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Close Call For US Banks
Technical Update
The following is from one of the technical trading services I subscribe to.
Here is my weekly updated chart of gold as it works its way through the correction from last year. The daily chart looks to be forming a larger Cup & Handle pattern which is extremely bullish. If this pattern does a text book move then we could see spot gold reach the $1400 area.
The following is from one of the technical trading services I subscribe to.
Here is my weekly updated chart of gold as it works its way through the correction from last year. The daily chart looks to be forming a larger Cup & Handle pattern which is extremely bullish. If this pattern does a text book move then we could see spot gold reach the $1400 area.
That being said this pattern still has to complete the handle portion which could easily last another 4 weeks, so I am not in a panic to add more to our position.
More Good News For Gold Investors
Mortgage Foreclosures Hit Record as Job Losses Strain Budgets
May 19 (Bloomberg) -- A record share of U.S. mortgages were in foreclosure in the first quarter as job losses caused homebuyers to fall behind on monthly payments, thwarting government efforts to stem property seizures.
The inventory of homes in foreclosure rose to 4.63 percent from 4.58 percent in the fourth quarter, the Mortgage Bankers Association said in a report today. The combined share of foreclosures and mortgage delinquencies was 14 percent, or about one in every seven U.S. mortgages.
Job losses have strained budgets, making it difficult for households to pay monthly bills, said Jay Brinkmann, the Washington-based trade group’s chief economist. U.S. unemployment in the second half of 2009 -- when people now in foreclosure would have first fallen behind on their payments -- reached the highest levels since 1983, according to the Bureau of Labor Statistics.
Mortgage Foreclosures Hit Record as Job Losses Strain Budgets
May 19 (Bloomberg) -- A record share of U.S. mortgages were in foreclosure in the first quarter as job losses caused homebuyers to fall behind on monthly payments, thwarting government efforts to stem property seizures.
The inventory of homes in foreclosure rose to 4.63 percent from 4.58 percent in the fourth quarter, the Mortgage Bankers Association said in a report today. The combined share of foreclosures and mortgage delinquencies was 14 percent, or about one in every seven U.S. mortgages.
Job losses have strained budgets, making it difficult for households to pay monthly bills, said Jay Brinkmann, the Washington-based trade group’s chief economist. U.S. unemployment in the second half of 2009 -- when people now in foreclosure would have first fallen behind on their payments -- reached the highest levels since 1983, according to the Bureau of Labor Statistics.
Housing Rebound at Least 3 Years Away, Ranieri Says
April 28 (Bloomberg) -- The U.S. housing market won’t recover for three to five years as mounting foreclosures hold down prices, according to mortgage-bond pioneer Lewis Ranieri.
“There’s another big leg down and the question is how long does it stay,” Ranieri, chairman of Ranieri Partners LLC, said during a panel discussion today at the Milken Institute Global Conference in Beverly Hills, California. “You can’t have much of a rally when you’ve got this big overhang.”
Home foreclosures probably will reach a record this year with more than 1 million properties seized by banks, according to data seller RealtyTrac Inc. Unemployment was 9.7 percent in March, unchanged for a third month, according to the Labor Department, and a fifth of mortgaged U.S. homes were worth less than their loans in the fourth quarter, Zillow.com reported.
April 28 (Bloomberg) -- The U.S. housing market won’t recover for three to five years as mounting foreclosures hold down prices, according to mortgage-bond pioneer Lewis Ranieri.
“There’s another big leg down and the question is how long does it stay,” Ranieri, chairman of Ranieri Partners LLC, said during a panel discussion today at the Milken Institute Global Conference in Beverly Hills, California. “You can’t have much of a rally when you’ve got this big overhang.”
Home foreclosures probably will reach a record this year with more than 1 million properties seized by banks, according to data seller RealtyTrac Inc. Unemployment was 9.7 percent in March, unchanged for a third month, according to the Labor Department, and a fifth of mortgaged U.S. homes were worth less than their loans in the fourth quarter, Zillow.com reported.
Panicky Greeks Paying Over $1,700 Per Ounce For Physical Gold
By Patrick A. Heller on May 25th, 2010
The fear running through the Greek populace is that the nation’s government may default on some of its debts.
In the first four months of 2010, the Greek central bank sold more than 50,000 sovereigns at its main downtown Athens office. Bank officials estimate that at least 100,000 other coins changed hands on the black market. The Bank of Greece has received as much as $409 per coin, which works out to a price of more than $1,700 per ounce of gold! Prices paid on the black market are reckoned to be even higher. A popular spot for street vendors to sell their coins is near the Athens Stock Exchange. There the traders wait for citizens to bring payments received from unloading their paper assets like stocks and bonds.
