Ainslie Bullion - Daily news, Weekly Radio and Discussions

92.9 million unemployed..
out of a population of say..what...260million.
Even (or worse still "especially") if you subtract those too old/young/infirmed to be in the workforce, there's something wrong with that 5.5% unemployment number.
Since he's been in office, Obama's government has seen over 12 million jobs dissappear. And of the 4 million new jobs created during the same time, nearly 70% have gone to immigrants (both legal & illegal).

http://thedailycoin.org/?p=21213#sthash.nMJQQNGc.dpbs
 
Greece's bad debts
There is an old saying that if you owe the bank $1m it's your problem, but if you owe them $100m it's their problem. On a grander scale that is what is playing out in Greece and the EC. Everyone talks as if the money Greece owes (cEUR360b) is their problem, but as the IMF has just admitted the bailouts provided in 2012 were to save German and French banks rather than Greece themselves. The Troika (IMF (International Monetary Fund), EC and ECB) are the 'institutions' that form the creditors group for the bailouts and other sovereign debt packages for Greece. Over the weekend they rejected Greece's attempt at outlining exactly how they will reform to be able to pay down this debt. Greece has until April to get agreement but the very hard deadline is June when their 4 month extension expires. There are the small issues of going broke before then too, which has seen them raid pension funds to survive but for how long? Make no mistake that whilst the main stream press has been distracted by another 'shiny thing' this remains a big issue. Not because of Greece itself so much, but because of all the very large banking institutions who's money it is they have borrowed. Last night the ECB started its QE program printing money to buy EUR1trillion of Euro bonds. It's the 'shiny thing' the market will rejoice in but the Greek tragedy will be back with a vengeance in a couple of months for sure and as Lehman's taught us you will have no warning if one of these banks goes bust, and the repercussions will be global.
 
And meanwhile in Australia the RBA are worried about another GFC...as if we don't know that's coming!


Australian households are equipped to withstand another global financial crisis, says the Reserve Bank of Australia.
http://www.brokernews.com.au/news/breaking-news/households-can-ride-out-another-gfc-rba-197820.aspx

Stress test: RBA finds banks would survive if households hit the rocks
http://www.smh.com.au/business/bank...households-hit-the-rocks-20150309-13yxcs.html


Australian bank shares have been downgraded by Goldman Sachs strategist Matthew Ross, who says the lenders look vulnerable to a weakening economy and tougher regulations.
http://www.smh.com.au/business/banking-and-finance/goldman-sachs-cuts-banks-20150310-13zcbj.html
 
Chinese Dominance Extends
There is little denying the long term strategic thinking of the Chinese. They are the masters of secretly employing long term macro economic strategies toward global dominance. Listeners to our weekly radio wrap know of their march toward internationalising their Renminbi (Yuan) currency with exchange hubs around the world making it now the 5th most traded in the world after a 345% increase in just under 2 years. They also announced yesterday they are on track for a September/October start of the China International Payment System (CIPS), similar to the dominant SWIFT system, and another clear move toward challenging the USD.
Just as important for gold investors is the announcement last week of the replacement to the old (prone to manipulation) London Gold Fix starting 20 March that will see the Shanghai Gold Exchange (SGE) able to influence the spot price. Currently it is dominated by paper traded COMEX futures where contracts far outweigh the amount of gold backing it up as most are settled in cash or closed out before expiry. The SGE requires settlement in physical gold and is based in the world's biggest importer and producer of gold. The significance of this should not be underestimated but it is not necessarily a panacea for immediate price growth. Again, the Chinese are strategic and patient. They may well 'like' the price this low for a little longer as they accumulate more gold from the west. That said, when they are ready they will tell the world just how much they have (1st since 2009) and that would most certainly send the price skyrocketing. No one knows when this will be and our oft repeated quote is never more relevant when it comes to investing in gold and silver "better a year too early than a day too late".
 
