In The News Today

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U.S. Gold Holdings Close to Zero-Rob Kirby
By Greg Hunter’s USAWatchdog.com

Financial analyst Rob Kirby is an expert on forensic macroeconomics.  His research shows central bankers are starting to not trust each other.  Kirby cites Austria’s recent demand to audit its gold held in London.  Kirby explains, “. . . Austria seems to have a reason to want to go and see it and inspect it and know that it is real and see it hasn’t been sold and nothing untoward has been done to it.”  Austria joins a list of countries, such as Germany, concerned about its gold holdings.  Kirby contends, “We are seeing cracks in the trust that, five years ago, there was no questioning the ownership or custody of sovereign metals stored at the Bank of England or the U.S. Federal Reserve; and, now, we’re seeing countries are questioning and want reassurances.  There’s been a breakdown in trust (between central banks). . . . This is now a distinct pattern, and I expect it will accelerate as time goes on.”

What happens if Austria is not granted access to its gold by the Bank of England?  Kirby speculates, “I would say there could be some piling on.  There could be some other countries that could be concerned about the state of their reserves.  Kirby goes on to point out, “Countries around the world with foreign reserve accounts where they hold vast amounts of U.S. dollars, all it’s going to take is for one of them to get really spooked . . . and bolting for the door is for countries with these massive foreign reserves is to start madly buying gold.  At some point, countries, if they feel their gold has been compromised, they might want to replace it in a hurry. . . . All the countries holding vast amounts of U.S dollars in their reserve accounts . . . think many of them think those dollars, in the end, are not going to be worth anything.  That raises the inclination for one of them to spend them or use them before they lose them or they become worthless.  I think there is a growing propensity for someone somewhere to do this.” 

What about America’s gold?  Is it still in Fort Knox?  Kirby says, “I don’t believe America possesses any substantial amount of gold.  America claims to have sovereign holdings of just over 8,000 metric tons.  I believe that number is grossly inflated, and it might be close to zero.”  What would happen to the dollar if it was indeed fact that America had very little gold left in its vaults?  Kirby contends, “There would be calamity in the financial markets around the world. . . . If the 8,000 tons of gold has grown feet and is not where it is supposed to be, it would certainly qualify as a national secret.  This would also explain why the United States has been so dead set against a proper audit of its gold reserves.” 

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Jim Sinclair’s Commentary

You would imagine they should have already regarding gold. The statement on currency is another focused on dollar settlement usage.

Putin says Russia and China need to secure their gold and currency reserves
ST PETERSBURG Sat May 24, 2014 9:30am EDT

Russia May 24 (Reuters) – Russia and China need to ensure their gold and currency reserves are secure, Russia’s President Vladimir Putin told foreign journalists at the St Petersburg International Economic Forum.

"For us (Russia and China) it is important to deposit those (gold and currency reserves) in a rational and secure way," he said. "And we together need to think of how to do that keeping in mind the uneasy situation in the global economy."

Putin also said China and Russia will consider further steps to shift to use of national currencies in bilateral transactions.

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Jim Sinclair’s Commentary

Equity bulls are concerned by the strength in the bond market accompanying strength in equities, previously a harbinger that one must change.

Everyone Is Talking About The Recent Disconnect Between Stocks And Bonds
MATTHEW BOESLER
FEB. 27, 2014, 11:08 AM

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Chart 1: Stocks and bond yields have diverged.

One of the hottest topics in the investor community is the recent disconnect between the stock market and the bond market.

The S&P 500 index and yields on U.S. Treasuries have largely moved in tandem over the past few months — up until early February, at which point they took turns in opposite directions as the stock market raced back to new all-time highs, and Treasury yields floundered at depressed levels (chart 1).

In a nutshell, the disconnect basically has equity investors worried about a pullback in the stock market, while it has bond investors concerned about the same in Treasuries, which would send yields higher and close the gap that has emerged this month.

There are a few explanations for why the correlation between these two asset classes has suddenly flipped.

The consensus view seems to be that bond market shorts have been squeezed out of positions due to weak economic indicators that are likely being weighed down by transitory weather effects.

