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Supply and Demand Report: 5 Oct

Posted by: Monetary Metals
Post date: 10/06/2014 - 00:04
How much higher can the dollar go? Betting on
the Feds paper has been one helluva
speculation... Read on for the supply and
demand fundamentals of gold and silver.

Posted by : hedgeless_horseman
Post date: 10/06/2014 - 00:34
You don't need to go sing at a mega-fellowship
church, pay a preacher, or call dial-a-prayer...What
would Jesus really do in less than 2500 words.

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What Will Trigger The Next Round of the

Financial Crisis?
Posted by: Phoenix Capital...
Post date: 10/05/2014 - 17:11
Today, we now have a financial system that is
even more leveraged than in 2007 backstopped
by even less high quality collateral. So when the
panic hits, the selling...

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3 Things Worth Thinking About

10 Investment
Mistakes

Submitted by Tyler Durden on 10/03/2014 12:51 -0400

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Federal Reserve
Market Internals

Ford
OPEC

George Soros
Reality

International Energy Agency

Recession

Iraq

Reflexivity

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Submitted by Lance Roberts of STA Wealth Management,

Correction Awakens Sleeping Bears

MEHR MIT IG

Since the end of 2012, the S&P 500 has been on an inexhaustible
rise despite rising geopolitical tensions, extremely cold weather and
weak economic data. The driver, of course, has been the massive
liquidity inflows from the Federal Reserve that have catapulted the
markets from their previous upward bullish trend into an accelerated
push. This is shown in the chart below.

Audio Commentary From RanSquawk:

RanSquawk News

The Fly On The Wall

10-06 7:15: Asos (ASC LN) says FMR LLC holds 5.39% of
voting rights
10-06 7:15: Shell delays UK St. Fergus start and the plant
will be fully...
10-06 7:15: Western European Car registrations rose 5.8%
in September, according...
10-06 7:15: Irish Consumer Confidence (Sep) M/M 92.8 vs.

Bauen Sie Ihr

Portfolio

(Prev. 87.1)
10-06 7:15: USD/JPY trades in close proximity to 109.00
where 2.95bln option...
10-06 7:15: London Silver Fix USD 17.02 (Prev. USD 16.97)
10-06 7:15: Russia must set acceptable terms for Ukraine
on gas, according to...
10-06 7:15: Deutsche Wohnen (DWNI GY) improves
financing structure and cash flow

However, the recent market correction has taken on a different

flavor with a deterioration in market internals and a narrowing of
leadership.
Walter Murphy noted on Wednesday that:

New Comments

Today's Top Stories

10-06 7:45: For these corps, innovation (Infinite QE)

"NYSE declining stocks exceeded winners by 5:1

while the up/down volume ratio was bearish by a
more robust 11:2 margin.

10-06 7:44: Fiorina should be pelted with (redd_green)

In recent comments, we thought that last weeks breach

of the 1978 double-bottom was a warning for lower lows.
The importance of that breakdown was brought home
today for at least four reasons. First, the S&P closed
below what has been the dominant intermediate
uptrend line from the November 2012 low. Second,
the percentage of NYSE stocks below their 200-dma is
below 45% for the 1st time since November 2012. Third,
the decline has an impulsive look to it. Finally,
intermediate to longer term Coppock oscillators are
deteriorating for a majority of indexes and stocks."

10-06 7:42: Please Banzai7, not before my (Cognitive

With both the number of S&P 500 stocks above their 200 day
moving average and on "bullish buy signals" deteriorating since mid2013, the increasing divergence of prices from the underlying
performance is cause for concern.

10-06 7:43: The red area is the (Cpiiesf7)

10-06 7:43: He may just print more (short screwed)
10-06 7:42: The Dow is on a clear path to (wmbz)
Dissonance)
10-06 7:42: The only thing lamer than, " (JulianAD)
10-06 7:41: Not gonna happen. We are (DocinPA)
10-06 7:41: Jesus was not a Jew, the (hustler etiquette)
10-06 7:41: Thanks for the link RM, and (medium giraffe)

