Silver is poised to form a so-called “golden cross” which may push the metal to a record $50 an ounce by October, according to technical analysis by brokerage GoldCore Ltd.
The attached chart shows silver’s 50-day moving average may be heading above the 100-day moving average. The golden cross, which occurs when a short-term trend line rises above a longer- term one, is viewed by some chart analysts as a bullish signal.
“The 50-day moving average is rising after the recent price gain and is looking like it will cross the 100-day moving average in the coming days, which will be a bullish technical signal,” said Mark O’Byrne, executive director of GoldCore in Dublin. “We should see silver surpass the record nominal high in the coming weeks or months.”
Silver for immediate delivery touched a record $49.79 on April 25 and traded at $41.561 by 5:49 a.m. in London today, taking its gain this year to 34 percent. It’s the best- performing main precious metal this year, beating global equities, commodities and Treasuries.
Prices rallied about 55 percent between Sept. 10 and the end of last year when the 50-day moving average climbed above the 100-day moving average. A gain of that much would push the metal to about $64, which is possible by the end of this year, O’Byrne said.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
...this alarmism over inflation on the part of consumers is nothing new, and it may not be warranted. We’ve given a lot of grief to professional forecasters, who never seem to know when a recession is about to begin or end. But when it comes to projecting inflation, the amateurs don’t do very well, either.
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there are a host of individuals and companies who benefit from freaking people out about inflation — i.e. gold bugs, bond vigilantes, politicians who believe that the Fed, simply by printing more money, creates inflation.
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Given that people seem to be incorporating higher inflation into their mindsets, perhaps policymakers should consider indulging them.
Last time we checked, inflation occurs when those responsible for issuing the currency, be it a Roman emperor who controlled the content of precious metals in coinage or a central bank that controls the money supply, is solely responsible for the resulting price inflation.
How else, save trillions of dollars in quantitative easing, can we explain the exorbitant price increases in commodities like food and gas over the last forty years? Yes, Mr. Gross, the Fed, simply by printing more money, does, in fact, create inflation. A third grader can understand this basic concept, that when you artificially create something, its value goes down.
The reason people “seem” to be incorporating higher inflation into their mindsets is because policymakers have already indulged them. Isn’t this exactly the current policy of the Fed?
Mr. Gross suggests that consumers are disconnected from reality because they are, on a personal level, expecting inflation of around 5.8% over the coming 12 months based on a recent survey. Clearly, Mr. Gross is himself disconnected from reality, because those consumers are already experiencing yearly price increases as of right now of over 11% – almost double what they are expecting for the coming year, and triple what the official CPI has reported.
The real data suggest everything the Federal Reserve is reporting, and mouthpieces like Mr. Gross are parroting, is nothing short of deceptive.
Well known economist and contrarian statistician John Williams, who incidentally is not an amateur, provides a concise explanation for how you’re losing purchasing power to inflation everyday.
Williams says, for example, that Social Security cost of living adjustments, if the government had utilized real data, should be double what they are today. Of course, that is simply not economically feasible for a government run retirement system that is a few years from collapsing using even manipulated data.
In an interview with Goldseek Radio, John Williams, proprietor of the popular alternative statistics web site Shadow Stats, provides those with the desire to understand the real numbers a concise explanation of how the government calculates their statistics, why the need for manipulation, and what the real data are actually saying:
You have to be careful when you are talking about inflation and deflation that you define what you’re talking about. When I talk about inflation I’m talking about the change in prices for goods and services consumed by the consumer. I’m not talking about asset inflation or deflation. When I’m arguing that we have higher consumer inflation, that’s again for goods and services. It’s not for assets and such. I can see a deflation in assets – I’d have no problem, conceptually, with a stock market crash. In fact, I think we’re probably seeing something akin to that now in slow motion over the last couple of weeks.
Our policymakers, utilizing all sorts of adjustments and machinations, are doing everything in their power to control the perceptions of the general population. If they were to come out and tell us the truth about what’s really happening to our currency you can fully expect panic buying of precious metals and hard assets would ensue. As we’ve pointed out many times before, the powers that be do not want anyone but themselves holding gold and silver assets, because then you are not beholden to their system of debt.
