Could Stocks Drop Another 30%?

The stock market is taking a breather from the recent bloodbath.

 

The key moving average that primed us for a bounce is the 252-DMA. If you take an entire year, remove the weekends and holidays, you arrive at 252 days during which the stock market is open.

As you can see in the chart below, this has been a line of great significance ever since stocks started going bananas in 2012:

 

 

As you can see, the 252-DMA has been “the line in the sand” three times since 2012. It was unlikely we’d take this line out the first time the market broke down.

 

However, the technical damage of this breakdown has been severe. We’ve learned a number of things:

 

1)   When selling pressure comes in, stocks crater VERY quickly.

2)   There are not a lot of buyers looking to enter the market during dips this time around.

 

This second point is key. The primary drivers for this latest leg up in stocks (the one that began in early 2013 has been individual investors and corporate stock buybacks.

 

We now are losing both groups. Individual investors put a record amount of money into bond funds last week. This money had to come from somewhere and most of it can from stocks.

 

Regarding corporate buybacks, it is now clear that the massive buying binge was the result of executives trying to juice stocks higher so they could cash out their options at the greatest possible price. We know this because while Corporate executives have been pushing their companies to buy stock at a record pace, on a personal level they have been dumping their personal stakes.

 

So… we’ve got a weak and fragile market, losing two of its biggest drivers… at the same time that the Fed is ending QE. This is a recipe for a potential bloodbath. If we wipe out the “bubble” portion of the market move from 2009, we’re going to 1,250 on the S&P 500.

 

That’s over 30% lower from where we are now.

 

 

The market is primed to drop. Now is the time to prepare.

 

If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis "Round Two" Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.

 

You can pick up a FREE copy at:

 

http://ift.tt/1rPiWR3

 

 

Best Regards

 

Graham Summers

 

Phoenix Capital Research

 




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Now Available in Paperback: The United States of Paranoia

The
paperback edition
of The United States of Paranoia, my
history of American conspiracy folklore, comes out today. It
includes a new afterword on the post-Snowden era, so the book is
now both longer and cheaper, and it’s easier to carry
around too.

The reviewers have liked the book—and when I say “the
reviewers,” I mean pretty much all of them, at least as far as
newspapers and magazines and webzines and journals go. (You can
find some negative takes on
Amazon
and
Goodreads
, and I love this sour
tweet
to death.) It’s enough to make a man suspect an unseen
hand is acting behind the scenes, pulling the critical community’s
strings. Some samples:

I'm also thinking of publishing an alt-text edition.

“a terrific, measured, objective study of one of
American culture’s most loaded topics” —Publishers
Weekly

“so many tasty morsels of historical marginalia that it nearly
bursts with weirdness” —The
Globe and Mail

“immensely entertaining” —The
Boston Globe

“lively and often witty…few readers are likely to get to the end
of the book without having cherished notions challenged” —Salon

“a thoroughly researched and completely readable look at infamous
and forgotten conspiracy theories and presumed cabals throughout
American history” —New
York Daily News

“It’s all too rare to come upon a writer willing to attack the
sacred cows of the right and left with equal amounts of
intelligence and flair. Walker is, thankfully, that kind of writer
and a tireless and thorough researcher to boot.” —Los
Angeles Times

“A lively, extremely interesting, and occasionally more than
slightly scary book.” —Booklist

Amazon named it one of the top 20
nonfiction books of 2013
, and it made the Chicago
Tribune
‘s year-end
best-books list
too. A conspiracy theorist reviews it
here
, and a conspiracy debunker reviews it
here
. The book is also, I am informed, going to appear in the
background during an episode of CSI. Disappointingly, the
show assured me that “the person whose home it would be in is NOT
evil.”

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All That Is Broken With The US Financial System In One Chart

We have shown this chart before. We will show it again because, to nobody’s surprise, nothing has changed since then.

The chart in question, which we believe demonstrates all that is wrong with the US financial and banking system, shows JPM’s quarterly deposits, which in Q3 just hit a new all time record of $1.335 trillion, and its loans, which despite the much hyped rebound in Q2, once again declined to $743 billion from $747 billion in Q2 (so much for that lending-driven recovery?) leading to a new record low Loan-to-Deposit ratio of 56%. So while deposits are obviously hitting new record nominal highs quarter after quarter, when was the last time JPM’s loans printed at all time highs? The answer: just as Lehman filed for bankruptcy, when the number was $761 billion.

