Markets were on the move upward on Friday morning after consumer sentiment rose to a six year high in early May. The Thomson Reuters/University of Michigan’s preliminary reading of the index showed rise to 83.7. This was up from the April reading of 76.4 and blew past economists expectations of 78. A level this high has not been recorded since July 2007. The reading of current economic conditions was also up to 97.5. This blew past April’s reading of 89.9 and a reading this high has not been seen since October 2007. Consumers did give a more upbeat view of personal finances and many people that responded did give a positive outlook on the path of the economy for the coming year. Scott Brown, chief economist at Raymond James, said “We’re still definitely on the recovery path. We expect that this is going to be a very long and gradual recovery. Most economists are looking for stronger growth in the second half of the year and into next year.”

The Internal Revenue Service has begun it’s first investigative hearing in front of a House of Representatives panel. The IRS is being accused of targeting conservative groups for for “extra tax scrutiny” during the 2012 election period. Steven Miller, who was the acting head of the IRS, and J. Russell George, the Treasury Department inspector general, are to be questioned by lawmakers. President Barack Obama assured that they will have full cooperation on all three of the investigations. Steven Miller was forced to resign on Wednesday. Miller allegedly learned that the IRS was targeting these conservative groups in 2012 however he did not disclose the information even when questioned by members of Congress. Republican Committee Chairman, Dave Camp, said “There are still far too many unanswered questions and until we know what truly happened, we cannot fully fix what is wrong. The IRS has demonstrated a culture of cover up and has failed time and time again to be completely open and honest with the American people.”

The European Central Bank announced that they will continue to keep their monetary policy stance in a growth-supportive position for “quite a long time.” At the May policy meeting, the ECB decided to cut the refinance rate to a record low of 0.5% while extending unlimited funds to banks for another year. These are steps are being taken to push the EU towards a recovery and will remain intact as long as necessary. Benoit Coeure, ECB member, “We are saying that because we are well aware that rigidities and difficulties of transmission in the euro zone mean that the monetary policy will have to stay accommodative for quite a long time.”

That’s all for the day. Have a great weekend, loyal readers.

All the best,
Jack Aubrey…

It wasn’t long ago that the precious metals were everyone’s sweetheart.  Gold bugs, hedge funds, man on the street – you name it, everyone was enthralled with the world’s oldest money, and everyone was making a mint off their PM investments, in whatever form they took.

And it came to pass that all believed that trees would grow to the sky, that gold and silver were a one way trade (buy and keep buying), and that never more would mankind know the evils of fiat currency, for all were coming to know the one, true god gold.

From Sweet Valentine to Morbid Massacre

Now, you can call Ben Bernanke a lot of things, and perhaps if you really stretched it you could call him Al Capone, but to hold the Fed Reserve Chairman responsible for the most recent massacre in the price of gold and silver is, we feel, stretching the bounds of credibility.

Today, gold and silver are taking a baseball bat of a beating, yet while they were in the ascendant there was no ink spared to explain how the embattled Fed Chairman’s Qualitative Easing (QE) program was weakening the Dollar, dooming it to obscurity and thereby pushing the value of gold and its related investibles through the roof.

Bernanke when it goes up, they cried.

And now Bernanke when it goes down?

Hunh?

The only problem with the initial diagnosis was that it wasn’t true.

In the four years since QE was first instated, the value of the dollar has fluctuated, but it has not lost a penny of value against the trading basket known as the US Dollar Index (DXY).

See here –

Since the spring of 2009, as the chart shows, we’ve traded in a band 6% higher and 6% lower than DXY 79 (black line), except for one, brief overbought period in early summer 2010, when the dollar became all the rage and shot up past DXY 88 (explain that one, please, all you dollar doubters).

We actually stand now slightly ahead of where we were at the launch of QE – with respect to the world’s strongest currencies, the Dollar is even stronger.

Tell the Truth, Son

Now, it’s not our intention to mock anyone, but with silver yesterday breaking below support and setting new bear market lows – and with the finger-pointing becoming ever more frantic, and even the Federal Reserve (and its criminal partners, J.P. Morgan et.al) taking the lion’s share of the blame – one feels the need to step in and call a spade a spade.

The truth is the Precious Metals Emperor has no clothes.

It’s very simple.  Gold and silver buyers got pulled in to a monsoon love- fest that was a decade in the making and have now spent the last two years getting dried out.  Their net worth is evaporating as the PMs continue their retreat, and because bear markets – like their bullish counterparts – have to run their full course before they reach their conclusions, we still await a final capitulation blow-off bottom before we re-enter the trade on the long side.…

Markets were relatively flat on Wednesday as the Federal Reserve announced that factory output fell in April. The numbers showed that auto manufacturers slowed on the number of cars produced along with mostly all other industries cutting back on output which caused a 0.4% drop for the index. This drop has been the third decrease in just four months for factory output and the largest drop since October. Auto production fell 1.3%. Industrial production fell 0.5%, the biggest drop since August of last year. Utility production tumbled 3.7%, which accounts for power usage returning to normal after an abnormally cold March. Paul Dales, a senior U.S. economist at Capital Economics, said “American manufacturers are continuing to struggle in the face of subdued global demand.”

The National Association of Home Builders/Wells Fargo (WFC) builder sentiment announced that confidence among homebuilders in the U.S. rebounded in May. The index rose in May to 44 from 41 in April. The increase can be partially attributed to the better sales trends that have been leading into the spring selling season and the strong outlook on sales over the next six months. In addition to sales trends, customer traffic has improved since last month. May’s reading surpassed analysts expectations of an increase to 43. Rick Judson, NAHB Chairman, said “Builders are noting an increased sense of urgency among potential buyers as a result of thinning inventories of homes for sale. This is definitely an encouraging sign even amidst rising challenges with regard to the cost and availability of building materials, lots and labor.”

The Labor Department reported that producer prices have posted their largest drop since February of 2010. The producer index dropped 0.7% in April, following the wholesale prices drop of 0.6% in March. The drop was partially attributed to declines in both gasoline and food prices. Economist had forecast a drop of 0.6% for the index. Paul Dales, senior economist at Capital Economics, said, “With previous falls in some commodity prices still to feed through, a further fall in producer price inflation is on the cards. This is especially the case when the weak activity climate is preventing producers from raising margins.”

The House Agriculture Committee has announced that they are going to consider a possible cut to the $80 billion-a-year food stamp program. The current food stamp program has become too expensive, according to conservatives, and the cuts would be a step in appeasing certain groups. The farm bill that they are introducing would cut nearly 3% of the total program, roughly $2.5 billion per year. The food stamp program is also known as Supplemental Nutrition Assistance Program, or SNAP. In 2012 there were roughly 47 million people using the program, or about 1 in 7 Americans, and costs have more than doubled since 2008.

That’s all for the day.

All the best,
Jack Aubrey, Oakshire Financial…