Make no mistake, the US Dollar is in serious trouble, but so long as people, those like the aforementioned Mr. Daniel Gross, have faith in what they’re being told by the Fed, the US government and the mainstream media, that the inflation rate is under control at 3%, there is still calm.
When the reality of what has happened becomes obvious, however, the people will go ballistic. And according to Mr. Williams, that time is coming sooner rather than later:
I’m not a day to day timer here, but I can tell you long-term that we have a catastrophe ahead for the US dollar. It will eventually become worthless in a hyperinflation, which I have written about it’s the time of thing that will break in the not to distant future. It could be another couple of years, but it’s coming. So, looking at the long haul you don’t want to be in the US dollar. Gold is a primary hedge against that, as is silver.
The U.S. economic and systemic solvency crises of the last two years are just precursors to a Great Collapse: a hyperinflationary great depression. Such will reflect a complete collapse in the purchasing power of the U.S. dollar, a collapse in the normal stream of U.S. commercial and economic activity, a collapse in the U.S. financial system as we know it, and a likely realignment of the U.S. political environment. The current U.S. financial markets, financial system and economy remain highly unstable and vulnerable to unexpected shocks. The Federal Reserve is dedicated to preventing deflation, to debasing the U.S. dollar.
John Williams – December 2009
The evidence is absolutely clear. The catastrophe cannot be stopped. The implications are life changing.
As the equity markets have run roughshod over debt-laden companies in the month of August, investors have been sent running for cover. Traditional safe haven plays such as gold and Treasuries have prospered as a result. For investors looking to wade back into stocks, here are four names that are rich in cash and have margins of safety to weather the storm.
Still on Fire
While the S&P 500 has shed 11.4% of its value in the month of August, the tobacco company Altria (NYSE:MO) has actually seen a slight uptick in its stock price. There is plenty to like about the company which split from Philip Morris International (NYSE:PM) back in 2008.
Altria recently reaffirmed its full-year guidance as it reported a Q2 in which its adjusted EPS rose 6.0% from the prior year quarter. For its trailing 12 months, it has generated operating cash flow of just under $3 billion and has been using the cash to reward shareholders. Altria repurchased more than $600 million worth of its common stock in Q2 and its current dividend yield is 6%.
Shares of competitor Reynolds American (NYSE:RAI) have managed a positive return of 5.9% in August as the company has an impressive cash position of its own. A favorable pricing environment enabled the company to more than offset the cigarette volume declines it suffered in Q2.
With the exception of a one-time settlement, Reynolds American generated more than $800 million in cash from its operating activities in Q2 and ended the quarter with $1.3 billion in cash. The 5.8% dividend yield of this stock is also attractive to income-oriented investors.
Healthy Diagnosis
The medical device maker Abbott Laboratories (NYSE:ABT) has cranked out $9.4 billion in operating cash flow over the past 12 months and its net sales in Q2 rose 9.0% from a year ago. The company has benefitted from double-digit growth from its international nutritionals business segment.
Shares of Abbott have been stable and have been flat in August. The company recently announced the payment of its 350th consecutive quarterly dividend payment dating back to 1924. The 3.8% dividend yield that shares of ABT wield is as safe as dividends come.
Medtronic (NYSE:MDT) is another company in the medical device field with monster cash flows. Over the trailing 12 months, it has generated $3.7 billion in operating cash flow. The company's cardiac and vascular business is coming off of a fiscal Q1 in which its revenue from emerging markets spiked 30% on a year-over-year basis. Medtronic also boasts a healthy dividend yield of 2.8%.
The Bottom Line
Most asset classes have taken a relentless pounding in August. However, investors should take solace in knowing that there are companies capable of weathering the challenging conditions that have surfaced. Those that have demonstrated the ability to generate robust cash flows have been able to outperform the market and protect their shareholders. There is no telling for how long these four stocks will continue to beat the market, but their ample stockpiles of cash provide sturdy backstops for stormy situations.
