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Friday 10.28.2016

Why Most Analysts’ Gold & Silver Price Forecasts Are Wrong

Precious metals investors are being misled by most analysts’ price forecasts because they do not understand the critical underlying fundamental value mechanism. Furthermore, there seems to be a great deal of animosity from the short-term trading analysts who view many in the precious metals community as pandering hype and conspiracies. One of these analysts is Avi Gilburt of the Elliottwavetrader site. He criticizes the “Gold bugs” in a few of his more recent articles, Who Do You Allow Yourself To Be Manipulated, Did Your Mother Write An Article On Gold, and Damn Manipulators.

Feel free to check out these articles as Avi Gilburt condemns those precious metals analysts who continue to regurgitate the “manipulation” theme over and over. On the other hand, Avi truly believes the value of the metals, and other commodities are based upon looking at the “tea leaves” or studying “goat entrails” as it pertains to the Elliott Wave theory.

Most certainly, he will defend the Elliott Wave theory to the death. While I admire that sort of conviction, Avi Gilburt is just as guilty in his forecasting of the “value” of gold and silver just as much as the precious metals community that he constantly criticizes. That being said, there is a difference between the two camps, in my opinion. While I am frustrated with the precious metals community in their lack of understanding of the true value of gold and silver, the short-term trading analysts such as Avi Gilburt and Dan Norcini are quite vicious in their critiques.

This is also true for CPM Group’s Jeff Christian. I heard from a source that when Jeff Christian was apart of a precious metals round table, when the question was posed to the group to the number of individuals who believed the metals were being manipulated, he blurted out, “Anyone in this group that follows my work, YOU BETTER NOT RAISE YOUR HAND.” Now, that isn’t the exact remark… but close enough.

Janet Yellen's talk about a 'high-pressure economy' may just be a bargaining chip

As if investors don't already have enough to think about when it comes to the Fed, Chair Janet Yellen has sent minds reeling again with a relatively new addition to the monetary policy lexicon.

In an otherwise-academic speech delivered this month at the Boston Fed, Yellen pondered the concept of running a "high-pressure economy." It's a nice-sounding phrase at a time when the economy has been a far cry from energetic.

But for some, notably including several Fed officials, the concept carries darker undertones. They worry that the central bank may be on a course that could make the next downturn worse, wherein it allows the economy to heat up too much, then has to rush to correct course. Others, though, think there's more at play — and it could be monetary politics.

"I think it's risky," said Jim Paulsen, chief investment strategist at Wells Capital Management. "One of the things that scares me in general about where we're at with interest rates is it seems everyone has accepted the lower-for-longer (position), including the Federal Reserve. When there's that big a consensus on anything, it always frightens me."

Tim Cook: 'We're going to kill cash'

Dallas-based Luminant, TXU Energy lays off about 10 percent of employees - 500

The new corporate parent of Texas power plant company Luminant and retail power sales company TXU Energy is laying off about 500 people this week. TCEH Corp. spun off this month from the bankruptcy proceedings for Texas power giant Energy Future Holdings.

The layoffs started yesterday and are continuing today, according to TCEH Corp. spokesman Allan Koenig. Not affected is Oncor, another former EFH company that has separate ownership and which Florida-based NextEra Energy is trying to buy. Also not affected now are the services being provided by Luminant or TXU Energy.

The layoffs account for roughly 10 percent of the company's employees. Most of the jobs lost are in North Texas. This is part of a reorganization that could eventually include shedding some coal-fueled power plants than have been the target of Texas environmentalists and are having trouble showing a profit in an era of cheaper alternative fuels, including natural gas.

But the first move is mashing TCEH, Luminant and TXU Energy into a single company, with a new name eventually to be announced. At the moment, the TCEH business services and Luminant are in the same office building in Dallas.

Italian PM threatens EU over migrant crisis

Italian Prime Minister Matteo Renzi on Tuesday threatened to veto the EU's budget over a lack of solidarity from European neighbors as it struggles with a huge influx of migrants. "We give 20 billion [euros] to Europe so that we can get back 12 – and if Hungary, the Czech Republic and Slovakia want to preach at us about immigrants, allow Italy to say that the system is no longer working," Renzi told RAI 1 television. Asked if he was ready to use Italy's veto to torpedo the EU's budget, he said: "Yes, absolutely."

