April 30, 2013
- Oil jumps as war drums beat in Washington: But how exactly do politicians propose to supply “the right people with the right weapons”?
- Another S&P record, but Treasury prices sit at a year-to-date high: The real story behind the “great rotation”
- Old hat: Short supply of precious metals at retailers. New info: What about the people who supply your retailer?
- As Japan’s stock market rises, so do these singers’ skirts… more on-the-ground stories of precious metals in short supply… your last chance to claim loyalty rewards… and more!
“There is a moral imperative to try to stop the onslaught against the Syrian population,” urges President Obama’s former Middle East adviser Dennis Ross. “But there is also a strong U.S. national security imperative.”
Hmmm…
Oil — at least the West Texas Intermediate variety — hasn’t poked above $100 a barrel in nearly 12 months. But events in the Middle East have propelled it from below $88 a week ago to $93.19 this morning.
“A familiar coalition of liberal hawks and Middle East hands is now pushing the president toward intervention in Syria,” says the Financial Times. The push got stronger last week when the White House said the U.S. spooks had “varying degrees of confidence” that the Syrian government of Bashar al-Assad had used chemical weapons and thus crossed the administration’s “red line.”
But wait: “New questions have emerged over the source of the soil and other samples from Syria which, it is claimed, have tested positive for the nerve agent sarin,” reports the U.K. Observer.
Eyewitness reports of one attack described “white smoke” coming from shells that smelled like hydrochloric acid. Except sarin is colorless and mostly odorless.
Of course, events 10 years ago proved that disputed claims over “weapons of mass destruction” aren’t enough to stop U.S. regime change in the Middle East. “I think it’s important for the administration to look for ways to up the military pressure on Assad,” says an undeterred Sen. Carl Levin, chairman of the Armed Services Committee.
Then there’s the question of the rebels — neatly encapsulated in this bumper sticker from LibertyStickers.com…
The full quotation, to CBS’ 60 Minutes last year, went like this: “We know al-Qaida [leader Ayman al-] Zawahiri is supporting the opposition in Syria. Are we supporting al-Qaida in Syria? Hamas is now supporting the opposition. Are we supporting Hamas in Syria?”
The question is, if anything, more relevant now than it was when Mrs. Clinton uttered it more than a year ago. “Nowhere in rebel-controlled Syria is there a secular fighting force to speak of,” said a New York Times dispatch from the war zone last weekend.
Of course, in the minds of some politicians, this fact makes the case for U.S. intervention even more urgent: “We’ve gotten to the point now where the opposition has been affected by the radicals,” says Sen. Lindsey Graham (R-S.C.) “I think we can arm the right people with the right weapons.”
As Addison wrote with Bill Bonner in Empire of Debt, the empire has a logic all its own.
Then again, maybe support for al-Qaida types has been the plan all along, even before Obama came on the scene.
“To undermine Iran, which is predominantly Shiite, the Bush Administration has decided, in effect, to reconfigure its priorities in the Middle East,” wrote The New Yorker’s Seymour Hersh in 2007. That is, the U.S. began to egg on the 1,354-year-old conflict between Shiite and Sunni Islam. Divide and rule.
“In Lebanon,” wrote Hersh, “the administration has cooperated with Saudi Arabia’s government, which is Sunni, in clandestine operations that are intended to weaken Hezbollah, the Shiite organization that is backed by Iran. The U.S. has also taken part in clandestine operations aimed at Iran and its ally Syria. A byproduct of these activities has been the bolstering of Sunni extremist groups that espouse a militant vision of Islam and are hostile to America and sympathetic to al-Qaida.”
Fast-forward six years: The Obama White House is working openly with the Sunni governments of Saudi Arabia and Qatar — which are funneling the money and weapons to the Sunni rebels in Syria trying to take down Assad and his Shiite brethren.
“It’s the Sunnis who run Saudi Arabia, Egypt, Jordan and many of the other countries in the Middle East,” says Byron King by way of background.
“On the other side, you’ve got the Shia Muslims. It’s the Shia that run Iran. And now run Iraq, as well as Lebanon and Syria. Think Protestants and Catholics in Northern Ireland… Serbs versus Croats in Bosnia… or even the religious Thirty Years’ War that ripped apart Europe in the 17th century. The Sunni-Shia split is that intense.”
And Syria is only one potential flashpoint…
Click on the map to see all the potential flashpoints…
and how they could drive oil to $220
Point is there’s a lot of dry tinder just waiting to go up. And when it does, sub-$100 oil will be a pleasant memory. In fact, Byron makes a compelling case for a price north of $200: Protect your portfolio accordingly.
Stocks are sliding after the S&P 500 set a record yesterday at 1,593. Small caps are holding up better than blue chips — the Russell is down barely, while the Dow has shed a half percent.
Pfizer delivered an earnings disappointment, but the Case-Shiller home price index registered a 9.4% year-over-year increase — the highest since May 2006. Midwest business conditions are contracting for the first time since 2009, but consumer confidence is on the rise again.
Meanwhile, the yield on a 10-year Treasury is down to 1.64% — the lowest since mid-December. As we noted in Apogee Advisory recently, the “great rotation” of 2013 touted by the media isn’t from bonds into stocks, as commonly claimed — it’s from money market funds into both bonds and stocks.