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Sprott Roundtable
Webcast
What's Next for Precious
Metals? Ask Eric Sprott, J.
Embry & R. Rule
I have also noted that the market has broken below the accelerated
bullish uptrend, and a normal 38.2% correction would pull the index
towards 1750 currently. While such a decline currently seems
beyond the grasp of reality, it would actually be a healthy 13%
retracement from the peak. However, since such a correction has
not been witnessed since 2012, it will feel far worse for most
individuals who have become overly complacent during the market's
accelerated advance.
Zero Hedge Reads
Alt-Market
Bearish News
Boom Bust Blog
Capitalist Exploits
China Financial Markets
Chris Martenson's Blog
Contrary Investor
Credit Writedowns
Daneric's Elliott Waves

Portfolio Action: What is missed by the "buy and hold" crowd is

that "portfolio management" is NOT about selling everything and
hiding in cash. As investors, our job is "buy low and sell high." With
the markets showing signs of deterioration on multiple levels, this is
probably a good indication that it is time to prepare to rebalance
portfolios, "trim" winners and "sell losers."
However, with the markets oversold on a very short-term basis it is
advisable not to "panic sell," but use "bounces" to rebalance
portfolios. Yes, this will mean an increased cash weighting in your
portfolio that is earning NOTHING, however, having cash is what
gives you the ability to "buy low" when the current correction
process is complete.

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View From The Bridge

Plunging Oil Prices Hit Energy Stocks

The recent spike in the US Dollar has impacted many areas of the
commodity complex but has been particularly nasty to oil prices.
There are many issues weighing on oil prices currently from reduced
demand due to globally weak economies, a reduction in driving
miles, continued improvements in fuel efficiency and a rising
supply/demand imbalance due to the explosion of domestic
"fracking."
Recent estimates from of demand growth from OPEC, the U.S.
Energy Information Administration (EIA) and the International
Energy Agency (IEA) place demand growth at 900,000 to 1.05
million barrels a day in 2014, and rising to around 1.2 million to 1.3
million barrels a day in 2015. The problem is that supply growth is
projected to surpass that demand by rising to 1.6 million barrels a
day in 2014 and 1.3 million barrels a day in 2015. Most all of that
supply growth will come from fracking in North Dakotas Bakken,
and the Permian Basin and Eagle Ford plays in Texas.The
Dollar Spike And Market Corrections
While fracking has been a boon to U.S. energy stocks the costs of
drilling wells has been climbing, and the decline rate of production
from fracking is extremely steep. This year independent oil
producers will spend roughly $1.50 for every $1.00 of revenue they
get back. Furthermore, it will take roughly 2,500 new wells a year
just to sustain the output of 1 million barrels a day in the Bakken
shale alone. (As a comparison Iraq can do the same with 60 wells)
If the confluence of the rising dollar and supply/demand imbalances
push oil prices below $85/bbl the profitability of drilling new wells
becomes much less attractive and existing revenue streams for
producers will deplete fairly rapidly. The poses a significant risk to
energy related investments due the recent deviation in price
performance from the underlying commodity.

Website is offline
No cached version of this page is available.

Error 520
Ray ID: 17519f3a1b0b0f5d

Web server is returning an

unknown error

Wolf Street

As shown, the performance of energy stocks has historically been

closely correlated with the performance of oil prices with the
exception of the liquidity driven asset inflations in 2007 and 201213.
Portfolio Action: Energy related investments are under pressure by
falling energy prices and the rising dollar. As discussed above with
reference to "portfolio management," energy is an area that is ripe
for "pruning and weeding" on any bounce. There is much "hope"
built into energy stocks currently but there is mounting evidence
that fracking may not be the "nirvana" most are expecting.

U.S. Dollar Spikes And Historical Market Impacts

As I discussed yesterday, the implications to investors of a strongly
rising U.S. dollar is important as it has a negative effect on stock
market prices. One of the last remaining last remaining footholds of
the "bulls" has been the strength in corporate profits.
"With valuations now expensive, interest rates set to rise
and yield spreads narrowing as the Fed removes
monetary liquidity, the risks to markets have risen
substantially since the beginning of the year. This
increase in risk, as the Federal Reserve extracts support
from the markets and economy, is being reflected by the
surge in the dollar as 'safety' is sought. This has
occurred each time QE has been extracted, and the
surge in the dollar has been historically associated with
market corrections."