And for those who missed our explanation last time, here it is again, updated for the times:

As the blue bar shows, total loans issued by the biggest US bank were $743 billion in Q3 2014: about $20 billion less than in the quarter Lehman blew up. Four years later, and the US commercial bank lending apparatus is still in a state of depression. Or so it would appear on the books.

But why doesn’t JPM lend out more: after all that is the main pathway to stimulate the economy as all pundits will tell us. Simple: it doesn’t need to. As the red bars show, total consumer deposits held by the bank just rose once more, this time to a record $1,335 billion, up $15 billion in the quarter, pushing the deposit-over-loan difference to a new record $591 billion. This is happening exclusively due to the Fed, which when banks do not “create” money from loans (as they clearly don’t), has to step in with QE and create money on its own.

It also means that JPM has to allocate this excess capital somehow and until the London Whale blew up, was simply funding its prop trading desk with this deposit cash as “dry powder” to manipulate and corner various derivative markets courtesy of its unregulated London traders. Another result of course is that risk assets are bid up to record highs – excess reserves are a perfectly fungible source of margin collateral – even as the actual flow through of the Fed’s “wealth effect” is halted precisely due to the complete collapse in new loan creation – the primary “transmission mechanism” of economic growth.

In other words, by keeping the pedal to the metal on QE for the past 6 years, the Fed has giving the banks all the benefits of money creation (soaring deposits), without any of the risks (loan creation in a record low Net Interest Margin environment). And if you are JPM you will be perfectly happy with this arrangement and not seek to lend out any money, as the case has been for the past six years. Which means consumers who wish to take out loans to fund ventures and other growth strategies are fresh out of luck, because the banks that ordinarily supply them with this risk capital have simply shut down the process entirely, and instead are gambling in the stock market.

* * *

And that is precisely the jist of all that is broken in the US financial system, and why the Fed is in fact making things worse, not better, and is progressively destroying the wealth of the middle class, stunting any growth opportunities the US may have, and all the residual wealth is pumped into the hands of those benefiting solely from rising asset prices.




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NYPD Cops Tell Comedian to “Shut the Fuck Up” After Interrupting to Arrest Alleged Theater Masturbator

Cops from the New York Police Department (NYPD) stormed in
during stand-up comedian Adam Newman’s act to arrest a homeless man
allegedly masturbating in the theater.

The audience quieted down for the police but like a pro the
stand-up comedian tried to talk through the incident and
incorporate it into his routine. The cops didn’t appear to
appreciate it, especially when he asked them if they really
couldn’t wait until after the set to make that arrest, responding
that he should shut the fuck up. Watch below, where the cops come
in at about 40 seconds in:

Weston made a comment about the profanity but eventually
apologized to the cops. After they left, he noted that usually he’d
go crazy on a heckler who told him to shut the fuck up but that
it’s different with cops, and he couldn’t tell them to shut the
fuck up, could he?

These cops must not have heard about the civilian complaint
review board chairman’s desire to see police
use less profanity on the job
.

h/t sarcasmic

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Nick Gillespie: The Web’s Biggest Stars

Johnny CarsonBack in his
day, Tonight Show host Johnny Carson bestrode the small
screen likea
late-night colossus
, pulling in audiences that were massive and
persistent for 30-plus years at NBC.

But the future (or even the present) belongs not to broadcast
networks or even cable—it belongs to the Internet and a host of
personalities and creators that you’ve probably never heard of
unless you have teenagers or gamers in the house.

Founded in 2005,YouTube reaches
a billion unique visitors a month all over the planet. “100 hours
of video are uploaded to YouTube every minute,” claims the
service’s stats page, and “over 6 billion hours of video are
watched each month on YouTube—that’s almost an hour for every
person on Earth.”

In 1981, the music-video network MTV famously launched by airing
a short video for the two-year-old
Buggles
 song “Video Killed the Radio Star.” These days,
online video is slowly killing old-style TV stars and replacing
them with people who gained their fame in the new medium of online
video. Here are some of the biggest and most interesting phenoms of
that burgeoning world.

View this article.

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Meanwhile In Kiev…

Not satisfied with fighting pro-Russian separatists, Ukrainians are fighting among themselves in Kiev. As RT reports, Kiev police deployed additional forces around the parliament building after a group of demonstrators started throwing smoke bombs and firecrackers at guards in an apparent reprisal over MPs' failure to honor past nationalists. More than 15 officers have been hurt as far-right protesters clash with riot police at the government buildings on the anniversary of UPA (Ukrainian Insurgent Army). Perhapa more troubling is, if this is the internal tension now, how bad will it get in the winter when they are freezing as Ukraine says it won't prepay for Russian gas.