Renzi railed against central European countries that have closed off their borders to migrants and refused to take in asylum seekers under an EU quota plan as Europe battles its worst migration crisis since World War II. "If you build walls against immigrants, you can forget about seeing Italian money. If the immigrants don't go there, the money won't go there either," he said.

Italian Finance Minister Pier Carlo Padoan confirmed Tuesday evening that the government had received a letter from the European Commission demanding "clarifications" from Italy concerning its 2017 national budget. Italy has a forecast budget deficit of 2.3 percent of GDP in 2017 – significantly higher than that expected by Brussels – due to a deadly earthquake in August as well as the costs of hosting migrants arriving across the Mediterranean from North Africa.

"The clarifications demanded are linked to exceptional expenditure for the earthquake and over immigration," Padoan said. Italy has seen 155,000 people arrive on its shores this year, putting immense strain on its overcrowded reception centers as well as government coffers.

Twitter Laying Off 9% Of Workforce After Failing To Sell Itself

As expected, Twitter has announced that it’s laying off a large chunk of its workforce as it prepares to go it alone after failing to attract a solid suitor. In its first quarterly report since Salesforce, Disney, and Google all walked away from the takeover talks table, Twitter posted another quarter of slowing revenue growth, and said it would be letting 9% of its global workforce go as it tries to restructure and revive business.

Twitter says in a letter to investors that the job cuts will mostly come from efforts to reorganize its sales, partnerships, and marketing as it tries to become profitable in 2017.

“The restructuring allows us to continue to fully fund our highest priorities, while eliminating investment in non-core areas and driving greater efficiency,” the company said in its report to investors.

Revenue was up by 8.2% to $615.9 million, it’s smallest gain yet and the ninth straight quarter of slowing growth, The Wall Street Journal notes. Monthly active users were only up 1.7% from the previous quarter, at 317 million. These numbers were actually a bit of a bright spot, as they just beat analysts’ expectations, causing stock shares to rise 4.3% on Thursday to $18.07 in premarket trading. That’s after falling 45% for the past 12 months.

With QE Near Dead, Economists Use Pretzel Logic to Argue for More

There is a growing body of public work that suggests Federal Reserve officials are prepared now for a very different sort of normalization than what had been envisioned up until this year. That comes with the realization that the economy is not just in rough shape but likely to remain that way for the foreseeable future.

So long as the current policy and monetary system remains firmly in place, there is little hope the global economy will just spontaneously ignite. Since economists and central bankers have made it clear they aren’t going anywhere despite being wrong about everything up to now, here we are.

Even Janet Yellen has been forced to concede that even if the Fed does manage to get on with further rate hikes, the ultimate destination for them in nominal terms is much less than prior “cycles.”

Current thinking seems to be aiming for around 3 percent for the federal funds rate rather than 5 percent as had long been accepted. The way things are going, and as the Japanese showed, they will be lucky to get even half that far.

Hillary Clinton's Helicopter Moneyman

You can see a nasty maneuver developing aboard the Hillary train that may end up being too clever by half. At least we can hope… I’m referring to the ill-disguised plan circulating among her policy inner circle to hand Janet Yellen a gold watch early so she can be swapped out for Helicopter Moneyman Larry Summers at the Fed. My response: Please, Hillary, bring it on!

For one thing, whatever is left of the GOP congressional majority after Nov. 8 would have a field day with Larry Summers’ confirmation hearings. The man is one of the great jackasses of American public life — whose record of offending people and groups is Trumpian in scale.

But the jackass part is actually his views on the supposed elixir of government debt. In the face of a $20 trillion public debt and what even the Congressional Budget Office (CBO) says will be another $10 trillion of red ink based on built-in policy over the next decade, Summers’ “moar” debt proposition is so asinine that it is likely to incite even the fiscally irresponsible Senate GOP into a fit of outrage.

