Economics

Economics
Max and Stacy give you all the financial news you need as the Global Insurrection Against Banker Occupation gathers pace. Occupy Wall Street, Crash JP Morgan, Buy Silver and DEFINITELY visit MaxKeiser.com!
Updated: 3 hours 17 min ago

Stagnation Nation: Middle Class Wealth Is Locked Up in Housing and Retirement Funds

26-Oct-2017

One of my points in Why Governments Will Not Ban Bitcoin was to highlight how few families had the financial wherewithal to invest in bitcoin or an alternative hedge such as precious metals.

The limitation on middle class wealth isn’t just the total net worth of each family; it’s also how their wealth is allocated: the vast majority of most middle class family wealth is locked up in the family home or retirement funds.

This chart provides key insights into the differences between middle class and upper-class wealth. The majority of the wealth held by the bottom 90% of households is in the family home, i.e. the principal residence. Other major assets held include life insurance policies, pension accounts and deposits (savings).

What characterizes the family home, insurance policies and pension/retirement accounts? The wealth is largely locked up in these asset classes.

Yes, the family can borrow against these assets, but then interest accrues and the wealth is siphoned off by the loans. Early withdrawals from retirement funds trigger punishing penalties.

In effect, this wealth is in a lockbox and unavailable for deployment in other assets.

IRAs and 401K retirement accounts can be invested, but company plans come with limitations on where and how the funds can be invested, and the gains (if any) can’t be accessed until retirement.

Compare these lockboxes and limitations with the top 1%, which owns the bulk of business equity assets. Business equity means ownership of businesses; ownership of shares in corporations (stocks) is classified as ownership of financial securities.

These two charts add context to the ownership of business equity. Note that despite the recent bounce off a trough, the percentage of families with business equity has declined for the past 25 years. The chart is one of lower highs and lower lows, the classic definition of a downtrend.

The mean value of business equity is concentrated in the top 10% of families.While the value of the top 10%’s biz-equity dropped sharply in the global financial crisis of 2008-09, it has since recovered and reached new heights, while the value of the biz equity held by the bottom 90% has flatlined.

Assets either produce income (i.e. they are productive assets) or they don’t (i.e. they are unproductive assets). Businesses either produce net income or they become insolvent and close down. Family homes typically don’t produce any income (unless the owners rent out rooms), and whatever income life insurance and retirement funds produce is unavailable.

This is the key difference between financial-elite wealth and middle class wealth: the majority of middle class wealth is locked up in unproductive assets or assets that only become available upon retirement or death.

The income flowing to family-owned businesses can be spent, of course, but it can also be reinvested, piling up additional income streams that then generate even more income to reinvest.

No wonder wealth is increasingly concentrated in the hands of the top 5%: those who own productive assets have the means to acquire more productive assets because they own income streams they can direct and use in the here and now without all the limitations imposed on the primary assets held by the middle class.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

The Massive Bitcoin Boom, and the Uprising of Cryptocurrencies

26-Oct-2017

CoinMarketCap has shown how the value of digital currencies has surged from less than $18 billion to nearly $180 billion this year. It doesn’t take an expert to notice how the market has ballooned since Satoshi Nakamoto’s invention of Bitcoin.

What you might not know is that Satoshi didn’t initially invent Bitcoin solely as a currency. In late 2008, he announced that he had developed “an electronic cash system for peer-to-peer network”.

Digital currency can’t be touched or held. It’s not a precious metal like gold or platinum. It doesn’t look as dazzling as a diamond. Yet, a single Bitcoin is worth several thousand dollars – more than the average American has in their bank account.  

In fact, from October 2016 to October 2017, price of Bitcoin increased by a whopping 720.6%. Meanwhile, the price of crude oil increased by only 16.4%, and the price of gold increased by a measly 0.09%.

You don’t need to be an expert to work out which seems like the better investment option right now.

How Does Bitcoin Work?

Bitcoin is an entry on a huge global ledger called the blockchain. It’s a fully digital currency that uses peer-to-peer technology, meaning it can operate with no banks or central authority figure.

The Importance of a Secure Digital Identity for the Internet 3.0

With the huge spike in cryptocurrency investment we’re currently experiencing, the digital identity security risk is higher than ever.  Because there is no organization handling the systems behind Bitcoin, it is vital that you follow the right precautions to keep yourself secure online while dealing.

Your Digital Identity is a permanent collection of data about you that is available online. This includes your email, your bank account, and all of your social media accounts. Think about how many messages you’ve posted on Facebook since you created your account. This is your digital footprint – and it’s growing larger every day.

Whenever you enter your financial details, address, and telephone number for shopping, trading or any other purpose, it is saved on a server. Even buying digital currencies poses a hazard. If something goes wrong or the website is hacked, all your information is instantly accessible to third-parties.

In today’s world, securing your digital identity is no longer a choice. It’s a necessity.

How to Secure Your Identity

You might think that you have nothing to hide. While that might be true, the fact is you have everything to protect.

As a user of the Internet, you should be concerned about your online identity. For example, when you trade Bitcoins, you are working under blockchain, which records every single transaction you make. The complete ledger is estimated to be around 138 GB of data.

The Blockchain is decentralized, meaning anyone can volunteer to keep the ledger up-to-date. The system works entirely on a cryptographic hash function, which is an algorithm that takes an input of any size and turns into an output of a fixed size.

The system is called Secure Hash Function 256 (SHA-256). It was originally developed by the National Security Agency in the United States. Unlike most money, Bitcoin is not attached to a state or government, so it doesn’t have a central issue authority or regulatory body.

As a result, there is no organization deciding when to make more Bitcoins, figuring out how many to produce, keeping track of where they are being transferred to and from, or investigating frauds. If you lose your Bitcoin wallet, the coins within it are gone forever.

Self-sovereign identity is the concept that people and businesses can store their own identity data on their own devices. Ultimately, it puts you in control of your own identity and allows you to instantly and securely access global financial services.

One company hoping to make this concept mainstream is the blockchain-based, end-to-end digital identity system, SelfKey.

Protect your identity with SelfKey

SelfKey gives you full control of your identity and puts all of your online security back into your own hands. You can protect your own personal data and instantly apply for passports, residency, and financial services in a safe and secure manner like never before.

For example, if you are dealing with Bitcoin or any other online currency, you will be able to use SelfKey Identity Wallet. This is a secure feature that allows you to manage your own personal identity document without the involvement of any third-party database. It is saved solely on your device. Who you choose to share it with is down to you.

SelfKey isn’t just used to exchange online currencies. The Identity Wallet can be paired with a cryptographic key and used for a wide range of other purposes, such as signing documents digitally or even verifying your identity using personal documents.

The SelfKey Network protects your identity from the big data ocean, the government, malicious third-parties who want to steal and use your data.

To see the full range of SelfKey’s services, take a look at their marketplace.

The Future of Crypto and Blockchain Technology for Online Identity Security

A brand new revolution is upon us. Everything is changing about how we interact and trade.

Blockchain and the technologies emerging from it are undoubtedly doing their job of lowering the risks and uncertainties involved with online trading. However, they’re also radically changing our economic system in the process. In the past decade since the creation of Bitcoin, things have changed more than we ever could have imagined.

We are entering a world where distributed technology is having a bigger role in economic development than we ever thought possible. The inevitable uprising of Self-Sovereign Identity is just around the corner.

Gold Will Be Safe Haven Again In Looming EU Crisis

26-Oct-2017

– Gold will be safe haven again in looming EU crisis
– EU crisis is no longer  just about debt but about political discontent
– EU officials refuse to acknowledge changing face of politics across the union
– Catalonia shows measures governments will use to maintain control
– EU currently holds control over banks accounts and ability to use cash
– Protect your savings with gold in the face of increased financial threat from EU

When we talk about the Eurozone crisis we are usually referring to the Eurozone debt crisis. According to the OECD the debt crisis of 2011 was the world’s greatest threat.

In the years that followed, Germany, France and the UK led EU members in their efforts to stave off debt defaults from the likes of Ireland, Portugal, Italy, Spain and, of course, Greece. This was partly in order to protect the German, French and UK banks who had lent irresponsibly into the periphery EU nations and were very exposed.

