Dec 23 Will they Hang Bankers Again on Wall Street?

Will they Hang Bankers Again on Wall Street?

Posted on December 21, 2014 by Martin Armstrong

What took place in Washington over the past two weeks with the repeal of Dodd Frank and then the effective repeal of the Volcker Rule sounds strikingly familiar to at least three previous periods in American History that led to total disaster. There were of course the Northern “carpetbaggers”, whom many in the South viewed as opportunists looking to exploit and profit from the region’s misfortunes following the Civil War.The “carpetbaggers” would play a central role in shaping new southern governments during Reconstruction period who were joined by Southerners who saw economic gain in joining the Northerners in the exploitation of the South. There were called “scalawags”.

Then there were the Silver Democrats who were bought and paid for by the mining industry. William Jennings Bryan’s red-hot emotional speech at the 1896 Democratic Convention will forever live on in history. The shenanigans of the Democrats and Republicans who tried to overvalue silver led to the near bankruptcy of the nation and made JP Morgan famous thanks to the Panic of 1896 when he had to arrange a gold loan to save the country.
Then there was what people called the First Gilded Age more than a century ago, when senators and representatives were owned by Wall Street and big business. This culminated in the 1929 Crash.
What did all three of these periods have in common with the last two weeks? Then, as now, those who footed the bill for political campaigns were richly rewarded with favorable laws. This is standard operating procedure in Washington and why we are in such desperate need of political reform.

In all three such periods there was a rising underbelly of rising tension and rebellion against the powers that be. Today, people are increasingly becoming fed up with Washington and the rebellion unfolds ONLY when the economy turns down. There was Charles Dazey’s Broadway Play The War of Wealth (February 10, 1896). This 51.6 year ECM Wave that peaked in 1929.75 (#919-924) was a Private Wave that began with the death of Karl Marx and the previous 51.6 year Wave peaked in 1878. In 1882, because of anti-monopoly laws, Standard Oil is organized as a trust, which would become the target of all time.
Indeed, what the bankers pulled off these past two weeks was done on the basis that they ASSUME the people have such a short-attention span that (1) they did not expect any press, and (2) they expected this will blow over with the holidays.
The bankers have made the greatest MISTAKE of their career. Their desire to exploit the world economy through trading preferring to be TRANSACTION oriented rather than RELATIONSHIP (meaning there is no long-term plan here just trade by trade), will be their undoing. The bankers have ALWAYS become the most hated within society. It was the bankers that caused the Panic in Ancient Athens, Rome, and even caused countless riots and civil wars. It was Philip IV of France who confiscated and imprisoned the Italian Bankers for lending money to England to wage war. He seized even the Papacy moving that to France. He wiped out the Knights Templar who were a major banking organization. Julius Caesar crossed the Rubicon because of the corrupt bankers in the Senate and the people cheered him as the bankers fled to Asia.
One a time scale, the Panic of 1896 came 13 years into that 51.6 year wave. Relating this to the current wave that began with the formation of G5 in 1985, that brought us to 1998 and the first bailout of Long-Term Capital Management. Then 26 years into that wave brought us to 1908. It was the 1907 Crash that shifted the focus from the Railroad to the Industrial Age. Currently, 26 years into this wave brought us to 2011 and the peak in all commodities from gold to oil. This has marked the beginning of the Euro Crisis with the first crack in 2010 being Greece.

We are embarking on a new shift and the stock market is reflecting this change. What the bankers just puled off will lead to their demise  They have played with a historical fire that may end in actual bloodshed. It would not be the first time they have been dragged from their palaces and hanged on the streets. That is what the term “BLACK FRIDAY” really stood for – the day a mob hanged bankers on Wall Street.

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Dec 23 Wall Street Bank Regulator Issues Outrageous Press Release

Wall Street Bank Regulator Issues Outrageous Press Release

By Pam Martens: December 22, 2014

Present Franklin Delano Roosevelt Signing the Glass-Steagall Act on June 16, 1933

