“The Price Damage Is Almost Beyond Belief At This Point”

Today one of the savviest and well connected hedge fund managers in the world told King World News the price damage in gold and silver “is almost beyond belief at this point.” Outspoken Hong Kong hedge fund manager William Kaye also warned KWN that a “criminal” syndicate of banks has now positioned themselves for a massive and spectacular rise in the price of gold and silver, and his firm’s money is long metals for the ride. Kaye, who 25 years ago worked for Goldman Sachs in mergers and acquisitions, had this to say in this remarkable interview.

Eric King: “Bill, your thoughts on this continued smash in gold and silver that we are seeing?”

Kaye: “It’s more of the same, Eric, that we talked about last time. They choose the thinnest sections of trading in gold, Asia time, for most of the smash. Most of the price damage was done overnight in the United States during Asian trading.

They took the price of gold down to levels that we haven’t seen for years….

“As I talk to you now we are now trading in the $1,220s, which is a new multi-year low. So the bulk of the damage was done in two time periods: In Asian trading and in equally thin Chicago (COMEX) trading, when most of the real players have already gone home.

The price damage is almost beyond belief at this point. Two years ago we were above $1,900 on gold and rightfully so given all of the events that were occurring and are still occurring. Now we are in the mid-$1,220s, which given the policy response to what is an ongoing crisis, is incomprehensible.

No one can make any logical sense of what has taken place because the currency wars that are fully underway everywhere in the world justify gold prices that are not only higher than they were two years ago (above $1,900), but they justify prices in our view that would clearly be above $2,000 and maybe even above $3,000.

Those prices I am giving you are the prices gold should be trading at today. Meaning they are not looking out on to the horizon because the money printing that is going on is not going to stop tomorrow. In fact it’s going to continue and if anything, in our view it will accelerate.

So the only thing that can explain the price behavior in gold has to be a concerted raid. What is of particular interest is that this manipulation really has to be the Fed, or coordinated intervention with the other central banks, including the ECB. The reason for this is because it’s very clear, if you pay attention to Andrew Maguire on KWN, that the bullion banks who were very short when this raid commenced in mid-April, are now long, and some are very long.

So the setup here is pretty fantastic. For people that are looking to add to their positions, we are certainly at levels now that look absolutely compelling, and levels that we may not revisit again in my lifetime.”

Kaye also added: “I strongly believe this is being done to create even more outsized profits for the bullion banks. We had a very controversial recapitalization of the banks, similar to what occurred in the 1930s in the United States, and most of the world at that time was on a gold standard.

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/6/26_The_Price_Damage_Is_Almost_Beyond_Belief_At_This_Point.html

The World Has Never Seen Anything Like This In History

On the heels of incredibly turbulent trading in key global markets, today 40-year veteran, Robert Fitzwilson, put together another extraordinary piece. Fitzwilson, who is founder of The Portola Group, warned that the world is about to see an event that will “shock the financial system,” and set the stage for a “New Financial World Order.” Below is Fitzwilson’s exclusive piece for KWN.

Fitzwilson: “1989 saw the release of a movie called “Field of Dreams” starring Kevin Costner. The film was nominated for three Academy Awards including Best Picture. In the movie, Kevin Costner is a farmer growing corn. While taking a stroll through his cornfield, he hears a voice that says “If you build it, he will come”. The “it” was a baseball diamond. While the movie revolves around baseball, the theme was really about regrets for events in the past and not following dreams….

“Policies followed by the Federal Reserve resemble “Field of Dreams”. Crafted from a lifetime of studying the failures of the 1930s, the two most recent office holders of the Chairman of the Federal Reserve and their colleagues have been building their own financial field of dreams driven by the whispers of history and the regrets of the men who preceded them during the 1930s. The most recent version has been called the wealth effect.

The idea behind the wealth effect is that when people feel wealthier, they are inclined to spend more freely. If spread across broad populations, that will create demand for goods and services resulting in strong economic growth. Two of those important traditional forms of wealth are stocks and real estate.

The trouble with the plan is that money can be created, but controlling where it winds up is much more difficult. What we now know is that the money largely winds up blowing bubbles in the stock, real estate and art markets as well as being channeled to the proprietary trading desks of the biggest global banking institutions. A $119 million purchase of a house in Woodside, California, and a $95 million penthouse purchase in Manhattan are but just two examples. Banks reporting zero trading losses on any day in the first quarter of this calendar year is another.

The money was created, but little of it reached the people from whom the wealth effect was expected. Temporary wealth was created for holders of fixed income due to the disastrous policy of driving down interest rates, but retirees saw their income confiscated. The income lost would probably have stimulated growth more than the increase in prices given to holders of fixed income. Real estate did see a recovery in some parts of the U.S., but it was driven by financial firms buying huge blocks of properties for repackaging and securitizing.

