSC hasn't been going after anyone else - their entire workforce was working on GPD.

Salient points:

The Company has removed from its website video interviews dated April 12, 2012 and October 9, 2012, with Mr. William Sherriff.  The Company has also removed all prior corporate presentations from the website and replaced them with an updated and amended corporate presentation.  Disclosure was made in those interviews and prior presentations regarding the Project that the Company hereby retracts, including:
Forecasts regarding timing for production; Forecasts regarding production rates of various phases; Statements as to targeted deposit size; Reference to the term "ore"; Capital cost estimates to place a mine into production; and Cost per ounce and recovery rate information.
The Company hereby notifies viewers of the videos that the above disclosures are not supported by a mining study or reserve report, and should not be relied upon.  The Company has engaged EBA Engineering Consultants Ltd. to prepare a preliminary feasibility study on the Project, which is currently expected to be available in the second quarter of 2013.  Pending the release of results from the preliminary feasibility study the Company hereby advises that it does not have established reserves on any of its properties.

and

The Company's disclosure in news releases and in its corporate presentations included disclosure that did not comply with NI 43-101 standards.  This disclosure is summarized below along with the Company's action in response.
Disclosure on royalty portfolio properties in some cases added proven reserves to probable reserves, and measured resources to indicated resources, without also providing the estimates separately in each category.  In addition disclosure on royalty portfolio properties in some cases did not state grade and quantity for each category of reserve or resource.  Disclosure on the Company's royalty interest in the Gold Rock project also included projected annual mining rates and time frames that are unsupported by a technical report.  In response, the Company has updated its corporate presentation and other disclosure on its website to present the categories of reserves and resources separately for each royalty property where applicable, and to remove projected production information that is not supported by a technical report.  The Company notes that in the case of the Bald Mountain property, operated by Barrick Gold, information is not currently available for each category of proven and probable reserves, and the Company is requesting the information.

Recovery rates of oxide gold on the Project was stated at 70%, rather than 65% as reported in the most recent technical report filed in connection with the Project.  The Company hereby retracts any reference to a 70% recovery rate as such rate is not supported by a current technical report.

References to "Discoveries" and "Major Discoveries" in disclosure relating to the Project's Sleeman, Bohemian and Classic Zones did not include discussion of why past work done in those zones did not support a discovery, or reasons otherwise applied by the Company in classifying these zones as discoveries.  The Company wishes to clarify that the results of past drilling and trenching in these zones were not considered sufficient to conclude the existence of a discovery.  The results of drilling by the Company in 2011 and 2012, which included new and separated drill-hole locations and under-trench drilling were included in the Company's assessment that the zones could reasonably be disclosed as discoveries.

Now, I can understand the BCSC forcing retractions, amendments and a shiny little news release. What I don't understand is why this is all that's going to happen.

Otto is on walkabout, Post #1


Cos Otto's off playing A Man and His Dog, I guess I'm the one supplying you with mining snark for the next few days.

Here's a fun story:

Mining.com - Six months after seizure Colquiri's output is DOWN 21%, workforce UP 30%. Quote:

The Colquiri zinc and tin mine was expropriated from Swiss commodities giant Glencore in June last year following a dispute between rival unions.

During that month the mine's output was 429 tonnes of unrefined tin and zinc.

By December 2012, the monthly production rate from the mine reached only 337 tonnes – that's a 21% drop.

Over the same period, the state-controlled miner increased its workforce from 959 to 1,249 workers, an increase of 30%.

Dear Evo and Ecuador: please stop it, you're making socialism look bad.

And some Monty Python


Poor video quality but a very funny thing.



The sucking of the miners


Lecter: You still wake up sometimes, don't you? You wake up in the dark and hear the sucking of the miners™. 


Let's look at this morning's carnage:



GDXJ is taking a hard puke.



Silver miners are jumping off the cliff.

And by the way, there's nothing wrong with the metals.

Also, FXI EEM UUP IEF and JNK all look normal. I won't even bother posting them, there's really nothing there. So don't kid yourself, this puke has nothing whatsoever to do with macro.

Is it an OpEx tomorrow? Fourth friday, but maybe they put it back a week cos of New Year's. Lemme know? Quid pro quo, Clarice.




Apple puked overnight. Like I said to Gary T, Apple's only sponsorship is the massive hedge funds who drove it up from $300. When a board lot is $40-$50K, and market cap is $400 billion, you're not going to see mom and pop buy this.

So again, the hedge funds bought without any idea of who they could possibly sell to. And people entrust these coked-up clowns with money?




Meanwhile, though, the S&P is still doing fine. It's obviously got a crush on 1560. What happens when we get there, hm?

I almost want to see the doomers have their asses handed to them. Give them a little bear trap, then spike up 100 points and rip their faces off.