In recent months one could argue that things were starting to look up for the single-currency area. Recent headlines report that the Eurozone’s recovery is firmly under way. Manufacturing workloads are rising and companies are hiring at their fastest pace in over a decade.

Of course much of the recovery is attributed to the ECB and their bond purchasing ‘stimulus’ of €60 billion euros every single month … courtesy of Super Mario’s Bazooka. This is unlikely to come to a halt later today in what is being touted as the central bank’s most important policy meeting recently.

There are a few different potential outcomes to the meeting, but none will address the new and very real and very pressing Eurozone crisis: the growing political crisis.

Political change: the real Eurozone crisis

Ever since the debt crisis exposed the cracks in the ‘single currency’ union, the increasingly two-tier economy has caused more and more problems, both economic and political.

Germany has surged ahead in terms of productivity and GDP growth. Meanwhile the southern states have experienced economic pain.

Click here to read full story on GoldCore.com.

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

Gold & Silver Prices Have Held Steady Amid Market Mis-Matches

25-Oct-2017

We have a nice pop in the pre-market today, Wednesday Oct 25th:

There’s good volume on that price rise too. Since opening on Sunday night, the silver price is down slightly:

As is the gold price:

Of course, we could see this coming from as early as Friday, so we have been in defensive posture anyway. But on the fundamental side of the equation, as the days go on, the fundamentals are going to become harder and harder to ignore.

The infamous “Trump Dossier” is back in the spotlight, and it has Hillary, the DNC, and the FBI’s fingerprints all over it. Then there’s Emperor XI and an oil for gold-backed yuan story that just won’t die.

There’s continuing geo-political risk in Iraq, Syria, and North Korea, and Europe is still a basket case. And that’s just politics.

As far as the stock market goes, well, that’s the Fed’s Frankenstein, and it’s not going to put it down if it doesn’t have to.

And so we have another record high just yesterday:

Of course, our President “Mr Big Fat Ugly Bubble Turned Pump-N-Dumper” Trump was right on cue:

 

Stock Market just hit another record high! Jobs looking very good.

— Donald J. Trump (@realDonaldTrump) October 24, 2017

 

Which may also give an explanation for this:

Although it doesn’t explain this:

The VIX (the “Fear” barometer) is slowly but surely waking up, which goes against a sell-off in bonds and a rise in the stock market. However, it is so low as it is, that it may take a lot more for than a couple points of action on the VIX to have an effect on the markets. Furthermore, a rising VIX would also translate into higher gold and silver prices reacting on an increase in “fear”.

It just goes to show how the central banks and governments around the world are in these markets 24/7, because when one takes all the individual components as a whole, it just doesn’t add up.

Though the dollar is not benefiting from the increase in fear:

Which goes to show that the dollar is not the safe haven it once was. Also, that’s a bearish engulfing candle forming on the daily. We had speculated that the dollar could get all the way up to 96 based on the chart patterns, but over the last few days, it looks to be running out of steam at 94.

Once the dollar continues the move lower, that will also help to boost the prices of gold & silver.

But then again, neither is Bitcoin:

Which brings up the next point to this midweek update: Nearly the price of everything is mispriced.

Granted, that’s why there have been titles about the “everything” bubble. 

Crude is starting to look over-extended in the most recent price rise:

The ascent is getting steeper and steeper. Of particular interest is the rise in the price of oil alongside the rise in strength of the dollar. Generally, a higher dollar means lower crude prices, and a lower dollar means higher crude prices.

Not over the last couple of weeks, however.

Although copper still looks healthy:

Copper built the multi-day base between $3.10 and $3.15 before retreating, although putting in a higher-low. The base metal now appears to be base-forming again from the next step up, between $3.15 and $3.20, although an argument could even be made that the base could be all the way up to $3.20 to $3.25.

An increase in the copper price will raise the floor for silver as silver trades in it’s “industrial metal” role.

Platinum is not looking like it is has braced in a defensive posture, however:

If platinum can hold here, it will have put in the all important higher-low, but those down days are nasty. We’ll see by the end of the week if the set up was bullish or bearish.

Although it is looking bullish in palladium for two reasons:

Palladium has formed both a rounded bottom on the daily, and there is a nice symmetrical cup-n-handle forming, which would also be bullish.

There are a number of data releases coming out between now and the end of the week. there are several market moving releases left including:

  • Durable Goods Orders
  • New Home Sales
  • EIA Petroleum Status Report
  • Trade Balance (Deficit)
  • Jobless Claims
  • Pending Home Sales

And then the big one is released on Friday: First Estimate of Third Quarter GDP.

As of the time of this Midweek Update, the Atlanta and NY Fed have not updated their forecasts, though those updates will be coming out later this morning.

We have been weathering the storm well.

The question is this: Has the storm passed, or are we merely in the eye of the storm?

We’ll know by Friday, but sudden moves coming from pent-up energy should not be removed from the realm of possibility.

All it takes is one match to the many barrels of fundamental news gunpowder and we could be thrown in the midst of another precious metals surge that catches everybody off guard.

SilverDoctors.com has been on the leading edge of Gold News and Silver News Since 2011. Each month, more than 250,000 investors visit SilverDoctors.com to gain insights on Precious Metals News as well as to stay up-to-date on World News impacting the metals markets.

Gold Is Valuable Due to “Extreme Rarity” – Must See CNN Video

25-Oct-2017

– Gold’s value is due to exceptional rarity: Only 0.00000002% of earth’s crust is gold
– Gold’s allure and psychology behind it are steeped in history and human psychology

– Gold’s colour and texture appeals to basic human survival instincts
– Gold’s sheen resembles water and “humans need water in order to survive” 

– Gold remains a sign of wealth but today is also a sign of prudence

Editor Mark O’Byrne

http://i.cdn.turner.com/cnn/.e/interactive/html5-video-media/2017/10/11/Colorscope_gold_loopingvideo_waves_430px.webm

Source: Colorscope via CNN

Why do we love gold?

There are so many given reasons. From its presence throughout history, to its role as money, to its status as a symbol of wealth. But what is the psychology behind the human race’s ever-present love for gold? How did it begin, why has it survived for so long?

CNN’s Colourscope series has recently addressed this question in ‘The psychology of gold and why it has that allure’ video which is well worth a watch.

Who would have thought that the material we seek to gift to our love ones, store in vaults or even use in medical products first grabbed our attention because of its texture glistening like water? Or, that at its most basic level of attraction we are motivated by its colour?

The following article covers these points and more as it takes us through gold’s psychological impact on humanity, throughout history.

The article is of interest even to those who are familiar with the economic reasons as to why we invest in gold and hold it in such high financial regard. Most interestingly, our love for gold comes down to a very basic fact: the colour and its role as a material are intertwined.

 

Click here to read full story on GoldCore.com.

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

Blockchain Explained: Bitcoin, Smart Contracts, Smarter Contracts

25-Oct-2017

If you have heard about Bitcoin, you’ll most likely have heard about Blockchain technology. In fact, every investor or trader worthy of the name would have heard about Bitcoin and its underlying Blockchain technology. You can’t claim to be an investor/trader and be oblivious to the fact that Bitcoin has delivered more than 500% gain in the year-to-date period. However, the fact that people have heard about Bitcoin doesn’t necessarily mean they understand how the underlying Blockchain technology works.

In fact, someone could have profited from the 500% gains in Bitcoin just because they were comfortable with taking speculative risk without necessarily being an adopter of Bitcoin and Blockchain technology. This piece provides straightforward explainer on how Blockchain works. I’ll also provide insights on the simplified everyday uses of Blockchain technology.

Blockchain explained

Query “What is Blockchain?” on Google and you’ll get at least 31.8 million hits explaining Blockchain technology. The problem however is that the answer to your query is buried in a maze of technical jargon that doesn’t mean much to a guy that wants to beat the returns from the S&P 500 on Wall Street. You’ll begin to see words like ‘decentralized’, ‘distributed’, ‘retroactive’, ‘alteration’ and collusion of the network among others.

