June 20, 2019
The Miles Franklin Newsletter
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From The Desk Of David Schectman
David's Commentary (In Blue):

When Gold Moves Past $1,385 It Will Quickly Move Up To $1,450 (Gerald Celente)

As expected, the Fed today indicated that they will hold rates steady in July, which will piss President Trump off. They never had a choice. They couldn’t keep raising the rates and didn’t want to be blamed for the stock market and economic crash that eventually would follow if they did. Same old, same old - buy more time. Never let the markets correct.

Fed Chairman Jerome Powell is standing pat on U.S. interest rates despite pressure from President Trump to cut them.

The Federal Reserve is no longer in patient stance regarding interest rates, pledging to "closely monitor" the data to see if interest rates need to be lowered.

After a two-day meeting Wednesday, Fed officials held benchmark interest rates steady between 2.25% and 2.5% said they still expected the economy to continue to expand.
However, over the last six weeks, "uncertainties" have increased about the outlook, the statement said.

In light of these uncertainties, and with inflation low, Fed officials shifted away its prior patient stance.

"The FOMC will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion," the statement said.

The vote to hold rates steady was 9-1. St. Louis Fed President James Bullard dissented in favor of a quarter- point rate cut.

Fed officials appear sharply divided about whether the Fed will cut interest rates this year, judging from the central bank’s projections of future interest rate moves, known as the "dot plot."

The median projection was for no change in 2019, but that is a bit misleading. The dots show a sharply divided Fed, with eight officials penciling in one or two interest rate cuts this year, while nine thought policy would remain unchanged.

The Fed median projection now sees on quarter-point cut in 2020. But that is because there was a subtle shift on the committee, where 9 officials saw one or two rate cuts and 8 thought rates would be unchanged.

This is a chasm between what the Fed projections and the market, which expects two rate cuts this year and two more in 2020.

In another dovish signal, Fed officials downgraded their inflation projections and now don’t think inflation will hit their 2% target until 2021.

Officials were not gloomy about the economy, basically sticking to their GDP forecasts, seeing growth at a 2.1% rate this year, 2% in 2020 and 1.8% in 2021.

Fed Chairman Jerome Powell will hold a press conference to discuss the decision at 2:30 p.m. Eastern.
Anyway, about the time they stuck their necks into the markets and indicated that they would RAISE rates to stay ahead of inflation and adjust their balance sheet, gold, which was around the price it is now, headed south, lost $100 and everyone became negative on precious metals.
So here we are, six months later, and guess what? Gold is back to where it was four months ago - above $1,340 and rising. I mean really rising. In the “must watch” Greg Hunter interview with Gerald Celente, below, Celente says When Gold Hits $1,385 It Will Move Quickly Up To $1,450 We won’t have long to wait to see if he is correct. Gold is $1,383 at 8 a.m. my time.
What happened recently is a perfect example of “short-term” investing. It should have been obvious all along that the Fed’s new policy of increasing interest rates that precipitated the correction had to come to an end shortly . And so it did.
The Fed is basing the policy change on their expectation that inflation is falling (below their 2% target). I guess they do not expect the tariff war with China will have an impact on inflation. Hey, it’s only a potential 25% increase in the cost of their imports that Walmart and other importers will pass along to consumers. 
Yesterday I pointed out the “Don’t Go Past Go” resistance for gold at $1,350 and for silver at $15. It’s 10:00 Wednesday evening and gold is up $19.20 to $1,379.10. Up a whopping $101.80 in the last 30 days. Silver is still lagging behind at $15.22, but well above the $15 resistance point.

Yesterday gold finished at a new 14-month closing high. And today, gold added another $35 (so far) to the total.  A close above $1375 in gold will prompt a very quick rallied towards $1440. As I am writing this, gold is $1,379.10.
Silver took out both its 50 ($14.80) and 200 day ($14.92) moving averages to the upside and closed at its highest level in two months. There is nothing between the current price at $15.22 and $15.60 with $16 a level the boyz will attempt to hold. The MACD on the chart below is moving back up. Things are looking better for silver.
Are you aware that in the last eight years, JPMorgan has managed to source some 850 million ounces of silver? Ted Butler estimates that the average cost is about $18. Imagine how much profit they will make when they decide to let the price run. If silver just gets back to its previous high at $50 then JPMorgan will profit to the tune of $27,200,000,000. That’s over $27 billion dollars, but it looks more impressive with all the zeros. And in gold Butler says that they acquired between 20 and 25 million ounces at an average price of $1,200. Do the math and when gold hits it previous high at $1,900, JPMorgan will be up by $17,500,000,000 – or $17.5 billion. That’s a combined profit of $44.5 billion dollars for either being the smartest traders on the planet or they have been given a free hand to manipulate the price – as the Treasury and CFTC sit idly by. 

