Metals & Markets: One Last Metals Smash Ahead as Fed Prepares to Taper?

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silver smashIn this week’s show, The Doc & Eric Dubin cover:

-The Doc’s report on the retail physical market, including record Silver Eagle sales
-This week’s metals trading action vis-a-vis mining shares, 10 year breaks 3%, econ data
-GOFO slips into positive territory, only to go negative again while prices declined (cartel footprints)
-Military strike?  Congress? What’s up? - Meanwhile Putin threatens Russia will retaliate for any US strike on Syria
-September FOMC meeting/statement looming, expect the Fed to announce a $10-15 B taper to QE- how will it affect gold & silver?
SD Weekly Metals & Markets With The Doc & Eric Dubin is below:


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This has certainly been an usual week.  We have Team Obama tucking their tail between their legs while framing the situation with Syria in such a way as to blame Congress for a “failure” should Congress ultimately vote against military action — in which case, no doubt, Obama would figure out some other means of justifying action all over again.  Meanwhile, gold and silver have sustained repeated cartel attacks and selling by speculators while physical demand remains high.  Let’s here it for contradictory forces!

We’re producing this week’s show a day early – on Thursday, Sept. 5th.  Friday will be an important day.  Non-farm unemployment will be reported at 8:30am EST.  Consensus expectation for the initial August report calls for an increase of 175,000 jobs, up from 162,000 in July, but below the 188,000 level reported for June.  Based on the 176,000 job addition estimate released by Automatic Data Processing today, odds are pretty good that we’re not going to see any major surprises with the Government’s numbers on Friday. Traditionally, non-farm payroll release Friday’s are the kiss of death for precious metals.  The cartel loves to “paint the tape” on unemployment report Friday’s.  But this time around, given the damage we’ve already seen, with RSI measures diving off their recent highs and mining shares brutalized, we’re probably going to see silver and gold make an effort to stabilize Friday.

To put the selling in mining shares into perspective, check out the downside volume at the close today in the GDX exchange traded fund:

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Selling was substantial.  It speaks to at least partial capitulation, as some longer-term investors appear to be taking money off the table ahead of this month’s Fed meeting.

The 10-year bond touched 3% today for the first time in years.  That is a reflection of the pricing in of tapering and outright bond selling by international and domestic investors.  At some point, the 10-year rate will reach a high enough level to put the breaks on any notion of economic recovery.  That, combined with investors in bond bear market mode will demand the Fed step-up as the buyer of last resort.  The Fed may put on a good show this month, performing a small taper.  But falling bond prices (and rising yields) will weaken bank balance sheets faster than any benefit banks can generate by playing the yield spread when borrowing “cheap” at the short-end and making longer-term, higher rate loans to businesses and consumers.  The Fed is stuck.

Keep an eye on TheNewsDoctors.com Friday and through the weekend. We’ll be posting exclusive stories about developments in the Middle East.

Thanks for tuning in — Eric Dubin

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Comments

  1. Would have been a lot better report if you waited until 5:15pm EST Friday.  Nice launch and a .31 gain for the week.

  2. Agree with Silverhawk.
    If you publish only after Friday, it better include the week close, whether US works or not, don’t forget that this is a global market wherein USA barely consumes or produces any :-) Only 4% of the world live in USA.

    When will sub-prime mortgage backed securities run out BTW? At this rate, surely they are catching up nicely?

  3. XCS   I just got an email from a residential mortgage broker advertising sub prime loans.
      It was exactly the same garbage that I received regularly on my fax machine 10 years ago. Liar loans, NINJA loans, 500 FICO etc etc.
    If this is the new mortgage paradigm, lather rinse and repeat,  then the mortgage pipeline will soon be refilled with this junk. Bankers donot care about the quality of their loans anymore.  They care about the profits contained in the mortgages and how quickly they can offload this total garbage on the unsuspecting buyers which include central bankers, hedge funds, retail brokers and sovereign wealth funds.  In other words, we are bound and determined to refill the world with junk.  It will end badly again. The US Housing market is back into a bubble and it will burst, showering us once again with festoons of crap.
    PS  I don’t do residential mortgages but these SOBs have tracked me down.  I guess they think I have ‘stupid’ written on my back

    • AG: Permit me to ask you a question regarding Reverse Mortgages.  Why are “they” going to reduce (by 40%) the amount one can extract from their equity when doing a reverse mortgage?  What’s their intention? 

    • “ I don’t do residential mortgages but these SOBs have tracked me down.  I guess they think I have ‘stupid’ written on my back”
       
      It’s probably nothing personal, AG.  The banksters likely think that we are all complete fools for allowing them to continue to prey on our wealth the way that they do and not have them hanged for it.  Men like the Founding Fathers would have done exactly that.  Yes, they might have tried tarring, feathering, and riding out of town on a rail first but the rope solution would not have been far behind.
       