In simple terms, Blockchain is technology that you can use to maintain agreements automatically and without the efforts of a central authority. Now, let’s assume that Peter, James, and John pledge $250, $150, and $100 respectively in a common purse for TGIF hangouts. They can have a ledger in which the amount deposited by each individual is recorded, Peter can be in charge of keeping the accounts.

If on Friday the three friends spend $253 on beer, Peter will need to note all the beer purchases so that they can understand who drank what beer when they become sober on Saturday — hopefully, Peter doesn’t get too drunk to make the correct entries. That’s simply how traditional financial institutions work. Banks keep a record of all your transactions in a big fat ledger they keep somewhere.

Two months later, Peter, James, and John can decide to keep three separate ledgers so that they can meet together and update the accounts when they add/remove money in order to keep uniform accounts. Hence, when they go to the bar, they bring out their ledgers and write out every beer order to ensure that they agree on the total expense at the end of the day.

Now, keeping multiple ledgers makes things smooth and easy between 3 people but it would be insane to coordinate such multiple ledgers manually between 1000 or 1,000,000 people.  Blockchain then, is a solution for keeping records of transactions on multiple peers systems so that a change in one ledger is replicated throughout the other ledgers in the network. In essence, any change you make on your account is will show up on other accounts automatically and you don’t need any central authority to be in charge of updating the accounts of peers in the network.

Smart Contracts explained

Smart contracts are another powerful application being built on blockchain technology. Since the Blockchain ledgers are designed to replicate alterations to the any ledger across the whole blockchain, blockchain based contracts provide the perfect solution for creating contracts without fears that a party to the contract will make changes without the knowledge or approval of the other parties.

Taken further, blockchain based contracts can be automated to take some actions based on a satisfaction of some predefined criteria following a set of instruction. Using the “if this, then that logic”, you can create a blockchain-based contract that performs calculations, store information, or send payments/transactions to other accounts based on the satisfaction of a previous event.

However, not everybody understand the full ramifications of the legalese, terms & conditions, and how the legal system might interpret agreements. Hence, lawyers would be sitting tight on the monopoly of helping people create smart contracts on Blockchain. Secondly, very few people actually have the coding skills needed to create smart contracts that can be executed on Blockchain technology.

Thankfully, Confideal is working on creating a solution that makes it easy, fast, and cheap to create Smart Contracts on the Ethereum platform. With Confideal’s platform, you don’t necessarily need to have a background in law or know how to write code before you can create a blockchain-based smart contract for your needs.

With Confideal, individuals, small businesses, and enterprise clients can use blockchain technology to create and enforce contracts that are inherently secure, efficient, and tamper proof. The Confideal ecosystem also has a number of experienced and unbiased arbiters and legal firms that can help resolve disputes right within the confidence platform and without any of the parties to the deal needing to reveal personal information.

The Confideal platform also has a CDL token, which is an internal currency that you can use for facilitating smart contracts and to pay for other services such as voting for arbiters. Confideal ran a successful presale for the CDL token in August, earning about $650,000. Now, Confideal team is preparing for a CDL ICO through which it plans to raise more money for the development of the platform. The Confideal platform is still in infancy, but you can expect blockchain-based Smart Contracts to shoot into limelight because of their inherent ability to remove the borders on business and trade worldwide.

Bitcoin explained

Bitcoin is a kind financial agreement built on Blockchain technology. Everybody lists the amount of Bitcoin they have and an increase/decrease in your personal stash of Bitcoin is recorded all over the distributed ledger. If you have 5 Bitcoin and decide send 1.5 Bitcoin to your friend, the ledger will record a 1.5Bitcoin subtraction from your wallet and increase the amount of Bitcoin your friend’s wallet by 1.5 Bitcoin.

Other salient factors in how Bitcoin works is that the transactions need to be confirmed by other people before they are actually recorded. Anyone can be a part of the important job of keeping the distributed ledgers. Making additions, reductions, or general changes to the ledgers is subject to previously agreed rules. Any valid change made on a ledger is replicated globally across the Bitcoin blockchain.

Now, the fundamental amount of Bitcoin that people own have no value in themselves, but the value of Bitcoin because of the fundamentals of demand and supply. Gold has no value on its own, other than the fact that a great deal of demand for gold suggests that it is valuable. The papers on which fiat currencies are printed have no value on their own, but the fact that governments fuel demand by making it a legal tender projects value on them. Critics can argue that Bitcoin are created out of thin air, but the fact that people project value on the cryptocurrency as an alternative to fiat currencies is value in itself.

Geopolitical Tensions Suggest It’s Too Early to Give Up on Gold

25-Oct-2017

Gold is returning to bullish ways in October as the weak dollar, geopolitical tensions, and an uncertain rate hike environment continues to provide tailwinds.  Better-than-expected September jobs report had increased the bullish sentiment on the possibility of a rate hike in December. However, the unending stream of news on geopolitical tensions has continued to counterbalance the downsides of a potential rate hike. Spot gold was trading around $1,292 an ounce on October 10 to mark a 1-week high from September trading range.

We haven’t heard the last on U.S. and North Korea

The threats of military action or nuclear war (though unlikely) have been boosting the prospects of the yellow metal this month. The U.S. has succeeded in getting more than 20 countries to end or reduce diplomatic and business relationships with Pyongyang as part of efforts to cut the rouge regime to size. U.S. President Donald Trump has also posted a couple of vague tweets hinting at military action against North Korea.

As expected, Kim Jong Un is maintaining his support for the nuclear program, noting that the weapons are a like a “treasured sword” serving as a “powerful deterrent” to keep peace in the Korean Peninsula. In his words, the missiles “are a precious fruition borne by its people’s bloody struggle for defending the destiny and sovereignty of the country from the protracted nuclear threats of the U.S. imperialists.” 

Jordan Anselm, an analyst at Weiss Finance notes the unending spat will continue to bolster the bullish case for gold because both Trump and Kim Jong on are predictably unpredictable in stoking tensions.  He also notes that “gold is gradually building momentum for a breakout, a sustained push above $1,300 could trigger an inflow that could last through the fourth quarter.

Here’s the latest on geopolitical tensions in Europe

In Europe, the Catalonian secessionist move to break away from Spain doesn’t appear to be slowing down. Catalonia’s secessionist leader, Carles Puigdemont is not succumbing to pressure from Spanish authorities and he is set to address the parliament in Barcelona. The thesis of his address will be aimed at getting the region’s parliament to cast their votes on a unilateral declaration of independence that takes Catalonia out of Spain.

Political tensions are also brewing in Germany as Chancellor Angela Merkel continues in her struggle to form a government.  The three political blocs in Germany have expressed interest in creating a coalition government; however, actual act of forming the government is taking longer than expected and German investors are getting antsy. Merkel is faced with the uninspiring task of forming a coalition between the disruptive Greens, her conservative Christian Democratic Union (CDU), and the pro-capitalist Free Democrats (FDP).

The fact that Spain might split up and the fact Germany might not have a functional government until 2018 is further weakening the fundamental bullish supports for the Euro. Hence, it is not surprising that European investors are taking bigger hedges with gold.

There’s still potential in Silver

Interestingly, analysts at Standard Chartered think that Silver is undervalued and the smart investor might want to seek out the latent potential in Silver. In a note to investors, the analysts opined that “Silver’s supply and demand dynamics are supportive of higher prices in light of stagnating mine output and firming industrial demand. Indias silver imports are up almost 60 percent for the year to August while Chinas are up 45 percent.” Silver has climbed up almost 2% to $17.13 an ounce after touching a  two-week high of $17.20

How Much of our Discord Is the Result of the “Engagement” Advert Revenue Model of Social Media?

24-Oct-2017

Few would deny that social discord is rising. The proposed causes range from wealth/income inequality to the rise of polarizing political ideologies and the Trump presidency.

A few commentators are starting to question the role of social media in this dynamic, and specifically, the advertising based revenue model of social media. This advert-based revenue model is based on two principles:

1. If an online service is free, you’re not the customer. You’re the product.

In other words, if you’re not paying for the service or content, then your personal information (harvested by Google, Facebook, et al.), your time online (i.e. your “engagement”) and the content you create and post for free (videos of your cute cat, expressions of outrage, etc.) are the products being sold to advertisers at a premium.