Goldman Sachs is doing it again. Goldman is telling the public that everything is going to be just fine, but meanwhile they are advising their top clients to bet on a huge financial collapse. On August 16th, a 54 page report authored by Goldman strategist Alan Brazil was distributed to institutional clients. The general public was not intended to see this report. Fortunately, some folks over at the Wall Street Journal got their hands on a copy and they have filled us in on some of the details. It turns out that Goldman Sachs secretly believes that an economic collapse is coming, and they have some very interesting ideas about how to make money in the turbulent financial environment that we will soon be entering. In the report, Brazil says that the U.S. debt problem cannot be solved with more debt, that the European sovereign debt crisis is going to get even worse and that there are large numbers of financial institutions in Europe that are on the verge of collapse. If this is what people at the highest levels of the financial world are talking about, perhaps we should all start paying attention.
There is a tremendous amount of fear in the global financial community right now. As I wrote about the other day, the financial world is about to hit the panic button. Things could start falling apart at any time. Most of these big banks will not admit how bad things are publicly, but privately there is a whole lot of freaking out going on.
According to the Wall Street Journal, Brazil believes that "as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China's growth may not be sustainable."
Perhaps most startling of all is what the report has to say about the debt problems of the United States and Europe.
For example, this following excerpt from the report sounds like it could have come straight from The Economic Collapse Blog....
“Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency?”
Remember, this statement was not written by some guy on the Internet. A top Goldman Sachs analyst put it into a report for institutional investors.
The report also goes into great detail about the financial crisis in Europe. Brazil writes about how the euro is headed for trouble and about how dozens of financial institutions in Europe could potentially be in danger of collapse.
But in any environment Goldman Sachs thinks that it can make money. The following is how Business Insider summarized the advice that Brazil gave in the report regarding how to make money off of the impending collapse in Europe....
Buy a six-month put option on the Euro versus the Swiss Franc, thus betting the Euro will drop against the Franc (the Franc being the currency that an official Goldman report recently referred to as the most overvalued in the world)
Buy a five-year credit default swap on an index of European corporate debt—the iTraxx 9. This is a bet that some of these companies will default, and your insurance policy, the CDS, will pay off
This is so typical of Goldman Sachs. They will say one thing publicly and then turn around and do the total opposite privately.
For example, prior to the financial crisis of 2008, Goldman Sachs was putting together mortgage-backed securities that they knew were garbage and marketing them to investors as AAA-rated investments. On top of that, Goldman then often privately bet against those exact same securities.
The CEO of Goldman Sachs has even acknowledged that the investment bank engaged in "improper" behavior during 2006 and 2007.
So will Goldman Sachs ever get into serious trouble for any of this?
No, of course not.
Yeah, they will get a slap on the wrist from time to time, but the reality is that the top levels of the federal government are absolutely littered with ex-employees of Goldman Sachs. Goldman is one of the "too big to fail" banks and they are going to continue to do pretty much whatever they feel like doing.
Sadly, the power of the "too big to fail" banks just continues to grow. At this point, the "big six" U.S. banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assets equivalent to approximately 60 percent of America's gross national product.
Goldman Sachs was the second biggest donor to Barack Obama's campaign in 2008, so don't expect Obama to do anything about any of this.
We have a financial system that is deeply, deeply corrupt and all of that corruption is a big reason why things are falling apart.
Sadly, the 54 page report mentioned above is right - we really are facing a global debt meltdown and we really are heading for an economic collapse.
You aren't going to hear the truth from the mainstream media or from our politicians because "keeping people calm" is much more of a priority to them than telling the truth is.
The debt crisis in the United States is unsustainable and the debt crisis in Europe is unsustainable. Right now we are in the calm before the storm, and nobody knows exactly when the storm is going to strike.
But let there be no doubt - it is coming.
