I Am Having a Serious Issue With Sandstorm Gold (SAND) (SSL.to) This Week

By Otto Rock

How can a 43-101 compliant resource like this one for Hod Maden…

…as revealed on Friday evening by 30% owner Sandstorm Gold (SAND) (SSL.to), be all-but forgotten by the market in just three days? Seriously, what’s a miner gotta do these days, announce they’ve found a lost cache of a hundred thousand Bitcoin on one of its old hard-drives?

And not just forgotten and back to neutral, SAND is actually negative for the week. This is gnat’s memory-span stuff, I mean look at that table it’s 12g AuEq at a two gram cut-off! Or in the words used to describe the numbers in The IKN Weekly on Sunday…

Continue reading I Am Having a Serious Issue With Sandstorm Gold (SAND) (SSL.to) This Week

Backmasking The DJIA’s Price Pattern

By Tom McClellan

DJIA 2008-18 upside down and backwards
April 05, 2018

The stock market is continuing to display a weird backwards rerun of its own behavior 9 years ago.  I wrote about this here back on Jan. 18, 2018, in a Chart In Focus article titled, “Ending How It Began (Parabolically)?”.  That was just a week before the stock market’s blowoff top.  So it is time for a review of how things have turned out since then.

Just so you understand what this week’s chart is showing, what I have done is taken the black-line plot of the DJIA, and rotated it around the Z-axis (perpendicular to the page) in order to create the red-line plot.  Each one is showing the same thing, it’s just that the red line is upside down and backwards from the black line.  And no, I was not smoking mushrooms when I thought up this comparison.  I just happened to notice that the parabolic shape of the DJIA’s swoop up in late 2017 looked a lot like the parabolic initiation of the new bull market in 2009, but backwards, and that led me to go hunting to see how the overall pattern fits together.

Continue reading Backmasking The DJIA’s Price Pattern

Look! Egregious Inequality In America

By Heisenberg

Do you know what it’s time for? No? Well, I’ll tell you.

It’s time for Deutsche Bank’s Torsten Slok to click “update” on his charts and send you the same slide deck he sent you a few months ago. Then he’ll watch as the financial news media marvels at the same visuals they got last quarter, on the way to furiously tweeting them out with headlines like “fantastic new chart from Slok!” seemingly without remembering that they tweeted out the exact same charts like 60 days ago.

I’m just kidding. I mean, I’m not kidding, but it’s not Torsten’s fault. I mean hell, “if it ain’t broke”, right?

Cynicism aside, these decks do a decent job of summarizing some of the prevailing macro themes and on Thursday, Jamie Dimon provides a good hook for the visuals on income inequality in America.

As noted first thing this morning, Dimon’s annual letter finds the famously verbose financier expressing some consternation about growing inequality, which is more than a little ironic coming from the guy who once made fun of an analyst for being relatively poorer than him and who makes 364 times the salary of an “average” JPMorgan employee.

“Of the 150 million Americans working today, approximately 21 million earn between $7.25 an hour (the prevailing federal minimum wage) and $10.10 an hour [and] approximately 42% of American workers make less than $15 an hour,” Dimon laments, adding that “it is hard to argue that you can live on $7-$10 an hour, particularly for families (even if two are working in that household).”

Yes, that is “hard to argue.” And while Jamie does a decent job of assigning blame, he seems to be reluctant to point fingers at the obvious culprit. To wit:

It is surprising that many younger people in the United States, who are effectively going to inherit the wealthiest nation on the planet, seem to be pessimistic about capitalism.

Gee, what could possibly account for that?!

Continue reading Look! Egregious Inequality In America

Emerging Market Equities

By Callum Thomas

Emerging market equities had a dream run since the bottom in 2016 (where, if you recall, they took a pummeling as a number of EM economies went into recession, China slowed, currencies crunched, and commodities crashed).  But if you look at the long term cycles of EM vs US relative performance, it appears that EM equities may only just be getting started.

Indeed, as I highlight below, EM equities appear to go through 7-9 year cycles of outperformance, and 5-6 year cycles of underperformance.  Looking at the charts it appears as though a new cycle of outperformance may be getting underway, and if the historical experience of this phase taking 7-9 years to play out continues, this could be a really key theme for investors to be across.

Bringing in some other data points, the EM equity earnings/macro pulse has been on the positive side for the past year, and cuts in monetary policy rates at an aggregate level across emerging market economies also reinforces the case for EM equities.  Finally, the relative value picture also lines up with the observations around long-term cycles of under/out performance. Thus it presents an interesting short term and longer dynamic for the outlook.

The key takeaways on EM equities and outlook for relative performance against the S&P500 are:

-EM equities appear to go through long-term cycles of under/out performance vs US equities.

-The chart suggests that a new cycle of outperformance may be underway, and the earnings/macro/policy/valuation picture seems to support this assertion.

-Cycles of EM outperformance seem to take 7-9 years to fully play out, so this could be a key long term theme for investors.