The US government and some state governments such as California are in financial straits as bad as or even worse than Greece. How long will it take before American buyers will have to wait in lines to pay outrageous premiums for what are now bullion-priced gold and silver coins? More than one analyst thinks those days will come within a few months or sooner.
By Patrick A. Heller on May 25th, 2010
The fear running through the Greek populace is that the nation’s government may default on some of its debts.
Since 1965, the Greek government has imposed restrictions on trading British Sovereign gold coins (gold content .2354 oz). Despite those restrictions, the Bank of Greece reports that it is selling an average of more than 700 coins per day to worried Greeks.
In the first four months of 2010, the Greek central bank sold more than 50,000 sovereigns at its main downtown Athens office. Bank officials estimate that at least 100,000 other coins changed hands on the black market. The Bank of Greece has received as much as $409 per coin, which works out to a price of more than $1,700 per ounce of gold! Prices paid on the black market are reckoned to be even higher. A popular spot for street vendors to sell their coins is near the Athens Stock Exchange. There the traders wait for citizens to bring payments received from unloading their paper assets like stocks and bonds.
The US government and some state governments such as California are in financial straits as bad as or even worse than Greece. How long will it take before American buyers will have to wait in lines to pay outrageous premiums for what are now bullion-priced gold and silver coins? More than one analyst thinks those days will come within a few months or sooner.
Buy real gold – before it’s too late
24/5/2010
By Marek Handzel
Pension funds must buy physical gold to protect themselves from hyperinflation and economic collapse.
The stark warning has come from Egon von Greyerz, a managing partner at Matterhorn Asset Management, who says that there is very little shelter available from another impending global financial crisis - one which will represent the culmination of the exponential credit creation of the past forty years.
Von Greyerz is based in Zurich with the Swiss asset management company which specializes in wealth preservation through precious metal investment, and was at one time vice chairman of Dixons and a trustee of the firm’s pension scheme. He told Pensions Age that “the world is in a mess”.
“The banking system is bust, the sovereign states are bust. There is only one solution, which is to print unlimited amounts of money which will make the money worthless.
“If I had a pension fund I wouldn’t trust a penny of it to the stock market and cash in the bank. Pension funds have three major assets: bonds, equities and property. In my view all three of those are going to collapse,” he said.
Investment in physical gold, not just “ETF paper gold”, he claimed, is the one safe haven for investors.
Demand, he added, was going up all the time as people are getting worried about the precarious state of the financial markets. UK pension funds, he said, are among some of the investors he is dealing with.
Dismissing descriptions of his analysis as extreme, he said gold still had a way to go from its current price of $1,230 per ounce.
“People say we’re talking about Armageddon – but we’re about preserving wealth. We’re concerned about protecting investors’ money. I don’t know a better way to do it. Sadly, this is our view.
“We’re not going to recommend gold for ever, but it’s the right asset in the next few years.”
24/5/2010
By Marek Handzel
Pension funds must buy physical gold to protect themselves from hyperinflation and economic collapse.
The stark warning has come from Egon von Greyerz, a managing partner at Matterhorn Asset Management, who says that there is very little shelter available from another impending global financial crisis - one which will represent the culmination of the exponential credit creation of the past forty years.
Von Greyerz is based in Zurich with the Swiss asset management company which specializes in wealth preservation through precious metal investment, and was at one time vice chairman of Dixons and a trustee of the firm’s pension scheme. He told Pensions Age that “the world is in a mess”.
“The banking system is bust, the sovereign states are bust. There is only one solution, which is to print unlimited amounts of money which will make the money worthless.
“If I had a pension fund I wouldn’t trust a penny of it to the stock market and cash in the bank. Pension funds have three major assets: bonds, equities and property. In my view all three of those are going to collapse,” he said.
Investment in physical gold, not just “ETF paper gold”, he claimed, is the one safe haven for investors.
Demand, he added, was going up all the time as people are getting worried about the precarious state of the financial markets. UK pension funds, he said, are among some of the investors he is dealing with.
Dismissing descriptions of his analysis as extreme, he said gold still had a way to go from its current price of $1,230 per ounce.
“People say we’re talking about Armageddon – but we’re about preserving wealth. We’re concerned about protecting investors’ money. I don’t know a better way to do it. Sadly, this is our view.