You would think that at some point, JPMorgan would cash out and walk away with a big smile on their collective faces. It’s only a matter of when, not if. 

Next up is another great Greg Hunter interview. This time he features one of my favorite industry icons, Gerald Celente. He offers his opinions on precious metals and the dollar and they are pretty much like mine.
Greg Hunter ( USAWatchdog.com )
New Gold Bull Run Already Started – Gerald Celente
By  Greg Hunter  On June 19, 2019
Top trends researcher Gerald Celente says global central banks are just helping the richest people on the planet and have not saved the economy. Celente says, “They didn’t teach us this stuff in economics 101 or in graduate school, they made this crap up. For example, quantitative easing, you mean buying corporate bonds and government bonds and shoveling money to your bankster buddies. . . . According to the Levy Institute at Bard College, they dumped in over $29 trillion. That’s right, $29 trillion to their buddies. So, what’s the deal? They are going to keep lowering interest rates. It’s monetary methadone.

All these people are addicts. Morons and imbeciles call them ‘investors.’ They’re addicts and gamblers. They can’t stop, and all they want is that drug– monetary methadone. They are just going to keep filling it in until they OD. . . . You don’t know when it is going to collapse, but our forecast is we are not going to go into a recession this year. We will begin to go into it in 2020, and the greatest recession/depression will happen by the end of 2020.”

Celente says, “There are lots of wild cards” that could upset his predictions. One is “rising oil prices,” and the other is conflict with a variety of adversaries. Celente say, “If war breaks out, it’s over, it’s over. It’s not like the old days, like WWII where you get the economy going. This is a different scene. This is way different. . . . The whole Middle East is doing terrible. Look at the problems they have in Turkey. . . . There is one currency after another going down. Look at the emerging markets. They are soaking money out like crazy. Look at America and all the money flowing into junk bonds.”

On gold, Celente says buckle up for a big rise in price. Celente explains, “We are near the bottom, and I am more bullish on gold than silver because silver is used in production. So, if the economies of the world slow down, which they are, you will use less silver. That said, silver follows gold. I believe the gold bull run is ready to begin its next run, and the last time I forecasted a gold bull run in The Trends Journal was 2005. It spiked after that. So, this is the only other time I have said that.

. . . Another thing is you are hearing major people coming out in the mainstream media being positive on gold, which means they have already bought it, and they are playing the futures markets. You are also getting many negative reports as well on the future of the economy. . . . Many people think we are going to go into recession, but I am holding back on that. I think they are going to do everything they can to keep it propped up going into the Presidential reality show.”
Join Greg Hunter as he goes One-on-One with the publisher of “The Trends Journal. 
Bond yields are plunging, and when the Fed decides to lower interest rates, which could happen yet this year, the trend will escalate. As it is, the 10-year, which determines the rate you pay on your credit cards and your home mortgages, has plunged below 2% for the first time in three years. Falling interest rates means the bonds go UP. And that usually means stocks go DOWN.
Zero Hedge
The 10Y US Treasury yield is now down 11bps from the FOMC Statement , plunging back below 2.00% for the first time since November 2016, erasing almost the entire move since President Trump was elected ...
There is a lot to be upbeat about if you own gold. Not so much if you are "all in" the stock market. Let’s sit back and see how the week ends up. It’s looking the best it has in 11 years for the precious metals complex. 
U.S. debt after China, similarly reduced its T-bill holdings, from $1.078 trillion in February to $1.064 in April, indicating a drop of $13 billion.
This story showed up on the  sputnik  news.com  Internet site at 2:09 p.m. Moscow time on their Tuesday afternoon, which was 7:09 a.m. in Washington -- EDT plus 7 hours. I found it on the  Sharps Pixley  website -- and another link to it is  here .
LeMetropole Café
Dave from Denver…
The Fed Is Running Out Of Bullets

June 19, 2019Financial Markets, Housing Market, Market Manipulation, U.S. EconomyHome sales, homebuilders, Housing bubble, mortgage rates

"The latest University of Michigan consumer confidence report noted that its index tracking those who think it’s a good time to buy a home has fallen by a hefty eight points in the past two months even as mortgage rates have dropped." – Danielle DiMartino Booth, "The Fed Can’t Help Housing Or Autos At This Point"

I’m not the only analyst who has concluded that lower rates likely will not re-stimulate housing market activity. As I’ve argued in my Short Seller’s Journal, the "pool" of potential homebuyers who can qualify for a mortgage has greatly diminished. In fact, mortgage delinquencies are rising because many who stretched to buy a home in the past several years are struggling with the all-in cost of home ownership. Stagnant wages and the rising cost of necessities are largely the culprits.