2. The more discord content sows, the more advert revenue it generates. In traditional media, audiences were measured by visitor impressions on websites, the number of web searches made for key words, the number of viewers of a TV program, the number of listeners to a radio station, and so on.

But Facebook has changed the advert-revenue model in several key ways.Facebook now seeks “engagement” rather than impressions, and it sells so-called “dark ads”, adverts that are targeted by the advertiser to very specific audiences, so that only the people in that audience see the paid content/advert.

Only three entities know who’s seeing the paid content/advert: Facebook, the advertiser and those targeted to receive the paid content/advert.

On the face of it, this seems fairly benign. A company selling Medicare plans might target Facebook users who are about to turn 65, for example, with paid content about Medicare plans or an advert for their services.

But these changes are not benign, as longtime correspondent GFB explains in his commentary on this article, How Facebook Rewards Polarizing Political Ads (via GFB):

Facebook has ditched the ‘conventional’ advertising metric for determining the value of advertising – ‘eyeballs’ viewing the material, i.e. ‘impressions’ – and instead uses their perverse and self-serving “engagement” model.

If your ad (your content) on Facebook generates users “engagement” (users like, hate, or share the ad or content) Facebooks spreads it to more users – because if the content is engaging, then users are staying on Facebook and are available to be shown more content.

The worst content for Facebook is content that is skipped over and ignored. And since Facebook can monitor that, that kind of content is fed out to users less and less.

So you have the ultimate circle – the more offensive and off-putting, the more “fake news” you make your paid content – the more people react to it (“engage” with it – reading it, and sending to other people who find it equally repellent or admirable as does the original viewer) the more the content appears system wide. Because in Facebook’s view, anything that keeps people on Facebook is a win, a chance to expose people to other paid content. Round and round it goes.

Other commentators are also recognizing the qualitative threat this new model poses to democracy, social discourse and the fabric of our daily lives, as evidenced by these two articles:

What Facebook Did to American Democracy

Smartphones Are Weapons of Mass Manipulation, and This Guy Is Declaring War on ThemWhat’s crucial to understand is that, from the system’s perspective, success is correctly predicting what you’ll like, comment on, or share. That’s what matters. People call this ‘engagement’.”

Meanwhile, concerns over the influence wielded by Google, Apple, Amazon, Facebook and Microsoft is also rising: Why Tech Is Starting to Make Me Uneasy

Ask yourself: how much of the discord and distress that’s so evident in both social media and traditional media would diminish if everyone spent no more than 5 minutes daily on social media?

Extending the question to the entire media space: what if everyone spent no more than 30 minutes a day on any media, other than pure entertainment (listening to music, watching a movie, etc.)

In effect, corporations are now incentivized by the advert revenue model to sow as much discord and distress as possible, because all these negative emotions fuel “engagement.”

What’s especially perverse about the Facebook model is that ad blocking software won’t eliminate the paid content in your FB feed, nor will it identify which advertiser targeted you or why.

Then ask yourself this: how much better would you feel if you limited your time on social media to somewhere between zero and ten minutes daily?

Personally, I severely limit my time on Facebook, Twitter, Instagram etc. not because I have great self-discipline, but because I find more than a few minutes of social media feeds deranging and a time time sink I can’t afford.

They don’t make me feel better or more positive. Generally they make me feel the opposite: more disconnected from a deranging zeitgeist, less positive and less productive.

I doubt I’m unique in experiencing these negatives.

The goal of maximizing profits for shareholders by any means available incentivizes discord as the primary source of profits when adverts are the primary source of revenues in the addict-pusher model of “engagement”.

If this isn’t the acme of a politically and culturally self-destructive model of profit-maximization, then what is it?

Of related interest:

Are Facebook and Google the New Colonial Powers? (September 18, 2017)

Hey Advertisers: The Data-Mining Emperor Has No Clothes (September 15, 2017)

The New Facebook Buttons: Promote, Despise, Abandon (November 1, 2012)

800 Million Channels of Me (February 21, 2011)

Are You Loving Your Servitude Yet? (July 25, 2012)

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Why Governments Will Not Ban Bitcoin

24-Oct-2017

To really understand an asset, we have to examine not just the asset itself but who owns it, and who can afford to own it. These attributes will illuminate thepolitical and financial power wielded by the owners of the asset class.

And once we know what sort of political/financial power is in the hands of those owning the asset class, we can predict the limits of political restrictions that can be imposed on that ownership.

As an example, consider home ownership, i.e. ownership of a principal residence. Home ownership topped out in 2004, when over 69% of all households “owned” a residence. (Owned is in quotes because many of these households had no actual equity in the house once the housing bubble popped.)

The rate of home ownership has declined to 63%, which is still roughly two-thirds of all households. Clearly, homeowners constitute a powerful political force. Any politico seeking to impose restrictions or additional taxes on homeowners has to be careful not to rouse this super-majority into political action.

But raw numbers of owners of an asset class are only one measure of political power. Since ours is a pay-to-play form of representational democracy in which wealth buys political influence via campaign contributions, philanthro-capitalism, revolving doors between political office and lucrative corporate positions, etc., wealth casts the votes that count.

I am always amused when essayists claim “the government” will do whatever benefits the government most. While this is broadly true, this ignores the reality that wealthy individuals and corporations own the processes of governance.

More accurately, we can say that government will do whatever benefits those who control the levers of power most, which is quite different than claiming that the government acts solely to further its own interests. More specifically, it furthers what those at the top of the wealth-power pyramid have set as the government’s interests.

Which brings us to the interesting question, will governments ban bitcoin as a threat to their power? A great many observers claim that yes, governments will ban bitcoin because it represents a threat to their control of the fiat currencies they issue.

But since government will do whatever most benefits those who control the levers of power, the question becomes, does bitcoin benefit those holding the levers of power? If the answer is yes, then we can predict government will not ban bitcoin (and other cryptocurrencies) because those with the final say will nix any proposal to ban bitcoin.

We can also predict that any restrictions that are imposed will likely be aimed at collecting capital gains taxes on gains made in cryptocurrencies rather than banning ownership.

Since the wealthy already pay the lion’s share of federal income taxes (payroll taxes are of course paid by employees and employers), their over-riding interests are wealth preservation and capital appreciation, with lowering their tax burdens playing third fiddle in the grand scheme of maintaining their wealth and power.

Indeed, paying taxes inoculates them to some degree from social disorder and political revolt.

I was struck by this quote from the recent Zero Hedge article A Look Inside The Secret Swiss Bunker Where The Ultra Rich Hide Their Bitcoins:

Xapo was founded by Argentinian entrepreneur and current CEO Wences Casares, whom Quartz describes as “patient zero” of bitcoin among Silicon Valley’s elite.Cesares reportedly gave Bill Gates and Reed Hoffman their first bitcoins.

Their first bitcoins. That suggests the billionaires have added to their initial gifts of BTC.

The appeal to the wealthy is obvious: any investment denominated in fiat currencies can be devalued overnight by devaluations of the currency via diktat or currency crisis. Bitcoin has the advantage of being decentralized and independent of centrally-issued currencies.

I submit that not only are the wealthy the likeliest buyers of bitcoin for this reason, they are the only group that can afford to buy a bunch of bitcoin as a hedge or speculative investment. Lance Roberts of Real Investment Advice recently produced some charts based on the Federal Reserve’s 2016 Survey of Consumer Finances (SCF) report– Fed Admits The Failure Of Prosperity For The Bottom 90%.

Put another way: how many families can afford to buy a bunch of bitcoin?

Here is a chart of median value of family financial assets: note that this is far below the 2000 peak and the housing bubble of 2006-07:

Here is mean family financial assets broken out by income category: note that virtually all the gains have accrued to the top 10%, whose net worth soared from $1.5 million in 2009 to over $2.2 million in 2016, a gain of $700,000.

The Fed’s 2016 Survey of Consumer Finances is a treasure trove of insights into wealth and income inequality in the U.S. Here are the highlights: Changes in U.S. Family Finances from 2013 to 2016.

