February 9, 2012
By Kevin Michael Grace
Gold was down (at press time) $30.70 (-1.7%) for the week to $1,731.30, and silver was down $0.38 (-1.1%) to $33.92. Reuters attributed gold’s decline to (surprise!) “the Euro g[iving] up early gains, with optimism over a pending bailout deal for Greece petering out.” Citigroup analyst David Wilson warned, “Strangely, if Greece doesn’t agree to austerity in the next couple of days, it might be negative for gold in terms of dollar/euro.” Strange, indeed.
Others claimed that gold fell because the US unemployment rate fell from 8.5% to 8.3%. Pat McHugh of Manulife Financial told Bloomberg, “The number was a huge improvement over expectations… The strength in the [US] economy implies that the probability of more Fed easing or another quantitative package is being diminished, and gold’s going to take it on the chin. The flight-to-safety movement doesn’t appear to be as important as a result of the stats we’ve seen today.”
According to “megawatt celebrity economist” Sherry Cooper, Team America will roar back in the second half (to perpetuate Clint Eastwood’s already famous metaphor): “Consumers are loosening their belts as mortgage refinancing is putting more money in their pockets, the labour market is improving, and pent-up demand is beginning to push consumers into spending mode. The US energy sector is booming, thanks to growth in the Bakken and the burgeoning natural gas sector. US manufacturing is enjoying a renaissance as the low greenback and depressed wage demands have markedly increased competitiveness. Even the downtrodden housing sector is beginning to show some life.”
The worthless balance sheets of those banks that created the housing bubble are certainly beginning to show some life, as those banks are about to get a bailout. But the “orgasms” precipitated by a one-month decline in the US unemployment rate seem rather premature. Step forward, the Ben Bernanke, unlikely voice of reason.
“It is very important to look not just at the unemployment rate, which reflects only people who are actively seeking work,” Bernanke told the Senate Budget Committee Tuesday. “There are also a lot of people who are either out of the labor force because they don’t think they can find work or in part-time jobs… The 8.3% no doubt understates the weakness of the labor market in some broad sense.”
A very broad sense. What constitutes “employment” according to the US Bureau of Labor Statistics? “At least 1 hour” of work per week. And who does not count as “unemployed” according to the BLS? Those “not in the labour force.” The BLS tells us that 243,000 non-farm payroll jobs were created in January. The BLS also tells us that the category not in the labour force increased in January by 1.2 million (a record). Which number seems more important?
Jim Quinn at The Burning Platform writes, “There are 242 million working-age Americans. Only 142 million Americans are working. For the math challenged, such as CNBC analysts, that means 100 million working age Americans (41.5%) are not working. But don’t worry, the BLS says the unemployment rate is only 8.3%. Things are going so swimmingly well in this country the other 33.2% are kicking back enjoying the good life.”
Quinn points out that the real US unemployment rate, after junking all of the BLS’ jiggery-pokery—”not in the labour force,” “discouraged workers,” “the birth/death model,” etc—is 23%. Great Depression unemployment was 25%.
Yes, the US is now characterized by what Cooper calls “depressed wage demands.” Or as Quinn puts it, “Those that do have jobs are falling further and further behind. Wages have gone up less than 2% in the last year and have been rising at an annual rate below 3% for the last four years. According to our friends at the BLS, inflation has risen 3% in the last year… If you measure CPI exactly as it was measured in 1980, at the outset of our great debt inflation, it exceeds 10% versus the fake 3% reported without question by the MSM.”
There are two American economies. There is the official economy, as measured by the BLS and celebrated by the MSM and mainstream economists, and the unofficial economy, which is ignored by the great and the good because it is unpleasant and rather frightening. According to Aldous Huxley, “Facts do not cease to exist because they are ignored.” Well, that depends on who creates the facts, doesn’t it? Oh brave new world! That has such statisticians in it!
So gold might just not take it on the chin after all. Jobs are scarce these days, but so is gold. Jeff Clark of Casey Research writes, “The population of planet Earth has grown roughly 15% just since the year 2000, while the new supply of gold from all sources (mining, scrap, de-hedging) has fallen 4.2%… At the same time, demand keeps growing. China imported 3.3 million ounces of gold last November—and total global mining production outside China is just 6.4 million ounces per month. Gold bullion held by the world’s central banks is at a six-year high—but it’s roughly 15% below the amount they held in 1980 and has fallen in half as a percent of their total reserves.”
Clark’s conclusion: “If this bull market continues, gold stocks will truly soar. An increasingly desperate clamor for exposure to gold could light a short fuse for our market sector.”
At the Globe and Mail, Darcy Keith and Jody White report that after Nevsun TSX:NSU cut its 2012 gold production guidance by 50%, Cosmos Chiu of CIBC World Markets now rates it “sector underperformer” and has cut his price target from $8 to $5.50 (currently $4.09).
And at Happy Capitalism, Lou Schizas takes a wait-and-see attitude toward Copper Mountain TSX:CUM, which, despite its name, is a significant producer of precious metals (7,800 ounces gold, 161,800 ounces silver in its first quarter of production). “I like the story, but what is needed is a convincing move to the upside. If the shares can make a move through $6 it has little resistance back to $8.” (Currently $5.13.)
Finally, the campaign against “hate speech” in all its hateful manifestations goes from strength to strength. Chanel’s Karl Lagerfeld called chanteuse Adele “a little too fat,” and from the outrage that ensued, you would have thought he’d advocated genocide. Is there no place left for plain speaking? Sure, Adele is a little too fat, just as Lagerfeld is a creepy old man who looks as if he’s auditioning for the position of Satan’s couturier.