“We’re not going to recommend gold for ever, but it’s the right asset in the next few years.”
Real Estate Market on "Life Support"
David Stevens, the head of the FHA had this to say about the current state of the U.S. real estate market... “This is a market purely on life support, sustained by the federal government,” he said at the Mortgage Bankers Association conference. “Having FHA do this much volume is a sign of a very sick system.” Source
In fact, according to Ed Steer, analyst at Casey Research, "... if the U.S. government wasn't borrowing and spending... plus propping up every market in sight... the world would now be in a depression many orders of magnitude worse than that of the 1930s.
David Stevens, the head of the FHA had this to say about the current state of the U.S. real estate market... “This is a market purely on life support, sustained by the federal government,” he said at the Mortgage Bankers Association conference. “Having FHA do this much volume is a sign of a very sick system.” Source
In fact, according to Ed Steer, analyst at Casey Research, "... if the U.S. government wasn't borrowing and spending... plus propping up every market in sight... the world would now be in a depression many orders of magnitude worse than that of the 1930s.
Revolving Credit
This chart shows the drop in revolving credit. The drop is the largest since records were kept. In earlier recessions the trend went flat but never did it drop like this during the past 42 years. It is due to a combination of factors: The banks are unwilling to lend and the consumer is maxed out. The result is a slowdown in the economy that will continue until this trend reverses.
This chart shows the drop in revolving credit. The drop is the largest since records were kept. In earlier recessions the trend went flat but never did it drop like this during the past 42 years. It is due to a combination of factors: The banks are unwilling to lend and the consumer is maxed out. The result is a slowdown in the economy that will continue until this trend reverses.
The 3 year chart clearly shows that gold resumed its upward trend from October 2007. And each time it has traded close or on the green support level of the upward channel, it has rebounded. Even if this support line is breached, the trend has not changed. The price of the yellow metal has now firmly established support above the US$1000 level with an upward bias. My medium-term target remains US$1350. But, this is only the beginning of this next leg up.
CLICK CHART TO ENLARGE
CLICK CHART TO ENLARGE
Source: David Levenstien of the Delaire Report.
US Mint Gold Sales
from Ed Steer's Daily Commentary
The U.S. Mint had another big jump in their three big bullion products. There were another 15,500 one-ounce gold eagles sold... 5,000 24-k gold buffaloes... and a huge 459,500 silver eagles reported sold on Monday. Month-to-date, these three items total 158,000... 66,000... and 3,500,000 respectively. These are serious numbers, dear reader.
from Ed Steer's Daily Commentary
The U.S. Mint had another big jump in their three big bullion products. There were another 15,500 one-ounce gold eagles sold... 5,000 24-k gold buffaloes... and a huge 459,500 silver eagles reported sold on Monday. Month-to-date, these three items total 158,000... 66,000... and 3,500,000 respectively. These are serious numbers, dear reader.
Morning Technical Outlook
from Rick Ackerman
The pullback from mid-May’s 1251.00 peak is sufficient in theory to have recharged the futures for a rally to as high as $1369. However, looking at the weekly chart (see inset) the eye craves more backing and filling to bring the current correction into better symmetry with the earlier correction at k-A. In any event, a resumption of the major uptrend would be signaled by a 50-point “booster rally” from the so-far point ‘C’ low at 1168.00 or lower.
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from Rick Ackerman
The pullback from mid-May’s 1251.00 peak is sufficient in theory to have recharged the futures for a rally to as high as $1369. However, looking at the weekly chart (see inset) the eye craves more backing and filling to bring the current correction into better symmetry with the earlier correction at k-A. In any event, a resumption of the major uptrend would be signaled by a 50-point “booster rally” from the so-far point ‘C’ low at 1168.00 or lower.
Gold to Bonds Ratio
Featured is the index that compares gold to bonds (stuff to fluff). After breaking out at 10.00 the breakout was tested and the target for the test was at the green arrow. Due to last weeks panic on Wall St., with stocks dropping sharply, bonds rose and caused this index to drop below the target. A close above the blue arrow will tell us that the short-term trend is moving back in line with the long term trend. This in turn will have a bullish effect on gold.
CLICK TO ENLARGE
Shadow Gold Price 
This chart courtesy QB Asset Management and Gata.org shows the ‘shadow gold price.’ It adds up the various components of the US money supply and divides this number by the amount of gold estimated to be in existence. The result is a potential gold price at $6,000.00 an ounce.