Many entertaining newses


Bonddad - Where's the inflation? I guess we've been more worried about deflation recently, eh?

BI - Swift Transportation beats on revenue. Again, US bullish.

New Deal Democrat - Housing permits look good for 2013. Again, US growth is accelerating.

Bespoke - over 90% of S&P 500 stocks are over their 50-day moving average. Either it's the start of an exciting bull run (cos stocks can stay overbought for a long time when it's a bull move), or the market is going to figure out a reason to back off for a bit. I'd wait til the market actually turns before I'd sell.

JC Parets - is the Australian dollar about to fly? If the AUD goes up, I'd assume by correlation that miners will have a bull move. I think the idea is that miners positively correlate with AUD.

Mineweb - even the drillers are getting drilled (see what I did there?) by reduced exploration spending. I guess with all the explorecos going bankrupt, you'd expect this.

Ritholtz - Albert Edwards notes that pensions have gone too underweight stocks and too overweight bonds. He's right, it is bullish for the long term.

The Conversation - the funny thing about iron ore prices. Apparently they don't have an established futures market, and price discovery is a joke anyway so the "quoted price" is completely not informational for us market watchers. Read the article for a shock at how primitive the iron ore market is.

Mineweb podcast - Ralph Aldis on the cash cost conundrum. This guy's at PDAC.

BI - India and Vietnam are trying to get their people weaned off gold. Won't accomplish anything. Most of these people can't even open a bank account, and who wants to put money in a bank in either of these countries? You nuts? What India should do to fix its trade deficit is phase out its fuel subsidies and replace them with a fuel ration for the poor; but of course that won't happen. Or, of course, India could export more than it imports - nah, that requires efficiency and an end to corruption, that won't happen either.

More later....

Wednesday, January 23, 2013

A link to GMO's "Feeding the Dragon"


In case you don't want to get yourself all dirty and smelly reading it at ZeroHedge, here's a copy of GMO's report "Feeding the Dragon", where they explain the problem with China.

Linky linky

If that doesn't work for some reason, the link is on this page at GMO.


Two evening news articles


Only two newsbits tonight. You're probably tired of this anyway. And I've got better things to do right now.

Vancouver Venture - on employee options exercise. He shows why stocks drop when options expire. And... heh... I seem to remember someone once saying "if a company tells you their people are exercising and not selling, never believe them". Who was that guy?

Mineweb - yet more on gold cash costs. Could this be what's driving the selling in the miners? Are some professional investment dolts pissed that their fundamental value metrics are changing, so now they'll just sell the stock? Dude, Yamana doesn't suck anymore than it did yesterday.

More charts - it's all a giant conspiracy I tell you!


Seriously, it's spooky. This is the same feeling I got when I started looking into Building 7.

Just look at this:


Yamana breaks through the SMA(50), then falls back down. Still in the uptrend though.




Goldcorp? It decided to test the SMA(50), then backed off today.




Newmont? Just look at that. Three fails at the SMA(50).



Gary Tanashian's girlfriend? Again three fails at the SMA(50).




Flying Spaghetti Monster Mines? Come off it. For fuck's sake, this is hedge funds beating up on the kindergarteners for their lunch here! Attempted breakthrough of the SMA(50), failed after one week.

So let's sum up what we know:

1) Every single stock has failed the SMA(50). Honest, I didn't cherrypick these: these were the first five US tickers I could think of.
2) Some (RGLD, NEM) failed twice this month before today. And they failed while basing - basically the SMA(50) had to come down to the market price so they could fail it. 
3) A frickin' silver miner failed the SMA(50) even. And that with silver going up.
4) Meanwhile silver's up and gold's up.
5) The Joos, the Lizard People, the Rothschilds, or the Bilderbergers are usually to blame for this sort of shit.

I can only conclude that one-world government is around the corner.

Either that or this is a normal backoff before a breakthrough of the SMA(50). Fuck, who knows, maybe it's just a bunch of algos programmed (by the Joos obviously) to sell at SMA(50).

Six charts at the end of the day

Looks like shit out there, dudes!



SLV looks fine to me. Moving up nice and strong, like. It could back off by $1 and still have a good chart.



And yet the silver miners ETF is caving in.





GDXJ looks fairly strong - it's only fallen to its Bollinger mean, temporarily after having turned back at the SMA(50). So it could turn back up here... but a failure tomorrow makes me stop liking it.





HUI is a bowl of puke that also is threatening to roll over. Maybe everyone's reading the news about massive writedowns in the base metal miners and assuming the same will happen with the senior golds?




FNV is completely breaking down and is -3SD right now on rising volume. Don't they basically have a license to print money? Why would the Lizard People be selling this?




Industrial metals look fine, so world demand is okay.


PDAC newsletter list is up, and who the hell are any of these guys?