Last week members of both the House and Senate were issuing press releases to express their outrage over the sneaky repeal of a Dodd-Frank financial reform provision meant to stop giant Wall Street banks from using FDIC-insured bank affiliates to make wild gambles in derivatives, thus putting the U.S. economy in grave danger again and the taxpayer at risk for another behemoth bailout.
What was the Federal regulator of these very same banks doing? It was bragging in a press release issued at the end of the same  week about the gargantuan risks these  insured banks were taking in derivatives.
The press release was issued on Friday, December 19, 2014 by the Office of the Comptroller of the Currency (OCC), the regulator of all national banks which is mandated to make sure that insured banks “operate in a safe and sound manner.”
The press release begins with a bizarre sounding headline for a bank regulator: “OCC Reports Third Quarter Trading Revenue of $5.7 Billion.” It wasn’t actually the OCC that had this trading revenue, of course, it was that “Insured U.S. commercial banks and savings institutions reported trading revenue of $5.7 billion in the third quarter of 2014” and year-to-date trading revenue of $18.3 billion, as the press release explains.
In a sane financial world, of course, insured banks are not supposed to be trading; they are supposed to be receiving insured deposits backstopped by the U.S. taxpayer in return for making loans to worthy businesses and consumers in order to create jobs and grow our economy.
But Alice in Wonderland regulators have now completely bought in to the lunacy of today’s Wall Street bank structure, as this press release leaves no doubt. This next paragraph sounds more like a gushing letter to clients from a hedge fund than a press release from a Federal bank regulator:
“ ‘There were fairly low expectations for trading revenue at the beginning of the quarter, but client demand picked up fairly sharply toward the end, helping to make trading performance fairly positive,’ said Kurt Wilhelm, Director of the Financial Markets Group. ‘Trading revenue tends to weaken as the year goes on, so it wasn’t much of a surprise that it fell from the second quarter. But, stronger client demand, especially in foreign exchange (FX) products, helped to make it a much stronger quarter than last year’s third quarter.’ ”
We learn further that “Credit exposures from derivatives increased during the third quarter” and were driven by a 90 percent increase in receivables from foreign currency exchange contracts which now total $623 billion.
A 90 percent increase in any speculative trading should raise alarm bells but when foreign currencies like the ruble, yen and euro are experiencing wild volatility and Wall Street banks are under investigation for rigging foreign exchange markets, the concern should be even more pronounced, not cause for a celebratory press release.
Equally alarming is the news that “the notional amount of derivatives held by insured U.S. commercial banks increased $2.6 trillion” to a total of $239 trillion, of which 93 percent is concentrated at the four largest banks. The report itself breaks this out in more detail: Citigroup, the poster child for bank bailouts, now holds more derivatives than any other bank, $70 trillion, in its insured unit, Citibank. JPMorgan Chase, the bank that lost $6.2 billion just two years ago gambling in its insured bank with exotic derivatives, now holds $65 trillion in derivatives. Next in line is Goldman Sachs Bank USA with $48.6 trillion in derivatives and just $111.7 billion in assets in the insured bank unit. Coming in fourth is Bank of America with $37.5 trillion.
The irrational exuberance of this press release reminded us of its stark contrast to the opening lines of the Glass-Steagall Act, the legislation Congress put in place following the 1929 Wall Street crash – an epic collapse of speculation very much on a par with the crash of 2008. The Glass-Steagall Act, also known as the Banking Act of 1933, opens with these words:
“…to provide for the safer and more effective use of the assets of banks, to regulate interbank control, to prevent the undue diversion of funds into speculative operations, and for other purposes.”
The legislation created insured bank deposits to stop the run on banks while giving the Wall Street banks just one year to split apart: banks holding insured deposits could no longer put the country at risk with wild speculations in trading and underwriting of securities. Those operations, investment banking and brokerage, had to be spun off. The Glass-Steagall Act was repealed at the behest of Wall Street and its army of lobbyists in 1999; the financial system crashed a mere nine years later.
The response by Congress to the 2008 crash was to allow Wall Street banks to grow dramatically in asset size, derivative holdings and systemic risk. Even after the Senate’s Permanent Subcommittee on Investigations released a 299-page report last year, clearly demonstrating that Wall Street had learned nothing from its wild trading gambles that collapsed the financial system in 2008, Congress has taken no concrete action to rein in the risk.
The Senate’s 299-page report released on March 15, 2014 concluded a nine-month investigation into how JPMorgan Chase, the country’s largest bank, had misled the public and its regulators while hiding vast losses on exotic derivatives in its insured banking unit. The episode became known as the London Whale scandal since the trading occurred in London and the size of the trades was mammoth. Senator Carl Levin, Chair of the Subcommittee, released the following statement at the time:

“Our findings open a window into the hidden world of high stakes derivatives trading by big banks.  It exposes a derivatives trading culture at JPMorgan that piled on risk, hid losses, disregarded risk limits, manipulated risk models, dodged oversight, and misinformed the public. Our investigation brought home one overarching fact:  the U.S. financial system may have significant vulnerabilities attributable to major bank involvement with high risk derivatives trading…

“The whale trades demonstrate how credit derivatives, when purchased in massive quantities with complex components, can become a runaway train barreling through every risk limit.  The whale trades also demonstrate how derivative valuation practices are easily manipulated to hide losses, and how risk controls are easily manipulated to circumvent limits, enabling traders to load up on risk in their quest for profits…And given how much major U.S. bank profits remain bound up with the value of their derivatives, derivative valuations that can’t be trusted are a serious threat to our economic stability.”

