Saturday, May 31, 2014

Gold and Silver weekend Report May 31 , 2014 - featuring Ed Steer's Report and items of note from additional sources......


It was pretty quiet in Far East trading on their Friday. The high of the day came shortly before 9 a.m. Hong Kong time---and then it was a long, slow slide into the 8:40 a.m. EDT open in New York.  The subsequent rally only lasted until shortly after 9 a.m.---and by the time the HFT boyz were done with it, gold hit its low minutes before noon EDT.  From that point, the gold price rallied quietly until 4:30 p.m.---and then traded mostly sideways into the close.
The CME recorded the high and low ticks at $1,260.60 and $1,242.20 in the August contract.
Gold closed in New York on Friday at $1,251.30 spot, down another $4.60 on the day---and at a new low for this move down.  Volume, net of June was pretty decent at 142,000 contracts.
The silver price traded sideway within a dime of unchanged either side of Thursday's closing price in New York and, like gold, the hammer fell shortly after 9 a.m. EDT---and by 12:45 p.m., all the damage was done, as silver also closed at a new low for this move down.  The silver price rallied until 4 p.m. in electronic trading before flat-lining for the rest of day.
The high and low ticks were posted as $19.085 and $18.615 in the July contract.
Silver finished the Friday session at $18.81 spot, down 23 cents from Thursday's close---and you would have to go all the way back to the late June close in 2013 to find a lower closing price.
Platinum wasn't spared, either---and had a similar price path to both gold and silver---and closed down six bucks on the day.  Palladium traded in a one percent range for the entire Friday session---and actually finished up two bucks from Thursday's close.  Here are the charts.
The dollar index closed late Thursday afternoon in New York at 80.50---and chopped quietly lower on Friday, finishing the day at 80.38---down 12 basis points.  Nothing to see here.


The CME Daily Delivery Report was another surprise in gold, as only 27 contracts were posted for delivery on Day 2 of the June delivery month.  There were a dozen issuers---and half a dozen stoppers.  In silver, there were 51 contracts posted for delivery within the Comex-approved depositories on Tuesday.  ABN Amro was the short/issuer on 50 of them---and JPMorgan and Scotiabank stopped 25 of them in total. There were deliveries posted in platinum and palladium as well and, like yesterday, the Issuers and Stoppers Report is worth a quick look.  The link is here.
The other big surprise was that there were no reported changes in either GLDor SLV on Friday---and after the big price smack-downs on Tuesday, one would have expected that to happen.  I'm only speculating here, but it's my opinion that JPMorgan and the other bullion banks were buyers of every share of these two ETFs that John Q. Public was puking up.  That goes for every other day of this week as well.
The U.S. Mint had a smallish sales report yesterday.  They sold 1,000 troy ounces of gold eagles---1,000 one-ounce 24K gold buffaloes---and 125,000 silver eagles.  Although there may be more sales reported on Monday that will change things, as of the last trading day in May, the U.S. Mint has sold 35,500 troy ounces of gold eagles---12,500 one-ounce 24K gold buffaloes---and 3,988,500 silver eagles during the month just past.  Based on these sales the silver/gold sales ratio was 83 to 1 in May.  Year-to-date the U.S. Mint has sold 21,436,500 silver eagles.
Over at the Comex-approved depositories on Thursday, there was no in/out movement in gold for the second day in a row.  But it was an entirely different kettle of fish in silver, as 600,135 troy ounces were reported received---and a whopping 2,000,163 troy ounces were shipped out the door.  The link to that action is here.
Well, yesterday's Commitment of Traders Report lived up to its hoped-for advance billing.  Maybe not all of Tuesday's engineered price decline made it into yesterday's report, but enough of it did to show big changes---and set some new records.
In silver, the Commercial net short position declined by a chunky 3,367 contracts, or 16.8 million ounces. The Commercial net short position is now down to 71.1 million troy ounces.
Because of the timing of the report, which was 15 minutes before my flight to Vancouver left Edmonton, I never had a chance to talk to Ted Butler about yesterday's numbers, but he did e-mail the highlights---and here they are.  The standouts were as follows:  the technical funds added 5,100 contract to their short position which takes them to a new record short position.  The raptors, the Commercial traders other than the 'Big 8', added 3,000 contracts to their new record long position of 48,800 Comex contracts.  And lastly, the big long position hiding in the bushes in the Managed Money category is still there.  I was afraid it might have been a casualty of the engineered price decline, but it wasn't.  And lastly, JPMorgan managed to cover about 1,000 contracts of their short-side corner in the Comex silver market---and are now short 'only' 90 million ounces of silver.  That represents 125% of the entire Commercial net short position.  How outrageous can you get? 
In gold, the Commercial net short position declined by 27,372 contracts, or 2.74 million troy ounces.  The new Commercial short position now stands at 7.86 million troy ounces.  The standouts in gold were as follow---and I just cut and paste what Ted sent our way---and lightly edited in the process---In gold, the tech funds added 22,000 new shorts, JPM bought 4,000 contracts---and their long-side corner in the Comex gold market now stands at 3.4 million troy ounces---34,000 contracts.  Mostly of the rest of the buying in the Commercial category was done by the gold raptors.
Ted added the following comment to his e-mail, which I thought worth sharing as well---Good report, but should be much better now - hard to see how it could get much better than what transpired through Friday.
The only thing to add to the above is Nick Laird's "Days of World Production to Cover Short Positions" chart, which is posted below.  Despite the improvements, it's little changed from the one posted in last Saturday's column, which you can check out by clicking here, and then scrolling down a bit.