High USD implications

The USD kissed 100 last night and sits at 99.72 as this is written, a 12 year high. Spurred on by rising expectations of an earlier US rate rise and a crashing Euro, the high dollar continues putting downward pressure on the gold price. A lot of talk is about how this affects the US as it grapples with a double whammy of potentially rising rates and the export trade headwinds a stronger dollar presents. Economic commentator Jim Rickards summarises below the implications outside of the US borders too

"Foreign corporate borrowers have borrowed over $9 trillion in U.S. dollar denominated debt. But neither they nor their central banks print dollars. When you are foreign and you borrow in dollars, you are effectively "short" the dollar because you have to acquire them to pay back your debt. As with any short position, if the price goes up, you lose your shirt. So, as the dollar gets stronger, these borrowers are losing their shirts because they have to acquire more expensive dollars to pay back their loans. If banks want more collateral on these loans, that works like a margin call on the losing short position. If the distress gets worse, a panic could emerge and a full-blown liquidity crisis will happen."

"Big difference between now and 2008 is that in 2008 and 2009 the central banks bailed out everyone. But central bank balance sheets are still bloated, so the question now is who will bail out the central banks? Answer: the IMF"

Jim's IMF inference is the much anticipated introduction of the already existing SDR global currency as a new reserve, and likely backed by gold. It also partly explains the de-(US)dollarisation that is occurring globally, down to 61% from 70% just in that last decade.

The graph below (2 days old) shows 3 years of USD pricing and the extent to which the USD is overbought at present. This all makes for some wonderful buying opportunity in gold in the meantime though

150311%20USD%20chart.png


Rickards also quipped this morning on twitter "If the Euro falls any more, the Greeks won't have to go back to the Drachma [Greece's pre Euro currency]. The Euro will be the Drachma."
 
What's wrong with this picture?

So much of the market turmoil right now is centred on one thing when will the US Fed raise rates because 'everything is awesome'? Simplistically they used to say they would when they reached 'full employment', nominally around mid 5's%. They are there now but as we discussed Monday, that rate is affected by a lot of people just giving up on working (near 40 year low participation rate which by the way is the same reason the Aussie rate dropped yesterday). They also talk about when they get to their target 2% inflation rate. They are well below that currently but arguably heavily influenced by low oil prices. So why aren't they raising rates? Maybe it's because they have over $4t on their own balance sheet and the country has over $18t and they don't like the bond price and interest cost implications? In today's radio we revealed Japan is spending 43% of all tax revenue on servicing its interest. That could be the US. Maybe because the truth is not as great as the headlines suggest? Sometimes when investing you need to independently step back and look at what's going on and ask yourself "Is this real do the fundamentals support my investment?" It is most certainly what the Fed is doing and hence not raising rates but they have to give the impression they are close to keep selling the 'all is good' message. The graph below gives an insightful snapshot of the disconnect your gut is no doubt telling you. (Check out todays Weekly Wrap to learn just how much of that S&P500 price is through companies buying their own shares using the very same low rate debt). Now you could well profit from 'not fighting the Fed' as they say and play the sharemarket game for a bit longer. All we are suggesting is that common sense says this must end at some time and end very badly, so a hedge or insurance may be quite prudent. Gold and silver are the world's oldest and most proven safe haven hard asset with no counterparty risk (as opposed to a bond say..).

us%20macro%20v%20sp%20v%20fwd%20e.jpg


Today's Ainslie Radio ~ https://www.ainsliebullion.com.au/g...rch-ainslie-radio/tabid/88/a/874/default.aspx
 
Buy low, sell high simple right?
History repeats and prices ALWAYS revert to the mean versus 'its different this time'. We always have 2 choices in making investment decisions. Call it math, call it human behaviour, it doesn't matter. It just is.
So right now we have US shares (of which Aussie/world inevitably follows) breaching an historic line. Per the graph below, in 140 years the S&P500 has never seen seven years in a row of consecutive gains. Never. In 2014 it hit the magic 6 'line in the sand' making 2015 the year 7 hurdle.

sp500%20consec%20yrs.png



Gold and silver on the other hand (per the 30 yo Philadelphia Gold and Silver index XAU graphed below) in 30 years has never experienced more than 3 years of consecutive losses. until 2014!

godl%20silver%20consec%20yrs.png



So right now you have financial markets breaching record high runs, and gold and silver exceeding record low runs. Throw in a sky high USD and sky high bonds as well. Which of these two looks to be the better long term buy right now??? Buy low sell, sell high that is pretty simple math, it's just not typical human behaviour
 
Despite the market data, I challenge anyone to;

Have seen an equivalent rise in the dividend payout from their shares, or
Been able to buy physical PM's at the 'paper market' price.

