The Day After the “Triple Threat”

Posted On Jun 9, 2017 By Dave Gonigam

  • The stealth trade in beer pong balls…
  • … plus a rundown of beer taxes state by state
  • The “triple threat” fizzles… except for the British pound
  • Another day, another “paper gold” manipulation…
  • … even as vault demand for real gold accelerates
  • “The next major tech interface and revolution”… Balkan wars in America?… a $1 million reward to catch gold manipulators… and more!

It’s been a long week. Let’s begin this Friday episode with a tip of the hat to America’s entrepreneurial spirit — able to overcome seemingly insurmountable bureaucratic and lawyerly obstacles…

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That’s in Washington, D.C., by the way. Someone else on Twitter replied with a photo of a devil-may-care store sign advertising “Ping-pong balls for playing beer pong — $2.99.”

He was in New Orleans… Heh.

As it happens, D.C. has some of the highest beer taxes in the country… but Louisiana isn’t far behind.

This week another fabulous map from the nonpartisan Tax Foundation landed in your editor’s inbox. The highest beer taxes in the country are in Tennessee — $1.29 for a 12-ounce container. At the other end of the scale is Wyoming — 2 cents.

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According to the Tax Foundation, neither the states nor the federal government imposed a beer tax until the Civil War — when the feds were desperate for revenue.

It’s yet another reminder of James Madison’s warning from 1795: “War is the parent of armies; from these proceed debts and taxes; and armies, and debts and taxes are the known instruments for bringing the many under the domination of the few.”

So much for yesterday’s “triple threat” to the markets; as we write the major U.S. stock indexes are reaching into record territory.

For much of this week, mainstream financial media tried to whip readers/viewers into a frenzy building up to yesterday — former FBI chief James Comey testifying to the Senate, the European Central Bank making an interest rate decision and British voters going to the polls.

In the end, Comey delivered no smoking gun on Trump but he said enough to keep the never-Trump crowd in a froth — ensuring many more months of gridlock.

As noted here yesterday, the ECB suggested it’s done cutting interest rates but also left the door open to extending its quantitative easing program.

But the British election did confound conventional wisdom. Prime Minister Theresa May’s hubris is having a visible impact on the pound…

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May called the snap election on April 18, figuring she could bolster her Conservative Party’s majority in Parliament going into the “Brexit” negotiations with the European Union. Instead, the Conservatives have lost their majority and May will have to cobble together a shaky coalition to achieve a 326-seat majority. It’s not inconceivable May will be forced to step down.

Yet again, the pundit class put their collective foot in it. For months they slimed Labour Party leader Jeremy Corbyn — too loony-left to command a large following, they said. But just as happened with Trump and Bernie Sanders, the demonization campaign backfired — Corbyn’s following grew and grew. Labour will have 261 seats in the next Parliament, up from 232 in the last one.

As sometimes happens in the United States, a weak currency is pushing stocks upward; Britain’s FTSE index is flirting with record highs reached last month.

Meanwhile, stateside, the Dow might well end the day above the 21,300 level for the first time.

Gold took another hit this morning. It tanked moments after Comex trading opened for the day at 8:30 a.m. EDT. At last check the bid was $1,267.

Usually a drop at that time of day coincides with the release of a big economic number. But there’s no such number today. And the move can’t be attributed to dollar weakness; the dollar index is ruler-flat at 97.3.

As we said in the midst of gold’s drop yesterday, you can go crazy paying attention to the Midas metal’s day-to-day moves. The big picture remains constructive — higher highs and higher lows going back six months. Gold would have to tumble below $1,240 before we started raising an eyebrow.

Too, gold’s drops like yesterday’s and today’s are an old story by now.

“U.S. gold investors,” says Jim Rickards, “have been frustrated for years as gold fundamentals continue to improve but the market price of gold gets smashed by manipulation in the paper gold market, specifically Comex gold futures contracts.

“The minute gold has some upward price momentum, a hedge fund with a short position can sell tons of ‘gold’ (really paper contracts) with almost no money down in the futures market. Leveraged long gold players have to sell out their positions too as the declining price hits preset stop loss limits. Momentum builds, local traders pile on and the price crashes based on nothing more than a few keystrokes in the automated Globex trading system.

“Then the paper shorts close out their positions with a nice profit, move to the sidelines and leave physical gold holders shaking their heads and asking, ‘What the heck just happened?’ Governments are also involved in price manipulation, although they operate secretly through the Bank for International Settlements, BIS, in Basel, Switzerland.

“But small investors are not the only ones fed up with the paper gold manipulation,” Jim goes on.

“Now major players are going to the all-physical side by opening physical gold exchanges, building their own physical gold vaults, buying gold mines and exploring for new gold deposits.”

It’s the vaults that have our attention today: “From safety-deposit boxes in leafy west London to high-security facilities housing gold and silver in Frankfurt, companies that store valuables are expanding to meet demand,” Bloomberg reports this week.

The story quotes Daniel Marburger, CEO of Frankfurt-based CoinInvest: “I was just dealing with a customer here in Germany who got charged negative interest rates on his bank account.” The client decided to buy some bullion instead. “That is definitely a driving factor and will lead to more sales and also more storage clients.” CoinInvest plans to build a 1,076-square-foot vault that could hold over $125 million of gold.

Baird & Co. in Great Britain has plans for a similar-sized vault. “Our customers are looking to park their wealth somewhere,” says CEO Tony Dobra. “They understand fluctuations in the gold price, but they’re comfortable with that.”

