Dear Germany, We're Very, Very Sorrry.....

Germany Gives Up On Trying To Repatriate Its Gold, Will Leave It In The Fed's "Safe Hands"

Several months after it was revealed that Germany was able to only recover a miserable 5 tons of its gold in all of 2013 (under 10% of the 84 tons it was scheduled to repatriate), Germany appears to have given up entirely in its attempt to recover gold which simply is not there, and as Michael Krieger reports, citing Bloomberg, has decided to keep "it" (by "it" we don't mean the gold since that clearly has not been at the Fed for decades, but merely the paper promises of ownership: for more see China's gold rehypothecation scandal and how the unwind works) at the NY Fed after all. That is to say, in the "safe hands" of former Goldmanite Bill Dudley.

Via Mike Krieger's Liberty Blitzkrieg blog,
Just last week, I published a post titled, Video of the Day – “End the Fed” Rallies are Exploding Throughout Germany, which subsequently went viral. Interestingly, only a few days later we find out that Germany’s very own criminal political class has decided it will continue to store the nation’s gold in New York rather than bring it back home as had been the intention. It’s quite ironic that just as protests against the fascist Federal Reserve are spreading throughout the land, the political class officially decides to keep Germany’s treasure across the Atlantic, in care of none other than The Fed itself.

To be fair, this merely seems like a way for Angela Merkel and the rest of her German cronies to save face. After all, it was very clear that the Federal Reserve had already told them “no” when they asked for the gold back in the first place. Why else would it take almost a decade to transport the gold from the U.S. to Germany, which was the latest repatriation schedule.
We learn from Bloomberg that:

Germany has decided its gold is safe in American hands.

Surging mistrust of the euro during Europe’s debt crisis fed a campaign to bring Germany’s entire $141 billion gold reserve home from New York and London. Now, after politics shifted in Chancellor Angela Merkel’s coalition, the government has concluded that stashing half its bullion abroad is prudent after all.

“The Americans are taking good care of our gold,” Norbert Barthle, the budget spokesman for Merkel’s Christian Democratic bloc in parliament, said in an interview. “Objectively, there’s absolutely no reason for mistrust.”

Ending talk of repatriating the world’s second-biggest gold reserves removes a potential irritant in U.S.-German relations. It’s also a rebuff to critics including the anti-euro Alternative for Germany party, which says all the gold should return to Frankfurt so it can’t be impounded to blackmail Germany into keeping the currency union together.

The Bundesbank, Germany’s central bank, sent a delegation to the New York Fed’s vault in 2012 for spot checks on the hoard. As the gold’s guardian, the Frankfurt-based Bundesbank is obliged to ensure its safety. It says it’s sensible to store part of the reserves outside the country so they can be swapped more easily for foreign currency in an emergency.

This last sentence is absolutely incredible in its Orwellian irrationality. Swap gold easily for foreign currency? Foreign currency can be conjured up in infinite amounts at will by crooked bankers in suits with phony smiles and calming words filled with complex economic jargon. So Germany needs to be able to swap its gold for that? Well, it seems many nations are falling for this simple, yet effective scam, as I outlined in my post: Ecuador to Transfer More Than Half its Gold Reserves to Goldman Sachs in Exchange for “Liquidity.”

German gold reserves, the second-biggest in the world after those of the U.S., totaled 3,386.4 tons on March 31, according to World Gold Council data. Due to German postwar history, the biggest part is stored at the Federal Reserve Bank of New York; the rest is in London, Paris and Frankfurt.

“Right now, our campaign is on hold,” Peter Boehringer, a Munich-based euro critic who co-founded an initiative to bring home all of Germany’s gold in 2012, said in an interview.

Bill Fleckenstein on the Irrational Markets

From KWN (Bold emphasis is mine):

“The stock market still believes that the Fed is going to be able to taper to somewhere near zero and not have an accident.  The stock market is wrong.  There will be an accident....

“A tapering is a reduction in the amount of easing but people need to keep in mind that the Fed is still easing.  In any case, the Fed is totally misreading the economy because it’s not as strong as they think and housing is rolling over.  There are also other signs of weakness.

So the Fed is in for a rude awakening about economic strength and they are also going to be in for a rude awakening about the amount of inflation they are going to be able to engender because it’s going to be a lot more than they want.  Today’s announcement was exactly as expected and I doubt Janet Yellen is going to say anything of any consequence in her press conference.  The stock market is continuing it’s game of chicken and the metals are trying to decide if they want to get going to the upside or not.”

 “The miners have acted much better in the last week or so.  Look, at the beginning of June there was a breakdown in the price of gold from the $1,280 level.  A lot of the gold-haters thought that the gold price was going to go test $1,250, then $1,220, then $1,175, and then we were going to trade at $1,000, $800, $500, $200, and then zero.