 

 

Bats, Chains, and firecrackers…

 

As RT reports,

The protesters launched their offensive shortly after Ukrainian MPs voted against considering a bill, which would treat Ukrainian nationalists, who fought against Soviet troops during World War II, as war veterans.

 

 

Tuesday is the anniversary of the UPA (Ukrainian Insurgent Army), an armed Ukrainian nationalist organization that at one point during the war sided with the Nazis to fight against Russian troops. The organization was accused of war crimes, including the killings of Jews and Poles in Ukraine, and was hunted down after Moscow fought off the Nazi invasion and took control of Ukraine again.

 

 

Modern Ukrainian nationalists from the Svoboda party are celebrating the anniversary with rallies across the country. The party's flags as well as those of the radical Right Sector movement can be seen in the crowd of people encircling the parliament building.

 

 

The bill, which the MPs decided not to consider on Tuesday, would give surviving members of the UPA benefits similar to those given to war veterans. Incidentally, it was submitted by the Svoboda party.

The scenes are ugly…






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Today at SCOTUS: Occupational Licensing Abuse on Trial

The U.S. Supreme Court will hear oral argument
today in the case of North Carolina Board of Dental Examiners
v. Federal Trade Commission
. At issue is whether that state
board engaged in illegal anticompetitive practices when it used its
powers to drive non-dentists from the teeth-whitening market.

The matter arose in 2006 when the state board, purportedly
acting in a public health capacity, started cracking down on
non-dentists who offered teeth-whitening services. But on closer
examination, this action turned out to be the opposite of a
legitimate government regulation. In fact, the board had a clear
conflict of interests. Six of its eight members are licensed
practicing dentists (elected to the board by other practicing
dentists), meaning that the board’s controlling majority had a
direct financial stake in preventing outsiders from entering the
teeth-whitening market and competing for customers. “At the end of
the day,” declared
the U.S. Court of Appeals for the 4th Circuit, which ruled against
the state board in March 2014, “this case is about a state board
run by private actors in the marketplace taking action outside of
the procedures mandated by state law to expel a competitor from the
market.”

Today’s case also represents a welcome departure from the
Court’s recent habit of dodging occupational licensing disputes.
For example, in 2012 the Court turned down a legal challenge to
Florida’s
preposterous law
forbidding the unlicensed practice of interior
design. Despite the fact that Florida’s own attorney general’s
office admitted that “neither the defendants nor the state of
Florida have any evidence that the unregulated practice of interior
design presents any bona fide public welfare concerns,” the Supreme
Court refused to get involved. Similarly, in 2004 and again in
2013, the Court refused to settle whether or not “dishing out
special economic benefits to certain in-state industries” (in the

approving words
of the 10th Circuit) justified a state’s
occupational licensing scheme.

The North Carolina Board of Dental Examiners should get no such
pass. The Supreme Court should affirm the 4th Circuit and rule
against the abusive state agency.

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Mortgage Application Pipeline At America’s Largest Mortgage Lender Drops To Lowest Since Lehman

So much for the much hyped, if quite negligible, second quarter rebound in mortgage activity. After rates tumbled, and continued to tumble, there was some hope that at least the offset to the bond market screaming contraction and deflation (something even stocks have realized in recent days), would be more American’s buying homes, which naturally means applying for mortgages. Well, that dead cat bounce has come and gone. As America’s biggest mortgage lender, Wells Fargo, reported moments ago when it once again magically managed to report EPS and revenues which came right in line with expectations (of $2.11 and $21.2 billion), the US housing picture is once again the worst it has ever been (excluding those days around the Lehman bankruptcy when all of finance died for a few weeks).

Case in point: according to Wells Q3 Earnings Supplement, while Mortgage Applications declined from a transitory one year high of $72 billion in Q2 to $64 billion, this number is going far lower. The reason: Wells’ Morgage Application Pipeline just tumbled back to $25 billion, matching the lowest number since Lehman, and putting an end to any debate about the state of the US housing market.

In short: the only people buying houses in the US now are foreigners laundering their illegal, tax-exempt profits (ever fewer) and those as close to the Fed’s ZIRP as possible, and, of course, paying all cash. Everyone else: not so much.