Nothing makes sense anymore :(
 
US Rates & Debt Ceiling the world's problem
All eyes are on the US this week for 2 reasons. Firstly Wednesday night's Fed (FOMC) meeting where the world will be hanging on every word to decipher when (if) they will begin to raise rates. Secondly the US has now breached its debt ceiling (again) at over $18.1 trillion. You may recall the Government shutdown last time this happened as Republicans and Democrats fight it out. Let's just pause and remind ourselves of what this debt looks like because the 2 events are inextricably linked. Since the world left the fiscal discipline of a gold standard (gold backing the currency) you may notice a trend in debt accumulation in the graph below (note the scale is millions of millions of dollars trillions), particularly since the GFC

us%20debt%202015.jpg



Arguably one of the bigger threats right now to the supposed US recovery is another shutdown. The Bureau of Economic Analysis estimated that the last shutdown cut 0.3% from GDP of Q4 2013. With recent downgrades to this quarter's GDP at 1.2% that would be very material to say the least. Secondly the Fed is stuck between having to 'walk the talk' of their 'everything is better' rhetoric by raising rates accordingly and the economic reality of every 1% rise costing between $150-175b in extra interest on all the debt not to mention the market disruption and even higher (then current 12 years high) USD. Quite the conundrum which is why we don't see it happening for quite some considerable time and, if it all, some token amount for appearances.
This of course is not just the US's problem it is the world's problem as the startling chart below (courtesy of banking giant Societe General) shows. How with that debt to GDP ratio do you service debt at higher rates? Hence the heading for the chart says it all.

gdp%20v%20total%20debt.jpg
 
AinslieBullion said:
Arguably one of the bigger threats right now to the supposed US recovery is another shutdown. The Bureau of Economic Analysis estimated that the last shutdown cut 0.3% from GDP of Q4 2013.
Click to expand...

Unfortunately in this case it's the "P" in GDP that's the problem. Government doesn't 'produce' anything. Sure they may lose a few bucks here and there from shutting down national parks and museums etc. But it is the stifling of the economy when the 'gate keepers' lock the gates that causes the loses to society. Government spending may contribute to economic activity but its hardly productive.. nor efficient.

This happened in Qld a few years back when I was working for the Govt. and we were all told to take our holidays for a week. Project approvals, environmental inspections and contract hold-points all remained frozen on pain of litigation until the Govt. bureaucratic/legislative 'enforcers' came back to work. (You should've seen the line-up outside Qld Transport licencing centres alone) Until then, thousands of contractors sat around wasting time effort and money... and for what? The cost would've been staggering... yet no one was brave enough to stand up to 'the machine'.
 
Gold - when the bubble bursts
Doug Nolan is a widely applauded "bubble" specialist. In his last bulletin he had this to say:
'"Total Securities" as a percentage of GDP is helpful for Bubble Analysis. After beginning the nineties at 173% of GDP, "Total Securities" ended the Bubble year 1999 at an unprecedented 341%. The bursting "tech" Bubble saw this ratio decline to 267% to end 2002. Mortgage finance Bubble reflation then pumped this ratio to a record 360% by the end of 2007. The Bubble burst and "Total Securities" ended 2008 at 297%. Six years of incredible monetary inflation had Total Securities ending 2014 at a record 417% of GDP.'
When bubbles go pop, money (that which is left or escapes) rushes to gold. Just before the time that BNP Paribas precipitated the banking seizure in August 2007 gold was AUD775. When Lehmans collapsed in September 2008 it hit around AUD1140, when the LondonG20 group agreed on $5t of global stimulus in April 2009 it was about AUD1330 and when they started bailing out countries not just banks (ala Greece) in May 2010 gold hit AUD1430. So gold nearly doubled in that period whilst financial markets plummeted.
Doug paints a pretty clear picture. Are you ready?
 