  4. Sorry folks.  Normally this tiny team is able to move mountains you don’t all see behind the scenes and things get done fast.  That didn’t happen here. 

    Moving on…

    Friday’s bounce was impressive.  I expected the metals to move higher and for people to be surprised that “employment report Friday bombing” didn’t happen this go-round. But the size of the bounce even surprised me. It speaks to the degree to which manipulation was active at pushing the beach ball below water, so to speak, and how many very short term traders jumped on board to follow cartel signals and go short, only to cover just as fast.  The direction is playing out as we spoke about, and we’ll just have to see if, in about a week or so, we start getting the down draft in anticipation of tapering.  Regardless, the jig is up and the bull is going to keep snorting this year and well into Spring.

  5. silverrrr  I had not given  much thought to reverse mortgages except a way for mom and pop to use their home as a means to provide a modest income stream in their latter years. 
    It seemed like a good plan.  But then I too a look this sytem and found it was not quite the beneficial thing as purported by hack overhill actors and hack overhill politicians.
    Pops pays his home loan over 30 years, burns the mortgage and has a free and clear home. 
    Bully. 
    After paying the banker interest that could easily equal 150% of the total price of the home (or more depending on the interest rates), the owners should have had a nice comfortable home unburdened by a mortgage, just the obnoxious property tax gulag system perfected by the kleptocratic corporatist governments that developed over the last 3,000 years. I hate property taxes more than I hate income taxes for the basic reason that this theft of our substance is just another way of telling us we are just sharecroppers and renters on the wanna-be king (aka country tax assessor) land.
    Now for the real issue with reverse mortgage.  If a person 65 years old finds out that the $300,000 they paid into the Social Security system, or the pension plan they and their employer paid into a 401K or a government worker who’s seen their pension ground to dust by the idiots that are supposed to have administered it for the last 30 years, they now realize that once their day job  income stops their pension income is half of what they need to live on. AND THAT ASSUMES THEY ACTUALLY HAVE A PENSION.  Most people do not and primaryfor the reason that their private sector employer screwed the pooch and divested itself of the pension burdens by bankruptcy or corporate merger
    I think you are getting where I am coming from
    Mom and Pop spent 30-40 years grinding away at the day job, either private or public sector, being told and expecting a decent pension at the end of their work cycle.  For most people this is not working out as they planned.  And I surmise it is largely due to the vast wealth bubble bursting rotations of wealth from Mr and Mrs. J.Q. Citizen by banks, pension plans, brokerages, government theft and promises not kept.
    Reverse mortages are touted as the way to recovery the only asset that remains capable of providing income. But that income comes with a price. It is a payment plan with interest accumulating on the value of the home hopefully will not be spent out before mom abd pop assume room temperature
    It is a real gamble since the compounding interest on this loan could easily accumulate so fast that the payments are forcibly reduced due to the loan and accumulated interest come too close to the value of the home. In a down market that could happen in a short period of years, leaving the folks homeless and the payment stream stopped.  If the home increases in value, the compounding value of the home may never equal the compounding interest burden
    Thus, in my opinion, reverse mortgages are the tool of the elite bankers to continue the theft of the final assets that might have remained in the hands of mom and pop had they not been forced to rely on eating the home equity they spent decades accumulating.
    in other words, they paid interest on FIAT loans and then pay interest on FIAT loans that strip them of a final assets that is actually their home
    Compounding interest and inflation will make this reverse mortgage scam a terrrible burden on those who fall into this trap. The worst part of this is the fact that mom and pop can’t go back into the job market to rebuy the income they had in their younegr years so that they can pay off the bankster who sold them this bill of goods.
    Tool of the devil  — Reverse mortgages. 

    • Yikkkes!  Where I thought “a benefit” would occur is when, say, a lump sum probably around 100K is taken (tax free), the mortgage payment goes away, and mom and pop live out their lives using the 100K to “chill”.  Their heirs get to opt in or out for the monies due to keep the house in the family.  Is that too simple of a scenario?  What am I missing?  So long as the upkeep/maintenance is taken care of by mom and pop, they are home free, as it were, with their 100K.  No? 

    • Also fine print on many reverse mortgages don’t protect the other spouse if one of them dies. Oops you didn’t see this? We now own the home get the hell out.

    • If it was me, I’d sell the $300,000 house and go into rent.  Take $280,000 and buy silver.  Year from now, buy back house and have $600,000 in bank.
      How easy it that?

    • Depending on the individuals involved and whether or not they love their home, it could be easy or not.  What you suggest looks fiscally possible to me but we have seen a lot of manipulation of the silver market and it might not work as suggested.  
       
      Also, this is a subject that is frequently based in emotions.  That makes it a minefield for some who might not have any other way to continue to stay in their homes.  Their choice could well come down to either take out a reverse mortgage OR sell the house and move into an apartment.  Some people get very attached to their homes.  Decades of living there can do that to some folks.
       

