Fake Statistics, Freaky Silver

January 18, 2013

  • Payback’s a female dog: Argentina’s comeuppance for cracking down on the economists who call BS on government inflation figures
  • “That’s all you need to know”: Guenthner on yesterday’s don’t-fight-the-tape lesson
  • The silver plot thickens: 10 days, 6 million Silver Eagles… while metal floods the biggest silver ETF
  • Krugman Twitter war becomes an opera… readers take aim at Mayer, Rancho Santana and the God Switch… how our new PRO service already saved one reader $600… and more!

  “Something has to be done to change this,” read the tweet. And with that, the “hacker collective” known as Anonymous took down an unlikely target last night: Argentina’s National Institute of Statistics and Census, known by its Spanish acronym INDEC.

Argentina is ground zero for manipulation of official inflation figures. INDEC says the cost of living rose 10.8% last year. Consultants and critics say 25.6% is more like it.

But they say so at their own peril: In 2011, the government of President Cristina Fernandez de Kirchner “levied heavy fines, and in some cases criminal charges, against several economists for publishing inflation estimates that were significantly higher than what INDEC reports,” according to Dow Jones Newswires.

“They lie to the people, but the people are true to their word,” Anonymous replies. The Daily Reckoning’s Joel Bowman concurs: “Inflation is theft… and the people here know it,” he wrote yesterday before Anonymous made its move.

Kirchner is an idiot… but she’s no fool. Last year during a talk at Georgetown University, she was asked about her country’s number-fudging. She responded by asking what the U.S. consumer price index was. Told it was 2%, she said, “Oh, really? Come on! And you believe that? If Argentina’s inflation rate was at 25% like some people say, the country will blow up in the air.”

“Hey, everybody does it…”

At last check, INDEC’s website was still down. Wonder if the U.S. Bureau of Labor Statistics is fortifying its firewalls today… Heh.

  Stocks are mixed as the week winds down. All the major indexes are slightly in the red, the S&P off three points from its new post-2007 high yesterday of 1,480.

“It does us no good to bicker with the rallies and corrections,” writes technician Greg Guenthner — mindful of yesterday’s melt-up.

“Never mind the fact that January job reports are always a little screwy after the holiday season. Or that manufacturing in Philly missed its number by a good margin. And don’t forget that while 71% of companies in the S&P reporting earnings so far have beaten estimates, fourth-quarter profits have grown only 2.5%. That’s the second-slowest growth period since 2009, according to Bloomberg.

“The market doesn’t care about these concerns. I’m not saying they won’t matter at some point. But right now the market wants higher. Mood is trumping any potential bad news right now.

“In the short term, we will see higher prices. That’s all you need to know.”

Greg is now delivering trading insights like these every day before the open in The Rude Awakening — the morning complement to your afternoon Daily Reckoning. Long-suffering “DR” readers are automatically getting it in their inboxes. If you’re not among them, sign up at the homepage.

  Precious metals are little changed from 24 hours ago. Spot gold goes for $1,686, silver for $31.82. Dollar strength is providing a bit of resistance: The dollar index pushed above 80 this morning.

Platinum, meanwhile, has once again fallen below the gold price. At last check, the bid was $1,669.

  Ten days was all it took for the U.S. Mint to empty its inventory of Silver Eagles. The 2013 issue didn’t go on sale until Jan. 7… and as of yesterday, the Mint informed its dealer network that the first batch is sold out.

“Periodic suspensions and rationing of Silver Eagle bullion coins had become almost commonplace between the years of 2008 and 2010,” according to Coin Update. “The past month seems to be a return to the times of old.”

Sales so far this month total 6,007,000 — a number eclipsed only by January 2012, with the record in January 2011. That record might fall; the Mint says the next batch is due to arrive the week of Jan. 28.

  Meanwhile, “there was a mysterious jump on Thursday of 572 tonnes in the quantity of silver held by the custodians at iShares Silver trust (SLV),” writes Alasdair Macleod at GoldMoney.

According to Joshua Gibbons at a site called about.ag, that’s $500 million in new shares, and by far the largest deposit into SLV in at least two years.

“This is a huge amount,” Macleod concurs, “which, if genuine, suggests the market is cleaned out of physical. If not, the custodian in the interests of an orderly market owes an explanation.”