So the PDAC 2013 newsletter itinerary for Sunday is up, and I'm not particularly inspired.


9:00 Introduction by Peter Bojtos
 
  Co-chair: Gary Baschuk, Raymond James Ltd.
9:05 Ian McAvity, Deliberations on World Markets
9:30 Al Korelin, The Korelin Economics Report 
9:55 Thibaut Lepouttre, Caesars Report
10:20 Keith Schaefer, Oil & Gas Investments Bulletin
10:45 Leonard Melman, The Melman Report
11:10 Garrett Goggin, Goldstock Analyst
 
  Co-chair: Leonie Soltay, Sentry Investments
11:35 John Kaiser, Kaiser Research Online
12:00 Jeb Handwerger, Gold Stock Trades
12:24 Brent Cook, Exploration Insights
12:50 David Skarica, Addicted to Profits
1:15 Jay Taylor, Gold, Energy & Tech Stocks
1:40 Mickey Fulp, The Mercenary Geologist
2:05 Ralph Aldis, US Global Investors
 
  Co-chair: Matthew O`Keefe, Mackie Research Capital Corporation
2:30 David Morgan, Silver-investor.com
2:55 Taylor Thoen, BTV
3:20 Lawrence Roulston, Resource Opportunities
3:45 Greg McCoach, The Mining Speculator
4:10 Adrian Day, Adrian Day Asset Management
4:35 Rick Rule, Global Resource Investments Ltd.
5:00 Concluding remarks by Peter Bojtos


Not going to see Korelin period. I'd be happy to see both Kaiser and Cookie, am happy they're in the middle of the day, and also nice to see a good smoke break scheduled between the two.

Not interested in staying for Day, since he seems to have a bit of a blind-spot, or even willful ignorance, toward some problems in China. I find Rick Rule odious and unpleasant. Not interested in Jay Taylor. I'm not interested in seeing Mickey Fulp if he's just going to be talking about his stock picks, so we'll have to see what his topic will be - hopefully something valuable.

Who are the rest of these guys? Garrett Goggin? Thibaut Lepouttre? Ralph Aldis? Taylor Thoen? Some of these guys I can't even find on YouTube. Has PDAC dumped the clowns and sprung for real analysts this time, or is this just a second wave of sad-sacks following in the footsteps of James West?

I'll probably go for Cookie and Kaiser, but that seems about it unless any of you guys think some of these guys are worth seeing.

Didn't really want to do PDAC reviews anymore anyway.

BI article on illegal conspiracy in the tech industry


Here's a BI article on illegal conspiracy in the tech industry.

Oh, wait... it's not an illegal conspiracy. It's not collusion or price-fixing. Because all they're doing is conspiring with each other to keep wages down by refusing to hire each others' employees.

That's a perfectly legal conspiracy. You can collude to keep labour prices down all you want, because labour doesn't own the government.

It was wise, btw, for Jobs to focus on colluding against engineers. Engineers are the most spineless twerps in industry.

They love to whine about how the guy on the afternoon shift on the machine with the tonnage bonus is making more money than an engineer, when overtime is taken into account; but when you explain to them that it's actually illegal to pay an engineer salary-without-overtime unless his job is managerial, and guess what dude if you have AutoCAD installed on your system you are production staff and are required law to be paid hourly with overtime, you see the cognitive dissonance and outright willful ignorance come out.

"No, I'm managerial! I get salary, and if I work 80 hours in a week I don't get overtime because I'm an engineer! With a title and everything! All that for a shitty $2000 Christmas bonus and never getting to watch my kids grow up!"

Basically, if you want to see slave mentality, go look at an engineer. An engineer with a spine is like a dog that cleans up after himself - bloody rare, and pleasant when you can actually find one.

I've always said if non-management engineers unionized in Canada, they'd go from $80K/yr to $200K. After all, if you pay based on scarcity, education and bottom-line productivity, each engineer should easily make 2x-3x as much as technical staff, and 4x-10x as much as operator staff.

The industrial unions would never unionize engineers of course, since getting them a decent wage would mean stoking the jealousy of the floor staff.

Engineers already have their own "professional associations", which could become a union, and a rather powerful one too; but they're only interested in protecting the interests of their employers.

So, basically, watch me not cry for the engineers.


Very interesting!


Silver is strongly advancing:



But the miners are strongly collapsing.


Maybe it's just intraday noise, like some hedge fund puking their GDXJ shares into an illiquid market. Elephants in the Mr. Turtle pool.

Even still, it is neat that silver has been moving up strongly for the past 2 weeks, now punching through the SMA(50) with ease, while the juniors began to wilt at about the same time.

Maybe some hedge is doing a long-silver-short-miners strategy, and again is so fucking huge that they're distorting the entire market?

Pfft. In the five minutes since I started writing this, now silver has begun to drop.