Well, that hasn’t exactly played out.  The so-called breakdown didn’t turn into anything.  This gives strength to the argument that the gold market might resolve itself to the upside sooner rather than later.  The miners have acted unbelievably well for some time now and this is just an extension of that.

Today the miners are really strong with gold being just flat.  That could be an indication that we could be about to have a big pop in the price of gold.  Usually when the miners diverge, the direction of gold stocks is the direction that gold goes.  Arguing for higher prices has been somewhat futile in the last few years for gold but I think that’s going to change pretty soon.”

Fleckenstein added:  “The Fed bought $1 trillion worth of paper last year.  Their balance sheet is $4 trillion now.  That doesn’t include what the other central banks have done in terms of the upside pressure on major markets they have exerted because of their operations.

The global stock markets are where they are because of the unfathomable amounts of monies that have been printed.  That is why this fall we will have a crash or some sort of dislocation.  At that point there will be so many people with expectations so high they can’t possibly be met and they will all be stuck looking at each other and then the market will hit an elevator shaft.

What we are talking about is a change in psychology but the question is, when does psychology change and what makes psychology change?  I don’t know what will be the tipping point but anybody who thinks there isn’t a fair amount of inflation or believes in deflation is in denial.

In 2007 the very first payment defaults started in January.  That was a sign that they had found the marginal buyer in housing and they were sending the keys back to the bank.  Meanwhile, the stock market didn’t figure out that mattered for another seven or eight months.  So psychology is a big component and when psychology changes there will be plenty of profit opportunities in different directions for years to come.”

 “They have to take a step back.  Last year the Fed printed over $1 trillion and they are still printing money.  In 1999 the liquidity injection for Y2K was about $40 billion and that was enough to blow the top off the stock market.  So anyone who believes that one plus one makes two has to be frustrated. 

The reason they are frustrated is because you can’t own stocks, you can’t own bonds, you can’t trust the dollar, and if they try to make an investment in the metals that hasn’t worked in the last few years.  So rational investors are understandably frustrated, just as they were in 1999 and in 2007.

I will say that this period of impossible things happening has gone on longer than most anyone anticipated.  But no one has seen what happens when the world’s central banks print this much money and we don’t have a currency that’s anchored to anything.  No one has any experience in this because no one has ever seen it.  It’s never happened in history. 

So the reality is we are all flying blind and it’s impossible to have any decent kind of handicap as to when things will begin to matter.  We know these policies will lead to destruction but we don’t know when.  And now more than ever we don’t know when, we just know that a day of reckoning is coming and there will be hell to pay.”

Fear of Missing Gold is Spreading

Austria now wants to verify their London held gold. From ZH:

First it was Germany, now another AAA-rated European country is starting to get concerned about its hard assets.

Overnight Bloomberg reported that following in Bundesbank's footsteps, Austria will audit its gold reserves located in the UK, which represent 80% of its total gold holdings. This gold reserve reviews held at Bank of England in London will be first conducted by external auditors, Christian Gutleder, a spokesman for the Austrian central bank, says via telephone.

As a reminder, Austria held 80% of its roughly 280 tons of gold in U.K., according to last annual report.

Percent of IPO's with Negative Earnings

Having lived in San Francisco both then and now I can say it does all look and feel familiar.

"Its Worse Than 2007"

Its been a while since I've posted because, frankly, nothing has changed. Markets seem to be as irrational as ever until just the last few days. It remains to be seen whether this is a brief pause or the beginning of a more substantial re-evaluation of market prices. Nearly every single asset class is over valued by nearly every metric. Yet, until the last two days the market has completely ignored the economic data and blaming every data point on the cold weather of the 1st QTR. Never mind that the data has been poor around the world, not just north America.

Below, William White of the Bank of International Settlements (BIS) provides a rare dose of reality:

Via Finanz Und Wirtschaft,
William White is worried. The former chief economist of the Bank for International Settlements is highly sceptical of the ultra loose monetary policy that most central banks are still pursuing. "It all feels like 2007, with equity markets overvalued and spreads in the bond markets extremely thin", he warns.
Mr. White, all the major central banks have been running expansive monetary policies for more than five years now. Have you ever experienced anything like this?

The honest truth is no one has ever seen anything like this. Not even during the Great Depression in the Thirties has monetary policy been this loose. And if you look at the details of what these central banks are doing, it’s all very experimental. They are making it up as they go along. I am very worried about any kind of policies that have that nature.

But didn’t the extreme circumstances after the collapse of Lehman Brothers warrant these extreme measures?

Yes, absolutely. After Lehman, many markets just seized up. Central bankers rightly tried to maintain the basic functioning of the system. That was good crisis management. But in my career I have always distinguished between crisis prevention, crisis management, and crisis resolution. Today, the Fed still acts as if it was in crisis management. But we’re six years past that. They are essentially doing more than what they did right in the beginning. There is something fundamentally wrong with that. Plus, the Fed has moved to a completely different motivation. From the attempt to get the markets going again, they suddenly and explicitly started to inflate asset prices again. The aim is to make people feel richer, make them spend more, and have it all trickle down to get the economy going again. Frankly, I don’t think it works, and I think this is extremely dangerous.