Non redundant news and views....

Fed can't raise rates without crashing economy, Sprott's Embry says

Sprott Asset Management's John Embry tells Sprott Money News yesterday that the Federal Reserve likely has no intention of raising interest rates any time soon because it would collapse the spectacularly indebted U.S. economy, which, declining bond yields suggest, is already imploding anyway.
Embry's interview is eight minutes long and is posted on the Sprott Money Internet site 

Doug Noland: He's Back

As I often quip, “Bubbles go to unimaginable extremes – then double!” These days I have to remind myself that markets are in the midst of the greatest Bubble in history. And we today see what I believe is a dangerous synchronization of global risk markets. Most markets demonstrate similar dynamics – it’s basically become one big global “risk on” trade. And as fundamental prospects darken, some players begin to position for a transition to more of a “risk off” backdrop. This shorting and buying of derivative hedges then provide the fodder for another round of squeeze-induced market rally. And in an environment with unprecedented scope for performance-chasing and trend-following trading, these rallies have a tendency to take on a (speculative) life of their own. Bubbles just get bigger.
The consensus view holds that market risk is currently low. I would counter that the VIX index (at multi-year lows) is low – not risk. These days the VIX is a better barometer of market complacency. Below the surface – where folks work diligently to pick the right stocks and sectors – the marketplace is really tough. As a Goldman official stated this week, markets are “abnormal.” And I would suggest that much of this abnormality just keeps forcing more players into (“closet indexing”) the S&P 500 index – in the process fueling the “market” melt-up. It all seems rather late-cycle dysfunction to me.

Why are British investors being forced to fill in US tax forms?

As if answering to HM Revenue & Customs were not onerous enough, British investors are now having to jump through hoops for the equivalent US tax authority, the Internal Revenue Service or IRS.
The IRS is trying to tighten its grip on US citizens living in other countries who owe tax. But a consequence of its crackdown is that British investors, who owe nothing in the US and may have no financial or other connections there whatever, have to complete IRS documents and provide information either to the IRS itself or to a finance firm acting under IRS instructions.
An estimated 125,000 British-based investors with JPMorgan Asset Management have been asked to complete a “W-8BEN” form (see image below). As far as these investors were concerned, JP Morgan – which runs a range of very well-known, popular investment funds out of its London offices – is more or less a British firm. They deal with British call centres and send cheques, queries or other correspondence to a British address.

USA 'to fine BNP Paribas €7 billion' in sanctions probe

The U.S. is seeking more than €7.4 billion ($10 billion) to resolve a criminal probe into allegations that the French bank evaded US sanctions against Iran, Sudan and Cuba, The Wall Street Journal reported Thursday.
BNP – the largest publicly traded French bank – is seeking to pay less than $8 billion, the newspaper reported citing people familiar with the case.
Still, the multibillion dollar figure would put the fine among the largest penalties ever imposed on a bank and is far higher than what BNP has provisioned for.