Who knows. Sorry for wasting your time or whatever.

News and an exhortation


First, the exhortation.

Read Deloitte's Tracking the Trends pdf. I read it last night. Now, to be honest, it is a 44-page advertisement for Deloitte's consulting services; however, it's written with an honest summation of the problems facing miners today, and gives you some pretty scary facts about the mining industry.

Basically, Deloitte should score a ton of consulting work with the booklet, because the miners really do have problems - mostly of their own making - and they generally do need someone to come in and teach them how to run a fucking business.

But if you read it, you'll probably end up with a very firm conviction that (outside of a major worldwide economic dislocation) there is no way you're going to see silver and gold prices come down. And you'll also understand why the miners generally suck™.

Then, some newsbits:

Salon - the conservative movement is still an elaborate money-making venture. This explains why American conservatives are happy to remain fucking batshit crazy, despite it being counter-productive to their own best interests: it's because the more batshit crazy you are, the more suckers you can generate for your sucker lists.

Buttonwood - Demography - swallowing the python. People are now talking about the dependency ratio. As if they're worried about China, maybe? Or worried about whether we can get another secular bull market?

Bloomberg - Pacific Group is converting 1/3 of its assets into gold.Not saying they're smart (though it does seem like a very hedgey thing to do), I'm saying it's happening and people are talking about it. Like the German repatriation thing. Bullish for gold til another story can take hold. William Kaye, the goldbug in charge of the fund, says:

Ownership of gold through financial instruments based on it, such as Comex futures contracts, now represents more than 100 times the physical gold that exists above ground worldwide, Kaye said, citing the Pacific Group’s own analysis.
“All you actually need for a major upward revaluation of gold is for a small fraction of people to physically reclaim from major central banks or other depositories that are holding your gold and using it for their purposes,” he added.

As a commenter said yesterday, price isn't driven so much by fundamentals as it is by what the hedgies are doing.

And by the way, on that? Going by their performance, the hedgies aren't making any money at what they're doing. So maybe the rest of the market is laughing at them and selling into their hands.

Maybe the entire world economy is too small for the totality of hedge fund positions.

What does that mean?

Tuesday, January 22, 2013

This evening's news


Deloitte - Tracking the Trends 2013. A forward-looking report on problems miners will face in 2013. Just so you know what the market's worrying about right now. More useful to read this than that fucktard at Zerohedge, so quit wasting your time.

Krugman - Shinzo and the helicopters. Kruggie doesn't seem to mind about currency depreciation in Japan. So you shouldn't either. Cos he was right on the recession and your best buddies were wrong.

FT Alphaville - more on Japan. A finally-resurgent Japan would be a game-changer for the world GDP, no?

Bespoke - Transports up 18% since November. Excuse me for my snark, but what happened to all those fucking doomers who said we were about to crash last year cos the transports weren't advancing? Hm? Maybe they've shut the fuck up? No? They're just whining about some other portent of impending doom, you say? Then just fucking unsubscribe them.

Cause of Russian depopulation discovered


Ah-ha! Maybe this is contributing to the depopulation of Russia?



Yes, let's definitely put a hundred million arrogant alcoholic losers into cars and let them drive them around. What's the worst that could possibly happen?

Christos Doulis on BNN


Here's a link to Christos Doulis from Stonecap on BNN yesterday.

My comments:

1) Blah blah fiat blah blah Zimbabwe. Dude, look around at the smoking ruin of your industry: you're going to be flipping burgers by this time next year unless you drop the Casey bullshit and start analyzing gold and silver like a grownup. As the EBITDA problem suggests, if gold and silver are proxies for money, then so is developing-world labour supply and diesel, so good luck seeing miners appreciate in value with your thesis. As Gary T says, inflation is a terrible reason to own a gold miner.

2) He seems to get most of his reccies from the odd issue of IKN that someone forwards him. It's funny how, generally, the set of all reccied producers has collapsed over the past couple years, to the point that now every stock that's being recommended is already featured either by IKN or Jojo's newsletter. Seriously, if you can pay $400/year for one of their newsletters, why subscribe to anyone else? It's as if you can no longer throw a dart at a dartboard. Or as if the big houses no longer have the power to be able to pump shitty producers and valueless exploration stories - they need some underlying value in what they pump now.

3) Check out this graphic that BNN ran:


So if the evil Bilderbergers and Joos have been printing money over the past 3 years, the miners certainly haven't been able to use that to their advantage.

Probably because if gold is a proxy for "real money", then so is developing world labour and so is diesel. Like I said.

The chart is the chart, dude.

3 charts for PM losers



GDXJ looks like it wants to roll over - like it has a problem with the SMA(50) or something. Also up against some downsloping resistance. It failed the SMA(50) pretty conclusively back in November, so maybe that's why?




