A little bounce still makes this the worst quarter since 2011 for the markets
Gary Savage kicks off today commenting on the bounce in the markets. We then move into how gold continues to move down and the dollar holds up.
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Don’t worry !
Eric Scott Hunsader: “I am amazed at how blatant a price manipulation algo is in Gold futures this morning. Really affecting prices.”
Gold doesnt do anything exciting until the comex breaks. All the rest is a sideshow.
Yall must have gotten up late out there on the LEFT Coast.
I am looking to buy back into SPXS this week in prep for the October non-surprise.
don’t know why that maund didn’t do the Link.. on 321gold
I have been out of the PM markets for months but am getting interested again. October could be the month to jump back in IMO.
Today is the quarter end and end of silver delivery month. A point has been made so we may go up from here.
Look, see little Barry run.
-another fifty cents and I’ll break even. pfftt
http://stockcharts.com/h-sc/ui?s=BG.V&p=D&yr=1&mn=6&dy=0&id=p66205928062&a=425924697
Why is the dollar baffling? It had a huge unexpected rally that people doubted and now it is consolidating. I would not expect any trend to develop yet.
The conditions for gold to drop to new lows at this juncture do not exist. I would expect more consolidation followed by a bullish breakout.
In the short term, I am bullish gold against the lows, especially provided 1,100 can hold.
The dollar is the biggest ship in the sea. Give it time, it will go back down.
Sprott to Host Webcast to Provide Update on Offers for Central GoldTrust and Silver Bullion Trust
Please join Rick Rule and John Wilson on Thursday, October 1, 2015 at 10:00am ET as they provide an update on Sprott’s offers for Central GoldTrust and Silver Bullion Trust. Rick and John will also answer questions from investors and advisers.
To participate in the webcast or submit a question, please register at: http://edge.media-server.com/m/p/6fc3idka
Should have been wrapped in quotes.
I think we still have a shot at the rally that Gary thought was coming in the miners.
http://schrts.co/yWcjiC
I disagree that QE 4 will have the same impact on the stock market that it did last time. Things are much different now (e.g.- valuations -stocks/gold/commodities; sentiment-QE doesn’t work/economy not getting better/profits falling; and cycles).
+1
“Real estate prices are not merely high. They are not merely “too high”. They are very obviously bubble high. There is perhaps no asset-bubble which is easier to see than a real estate bubble. The reason for this is very simple. There is, always has been, and always will be a strong correlation (over the long term) between real estate prices and income levels.”
…
“There are a dozen different means of demonstrating, in fundamental terms, how/why gold and silver are objectively cheap, as asset classes, but we only need one. One such previous analysis showed that gold is now clearly priced below the average cost of production, in a sector with a large, ongoing supply deficit. As a matter of “fundamentals” (economics, logic, and arithmetic); the only, possible direction for the price of gold to go over the long term is up. That is investing.”
~By Jeff Nielson
Yes. On the East Coast, I am beginning to see the fixer-upper homes listing in bubble prices again. These are homes with essentially no value and only land value. They are non-desirable pieces of land. The cost of restoration work far exceeds the “restored” value of the property.
Gary,
When we get Q.E.4 and enter the bubble phase which market will outperform; the conventional market or the gold and silver mining stocks?
I would think stocks first, especially biotech and then when the bubble pops the liquidity will move into commodities and gold for their bubble.
oh so many gold bulls, ready for its traditional spike down in October, unless of course you think this time it’s different. gary,gives up on the rally from two weeks ago, now on the fence that way you can’t be wrong
Richard, I have to disagree.
There are two very very old homes three blocks from where I live.
One was knocked down and they are in the process of putting up 4 new ones.
They bought it for land value, $700k
If each home costs $300k to buy they are in for 1.9 million.
They will turn around and sell each for $700k
For a return of 2.8 million and a cool 900k profit
The other house is a landmark and can’t be torn down.
They will reconstruct it.