We now have official confirmation that the federal deficit rose by 35% in 2016, to $589 billion. That’s bad enough in itself. But what’s worse is that it came at the end of an 87-month-old business cycle expansion when the budget should be balanced or in surplus. And in any event, it was a ringing announcement that the phony trend toward a lower annual deficit is now in the rearview mirror.

Doug Casey on Why This is The Most Important American Election in History

Slumping Used Car Prices Spell Disaster For Subprime Auto Securitizations

It will come as no surprise to our readers that sales of automobiles in the U.S. have bubbled over in recent years and stood at a SAAR of 17.7mm units at the end of September. To put that number in context, an assumed 15-year useful life for vehicles would imply that's more than 1 car for every driving age person in the United States. Obviously that's likely not sustainable which is probably why Ford executives admitted on a recent conference call that U.S. auto sales have reached a "plateau."

As we've argued in the past, the main reason auto sales have bubbled over is due to the continuous degradation of lending standards over the past 6 years fueled by the Wall Street securitization machine. Of course, the problem with "rigging" new car sales in this way is that eventually all of those vehicles come back to flood the used car market with excessive supply resulting in lower used car prices and higher securitization losses...and that's when the whole ponzi starts to unravel. Which, as the Wall Street Journal points out, is exactly what is starting to happen right now.

Several large companies have warned that prices of used vehicles are likely to weaken, potentially leading to higher losses on loans on which cars are the collateral. That, combined with looser terms for loans and the growth of loans going to subprime borrowers, is sounding a warning for the long credit boom that has spurred auto sales.

Auto­loan balances topped $1 trillion for the first time ever this year. Actual default rates remain low, but losses are starting to tick up, leading some big lenders to scale back. That has the credit underpinnings of the auto boom looking shakier. “Losses are going to go higher—there’s no question about that,” said Hylton Heard, senior director at Fitch Ratings.

September’s Rise In Chinese Gold Imports Is Just The Start

Physical gold demand in one of the top consuming nations picked up in September and one research firm is expecting the trend to continue.

According to the latest trade data, net gold imports into China from Hong Kong increased by 44.9 tonnes in September, up from August’s level of 41.9 tonnes, which was its lowest point in seven months. Gold imports are down by more than 53% compared to September 2015.

However, taking out the monthly volatility, Simona Gambarini, commodities economist at Capital Economics, said that gold imports into China so far this year are up 9% compared to the same time frame last year, “suggesting that China’s appetite for gold has remained robust.”

Gambarini, added that she is expecting the trend to continue, particularly after the 5% drop at the start of the month. “Chinese consumers tend to be very sensitive to changes in price and the recent fall in the gold price below the $1,300 per ounce level has probably stimulated buying activity.

Something is bothering the American shopper

Maybe it’s the contentious presidential race that has consumers so jumpy. Or the specter of higher interest rates later this year. Or gasoline prices jumping some 20 percent over the last two months.

Whatever the reason, anecdotal evidence is building that the American consumer has suddenly pulled back heading into the critical holiday shopping season. Corporate earnings confirm this. Measures of sentiment confirm this. And retail sales data confirm this.

Adding to the mystery is that job gains have been steady and wages rising. But clearly, either the labor market hasn’t improved enough or many Americans view the gains as short-lived.

On Tuesday, the Conference Board’s measure of consumer confidence fell to a reading of 98.6 vs. the 101 that was expected and the 103.5 that was reported in September. Strength continues to be centered on job market and pay raise prospects, while weakness is focused on widening pessimism over future job prospects and dips in buying plans for both homes and appliances.

Deutsche Bank posts surprise €278 million profit

Federal spending spree must stop

Year after year, the federal bureaucracy goes on a spending spree at the end of the fiscal year with your tax money — much of which is frivolous and wasteful — to avoid budget cuts in the next fiscal year. “These spending sprees are the result of baseline budgeting, under which an agency’s budget’s starting point is derived from the previous year’s spending,” according to Citizens Against Government Waste, a nonpartisan watchdog group over wasteful government spending. This “tradition” of “spend it or lose it,” is conducted in the month of September, the last month of the fiscal year.”