The amazing prosperity that we have enjoyed for the last several decades has largely been a debt-fueled illusion. It was a great party while it lasted, but now it is coming to an end and the aftermath of the coming crash is going to be absolutely horrific.
Keep watch and get prepared. We don't know exactly when the collapse is going to happen, but it is definitely on the way and now even Goldman Sachs is admitting that.
After weeks of apparent calm in Europe, the sovereign debt crisis that has engulfed the Old Continent is set to explode once again. As policymakers return from summer breaks and the EFSF debate flares back up, Nomura’s analysts strike an eerie tone: “we are just about to enter a critical period for the Eurozone [where] the threat of some sort of break-up between now and year-end is greater than it has been at any time since the start of the crisis.”
Ratification of the EFSF, an inherently political processes that must pass through legislative bodies across Europe, and Greece’s capacity to reach an agreement with private creditors over a “voluntary debt restructuring” will stir the volatility pot in coming weeks and send ripples through European and global markets.
The 18-month long Euro sovereign debt crisis has been characterized by a series of market shocks followed by momentary calm after the European leadership speaks up with some sort of seemingly permanent, but actually temporary, solution, repeating itself ad infinitum. Nomura’s analysts infer that shocks will return in September. (See below for a list of important events in coming months, courtesy of Nomura).
One important variable to watch is the evolution of Greece, and, in particular of its debt restructuring program. Greece has set a deadline of September 9 for 90% of private investors (in Greek sovereign debt) to sign up to the debt swap deal agreed on July 21 (see the IFF’s release on investors’ different options within the program here). Estimates suggest about 70% have taken the bait. Greek authorities have suggested that unless they reach the magical 90% number, they “will not feel obliged to continue with ‘any portion of the [austerity] package.’” (more)
The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin.
It's a fairly simple concept, but laborious to calculate.
The Q Ratio is the total price of the market divided by the replacement cost of all its companies.
Fortunately, the government does the work of accumulating the data for the calculation.
The numbers are supplied in the Federal Reserve Z.1 Flow of Funds Accounts of the United States, which is released quarterly.
The first chart shows Q Ratio from 1900 to the present.
I've estimated the ratio since the latest Fed data (through 2011 Q1) based on a combination of the price of VTI, the Vanguard Total Market ETF, and an extrapolation of the Z.1 data itself.
The data since 1945 is a simple calculation using data from the Federal Reserve Z.1 Statistical Release, section B.102., Balance Sheet and Reconciliation Tables for Nonfinancial Corporate Business. Specifically it is the ratio of Line 35 (Market Value) divided by Line 32 (Replacement Cost). It might seem logical that fair value would be a 1:1 ratio. But that has not historically been the case. The explanation, according to Smithers & Co. (more about them later) is that "the replacement cost of company assets is overstated. This is because the long-term real return on corporate equity, according to the published data, is only 4.8%, while the long-term real return to investors is around 6.0%. Over the long-term and in equilibrium, the two must be the same."
The average (arithmetic mean) Q Ratio is about 0.71. In the chart below I've adjusted the Q Ratio to an arithmetic mean of 1 (i.e., divided the ratio data points by the average). This gives a more intuitive sense to the numbers. For example, the all-time Q Ratio high at the peak of the Tech Bubble was 1.82 — which suggests that the market price was 158% above the historic average of replacement cost. The all-time lows in 1921, 1932 and 1982 were around 0.30, which is about 57% below replacement cost. That's quite a range.
Smithers & Co., an investment firm in London, incorporates the Q Ratio in their analysis. In fact, CEO Andrew Smithers and economist Stephen Wright of the University of London coauthored a book on the Q Ratio, Valuing Wall Street. They prefer the geometric mean for standardizing the ratio, which has the effect of weighting the numbers toward the mean. The chart below is adjusted to the geometric mean, which, based on the same data as the two charts above, is 0.65. This analysis makes the Tech Bubble an even more dramatic outlier at 179% above the (geometric) mean.