As you’d expect, the report starts off on a rosy note: GDP rose by 2.2% a year, unemployment declined to 5%, and the median family income rose 10% between 2013 and 2016.

Blah blah blah. Meanwhile, on page 10, it’s revealed that the top 1% receives 24% of all income, and the families between 90% and 99% receive 26.5%, for a total of 50.5% of all income flowing to the top 10%.

The top 1% owns 38.6% of all wealth, and the families between 90% and 99% own 38.5%, so the top 10% owns 77% of total wealth.

On page 13, we find that the total median net worth of all families between 40% and 60% went from $57,000 to $88,000, a gain of $31,000, while the median net worth of families in the 60% to 80% bracket rose from $166,000 to $170,000, a grand total of $4,000.

Meanwhile, back in La-La Land, the median net worth of the top 10% soared by $468,000, from $1.16 million to $1.62 million.

Which family has the wherewithal to buy a bunch of bitcoin at $5,900 each as a hedge or investment, the one that gained $4,000 in net worth, the one that gained $31,000 in net worth or the one that gained $468,000?

You see the point: the likely buyers of enough bitcoin to count are the politically powerful financial elite. If any politico was foolish enough to propose banning bitcoin, a few friendly phone calls from major financial backers would be made to impress upon the politico the importance of blockchain technology and cryptocurrencies to the U.S. economy.

Heck, the financial backer might just suggest that all future campaign contributions to the politico will be made in bitcoin to drive the point home.

My vision of cryptocurrency, laid out in my book A Radically Beneficial World: Automation, Technology & Creating Jobs for All, is of a truly decentralized currency that directly funds work that addresses scarcities in localized community economies. The reality of existing cryptocurrencies is that they are probably being snapped up for buy-and-hold storage by the wealthy.

Those who see governments banning ownership of bitcoin are ignoring the political power and influence of those who are buying enough bitcoin to matter. 

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

[KR1140] Keiser Report: Markets & media meltdown

24-Oct-2017

In this episode of the Keiser Report, Max and Stacy discuss the meltup in markets and the meltdown in media as gossip and tittle-tattle rule the airwaves while Rome burns. In the second half, Max interviews the former chairman of the North Carolina Democratic Party, Randy Voller, about the ongoing economic and financial catastrophes set in motion by President Barack Obama – from Obamacare to bank bailouts, how can the Democratic Party move on past these failures?

Gold Is Better Store of Value Than Bitcoin – Goldman Sachs

24-Oct-2017

– Gold is better store of value than bitcoin – Goldman Sachs report
– Gold will continue to perform well thanks to uncertainty and wealth demand
– Bitcoin’s volatility continues to impact its role as money
– Gold up 12% in 2017, bitcoin over 600%
– BTC is six times more volatile than gold – see chart
– Gold’s history and physical property shows it meets requirements as a medium of exchange and store of value

Since the birth of bitcoin there has been one question that has repeatedly grabbed headlines and led debates all over the world – will bitcoin replace gold?

The latest to weigh in on this question is Goldman Sachs which, in a research note entitled ‘Fear and Wealth’, has concluded that gold is better than bitcoin.

Examining gold and bitcoin against the key characteristics of money, the report concludes that “Precious metals remain a relevant asset class in modern portfolios, despite their lack of yield…They are neither a historic accident or a relic.”

Goldman Sachs looked at four key properties of a long-term store of value – durability, portability, intrinsic value and unit of account – concluding that the reasons why gold was originally adopted remain relevant to today.

They believe as the level of uncertainty increases investors increase their exposure to gold. Fear is the medium to short-term driver of the gold price. The long-term driver, Goldman Sachs believes, is wealth.

The debate of gold versus bitcoin is really a rather tedious one. So rarely do you see any other two assets pitched against one another. Yet those choosing to debate it manage to find common ground between the two, so the debate rages on. Bitcoin’s finite supply and occasional rise on the back of geopolitical tensions has led to such comparisons.

Conversely the debate is relevant as both assets are ones which evoke a strong emotive reaction and raise similar questions about the state of the economy and the investment space. As bitcoin’s market cap increases (heading to $100 billion) it is inevitable that it will continue to grab the attention of the likes of Goldman Sachs and institutional investors. Most recently, Ray Dallio, the world’s biggest fund manager felt the need to point out the bitcoin bubble and how he favoured gold over the cryptocurrency.

Click here to read full story on GoldCore.com.

 

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

Lessons On Anniversary Of 1987 Crash Including Gold’s 24% Gain In 1987

23-Oct-2017

– Next Wall Street Crash looms? Lessons on anniversary of crash
– 30 years since stock market  ‘Black Monday’ crash of 1987

– Dow Jones Industrial Average fell 22.6% on October 19, 1987
– S&P 500, FTSE and DAX fell 20%, 11% & 9% respectively
– Gold rose 24.5% in 1987 (see chart), acting as safe haven 
– Prior to crash, stocks hit successive record highs despite imbalances
– Imbalances that lead to 1987 crash are much worse today

Editor: Mark O’Byrne

Gold prices in USD in 1987 (LBMA AM)

Last week markets wobbled somewhat on the 30th anniversary of Black Monday with a 2017 version of an iffy day’s trading. The S&P 500 posted it’s biggest post-midnight drop on Friday, but went onto finish the day with yet another record close.

Prudent traders and investors are growing increasingly uncomfortable with the increasing “irrational exuberance” in markets. We are repeatedly seeing new record highs in U.S. stocks and yet trading volume and volatility remain suspiciously low.

Many are asking how long this situation can go on for? Especially given the significant macroeconomic risk in the form of a massively indebted U.S. and western world and heightened geo-political risk.

The Black Monday of 1987 is firmly etched in markets’ histories. Few came away unscathed. It is generally remembered as something akin to a bloodbath that few wish to repeat.

But a repeat of that crash looks more and more likely by the day. None of the factors that pushed the markets to react in such a way are particular to 1987. They all exist today, arguably on a grander and more dangerous scale.

Click here to read full story on GoldCore.com

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

[KR1139] Keiser Report: ‘Luxury-priced’ Obamacare policy

23-Oct-2017

In this episode of the Keiser Report, Max and Stacy discuss their ‘luxury-priced’ Obamacare policy and compare it to the new plan from Porsche which allows members to drive a new Porsche every day of the week all year long for the same price. In the second half, Max interviews independent journalist, Andrew Coffey (@coffeygrinds) about the latest in the alt-media market as demonetisations sweep the sector.

Which Rotten Fruit Falls First?

20-Oct-2017

To those of us who understand the entire status quo is rotten and corrupt to its core, the confidence of each ideological camp that their side will emerge unscathed by investigation is a source of amusement. The fake-progressives (fake because these so-called “progressives” support Imperial over-reach and a status quo whose only possible output is soaring wealth and income inequality) are confident that a “smoking gun” of corruption will deliver their most fervent dream, the impeachment of President Trump, while Trump supporters are equally confident there is no “smoking gun.”

One camp is confident that the wily Clintons and their army of enablers, from former FBI Director Comey on down, will finally be brought to long-evaded justice for their various perfections of corruption and collusion: pay to play, and so on.

Clinton supporters are equally confident that there is no “smoking gun” that will bring down the House of Clinton, and by proxy, the organs of the Democratic Party.

The implicit historical model each camp is anticipating is of course Watergate, which unfolded with a dramatic inevitability that in retrospect almost seems scripted: a minor burglary led to the hubris of cover-up which led to the destruction of the Nixon presidency.

Often overlooked in this history is the key roles played by insider informants (such as Deep Throat) and the wider political demands for greater transparency the scandal triggered. The Church Committee ended up investigating the illegal campaigns of the FBI and CIA against the anti-war and civil rights movements (COINTELPRO etc.), and a small dent was made in the federal government’s decades-long reliance on official secrecy to cover up official corruption, collusion, malfeasance, lies, etc.– the ugly underbelly of agencies protecting the Empire from any inconvenient leaks of truth.

I submit that Watergate will not be the template for the multiple investigations being pursued in the present. It seems highly likely to me that who and what gets taken down by the investigations is much less predictable than in the Watergate template, which distilled down to an escalating campaign of cover-ups and stonewalling which simply compounded the crimes previously committed.