The September 2016 Mercatus Center report noted that between fiscal years 2003 and 2015, “federal agencies spent almost a quarter of their annual obligated contract funds in August and September. In addition, a 2010 Harvard Study reported that from 2004-2009, the Department of Defense spending in the final week was four times higher than throughout the rest of the fiscal year.

The National Taxpayers Union Foundation released some examples of this year-end spending spree for 2016. The Department of Defense, on Sept. 6, 2016, spent $30,900 for an expandable paintball arena, $30,630 for a “Basketball Boot & Shoot Hoop,” $29,103 on an inflatable football toss, and $14,306 for T-shirt cannons. Other examples include the Department of Transportation spending $20,000 on a new grand piano; the Department of the Interior $162,800 for a bronze sculpture for the Itjen Courtyard in Skagway, Alaska, which has a population of 1,057.

You can find other examples of how the federal government is spending your money at the website USASpending.gov. At least there are attempts in Congress to curb this wasteful spending habit in the federal bureaucracy. The House Committee on Oversight and Government Reform, on Sept. 15, approved H.R. 2532, the Bonuses for Cost-Cutters Act of 2016.

Amazon misses on earnings, stock down 5%

Amazon posted a big miss on earnings Thursday but the company's revenue was close to what had been predicted. The results, coming off of a very profitable second quarter, surprised investors and sent the stock tumbling in after hour sales.

The Seattle-based company reported earnings per share of 52 cents, versus an expected 82 cents as polled by S&P Global Market Intelligence. The company's revenue was on target with predictions, coming in at $32.7 billion, versus an expected $32.654 billion.That compares with 17 cents in the year-earlier period with sales of $25.36 billion and represents a 28.9% increase year-over-year. Amazon’s third-quarter guidance was net sales of between $31.0 billion and $33.5 billion.

For the all-important fourth quarter and its holiday sales season, Amazon gave guidance that net sales were expected to be between $42.0 billion and $45.5 billion, which would be between 17% and 27% growth compared with fourth quarter of 2015. Operating income was expected to be between $0 and $1.25 billion, compared with $1.1 billion in fourth quarter 2015.

Amazon (AMZN) was down 5.2% in after-hours trading. Overall the stock has been up 21% for the year, and it has outperformed both the S&P (+6.1%) and Nasdaq (+8.7%) indexes. It's risen 70% just since February. The last time Amazon missed earnings expectations was for the fourth quarter of 2015. The online retailer and cloud services company made $1 a share, less than the $1.58 per share expected by analysts.

Venezuela hikes minimum wage 40% -- to $67 a month

Venezuela's President Nicolas Maduro just increased the nation's minimum wage by 40%. But that's still not much in a world where inflation is expected to soar by nearly 500% this year and 1,660% next year, according to forecasts by the International Monetary Fund.

Venezuela's minimum wage, including food subsidies, is rising to 90,812 bolivars a month. That's just $67 a month, according to the popular, unofficial exchange rate on DolarToday.com. The previous wage was 65,065 bolivars.

On the government's highest exchange rate (it has three), the new minimum wage is worth $138. It is the fourth time Maduro has increased the minimum wage this year. Food stamps and worker bonuses make up most of workers' total "wages" in Venezuela.

The raise comes one day before opposition leaders, who want to oust Maduro, planned a nationwide strike of businesses. Leaders in Maduro's party said businesses that participate in the strike would be seized by the armed forces, which support Maduro. He didn't leave them out of the pay raise. Venezuela's military members are getting a 20% wage hike. Opposition leaders said the threats against the strike are "an abuse of power and another example of authoritarianism by the government." In addition to Friday's strike, they summoned their supporters to participate in another protest on Nov. 3.

Huff Post: 600,000 Americans Unemployed For 2+ Years

More than half a million people have been unemployed for at least 99 weeks, which translates to about two years, according to a new report. The Huffington Post cites Labor Department data that shows 600,000 people are part of that group. In 2011, the figure hit almost 2 million people.