Until the Glass-Steagall Act is reinstated, our country, our economy and the U.S. financial system remain in peril.

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Dec 23 Could an Energy Bust Trigger QE4? Peter Schiff

Could an Energy Bust Trigger QE4?

Peter Schiff


In a normal economic times falling energy costs would be considered unadulterated good news. The facts are simple. No one buys a barrel of oil to display above the mantle. No one derives happiness from a lump of coal. Energy is simply a means to do or get the things that we want. We use it to stay warm, to move from Point A to Point B, to transport our goods, to cook our food, and to power our homes, factories, theaters, offices, and stadiums. If we could do all these things without energy, we would happily never drill a well or build a windmill. The lower the cost of energy, the cheaper and more abundant all the things we want become.

This is not economics, it is basic common sense. But these are not normal economic times, and the mathematics, at least for the United States, have become more complicated.

Most economists agree that the bright spot for the U.S. over the past few years has been the surge in energy production, which some have even called the "American Energy Revolution". The stunning improvements in drilling and recovery technologies has led to a dramatic 45% increase in U.S. energy production since 2007, according to the International Energy Agency (IEA). And while some suggest that the change was motivated by our lingering frustration over foreign energy dependence, it really comes down to dollars and cents. The dramatic increase in the price of oil over the last seven or eight years, completely changed the investment dynamics of the domestic industry and made profitable many types of formerly unappealing drilling sites, thereby increasing job creation in the industry. What's more, the jobs created by the boom were generally high paying and full time, thereby bucking the broader employment trend of low paying part time work.

The big question that most investors and drillers should have been asking, but never really did, was why oil rocketed up from $20 a barrel in 2001 to more than $150 barrel in 2007, before stabilizing at around $100 a barrel for much of the past five years. Was oil five times more needed in 2012 than it was in 2002? See my commentary last week on this subject.

Despite the analysts' recent discovery of a largely mythical supply/demand imbalance, the numbers do not explain the rapid and dramatic decrease in price. Yes, supply is up, but so is demand. And these trends have been ongoing for quite some time, so why the sudden sell off now? Instead, I believe that oil prices over the last decade has been driven by the same monetary dynamics that pushed up the prices of other commodities, like gold, or of financial assets, such as stocks, bonds, and real estate. I believe that oil headed higher because the Fed was printing money, and everyone thought that the Fed would keep printing. But now we have reached a point where the majority of analysts believe that the era of easy money is coming to an end. And while I do not believe that we are about to turn that monetary page, my view is decidedly in the minority. Could it be a coincidence that oil started falling when the mass of analysts came to believe the Fed would finally tighten?

If I am wrong and the Fed actually begins a sustained increase in rates starting in 2015, oil prices may very well stay low for a long time. But apart from the fact that our broad economy can't tolerate higher interest rates, an extended drop in oil prices may create conditions that further force the Fed's hand to reverse course.

If prices stay low for very long, many of the domestic drilling projects that have been undertaken over the past few years could become unprofitable, and plans for further investment into the sector would be shelved. Evidence suggests that this is already happening. Reuters recently reported a drop of almost 40 percent in new well permits issued across the United States in November (this was before the major oil price drops seen in December).
This huge negative impact on the primary growth driver of U.S. economy may be enough in the short-run to overwhelm the other long-term benefits that cheap energy offers. If prices stabilize at current levels, then the era of triple digit oil may, in retrospect, be looked back on as just another imploded bubble. And like the other burst bubbles in tech stocks and real estate, its demise will make a major impact on the broader economy. But there is a crucial difference this time around.

When the dot-com companies flamed out in 2000, most of the losses were seen in the equity markets. Dot-coms either raised money either through venture capitalists or the stock markets. They rarely issued debt. The trillions of dollars of notional shareholder value wiped out by the Nasdaq crash had been largely paper wealth that had been created by the sharp run up in the prior two years. As a result, the damage was primarily contained to the investor class and to the relatively few number of highly paid tech workers and entrepreneurs that rode the boom up and then rode it down. In any event, the Fed was able to cushion the blow of the ensuing recession by dropping rates from 6% all the way down to 1%.