1. Emerging Markets vs the S&P500: EM equities appear to undergo long term cycles of under/out performance against US equities. The first two up cycles in the chart below took 7 and 9 years respectively to complete, and the down cycles took 6 and 5 years respectively to complete.  So we can deduce that down cycles are more rapid and up cycles are more prolonged.  This is important context given we now appear to be in a new up cycle.

Continue reading Emerging Market Equities

Not Your Grandfather’s Trade War

By David Stockman

The Revenge Of Bad Money, Part 1

With his China Trade Wars tweet this AM, the Donald has proved once again that he has an uncanny ability to get to the heart of matters….even if by sheer accident!

Yet he’s right.The trade war was “lost many years ago” and it’s the reason Flyover America has rallied to his bluster and bombast on imports and the nefarious practices of furin guberments:

We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!

But, alas, the “foolish or incompetent people” skewered in the Donald’s 7:22 AM tweet are not some defunct Commerce Department or USTR officials from bygone times.

Nope, it’s not pointy-head trade bureaucrats at all. The actual culprits are the “low interest” men and women resident in the Eccles Building, who over the past three decades have transformed the Fed into a Bubble Finance machine and the main street economy into a hollowed out tower of debt.

In a manner of speaking, free money has trumped free trade. And that means what is aborning is not your grandfather’s garden variety trade war; it’s the abiding revenge of bad money—–a debilitating affliction that cannot be bargained away by cooler heads among professional trade negotiators as the dip buyers are so foolishly betting again today.

The truth is, the Red Ponzi is an absolute freak of economic nature that has laid waste to much of the US industrial economy. But the dark secret unbeknownst to the Donald, and the Wall Street/Washington establishment alike, is that the China monster was enabled, fostered and feed by the US central bank’s pursuit of an upside-down monetary policy after 1987.

The turning point came when Mr. Deng concluded that Mao had been wrong about the source of state power: Rather than emanating from the barrel of a gun, as the Great Helmsman had insisted, Deng Xiaoping ordered a 60% depreciation of the yuan, thereby recognizing the far greater efficacy of the credit power that issued from the end of the central bank’s printing press.

Then and there the die was cast. Faced with world history’s greatest mercantilist export campaign and the draining of China’s vast rice paddies of tens of millions of cheap workers to fill Mr. Deng shiny new export factories, the US economy required one thing above all: Namely, a systematic deflation of its bloated price, wage and cost structure; high interest rates to dampen consumption and encourage savings; and sustained supra-historical levels of investment in plant, equipment and technology to equip American workers with an insuperable edge in tools and labor productivity.

Needless to say, Greenspanian money-pumping, soaring debt and wealth effects driven financialization were not merely the opposite of what a regime of sound money would have generated; they were the kiss of death for jobs, prosperity and hope in Flyover America, as the chart below so dramatically illustrates.

Folks, this chart is not the fruit of Adam Smith’s unseen hand of free trade going about the work of the economic gods. China’s monthly exports to the US of just $490 million in November 1987 did not explode by 98X over the next 30 years to $48.2 billion in November 2017 owing to comparative advantage!

Indeed, the chart below would not have happened in 10,000 years under a regime of sound money and honest price discovery in the capital markets. To the contrary, China’s initial advantage in cheap labor would have led to a large inflow of reserve assets (e.g. gold) to China and a large outflow from the US, causing wage and cost inflation in China and deflation in the US.

Stated differently, when coupled with sound money, the free market is not suicidal. Instead, current account imbalances get settled via the movement of true reserve assets. That settlement process, in turn, causes domestic interest rates to fall and credit to expand in the case of  inflows, and the opposite to occur in the case of persistent trade deficits and reserve asset outflows.

At length, domestic prices, costs and wages clear at sustainable levels and current accounts remain in reasonable equilibrium among trading partners over the longer run. By contrast, the purple peak in the upper right hand of the chart below represents a 17% compound annual rate of growth for thirty years running; it’s the work of free money, not the free market.

Continue reading at Contra Corner →

Are We Hitting The Point Of Maximum Trade War Concern?

By Chris Ciovacco


Financial networks and websites are in the eyeballs and click business; not that there is anything wrong with that.  The uncertainty related to a possible trade war between the United States and China is good for attracting eyeballs and generating clicks. Therefore, some of what has been written needs to be taken with a “what business are they in” grain of salt.


Are there reasons to be concerned?  Yes

Are there reasons to believe the worst may be behind us?  Yes


A rational argument can be made that Trump’s tariffs are nothing more than a negotiating tactic to increase leverage when discussions begin with China.  China’s response to Trump’s moves have basically the same “we will not be pushed around at the negotiating table ” objective.


Continue reading Are We Hitting The Point Of Maximum Trade War Concern?


By Tim Knight

Well, that was quite the reversal. My highest profit of the day was pretty much the millisecond that the market opened. It was all downhill from there. A glance at XLB, the Materials ETF, shows that the market is having just a bit of trouble making its mind up.


The bulls had two big things in their favor. First, on the whole, the lows of 2/9 didn’t get taken out, and second, the market had come down very far, very fast, recently, leading to an oversold state. We aren’t necessarily out of this oversold state yet, since the price gap is still a fair bit north of present price levels.