Called 99ers, people in this group have exhausted their unemployment benefits. They now make up 8.1 of the unemployed population in the United States, a change from 14.5 percent in 2012.

A recent report showed the unemployment rate went up in three of the eight swing states in the presidential election — Michigan, North Carolina, and Ohio. It remained steady in New Hampshire.

Republican presidential nominee Donald Trump said last month he will create 25 million jobs over the next 10 years if he wins the election on Nov. 8.

Obama Orders 98 More Prisoner Releases, the Most Ever in a Year

Obama has now ordered more prisoners released early from federal penitentiaries in a single year than any of his predecessors, after commuting the sentences of 98 people on Thursday.

The announcement of the release of mostly non-violent drug offenders brings to 872 the number of people whose sentences Obama has shortened, with clemency granted to 688 people this year alone. That’s more than the past 11 presidents combined.

“While there has been much attention paid to the number of commutations issued by the President, at the core, we must remember that there are personal stories behind these numbers,” White House counsel Neil Eggleston said in a blog to be posted to the White House website later Thursday afternoon. “These are individuals -- many of whom made mistakes at a young age -- who have diligently worked to rehabilitate themselves while incarcerated.”

Thursday’s commutations include 42 prisoners who were facing life sentences for their crimes. Not all will be released immediately; some will not see their sentences expire until late 2018 and will be required to enter residential drug treatment programs.

CKE Restaurants CEO on minimum wage debate

Too Big to Fail, Hillary-Style

As this endless election limps toward its last days, while spiraling into a bizarre duel over vote-rigging accusations, a deep sigh is undoubtedly in order. The entire process has been an emotionally draining, frustration-inducing, rage-inflaming spectacle of repellent form over shallow substance. For many, the third debate evoked fatigue. More worrying, there was again no discussion of how to prevent another financial crisis, an ominous possibility in the next presidency, whether Donald Trump or Hillary Clinton enters the Oval Office -- given that nothing fundamental has been altered when it comes to Wall Street’s practices and predation.

At the heart of American political consciousness right now lies a soul-crushing reality for millions of distraught Americans: the choices for president couldn’t be feebler or more disappointing. On the one hand, we have a petulant, vocabulary-challenged man-boar of a billionaire, who hasn’t paid his taxes, has regularly left those supporting him holding the bag, and seems like a ludicrous composite of every bad trait in every bad date any woman has ever had.

On the other hand, we’re offered a walking photo-op for and well-paid speechmaker to Wall-Street CEOs, a one-woman money-raising machine from the 1% of the 1%, who, despite a folksiness that couldn’t look more rehearsed, has methodically outplayed her opponent.

With less than two weeks to go before E-day -- despite the Trumptilian upheaval of the last year -- the high probability of a Clinton win means the establishment remains intact. When we awaken on November 9th, it will undoubtedly be dawn in Hillary Clinton’s America and that potentially means four years of an economic dystopia that will (as would Donald Trump’s version of the same) leave many Americans rightfully anxious about their economic futures.

HPE Lays off US Employees Amid Cloud Struggles

American IT, technology, and enterprise solutions provider Hewlett Packard Enterprise (HPE) has reportedly laid off an undisclosed number of employees in the United States, as the firm struggles to gain a foothold in the cloud services business. Although HPE has confirmed the report, it has not yet disclosed the precise number of employees it removed.

“Workforce changes are part of a company-wide strategy to give HPE the needed workforce to be a more nimble customer and partner-centric company,” HPE spokeswoman Meghan Fintland told Geekwire. Moreover, the company has attributed the latest layoff to its previously announced restructuring plans.

The news comes barely weeks after its hardware unit, HP Inc, disclosed plans to reduce its workforce by 3,000 and outsource an additional 1,000 jobs to third-party service providers.

According to Geekwire, HPE is all set to sell Stackato – a unit whose service helps developers create apps for private hybrid or public clouds – to Germany’s SUSE. Some employees have taken to social media to vent their anger and disappointment. HPE senior engineering manager Vicky Brasseur tweeted: “Today I laid off my entire team. I’m completely gutted. They’re the best with whom I’ve ever worked.”

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