I submit that the investigations launched with an implicit intent of bringing down selected targets may well end up destroying people and institutions that weren’t in the crosshairs. The reason why this seems so likely is that the entire status quo is corrupt: the fraud, pay-to-play, lies and collusion are institutionalized and system-wide, and once some investigation drills a hole in the dam of secrecy and collusion, the hole may quickly widen as the fetid gush of hidden truths pours out.

In other words, when the entire status quo is corrupt and hiding its collusion, gathering evidence to nail one target inevitably tugs loose other threads, threads that the original investigators reckoned could be safely left untouched.

It doesn’t work that way, folks. Insiders end up releasing more than investigators bargained for, and all it takes is one insider and one journalist who isn’t beholden to a colluding-insider corporate boss to widen the hole in the dam into a veritable flood.

Longtime readers know I have long made the case that the Deep State has fractured into competing camps. For example:

Is the Deep State Fracturing into Disunity? (March 14, 2014)

Surplus Repression and the Self-Defeating Deep State (May 26, 2015)

Public investigations are one field where this conflict plays out, but unfortunately for the players, it’s a game that’s easier to start than to control.

For this reason, I predict the current investigations will widen and take a variety of twists and turns that surprise all those anticipating a tidy, narrowly focused denouement. Which of the many rotten fruits will fall first? How many will fall by the time the investigations have burned through a corrupt status quo that’s exquisitely vulnerable to a single lightning strike? Only one lightning strike is needed to ignite the combustible corruption and trigger a conflagration tha quickly escapes the handlers’ control.

If you want a recent example of this dynamic, consider Harvey Weinstein, a mere brush fire that may well spread further and faster than the handlers expect.

For more on the systemic nature of corruption in our status quo, please check out my books:

Resistance, Revolution, Liberation

Why Our Status Quo Failed and Is Beyond Reform

Gold Up 74% Since Last Market Peak 10 Years Ago

20-Oct-2017

– 10 year anniversary of pre-Global Financial Crisis market peak in S&P 500 on October 9th
– Gold up 74% since the last market peak a decade ago; 11% pa in USD, 9.4% pa in EUR and 12.4% pa in GBP
– Precious metal has climbed $736/oz on Oct 9th 2007 to $1278.75 ten-years later
– S&P 500’s 102% climb is thanks to asset-pumping policies by central banks, rather than value
– Gold’s performance is slowly forcing mainstream to re-consider gold
– “Notion of gold as a hedge against serious risk aversion is true… ” – Bloomberg analyst

Editor Mark O’Byrne

Ten years ago last week the U.S. stock market hit a peak before crashing during the financial crisis. That now seems a like a distant memory but with stocks making new record highs every day recently, it is prudent to step back and evaluate the long term performance of assets and indeed the outlook in the coming years.

Today the S&P 500 continues to make headlines as it repeatedly reaches new highs, most notably in September as it pushed past 2500 despite North Korean/Trump war drums.

Quietly in the background gold has been putting in its own stellar performance. Although few would have known, given the lack of interest most market participants have paid to it in recent years.

Since the last peak of the S&P500 the precious metal, and ultimate hedge against inflation, has climbed over 74%.

After massive gains during the financial crisis, it fell quite sharply in all currencies in 2013 prior to consolidating at lower levels in 2014 and 2015 and then eking out gains again in 2016 and so far in 2017.

Click here to read full story on GoldCore.com.

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

GDP Is Bogus: Here’s Why

19-Oct-2017

The rot eating away at our society and economy is typically papered over with bogus statistics that “prove” everything’s getting better every day in every way. The prime “proof” of rising prosperity is the Gross Domestic Product (GDP), which never fails to loft higher, with the rare excepts being Spots of Bother (recessions) that never last more than a quarter or two.

Longtime correspondent Dave P. of Market Daily Briefing recently summarized the key flaw in GDP: GDP doesn’t reflect changes in the balance sheet, i.e. debt.

So if we borrow money to pay people to dig holes and then fill them with the excavated dirt, GDP rises to general applause. The debt we took on to fund the make-work isn’t accounted for at all.

Here’s Dave’s explanation:

Once I learned about accounting, I figured out why the GDP metric wasn’t sufficient. What is missing?

The balance sheet.

Hurricanes are a direct hit to your nation’s balance sheet. The national income statement goes up because of increased spending to replace lost assets, but the “equity” part of the national balance sheet ends up taking a hit in direct proportion to the damage that occurred. Even if you rebuild everything just the way it was, your assets remain the same, while your liabilities have increased.

We know this because we use the balance sheet equation: equity = assets – liabilities. Equity is another word for wealth.

Before hurricane:

wealth = (house + car) – (home debt + car debt)

After hurricane, you rebuild your house, and buy a new car, using borrowed money:

wealth = (house + car) – (2 x home debt + 2 x car debt)

Wealth (equity) has declined by the sum (home debt + car debt)

So when you see pictures of a hurricane strike, you can now look through all that devastation and see the impact on the balance sheet. National equity (wealth) just dropped by the amount of damage inflicted by the hurricane. Whether it is ever rebuilt doesn’t actually matter; that equity is just gone. Destruction is always a downside for equity – even if there is a temporary positive impact on the income statement.

Isn’t it interesting that the mainstream economists, who don’t use banks, debt, or money in their models, largely ignore balance sheets and instead just looks at the income statement alone? Its almost as if the entire education system was organized so that people paid no attention to banks, debt, and money. Who do you think might benefit from our flock of PhD economists ignoring the extremely profitable debt-elephant in the room, and its purveyors, the banks?

Thank you, Dave, for an explanation we never see in the mainstream. And here’s a chart of our fabulous always-higher GDP, adjusted for another bogus metric, official inflation:

 

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Silver Price Spiking & Gold Pushing Higher On The 30th Anniversary Of Black Monday

19-Oct-2017

The intra-day “bull flag” formed in silver:

 

Here’s a closer look at silver with good volume:

Which makes us wonder if this short-term bottom is in?

Here’s gold on the 3 minute chart:

And the dollar, which is struggling to maintain 93:

It is the anniversary of Black Monday:

And it appears it is indeed risk off:

And something is indeed spooking the markets. Though not exactly the President, the MSM narrative is wearing thin:

.@foxandfriends “Russia sent millions to Clinton Foundation”

— Donald J. Trump (@realDonaldTrump) October 19, 2017

Here’s Bloomberg featuring this (in)famous day 30 years ago highlighting statements of many famous investors of the time:

PETER BORISH, head of research at Tudor Investment Corp. and Paul Tudor Jones’s No. 2:

We were tracking exponential moves in the equity market. The main one was the equity move in the 1920s, and the market in 1987 looked almost identical. The week before Black Monday, the technical and fundamentals aligned, and so we thought Monday would be the day.

ALLAN ROGERS, head of government bond trading at Bankers Trust Co.:

In the first half of 1987, the bond and stock markets diverged for seven months. Bonds went straight down, equities straight up. These sorts of divergences always get my attention. In August and September, I persuaded management to cover all of our hedged short positions in sovereign fixed income, and we built up a long position in notes and bonds.

MICHAEL LEWIS, bond salesman at Salomon Brothers:

A week or two before Black Monday, Salomon announced job cuts. They chopped a few departments, including the municipal and money-market groups. It felt ill-considered and rushed. Nobody completely understood why. [Ed. note: Lewis is a Bloomberg View columnist.]

ROGERS:

Nippon Tel, the Japanese telephone company, was going to do an IPO in mid-August. I thought that would pull money from other segments of the equity market. In early October there was another IPO, which I think was a very large British company. These IPOs were a big deal to me, because the main thing I pay attention to is changes in global money flow.

NASSIM NICHOLAS TALEB, FX options trader at First Boston who later wrote The Black Swan, a book about the impact of unpredictable events:

Currency options were very inexpensive during that period for some reason, especially OTM [out-of-the-money] options, so I had accumulated a few of these. I had accumulated a lot of OTM options in Treasuries and eurodollars, for no other reason than that they were cheaper than I had seen in a long time. [Ed. note: Eurodollars are U.S. dollars deposited in commercial banks outside the United States and futures tied to the interest rates paid on them are among the most-traded contracts in the world.]