100   “It appears that a widespread retail, and perhaps industrial, physical silver shortage is developing and escalating by the hour,” reads an excitable post from the reliably excitable SilverDoctors webpage.

It cites an Apple sales contractor who says it’s been 10 weeks since Apple shipped any 27-inch iMacs due to “production problems.” Seems the model’s new Iris screens use a lot more silver.

“Apple manufactures its iMacs and iPads in China,” the post goes on, “and China is now importing massive amounts of silver, where once a few years ago it was a net exporter — and this in spite of a huge increase in domestic silver production!”

Double hmmm…

100   Watch China’s real estate bust to return with a vengeance, warns our macro strategist Dan Amoss: “Many poorly planned real estate projects are not producing cash flow. The loans that funded these projects were, in many cases, not rolled over during China’s credit tightening phase of 2010-11.

“Noncreditworthy borrowers, shunned from the banking system, were desperate to find new sources of funding. They found high-interest, short-term funding from ‘trust’ companies. Trust companies match savers looking to earn high interest rates with desperate borrowers.

“At the end of last year, borrowers scrambled to secure loans from trust companies. According to new data from China’s central bank, trust loans rose 679% in the year ending December 2012, to 264 billion yuan (US$42 billion). High-interest-rate trust loans now make up 16% of China’s entire pool of financing (including stock and bond sales).

“Trust loans, like payday loans in the U.S., have short maturities. ‘The amount of loans in China due to mature within 12 months doubled in four years to 24.8 trillion yuan,’ reports Bloomberg. Short-term loans amount to more than 50% of Chinese GDP.

“Local governments are big trust loan borrowers. They’ve recently reverted to bad, old infrastructure spending habits. The recent revival in infrastructure spending may be cut off when trust loan defaults soar and the central government is forced to restructure this mess.”

How can you profit from turmoil in China? Learn how to short China’s entire financial system in a single NYSE-listed stock in today’s 5 Min. Forecast PRO. If you’re already subscribed, it’s at the bottom of this email. If you’re not, you still have four days to take advantage of a free trial.
  “Let’s write about something we know nothing about & be smug, overbearing & patronizing,” Estonia’s bitter President Toomas Hendrik Ilves tweeted last June in Paul Krugman’s direction.

“Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a ‘wasteland,'” he went on, referring to Krugman’s “Estonian Rhapsody” article criticizing the Baltic country’s austerity measures.

“Twitter wars” as the media has dubbed them, especially when it comes to Mr. Krugman, are nothing new. What is new is composer Eugene Birman’s Krugman vs. Ilves-inspired project: a “financial opera.”

Nostra Culpa (Our Fault),” journalist and the project’s libretto writer Scott Diel explains to AFP, “is a short 16 minute operatic piece which takes up the age-old economic disagreement of austerity vs. stimulus.”

The title is inspired by a series of mocking tweets from Ilves concluding in, “Let’s sh*t on East Europeans.”

“Scott took various parts of the president’s tweets,” Birman told The Wall Street Journal, “and we tried to create almost a refrain for the respective public figures. For Krugman, for example, it’s simply ‘Stimulate!’ while for Ilves, it’s ‘Nostra culpa.'”

  This isn’t the only thing Mr. Krugman’s “print and prosper” views have inspired lately…

“If New York Times columnist Paul Krugman, ” Breitbart reported last September, “debates Austrian economist Robert Murphy, a New York food bank will get over $73,000.”

Last year, Robert Murphy, an Austrian School economist and anarcho-capitalist, started a campaign to encourage the Keynesian Krugman to join him in debate.

Although the campaign has reached a whopping $81,365, Murphy’s had no luck: “Yet Krugman,” Breitbart goes on, “who believes in income redistribution to help the poor, has refused to debate Murphy.”

We wonder if he’s tried Twitter.

[Ed. Note: For those unfamiliar with Robert’s work, he’s been attributed to predicting the housing crisis before it popped in October 2007 in an article titled, “The Worst Recession in 25 Years?”

He wrote, “One of the consequences that has already manifested itself is the housing bubble. But a more severe liquidation seems unavoidable. The recent Fed [interest rate] cut may postpone the day of reckoning, but it will only make the adjustment that much harsher.”

