Gold and silver Raid/Failed German Auction/Europe and USA stocks tumble

Harvey Organ at Harvey Organ's - The Daily Gold and Silver Report - 1 hour ago

Good evening Ladies and Gentlemen: Gold closed today down $6.50 to $1695.70 surviving another round of banker raids as they try and stop the option holders from exercising contracts and standing for delivery of metal. The price of silver served as a punching ball to the bankers falling by $1.07 to $31.88. The total gold comex open interest fell by 3317 contracts (from 460,387 to 457,070) as

WHY SILVER WHY NOW

Revisiting Today's "Failed" Bund Auction: Less Than Meets The Eye

In the aftermath of today's so-called failed 10 Year Bund auction, the number of explanations seeking to goal seek some preconceived theory as to what happened has soared with justifications ranging from the amusing to the bizarre to the outright ridiculous. Here is the bottom line: "failed" Bund auctions, in which the Buba (Bundesbank or the German monetary authority) steps in to "retain" an unbid for amount and hit a maximum issuance happen all the time. In fact literally all the time as the inset chart shows. Such is the Buba charter - some European countries fail to issue the maximum amount (such as Spain and Italy in the past week), others see the central banks filling the demand. This has nothing to do with implicit or explicit monetization, or with some opaque negative repo prevention scheme (incidentally negative repo rate in the US bond market happen all the time - see here for instances in just the last week). It has everything to do with lack of demand at a given price. Nothing more, nothing less. And while it is intriguing to fabricate complex theories about broken secondary conduits or what have you, the explanation is far simpler. As SocGen puts it: ":The fact that the Buba was forced to retain the biggest share of the sale in recent memory (see chart) is clearly a sign that some investors are no longer showing up or have started to buy considerably less, preferring other fixed income or alternative safe havens." No need to conceive an explanation where simply supply and demand will suffice. And in this case there was not enough demand at prevailing yields. And that in itself is the most ominous explanation because as SocGen concludes, "certain investors are starting to overlook the eurozone altogether".

Q&A On Holiday Shopping

As America prepares to spend its meager savings (which today were reported to have increased modestly from 4 year lows of 3.3% to 3.5%) and dip even more in debt on yet another epic shopping exodus which begins in just over 24 hours and continues through the end of the year, whereby people are somehow once again fooled into believing they "save money" by "spending money", those with a more pragmatic eye may wonder if this will be the weakest holiday shopping season in a decade, if the economy indeed mimics the stock market (the opposite, not so much), and whether it is now time to finally short consumer discretionary stocks with impunity. Goldman's Zach Pandl answers this question and more with his "Q&A on Holiday Shopping." To wit: "The US consumer looks mixed heading into the holiday season. On the one hand, growth in consumer activity slowed significantly this year. On the other hand, the most recent spending numbers have shown an incremental improvement. In addition, job growth has been holding up, which should underpin spending. Retail industry groups expect year-over-year growth in holiday sales of 2-3%, down from a 4-5% increase last year. The GS/ICSC 2011 Holiday Spending Intentions Survey also seems consistent with slightly slower growth than last year." Naturally, this being Goldman, if there is a way to take the other side of the bet (or do what GS is doing and not its clients) that is probably not such a bad idea.

In The News Today

November 23, 2011, at 2:04 pm
by Jim Sinclair

Dear Extended Family,

The German bond issued bombed. It wasn’t so much disappointing as it was a plain splat. This shatters the illusion of the durability of Germany’s assumed outstanding superiority as "uber" giant in EU economic matters.

I would say that helps the potential of a quick reversion to QE everywhere.

Regards,
Jim

Jim Sinclair’s Commentary

John Williams is the keeper of the real books at www.ShadowStats.com.

- Headline Gross Domestic Income (GDP Equivalent) Growth Collapsed with Suggestion of 0.8% Contraction for Third-Quarter

- Slowing Annual Growth in Durable Goods Orders

- Existing Home Sales Bottom-Bounce

- Once Again, U.S. Government Signals Lack of Fiscal Concerns

www.ShadowStats.com

Jim Sinclair’s Commentary

Now how can anyone say something like that?