GLD is +2SD. Does it fall back to the Bollinger mean or EMA(16) now? Is it also shy of challenging the SMA(50)? What would make it continue up strongly?




SLV is hugging the +2SD line as well, and trying to break through the SMA(50) as well.

So I guess, all told, this would say that the short-term risk-return for PMs and their miners is a little bit high right now.

Silver looks the best of the three, and considering it's more of an industrial and consumer-electronics metal that seem to make more sense, considering the global economy is improving, no?

Some morning news for you again


FT Alphaville - China doooom. China's workforce shrank in 2012, thus sounding an alarm for their demographic rollover; though there's mention that they can overcome the demographic problem by increasing productivity of the remaining workers, which they do still have a lot of leeway to achieve (unlike a developed economy like the US or Japan, where demographic rollover can't be sufficiently overcome with productivity improvements). Still it's a headwind. And there's the problem of China's GDP growth coming too much from fixed asset investment.

Telegraph - China's communist officials selling property cheap. The kleptocratic elite have tons of ill-gotten real estate that they need to get rid of. The Telegraph is suggesting they're dumping it for fear of the anti-corruption movement; but as Bill Bishop at Sinocism has noted, they might instead be getting rid of it because they don't have enough money (failing more corruption) to pay the property taxes that the government threatened to institute.

JC Parets - why does technical analysis make some people so angry? For Otto.

Mineweb - India hikes gold import duty from 4% to 6%. I'm not worried, and it seems the market's not worried either. But Indians will complain, because 1) Indians are whiners and 2) Indians are cheapskates.


Monday, January 21, 2013

Is massive devaluation of the yen good?


A user's been writing long responses to my gold post stuff, going into Bob Hoye.

As an aside, i'm not impressed with Hoye.

Anyway, he (the user, not Hoye) got me thinking about Japan's Abe and his apparent decision to devalue the Yen.

Know what? I think it's a great idea.

From what I've read, while the Japanese export economy is vital, internationalist, and very American in its governance, the Japanese domestic economy is supposed to be grossly mismanaged, horribly corrupt and essentially a Mafia.

Devaluing the Yen provides a boost to the healthy export economy, while it kicks in the teeth of the crooks who own the domestic economy. That sounds good to me.

I'd not be surprised if the Yen had never been strongly devalued before due to the influence exerted on previous governments by the crooks that run the domestic economy.

Bernanke's answer to a long structural depression was to inflate like fuck. Devaluing the Yen might have a similar result, no?

Yeah, Japanese debt is over 200% of GDP. So let's you and me watch what happens to the yields, okay? Cos if Japanese debt yields don't skyrocket, then you and I will have a nice dataset that we can shove in the faces of all the anti-debt fruitcakes out there. What will the creation of a huge balance of payments surplus do for their debt yield?

And there is a certain kind of person who would blubber "b-b-but debt is bad! But devaluation is... uh... b-b-badder!" And that makes me think it'll work out fine.

Because back when Hollande won the French presidency, the exact same blubberers were saying "socialism is bad! Watch France's yields skyrocket! That'll teach them for voting for socialism!" And guess what? Fr/US 10Y spread tightened under the new Stalinist/Maoist regime and is now around 0.3%.

If someone was stupidly wrong before, it's often 50/50 or better that this same person will be stupidly wrong again.

Oh, btw... I talked to someone I know who lived in Japan for a while, and he says Japanese culture doesn't think of gold any different from American culture. It's no big deal to them. So I doubt we'll see much gold buying in Japan.

A few newsbits


It's somewhat sinister that "gun appreciation day" was set for 1 day before the inauguration of a black president and 2 days before Martin Luther King day.

I'm only saying.

Anyway, here's the news:


Calculated Risk - The case for deficit optimism. Related to that, 

BI - Buffett says the debt is not a problem. BI steals articles from elsewhere, so I'll steal some from them:

"The womb from which you emerge determines your fate to an enormous degree," he said. "I was born in 1930. I had two sisters that had every bit of intelligence I had. Every bit the drive. But they didn't have the same opportunities."

"Because you were a man," said Jarvis.

"And I was white," added Buffett. "So, if I'd been black, my future would've been entirely different. If I'd been a female, my life would've been entirely different."

"What about our debt?" asked Jarvis. "$16.4 trillion."

"It's a lower percentage of GDP than it was when we came out of World War II," said Buffett. "You've gotta think of it in relation to GDP. It is not a good thing to have it going up in relation to GDP. That should be stabilized. But the debt itself is not a problem."

Speaking of which, French 10 year yields are only ~0.3% more than the US. Despite having a socialist president and an "unproductive economy". Hm.