ERIC ROSENFELD, vice president in the U.S. fixed-income arbitrage group at Salomon Brothers:

On Friday night, Oct. 16, the Dow was down 4 percent on the day and 10 percent on the week. I remember going to dinner with my wife, and the couple next to us were a young guy and gal out on a date. He was telling her how he was going to make a killing, because he’d put all of his money into the market on the close. And I’m thinking to myself, “I’m not so sure she should want to date this guy …”

BORISH:

That Monday morning was probably the greatest demonstration of trading skill that I have ever seen in my life. Even though we had this model saying Monday was the day, Paul was willing to add to the position.

LEWIS:

We were in One New York Plaza still, and everything seemed off from the time I arrived. I wasn’t exactly working. I was based in London at the time, and they’d asked me to come to New York to give a talk at the Salomon Brothers training program. I had free run of the place, so I was almost like a reporter who was wandering around the firm watching and talking to people.

DRUCKENMILLER:

On Monday morning, I took advantage of a very brief rally to sell the equities that I had bought on Friday.

JIM LEITNER, Bankers Trust FX trader:

During the day, the noise level in the trading room got quite ferocious. The chairman of the bank, who at one point had been a trader, walked onto the trading floor and stood behind my chair, which was a first.

LEWIS:

I remember walking from the 41st floor down to the 40th floor. The 41st floor was this cathedral of bonds, and then you walked down to 40 and were in this cramped, low-ceiled, dark place that was the equity department, with a lot of guys who were named Vinny and Tommy and Donny. They’d been around forever, and they had Brylcreem in their hair and big guts and they smoked too much and they were lovable. And they were all going through this visceral animal experience. People were screaming and going absolutely crazy in ways I’d never seen before. It was the first time in my career at Salomon Brothers where I was actually interested in standing beside the equity department and watching these people do their job.

EDWARD THORP, managing partner at Princeton Newport Partners:

We didn’t use Black-Scholes for option prices; we had our own model. And we didn’t model prices using a lognormal distribution—instead we had found a distribution that better fit the historical stock price data. We were trading off of those models. So even though I was surprised by the drop, I wasn’t nearly as shocked as most.

JIM CHANOS, founder and CIO of Kynikos Associates:

I had scheduled a marketing trip to Texas and flew from New York to Dallas on Monday morning. When the plane landed I called my brother, who was a stockbroker in Wisconsin. He mentioned a conflict with Iran in the Persian Gulf involving some oil platforms. “That’s making this whole thing worse,” he said.

ROGERS:

We hadn’t been able to sell our long Treasury position or make markets because of the fire drill. So we came back up and I think by the end of the day, 3 o’clock or whatever, we finally sold our long bond position. That fire drill saved us a fortune.

LEITNER:

In the afternoon, I went out and I bought a bunch of Japanese bonds, which were still yielding 6 percent. And I said, “If the world is really going to hell in a hand­basket, interest rates will collapse and at some point I’ll be able to sell those bonds at a higher price.”

LEWIS: It was right around then that I was selling my book, which would become Liar’s Poker, and I was absolutely aware that this was literary material. I remember grabbing scraps of paper and writing down notes, so I had it if I needed it.

ROSENFELD:

I remember talking to Mike Halem, the proprietary equity trader. I was urging him to do these basis trades. It was tough to do futures vs. stocks, because you couldn’t execute the trades simultaneously. So I was telling him to do futures vs. the most liquid stocks and not worry about the fact that he wasn’t doing exact arbitrage. I was talking to him about futures vs. IBM or futures vs. GE, and forget about anything else.

THORP:

By the time I left the office in Newport Beach, Calif., for lunch with my wife, the market was off 7 percent. I remember noting that was about half the decline of the two largest previous ones—Oct. 28 and 29, 1929, which signaled the start of the Great Depression. I then got a call at the restaurant that the market was down 18 percent. My wife thought maybe I should go back to the office, but I stayed and finished my lunch. There was nothing I could do.

SHIELDS:

There was one big pension fund that had 10 pieces of $100 million sales that came in the last hour and that just kept pressure on the market, so it closed at the bottom.

BORISH:

I think that Paul’s greatest skill was realizing that people were going to drive to the place of most liquidity, and that was going to be fixed income.

JONES:

I decided to get very long fixed income on the close on Black Monday, as I knew the Fed would react.

BORISH:

We were concerned about a lot of the counterparties and their liquidity, so the best place to be was in fixed-income futures, because if worse came to worst, we could always take delivery of the bonds.

ROGERS:

I was so scared that I got $10,000 out of the bank, took it home, and stored it in the rafters. When I moved out, I forgot that I’d stashed the money. I think it’s still there.

JONES:

I was feeling guilty about our success. I thought we were going into the Great Depression.

BORISH:

I had 1929 on my mind. Paul and I were concerned about our friends and people who were struggling that day.

ROSENFELD:

That night, [Salomon Brothers Vice Chairman] John Meriwether and I had dinner at Il Mulino in Little Italy with Vinny Mattone, the head of repo at Bear Stearns. For us, a key element to these longer-term convergence trades is making sure that you can hold the trade until convergence. Our worry was that clients were getting so skittish that they would pull their repo lines. The outlook from Vinny was dismal. It reinforced that we had to rethink the portfolio.

TALEB:

I started calling my friends to see if they were OK. I couldn’t leave the apartment, because Hong Kong might call, so I was calling anyone to chat. My cousin called and said the police were outside. It turned out a guy had committed suicide at 72nd Street and First Avenue, so it hit close to home.

THORP:

I went home and thought about what had happened. There was a huge difference between S&P futures, which were trading at 185 to 190, and the corresponding price of the S&P index, which was at 220. This difference was previously unheard of. Arbitrageurs usually kept it in line.

BASSMAN:

I had bought 100 bps out-of-the-money call options for a tick [1/32nd of a point] a month prior for a thrill. They had a few weeks to expiry. As the bond market exploded higher, my options started moving into the money. I ran over to the Treasury desk to sell some Treasuries to hedge my position, and in the time it took me to run over to the desk the market had rallied another point. That’s how fast the Treasury market was moving.

TALEB:

I had a huge delta in eurodollars. I remember vividly offering eurodollars at a price and selling them for much higher—it was like in Trading Places. We spent the day liquidating our positions and selling above our offers all morning. Currencies went wild and the USD collapsed.

BASSMAN:

I could use the Treasury basis—the relationship between cash and futures—to figure out where futures should be trading and, by extension, where options on futures should be priced. So I started trading futures options vs. cash, which the locals on the exchange couldn’t do. The spread was huge, and it was quite profitable.

SHIELDS:

Finally, Howard Baker [President Ronald Reagan’s chief of staff] called and said he’d just seen the president. And this is a direct quote, he said, “I’ve just been to see the president, and the president understands that you have to do what you have to do to protect your people. However, the president of the United States would very much prefer if the New York Stock Exchange could see its way clear to remain open.”

SHIELDS:

I think there was something that came out of either the Fed or Treasury that the New York Stock Exchange was not closing. And at that point, I think someone called somebody. My guess is it would have been one of the monetary people that would have done it; they would have known where to go. And the MMI started rallying, carrying everything along with it.

HULL:

“What will you buy 100 at?” a trader from Drexel [Burnham Lambert] asked. “285,” I said. And the Drexel trader said, “You own them.” I swallowed hard; it trades 287, 288. A few minutes later he asks, “Will you buy another 50 at 285?” And I said, “Yes.”

STRAUS:

On Tuesday, we were all watching, and it looked like the decline would continue—and then someone bought the MMI, the small index in Chicago, and that started to stabilize the whole market.

HULL:

These trades with me were really whisper trades—in other words, he sold them to me knowing that I was the only buyer. He didn’t want to hold an auction because there would have been a mass panic. I ended up buying 150 contracts at 285.

BORISH:

The early part of Black Monday was probably due to portfolio insurance, but the second part of the day was due to fear.