After a slight pop yesterday, gold is back where it was 24 hours ago, at $1,467. Silver’s at $24.12.
“It’s worse than you may know,” writes Jeff Clark at Casey Research about the tight supply of physical precious metals.
We know about — and have chronicled — the intense retail demand. “This information is indicative,” writes Mr. Clark, “but more important is the activity among the wholesalers.” In other words, is there just a short-term supply bottleneck or is something bigger going on?
Wholesalers tend not to speak up by name, so Clark says we have to take the information he gleaned from them on faith. “We can say this, though: We spoke with almost all the major ones” the week of April 15 — in the wake of gold’s swoon over two trading days. His conclusions…
- Bullion banks: “As a group, there were roughly four times as many buy orders as normal.” The buy/sell ratio was roughly 9:1
- Bullion traders: “There were twice as many trades placed as usual — and the buy/sell ratio was a whopping 95:1”
- Precious metals refiners: “These entities deal in large trades only. None would reveal the quantity of their orders, but two stated they had no sell orders. A third told us they had one sell order out of 100 transactions.”
“What we learned from these big players,” Clark concludes, “is that no one was a net seller. There was across-the-board purchasing, and on significantly increased volumes. We heard more than once that ‘We’ve never seen anything like this.’
“Keep in mind that these are the entities that supply your local dealer. So if your favorite shop found it difficult to access product last week, their woes are unlikely to let up… Premiums will likely continue to rise, and… delivery times aren’t going to shorten right away. If you’re a bullion buyer, purchasing now could save you some money and hassle over waiting.”
[Ed. note: Our friends at the Hard Assets Alliance report that bullion is still available at reasonable premiums with few delays — thanks to their extensive dealer network. Orders for even the most popular products are being filled in about two weeks.
You can open a Hard Assets Alliance account with no setup fee by following this link. For their precious metals IRA option, look here. Agora Financial may be compensated once you fund your account, but we wouldn’t back the Hard Assets Alliance if we didn’t believe they’d do right by you.]
“When the economy is good, the skirt lengths get shorter,” says Yuki Sakora.
The “hemline indicator” was first posited during the Roaring Twenties by economist George Taylor: Booming market, lots of leg. But a Japanese girl band calling itself Street Corner Economists — of whom Ms. Sakora is a member — is taking it quite seriously.
“When the Nikkei goes below 9,000,” she says, “we wear long skirts; when it’s between 10,000 and 11,000, we go medium-length, and miniskirts when it’s 11,000-13,000.”
Today’s close in Tokyo, let it be noted, was 13,860.
But all that leg is no mere publicity stunt. No, the Street Corner Economists are evangelists for the easy-money policies of the new prime minister Shinzo Abe. Their signature tune “Abenomics” includes the stirring lyric “Let’s aim for 3% economic growth!”
No lie…
Asked by CNN what Abenomics means to her, Sakora said, “The weaker yen probably means prices will go up. But that helps exports. And I think companies will start to earn more and that will boost consumer spending.”
Oy… Did she study at Princeton under Krugman?
“Went to two local coin shops in central Pennsylvania last Thursday,” writes the first of several on-the ground reports from precious metals buyers. “Both have been around at least 10 years, because I’ve been patronizing them that long. Neither had any junk silver available at any price.
“One had some Engelhard silver and Buffalo coin 1-ouncers that he would not part with for less than 25% markup on spot. Other dealer had no junk, no Engelhards, no Buffalos, nothing. He was eager to buy anything I might have or come across, though, as he said he has a waiting list of people who will pay him spot plus 20% right now.
“These two coin shop visits are obviously anecdotal, but they confirm what I’m reading about what others are experiencing across the country — physical silver cannot be had anywhere near spot right now.”
“Went to my local coin/metals dealer in southwest Florida on Saturday,” another reports, “not so much as to buy (although I did purchase a 10-ounce bar) but to inquire about people selling versus buying, etc.
“They reported seeing activity going both ways with regard to silver; half selling, half buying. Despite these claims, however, they were totally out of silver rounds, and prices have doubled.
“They do still have Silver Eagles in stock selling at $28.50 per ounce, about a 20% premium. Previously, this shop sold them for $2 over spot, until the recent drop in price. Rounds went up from $1 over spot to $2. Same with bars of all sizes.
“They reported seeing more buyers of gold coming out of the woodwork than sellers.”
“My local dealer has been in the coin business for over 40 years. He told me that he can order bullion coins after you pay for them.
“If he gets in some silver bars, sometimes 10 or so 100-ounces, they are gone the same day. The few Silver Eagles and junk silver are kept for his numismatic buyers, some of whom are spending several thousand dollars at a time, and often.”
“The so-called ‘premium’ on silver,” one reader avers, “is a premium only if you consider the exchange rate for U.S. dollars (i.e., monopoly money). Realistically, compared to gold and its ‘premium,’ silver is still way underpriced.
“I continue to buy silver at these super low prices (even with the so-called premium) and lose no sleep. As the world’s reserve currency continues to devalue at an alarming rate, it’s a wonder that any precious metals are even priced in the Almighty Dollar anymore.”
The 5: Give it time, give it time…
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. Reminder: Your current round of “loyalty benefits” expires today at 5:00 p.m. To learn what you get in exchange for redeeming them, give this a look.