New to Ainslie Bullion, the silver 1 oz Funnel Web minted coin.
Available for purchase / pre-order through our website or just call us today 1800 819 474

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Source:
 
US Fed speak bad news is good news

Well it was another night of 'bad news is good news' fuelling sharemarkets. Whilst the Fed did indeed drop their "patient" language around when they will raise interest rates, they countered with clearly 'dovish' talk including lowering their GDP forecast for 2015 by 12% from 2.6-3% down to 2.3-2.7%, along with 2016 and 2017 as well. They also lowered their core inflation projection down to 1.3-1.4% from 1.5-1.8% along with 2016 as well (well away from their rate hike trigger target 2%). Accordingly and critically it was the pace of rate hikes that was cut, now down to a median 2015 estimate of 0.625% compared to 1.125% previously. So of course, despite clearly weaker economic fundamentals now projected stocks rallied strongly. The USD also came off sharply dipping below 97 before coming back to 97.7 as this is written. That, plus surely a lot of buyers seeing this game for what it has become, saw gold and silver up strongly. We didn't see that here in AUD terms as our dollar went up against the falling USD. We wrote on Friday about why they can't raise rates. Now they have stopped the QE money printing presses rates are their only tool. But the problem is they can't go much lower and they know they can't actually raise them by any meaningful amount. So they are using words to play the market and keep it going on its hunt for yield in a zero interest world.
So last night was just a change in words with basically the same message. The economy is still too poor to raise rates so go forth and use this free money to inflate the bubble further. There are currently 25 nations around the world dropping their rates to try and stimulate their economies. Whilst the US would like to think it is immune, it is a part of the world economy and its hard to see it raising rates when everyone else is dropping them. Either way could be good for gold. Raise them and we will surely see something 'snap' somewhere bringing down the interlinked global markets. Keep them as is or even join the rest in lowering them (a few are now negative) and the bubble will no doubt pop. By all means you can play this 'don't fight the Fed' game in shares but there has rarely been a time when a safe haven hedge should be a substantial part of your investment portfolio for when, not if, this ends very badly.
Ex US Fed Chairman Ben Bernanke has said recently there will be no rate normalisation in his lifetime. He may just be right

11073501_883966168309511_2087757982549033110_n.jpg
 
Asia's hunger for gold.
This week the ANZ released a report by the name of "East to El Dorado: Asia and the future of gold". The report examines the future consequences of Asia's already established trend towards financial unshackling and wealth generation. It is not hard to see the impact of Asia's current desire to accumulate wealth in our day to day life and the current discussions relating to foreign property investment in Australia are but one example.
According to the report, ANZ has projected that the coming one to two decades will see a doubling of gold demand to 5000 tonnes within the ten largest Asian economies. These estimates accommodate both investor and retail demand and result in an anticipated target price of $US2400 to $US3,230 within that time frame. Improving employment conditions and disposable incomes within the A10 are expected to see consumer behaviour to better approximate that found within traditional developed nations and it follows that an increase in gold jewellery (Asia's preferred investment form) demand is to be expected.
Listeners to today's weekly wrap will learn of the extent of China's demand alone.
For the investor, this suggests that gold will have a broader appeal in the future by becoming more available to those Asian cultures that tend to align themselves with precious metals as a store of wealth and protection.
It is important to keep in mind the real impacts of supply and demand when evaluating projections for various asset classes. Where traditional financial instruments can be easily created or diluted, physical assets (especially those subjected to global demand) such as precious metals are finite in quantity. Consequently, higher demand encourages augmentation of existing mine infrastructure and recycling efforts. Such activities are seldom achieved without higher prices.

This week's Ainslie Radio is now live on our website.
 