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Yellen Has Scant Power to Relieve U.S. Housing Slowdown
By Rich Miller and Victoria Stilwell May 28, 2014 9:44 AM MT

The hesitant housing recovery has surprised and concerned Federal Reserve Chair Janet Yellen and her colleagues at the central bank. It’s not clear how much they can do about it.

While the industry is rebounding from a weather-ravaged first quarter, the pickup will probably fall short of previous projections, according to economists at Goldman Sachs Group Inc. of New York and Macroeconomic Advisers LLC in St. Louis. As a result, they trimmed their forecasts for economic growth in the second half of 2014 to about 3.25 percent from 3.5 percent.

“Housing is a growing worry,” said Macroeconomic Advisers’ senior economist Ben Herzon.

Yellen and many of her colleagues agree. The Fed chair flagged the industry as a risk to the outlook in testimony to Congress on May 7, while Federal Reserve Bank of New York President William C. Dudley said last week he had been surprised by how weak it had been recently. He added that he still expects gross domestic product to “get back on a roughly 3 percent growth trajectory” after stalling in the first quarter.

The trouble from the Fed’s perspective is that many of the forces holding housing back are outside of its control. While the Fed can influence mortgage rates through its conduct of monetary policy, it can’t do much, if anything, to counteract the other causes of faltering demand: lagging household formation, stingy lenders and wary borrowers.

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U.S. Mortgage Application Volume Down 1.2% Last Week, MBA Says
By Maria Armental
May 28, 2014, 7:15 a.m. ET

The average number of mortgage applications for the week ending May 23 dropped 1.2%, according to a Mortgage Bankers Association’s weekly survey.

Purchase applications, MBA said Wednesday, fell 2% unadjusted over the week and were 15% lower than the year-ago period. The refinance share of mortgage activity remained unchanged at 52% of total applications.

The average rate on 30-year, fixed-rate mortgages with conforming loans decreased to 4.31% from 4.33% a week prior. Rates on 30-year, fixed-rate mortgages with jumbo-loan balances fell to 4.23% from 4.24% the previous week.

The average rate for 30-year, fixed-rate mortgages backed by the Federal Housing Administration fell to 4.04% from 4.06% the prior week.

The latest rates are the lowest since June last year, MBA said.

The average rate for 15-year, fixed-rate mortgages dropped to 3.42%–the lowest level since October–from 3.43% the prior week. The 5/1 ARM average decreased to 3.13% from 3.14%.

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Bad Trend Breaking: Why Retail Results Are Not Better Than Expected, But Worse Than Ever!
by David Stockman

The ultimate evil of monetary central planning is that it drastically distorts pricing signals in capital markets, thereby inducing vast malinvestments in the real economy—-mistakes that eventually result in uneconomic returns
and losses which must be someday written off. Accordingly, what is recorded as a boost to GDP by our Keynesian policy overlords in the front-end of the malinvesment cycle results in a reduction of national wealth when it’s all said and done.

Needless to say, if central bank induced financial repression is carried on long
enough the level of capital market deformation and main street malinvestment
can become monumental. In fact, there are four bell-ringer statistics among the
macro-economic data that dramatize perhaps the greatest of these central bank induced investment errors, but they are never published in the main street financial press—–probably because they explain far too much in one glance.

The skunks in one of the nation’s greatest uneconomic woodpiles are: 100k, 1 million, 15 billion and 47 square feet. Those stats measure the collective girth of America’s shopping emporia, and designate, respectively, the number of shopping centers and strip malls across the land; the number of retail stores spread among them; the total retail space occupied by the nation’s shopping machinery; and the amount of space at present for every man, woman and child in the nation.

It does not take much analysis to see that these bell ringers do not represent sustainable prosperity unfolding across the land. For example, around 1990 real median income was $56k per household and now, 25 years later, its just $51k—-meaning that main street living standards have plunged by about 9% during the last quarter century. But what has not dropped is the opportunity for Americans to drop shopping: square footage per capita during the same period more than doubled, rising from 19 square feet per capita at the earlier date to 47 at present.

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