The real estate and credit crash of 2008 was a much different animal. Despite the benefits that lower home prices may have brought to many would be home-buyers who had been priced out of an overheated market, the losses generated by defaulting mortgages quickly pushed lending institutions into insolvency and threatened a complete collapse of the U.S. financial system. Unlike the dot-com crash, the bursting of the housing bubble posed an existential threat to the country. The construction workers, mortgage brokers, landscapers, real estate agents, and loan officers who were displaced by the bust represented a significant portion of the economy. To prevent the bubble from fully deflating, the Fed bought hundreds of billions of toxic sub-prime debt (that no one else would touch) and dropped interest rates from 5% all the way down to zero.

I believe, a bust in the oil industry will likely play out somewhere between these two prior episodes. As was the case with falling house prices, while low prices offer benefits to consumers, the credit and job losses related to unwinding the malinvestments, made by those who believed prices would not drop, can impose severe short-term problems that the Fed will be unwilling to tolerate. Of course, long-term it's always good when a bubble pops, it's just that politicians and bankers are never prepare to endure the short-term pain necessary for long-term gain when they do.

A good portion of the money used to finance the fracking boom was raised by relatively small drillers in the debt market from banks, institutional investors, pension funds, hedge funds, and high net worth wildcatters. Public involvement has been involved primarily in the high yield debt market where energy companies have issued hundreds of billions of "junk" bonds in recent years. In 2010, energy and materials companies made up just 18% of the US high-yield index but today they account for 29%.

But many of the financing projections that these bond investors assumed will fall apart if oil stays below $60. Although the junk bond market is nowhere near as large as the home mortgage market, widespread defaults from energy-related debt could cause a crisis, which could make wider ripples throughout the financial edifice. Bernstein estimates that sustained $50 oil could result in investment in the sector to fall by as much as 75%. According to the Department of Labor, oil and gas workers as a percentage of the total labor force has doubled over the past decade, and have accounted for a very large portion of the high-paying jobs created during the current "recovery." As a result a bust in the oil patch will result in a very big hit to American labor, causing ripple effects throughout the economy.

But we are far less able to deal with the fallout now of another burst bubble than we were in 1999 or 2007 (the years before the two prior crashes). I believe it will take much less of a shock to tip us into recession. But I don't even believe that a burst energy bubble is even our biggest worry. Much greater and more fragile bubbles likely exist in the stock, bond and real estate markets, which have also been inflated by the easiest monetary policy in history. More importantly at present the Fed lacks the firepower to fight a new recession that a bursting of any of these bubbles could create. Since interest rates are already at zero, it has no ability to aggressively cut rates now in the face of a weakening economy. All it can do is go back to the well of quantitative easing, which is exactly what I think they will do.

Despite the widely held belief that 2015 will be the year in which a patient Fed finally begins to normalize rate policy, I believe the Fed has no possibility of withdrawing the stimulus to which it has addicted us. QE4 was always much more probable than anyone in government or on Wall Street cares to admit. A recession and a financial panic caused by sub $60 oil will significantly quicken the timetable by which the Fed cranks up the presses. When it does, oil could once again increase in price, along with all the other things we need on a daily basis. That should finally dispel any remaining illusions that the Fed could successfully land the metaphorical plane. More QE may minimize the damage in the short-term, but I believe it will keep us trapped in our current cocoon of endless stimulus, where we will slowly suffocate to death.

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Dec 23 Gold Stocks: Rational & Profitable In 2015 Stewart Thomson

Gold Stocks: Rational & Profitable In 2015

Stewart Thomson


Dec 23, 2014

1. As the end of the year approaches, gold is swooning a bit. Please .
   
   
2. That’s the daily chart for gold. A broad and gently sloping uptrend channel has been established, with very volatile price action between the channel lines.
   
   
3. I expect gold to trade in this manner throughout most of 2015. Short term volatility will be high, but the price will trend higher.
   
   
4. Gold is working off what is an overbought technical condition, and should be poised to stage a significant rally by early January.
   
   
5. Please. That’s the daily oil chart. While the odds of a brief and violent rally are growing, the overall fundamentals are horrific. Demand for oil is collapsing around the world, and supply continues to increase.
   
   
6. While a modest rise in the price of gold in 2015 might not sound very exciting, when coupled with a further collapse in the price of oil, gold stocks could suddenly become the darling of institutional investors around the world.
   