[Ed. note: What’s good for gold is even better for the miners. And a huge anomaly is about to hit penny gold stocks. At least 10 of them are poised to soar — and quickly.

The situation is moving so fast that Jim is organizing an urgent live webinar only five days from now — next Wednesday at 7:00 p.m. EDT. Access is free; details are at this link.]

“The next major tech interface and revolution is about to be unleashed,” says our Louis Basenese. “It’s voice.”

Apple made a splash this week unveiling a smart-home speaker called the HomePod — its answer to Amazon’s Echo and Google’s Home. Yes, it can play music and turn the air conditioning on… but the main appeal of such devices is the ability to recognize your voice.

“The voice explosion is imminent,” says Louis. “Not because all the major tech companies are introducing products, but because voice recognition technology is finally ready for prime time.

“More specifically, it’s within spitting distance of being on par with human speech recognition capabilities at 95%. In March, IBM’s speech recognition team achieved a new record high at 94.5%.”

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Adds Shawn DuBravac, chief economist for the Consumer Technology Association, “We’ve seen more progress in this technology in the last 30 months than we saw in the last 30 years.”

“The progress,” Louis concludes, “has reached a point where the technology is finally ripe for mass adoption — and, in turn, investment.” Louis has already recommended a way to play it in the pages of his small-cap letter True Alpha.

“I am way, way past fed up with the presstitutes in the news media constantly going after Trump for anything and everything,” writes a reader determined to go political on us today.

“They are totally destroying any claim to credibility that they used to enjoy and have been caught lying numerous times.

“I get the distinct impression that if Donald Trump were to drive a free food truck that he paid for himself to a homeless shelter and saw a bank robbery in progress, stopped the truck, got out and collared the robber until the police arrived, then got back in the truck and continued driving, saw a nursing home on fire, stopped the truck again and went in and saved a dozen elderly residents that the very next day there would be someone in the media complaining about him ‘dangerously stopping his truck where it could cause an accident’ and demanding he be impeached for this.

“And for the record I didn’t even vote for Trump but for Gary Johnson, but a raw deal is a raw deal.”

The 5: We don’t have a dog in the Washington fight, either… but there’s truth to what you say.

There’s also truth — and we pointed this out a few weeks ago — to what Trump said during the campaign about his own loyalists. “I could stand in the middle of Fifth Avenue and shoot somebody and I wouldn’t lose voters.”

Once in a while we start wondering how far the nation is — parts of it anyway — from a 1990s Balkan-war scenario. That’s what the hard-core patriot/prepper types anticipate. “This is about people burning down their neighbors’ houses and businesses, to run them out of town, over ideological differences,” wrote one a couple of weeks after Trump’s inauguration.

“You’re obtuse,” writes our next correspondent.

“With respect to the sudden drop in gold yesterday, you wrote, ‘Conspiracy theorists immediately smelled a rat.’

“It’s no conspiracy theory when it’s as plain as the nose on your face. Ask Jim Rickards.

“‘Flash crashes’ in gold have occurred repeatedly over the past few years. Zero Hedge does a good job documenting them. Yesterday, ‘someone’ dumped $4 billion of gold contracts in the space of a few minutes. Who might it be?

“Let’s crowdfund it to find out. Offer a $1 million reward to whoever reveals the identity of those behind these shenanigans. It can’t be someone with fiduciary responsibility. That pretty much leaves central banks panicking to extend reverence for their crap scrip, or bullion banks participating in the endless wash-rinse cycle that milks the idiots foolish enough to buy the paper gold on offer at the CME and LBMA. Either way, I’d love to see their trousers yanked down for all to see.”

The 5: And then what?

Eight months ago, gold took a $43 whacking in a day. It happened around the same time of morning as today’s more modest $10 drop. The day after, we fessed up that clean-and-simple explanations were elusive: “We wish we could tell you JPMorgan Chase CEO Jamie Dimon barked out everyone’s marching orders over the phone at 7:45 while soaking in the marble tub of his master suite. Alas, the evidence isn’t there. (Which doesn’t mean it didn’t happen, heh.)”

Today we take our little exercise in fancy a step further. Say someone takes you up on your $1 million offer and leaks audio of Dimon barking out said orders over the phone.

Would the feds haul him away in leg irons? Would crowds with torches and pitchforks chase him into the East River? And most important, would the gold price even respond to the revelation? Or would traders shrug it off and say, “Of course, that’s how the system works.”

Look, we get it: The “paper gold” market is used to suppress the gold price. The only way anyone will ultimately call BS on the game is by “standing for delivery” on the Comex and demanding real metal to fulfill the contract instead of a cash settlement.

But as Jim Rickards has explained in this space more than once, the only way that will happen is during the course of a market shock; only then can someone stand for delivery without fear of prosecution. (We explored this scenario in considerable detail just a year ago with Jim’s help. It’s worth rereading.)

Meanwhile, a bit of friendly advice: Stop refreshing Zero Hedge and get a life.

Have a good weekend,

Dave Gonigam
The 5 Min. Forecast

P.S. Far from the trade in paper gold contracts, an anomaly is appearing in the market for penny gold stocks. And Jim Rickards says you could easily parlay it into a six-figure fortune.

Events are moving quickly, so Jim has urged us to organize a live webinar next Wednesday at 7:00 p.m. EDT to bring you up to speed. It won’t cost you a thing to watch, but we do ask that you RSVP so we know how many people to expect and how much server space to set aside. Here’s where you can sign up.


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