China media says US sitting on debt ‘bomb’
SHANGHAI — China’s state media Tuesday blasted the United States over its "ticking debt bomb" and urged American lawmakers to be more responsible after they failed to agree on deficit-cutting measures.
China is the world’s largest foreign holder of US Treasuries with a portfolio of around $1.15 trillion, prompting Beijing’s keen interest in the state of the US economy.
"Washington’s political elites… are obligated to muster the courage to defuse the ticking debt bomb and start to show the world they have the wisdom and determination not to further jeopardise the fragile global economic recovery," Xinhua news agency said in a commentary.
A US Congress "supercommittee" Monday failed to reach a deal to rein in the government’s galloping deficits due to angry partisan battles over how best to revive the nation’s sluggish economy.
The move confirmed widespread expectations that the 12-member committee would miss its goal to cut US deficits by $1.2 trillion over 10 years amid political feuds over tax hikes on the rich and cuts to social spending.
Xinhua, a mouthpiece for the Chinese government, blamed partisan in-fighting, saying both Democrats and Republicans were ignoring the impact of a possible US default on the global economy.
More…

Market Commentary From Monty Guild

November 23, 2011, at 2:02 pm
by Monty Guild

Breakup Of The Euro…Greece Will Be The First To Leave…Germany Leaks A Bombshell Proposal
In our opinion, global stock markets are beginning to price in a breakup of the Euro-Zone currency. The Euro currency is bound to lose some of its 17 direct members and 5 small users who use the Euro but are not part of the EU in the next few years. Some will quit under pressure or be forced out and possibly some will quit because they do not want to pay part of the bill to bail out less conservative more spending oriented sister states.
We anticipate that Greece will be the first to leave the Euro. The Greeks are perceived to be thumbing their nose at their European neighbors, and the Euro community could use Greece as an object lesson for other countries who might consider the role of non-cooperation.
Ireland is being complimented for its cooperation, and for beginning to put their fiscal house in order. For Portugal, Belgium, Spain, Italy, and possibly three Eastern European countries, the jury is still out.
While a mechanism to remove those countries who fail to comply with the fiscal demands of their European neighbors and the IMF is in the works, another option has also been proposed…

Countries Unwilling To Institute Cost and Benefit Cuts May Be Offered Another Alternative…Yield Control Of Their Economy To Outsiders
In the next 5 or 10 years big changes may be afoot in Europe. Proof of that emerged in a November 18th article by Bruno Waterfield in the Telegraph. The article makes visible a leaked memo written by the German Foreign Office. To quote from the article, “The six page German foreign ministry paper sets out plans for the creation of a European Monetary Fund with a transfer of sovereignty away from member states.”
In addition, “The fund will have the power to take ailing countries into receivership and run their economies. Even more controversially, the document, entitled ‘The Future of the EU’: required integration policy improvements for the creation for a Stability Union’ declares that the treaty changes are a first stage in which the EU will develop into a political union. The debate on the way towards a political union must begin as soon as the course toward stability union is charted, it concludes.”
“The negotiating document also explicitly examines ways to limit treaty changes to speed up the reforms. It indicates that Mrs. Merkel will tell Mr. Cameron to rule out a popular EU vote in Britain.”
“Limiting the effect of the treaty changes to the Euro-Zone states would make ratification easier, which would nevertheless be required by all EU member states (thereby less referenda could be necessary, which could also affect the UK), read the paper.”

What Led To Germany’s Frustration
Greece’s situation is almost two years old and it still is not cooperating with the mandates required of them. Italy has yet to implement the changes that they have promised. Spain’s fiscal problems are the latest to be targeted by the bond market vigilantes, and Europe’s ‘solution’, a levered up European Financial Stability Fund (EFSF) produced a lot of talk, but not a lot of action.
To quote what the new head of the ECB Mario Draghi said about the European bailout fund, “We are more than one and a half years after the summit that launched the EFSF… We are four months after the summit that decided to make the full EFSF guarantee volume available. And we are four weeks after the summit that agreed on leveraging of the resources by a factor of up to four or five.” Draghi wants the EFSF geared up, and operating, now!
The bailout fund needs to get going, however, the ECB does not want to bring down the borrowing costs of countries like Greece and Italy while the politicians on those countries refuse to cut costs as agreed. The ECB has to provide strong leadership to get the countries perform and cut costs as agreed, but there is no question that the ECB will get stuck with the role of Bailer-Outer-In-Chief when the system begins to implode. However, the deepest pockets in Europe reside in Germany, and Germans are loathe to allow for large scale money printing by the European Central Bank.
All of this has moved to provide the backdrop for the German proposal which showed up in the papers last week. In spite of the many reasons for many Germany’s frustration, their proposal will be a bombshell. We will unequivocally say that it will be hard for this proposal to pass in it s current form. The proposal sets the stage for more negotiating, more bickering, more disputes… and more uncertainty. Markets hate uncertainty. While this proposal may be produce some long term benefits, it decreases market visibility in the near term.