JC Parets - equal-weight works better than market-cap long-term. I was trying to look into this for my sister, since she wants a passive strategy for when the next secular bull market comes; turns out JC already took care of it. It stands to reason that it'd work, long-term, right? Relative to market-cap weighting, equal-weight will underweight developed stories like PG, and overweight growth stories. Plus it automatically takes money off the table as a growth story increases market cap.


Mining.com - we just can't shut up about all-in costs. It's becoming the story du jour in mining - so maybe the rest of the world is catching on to the supply crisis in PMs? And Goldcorp & Yamana's new "all-in costs" doesn't even include acquisitions; so it still doesn't take into account the full cost of bringing ounces out of the ground!


der Spargel - Shed a tear for the poor investment bankers. They're all losing their jobs. Fuck 'em. Also though, is this proof of the idea that the developed world is moving away from unproductive speculation and back towards productive capital? Cos that's what you need for a secular bull.


Ambrose Evans-Pritchard - wharrgarbl gold standard wharrgarbl Ron Paul. Follow the link to point and laugh as a British thinker descends into madness. Seriously. Ambrose Evans-Pritchard, famous Euroskeptic, famous Telegraph columnist, is now advocating a return to the gold standard. Either he's come down with the hydrophoby, or a new gilded age for goldbugs has begun.

Sunday, January 20, 2013

Another gold thread comment


Somebody somewhere else says they tried to post this comment on the gold thread but Bloogler doesn't allow comments >4096 characters.

How very DOS of Bloogler.

Anyway, here's their comment:

I'm not offering this as a counter argument ( to IWNATTOS ) - because I agree with most of the things you say regarding supply and demand. Rather I submit this as hopefully an interesting observation between your viewpoint and those of Bob Hoye. I have followed Bob Hoye for over 10 years now, and his track record is one of the best. His methodology is to track past occurences as far back as the financial data will allow - and to that end he had identified 5 Great Depressions going back to 1720 - with the 6th one having started in 2007. Every present day chart he uses, is only in comparison to some event ( or sequence of events / signals ) - that occurred many times before. If he has a weakness, it's explaining in plain English what exactly he's talking about - something at which Gary Tanashian ( who follows Hoye ), is far better. But I found a speech of his from last September, and though it's a little out of date - the fact it's a 'speech' by definition makes it an easier read than his weekly publication. Here is the link to his speech ( which I assume I can post, as it's on his website ):

http://www.institutionaladvisors.com/uploads/9/7/9/5/9795010/san_diego-sept-2012.pdf

What I find interesting is that you both believe interest rates can rise, along with the price of Gold. The reason's you expect rates to rise differ: 1) Bob believes that we are in a post bubble contraction that will last about 20 years ( from 2007 ), and the main feature of the post bubble economy - is severe recessions and weak recoveries. And though the U.S. has definitely been showing some strong growth signals since last Fall ( particularly in housing ) - that growth will be ending soon as the ratio of the Gold price to the Commodity Index is anticipating a future liquidity crisis. 2) Where as you believe that the U.S. economy is getting stronger, which will help out the global economy...further helping the U.S. economy - which will eventually necessitate an increase in interest rates. And while you mention that your not expecting a Volcker-style rise in rates - Bob Hoye says that is entirely possible, with the charts showing a rise of 1200 basis points in long dated securities as a possibility ( and note that I don't think Hoye is anticipating any type of hyper-inflationary, post apocalyptic, zerohedge type world ).

So you both believe Gold can rise in a time of rising rates. You don't give price targets for Gold - I get the impression you just don't think Gold can fall much below current prices, for long...with today's all in cash costs of about $ 1200.00. But Hoye looks at the previous depressions / recessions and sees real Gold price increases by a factor of 1.6-1.7. Although Hoye believes that you also see rising production as the price rises - which you ( as per Brent Cook ) don't seem to see happening...though I suppose you might change your mind if the real price of Gold rose by a factor of 1.6-1.7.

So your main difference seems to be the outlook for the economy ( which is not a small difference ) - but I would suggest that the common ground you share on the Gold price rising in a time of rising interest rates, means you have more in common than you might think. You both talk about 'cause and effect' a lot - specifically that correlation doesn't imply causation. So how do you get from point 'A' to point 'B'...who is right and who is wrong ? I have no idea, but I'd suggest that your differences are akin to to the differences between Otto and Gary. While Otto seemingly doesn't put a lot of stock in charts ( though that seems to be changing a little recently ) - he and Gary have had pretty much the same view on Gold's ( long term ) future the last 3-4 years ( since I've been following them ). Whenever things look particularly grim in the Gold secor, Otto always whips out his ten year monthly Gold Chart - and notes 'if you look closely, you may be able to spot a trend".