Sex, Drugs and Accounting in Europe

Europe has a new source of economic growth. In the next few months all European Union countries that do not already include drugs, prostitution, and other illegal and gray-market businesses in their gross domestic product calculations will have to do so.
The 2010 version of the European System of Accounts becomes obligatory for GDP reporting by EU member states in September. It states unequivocally that "illegal economic actions shall be considered as transactions when all units involved enter the actions by mutual agreement. Thus, purchases, sales or barters of illegal drugs or stolen property are transactions, while theft is not."
The ostensible goal is to make countries' economic data comparable. Relatively permissive EU members such as Germany, Hungary, Austria and Greece, where prostitution is legal, already include the revenue it produces in their national accounts. Other countries with more prudish laws have been denied a statistical bonus. The same goes for drugs: Some of them are decriminalized in the Netherlands -- and have long been included in the GDP calculation -- while other countries have shied away from doing this, to their own statistical detriment.

U.S. Mint stops rationing silver eagle coins

The U.S. Mint will stop rationing U.S. silver eagle coins next week, for the first time in 16 months, Mike Zielinski reports at Coin Update.
"Despite the restraints on availability," Zielinski writes, "year to date silver eagle sales have reached 21,436,500 ounces, according to the latest data available on the Mint's website. The current sales level and the removal of allocation create the possibility for another annual sales record. During 2013 the Mint had sold a record high 42,675,000 ounces."
I would guess that part of the reason that the allocation process is ending, is because Ted Butler's big buyer has stepped away from the table.  I'm sure he'll have more to say about this in his commentary later today.  I found this very interestingstory embedded in a GATA release from yesterday---and I thank Chris Powell for wordsmithing the above paragraphs of introduction.

Gold premiums in India halve on hopes of easier import rules

Gold premiums in India almost halved this week on hopes the new government would ease restrictions on imports of the precious metal, while demand in rest of Asia failed to pick up despite a drop in prices.
Indian premiums fell to $30-$40 an ounce over the global benchmark, from $80-$90 last week, dealers told Reuters.
India - the world's second biggest consumer of gold after China - imposed curbs on bullion imports last year, including a record 10 percent duty on overseas purchases in a bid to control its ballooning current account deficit.
The restrictions are likely to be eased by the country's new government led by Narendra Modi, industry officials had said earlier this month. Modi has said any action on gold should take into account the interests of the public and traders, not just economics and policy.

China's weekly gold demand rises to highest level in nearly three months

In week 21 (May 19 – 23) Chinese wholesale gold demand, measured by SGE withdrawals, was 36.4 metric tonnes, up 22.98 % from the week before. This is the highest weekly demand since week 9 (February 24 -28). 36.4 tonnes is just shy of the year to date weekly average of 37.5 tonnes. Chinese gold demand has been down in recent weeks from extremely strong in the first 9 weeks of 2014 to less strong in the last 12 weeks.