Global stocks. Last time this happened.
We may appear at times to focus too much on US share markets in our reporting the various warning signs of an imminent correction. Whilst it is arguably the most bubble like and most 'contagious' in a global context, it is certainly not alone and with the ECB now embarked on its own full blown QE program, Euro shares are off and running too. But like the US, these markets are rallying on cheap money forcing a search for yield as opposed to buying future performance. So looking at the global index, the basket of sharemarkets around the world, we see exactly the same situation. We see an index at record highs but with forward earning in decline, and sharply so. In fact the graph below courtesy of Bank of America shows global equity 12-month forward EPS -6.7% year on year, the fastest plunge since the GFC. We are not saying the crash will happen tomorrow or even this year, but it will happen and the world's oldest safe haven is at bargain prices right now.

global%20EPS%20rollover_0.jpg
 
According to a recent financialsense webcast, investors can earn 10x more than a medium term German bond by investing in the top 50 European dividend paying stocks. Reportedly, investment banks, fund managers, and sovereign wealth funds are shifting towards equities for yield. Arguably declining earnings per share wouldn't put them off when there is such a yield difference compared to bonds.
Also corporations in America are doing record buybacks rather than reinvest into their operations. They can use their own cash or cheap debt to extinguish shares and expensive yield.
Another argument made is that the retail public has not been a critical factor in this multi year SPX bull run, therefore their increased participation is expected as they tire of no income and see the bull stock market persisting. In the case of the DJIA, another year of advance will still only put it in 3rd ranking for duration of a bull since 1900.
 
Paradox at Play
There are a number of 'paradox's' at play in this global economy.
Governments are racking up debt as they spend or print money to try and stimulate the economy. The problem is, as we've reported many times, debt to GDP ratios are through the roof around the world, and all that debt is a burden that eventually drags economies down as they need to service the interest.
Whilst governments and corporations are embracing new debt, many individuals are actually saving as they try to deleverage having learned the lessons of the GFC. When you refer to the table in the link above you can see that this is the case in the US, but our love affair with overpriced property in Australia has seen the opposite, meaning Australia has one of the highest personal debt levels in the world. You can understand the RBA's dilemma in reducing rates further
The Paradox of Thrift is the phenomenon where saving may be good for an individual, but it is bad for an economy as a whole. This is certainly the case for the US (when combined with a near 40 year low labour market participation rate but don't call it unemployment)When a single person saves, he improves his personal finances. But when many people save, consumer spending goes down. Then sales go down...profits go down...and the entire economy goes into recession. The graph below shows this may not be far away for the US.

us%20consumer.jpg



This and the various other graphs of the 'real economy' lately are not scare mongering. We are demonstrating that financial markets are inflated by stimulus not fundamentals. That simply can't last forever, and some argue, much longer at all. We are simply suggesting it may be time to increase your "insurance" against that crash. And as of today, it's even cheaper to have it shipped to you!

AB-freightcampaign.jpg
 
AinslieBullion said:
The Paradox of Thrift is the phenomenon where saving may be good for an individual, but it is bad for an economy as a whole.
Click to expand...

IMO, the truth of this issue is like a buddist koan. There is no paradox. We individuals ARE the economy. What's good for us is good for 'the economy'.

From the biggest Multinationals down, ultimately all economic activity (which is what "the economy" is) exists at the whim of the decisions made by individual citizens.

Once people link their individual decisions and behaviours to the trends in their society, we will begin to have economic & social stability...and Governments & their lapdog media will have no control over it. :cool:
 
China's share and debt frenzy
It looks as though the Chinese are well and truly joining the cheap money stimulus fuelled share frenzy with last week seeing the 7th straight session on the combined Shanghai and Shenzhen markets exceeding 1 trillion Yuan traded. Wednesday hit 1.24t Yuan which is $198b. To give you a gauge, the New York exchange sees around $40 - $50b And like we've shown previously with record high margin debt on the NYSE, just check out the debt supporting this buying frenzy in the graph below. Keep in mind this is in a weakening, not strengthening economy and one like many others around the world that is fuelling markets with cheap debt and lowering rates forcing that hunt for yield. Seem sustainable to you?

china%20Margin%20Debt.jpg
 
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