CLICK CHART TO ENLARGE
CLICK CHART TO ENLARGE
The #1 Reason Why To Own Gold
excerpt from the Delaire Report
With sovereign debt around the world exploding, governments are going to be forced to print more money to fund these massive debts. And, as history has shown us, this system of paper money (fiat money) always fails. The reason paper money systems always fail is because they provide no practical limit to credit. New currency reserves can always be printed. Bad debts are funded with more debt. This ability to simply manufacture money will continue as long as there remains confidence in the system.
Unfortunately, at some point, the debts become so large the whole system simply collapses and all that paper money becomes worthless.
This scenario is frightening and if you simply choose to ignore it, you will be financially destroyed over the next several years. And, the only way to protect yourself against this trend is to hold real assets including metallic money such as gold and silver.
excerpt from the Delaire Report
With sovereign debt around the world exploding, governments are going to be forced to print more money to fund these massive debts. And, as history has shown us, this system of paper money (fiat money) always fails. The reason paper money systems always fail is because they provide no practical limit to credit. New currency reserves can always be printed. Bad debts are funded with more debt. This ability to simply manufacture money will continue as long as there remains confidence in the system.
Unfortunately, at some point, the debts become so large the whole system simply collapses and all that paper money becomes worthless.
This scenario is frightening and if you simply choose to ignore it, you will be financially destroyed over the next several years. And, the only way to protect yourself against this trend is to hold real assets including metallic money such as gold and silver.
Rates Headed Down
This from Rick Ackerman's commenary this morning.
2.86% Coming on the 10-Year Note?
Check out the chart that accompanies todays bond tout if you don’t believe that rates on the 10-Year Note are headed down to 2.86%. This will be punitive for savers and pensioners, but we doubt that foreign lenders will balk if the alternative is still euros. Shouldn’t someone tell them about gold?
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This from Rick Ackerman's commenary this morning.
2.86% Coming on the 10-Year Note?
Check out the chart that accompanies todays bond tout if you don’t believe that rates on the 10-Year Note are headed down to 2.86%. This will be punitive for savers and pensioners, but we doubt that foreign lenders will balk if the alternative is still euros. Shouldn’t someone tell them about gold?
The Future of Paper Money
from the TraderView Newsletter, May 6, 2010
We are just waiting for purchasing power to collapse under the debasement which is currently unfolding both in PLAIN sight, and by stealth by morally and fiscally-BANKRUPT central bankers and public servants. All FIAT currency and financial systems (they are just credit, aka IOU’s) throughout history have fallen to their doom in insolvency, and this episode will be no different. Never in the history of the world have the outcomes been different. Let’s take a look at a recent comment from the granddaddy of newsletter writers Richard Russell:
“I want to make one thesis clear. Up until recently, gold moved inversely to the dollar. If the dollar was weak, gold rallied, and vice versa. But I believe that has changed. With the mess in Greece and other European nations (Portugal, Spain,Italy, Ireland), suspicion is rising about ALL fiat money. Increasingly, gold is considered the ONLY safe money (probably along with diamonds and famous works of art). The most stable intrinsic wealth is gold because it is priced around the world every hour of the day, and it can be sold immediately in any quantity, making it completely liquid.
As I see it, a great drama is unfolding. What we are seeing is the slow, steady decline of the greatest fraud ever perpetrated on the people of the world. The fraud I am referring to is fiat money. This is the so‐called "money" created by the central banks. Fiat (non‐intrinsic) money can be created at will by a central bank via a computer.
You work all your life to make a total of $900,000. The Fed, with no work or sweat on its part, can create a billion or 10 billion fiat dollars at will. Is that logical or moral? It allows politicians to spend whatever they want, and the bills are paid for in fiat money. The result is that many nations have spent far more than they ever should have, and oceans of fiat money have swept across the planet.
If you continue to produce an over‐supply of an item, ultimately that item will become progressively less valuable. This is what's happening to fiat money. As fiat money, all of it, loses value, it takes an increasing amount of a given fiat currency to buy an ounce of gold.
As economies sink, governments create an increasing amount of fiat money in an effort to jump‐start their sinking economies. Thus, what we are seeing is the perfect formula for the death of fiat money. But before death, the value (purchasing power) of a given fiat money must head down.
Therefore, I view rising gold as the death knell for all fiat money. But first, investors will exit the weakest and most speculative of the various fiat monies. Right now we are seeing investors fleeing Greek money in favor of the US dollar. In the end, I believe this is a fool's trade.