Unfortunately, as I mentioned earlier, the Q Ratio isn't a very timely metric. The Flow of Funds data is over two months old when it's released, and three months will pass before the next release. To address this problem, I've been making estimates for the more recent months based on changes in the market value of the VTI, the Vanguard Total Market ETF. In an effort to improve my estimates, I'm now using a combination of the VTI price change and an extrapolation of the Flow of Funds data itself.
Bottom Line: The Message of Q
The mean-adjusted charts above indicate that the market remains significantly overvalued by historical standards — by about 48% in the arithmetic-adjusted version and 60% in the geometric-adjusted version. Of course periods of over- and under-valuation can last for many years at a time, so the Q Ratio is not a useful indicator for short-term investment timelines. This metric is more appropriate for formulating expectations for long-term market performance. As we can see in the next chart, the current level of Q has been associated with several market tops in history — the Tech Bubble being the notable exception.
Please see the companion article Market Valuation Indicators that features overlays of the Q Ratio, the P/E10 and the regression to trend in US Stocks since 1900. There we can see the extent to which these three indicators corroborate one another.
Footnote on intangibles: I frequently receive emails asking about the absence of a line item for intangibles in my Q Ratio analysis. On this topic I defer to Andrew Smithers, who touches on the topic in the FAQs on his website:
Does the Existence of Intangible Assets Invalidate q?
The world needs at least 100 million tonnes of additional iron ore supply each year for the next eight years to meet demand growth projections in steel making, miner Rio Tinto said on Thursday.
At that rate, global iron ore production would almost double over the period, based on industry trade data -- largely covered in the early years at least by expansions underway among the major miners, including Rio Tinto.
"This represents a staggering increase in demand as markets like, China, India, Indonesia, Vietnam and countries in Africa and South America continue to industrialize and urbanise," David Joyce, head of expansion projects for Rio Tinto's iron ore group, told an industry conference in Australia on mining in Africa.
Emerging markets comprise 75 percent of global iron ore demand and 90 percent of that is Chinese demand.
Rio Tinto, the world's second-largest producer behind Brazil's Vale , also said its Simandou iron ore joint venture with China's Chinalco in Guinea was on track to make its first shipment by mid-2015.
"We remain committed to ambitious timeframes of shipping our first tonnes of iron ore by mid-2015," Joyce said, adding that the company has invested $1.5 billion in the project to date.
The joint venture targets initial production from the Simandou mine of 70 million tonnes per year, with estimates for potential future output reaching up to 170 million tonnes.
Joyce also said Rio Tinto was on track to expand its iron ore production capacity in Western Australia to 333 million tonnes a year from about 225 million now..
Rio Tinto last month moved up its the target date to reach the higher figure by six months to the first half of 2015.
Rio Tinto isn't the only miner that sees gold in mining more iron ore
AngloAmerican expects to nearly double iron ore production to around 80 million tonnes by 2014 as it digs new mines in Brazil and South Africa.
But that's still well below current production figures for others, including Vale , BHP Billiton and Fortescue Metals Group each of which has massive expansion plans in the works.
BHP Billiton is proceeding with a $7.4 billion expansion of its Western Australia iron ore operations with its own share of the investment totalling $6.6 billion.
That expansion will raise capacity to over 220 million tonnes per year, with first production expected from its new Jimblebar mine in early calendar year 2014.
World trade in iron ore was 1.036 billion tonnes last year, according to the Australian Bureau of Agricultural and Resource Economics and Sciences.
Even in today's depressed housing market, you might have trouble scrounging up the $10 to buy a somewhat functioning house. (Pro tip: if you're going to exchange one Alexander Hamilton for a house, put at least two bucks down so you can avoid having to pay private mortgage insurance. That could easily add another 18 cents to the price of the house.)
Fortunately, there's a way around this whole business of exchanging your hard-earned money for a house. Depending on the circumstances, you can own a house for free - no inheriting or auctioning involved. It's not a government program, it doesn't involve threatening the existing owner's family and it's all perfectly legal. (To learn why the housing market changes so dramatically, read Why Housing Market Bubbles Pop.)