Buy the land for $400k, sink in $250k in renovations, sell for $800k
Walk away with $150k for your trouble
The cost does not far exceed the restored value
I live on the east coast, I see it everyday.
Money is being made here hand over fist
James-
You have a builder’s dream situation. If 2 homes cost $700,000 and zoning allows four to be built on the property, that is $175,000 per lot. Not too shabby. Not bubble pricing.
I am talking different numbers here. I am talking about 1,200 sq.ft homes built in the 1950s on non sub-dividable lots selling for $400,000. Even if you paid $350,000 and sunk $100,000 into it for restoration, your resultant cost is around $400/sq.ft.
Around here, experienced builders will attempt to find lots around $350,000 and build 3,500 sq. ft homes and sell these for $1M, which translates to a NEW home on a FULL lot for $285 sq.ft.
So while we do not have a rampant speculation situation going on here in the housing market, I am seeing signs of bubbles being re-ignited. It is only on these lower end fixer uppers and is nothing like back in 2003-2006.
And I forgot to add, these lots would not permit a 3,000 or 4,000 square foot home due to zoning requirements. So they are all in on a restoration only, not a tear down. The real estate commissions, transfer tax, property tax and insurance alone would eat more than any potential profit.
Wonder if james ever developed any real estate……..
Thanks for the figures, good example of pricing and real life examples of other areas.
Irwin,
Unfortunatrly I have to disagree with you as well, or Jeff Nielson I should say.
Just because the price of gold is below cost of production it is not a given it has to rise.
Quite the contrary
I need another reason why you say gold is fundamentally cheap
Matthew,
Luhansk for that chart of the 33 year Dow.
Once again you prove my point.
Take a good look at that chart, up up up.
These corrections are merely speed bumps along the way.
Buy stocks 33 years ago you are wealthy today
Buy gold and silver 33 years ago too bad
I don’t know why you felt the need to say the same thing again, one day later… but here’s my reply again:
Re: “And yet another chart that proves my point.”
-Really? What point is that; that linear extrapolation is a good idea? Or is it that one should avoid learning the difference between nominal and real? Are you aware that gold is up TWICE as much as the Dow since 1966? (16x vs 32x)
I doubt that anyone besides BB is impressed with your recognition that the ’80s and ’90s were a good time to deploy capital. Hopefully, but doubtfully, you also realize that holding a lot of the best form of cash has been the best thing to do since ’99/’00. Gold is STILL worth THREE TIMES more Dow today than it was back then. In 2011, it was worth 7.5 times more Dow(!!!).
Yes, keep bringing that “balance” that is SO needed around here, lol.
Matthew,
Did you including dividends this time in your returns? No, of course you did not. If you include dividends (and you did nothing with that extra money) then gold still beat the DOW but not by as much as you stated. And if you had reinvested those dividends, the DOW easily beat gold.
JMiller, are you saying that the Dow with dividends reinvested has tripled since 2000? The way I see it, the fact that gold did TWICE as well as the Dow over the last 50 years is pretty damn good considering the lack of effort and risk. TWICE as well accounts for a lot of dividends too. In addition, there were no index funds 50 years ago and just one in 1975. “Smart” stock pickers would have ended up with losers that either went bankrupt or were kicked out of the Dow. It wouldn’t take many losers to hurt long term performance substantially.
Did you account for taxes on those dividends? How about commissions and management fees? No, of course you did not.
Again, the “conversation” is silly. For me, it’s not an either/or proposition, but rather, a timing and allocation one. Gold is my cash, period. I need gains far greater than an index fund can deliver to get me excited about risking my capital. IF (big “IF”) the Dow has beat gold since the dollar became an “IOU nothing” back in 1971, it didn’t do so by much and THAT makes the paperbugs fools in my book. That 90%+ segment of the population clearly does not remotely understand how to assess risk or reward. Don’t believe it? Then why do we have bubbles in greed followed by bubbles in fear, over and over and over again? Why is it that the hallmark of such bubbles is massive public participation.