   
7. Gold companies are much more efficient now than they were just two years ago. Lower fuel prices coupled with even modestly higher gold prices could produce a violent move to the upside, for the entire gold stock sector.
   
   
8. Demand for gold from China and India should see another year of superb growth in 2015. While gold may decline for another week or two, that’s mainly due to technical and seasonal factors. The ebb and flow of Indian demand is based on religion, and December is viewed as an inauspicious time to buy gold.
   
   
9. With key physical buyers taking a rest, the price is a little soft. Also, Western investors tend to buy when the price of any asset is high, and sell at a loss each December. They are adding to the gold price softness now.
   
   
10. I expect Chinese demand in 2015 to increase substantially. Trading volume on the Shanghai Gold Exchange (SGE) is experiencing truly dramatic growth, year after year. My subscribers know that I’ve predicted that volume on the SGE will surpass COMEX volume by early 2017.
    
    
11. Gold is clearly the ultimate asset, and it should offer the ultimate in stability to conservative investors for the next decade. Aggressive investors should focus on gold stocks.
    
    
12. Unfortunately, the outlook for the American stock market is much less rosy than it is for gold. Mainstream media claims that debt-soaked consumers working multiple part time jobs are somehow the “economic leader” of the world economy.
    
    
13. Now, the US stock market has lost a prime engine of earnings growth; oil. Healthcare and defensive stocks are keeping the huge stock market rally alive, but the impact of much lower oil prices won’t be felt for another quarter or two.
    
    
14. Technically, healthcare stocks look headed for trouble. Please click here now. This monthly chart of a key biotech ETF shows a rapidly deteriorating technical situation.
    
    
15. I think that the month of December in 2015 will see Western investors back at the “tax loss trough”, selling most of their US stock market investments.
    
    
16. American GDP numbers will be released this morning. With most of India’s gold buyers in “quiet mode” this month, that report could push gold to my $1150 - $1160 short term target area, and provide a short term boost to the US stock market.
    
    
17. US economic data generally has only a short term effect on the gold price. The long term price is determined mainly by the demand from China and India, compared to supply from mines and Western entities. Once the Western funds and retail entities have sold most of their gold, I expect Chinese and Indian jewellers to begin tapping Western central banks for the gold they hold, since mine supply appears to be peaking.
    
    
18. In the Western world, good economic data causes seemingly rational economists to make very irrational statements about gold. In contrast, in China and India, good economic news spurs gold demand. People celebrate the good news, by buying more gold!
    
    
19. As the West becomes more irrelevant to the global gold market, the questionable statements made by Western economists about gold will likely be ignored by most professional investors.
    
    
20. I doubt there will be much gold left anywhere in the West by the year 2050. Crypto currencies like bitcoin are more suitable as central bank reserve assets than gold. Rather than being held as useless bars by bankers and government bureaucrats who can’t be trusted, most gold should be held in the form of fabulous jewellery, by the citizens of the world. Also, he or she who has the most gold, makes the most rules. The citizens should make the rules, not bankers and “Gmen”, and in time they will.
    
    
21. The Swiss government just released that country’s latest import and export statistics for the month of November. Please click here now. I’ve highlighted a few key numbers from that report.
    
    
22. While the United Kingdom did import about 64 tons of gold, it exported about 109. While gold price enthusiasts may be a little disappointed with the numbers from China, I should mention that Hong Kong also imported about 34 tons.
    
    
23. In 2013, Chinese demand surged far above 2012 levels, but Western exports overwhelmed Chinese and Indian imports, and the price declined. In 2014, demand roughly matched supply, and the price was neutral. By late 2015, I expect Chinese and Indian demand to place noticeable stress on available supply, and the price should begin moving aggressively higher.
    
    
24. Please click here now. That’s the daily GDX chart. Gold stocks are my “trade of the year” for 2015. Like gold, GDX is working off an overbought situation on the chart. There’s a bull wedge pattern in play. In the very short term, US economic data today could create panic selling, by Western gold stock shareholders that respond to that data with irrational action. With the Indian “titans of ton” quiet in December for religious reasons, the price movement in many gold stocks could be a bit frightening, but only for a few days. I’m a buyer of all irrational selling, and I think the entire Western gold community can look forwards to a very rational and profitable year, in 2015!