As Sigmund Holmes recently penned similar thoughts:

"The dollar also rallied in the [2011] although it didnt
really get started until later in the correction in
September and October. This time the dollar has had a
major rally even before the official end of QE. The
end of QE 2 also ushered in the Euro crisis and once
again, albeit to a lesser degree, we are seeing problems
in Europe. One final similarity is that the economic
data going into the correction was fairly good as it
is now. It was only after the correction and the
onset of the European problems that US economic
data started to deteriorate. One cant help but think
of George Soros theory of reflexivity whereby it is
markets that move the economy rather than the other
way around.
Well see if this continues to develop in a similar fashion
to 2011. I have a sneaky suspicion that it may actually
turn into a bigger correction. There are a lot of people in
this market who really dont want to own it and any hint
of losses may be enough to send the hedge fund and
mutual fund traders to the door in an effort to protect

the old year end bonus."

Portfolio Action: The spike in the U.S. dollar is a drag on U.S.
exports that comprise roughly 40% of domestic profits. Again, there
is much "hope" built on sustained growth in U.S. profits as shown in
the chart below. (Read: Analyzing Earnings Q2 2014)

The reality is that the trend is historically unsustainable and

eventually will lead to a mean-reverting event in asset prices
as fantasy collides with reality. The loss of capital, when it
occurs, will be much greater than most are currently capable of
comprehending. Again, this why a disciplined process of "portfolio
management" is necessary to protect capital against such
catastrophic losses.
Final Note: I heard an advisor say recently that major stock
market declines only happens during recessions. While he is correct,
here is something worth pondering: "Did a recession cause the
correction, or did the correction cause the recession?"
Average:
Your rating: None Average: 3 (3 votes)

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William Finn
The Perilous Parable
of Saltwater

Fri, 10/03/2014 12:56 | 5285177

A scenic ridge running South to North, sports a hiking trail

running the length of it. Alongside the ridge, there is ocean to
the left, and to the right, a bubbling freshwater creek. At the top
of the ridge is a vista from which both creek and ocean can be
seen. The ocean can be accessed through an easy walk down a
cleared path and the brook, while accessible has no path. Those
hikers wishing to get to the brook must climb down an uncleared, rocky hillside not difficult, but not easy either.
Two men sit at the vista and play cards all day long. When
thirsty they would grab a passing hiker and pay him $1 to go get
them a bucket of freshwater to drink. For years, this system
worked for both cardplayer and hiker.
One day, one of the card players surprised the other and said,
My uncle Ben died and left me $4 trillion dollars.
The other said, That is great. What are you going to do with it?

The Heir said, See this ravine behind me? I am going to fill it up
with saltwater. I have always wanted a saltwater pond.
To the very next hiker the Heir saw, he offered the following
deal: For every bucket of saltwater the hiker would bring up the
hill, the Heir would pay $5.
The hiker was ecstatic. He brought up a bucket and was paid
$5. He ran down the hill and got another one, and was paid $5
again. The next day the hiker brought two buckets, and was paid
for each bucket he could bring up and dump in the ravine.
The other card player was annoyed because when he handed the
hiker $1 for freshwater the hiker laughed at him. Saltwater is
easier to get, and I get $5 for it. If you want freshwater, you
have to pay $6.
The hiker continued to exploit this arrangement. Soon he was
bringing friends to the hill to gather saltwater all day long and
dump it in the ravine, making an aggregate profit on each
bucket. It was not long before word spread, and hundreds of
people converged on the ridge to make their $5. Soon, cottage
industries sprouted upfresh water for the workers, temporary
housing, food sales. Next, the formerly beautiful ridge saw
developmentfirst stairs to make the water easier to bring up.
Then a pipeline. And very shortly, because the heir was paying
$5 for worthless saltwater, an entire economy developed at the
vista.
A bearded, Nobel Prize winning economist saw this and remarked
on the health of this vibrant, hillside economy. Transactions in
freshwater proved that the value of all water had gone up.
Unemployment was falling. Buildings were constructed. Money
was multiplying. All was good.
Until one day, the heir looked at his ravine and saw that it was
full. If any more saltwater were dumped in, the vista would flood
and he and his friend would have no place to play cards. So he
abruptly stopped buying worthless saltwater.

My ten year old son figured out what happened next.

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comments

RaceToTheBottom
Well, who won
the card games?

Fri,
10/03/2014 13:22 |
5285297
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post comments

101 years and c...