"Despite lower mortgage rates, home prices remain somewhat high relative to incomes, which is particularly challenging for entry-level buyers." – NAHB Chief Economist Robert Dietz. That quote accompanied the NAHB’s release of its Housing Market Index, which used to be called the Homebuilder Sentiment Index because it’s a "how do you feel?" survey.

The Housing Market index fell to an index level of 64 in June from 66 in May. Wall St’s finest were looking for a consensus 67. All three sub-indices declined: current sales conditions, buyer traffic and expectations for the next six months. Buyer traffic has been below 50 for two months in a row. This is despite more than a 1% decline in the average rate on a 30-year fixed rate mortgage during the last 7 months.

At the end of the day, it doesn’t really matter how homebuilders "feel" about the sales environment now or in six months, declining foot traffic translates into decline sales volume. The quote above reinforces my theory that the "pool" of potential homebuyers, especially first-time buyers, who can qualify for a mortgage and afford the monthly cost of home ownership is drying up. Lower interest expense somewhat offsets high prices relative to income. However, the general cost of home ownership other than debt service is rising beyond the spending budgets of many potential homeowners.

Quant-oriented perma-bulls, like Josh Steiner at Hedge Eye, understand the extent to which easy credit has fueled the housing market since 2010. You can’t necessarily call it a "housing bull market" because the until sales level is not even remotely close to the previous peak in 2005. New single-family home sales peaked at a seasonally adjusted annualized rate of 1.39 million in July 2005. The current SAAR is 673,000.

Furthermore, the Government "pulled forward" future demand when it began to lower the bar to qualify for a FNM/FRE mortgage. The demand pool Steiner probably imagines is out there for starter homes has mostly already bought OR can’t qualify. This is why that huge drop in the 10yr has not stimulated housing sales.

The rate on a 30yr fixed mortgage has dropped over 100 basis points since November, yet housing sales have been declining. It would be interesting to know to what extent home sales would have declined over the last few months if rates had not fallen over 1% in 7 months. Just look at the big gap down in mortgage purchase applications reported this week despite a 10yr yield that has fallen relentlessly.

It doesn’t really matter what the Fed does today with the Fed Funds rate policy decision. To be sure, if the FOMC postures toward take rates to zero if necessary it might juice the stock market temporarily. But it won’t take long for brains to take over from the algos and interpret the message that would be transmitted by the FOMC as extraordinarily bearish.
Any attempt at holding off the economic catastrophe creeping into view would require massive money printing. But given that some FOMC members consider a $3 trillion balance sheet to be "normalized," I’m not sure at the margin to what degree more money printing will save the economy. Perhaps a Debt Jubilee for all households…

The above commentary includes excerpts from my Short Seller’s Journal, a weekly newsletter ideas for those looking to short stocks – including options strategies – based on fundamental analysis. You can learn more or subscribe using this link: Short Seller’s Journal information.  http://investmentresearchdynamics.com/short- sellers-journal/
Ed Steer

All the precious metal price action came at, or after the Fed news -- and the spike up that came the moment that the equity markets closed in New York on Wednesday, was the surprise of the day. Ditto for silver. I highly suspect that this was short covering in the COMEX futures market, as the currencies weren't doing a thing at the time. And I certainly think that was the case in the Far East in early Thursday morning trading over there.
Here are the  6-month charts for gold and silver.
It's obvious that JPMorgan et al are fighting these rallies with every short contract that they can muster. As I said before, the rally that began last week -- and that has continued into this week has been met with all guns blazing.
Well, the fight is certainly on between all things paper -- and all things physical...especially the precious metals. Volumes have been sky high all week long -- and in Far East trading this morning, as well. So the powers-that-be, led by JPMorgan et al, are showing no signs of backing down as short sellers of now what appears to be first resort.
Ed’s Critical Reads