We Expect Big Money Printing From Europe…But When?
We expect the printing to take place, but not until one or more major bank failures takes place, which could take place within the next three months. We believe that by the end of February 2012 a crisis will occur and liquidity from Europe will be expanded. The last big crisis started in the August period when European leaders were on an extended vacation. The next crisis could easily happen over the Christmas-New Year vacation period.
European officials often take an extended vacation during this period.
In fact, we would not be surprised if that was when the next big wave of money printing takes place in Europe.
There is bond buying and liquidity already being created in Europe as the ECB buys bonds. The ECB claims that they are sterilizing the purchases and thus avoiding quantitative easing. We find that hard to believe. We have no doubt that the ECB will eventually opt to print money to keep the banking systems of Europe from imploding…and admit it.
In actuality, there is no shortage of QE being done in many countries, and more is on the way. Money is also being created by Britain, China, US, India, Japan, Brazil, and many other countries wanting a lower currency to spur growth.

Many Countries’ Bonds Will Have Debt Downgrades
Many countries will have debt downgrades for the next few years. We expect the major rating agencies to belatedly make up for downgrades that should have happened over the last few years. We further anticipate that they will be more vigilant to make additional downgrades when politicians continue their traditional foot dragging on reform in future months and years. In short many countries will see a series of downgrades of their credit ratings over the next few years. Look for France and Spain to be downgraded soon.

Global Gold Purchases In Q3 2011…Central Banks Are Buyers
On November 17, 2011 the World Gold Council announced its quarterly gold demand trends report. In summary, total gold demand was up by 6 percent from the year earlier quarter.

Demand rose from bars and coins, central banks, and gold ETF’s [up 58 percent].

Jewelry demand fell by 10 percent due to higher prices.

If prices are taken into consideration the total rise in gold consumption was up by over 30 percent. Gold mines produced about 5 percent more gold than in the year earlier period.

Gold production was about 746 tons while total demand was a whopping 1,053 tons…during the quarter; demand exceeded new mine production by 40 percent.

Central bank purchases totaled 148.4 tons, the most of any calendar quarter in 40 years. According to their report, the council did not identify the banks behind the buying, just saying “a slew of new entrants emerged wishing to bolster gold holdings”. We know from earlier statements and from the news that Russia, China, Sri Lanka, Korea, India, and many other developing countries were in the queue to buy. For those who are not aware that before 2010 the last time that central banks were net buyers of gold was in 1988.
For the prior twenty years from 1989 to 2009 central bankers were heavy sellers of gold as anti gold financial officials and socialist leaning governments in many countries believed that gold was a useless investment. This view has changed as many countries are fighting inflationary and deflationary impulses and debt burdens threaten to bring down many of the worlds former leaders including Europe, Japan, and the U.S.
Please click here to view in the Financial Times by Jack Farchy
The Guild Basic Needs Index^TM Ticks Up In October

Please click image to enlarge.