So, the financial “Field of Dreams” created by our central banks has obviously failed. There were some positive effects, but those are now being seen as temporary. The desperate actions taken to pump up stock prices and to smash historical safe havens, such as gold and silver, signaled that the end was near. It is blatantly apparent to rational observers of markets that the policies of the Federal Reserve are broken. You can even include the Federal Reserve in that group in my opinion.

Last week may have marked the beginning of a serious reversal of any gains realized during the last four years. It was reported that the bond market had the worst week in 50 years, with the 10-Year Treasury rate at 2.50%. Having lived through the 1970s, when Treasury rates were in double digits, if we think this past week was bad, prepare to be really shocked if rates continue upward in any manner which closely resembles that period (of the 1970s). A secular rise in rates theoretically could be described as manageable, but a rapid and dramatic rise in rates will shock the financial system.

Since the first of the year, stocks were the envy of investors. The popular indexes basically went straight up with the help of official policy and company stock repurchases. Up until two weeks ago, all of the gains for the year typically came on Tuesdays. That pattern abruptly halted this past week. After Chairman Bernanke’s press conference on Wednesday, the last two days of the week showed severe damage to the sectors that had led the equity markets higher this year. The combination of rising interest rates and a key breakdown of leadership is a warning that steep declines in stocks and bonds could lie ahead.

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/6/25_The_World_Has_Never_Seen_Anything_Like_This_In_History.html

A New Monetary System & End Of The Fed

One the heels of last week’s propaganda by the Fed, the Godfather of newsletter writers, Richard Russell, writes about the end of the current monetary system, the bond market collapse, volatility in stocks and the end of the Federal Reserve.  This is a fantastic piece where Russell includes two key charts.

Richard Russell:  “The great bull market that started in 1982 with the Dow at 776 possessed one great advantage — It had a bull market in Treasury bonds behind it.  At the time (in 1982) the yield on long T bonds was around 15%.  The bond market and the stock market rose together until the 2000s.  The stock market hit its bull market high on October 7, 2007 at 14,164.53 on the Dow.  The bond market hit its bull market peak in May of 2013.

Now the great bond bull market has topped out, and a new bear market in bonds is underway.  This will mean rising interest rates for as far as the eye can see, with accompanying interest rate pressure on stocks.

Question — Russell, you stuck your neck out last week and stated that the stock market may be in major trouble.  How come?

Answer — First, I believe the bull market in bonds is over.  That means that we may face many years of irregularly rising interest rates.  Remember, the Bernanke Fed artificially depressed interest rates with its huge QE program, during which it bought massive quantities of bonds.  The Fed’s program cannot continue forever — in fact, Bernanke has recently conceded that the Fed is making plans to “taper” (down) its bond buying program.  When the Fed tapers, bond prices will decline towards their normal, free-market levels, and interest rates will rise (bonds and their yields move in opposite directions).

Next, one crucial characteristic of a bear market bottom is the appearance of great values in blue-chip stocks.  At the lows of 2009 we never saw blue chip stocks selling at classic great values.  At the bear market lows of 1932, 1942, 1949, 1974 and 1982, the Dow sold at less than 10 times earnings with dividend yields in the 5-7% range.

For instance, in 1974 dividend yields on the Dow were as high as 7%.  In 1932 dividend yields on the Dow were 10%.  The absence of great values at the 2009 low made me suspicious and led me to believe that the low of 2009 was not a true bear market bottom.  The fabulous values that accompany true bear market lows were just not there.

Last night I read through the latest issue of Barron’s from cover to cover, and nowhere did I see a single mention of a primary bear market.  This made me suspicious.  Obviously, I can’t guarantee that we’re in a primary bear market, but I certainly can suspect as much.  The worst part is that if indeed we are in a bear market, then the vast majority of investors are not positioned or prepared for such an event.  I believe that most investors think that last week’s sell-off was simply a gut-check reaction to Bernanke’s remarks about a potential cessation of QE.

If indeed a bear market has started, one hint will be provided by volume.  On declines in a bear market, volume will tend to expand, while during rallies volume tends to subside.  Also, in a primary bear market the down-legs tend to be extended and “dragging,” while the counter-trend rallies will usually be sudden and violent.  Therefore, volatility will be on the high side during a primary bear market.

Of course, price limits have to do with classifying a bear market.  By common acceptance, a decline of 20% from the preceding peak identifies a bear market.  I pick Dow 10,000 as a key level.  Below 10,000 is the point of no return.

… Now we come to the question of consequences.  What are the consequences if you sit stubbornly with your portfolio of stocks, insisting that we are simply experiencing a correction, and it turns out that you are wrong?  The consequences could be catastrophic.

For that reason, I suggest that my subscribers act “as though” we are possibly in the second part of the primary bear market that started in 2007 — we will know more as we go along.

… To repeat, I maintain that the bear market that began in 2007 was never completed.  In my worst scenario, the remainder of the bear market that started in 2007 is now on its way to completion.

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/6/25_Richard_Russell_-_A_New_Monetary_System_%26_End_Of_The_Fed.html