An epic gold bull market is on the menu for 2019.
I'm not talking about a garden-variety cyclical gold bull market, but rather one of the biggest gold manias in history.
This gold mania will be riding the wave of an incredibly powerful trend... the re-monetization of gold.
The last time the international monetary system experienced a paradigm shift of this magnitude was in 1971.
Then, the dollar price of gold skyrocketed over 2,300%.
It shot from $35 per ounce to a high of $850 in 1980. Gold mining stocks did even better.
Today, gold is still bouncing around its lows. Gold mining stocks are still very cheap. I expect returns to be at least as great as they were during the last paradigm shift.
So let's get right into it, starting with the first four catalysts that will send gold prices higher...
This gold-related news item is from last week -- and I didn't post it because I've already covered everything that Nick talks about in my column on numerous occasions, as reader George Whyte kindly pointed out to me in an e-mail yesterday evening. But because of the current circumstances, I though it worth posting now -- and I thank Larry Galearis for sending it along.  Another link to it is  here . Nick also had a follow-on to this article on the internationalman.com  Internet site -- and it's headlined " Why an Epic Bull Market in Gold Is About to Begin ". Of course how high this rally is allowed to go is still entirely dependent on JPMorgan et al...and they're showing no signs of backing down as they are selling short against all comers currently...a point that Nick would never point out, even though I've explained it to him chapter and verse -- and in person.

Since then, GDP growth rates have gone down; real incomes for real people - in America - have declined. And a large part of the public has shifted from looking forward to the future to looking backward to the good ol' days. From a positive-sum, win-win world... it ebbed back to a zero-sum, win-lose world.
From Greed to Fear, that is.
That's what we're calling the big moves in our Dow-to-Gold gauge. It peaked out in 1999 at over 40 (it took more than 40 ounces of gold to buy the Dow). Today, it's around 20.
Three times in the last century, the gauge went below 5. Our guess is that it would have reached its rendezvous with destiny again - below 5 ounces of gold to the Dow - in 2009, had the Fed not intervened.
But the Fed panicked. It then disguised, delayed, and denied the truth of this tidal shift by falsifying the most important price signal in capitalism - the price of capital itself.
Mispricing capital - by setting artificially low interest rates - made the downtrend worse. Growth slowed further. The Swamp deepened. The empire grew bigger and more corrupt.
This  interesting and   worthwhile  commentary from Bill, filed from Dubai yesterday, showed up on the  bonnerandpartners.com  Internet site early on Wednesday morning EDT -- and another link to it is  here .

The targeted selloff brings Russian holdings of U.S. Treasuries to a 12-year-low; total holdings have fallen by over $150 billion over the last decade.
The Russian Central Bank dumped $1.58 billion in U.S. Treasuries in April, freshly released data from the US Treasury indicate.
According to the figures, Russia's Treasury holdings dropped from $13.716 billion in March to $12.136 billion in April. The sell-off brought Russia's US debt holdings to their lowest level since mid-2007.
Russia, once one of the most dependable investors in T-bills, has gradually shaved its holdings amid a worsening in relations with the U.S., dropping out of the top 33 holders last year in a sell-off worth tens of billions of dollars. Less than two years ago, in late 2017, Russian Treasuries holdings stood at over $92 billion. In 2010, when bilateral relations were better, Russia owned over $170 billion in U.S. Treasuries.
The April data also showed that China and Japan dropped some of their (much more sizable) Treasury holdings. China dropped its investment by some $8 billion, from$1.121 trillion in March to $1.113 trillion in April, with the figure Beijing's lowest in nearly two years.
Japan, the second-largest holder of U.S. debt after China, similarly reduced its T-bill holdings, from $1.078 trillion in February to $1.064 in April, indicating a drop of $13 billion.
This story showed up on the  sputnik  news.com  Internet site at 2:09 p.m. Moscow time on their Tuesday afternoon, which was 7:09 a.m. in Washington -- EDT plus 7 hours. I found it on the  Sharps Pixley  website -- and another link to it is  here .
Europe has been warned. Any use of monetary levers to hold down the euro exchange rate will be deemed a provocation by the Trump administration.
Further cuts in interest rates to minus 0.5 percent or beyond will be scrutinized for currency manipulation. A revival of quantitative easing will be considered a devaluation policy in disguise, as indeed it is, since the money leaks out into global securities and depresses the euro.
The Bank for International Settlements says €300 billion of Europe's QE funding reached London alone between 2014 and 2017.
If the ECB copies the Swiss National Bank and starts to amass foreign assets directly to cap currency strength Europe will face certain retaliation.
Whether the Swiss can get away with their policy for much longer is an open question. The SNB has foreign holdings of $760 billion -- near 120 percent of GDP -- and owns slices of Apple, Microsoft, Amazon, Facebook, and Exxon.
As the global economy falters we are entering the next phase of currency warfare. There is going to be an ugly fight for scare global demand.
Wow! What a headline! Ambrose really has his knickers in a twist...calling out poor Mario Draghi like that. His entire commentary, which was posted late last night BST on the telegraph.co.uk  Internet site, certainly falls into the  absolute must read category . It was posted in the clear in its entirety on the  gata.org  Internet site yesterday evening -- and another link to it is  here .
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