Please click image to enlarge.
After declining for a few months, the basic needs that make up the Guild Basic Needs Index^TM rose in price in October. The rise in prices of the GBNI components impacts all in America who live, eat, use energy, and clothe themselves.
Guild Investment Management has long believed that the existing indices used to measure cost of living changes in the United States are inadequate and misleading.
For instance, the widely quoted inflation index, the Consumer Price Index, is currently based on data collected from spending surveys given by the U.S. Bureau of Labor Statistics from approximately 14,000 urban families. In addition to basic needs, the CPI includes other expenditures, such as insurance and taxes. However, it also includes discretionary spending items such as personal care services and entertainment purchases such as the latest flat screen televisions and consumer electronics.
Another point about the CPI is that the Bureau of Labor Statistics periodically alters its content, making adjustments to the weighting of the components, and smoothing seasonal patterns. Such tinkering with data, as we have mentioned over the years, usually results in an understatement of the inflation rate and creates an unreliable, misleading cost of living index.
We believe a simpler index is necessary for tracking the price changes of basic needs. No such index exists. So, we have created one: the Guild Basic Needs Index^TM. The GBNI will not reflect spending patterns of one segment of the population. Rather, it will measure the changing prices of essential living expenditures. Another key differentiator between the GBNI and the government’s measures is that the components of the GBNI do not change. They are not adjusted, statistically smoothed or manipulated.

Summary
Uncertainty reigns and we are taking a very conservative and defensive position with our portfolios. We have high cash balances. We own some high yielding oil related stocks, and we own gold.

Recommendations

	Date	Date	Appreciation/Depreciation
Investment	Recommended	Closed	in U.S. Dollars

*Commodity Market Recommendations*

Gold	6/25/2002	Open	+423.0%
Wheat	10/24/2011	Open	-4.6%
Oil	10/24/2011	11/17/2011	+16.4%
Corn	4/20/2011	8/3/201	-6.3%
Oil	2/11/2009	8/3/2011	+157.1%
Corn	12/31/2008	3/3/2011	+81.0%
Soybeans	12/31/2008	3/3/2011	+44.1%
Wheat	12/31/2008	3/3/2011	+35.0%
*Currency* *Recommendations*
Long
Canadian Dollar	10/24/2011	Open	-3.0%
Long
Singapore Dollar	10/24/2011	Open	-2.2%
Long
Canadian Dollar	9/13/2010	9/21/2011	+2.2%
Long
Chinese Yuan	9/13/2010	9/21/2011	+5.8%
Long
Swiss Franc	9/13/2010	9/21/2011	+12.1%
Long
Brazilian Real	9/13/2010	9/1/2011	+6.4%
Long
Singapore Dollar	9/13/2010	8/3/2011	+10.9%
Long
Australian Dollar	9/13/2010	6/29/2011	+14.1%
Long
Thai Baht	9/13/2010	6/22/2011	+6.5%
Short
Japanese Yen	4/6/2011	7/27/2011	-9.7%
Short
Japanese Yen	9/14/2010	10/20/2010	-3.3%
*Equity Market* *Recommendations*
IShares MSCI Emerging Market Index	10/24/2011	11/21/2011	-0.8%
U.S.	10/24/2011	11/21/2011	-1.6%
U.S.	9/14/2011	9/21/2011	-2.3%
India	4/6/2011	9/21/2011	-21.6%
Malaysia	6/29/2011	8/3/2011	+0.1%
U.S.	6/29/2011	8/3/2011	-4.6%
Japan	2/15/2011	8/3/2011	-9.5%
Australia	2/15/2011	6/22/2011	-0.9%
Canada	3/24/2011	6/22/2011	-7.1%
Colombia	9/13/2010	6/22/2011	+2.6%
Malaysia	4/6/2011	6/22/2011	+0.8%
Canada	12/16/2010	3/11/2011	+7.9%
U.S.	9/9/2010	3/11/2011	+18.1%
South Korea	1/6/2011	3/3/2011	-2.9%
Colombia	9/13/2010	2/2/2011	+3.9%
China	9/13/2010	1/27/2011	+5.0%
India	9/13/2010	1/6/2011	+7.9%
Chile	9/13/2010	12/16/2010	+8.9%
Indonesia	9/13/2010	12/16/2010	+9.5%
Malaysia	9/13/2010	12/16/2010	+1.3%
Peru	9/13/2010	12/16/2010	+32.2%
Singapore	9/13/2010	12/16/2010	+4.8%
Thailand	9/13/2010	12/16/2010	+11.9%

*Bond Market* *Recommendations*

30 YR Long Term
U.S. Treasury Bond	8/27/2010	10/20/2010	0.0%