Fri,

10/03/2014
the recession
(started in
- 13:24 |
Q4, 2007) started the
5285308
correction. the
correction became a crash that created the depression
(and the need for the Fed to print over $3.5 TRILLION to
pretend we're not in depression).
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to post comments

William Finn
The one with
$4T.

Fri,
10/03/2014
- 13:31 |
5285333
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to post comments

all-priced-in
Government
installed a stiff tax
on rich heir so they
could keep paying people
to do nothing?

Fri,
10/03/2014 13:34 |
5285353

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William Finn
Dupe. Sorry

Fri, 10/03/2014 12:58 | 5285179

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comments

Soul Glow
Yellen smokes DMT.

Fri, 10/03/2014 12:55 | 5285182

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comments

Dr. Engali

Fri, 10/03/2014 -

12:59 | 5285186
"I heard an advisor
say recently that major stock market declines only
happens during recessions. While he is correct, here is
something worth pondering"

WTF don't these guys get about he words "policy tool"? And
BTW, we are in a depression butt munch.
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comments

firstdivision

Fri, 10/03/2014 -

12:58 | 5285190
Only two things
keeping the SPX where its at:

1) Smashing Vol https://www.google.com/finance?

chdnp=0&chdd=1&chds=1&chdv=1&chvs=Logarithmic&chdeh=0&chfdeh=0&chdet=1412366400000&chddm=1173&chls=IntervalBase
2) Squeezing the shorts

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comments

TheRideNeverEnds

Fri, 10/03/2014 -

12:58 | 5285192
Recessions, just like
10% corrections, are a thing of the past.
You cannot enter a recession if you are already in a depression.
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comments

Winston Churchill
1933 and 1937 ring
any bells ?
It must be blissful being
as ignorant as you.

Fri,
10/03/2014 13:55 |
5285447

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Seasmoke
I am done pondering.
Fuck it.

Fri, 10/03/2014 12:59 | 5285201

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comments

Doubleguns

Fri, 10/03/2014 -

13:00 | 5285202
I'm thinking the
correct answer is.....THE FUCKING BANKERS!!!
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KnuckleDragger-X

Fri,

It's easy to blame 10/03/2014 it all on the

13:10 |
bankers but they
5285243
have their enablers and
we the people not only elect them but encourage them as
long we get our (tiny) cut. The only good thing is when this
all goes to hell the freeloaders will suffer the the worst.
Unfortunately the people with a clue will get a free trip to hell
with them.
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Doubleguns

Fri,

10/03/2014
I elected no
one at the
- 13:15 |
FED. Maybe
5285263
changing that would
make a difference. Nah folks would just vote for the one
that prints them the most money and has the biggest
helecopter.
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KnuckleDragger-

Fri,

10/03/2014

- 13:38 |
The FED
exists only 5285364
because
the government created it and allow's it to continue.
the representitives that were elected by the people
aren't even interested in something like an audit and
for very greedy personal reasons. But don't worry, the
worst of them will be re-eleted to help us continue
down the path.
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post
comments

SheepDog-One

Fri, 10/03/2014 -

13:13 | 5285251
Banksters, clinging
desperately to a dead system.
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comments

hawaiian waverider

Fri, 10/03/2014 -

15:36 | 5286010
Also, recessions are
noted to start before people "feel" they are in one. So,
corrections can happen when things "feel" good and later it can
be shown, as it has in the past, that we were in a recession
already.
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comments

limacon
The correction caused
the recession .

Fri, 10/03/2014 15:48 | 5286070

This is because the correction happens slowly . The smart money

pulls out ahead of time carefully so as to disturb the price as little
as possible.
When the pack wakes up and smells the coffee , the rush for the
exit causes the major , visible correction .
The recession then occurs as capital and confidence dries up .
The coming correction is well underway . The major players in
hedge funds , etc have departed , leaving the Fed to play the
music box to a bunch of foolish children playing musical chairs
with widow-and orphan money .
Everybody is leveraged to the hilt and the gamesmaster has
locked the doors shut by removing liquidity .
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Raoul_Luke

Fri, 10/03/2014 -

16:26 | 5286241
We've been in
recession since 2000. If you back out all the deficit
spending since then and use a proper GDP deflator (not
that crock of crap the BEA uses) we're definitely behind for the
decade and a half Keynesian bacchanal we've "enjoyed" under
Bush/Obama. The crash didn't CAUSE that...
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comments

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