There are no markets anymore---only interventions. - Chris Powell, GATA---April 2008
Today's pop "blast from the past" is one that popped into my head out of the blue---and I immediately rushed to the computer to look it up on the youtube.comInternet site---and the link is here.  The singer, Marty Balin, was one of the founding members of Jefferson Airplane back in the 1960s---along with its spin-off,Jefferson Starship,
Today's classical "blast from past" is the second moment of Mozart's Piano Concerto No. 20 in D minor, K. 466.  I've posted this before, but it was years ago.  The pianist is Ivan Klánský---and I'm just sorry that this recording is not available on CD, because I'd buy it in a heartbeat if it was, as I consider it to the definite recording of the work.  If you've ever seen the movie Amadeus, this is the music that's playing as the credits roll at the end.  It's the only movie I have ever seen in a theatre where the audience remained in their seats until the credits were done---and the piano piece was over.  I was one of them.  It was a surreal experience. The link is here.
Just when you think that this price management scheme couldn't get any more blatant than it already was, JPMorgan et al pull off this stunt during the New York trading session yesterday.
And as spectacular as the COT Report was on Friday, the one that we will get next Friday will certainly be another one for the record books, provided we don't have a big rally before the cut-off for that report at the close of Comex trading on Tuesday.
Ted Butler was certainly right about the fact that "da boyz" hadn't finished loading up the technical funds on the short side in gold.  Well, they added 22,000 shorts in the last COT Report---and a bunch more since then, including a big chunk yesterday.  As Ted said in his comments further up in this column---"[It's] hard to see how it could get much better than what transpired through Friday."  I agree totally.
Here are the 1-year charts for both gold and silver---and you can tell that we are near a major bottom in both metals, especially in silver.
But it's what happens going forward that really matters now.  Whether we're at the exact bottom or not, the rally that starts at some point will be met by raptor selling as they take profits as the technical funds begin to cover their short positions .  But if the raptors don't sell enough of their long positions to contain the price as the tech funds rush to cover as moving averages are penetrated to the upside, will JPMorgan et al as sellers of last resort step in to prevent the rallies from going supernova?  They've always done that in the past.  Will this time be different?  Beats me.
As Jim Rickards has so correctly pointed out, the price management scheme is now so obvious that the manipulators should be embarrassed by what they're doing.  Embarrassed or not, will it make any difference?
Whatever happens, I'll be watching the price activity closely from this point onward---and I was encouraged by the share price action today despite the beating the metals themselves got.
And if I had to bet ten bucks, I'd say that we're done to the downside. But I felt that way at the close of trading on Tuesday, Wednesday and Thursday as well.  The open in New York on Sunday evening should tell us a lot.
I'm done for the day---and for the week.  I'll be interested in what Ted has to say in his weekly review for his paying subscribers later today---and I'll steal what I think I can get away with for my Tuesday missive.  See you then.

Additional items......

Jesse's Cafe Americain .......

30 MAY 2014

Gold Daily and Silver Weekly Charts - Why The State Might Prefer a Purely Digital Form of Fiat Money

"This place is like somebody's memory of a town, and the memory is fading.
It's like there was never anything here but jungle."

Rust Cohle, True Detective

Gold and silver took it on the chin for this week, as we welcome the active month of June.

This is a historically weak period for precious metals, and the metals bulls should be glad of it, because contrary to the portraits being drawn on the paper charts, they are in a highly vulnerable position with regard to physical supplies. They are never so brazen as when they are desperate, and seek to put on a bold face, while quietly shitting their pants offstage.

I have been meaning to say something more about digital money, and the recent blurbs in its favor by some of the Western central banks, and their kindred voices amongst the economists. I intended to write a follow up to yesterday's Arbiters of Value, expanding the discussion to pure fiat in purely digital form, but became distracted by other matters. As I have noted before, sometimes procrastination has its benefits, because someone else speaks up, and says what one is thinking, and sometimes even better and more concisely.

I think Janet Tavakoli 'hit the nail on the head' with this recent letter she sent to The Financial Times with regard to Kenneth Rogoff's proposals for purely digital money. It was of course a nonsensical piece, but one might ask themselves why such a thing would be put forward now in this manner.

Here is an excerpt from the letter. You may read the entire piece at the link provided below.
It seems to me Kenneth Rogoff’s commentary, “Paper money is unfit for a world of high crime and low inflation” (May 28), is less about deterring crime and the problems of “low” inflation – food consumers in the US know double-digit inflation – than it is about eliminating the zero bound on interest rates and preventing people from bailing into cash.
In other words, Mr Rogoff proposes to machinegun one of the lifeboats by eliminating paper currency as an alternative to unlimited digital currency..
His specious argument about the anonymity of paper currency facilitating tax evasion and crime is propaganda..."

Janet Tavakoli
Tavakoli Structured Finance
Chicago, IL USA

Read the entire letter at The Financial Times

'Negative interest rates' are a hightoned euphemism for systematic confiscation, a highly regressive form of bail-in.

I could not have said that better myself.  When money is purely digital, the state obtains a significant control over all money everywhere, no matter what 'security' and 'algorithms' are said to be built into it.   Digital anything requires a exceptional amount of trust in what those who manage the system do while no one is watching.  And I would like to think that we are well beyond that point by now.

Non-Farm Payrolls report next week. We are now in the June delivery month, and the relevant chart shows the initial positions stood for below.  Gold fell to a deeply oversold level on heavy volume for the option expiration 'mini-puke.'

As a reminder, the importance of the Comex is fading, and it will begin to fade even more quickly as the year progresses until it falls into irrelevancy, unless it is reformed.