Ultimately, we'll see the final flight to safety. This will be the flight out of dollars into gold.” ‐Richard Russell
from the TraderView Newsletter, May 6, 2010
We are just waiting for purchasing power to collapse under the debasement which is currently unfolding both in PLAIN sight, and by stealth by morally and fiscally-BANKRUPT central bankers and public servants. All FIAT currency and financial systems (they are just credit, aka IOU’s) throughout history have fallen to their doom in insolvency, and this episode will be no different. Never in the history of the world have the outcomes been different. Let’s take a look at a recent comment from the granddaddy of newsletter writers Richard Russell:
“I want to make one thesis clear. Up until recently, gold moved inversely to the dollar. If the dollar was weak, gold rallied, and vice versa. But I believe that has changed. With the mess in Greece and other European nations (Portugal, Spain,Italy, Ireland), suspicion is rising about ALL fiat money. Increasingly, gold is considered the ONLY safe money (probably along with diamonds and famous works of art). The most stable intrinsic wealth is gold because it is priced around the world every hour of the day, and it can be sold immediately in any quantity, making it completely liquid.
As I see it, a great drama is unfolding. What we are seeing is the slow, steady decline of the greatest fraud ever perpetrated on the people of the world. The fraud I am referring to is fiat money. This is the so‐called "money" created by the central banks. Fiat (non‐intrinsic) money can be created at will by a central bank via a computer.
You work all your life to make a total of $900,000. The Fed, with no work or sweat on its part, can create a billion or 10 billion fiat dollars at will. Is that logical or moral? It allows politicians to spend whatever they want, and the bills are paid for in fiat money. The result is that many nations have spent far more than they ever should have, and oceans of fiat money have swept across the planet.
If you continue to produce an over‐supply of an item, ultimately that item will become progressively less valuable. This is what's happening to fiat money. As fiat money, all of it, loses value, it takes an increasing amount of a given fiat currency to buy an ounce of gold.
As economies sink, governments create an increasing amount of fiat money in an effort to jump‐start their sinking economies. Thus, what we are seeing is the perfect formula for the death of fiat money. But before death, the value (purchasing power) of a given fiat money must head down.
Therefore, I view rising gold as the death knell for all fiat money. But first, investors will exit the weakest and most speculative of the various fiat monies. Right now we are seeing investors fleeing Greek money in favor of the US dollar. In the end, I believe this is a fool's trade.
Ultimately, we'll see the final flight to safety. This will be the flight out of dollars into gold.” ‐Richard Russell
The Money Changers
The following is an excerpt from a MUST READ article entitled Gold: Why The Bankers Need The Miners. Referring to Vietnam, the author states that "using constant wars as a tool to drain the wealth of entire economies, and enslave people with debt was nothing “new” to the bankers, even back in 1961. They had already had more than two centuries of “practice” in hollowing-out the economy of the British Empire. With that economy sucked-dry, it was now time to do the same to the United States.
Like Grima Wormtongue, from Tolkein's classic “The Lord of the Rings”, it was the bankers who were constantly “whispering into the ears” of Kings. However, unlike Wormtongue, the bankers did not use their words to try to soothe British Kings into a stupor, but rather goad them to war over and over and over.
Even three centuries ago, the bankers already knew that nothing created a need for as much “capital” (i.e. debt) as wars, and it is through the creation of debt (and the 'magic' of compound interest) that bankers have been plundering the wealth of societies since the Bible first warned us of “the money-changers”.
Indeed, it is a shame that we abandoned that Biblical name for bankers, since it is far more descriptive and instructive – for that is exactly what bankers do. They “change” your money (i.e. gold and silver) into their own paper, which they ruthlessly and relentlessly dilute, until it becomes nearly worthless – and then they start the process all over again (usually in a different country).
It is this insidious process of stealing-by-stealth which explains the bankers' love/hate relationship with gold. As the personifications of greed, the bankers covet gold (and silver) as the only, true money; and they will always strive to at least control all of the gold and silver in a society, even if they don't have official title to it (yet).
At the same time, they understand better than all others that gold is also their enemy, the “foe” who ultimately “exposes” the bankers' theft – but generally only after they have already stolen most of a society's wealth. Gold has been referred to as an economic “barometer” of inflation. This is a misnomer, as it reflects a fundamental misunderstanding of the true nature of “inflation”. Gold is actually a “warning siren”, which tells us how much (and how fast) the bankers are stealing from us – or, at least, it's supposed to.