I wish I had a better 'conclusion' to this post - because it would solve two things I believe in, that often lead to different outcomes: 1) Namely I believe ( like Hoye ) that we should follow history in predicting future events, especially when the same patterns in History are seen again and again; and 2) I also believe in supply and demand - I'm an Economics grad, but the main chart I remember from my 4 years of School was that Supply and Demand chart they put on the overhead that first day of Eco 101. So how can I rationalize the growing evidence that the U.S. economy is starting to really grow ( with the Housing sector 'tailwind' providing impetus to seemingly get through any rough patches the next couple of years ) - with my belief in Bob Hoye and his view that we're in a post bubble contraction ( with severe recessions and weak recoveries ). As I said, I don't have the answer to this question - but I suppose if either scenario leads to a rising ( or at worst flat ) Gold price, then that's fine with me. I'm not a Gold Bug, but I do like being a 'stock picker' - and I don't want to have to study and learn a whole new sector...at least for a couple of more days.

My response?

I dunno, frankly I haven't paid any attention to Bob Hoye, ever. I didn't get what he was saying in your link. Is Hoye the guy who says healthy growth should manifest in production of goods and not growth of credit? I do agree with that, if that's him. I'll otherwise leave it to Tanashian to tell me what Hoye says.

My response?

1) I expect rates to rise as the US returns to normalcy. Big diff from what Hoye seems to say. This raising of rates is not the same as that raising of rates.

2) Truth be told, I haven't paid attention to the debt/leveraging/credit thing. I do know it's supposed to be a Big Scary Thing, I just haven't found a commenter that I feel I can trust yet. Many anti-debt commentators seem to just want to inflict Protestant Germanic ethics on everyone. I seem to have heard, though, that we've done a good job of credit destruction in the last 5 years; and Basel III seems to want to continue that.

3) When you're looking for analogues in history, you have to be sure this time is the same as that time. Reinhart and Rogoff are clever and all, but are also dicks for using a book title that tells people to ignore differences in historical situations - and then not writing a book that those people will actually read.

4) This time doesn't have to play out as long as last time (20 years? Give me a break) because the people in charge seem to know more about how to fix things now. E.g., Bernanke actually studied the 1930s depression, and he's smarter than any of his detractors who hasn't steered the world's largest economy out of an economic crisis.

5) Gold versus commodity index is a bit touchy to me: seems like you can grow more crops and drill more oil, and certainly grow more coffee and cocoa and oranges, but the market's having a really hard time mining more gold, cos the cost of gold mining is based on the cost of all those other things and the cost savings of mining in poor nations are disappearing. Also, commodity index should move based on change in consumption, while gold should move based on changes in wealth creation. The effect of globalization makes this time different.

6) Like Marino Pieterse says, SHTOP USHING LONG-TERM GOLD CHARTSH! How can someone compare this time to a time when currencies were gold-backed? That's a major discontinuity; it's almost like the laws of physics were different back then.

What to do?

Well, do you feel the suggestion that the EZ has bottomed, US growth is improving, and China bottomed, is persuasive at all? If so, give things 6-8 months, and see if the world economy plays out the way I think, or the way Hoye thinks.

I'm okay with the idea of another major crash coming, and I personally think it happens in China and wipes them out, thus killing the commodity and EMs boom. I think it'll sync with the Chinese demographic rollover in 2015 or so. I just don't think we ever see S&P 666 again. But copper $1 and gold $800 in a spike-down? Maybe.

I'm only interested in what's going on in the next year. Do we get a 3rd crash of this secular equity bear? I guess so... but it doesn't have to come at S&P 1560. The crash could happen at S&P 1800.

As for comments, just break them up.

An opinion piece which strangely veers into the realm of a movie review

I said in my previous post

Part of the appeal of accepting the story of a fading American empire is that it gives Americans a reason to excuse American stupidity, ignorance and small-mindedness. Why should we explore space if we're a fading empire? Why should we promote education and learning if we're a fading empire? Why should we fight corruption if we're a fading empire? Why should we fight to improve the lot of mankind, or even our own citizens, if we're a fading empire?

And this got me to thinking about the differences between the movie and book versions of I Am Legend.

I thought I might have posted a discussion of the move here a few years ago, but if so, the only person reading this space back then was some loony in a cave in Peru. And I can't find it with a google search.

So I'll go into this again. Because when you look at the differences between the movie (made in 2007) and the book (published in 1954), it illuminates a stark change in American culture.

I really strongly suggest you read the novel and then watch the movie. The movie isn't that great - Will Smith is one of my favourite actors, but it's a see-it-once thing for me, not worth watching again even if just to watch Smith. (If you want a great Will Smith movie, watch Enemy of the State. Awesome.)

The novel I Am Legend isn't the greatest sci-fi book of all time, but it is definitely a very well-written novel, and much less pulpy than most of what came out in the 50s. It owes more to the serious dystopian genre than it does to sci-fi, and is definitely very mature in its treatment of morality, psychology, the human condition, and so on. (While writing this post, I even realized that it might be a clever dystopian allegory on mass societal change - something you'd almost expect from a blacklisted Soviet author of the 1920s or 1930s.) I definitely recommend you read the novel.