  6. Silverrr   what you describe is a one time extraction of capital from the equity of the home.  That usually requires a loan application with the attendant underwritng that shows mom and pop are capable of making monthly payments on the loan. If approved then they tuck away this capital as their nest egg.
    If that $100,000 was a  5% rate line of credit, that’s $5,000 a year.   The bank expects that $5,000 to be paid month by month. 
     The folks could tuck that $100,000 into interest bearing accounts that hopefully make more than 5%.
    If that does not happen then there is a steady bleed of capital from their income or even a bleeding of the $100,000 nest egg principal so that they can live off that hard capital, interest earned on the $100,000 and whatever stipends they get from their refirement plans, SS and other income sources. 
    That system usually does  not work for expended periods because if they spend down the $100,000 on unwise investments like bonds, stocks and even precious metals that dropped by 30-50% over the last 2 years. they either liquidate their remaining capital to pay off the bank or risk losing their home if the bank forcloses due to failure to make that $5,000 interest payment   In the interim that rate could even go up depending on the rate cycle where they originally borrowed. The banksters know how this system works and also know that very few people can make more than the banks, essentially frontrunning that banker interest payment.  It can be done but the people who are capable of this are sophistocated and knowledgeable investors who can make that money work for them.  Mom and pop are usually not aware of those systems
     A reverse mortgage usually involves a free and clear home, or one that is nearly free and clear.  There is little or no underwriting since thebank makes a small payment, maybe $1,000 a month, from the equity of the home and sends the check to Pops so he can balance his personal budgets.  That $1,000 is permanently added to the principal along with interest that is calculated daily. This can continue for years. If the $1,000 payment hasno inflation adjustment, the interest accumulates against the principal and grows on a near exponential basis over the years. If that $1,000 is $12,000 a year, pretty soon it’s 5 years and $60,000 in principal eaten by the monthly payments but the interest is accumulating relentlessly.  $60,000 might have $3,000 a year interest accumulating. $100,000 wouldhave $5,000.  At $5,000 a year, thats getting pretty close to half the payment of $12,000 that in the reverse mortgage stipend
    It would not take long for the principal and interest to ramp to $100,000.  If the value of the home is $250,000 and the lender maxes out at $200,000 total P&I, then once that total is reached, the homeis forfeit and the payment stop.  It would take more than 10 years to hit this $200,000 but $120,000 in monthly payment plus the accruing interest would hit it eventually and what then?
     
    Sell the home?
    The one thing that is not mentioned is that the $1,000 is going to be worth less and less over the 10 years. It might not buy $500 of goods and services in 10 years and where does that leave mom and dad?  Their pension and SS incomes will NEVER keep up with inflation rate. SS went up 1.7% last year and there is a real threat that it will be less this year due to that sneaky hedonics bullcrap that the Government uses to adjust their mandated payments to pensioneers, veterans and SS recipients.
    I would think that the reverse mortgage firm would never increase the payments due to inflation hammering the buying power of that $1,000  It might seem to be a good deal back then and help balance the budget but the compounding power of interest and the inflation induced destruction of dad’s buying power will hammer these good folks into penury sooner than later and become the next mortgage scandal that will bring the government racing to the rescue. How that will work out is unknown but rest assured the government sponsors these programs and they will screw the pooch when the crap hits the reverse mortgage fans.  See the lawsuits start within 5 years or so. I hope Fred Thompson and Henry Winkler, shills for this crap, are living in a distant country with no extradition treaties because these grey panthers will be on the war path

  7. I find it hard to imagine them tapering even a little bit. After what we have seen in June (or July?), when they only hinted at tapering and stocks went down pretty badly, my gut feeling tells me this won’t work. Then taking back that tapering in 3 months time? All the confidence that still holds the system in its hinges will be gone and the economy will be in ashes. The FED knows this.

    If they really do dare to taper, I expect some VERY bad things to happen very soon and subsequently them taking it back very, very quickly.

    Does anybody here agree?

    Well, we will see in 10 days how this plays out.
     

    • BIS has ordered the taper so we will see a token effort.  Fed does have a little wiggle room as 10 year Treasury is just below 3% and maybe more important from a ‘first domino to fall aspect’ is Japanese 10 year is at 0.80%.  However, Fed will maintain MBS purchase levels.  Let the looting continue.  In the end the owners of the Fed will own nearly all the mortgaged backed real estate in the U.S. for free as they do not have to work for their money.  Factor MERS clouding clear title on what remains, they’ll be able to get the rest of it through the courts if they desire.  In a couple of years those FEMA camps are going to look pretty attractive to a lot of hurting Americans.  

    • “In a couple of years those FEMA camps are going to look pretty attractive to a lot of hurting Americans.”
       
      Either that or there will have been The American Revolution, Part II, and these FEMA camps will be filled with all of the banksters and politicians who managed to temporarily escape hanging.

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