International Forecaster Weekly

What Next After The Recent Attack On Gold

Well there you have it. Do you think that if Japan is going to spend 35 BILLION dollars on stocks; that stocks just might go up?? Do you suppose that in looking for return, the Swiss National Bank might have taken some of that "10% of entire reserves" and bought dividend paying US stocks? If the UK plans on spending “billions” on stocks, don’t you feel that maybe the stocks will rise?  If not, then I suggest you check yourself for signs of a frontal lobotomy.

Bob Rinear | April 27, 2013

We have a pretty extensive history of making statements that sound sort of off the wall. Well of course they do, because they usually aren't statements that the main stream media is allowed to say. Now I try my best not to pound my chest and repeat ad-nauseam about any correct calls, simply because 1) it's not my style and 2) we make some bad one's too. If you're going to crow about being right, you best fess up when you blow it.

But the news I saw Thursday put such a big smile on my face that I almost burst out in a chuckle. Why? Well for years I've been explaining to anyone that would listen that the Central banks are behind the stock market rise. Depending on the person hearing that, the response that I get from it might be as agreeable as "Yeah I thought so" to "Are you nuts?"  In fact, just recently I was told in an email from a quite "powerful" analysts that he's tired of me blaming everything from the Gold attack a couple weeks ago, to the market's rise on the Central Banks. Basically his theme was that CB's are there to do their best at managing underlying economies, not and I quote "distorting markets with your conspiracy explanations of their maneuvers". 

So what do we see Thursday? Well according to Bloomberg in an Article by Sarah Jones...

Central banks, guardians of the world’s $11 trillion in foreign-exchange reserves, are buying stocks in record amounts as falling bond yields push even risk- averse investors toward equities.

In a survey of 60 central bankers this month by Central Banking Publications and Royal Bank of Scotland Group Plc, 23 percent said they own shares or plan to buy them. The Bank of Japan, holder of the second-biggest reserves, said April 4 it will more than double investments in equity exchange-traded funds to 3.5 trillion yen ($35.2 billion) by 2014. The Bank of Israel bought stocks for the first time last year while the Swiss National Bank and the Czech National Bank have boosted their holdings to at least 10 percent of reserves.

            Well there you have it. Do you think that if Japan is going to spend 35 BILLION dollars on stocks; that stocks just might go up?? Do you suppose that in looking for return, the Swiss National Bank might have taken some of that "10% of entire reserves" and bought dividend paying US stocks? If the UK plans on spending “billions” on stocks, don’t you feel that maybe the stocks will rise?  If not, then I suggest you check yourself for signs of a frontal lobotomy.  Now some of you will do your best to suggest that "our" Federal Reserve isn't doing that. Well that might be true in the literal outright sense. They have no mandate that says they can go buy stocks outright. Yet over and over Bernanke has said they could and would use "unconventional" ways to combat the slowdown. So could they be buying stock on the quiet? Could be. But there's no doubt what so ever that their bond purchase money ends up in the markets. Follow along...

When the Fed wants to buy up our Governments debt ( because no other countries want it any more) they don't just walk down the hall to the Treasury and knock on the door and say "hey we'd like to buy 4 billion in Treasuries". Nope, that would keep the banks out of the lucre. What happens is that the Fed has to go to the "Primary dealer banks" of which there's about 18 of, and buy the Treasuries from them. Well, if you're buying say 40 billion a month in Treasuries, how much of that is commission or "vig" to the banks? Frankly we don't know, no one seems to have that pricing mechanism. But let's suppose it's relatively high. That's a lot of money that lands in the banks hands. Now, what do the banks do? They hand it to their trading desks. They "buy stocks". So, when you look at the 85 billion a month that Bernanke's giving the banks, to think that "X" amount of that doesn't make it to the stock market is simply STUPID. Don't be stupid. Believe it happens because it does. Remember those reports of the bank trading desks going entire quarters without a losing trade? Billions of dollars and not one misstep. Impossible for us. Normal for them.

The disturbing part of the whole central banks buying stock thing is this... they have unlimited funds. When a Central banker needs money, where does he get it? A computer. He puts in a few figures, hits the button and instantly "money" is created. They can do this all day, every day. There is no limit to the amount of digits they can create. That causes us a real problem. See, stocks are already well higher than they should be. But when you have Central Banks thinking that there's no better place to be than in the stock market, we get abnormal stock action.  For instance CAT comes out and misses earnings, says the world is slowing, and lowers its guidance. A horrid report. What happens to the stock? It's up 6 points from the dip. Who's buying that? Do you think mom and pop are diving into that? Of course not. That's our friendly bankers at work. If the money cost you nothing, you can take risks all day, you have no real skin in the game. That is a distortion of epic proportions folks.

Here's the take away about that. Stocks are up in the face of fading economic reports because the Central's are keeping them there. Period. Just this week we saw so much poor economic news, that in a "normal" market stocks would be down 1000 points. But today? Hell no, we get rallies. Consider this for a second, okay? This week we saw the durable goods report fall for 5.7%, a horrendous number. This week we saw the Richmond Fed report on area manufacturing fall to -3 while estimates were for +6. The Kansas City Fed report was slated to come in at "0" but instead it fell -5. The US flipped its stance and now says Syria is using Chemical weapons on folks meaning we're going to get "more involved". The market experienced a flash crash over a hacked twitter report and tons of folks lost money on stop outs. Then the CBOE system C1 glitched out and options trading on things like the VIX was going unreported and then halted. Europe's bank lending survey showed without a doubt that the Eurozone is firmly in a soft depression.  Should I go on? I don't have to, because right there is more than enough reason for the market to have fallen hard all week. Instead, by Thursday at noon we were threatening the all time S&P high. Mom and pop didn't do that. Mom and pop didn't dive in after the flash crash, the CBOE glitch, the Fed reports or anything else. The BANKS did.

