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In today’s Featured Articles section below, we feature Jim Willie, Ted Butler and Bill Bonner.  Their articles are of the must-read variety.  All three are very informative and interesting.  Bill Holter hits it out of the park today in his section.  As 2013 winds down, amidst mild tapering, the drop in precious metals is setting the stage for the bottom that we need to be in place so the bull market can resume.

We spend half the year in Aventura, Florida.  From Thanksgiving on, the traffic and shopping is unbearable, as the snowbirds descend on Miami Beach and the surrounding areas.  One of the biggest attractions is the Aventura Mall, about two miles from where we live.  We avoid it like the plague, this time of the year.  Parking is impossible and the pre-Christmas crowds are impossible.

On Wednesday morning, Susan drove there to pick something up at Nordstroms.  The parking lot was half empty.  The mall was empty.  The employees at Nordstroms couldn’t understand where all the traffic was?  Every year, at this time, it is a mad house.  Not now.  I wonder if this is a barometer of a very weak retail Christmas season.  If so, this doesn’t bode well for 2014, but that wouldn’t surprise me at all.  The healthy economy is really mostly smoke and mirrors.  Here is an interesting article from Zero Hedge:

The Real Numbers Behind America’s Phony Recovery

Submitted by Tyler Durden on 12/18/2013 09:40 -0500

Today is the big day. Investors are on the edges of their seats, waiting to find out what the Fed will do. Taper? No taper? Or maybe it will taper on the tapering off?

Investors don’t seem worried. Most of the reports we read tell us the economy is improving. Unemployment is going down. Meanwhile, manufacturing levels are rising. Compared to Europe, the US is a powerhouse of growth and innovation, they say. Compared to emerging markets, it is a paragon of stability and confidence.

But wait… What if all these things were delusions… statistical folderol… or outright lies? What if the true measures of the economy were feeble and disappointing? What if the US economy was only barely stumbling and staggering along? As Rick Santelli so uncomfortably asked, “What is Bernanke”

In a recent interview with King World News, William Kaye pointed out that the Spyder GLD lost another 1.05% of their inventory.  They are now down to around 800 tons, from a peak of around 1,350 tons one year ago.

Meanwhile, the silver ETF, SLV’s inventory remains roughly the same.

Kaye said:

I’m saying that I am extremely suspicious about what is taking place with regards to the further draining of GLD inventories, especially ahead of tomorrow’s Fed decision.  But the other thing I have been watching is that Comex inventories, which continue to be very low, in recent days have been somewhat replenished.  Both JP Morgan and to a lesser extent HSBC have been seeing increases in the inventory that is being made available to the Comex.  This reduction in the inventory of the Spyder Gold Trust and some of the other exchange-traded products could be partly responsible for that.

The bottom line here is gold is being looted out of GLD for one reason or another, meaning, the central planners may very well be up to something here, and KWN readers around the world should be aware of this fact, particularly ahead of tomorrow’s Fed announcement. (Link:  Absolutely Shocking Developments in the War on Gold“.)

 –King World News, December 17, 2013

Fed Taper is minimal.  They know they can’t drain the punch bowl.  $10 billion a month is not a big number vs. bond sales many times that amount.

What is the difference between $85 billion and $75 billion is in the grand scheme of things?  Here is a chart showing what the barely perceptible impact of today’s announcement will be on the Fed’s balance sheet over the next 12 months, when instead of printing well over $5 trillion at its old monetization pace, the Fed’s balance sheet will be only $4.9 trillion.

Federal Reserve Balance Sheet Taper vs No Taper

Since the Fed is the primary buyer in this market, who will step up to pick up the slack?  If interest rates start to rise, as the Fed eases, it will be a drag on housing and the stock market, plus of course, the bond market.  It is one thing for the Fed to say they will taper and another to actually do it.  This is just the beginning of the story, and there is a LOT to follow.

At the first sign of trouble (bonds, stocks, housing) don’t be surprised to see the Fed reverse course and increase tapering.  If they don’t, 2014 will be a very bad year for Wall Street.

This is the way they see things over at Zero Hedge.

Fed “Tightens”, Tapers $10 Billion – Full Redline

Submitted by Tyler Durden on 12/18/2013 14:01 -0500

Despite the world of mainstream media pundits proclaiming the U.S. is recovering nicely and that a taper is priced in (and the warning that the 5-year auction gave this morning that it’s not), markets are already reacting violently to the Fed’s decision to announce a small ‘taper’ (and more dovish forward guidance).

As a reminder, here are the four reasons why the Fed was cornered into tapering… as we have noted numerous times before; the “taper” is all about economic cover for a forced move the Fed has to make:

1. Deficits are shrinking and the Fed has less and less room for its buying

2. Under the surface, various non-mainstream technicalities are breaking in the markets due to the size of the Fed’s position (repo markets, bond specialness, and fail-to-delivers among them).

3. Sentiment is critical; if the public starts to believe (as Kyle Bass warned) that the central bank is monetizing the government’s debt (which it clearly is), then the game accelerates away from them very quickly – and we suspect they fear we are close to that tipping point

4. The rest of the world is not happy. As Canada just noted, the US monetary policy will be discussed at the G-20

Obama is already facing the heat (deservedly so) and soon the Fed will too.

Jim Sinclair wrote:

Apparently tapering is good for stocks (Dow plus $200) so there is an interpretation at the Fed that both the economy and inflation are moving higher. Others ask if the Fed is simply giving up.

jsmineset.com, December 18, 2013

Richard Russell wrote:

I must admit, I was wrong. I did not expect the Fed to taper at this meeting. But the overall market response seems to be great. The taper was “priced in” and market psychology is notably different than when QE1 and QE2 were ended.

On the news, the Dow has moved up over 150 points and the 10-year remains nearly unchanged from before the announcement. As I continue writing near market close, we are in record territory on the Dow and S&P 500. The Transports are about 50 points away from an all-time high and thus another bullish Dow Theory confirmation.

Markets hate uncertainty. The removal of this overhang is being seen as a great relief and has the potential to induce a year-end “Santa Clause” rally.


Richard’s Remarks

December 18, 2013

Central banks fear low inflation since it can lead to actual deflation, which is difficult to control.

The huge and growing total of world debt is basically deflationary since it takes increased savings and money to carry debt. In other words, debt swallows up savings and earnings and is deflationary. If you want to slow down a business, load it with debt.

Aside from debt, the entrance into the world’s economic system of the third world, Asia and China meant a huge increase in the planet’s supply of goods. Thus, as a monumental stream of new goods and merchandise entered the world economic system, prices were forced down, and all of this empowered the forces of deflation.

What to do? During the Great Depression, FDR chose to fight deflation by re-setting the price of gold from 22 dollars per ounce to 35 dollars per ounce. Thus he sought to re-liquefy the system.

I believe we’re going to repeat that measure in a fight to re-inflate the US and world economies. In other words, I believe that in their desperation to re-inflate and ward off deflation, the US is again going to re-set the price of gold. But much more about this on tomorrow’s site. So stay tuned.

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