Have a pleasant weekend.


European Central Bank expected to push key interest rate below zero

ECB Prepares to Launch Fresh Tools to Battle Low Inflation
By Szu Ping Chan
The Telegraph, London
Saturday, May 31, 2014
The European Central Bank is preparing to take monetary policy into uncharted territory this week as it fights to prevent the 18-nation bloc from being sucked into a Japanese-style deflationary trap.
Mario Draghi, the president of Europe's central bank, is expected to unveil a package of measures designed to boost eurozone lending and stimulate growth, including reducing one of its key interest rates below zero.
Analysts expect the ECB to introduce a negative deposit rate, meaning the central bank would charge lenders to hold money with it overnight. Such a measure has never been introduced by a major central bank, although Sweden and Denmark have set negative rates on reserves. ...
... For the full story:

Gold Prices Possibly Manipulated For a Decade: Professor

Tune in to Kitco News' exclusive interview with Rosa Abrantes-Metz, the researcher responsible for creating waves in the gold market earlier this year regarding manipulation in the London gold fix. Metz speaks with Daniela Cambone to discuss the research paper and her findings, which are soon due for release. "We found that, particularly since 2004, the incidents of large spikes in prices for spot gold has very significantly increased for the PM fixing," she says. ... (read more)

Silver still in backwardation on the Shanghai Futures Exchange (first delivery month +6% over COMEX)

Bitcoin Price Crosses $600, 

Rising 34% in One Month

 (@emilyspaven) | Published on May 30, 2014 at 13:26 BST | NewsPrices

The price of bitcoin has increased above $600, rising over 7% in the past 24 hours and 34% in a month.
The last time the price was over $600 was 21st March, during a gradual decline that eventually saw the value reach a low of $344 on 11th April.
For the majority of this month, the price has ranged between around $418 and $453, beginning to rise above this level the week after the Bitcoin2014 conference in Amsterdam.

coindesk-bpi-chart (8)
The price of bitcoin topped $600 today.

This week’s price increase follows the news that US satellite service providerDISH Network is to start accepting bitcoin payments later this year.
DISH Network Corporation, which employs more than 30,000 people, has more than 14 million customers and reported revenue of $13.9bn in 2013.
This makes it the largest company, to date, to accept bitcoin. Previously, online retailer Overstock was the largest, with revenue of $1.3bn in 2013.
Bernie Han, executive vice president and chief operating officer at DISH, said: “Bitcoin is becoming a preferred way for some people to transact and we want to accommodate those individuals.”
DISH has chosen Coinbase as the company that will process its bitcoin payments. Coinbase claims to currently have around 32,000 businesses on its books, with competitor BitPay citing a similar figure.

Sat May 31 13:30:55 2014

Gold's Next Critical Level: $1,232 - Chart This!

Kitco News heads into the weekend with Gary Wagner to discuss gold’s lower prices and to see what the charts are telling him! “I don’t know about the $1,000 level,” he says when asked if gold could reach that price point. “The critical number to me is $1,262.” However, Wagner says that if that level cannot hold and the market continues under pressure, he will be looking at $1,232 for the metal. Tune in now to get his in-depth analysis of the gold markets and learn ... (read more)