Dec 23, 2014
Stewart Thomson

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Monday's Forex Analytical Charts - by Jim Wyckoff

Monday's Forex Analytical Charts

Investors/Traders Need to Closely Monitor the Forex Market

"Wyckoff's Market Rating" System Explained

Understanding the charts:

Sharpening Your Trading Skills: The MACD Indicator

Sharpening Your Trading Skills: Moving Averages

Sharpening Your Trading Skills: The Relative Strength Index (RSI)

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Dec 22 Five Rare Birds Sing a Wise Tune MillersMoney

Five Rare Birds Sing a Wise Tune

Dennis Miller

December 18, 2014

In the spirit of the holidays, I’m sharing a happy truth: many people do, in fact, retire rich. Who are these rare birds and what can they teach us?

Rich Retire #1—The Pension Holder. If you have a large pension in 2014, you likely are or were a government employee. Many government workers receive pensions equal to 75-80% of their working salaries. In some government departments, it’s the unwritten custom for department heads to bump a worker’s salary 20% or so when he or she is a year or two from retirement. This boosts the employee’s base for his retirement pay.

Of course, in the private sector, pensions have gone the way of the slide rule. So let’s move on.

Rich Retire #2—The Small-Business Owner. If a self-employed person builds up a small or mid-sized business that he can sell when he’s ready to retire, that can fund a comfortable lifestyle during his nonworking years. Sure, it’s not “retirement investing” in the traditional sense, but it’s a path that’s worked for many entrepreneurs.

Rich Retire #3—The exceptional investor. Investors who lock in large boom-time gains are a step ahead of most. Those who resist the ever-so-tempting urge to spend that extra dough can watch it grow, and just like that, a rich retirement is theirs for the taking.

Rich Retire #4—The exceptional saver. A friend’s dad used to tell him, “Save 10% of your pay once you start working and you’ll be a millionaire by your mid-40s.” This friend’s dad was wrong. It didn’t take him that long. Ultra-disciplined savers live their lives this way, setting themselves up to retire rich without a last-minute race to the finish line.

Rich Retire #5—The former debtor who pays himself now. Except for those born independently wealthy, many of us spend years paying down sizable debts, such as a mortgage or educational loans. The rich retire clears those debts as soon as possible, but continues to make those payments… to himself.

Paying off your mortgage is a golden opportunity. Say it eats up 30-40% of your income. After you write that last check to the bank, you can save and invest 30-40% of your income without adjusting your lifestyle the tiniest bit. That money starts to compound, and pretty soon your real wealth is growing in leaps and bounds.

Joining the Flock

If you’re one of these rare birds, your biggest financial problem is the kettle of hawks eager to confiscate your wealth and redistribute it to those who haven’t exercised as much financial discipline as you have. On the other hand, if you’re not part of this flock, there’s likely still time for you.

Though the statistics often sound bleak for people who’ve spent 40-plus years as capital-S Spenders, it’s still possible to change.

Build a realistic plan. Some friends of mine had 20-plus credit cards, each with large balances. The exorbitant interest rates charged by credit cards makes paying off large balances extremely difficult. But these friends wrote out a tight budget, focused on paying off one credit card at a time, and with each success took a large pair of scissors and cut up the card and celebrated—on the cheap.

Large debt can make people feel out of control. It’s often overwhelming. But we all have a lot control over the expense side of our ledgers. You can’t un-spend money you’ve already spent, but you can reduce what you spend today, the next day, and the day after that. Those reductions can help you eliminate debt, and from there, you can follow the path of Rich Retiree #5—start making those debt payments to yourself.

Sell off large assets. Are you still living in a McMansion? Could you capture some of that equity and add it to your nest egg? Downsizing to the Goldilocks house—the one that’s not too big and not too small—can help you reduce regular home maintenance costs and property taxes. In high-tax states like Illinois, for example, it’s not unusual to pay well over $10,000 in real estate taxes.

Do you need a new luxury car every three years? Do you own a boat you take out on the lake once or twice a year? Jettison all of your unnecessary stuff and you’ll be many steps closer to a comfortable retirement.

Reduce your overhead. Do you really need to pay the cable company $100-plus per month for channels you never watch? What other fixed monthly expenses are wants disguised as needs?

This is emotionally tough stuff. We have friends who gave up their country club membership because they decided a comfortable retirement was a much higher priority. It was a straightforward decision in theory, but a lot of their friends are at the club. It’s hard to give up life’s little luxuries, especially when giving them up means excluding yourself. But when those luxuries are keeping you from a comfortable retirement, it’s time to bite the bullet.