Oct. 19, 1987 remains the biggest one-day stock market drop in history.

ROSENFELD:

The need for dynamic trading from portfolio insurers exceeded the liquidity. The standby capital that usually comes in during these times was slow to come in. In that sense, circuit breakers do help. It allows the standby capital to assemble.

LEWIS:

It makes everybody uncomfortable when something dramatic happens with prices, and no drama in the world could explain such movement. It makes the market seem absurd. And so that was the feeling. To me it was like, Corporate America is not worth whatever percent less today than yesterday.

MARKS:

People think that if stocks went down 20 percent in a day, it must be the end of the world. That is, they impute intelligence to the market—and that’s a mistake.

JONES:

Black Monday’s 33 percent decline in S&P 500 futures taught newly baptized regulators what old-school commodity traders had known for a hundred years: Limits on trading of stock futures were obligatory. They learned the hard way that markets, left to their own devices, can and will break down into panic and chaos.

LEITNER:

It was the first time we gave a lot of thought to counterparty risk. Had the Hong Kong Futures Exchange [which was closed for nearly a week and subsequently bailed out by the Chinese government] gone belly-up and those futures contracts not been honored, I probably would have been fired.

BORISH:

Afterward, Paul seconded me to the New York Fed to help with the Brady commission. To Paul’s credit, he put a lot of resources into getting data and computers. We’d be in there on weekends with screwdrivers taking out floppy drives and putting in hard drives. We hired summer interns to type data into spreadsheets, which only had 3,000 rows at the time. We provided all of our data to the Brady commission; Goldman didn’t have it, J.P. Morgan didn’t have it. The chapter on the market break mostly came from Tudor.

ROSENFELD:

There wasn’t this global perspective that you see today with correlations being so high, and I think that’s what saved the marketplace that day. It wasn’t the circuit breakers that saved the day; it was that the markets were siloed. If that were to happen today, who knows what would happen.

BORISH:

If you look at Greenspan’s behavior during the Long-Term Capital Management crisis 10 years later, he moved quickly to provide liquidity to the system. So like every good trader, he learned from his prior mistakes. He thought, “We’re going to get out there, we’re going to get in front of it, and we’re going to provide liquidity to the system.”

TALEB:

If the Fed hadn’t stepped in on Tuesday morning, we would have a lot cleaner financial system today, but it would have been a complete bloodbath then.

SilverDoctors.com has been on the leading edge of Gold News and Silver News Since 2011. Each month, more than 250,000 investors visit SilverDoctors.com to gain insights on Precious Metals News as well as to stay up-to-date on World News impacting the metals markets.

How Gold Bullion Protects From Conflict And War

19-Oct-2017

– Gold and silver’s historical role in conflict shaped the world today and the modern financial system
– Gold played an important function in the great conflicts up to and throughout the 20th century
– Gold and the effective use of bullion played a crucial role in the outcome of the American Civil War
– Gold was an important economic agent in both World Wars, conferring a huge advantage on the allies
– In a world beset with risks of war both in the Middle East and with North Korea, Russia and China … gold will protect

Editor Mark O’Byrne

Gold and silver have played important roles during periods of conflict and have protected people but also protected nations and conferred power. HSBC Chief Precious Metals analyst James Steel has written a fascinating piece for this month’s Alchemist about this.

The article takes us through the major wars and conflicts from the 15th century to modern times. Each major war serves as a reminder that success is as much down to the management of bullion and finance as it is about the role of gold and silver.

…the way bullion was used, moved, stored and shifted had profound effects on long-term economic or military success. Indeed, the role of gold and silver in wars not only in influenced the shape of the world today, but laid the foundations for the modern financial system.

When managed effectively we see how important gold and silver were for victorious countries. Central bankers and politicians of today should use the following historical examples of military successes to appreciate the importance of a strong source of bullion and conservative financial planning both in and out of peacetime.

Click here to read full story on GoldCore.com.

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

Fraud, Exploitation and Collusion: America’s Pharmaceutical Industry

18-Oct-2017

America’s Pharmaceutical industry takes pride of place in this week’s theme ofThe Rot Within, as the industry has raised fraud, exploitation and collusion to systemic perfection.

What other industry can routinely kill hundreds of thousands of Americans and suffer no blowback? Only recently has the toll of needless deaths from the opioid pandemic finally roused a comatose corporate media and bought-and-paid-for, see-no-evil Congress to wonder if maybe there should be some limits placed on Big Pharma and its drug distributors.

The Drug Industry’s Triumph Over the DEA (WaPo)

Explosive ’60 Minutes’ investigation finds Congress and drug companies worked to cripple DEA’s ability to fight opioid abuse

What other industry can raise prices any time it wants because, well, it can?Longtime correspondent/physician J.F. recently submitted a chart of medication price increases (below)–nothing special, nothing out of the ordinary, just the usual because we can price increases.

What other industry has such complete control over the federal government? Dr. J.F. reminded me that the law enacting Medicare Part D prescription drug coverage specifically prohibits the U.S. government from negotiating lower prices on the immense volume of medications it purchases through Medicare (not to mention the Medicaid and Veterans Administration programs).

J.F. also submitted this investigative report from CNN, The little red pill being pushed on the elderly.

Here’s the money-shot:

“The combination of two generic drugs that makes up Nuedexta — a cough suppressant and heart medication — was once available from specialty pharmacists willing to combine the ingredients for less than $1 a pill, according to a US Senate report on rising prescription drug prices. Now the FDA-approved medication costs as much as $12.60 a pill.”

If this isn’t fraud, exploitation and collusion, then what is it? Please don’t say “good old free-market capitalism,” because competition is nowhere in sight.

The pharmaceutical industry is a crony-capitalist cartel that buys whatever political influence it requires to maintain its power and profits. Isn’t it obvious? Or have we become so distracted and drugged that we no longer care?

Ho-hum, just another 20 times the rate of inflation increase in medication prices by Big Pharma: nothing to see here, folks, just move along and take your meds….

We’re number one! — in drug-induced deaths per million residents: isn’t it amazing that this raises no eyebrows at all in our “leadership” or the citizenry?

Can we be honest for a change, and just admit that profits are way more important in our status quo than a couple hundred thousand deaths in America’s permanent underclass?

The rot within manifested by the pharmaceutical industry almost defies description. That we tolerate this as business as usual (BAU) shows that ours is a society and economy afflicted with the sickness unto death.

‘Worse Than Big Tobacco’: How Big Pharma Fuels the Opioid Epidemic 

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Silver Bullion Prices Set to Soar

18-Oct-2017

Silver bullion prices are expected to jump as solar and smartphone demand rises and the Fed tries to stave off economic weakness

by Myra Saefong via Barrons

Gold prices have far outpaced gains in silver so far this year, but silver will emerge as the winner for the second year in a row.

With a per-ounce price of $17.41 for silver futures as of Friday, analysts say the white metal is poised for a big climb, particularly as the gold-to-silver ratio stands well above historical averages. “Silver is definitely undervalued compared to gold and as a stand-alone investment. I consider it likely to be the most undervalued asset in the general investment markets,” says Paul Mladjenovic, author of Precious Metals Investing For Dummies.

The best barometer of its potential gains comes from its value relative to gold. The long-term average gold-to-silver ratio runs around 15 to 1, while the modern average going back a century is roughly 40 to 1, says Mark O’Byrne, research director at precious-metals storage provider GoldCore. The ratio, which reflects how many ounces of silver bullion it takes to equal the value of one ounce of gold, stood at a whopping 75 to 1 on Friday.

That steep ratio suggests “it’s a good time to buy silver bullion,” says O’Byrne. He explains that the “huge amount of silver used up in industrial applications” suggests the ratio should fall over the long term: “It’s likely that the gold/silver ratio will gradually return to below the 100-year average of 40 to 1.” At the current gold price, that would put silver at nearly $32 an ounce, O’Byrne says.

So far this year, however, prices of gold futures have risen nearly 12%, while silver has gained roughly 6%. Last year, silver’s climb of about 16% outpaced gold’s rise of almost 9%.

Click here to read full story on GoldCore.com.

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

Pages