Last week, we were able to get Mr. Murphy in our studio to publicly release his newest forecast and three specific “triggers” to watch out for before the next financial crisis hits. He’s calling it The Anatomy of Booms and Busts: How to Detect, and Protect Yourself From, the Coming Crisis. This exclusive three-day installment can be accessed only until Sunday at 5 p.m., here.]

  “Is it possible,” a surly reader writes, “to get any objective analysis on precious metals, instead of never-ending pumps by front-running gold fanboys such as Chris Mayer?

“Oh, but by all means, keep humping Rancho Santana. Great photos. Makes me want to jump on a plane. Who cares if it is in BF Egypt. Isn’t that the point?”

The 5: Chris Mayer? A “front-running gold fanboy”? Now that’s a 5 first.

As for the Ranch, no it won’t be everyone’s cup of tea… but what place is? Fact of the matter is we’ve had overwhelming response to our plans for the next Chill Weekend next month. Enough that we’re looking to do another sometime this spring. We’ll keep you up to date.

Heck, we feel like showing another photo…

  “I love your stuff…at least, most of the time.”

[This is a nice twist from the usual — the “however” part right there in the first sentence.]

“But I can tell you with the absolute certainty of Scripture that God alone has had, does have and forever will have the power to grant a person ‘eternal life.’ Heaven will NEVER be robbed of that… by any man at any time. It’s a guarantee! ‘For inasmuch as it is appointed for all men to die once and after this comes judgment.’ (Hebrews 9:27) God’s Word on the matter is true…and every man’s hope otherwise — a most cruel deception.”

The 5: Taking the God Switch a bit too literally, are we?

Well, we knew from the outset when our researcher came back with the fruits of his research that it would stir the pot. As always, we leave it to you to make an informed decision.

  “With respect,” a reader writes on the conflict in Mali, “the Tuaregs have been resisting French imperialism since the late 1800s. No doubt the recent events in Libya and renewed French (and U.S.?) incursions into Mali have rekindled their hatreds, but there does seem to be more of a back story than you suggest. Thanks, and love The 5.”

The 5: You mean history didn’t begin on Sept. 11, 2001? Imagine that…

  “I just signed up yesterday after you beat me over the head a few times,” writes a new reader of The 5’s PRO level of service. You already saved me upward of $600 with the VERY GOOD handbook.

“I called my broker and got $3 off each trade. I did about 300 trades last year and 34 so far this year.
I know the math doesn’t work because I had a lot of free trades.”

The 5: Thanks, we’re happy to oblige.

If you haven’t already signed up, you got an extremely brief email from us this morning reminding you there are only four days to take advantage of our free trial offer. It looked like this…

We’re not trying to be obnoxious. We’re just making the point that once this free trial offer expires, the likelihood is we will never extend it again. No time like the present.

  “Adored the investor kitty joke! So cute!”

The 5: You’re too kind: This editor spent entirely too much time coming up with it yesterday… and still thought it was lame when all was said and done!

Have a good weekend,

Dave Gonigam
The 5 Min. Forecast

P.S. Moments before press time, the Federal Reserve released transcripts from its August 2007 meeting. “Federal Reserve officials in August 2007 remained skeptical that housing foreclosures could cause a financial crisis, just days before the Fed was jolted into action,” says The New York Times in its best irony-free style.

“Just three days later, the Fed’s chairman, Ben S. Bernanke, convened an early-morning conference call to inform them that the central bank had been forced to start pumping money into a financial system that was suddenly seizing up. More than five years later, the system remains heavily dependent on those pumps.”

As noted above, Robert Murphy saw the crisis coming at a time the Fed thought everything was peachy keen. He’s identified three triggers for the next crisis coming our way… and one of them’s already been pulled.

Don’t miss Mr. Murphy’s special video series The Anatomy of Booms and Busts: How to Detect, and Protect Yourself From, the Coming Crisis. There’s still time to sign up, but not much time: We close the doors at 5:00 p.m. on Sunday.

P.P.S. We’re back tomorrow with 5 Things You Need to Know — your weekly way to catch up on anything you missed 5-wise during the week. U.S. markets are closed Monday for Martin Luther King Jr. Day… so the weekday edition of The 5 returns on Tuesday.


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