Gold Market Looks To ECB Meeting, U.S. Jobs Data

By Debbie Carlson of Kitco News
Friday May 30, 2014 2:00 PM

(Kitco News) - The highly anticipated meeting Thursday of the European Central Bank could set the tone for the gold market next week, with expectations that the ECB will take some action to combat persistently low inflation and credit growth in the eurozone.
Gold and other markets expect action because of comments by ECB President Mario Draghi following the bank’s May meeting that the Governing Council was “comfortable with acting next time,” meaning its June meeting, to take some sort of stimulus measures. Draghi said at the time the council wanted to see more economic data before acting. Subsequent comments by other European Union finance officials have backed up Draghi’s original message.
But the ECB meeting is not the only major factor for gold for next week, as on Friday the May U.S. nonfarm payrolls report is set for release.
August gold futures fell Friday, settling at $1,246 an ounce on the Comex division of the New York Mercantile Exchange. The contract was down $45.90, or 3.6%, for the week. July silver also fell Friday, settling at $18.682 an ounce, down 3.8% on the week.  For the month gold declined 3.9%, while silver fell by 2.6%.
In the Kitco News gold survey, 18 participants see prices lower, seven see prices higher and two see prices trading sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts.
Market participants said ever since the early May ECB meeting, the U.S. dollar index has risen and the euro fallen in anticipation of stimulus.
Weak European economic data, with softer readings from German retail sales, and weak consumer price index data out of Spain and Italy on Friday, may reinforce ideas the ECB will act next week, says Brown Brothers Harriman. “Most expectations appear to be for a 10-15 (basis point) cut in key ECB rates and possibly some new facility to foster credit to small and medium businesses,” they said.
Analysts at Standard Chartered said currency markets have fully priced in cuts to the ECB’s deposit and refinance rates. But what if the ECB doesn’t act, or does less than what the markets anticipate? The risks for an “underwhelming outcome” are rising because the consensus expectations are for cuts, they said.
For gold this might mean a temporary boost, but Dan Pavilonis, senior commodity broker at R.J. O’Brien, said the larger trend for gold is down.
“There’s just more and more pressure on it, and less reasons to (buy)…. (Thursday’s) GDP numbers were terrible and you’d expect gold would have rallied if there was any flight to quality, but it didn’t,” Pavilonis said.

Related Stories:

Brian LaRose, technical-chart analyst at United-ICAP, said the U.S. dollar index moved above the 200-day moving average on Thursday, which could mean further gains for the greenback. “As long as the (dollar) index is headed higher, expect the (euro) to head lower. (We) see room down to $1.3399 next if $1.3562-$1.3533 can be broken,” he said.
That’s not good news for gold bulls. As long as the dollar “index is headed higher, our trend for gold will be down,” he said. The 61.8% Fibonacci retracement level from the $1,392.60 high targets a range of $1,238 to $1,227.30, he said.
This week gold finally broke out of the tight technical chart wedge formation, falling through support at $1,280 to test four-month lows.
Bullion dealers said they are now going to watch to see whether or not buying interest materializes at the lower prices. Physical buying has been noticeably absent in the market for the past few months, particularly out of Asia. Hopes are that the softer prices, along with a new government in India relaxing gold import rules, will spur some buying interest and support values.
In addition to the ECB meeting, gold-market participants will also look at the May U.S. nonfarm payrolls report. In April, the Department of Labor said nonfarm payrolls rose 288,000, while the jobless rate was 6.3%.
Early indications from economists suggest that the May jobs data may show further growth.
“Labor market indicators released since the last jobs report have been generally favorable for payroll growth,” said analysts at Nomura.
They said initial jobless claims and continuing claims trended lower in May, and regional manufacturing surveys show improved manufacturing employment, too. Nomura forecast total nonfarm payrolls to rise 225,000, with the jobless rate steady at 6.3%.
Robin Bhar, head of metals research at Societe Generale, said gold traders may need to brace themselves.
“We’ve seen quite a strong report the last few months. So the expectation would be for another positive report on Friday,” Bhar said. Assuming this is the case, the data -- like the expected ECB easing -- could pressure gold, Bhar added.

Enter the Dragon.

It was only a matter of time (a very short time) before China (and their new partner Russia) woke up to being poked and prodded by the U.S..  Last week saw the biggest geopolitical news possibly since the end of WWII nearly 70 years ago.  I do not make this statement for shock value, it is true.  70 years ago the United States held a global monetary conference in Bretton Woods N.H. that formalized the dollar as the world's reserve currency, this arrangement is about to change drastically. 

  Unbelievably this past week went by with almost no Western press coverage of China and Russia's new partnership.  What coverage there was did not even look 5 seconds into the future as to what it really means.  The biggest events were the $400 billion energy deal which will include pipeline infrastructure and the exclusion of dollars.  We accused China of spying and indicted 5 of their military officers of espionage.  The Russians also test fired an ICBM just prior to a massive "joint" naval exercise with China.  This was all followed by a Chinese fighter jet passing within 50 meters of Japanese fighters, a dangerous game of "I dare you".