Just live there for a few years without the owner knowing and/or caring. Simple, huh?
Come on, you're joking.
Not at all. In fact, if the registered owner of a property challenges the ownership claim of someone who has lived there right under the registered owner's nose, the courts will rule with the resident every time (assuming he follows some other simple conditions that we'll get to in a second.)
Why would the government write laws ordering the owner of a house to give it up to squatters? Didn't we fight a war with England over this?
Well, first of all the law doesn't use the inelegant word "squatters." Instead, if you squat you're called an adverse possessor. But don't get too excited: adverse possession doesn't mean that you can wait until your rich neighbor leaves for a vacation, move in, change the locks and have your mail forwarded. There's a little more to it than that.
The rationale behind taking property from a taxpaying owner and giving it to a seemingly larcenous tenant is that every piece of land should enjoy its best possible use. With an absentee landlord who never visits, nor even has a representative keep an eye on the place, a property on an otherwise clean and tidy street could be covered in unkempt weeds and graffiti or worse. The neighbors' property values thus decrease, and the owner of the ignored property is negatively impacting the neighbors by his negligence.
As far as real estate case law is concerned, at least whoever's living there cares enough about the place to live there. That's more than you can say about an absentee owner. But again, we're talking about an absentee owner; someone who pays no attention to the place and hasn't for a long time.
How long a time? It depends on the state. In Nevada, an adverse possessor has to live on someone else's land for at least five years before he can claim it as his own. In Hawaii, it's 20 years. Most states range from 5-30 years.
However, there's more to adverse possession than that. You can't build an underground tenement on one corner of the property and only come and go under cover of darkness. Every state requires that you live there openly and notoriously. Also, your living there has to be continuous and uninterrupted. So if your aforementioned rich neighbor goes to the Bahamas every winter, you can't move onto his house for 15 consecutive winters, return home every spring, then go down to the county assessor's office and claim his place as your own.
Sounds pretty clear in theory, but does it ever happen in real life? You bet it does. In 2007 a Boulder, Colorado couple let their land sit unused for well beyond the state's 18-year requirement. Their neighbor - and let's ignore for a minute that the neighbor was not only a judge, but the city's former mayor - laid claim to the couple's prime tenth of an acre. The courts ruled in the ex-mayor's favor, and the couple had nothing but tax bills to show for the site of their would-be dream home.
The Bottom Line If you're uncommonly determined, you can take adverse possession of a property, have all the contingencies break in your favor, and hope the current owner never gets wise within the prescribed period. But for most of us, it's easier to just shop for houses the old-fashioned way.
Solar stocks have neared the one times enterprise value (EV)/replacement value of capacity we have long argued as downside to the space, and there could well be a bounce trade into PV-SEC conference in Germany next week.
However, in this report we present several charts that highlight the excessive lending by Chinese banks to the solar industry, which is prolonging the necessary correction in fundamentals for the industry.
The longer and larger the Chinese bank-lending bubble for solar inflates, the sharper and more unpredictable will the eventual fundamental correction be due to industry consolidation.
A prolonged bubble could result in a worst-case scenario eventually that involves fire-sale prices driven by widespread inventory liquidation by companies forced to exit the business. We expect the lending spigot will tighten soon, and lead to production cuts for wafers and cells.
We will first observe the symptoms of that in the form of rapidly declining polysilicon prices. A trough in polysilicon prices is a prerequisite to call the bottom for the sector, and if not for the lending bubble, polysilicon prices could be a lot lower already.
How big is the bubble? Net debt for the U.S.-listed solar companies (about 50% of total industry volumes in 2010) has ballooned from $2.0 billion in the fourth quarter of 2010 to $6.2 billion by the end of the second quarter of 2011.
Gross debt has increased from $10.4 billion to $14.8 billion from the fourth quarter of 2010 to the second quarter of 2011 -- an increase of $4.4 billion. (more)
Silver is poised to form a so-called “golden cross” which may push the metal to a record $50 an ounce by October, according to technical analysis by brokerage GoldCore Ltd. 