All I am bring up Matthew is that every time you mention how much better gold did compared to stocks you always intentionally neglect to include dividends in your returns. Why? Is it so you can make gold look that much better than stocks. That is all I was pointing out.
I leave them out because of the variables affecting real world outcomes. One person’s results could be more misleading than leaving them out. Even modest attempts to manage risk or time the market over decades could have a huge impact. Then there’s short and long term capital gains and income taxes along with the aforementioned commissions and management fees.
Everyone knows that dividends exist so I leave that calculation to the individual.
It’s still pretty impressive and suspiciously absent from mainstream dialogue that gold has done twice as well as the Dow, minus dividends, since Nixon -pretty good for a pet rock.
With oil flat the major oil stocks have started moving up sharply. Looks like a good sign. Production should start to decline over the next few months with 1000 less rigs operating.
Extremely oversold sector! They have still not caught up to the price of oil!
Oil is walking a tightrope.
When it gives up support here look out below
Now you are going back to 1966? Very convenient.
Keep changing the goal posts
No, you unfairly chose to highlight a period that began with a secular low for stocks and high for gold. So I decided to balance you out by starting at the previous secular high for stocks and low for gold. Remember, I put up those charts for reasons having nothing to do with your beliefs when you decided to claim they proved something other than the obvious.
The whole argument is silly anyway because there is a time to be overweight each asset class and that cyclicality will never change. You’re just determined to do everything you can to blame an asset instead of yourself for your results. Pathetic.
Market wrap?
A first world problem (fwp) from someone named Charles.
Quoting Charles:
“Garth I enjoy your blog, read it regularly and need your serious help. I’m 44, my wife is 42 and hot. Lovey is a stay at home Mom, we have two little girls 8 & 3. We have a dog who is a black hole of emotional need, he’s around 8, also no job.
I have my own company, underpay myself and make about $250-300K/year in US$. I have around 350K in RSPs/TFSAs. We have very little consumer debt – we run a small deficit if we have to.
Now it gets tricky …We own a house that we owe under 400K on. We bought for 469K about 6 years ago. We live in a ‘hood that everyone would like to live in, and the batshit crazy “investments” that have been made around here are nuts. Tear downs sell for at least 500K and up to 650K. New houses sell for 1M or more. If I listed my house today, I’d ask $700K and I’d probably get it. There are 2 new houses behind us – each selling for 1.4M.
We have finished plans to do an addition to our home and I have cold feet. We owe 400, add 300 we now owe 700K . If you believe the crazies, I could list my house post reno for 1.4M as it’s a fair comparison to the house listed behind me now. Lovey wants this house done. Yesterday. She sees it as an immediate life experience upgrade, a workable house and she believes it has a lot of equity, and that even though a crash is coming, we are safe.
I have managed to win a round or two, delay the project and if the crash would cooperate and show up on time I’d be looking like a genius.
Options: I can do nothing and make due with a house that needs some $ spent and has a kitchen just big enough to make a drink in. I can move – I’d have to move to a new part of town, we don’t want to do that and anything I buy here is going to cost 850-900K.
I can rent – I have lobbied for this but for now it’s a no go – there isn’t enough to rent (yet) and we are not quite at condos. I can do the reno and live here for years. Kids are little, school is at the end of the street, high school is right over there and ride it out, taking comfort in my desirable neighborhood and proximity to downtown etc.
Am I over-thinking this?”
The answer is here – and gold is not mentioned even once.
http://www.greaterfool.ca/2015/09/30/firstworld/
Note – the story is Canadian, explaining the reference to “you stand to make a big capital-gains tax-free profit from the stupidity bubbling around you.”
Mining Giant Glencore To Sell Gold & Silver Output To Pay Down Debt
Filed in Mining, News, Precious Metals by SRSrocco on September 30, 2015 • 7 Comments
GLENCOREIn an ironic twist of fate, the mining conglomerate Glencore is seeking to pay down its massive debt by selling future gold and silver output. While this is only part of its solution to pay down a third of its $30 billion in debt, it’s quite interesting that the company is selling forward production of two of the most despised monetary metals in the Mainstream Media.