Continue reading Mega-Reversal

Inflation and Castles Built on Sand

By Michael Ashton

Now that we can stop focusing on the imminent destruction of wealth in the stock market, for at least today (I am underwhelmed at the rebound on light volume), we can get back to something that matters: inflation.

The chart below shows a straight, unweighted average of core or median inflation in the US, Europe, Japan, the UK, and China. (The chart looks similar if we only include the US, Europe, and China and exclude the recent ‘outlier’ Japan and UK experiences).

We know that, in the US, measured inflation is going to be rising at least until the summer, as the one-offs from 2017 drop out of the data. The prior decline, and the current rise, obscure the underlying trend…which is for steady acceleration in prices. But it’s important to realize that this is not merely a US trend, caused supposedly by ‘tight labor markets’ or somesuch. It is a much broader phenomenon. The chart below shows four of those five countries.

Continue reading Inflation and Castles Built on Sand

METALOR of Switzerland, Caught Trading in Illegally Produced Gold

By Otto Rock

This is a great report out of Peru’s investigative reporting team “Ojo Publico” (public eye) that follows the paper trail and shows how Switzerland’s METALOR, one of the biggest precious metals refineries in the world, is willingly dealing in illegally produced gold from the Peru’s infamous Amazon basin region Madre de Dio.

It’s in Spanish but this is 2018 and that shouldn’t put you off, Google Translate exists. Go read it right here.

More on the METALOR illegal gold story

Further to the news broken by Ojo Publico yesterday about the way Swiss precious metals refining giant METALOR has been accepting illegally produced gold from the Madre de Dios region of Amazon basin Peru, we have interesting information to pass on.

Canada’s Scotia Mocatta does plenty of business with Peru produced gold and several businesses sell gold to the company, including METALOR. We hear from reliable sources that since last week  Scotia Mocatta has been withholding payments to all Peru domiciled suppliers of gold until further notice. Scotia Mocatta is demanding extra compliance work be done to guarantee the legal status of the gold it buys and is conducting its own DD on bonafides of the supply companies. In other words:

1) Word has been out in the bullion world on this Ojo Publico story for a few days, probably coming from the Peru customs and tax people.

2) Scotia Mocatta is now being very careful that it doesn’t leave itself open to problems and quite right too. Canada has strict laws about knowingly trading in illegally mined products.Most importantly, if you’re METALOR this story is not going to go away.

3) They are deep in the doo-doo and if Scotia Mocatta is doing this, you can bet that a lot of other financial houses are doing the same.

Again, congrats due to Ojo Publico for its great reporting and bringing METALOR to account.

Curse of the Zombie Junk

By Jeffrey Snider

If the road to Hell is paved with good intentions, in economic terms the paving is done by zombies. We’ve all heard of the convention regarding Japanification. In desperation trying to avoid a worse fate, many of Japan’s tortured financial institutions were left open and operating so as to not force losses too much at a time. Rather than allow for recovery, these zombie banks locked Japan’s economy into its so-called deflationary mindset from which it has yet to escape almost three decades later.

Zombie banks were not the only undead firms in Japan’s lasting fall. These eventually gave way to a proliferation of zombie firms, largely industrial, who made up the vast majority of that country’s NPL problem lingering well into the 21st century. Firms that creative destruction would have destroyed long ago were purposefully propped up often on official approval simply because central bankers fear 1929 as if that is the only route to long-lasting depression.

Just as the global economy has exhibited the same symptoms as Japan’s did in the nineties, starting with one lost decade for it already, several OECD researchers last year raised the zombie issue in the non-financial context (at least with regard to Europe).

Policies that spur more efficient corporate restructuring can revive productivity growth by targeting three inter-related sources of labour productivity weakness: the survival of “zombie” firms (low productivity firms that would typically exit in a competitive market), capital misallocation and stalling technological diffusion…As the zombie firm problem may partly stem from bank forbearance, complementary reforms to insolvency regimes are essential to ensure that a more aggressive policy to resolve non-performing loans is effective.

In places like Italy where Italian banks are bursting with NPL’s, there is an obvious link between them and Italy’s descent into further upheaval.

Continue reading Curse of the Zombie Junk

As Boeing Dives, Markets Plunge, Trump Says ‘We’re Not In A Trade War With China Because We Already Lost That War’

By Heisenberg

Remember this, from just over a month ago?

It’s a good thing trade wars are “good” and “easy to win”, because by God we’ve got one now. Or maybe not. Because despite the fact that markets were roiled overnight as China struck back just hours after the U.S. published a list of products subject to tariffs in connection with the 301 investigation, Trump insists that what’s unfolding in front of people with working eyes and ears isn’t actually happening.

So wait, this isn’t a trade war and the reason it’s not is because there was a trade war before Trump was President and we already lost that one? Can you not have more than one trade war? Does an old trade war rule out a sequel? And why did we not “win” the first one? I thought “trade wars are easy to win”? Or maybe not for “foolish” people. And Trump is no “foolish” person, ok? Believe me.

Continue reading As Boeing Dives, Markets Plunge, Trump Says ‘We’re Not In A Trade War With China Because We Already Lost That War’