I'll pagebreak this here.



Frequency-domain analysis, for those who like to rub braincells together


Here's an idea I thought up while responding to a comment on that failed gold price discussion thread of a few days ago.

Frequency-domain analysis of volatility.

More, if you can stand it, after the break.


Six more newsbits, and a lot of commentary


By the way... when I pass these articles on to you, I'm usually saying you really should follow the link and read them in their entirety. Only because some people who do read the blog have said things to me privately recently where I had to respond "haven't you been reading the fucking news?"

I'm passing this stuff on to you because I care that you hear about what's truly going on out there. But also because I'm tired of having conversations that veer off into unreality.


Mining.com - survey says US senior geologists got a 10% raise last year. So you know they're in demand! That's another thing - I think both Cookie and Mickey have brought up the fact that there simply isn't enough qualified personnel to mine gold nowadays. How will you expand production with grades going down and the same number of (or fewer) geologists per ton of rock mined?

Also, I've fallen in love with Mining.com. I'll be putting it on my "daily reading" list to the right. You should subscribe to all the feeds. A few great gems, and very little filler, it doesn't waste your time.

Mineweb - Philip Klapwijk on the GFMS gold survey. It's an audio interview. Do, do do listen to it!


Metal Augmentor - FM announces forward sale of zinc and lead. Pb at $1.01, Zn at $0.96. Either the China boom is over and FM is smart, or the China boom will continue and these prices are too high. I dunno which.


Bloomberg - Default alarm bell rings as Chinese trust loans jump sevenfold. Yeah, I almost forgot that thing about an imminent Chinese financial collapse. Which will mean a collapse (temporary at least) in the price of gold, as well as other commodities, thus giving the US a secular equity boom as the cost side of business is put under control.


And related to that,

BI - five reasons China won't take over the world. Read the damn article! Nothing I can disagree with.

The five reasons given are: 1, China is fucking corrupt. 2, the infrastructure needs to actually support something. 3, the banking system isn't supported by anything. 4, the great coming demographic collapse. 5, the US is simply more competent.

But read the article in detail, please, and then do more research afterwards.

Meanwhile for all its warts, defects and outright fucktard insanity, the US is still the country that gave the world democracy, the Federalist Papers, Thomas Edison, Nikola Tesla (he invented all modern electricity, not Edison), Einstein, Henry Ford, JP Morgan, Walt Disney, William Shockley (he invented the transistor, dumbass!), Sam Walton, Jobs & Gates, McDonalds, Coke and Pepsi and Levi's and every other brand with mass-market appeal... basically the US invented the entire late-industrial and post-industrial capitalist world, and does it better than anyone else.

Having worked with Chinese engineers, I can tell you for a fact that China does not have what it takes, culturally or intellectually, to ever even approach the US.

Part of the appeal of accepting the story of a fading American empire is that it gives Americans a reason to excuse American stupidity, ignorance and small-mindedness. Why should we explore space if we're a fading empire? Why should we promote education and learning if we're a fading empire? Why should we fight corruption if we're a fading empire? Why should we fight to improve the lot of mankind, or even our own citizens, if we're a fading empire?


Daniel Drezner - The myth of Chinese ownership of US Treasuries. Read the article. You should probably also subscribe to Drezner for more reality in your reading list. I want to go over this in detail, so this link is the last.

First:

China has actually decreased its short term U.S. bond holdings by 5.1%. China holds $US 3.7 billion short term U.S. paper. On June 2011 China held $US 4.9 billion of short term U.S. paper. So basically all the debt that China holds are long term treasuries now. Interesting to know, China had $US 200 billion in short term U.S. debt in May 2009. So they divested all short term paper to long term paper.

Which Drezner notes is contrary to the bullshit propaganda you hear from Americans.

So if anyone feeds you the bullshit line that China wields immense power over the US by being able to threaten to not roll over short-term debt, unsubscribe from their newsletter and delete their RSS feed from your system. You don't need their fucking lies and outright ignorance making you worry about shit that ain't happening.

Also:

In the past several years, the national debt of the United States has undergone a tremendous change. Long-term securities -- those with maturities of seven years or more -- have gone from about 30 percent of the debt in 2009 to about 40 percent today. By 2018, according to the Treasury's own estimates, they'll make up 50 percent of the debt, a proportion the Treasury expects to maintain from then onward. The United States is doing what any smart borrower would do: locking in low rates for the long term. As a result, its probability of default for any given level of debt has dropped.

No shit? The US has locked in at the present low long-term rates, eh? That's kinda smart, ain't it? That means their total interest payments are less likely to go up over time, no? So Bernanke is smart, not dumb, right?