Ask yourself the tough questions. Are you spending on status and prestige to give yourself an emotional boost? Many of us do this without even knowing it. But is a rich retirement worth giving up for status?

Know your bottom line. When baby boomers run their retirement numbers the first time, many are shocked. They realize they’re not saving nearly enough to retire comfortably. Up to this point, they’d never had to live within, much less below, their means.

Depending on your age, it can be difficult to save enough to replicate your current lifestyle in retirement. You can, however, begin to control your expenses fairly quickly. Once you do that, you can determine what kind of lifestyle you can realistically afford and build a plan to get there. Or maybe you’ll decide to work a few years longer or launch a second career so that you can maintain your current lifestyle over the long haul.

Money Forever Chief Analyst Andrey Dashkov built a Retirement Income Calculator that you can download to run your own projections. Using it is an invaluable first step. You can also sign up to receive timely, actionable tips on how to make the most of your nest egg from our free weekly e-letter, Miller’s Money Weekly. Each Thursday we send out need-to-know economic and investment news uniquely tailored for seniors and savers. Click here to join the Miller’s Money Weeklyfamily today.

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Dec 22 Russian Roulette: Taxpayers Could Be on the Hook for Trillions in Oil Derivatives

Russian Roulette: Taxpayers Could Be on the Hook for Trillions in Oil Derivatives

Posted on December 19, 2014 by Ellen Brown

The sudden dramatic collapse in the price of oil appears to be an act of geopolitical warfare against Russia. The result could be trillions of dollars in oil derivative losses; and the FDIC could be liable, following repeal of key portions of the Dodd-Frank Act last weekend.

Senator Elizabeth Warren charged Citigroup last week with “holding government funding hostage to ram through its government bailout provision.” At issue was a section in the omnibus budget bill repealing the Lincoln Amendment to the Dodd-Frank Act, which protected depositor funds by requiring the largest banks to push out a portion of their derivatives business into non-FDIC-insured subsidiaries.

Warren and Representative Maxine Waters came close to killing the spending bill because of this provision. But the tide turned, according to Waters, when not only Jamie Dimon, CEO of JPMorgan Chase, but President Obama himself lobbied lawmakers to vote for the bill.

It was not only a notable about-face for the president but represented an apparent shift in position for the banks. Before Jamie Dimon intervened, it had been reported that the bailout provision was not a big deal for the banks and that they were not lobbying heavily for it, because it covered only a small portion of their derivatives. As explained in Time:

The best argument for not freaking out about the repeal of the Lincoln Amendment is that it wasn’t nearly as strong as its drafters intended it to be. . . . [W]hile the Lincoln Amendment was intended to lasso all risky instruments, by the time all was said and done, it really only applied to about 5% of the derivatives activity of banks like Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo, according to a 2012 Fitch report.

Quibbling over a mere 5% of the derivatives business sounds like much ado about nothing, but Jamie Dimon and the president evidently didn’t think so. Why?

A Closer Look at the Lincoln Amendment

The preamble to the Dodd-Frank Act claims “to protect the American taxpayer by ending bailouts.” But it does this through “bail-in”: authorizing “systemically important” too-big-to-fail banks to expropriate the assets of their creditors, including depositors. Under the Lincoln Amendment, however, FDIC-insured banks were not allowed to put depositor funds at risk for their bets on derivatives, with certain broad exceptions.

In an article posted on December 10th titled “Banks Get To Use Taxpayer Money For Derivative Speculation,” Chriss W. Street explained the amendment like this:

Starting in 2013, federally insured banks would be prohibited from directly engaging in derivative transactions not specifically hedging (1) lending risks, (2) interest rate volatility, and (3) cushion against credit defaults. The “push-out rule” sought to force banks to move their speculative trading into non-federally insured subsidiaries.

The Federal Reserve and Office of the Comptroller of the Currency in 2013 allowed a two-year delay on the condition that banks take steps to move swaps to subsidiaries that don’t benefit from federal deposit insurance or borrowing directly from the Fed.

The rule would have impacted the $280 trillion in derivatives primarily held by the “too-big-to-fail (TBTF) banks that include JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. Although 95% of TBTF derivative holdings are exempt as legitimate lending hedges, leveraging cheap money from the U.S. Federal Reserve into $10 trillion of derivative speculation is one of the TBTF banks’ most profitable business activities.