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Small Business Optimism Slides, Hiring & Capex Plans Collapse

Just when the talking-heads thought it was safe to proclaim small business is back, the data turns around and smashes them in the face. The headline NFIB Small Business Optimism index slipped to its lowest since June (the 4th month below the 7-year-high peak in May). More problematic was the sub-indices which saw plans-to-hire drop to six-month lows and wage-related series stalling out, capex spending plans plunge to 2-year lows, along with current job openings.

Hiring tumbles…

 

Capex plans collapse…

As Goldman adds, NFIB small business optimism edged down a bit more than expected in September.

KEY NUMBERS:
NFIB small business optimism 95.3 for September vs. median forecast 95.8

MAIN POINTS: NFIB small business optimism declined to 95.3 in September (vs. consensus 95.8), from 96.1 in August. By component, the largest declines occurred in plans to make capital outlays (-5pt to +22) and current job openings (-5pt to +21). However, the proportion of respondents describing now as a good time to expand their business rose to a new high for the recovery (+4pt to +13). Upward momentum in wage-related series stalled in September, as reported wage increases declined (-4pt to +18), while plans to raise wages remained unchanged at +15. Despite the September downtick in the headline index, small business optimism is not far from the post-recession high set in May.




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Swiss Gold Referendum “Propaganda War” Begins

Swiss Gold Referendum “Propaganda War” Begins

The referendum for the Swiss Gold Initiative is scheduled for November 30th and the propaganda war – between the Swiss National Bank (SNB) and the Swiss Parliament on one side and the Swiss People’s Party (SVP) on the other – has begun and we expect it to escalate  as the day draws nearer.


Swiss Gold Coin

The SNB, who oppose the initiative, has warned that a ‘yes’ vote would severely hamper the ability of the central bank to conduct its business. A proposal that the SNB should hold a fifth of its assets in gold and be prohibited from selling the precious metal in the future would severely restrict its ability to conduct monetary policy, Vice President, Jean-Pierre Danthine, told the Wall Street Journal. 

The gold referendum was proposed by the SVP and backed by the necessary 100,000 signatures required the put an issue to referendum in Switzerland. The SVP is one of the largest political parties in Switzerland. The party is the largest party in the Swiss Federal Assembly, with 54 members of the National Council and 5 of the Council of States.

This indicates a degree of popular support for the measure and all eyes are on November 30th. If the referendum is passed, it would result in the following:

?*the repatriation of Swiss gold reserves currently believed to be in the UK and Canada

*an increase in gold holdings of the SNB to reflect an allocation of 20% of total reserves (today gold accounts for 7.7% of total reserves)

*and a moratorium on the sale of Swiss gold reserves

The SNB opposes the repatriation issue on the somewhat flimsy grounds that in a dire national emergency foreign holdings could be sold quickly whereas domestic holdings may be tied up. 

This appears to be disingenuous as many international buyers including the People’s Bank of China and other central banks would likely be willing to buy the Swiss gold reserves in loco Switzerland, and then repatriate or take delivery to their own country.

Many Swiss look with alarm at the recent German experience, when Germany attempted to have their sovereign gold repatriated from the U.S. Of the 300 tonnes requested it has, to date, received a mere 5 tonnes. 

Speculation, even among more sober gold analysts, is that the central banks of the world no longer have the gold they claim to have. Some of the gold belonging to the people of the west appears to have been loaned, leased or indeed sold onto the market.

This may have been done in an attempt to suppress to gold price and maintain faith in the dollar, euro and other fiat currencies and indeed maintain faith in the fragile monetary and financial system.  

Much of the physical bullion is now in the very strong hands of store of wealth buyers in India, China and Asia. Other strong hands who have been allocating to gold are Asian and other central banks including Russia’s central bank as stealthcurrency wars continue. 

That central banks have likely been involved in manipulating the gold price was confirmed again recently by Alan Greenspan in his recent essay in Foreign Affairs on gold as an invaluable monetary asset where he wrote “[the western central banks] all agreed to an allocation arrangement of who would sell how much, and when…”

The requirement for the SNB to hold 20% of its reserves in gold is also opposed by the central bank on the basis of the jaded and disingenuous argument that gold does not pay interest and does not yield a dividend. Therefore, the stipends it regularly pays to the state and the cantons would have to be curtailed. 

This overlooks the fact that with interest rates at record low levels near 0%, central banks are receiving very little yield on their dollar and foreign exchange reserves.

It also ignores the very purpose of holding gold. As we consistently emphasise, gold is a real tangible, safe haven asset that cannot be debased by politicians, bankers and central bankers. 

