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Greatest Juggling Act On Earth - WilliamBanzai7 In this week’s SD Weekly Metals & Markets The Doc & Eric Dubin discuss:

- No taper next week, but expect jawboning and an attempt to smash gold & silver- will June’s lows hold?
– The Doc, Eric, & AGXIIK to host a live chat event @ The News Doctors Wednesday for the FOMC statement
– Precious metals trading this week- raid fails to break gold & silver below $1200 and $19
– The Doc’s report on retail physical trends as US Mint shuts down for 6 weeks
- The stock market and 2014- Why the Fed’s actions to attempt to taper QE in 2014 will precipitate a stock crash & the brown stuff exploding off the fan between late 2014 and 2016

The SD Weekly Metals & Markets Wrap is below:

 

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# # # # I came across a couple of charts worth discussing. Hat tip to Zero Hedge for publishing the first:

 

DJIA-FED-BALANCE-SHEET

When you look at the chart above, the tight correlation between the Dow Jones Industrial Average of 30 stocks and the Fed Balance Sheet bloated from multiple rounds of quantitative easing is uncanny. The chart was created in may, but the exact same relationship extends through today. This graphical representation also happens to shred the arguments of those that say warehousing of both standard Treasury debt and crap MBS assets on the Fed’s balance sheet does little to create real world inflation. That’s just total nonsense, and the relationship with the equities market as seen above ends the debate.

There has been containment of end market inflation in real goods, with real rates of inflation above government numbers but nonetheless somewhat contained. But there can be no doubt we’d be in a deep deflationary depression were it not for this massive flood of new debt creation to shore-up liquidity and enable the banking and shadow banking system to lever-up with new investment activity enabled by their “cleaner” balance sheets. “Wealth” based on rising financial assets is to a certain extent, an illusion — and certainly to all but the upper class. Thanks, Uncle Ben.  Trouble is, this can’t go on forever and many pundits are starting to see early to mid 2014 as the end game.

We published a story about this earlier this week on Silver Doctors. Click here. So, when does the brown stuff hit the spinning rotary blades? If Janet Yellen tries to either jawbone with loud noises about tapering or actually does taper during the first quarter of 2014, the S&P 500 index will likely see a 20% or greater correction and almost everyone will be running around with their hair on fire.

Take a look at this juicy chart:
DJIA-VS-TOTAL_CREDIT_MARKET_DEBT

The stock market has been racing higher — with a bit of a breather this week. Meanwhile, total credit could easily come under pressure when and if the Fed actually tapers. Looking to history, there are numerous examples of the markets throwing hissy fits when the Fed initiates a policy change. The first quarter of 2014 is set-up for just such an episode should the Fed actually taper.

My operating forecast is that they will try to taper, the stock market will see a major correction, and they’ll reverse course. QE will go on, making the situation worse still. Then, sometime between late 2014 and late 2016, the fan will be blown off the table and out the kitchen window as the velocity of brown stuff becomes untenable. Getting the specific time-frame for each of these stages correct is certainly more art than science — and I could be dead wrong. But I have high confidence in the sequence of these stages in the least. We’ll have a taper-induced (or jawboning about taper induced) stock market correction. Everyone will freak out, including the Fed. Discussion about more credit QE will follow, either in the form of more QE, or talk about the duration of the program openly called indefinite and mainstream Wall Street actors shifting expectations for the end of QE to perhaps as far out as 2020, or beyond. That’s when the roll of the dollar as the trade settlement and reserve currency will suddenly be questioned by most of the currently oblivious Wall Street intelligentsia, setting-up for the end game, with a window of late 2014 through Q4-2016.

Greatest Juggling Act On Earth - WilliamBanzai7

 

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    • Hehe
      and Israeli drivers are already terrible (more people die in Israel of car crashes than terrorism), I can just imagine them going crazy in this.
      I remember skating at the Canada Centre in the North of Israel and getting a kick out of these Israeli teen soldiers with their rifles skating for the first time… bunch of goof balls that kept slipping and falling like kids with their rifles whacking the ice lol Ah, Israelis and snow/ice don’t mix.