  China as I mentioned last week dropped using Microsoft's Windows 8 on state owned computers and since then in very big news told all state owned entities to discontinue business with U.S. consulting firms  Cisco says that they have not received any new Chinese orders in a month and IBM supercomputers are now being taken out of service.  It is of utmost importance that you understand what is happening right before your very eyes.  The U.S. is being isolated and cornered on its own with WWIII already begun.  No, no shots have been fired yet (with the exception of Syria and Ukraine so far) but this is yet to come.  So far it has been a war of words and finance, finance being what it's all about.

  I wish that Americans would for their own sake wake up to what is happening because one morning soon we will wake up to go to work (or not) and our world will have changed.  Actually, it is better said that our world will have "been" changed for us.  Our world is changing right in front of us and in the open yet so few see it.  China and Russia (along with over 100 other countries) are none too pleased with the way we have "run the world".  Unfortunately, this tandem now has the ability to steer our destiny and if they wish, destroy our way of life. 

  I have seen analysis that states the Chinese will (can) never cut ties with the U.S. because it would kill their exports, I disagree with this.  I truly believe that this latest announcement of state owned companies dropping business with U.S. consulting firms is only a precursor of things to come and ultimately the start of a trade war.  I wrote a week or two back that "they don't need us, we need them" and this is true on so many levels.  It is true financially, economically and from the standpoint of "our way of life". 

  I don't think that even those who understand this concept really understand just how easy it now is for the SinoRussian partnership to cripple the West.  A concerted dumping of dollars and U.S. Treasuries coupled with demands for the delivery of gold and silver from our impaired vaults would pretty much do the trick financially.  If this were followed by a trade embargo of physical products, a trip into WalMart will become a past luxury.  You can pooh pooh this analysis if you'd like, if I (we) understand this, the military minds in both Russia and China understood it far earlier. 

  I ask you this, do you believe that our "dependence" on China for capital and goods was a fluke thing or happened just by chance?  No, just as a drug dealer gives enough "freebie" product early on to "hook" the junkie, this is what has happened to us.  China made it easy for us to borrow money and to consume products because they supplied us, they can just as easily shut off the spigot.  Could they have just shut off the spigot for no reason?  Physically yes but practically no because then they would be the bad guys in the eyes of the world.  No, they waited for the U.S. to "cheat" enough times in visible fashion so that the world saw with their own eyes.  We have spied, cheated, stolen, killed foreign leaders and supported coups all over the world, were China to shut us off in any or every fashion the "world" would more than likely applaud at this point.

  I am so saddened to have come to this conclusion because I grew in the era where the U.S. wore the white hat and stood for justice.  Unfortunately this is no longer the case.  Allies nor business partners know what to expect from us anymore.  What we say, we don't do and what we do, we say we didn't do it.  Foreigners see this as plain as the nose on their faces, for the most part Americans unfortunately don't see it at all.  "We" don't see it because we don't want to, we don't want to because it is as "ugly" as anything we've ever seen.
  Please understand that the Chinese are assuming a leading role in many separate yet connected areas.  This is being done "gracefully" and they have allowed the U.S. to flail our arms and speak poorly for the world to see.  On any given day the Chinese have the ability to change our lives forever.  No charts nor crystal balls exist to tell us when this will happen, all I know is that they will... because they can and we have abused our power to the detriment of others and done it publicly.  If you truly understand the Eastern mindset, they have "helped" us do it of our own free will. 

  I have been asked why I am writing so much about Russia and China.  You must understand that as I see it, the Sun is rising in the East and setting on the West.  We (the U.S.) have been hanging on to past glory and power literally since the turn of the century.  Economic numbers have been grossly fudged, our news has been massaged, altered and even hidden from us.  It's as if "if we don't see it or know mustn't be".  The reality is that the rest of the world sees it and knows it, the reality is that wealth and power are shifting and changing hands.  I believe that if you see this, understand it and know it, you can at least attempt to protect yourself from what is coming.  The timing of your "personal economics and finances" will be directly affected by decisions that are being made in Russia and China.  This was not the case 20 years ago, unfortunately it is today.  If you ignore the current geopolitics, I believe that you do so at your own (and your families risk). 

  I plan either for Monday or later in the week to write about a "stockbroker" that I recently met.  He was a very nice guy... but oblivious and I believe "representative" of why doing your own homework and why geopolitics are so important to truly understand.  
Until next week I will leave you with this thought, he asked me "but everything is doing so well, how can what you are telling me be true?".  

Regards,  Bill Holter