What was and was not included in the exemption was explained by Steve Shaefer in a June 2012 article in Forbes. According to Fitch Ratings, interest rate, currency, gold/silver, credit derivatives referencing investment-grade securities, and hedges were permissible activities within an insured depositary institution. Those not permitted included “equity, some credit and most commodity derivatives.” Schaefer wrote:

For Goldman Sachs and Morgan Stanley, the rule is almost a non-event, as they already conduct derivatives activity outside of their bank subsidiaries. (Which makes sense, since neither actually had commercial banking operations of any significant substance until converting into bank holding companies during the 2008 crisis).

The impact on Bank of America, Citigroup, JPMorgan Chase, and to a lesser extent, Wells Fargo, would be greater, but still rather middling, as the size and scope of the restricted activities is but a fraction of these firms’ overall derivative operations.

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Dec 22 BBSSB This past week in gold Jack Chan

This past week in gold

Jack Chan
Posted Dec 22, 2014

GLD – on buy signal.
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SLV – on buy signal.
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GDX – on sell signal.
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XGD.TO – on sell signal.
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CEF – on buy signal.

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USD - remains firmly above the 50ema and the trend is strong.

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Gold Ends Sharply Lower, Hits 3-Week Low, on Technical Selling, Lower Oil

P.M. Kitco Roundup: Gold Ends Sharply Lower, Hits 3-Week Low, on Technical Selling, Lower Oil

Gold prices ended the U.S. day session sharply lower and hit a three-week low Monday. Technical selling was featured amid a lack of fresh, bullish fundamental news. Lower oil prices were also a bearish “outside market” force working in favor of the precious metals bears Monday. Thin volume, as many players are already off for the Christmas week, likely exacerbated the downside price move in gold Monday. February Comex gold was last down $21.40 at $1,174.70 an ounce. Spot gold was last down $19.80 at $1,174.75. March Comex silver last traded down $0.38 at $15.65 an ounce.

Trading activity could be active Tuesday, as the main U.S. economic report is on tap this week: the third-quarter gross domestic product report. GDP is expected to be up 4.3%, year-on-year, versus the previous reading of up 3.9%. Tuesday could be the busiest trading day of the week as there are also several other key U.S. economic reports due out. Look for trading activity to then quickly fade ahead of the Christmas holiday Thursday, and to remain light until the new year begins.

European and Asian markets were also quieter overnight. The feature in Europe was the Italian 10-year bond yield fell to a record low of 1.68%, reports said. Ironically, EU country bond yields are falling when anxiety about the health of the European Union is rising. A main reason for this paradox is that there are also heavy odds in favor of the European Central Bank initiating quantitative easing of its monetary policy next year. That prospect is leading investors to put their likely deflating Euros into even shaky EU governments’ debt.

The Russian ruble is stable Monday, following last week’s turmoil. Last week the ruble fell to 80 versus the U.S. dollar and was trading at 57 to the greenback on Monday.

The London P.M. gold fix was $1,195.25 versus the previous London A.M. fixing of $1,195.25.

Technically, February gold futures prices closed near the session low and hit a three-week low today. The gold bears have the firm overall near-term technical advantage. Their next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,225.00. Bears' next near-term downside price breakout objective is closing prices below solid technical support at $1,150.00. First resistance is seen at $1,182.00 and then at $1,190.00. First support is seen at today’s low of $1,174.20 and then at $1,170.00. Wyckoff’s Market Rating: 2.0

March silver futures prices closed nearer the session low and closed at a three-week low close today. Prices also scored a bearish “outside day” down on the daily bar chart. Silver bears have the solid overall near-term technical advantage. Bulls’ next upside price breakout objective is closing prices above solid technical resistance at the December high of $17.355 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $15.00. First resistance is seen at $16.00 and then at today’s high of $16.175. Next support is seen at today’s low of $15.53 and then at $15.25. Wyckoff's Market Rating: 2.0.

March N.Y. copper closed down 70 points at 287.75 cents today. Prices closed nearer the session low today. The copper bears have the solid overall near-term technical advantage. Copper bulls' next upside breakout objective is pushing and closing prices above solid technical resistance at 295.00 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the contract low of 277.75 cents. First resistance is seen at today’s high of 290.50 cents and then at 292.50 cents. First support is seen at 2.8500 cents and then at last week’s low of 282.70 cents. Wyckoff's Market Rating: 2.0.

By Jim Wyckoff

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What's Your Strategy - Full Coverage

Central Banks On Diverging Paths In 2015

 With the 2008-2009 global financial crisis finally fading into the rear view mirror, focus turns the Big Three global central banks —the U.S. Federal Reserve, Japan's Bank of Japan (BOJ) and the euro-zone's European Central Bank (ECB).

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