  1. They will not taper in 2013. Foundations and trusts lock in 2014 distributions on last day of 2013 trading. Any tapering announcements would send equities down for that last day of trading. The other factor is Bernanke will not alter policy one month before he steps down. I think Yellen will up QE 30% next year. They have a virtual lock on federal appointments. They also have very cold fish leading all three branches of the federal government. Why a 30% increase in QE from Yellen?
    1) The ECB needs more help
    2) They need a take down of the GOP House in the midterms and lock in Hillary with all three branches
    3) They need to buy more residential and commercial mortgages to confiscate when you do not pay your healthcare premiums
    …to name a few. If the Senate flips and the GOP keeps the house, then we could some unsettling policy shifts. TPTB have branded American Conservatives as public enemy number one. I am a William Buckley Jr conservative till their bitter end. I put politics in my models along with charts, global strategies, and alliances.

    Fed to Explode QE Next Downturn by Mike Maloney (hyperinflating of base currency)…I say 30% increase to be announced by Yellen in next 90 days. I know no one listens to me so hear it from Mike. I made the call to sell my PM’s last December, all out by March 2013, and my equity position is up 44,000.00 for 2013. I will re-think PM’s in 2nd QTR 2014.

    • Great stuff Thomas (Maloney link), thanks.
       
      Hope you lock in some physical gold and silver with that nice equity profit you managed to scalp. Good call on that one.

    • I agree.  Tapering in 2013 would be counter-productive as a part of what we have seen unfold so far in 2013.  I do like the Doc’s thought that there will be a PM price smash, probably next Wednesday.  Have mucho dinero awaiting such antics with anticipation.  :-)
       
      @Thomas
       
      Thanks for the link.  It reminded me that I hadn’t seen Episode 5 of The Hidden Secrets of Money yet.  In fact, I am downloading all 5 episodes today for secure storage on DVD.
       

    • Great Stuff, THOMAS, including your thoughts! 
      Buckley is great, from what I have read. I took the political quadrant test, it showed I am 1 point 
      off from being a perfect Libertarian, and that single point was right of center… However, I can 
      sympathize with some liberal positions, but see the answers coming from PEOPLE, not the F’ed Govt.!

  2. I understand that Rick Rule amongst many others at KWN have been caught on the wrong side of this down move for some time; however, in this interview he makes some very important observations….If I wasn’t so convinced we were nearing a bottom here, I’d be far less enthused about this comments. His observations seem to coincide with the price action we’ve been seeing across this sector for at least the past 6 months or so…
    “We have noticed at Sprott that the flow of funds in our mutual funds–in our public mutual funds complex–have turned positive after two years of having net outflows of funds. We now have net inflows of funds. We’re having those both at the Sprott Canada mutual fund level and also in the Sprott USA retail level. So the flow of funds has gone positive, from negative…”
    He also mentions he’s beginning to see an acceleration of “big money” into the resource sector…
    http://kingworldnews.com/kingworldnews/Broadcast/Entries/2013/12/15_Rick_Rule.html
     

  3. I’m thinking Humpty Dumpty before the next fall.   He dropped like a rock in 2008 but spit, glue and some duct tape saved the day.  The next fall would be catastrophic.  I see lots of big money going into things; art work and real estate.  But what value is there to a trytich sold at $142,000,000 when firewood is at a premium.  And what will you do with a $75 million Park Avenue condo, 32 stories up, with no heat, running water. Heck of a stairmaster to go get groceries but damn, that does not float my boat.
    If some people are smart enough to buy something pretty much without conterparty risk and actually valuable, like gold and silver, then there will be other people who have figured it out that trading or selling valuable things so they can get some precious metals will pay some serious coin to get precious metals when things get a bit rocky here in the near future

    • “And what will you do with a $75 million Park Avenue condo, 32 stories up, with no heat, running water. Heck of a stairmaster to go get groceries but damn, that does not float my boat.”
       
      Not a problem, AG.  NYC is an island of elite domination.  It will be kept going at ANY & ALL cost.  Water and power will be there, no matter who else has to suffer terribly to make it happen.  Not that I see a lot of value in living there, just saying.
       
       

    • “I’m thinking Humpty Dumpty before the next fall.   He dropped like a rock in 2008 but spit, glue and some duct tape saved the day.  The next fall WILL be catastrophic.”  
      Yup, fragile repair to say the least!

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