In this time of continuing QE, it is more prudent than ever to hold a greater balance of gold as a hedge against fiat currencies being further devalued and from potential declines in stock, bond and property markets.

Indeed, as Bloomberg reported over the weekend, Mario Draghi has intimated that the ECB may disregard German objections and begin to expand its balance sheet and print euros in a last-ditch attempt to stave off deflation.

This, despite the fact that the same policies have been an abysmal failure in Japan and are not working in the U.S. 

Indeed, the weak data out of Europe last week spurred Stanley Fischer, vice-chair of the Fed, to state that the European situation would have to factor into any decision to raise interest rates in the U.S. 

This weak data and the apparently dovish tone of last weeks Fed statement had already had an adverse affect on the dollar – reversing a 12-week run-up – and equities in recent days- indicating, once again, that currencies are as volatile as gold and, in extremis, far less safe.

The reserve status of the dollar grows ever-more precarious as confirmed, yet again, over the weekend when Bloomberg reported that the governor of the central bank of China claimed that some countries were already using the yuan as a reserve currency, albeit informally. 

While on the subject of China it is worth noting that Chinese gold demand last year – previously regarded as voracious – was actually twice as high as had been estimated and is on track for over 2,000 tonnes again this year.

The previous estimate was based on flows of gold through Hong Kong. But Xu Luode from the Shanghai Gold Exchange confirmed what more astute gold analysts have been asserting in recent months,  that other cities in China are now also importing large volumes of gold – far more than through Hong Kong alone. 

Demand from the growing middle classes of China, India and the East continues to grow ever stronger. Clearly, China, India and Asia’s appetite for gold is far from sated.

Back in Switzerland, the SNB also objects to the third aspect of the Swiss Gold Initiative i.e. the moratorium on sales of Swiss gold. From their perspective it would encumber their ability to conduct business.

In a shameless display of attacking the man and not the ball and with tongue planted firmly in cheek, we would question the SNB’s skill in conducting effective monetary policy at all – at least insofar as gold is concerned. 

We would recall how, in 1999 – around the same time as Gordon Brown’s infamous blunder, the SNB sold a whopping 50% of the gold belonging to the Swiss people at the very bottom of the market in what appears to have been an attempted coup de grace on the “barbarous relic.” 

Gold in U.S. Dollars- 20 Years (Thomson Reuters)

Well fifteen years later and gold has risen from $250/oz in 1999 to over $1,230/oz or nearly 5 times, and gold is as valued as it has ever been, particularly by non western central banks and by the people of Asia.

The maxim that all fiat currencies eventually revert to their intrinsic value has generally been vindicated in monetary and economic environments such as we are now witnessing. 

And if the mass of what has historically been regarded as a true store of wealth, gold bullion bars, are now sitting in vaults in the East – it suggests that we in the West could be in store for further currency devaluations and a further decline in our living standards.

With this in mind we hope the Swiss people display their fierce independence and reject the advice of the “experts,” many of whom got us into this mess, in favour of the policies that have kept them peaceful and prosperous for centuries.  

The referendum has the potential to become a lightning rod that leads to an increase in awareness about the importance of gold as a hedging instrument and a monetary, safe haven asset. It could also potentially lead to a marked increased in official or central bank gold demand and substantially higher gold prices.

Must Read Guide To Gold Storage In Switzerland

 

GOLDCORE MARKET UPDATE
Today’s AM fix was USD 1,233.00, EUR 974.55 and GBP 772.41 per ounce.
Yesterday’s AM fix was USD 1,228.00, EUR 969.14 and GBP 763.82 per ounce.
    
Gold climbed $9.00 or 0.74% to $1,232.70 per ounce and silver rose $0.10 or 0.58% to $17.45 per ounce yesterday.         

Silver in U.S. Dollars – 1984 to October 14, 2014 (Thomson Reuters)

Gold in Singapore ticked marginally higher initially  but then saw slight falls and it remains largely unchanged from yesterday’s close in New York.

SPDR Gold Trust holdings, a gauge for investor demand, climbed 1.79 tonnes to 761.23 tonnes on Monday, making it the fund’s first inflow since September 10th.
News of the latest delay in interest rate hikes from the Fed and concerns about the Eurozone and global economy has seen sharp sell offs in stock markets. This coupled with the dollar registering its worst day in a year, sent investors into safe haven gold bullion.

Must Read Guide To Gold Storage In Switzerland

www.GoldCore.com




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