Bitcoin & Gold

From Zerohedge:

Bitcoin And Gold
Only in a bull market could an online “currency” dubbed bitcoin surge 100-fold in one year, as it did in 2013. The phenomenon spurred The Wall Street Journal to call it a “cryptocurrency” craze, with dozens of entrants. Bitcoin now has an estimated market “value” in excess of $6 billion, leaving alphacoin, fastcoin, gridcoin, peercoin, and Zeuscoin in its wake. Now most sell-side firms are rushing to provide research on this latest fad, while “bitcoin funds” are being formed. Recent recruitment e-mails to staff such a platform reassure that even though experience is preferred, it is not required.

While bitcoin is yet another bandwagon we are happy to let pass us by, the thinking behind cryptocurrencies may contain a kernel of rationality.
If paper currencies – dollars and yen – can be printed in essentially unlimited volumes, and just as with all currencies are only worth what recipients on any given day will exchange in goods or services, then what makes them any better than the “crypto” kind of money? The dollars and yen are, of course, legal tender issued by governments, but in an era in which governments are neither popular nor trusted, that is not necessarily a big plus.

Gold, at least, has been regarded as “money,” for thousands of years, and it is relatively stable and widely accepted store of value and medium of exchange. It’s a well-known monetary “brand.” It doesn’t exist only (or at all) in cyberspace, and it cannot be printed on the whim of authorities. Ironically and perplexingly, while gold, the hard money alternative to the printing press kind of money, dropped 28% in 2013, the untested and highly speculative bitcoin went completely through the roof.

And this is why the Gold Bullion Debit Card has much greater potential around the world than Bitcoin. Gold has a history as money that no other currency can match. Enabling it to be "spent" through a debit card will make it nearly universal as a method of payment.

From goldbulliondebitcard.com

What it is

Around the world, people see central banks printing money at historic rates and devaluing their own currencies. As a result, consumers are responding by buying physical gold as a store of value proven to be money for thousands of years.
However, despite gold's recognition as money for over 5,000 years, its not convenient for making day to day purchases at your local store. Gold is not readily accepted by merchants still tied to paper currencies and is not easily divisible.
GoldBullionDebitCard revolutionizes money by solving these two problems.
The debit card is widely recognized by both consumers and merchants and makes for ease of transactions. The patent pending GoldBullionDebitCard payment system allows account holders to sell extremely small amounts of gold, converting only the amount desired into local currency while leaving the balance of gold available for future purchases at the future price which may help hedge inflation.
This process changes the nature of gold investing by making physical gold holdings a much more liquid asset class which empowers consumers who want to hold less paper wealth and more physical gold.

How It Works

After opening an account online, you can use the ADD GOLD function to indicate what type of gold you plan to deposit with our gold bullion dealer partner outside of the banking system. You will then receive a free postage paid packet to send in your gold. Just drop it in the mail.
We will e-mail you immediately once it's received and credit your account in milligrams of gold. You will then receive an ordinary debit card that can be used exactly the same as a traditional bank card to make purchases anywhere that debit/ATM cards are accepted.
The amount of gold debited from your account will depend on the price of the purchase and the day's closing price of gold as determined by the LBMA, COMEX or Shanghai Gold Exchange.
The merchant receiving the payment will be paid in local currency. Your account is debited in milligrams of gold, selling just enough to make the payment in the merchant's local currency.

This product is under development. Patent pending (13/926,948).

What Happens When There Are No More Bears?

Back when I posted Classic Sign of a Market Top margin use was extremely high and the contrarian in me thought we must be near the top. Today, via Zerohedge, we see that the Bullish/bearish ratio is the most out of balance its been since at least 1989.

Just 15% surveyed are bearish on the market, even less than in the bubble of 1999. Near term that's very bullish on stocks. But it also means markets are more irrational than they've been at any time in the last 25 years.

And from Dallas Fed's Richard Fisher concerned about "Eye popping levels":

In his speech in Mexico City, Fisher said some indicators like the price-to-projected forward earnings, price-to-sales ratios and market capitalization as a percentage of GDP, are at levels not seen since the dot-com boom of the late 1990s.

He noted that margin debt is pushing up against all-time records.

"We must monitor these indicators very carefully so as to ensure that the ghost of 'irrational exuberance' does not haunt us again," Fisher said. While a few Fed officials have mentioned unease about stock prices, Fisher's comments are the most pointed to date.

Fisher did not spare the bond market, saying that narrow spreads between corporate and Treasury debt "reflect lower risk premia on top of already abnormally low nominal yields."

And finally, from  Cyniconomics blog:

As shown, the aggregate equity allocation for U.S. households is now at a level that’s only ever been reached in the Internet bubble years of 1998 to 2000.