Now I need you to ponder this. I could be called any one of a hundred derogatory slang words for "someone who likes gold and silver". Gold bug, Right wing Gold nut, you name it. I explained to you all about the paper take down they arranged two weeks ago. Well, it didn't do all it was supposed to do. That take down had 2 distinct goals behind it. One was to scare folks away from it. The second was to get it down to a level where they felt good buying it themselves. Well, they did get it down for a bit, so that may have worked. But the idea that they'd scare everyone away from gold by driving the price down has back fired in a big big way. They set gold sales records in Asia and India. The mint ran out of 1/10 ounce gold coins here in the states. They sold 60,0000+ coins the days after the plunge. All across the world, people lined up for hours to buy gold. Most dealers simply "ran out".

Well it isn't just the coin and bullion dealers that are "running out" of the stuff. Did any of you see the COMEX gold depository update for the 25th? The JPM warehouse of commercial gold fell like a rock, as their holdings fell to levels not seen since 2010. Comex "eligible" gold holdings have fallen from 9 million ounces to 6 million. If JPM's commercial holdings fell 64% in virtually a day, where did it go? Who's taken that delivery??? 

Don't you find it rather odd, that as they tell everyone how lousy gold is as an investment, as they try and scare everyone out of gold and into paper dollars, the Central Banks themselves are enormous buyers of the metal! I can't even make something this blatant up folks. According to another Bloomberg article just published this week, Central bankers have been rabid gold buyers, taking on more than any time since 1964!! Check this...

Central banks bought the most gold since 1964 last year just before the collapse in prices into a bear market underscored investors’ weakening faith in the world’s traditional store of value.Nations from Colombia to Greece to South Africa bought gold as prices rose for an 11th year in 2011, highlighting the reversal of a three-decade-long bout of selling that diminished the world’s biggest bullion hoard by 19 percent. The World Gold Council says they added 534.6 metric tons to reserves in 2012, the most in almost a half century, and expects purchases of 450 to 550 tons this year, valued now at as much as $25.3 billion.

Now isn't that odd? The same folks that discourage gold, the same folks that say it isn't "Money" and it is a relic of an older time, bought 534 TONS of the stuff last year and want another 500 or more this year.  Read this statement and let it really sink in....

Central banks owned 31,671 tons at the end of 2012, about 19 percent of all the metal ever mined, the London-based World Gold Council estimates

Central banks own one fifth of all the gold ever mined. Yet Greenspan and Bernanke have both dismissed it as junk. Garbage. The idiots they parade all day on CNBC tell you it's garbage, it's a joke, it isn't a wise purchase. If it isn't wise to own, why do the CB's want it?? Because they might be criminal but they aren't stupid. "he who owns the gold makes the rules" is a long enduring adage. They understand that. So we have them gobbling up Gold AND stocks. Can you imagine anything so twisted? Is it a Central bankers job to play in the stock market??

I know I must sound like some form of bizarre broken record folks, but here's the bottom line. I don't profess to know any more about the future than any lunatic standing on the corner in New York City. But I can certainly connect dots, dig in under the main stream baloney, and come to conclusions. My conclusions are interestingly still the same. We're in some form of economic end time. The Dollar is losing it's reserve status. Central banks are picking up gold because they know their fiat digital dollars are worthless. The paper metals market has been the tool to keep the metal price down so it doesn't look as much like their paper dollars are fading in value, but they're slowly loosing control of it. They can't rebuild the economy, they can only prop it up and when they stop propping, it will crash. The  stock market is only above 10,000 because of the bankers, as it is one of the few things it can control.

Consider these two headlines that hit Thursday evening...



Now isn't it interesting that as almost 16 billion was pouring out of etf's and stock funds, we challenged the S&P all time again?? Where'd the money come from? You know where. Uncle Ben.

Finally, this whole mess will end one day. But the way the political situation is set up, there's really only two ways out. They stop  the printing, we go through the massive bankruptcies and implosions, pick up the pieces and rebuild....OR... we continue this printing game until the velocity picks up to the point of hyper inflation and everything collapses on that.  I know how "doom and gloom" that sounds, but it is reality. So far they've chosen the "print and hope" strategy.

The ONLY way out of our economic mess is the one that they won't take. We built America on cheap energy and we're loaded with it. We have enough coal, oil, shale, natgas etc, to be the world's supplier. We could change our tax structure, we could get the huge corporations that have billions overseas to have to pony up taxes instead of playing us like AAPL is by selling bonds to raise the cash to do their dividend/buyback. They won't touch their 150 billion in cash, because they'd have to pony up taxes. GE the same. Now MSFT is doing the same thing. NO TAXES. We could cut the zillion layers of red tape we have to go through to do something as silly as opening an ice cream store. There are things we could do right this very second to set in motion an actual "real" recovery. Yet I see absolutely no sign of those things. Thus, we continue down a very ugly path.

While I expect a lot more bumps, grinds, wiggles, attacks and panic... buying physical gold and silver, and taking delivery of that metal is our best shot at getting through all this. It won't be smooth. It won't be painless. But, there's very few "other" choices. I guess the best way to say it is this; 'if Central banks want it, I should want it" and the Central's want it bad. You can almost "feel" them losing control of things.  They're buying stocks folks, the one thing they can indeed make "go higher" if they want. That my friends is the sign of some desperation.