According to the Bloomberg article, Glencore’s next step seen as selling future gold, silver output:
The company is seeking more than $1 billion in a so-called precious metals streaming deal linked to some of its mines in South America, according to two people familiar with the situation, who asked to not be identified because the talks with potential buyers are private. The transaction is part of Glencore’s broader restructuring to reduce its $30 billion debt pile by about a third and bolster its finances to withstand a continuing slide in commodities.
… The company produced 35 million ounces of silver last year and 955,000 ounces of gold from mines in South America, Kazakhstan and Australia.
The company’s negotiations in the streaming deal are likely to attract interest from the small group of companies, such as Silver Wheaton Corp., that specialize in the transactions, which give miners upfront payments in exchange for metal that’s later sold. Other companies involved in those kind of sales include Franco Nevada Corp.
What wasn’t stated in the article was the selling of a percentage of Glencore’s gold and silver production was in fact a “Forced hedging strategy.” Thus, Glencore’s massive debt burden has forced them to sell their future gold and silver at bargain-basement prices.
We must remember, Silver Wheaton pays between $4-$6 for silver and $400 for gold in its standard streaming agreements. Glencore may start off by selling 10% of its gold production, but this might not be enough. According to the Bloomberg article:
Glencore could raise $1 billion to $1.5 billion by selling 10 percent of its gold output through streaming deals, Macquarie Group Ltd. said in a report Tuesday. That means there’s “substantial scope” to conclude more of the transactions, the bank said. JPMorgan Chase & Co. analysts wrote in a note to clients on Wednesday that it sees the company being able to raise more than $1 billion.
Aside from its South American mines, Glencore could also look to sell a gold and silver stream from its Kazzinc project in Kazakhstan, BMO’s Sterck said. Glencore owns about a third of the Antamina copper operation in Peru. Teck Resources Ltd., which has a 22.5 percent stake in the mine, previously said it would consider selling silver streams to increasing liquidity.
The interesting part of the quote above we need to highlight is, “JPMorgan Chase & Co. analysts wrote in a note to clients on Wednesday that it sees the company being able to raise more than $1 billion.”
How nice of JP Morgan to write a note to clients that Glencore could raise more than $1 billion to pawn off its gold and silver production at below bargain basement prices. I wouldn’t be surprised if analysts at JP Morgan Chase & Co. advised Glencore to sell even more of its gold and silver production forward.
Glencore being forced to sell a portion of its future gold and silver production to pay down debt is just another irony in a sea of ironies now taking place as Central Bank propped up highly leveraged stock markets are on the verge of another epic collapse.
The majority of investors are not prepared for whats coming. As I stated in my previous article… There were 713 survivors on the Titanic of the total 2,229 passengers and crew. Thus, 32% survived the sinking of the Titanic, whereas only 1-2% of investors have gold and silver lifeboats.
World set for emerging market mass default, warns IMF
Higher US interest rates will expose weaknesses in emerging market corporations which have gorged themselves on cheap debt, IMF warns
By Szu Ping Chan
6:50PM BST 29 Sep 2015
The International Monetary Fund (IMF) has issued a double warning over higher US interest rates, which it said could trigger a wave of emerging market corporate defaults and panic in financial markets as liquidity evaporates.
The IMF said corporate debts in emerging markets ballooned to $18 trillion (£12 trillion) last year, from $4 trillion in 2004 as companies gorged themselves on cheap debt.
It said the quadrupling in debt had been accompanied by weaker balance sheets, making companies more vulnerable to US rate rises.
“As advanced economies normalise monetary policy, emerging markets should prepare for an increase in corporate failures,” the IMF said in a pre-released chapter of its latest Financial Stability Report.
More…
Sep 30 Junk bond market imminent collapse threatens (unwelcome) big rate rises CliveMaund