As I have explained on many occasions in the past, gold is the true, ultimate “store of value” (or preserver of wealth). An ounce of gold is what is: immutable. When the “price” of gold rises (i.e. its exchange rate versus paper), it is not the gold which becomes “more valuable” (since that is impossible) but the paper which is becoming less valuable.
Gold is the “smoking gun” which provides conclusive evidence of the bankers' theft of our wealth. Thus, if the bankers can “suppress the price of gold” (i.e. conceal how fast their paper is losing value), then the bankers can continue stealing much more (and for a much longer time) than if the price of gold is allowed to rise freely in markets – and expose their stealing at a much earlier stage.
The following is an excerpt from a MUST READ article entitled Gold: Why The Bankers Need The Miners. Referring to Vietnam, the author states that "using constant wars as a tool to drain the wealth of entire economies, and enslave people with debt was nothing “new” to the bankers, even back in 1961. They had already had more than two centuries of “practice” in hollowing-out the economy of the British Empire. With that economy sucked-dry, it was now time to do the same to the United States.
Like Grima Wormtongue, from Tolkein's classic “The Lord of the Rings”, it was the bankers who were constantly “whispering into the ears” of Kings. However, unlike Wormtongue, the bankers did not use their words to try to soothe British Kings into a stupor, but rather goad them to war over and over and over.
Even three centuries ago, the bankers already knew that nothing created a need for as much “capital” (i.e. debt) as wars, and it is through the creation of debt (and the 'magic' of compound interest) that bankers have been plundering the wealth of societies since the Bible first warned us of “the money-changers”.
Indeed, it is a shame that we abandoned that Biblical name for bankers, since it is far more descriptive and instructive – for that is exactly what bankers do. They “change” your money (i.e. gold and silver) into their own paper, which they ruthlessly and relentlessly dilute, until it becomes nearly worthless – and then they start the process all over again (usually in a different country).
It is this insidious process of stealing-by-stealth which explains the bankers' love/hate relationship with gold. As the personifications of greed, the bankers covet gold (and silver) as the only, true money; and they will always strive to at least control all of the gold and silver in a society, even if they don't have official title to it (yet).
At the same time, they understand better than all others that gold is also their enemy, the “foe” who ultimately “exposes” the bankers' theft – but generally only after they have already stolen most of a society's wealth. Gold has been referred to as an economic “barometer” of inflation. This is a misnomer, as it reflects a fundamental misunderstanding of the true nature of “inflation”. Gold is actually a “warning siren”, which tells us how much (and how fast) the bankers are stealing from us – or, at least, it's supposed to.
As I have explained on many occasions in the past, gold is the true, ultimate “store of value” (or preserver of wealth). An ounce of gold is what is: immutable. When the “price” of gold rises (i.e. its exchange rate versus paper), it is not the gold which becomes “more valuable” (since that is impossible) but the paper which is becoming less valuable.
Gold is the “smoking gun” which provides conclusive evidence of the bankers' theft of our wealth. Thus, if the bankers can “suppress the price of gold” (i.e. conceal how fast their paper is losing value), then the bankers can continue stealing much more (and for a much longer time) than if the price of gold is allowed to rise freely in markets – and expose their stealing at a much earlier stage.
Five Facts You Need to Know About the Financial System
Let’s connect the dots on the ENTIRE financial system right now.
Fact #1: Banks are Insolvent.
The only reason they’re still in business is because they are permitted to value their balance sheet at whatever price they choose. I could privately value my car at $500 TRILLION, but that doesn’t mean I’ll get that price for it when it comes time to sell.
Ditto for the banks and their garbage saturated balance sheets.
Fact #2: Countries are Insolvent
Europe, a union of broke countries, recently announced it is bailing itself out. This is a bit like your bankrupt friend announcing he is gifting himself $1 million: it DOESN’T SOLVE ANYTHING. As I’ve stated time and again, you CANNOT solve a debt problem by issuing more debt.
Fact #3: Wall Street is Crooked
Anyone who even wants to debate this can look at Goldman Sachs’ latest trading results: Goldie made money EVERY SINGLE DAY of last quarter. As if that wasn’t statistically impossible enough, the firm pulled in $100 million+ on 35 out of 63 days. This simply cannot be done ethically. The only way your trading is that good is because you’re cheating (front-running your clients or manipulating the market).
Fact #4: The Central Bankers Cannot “SAVE” Anything
The world’s central bankers are clueless about fixing the debt problems (see Europe). If a private business employed the same tactics as Ben Bernanke and pals, it would be bankrupt. Leaving a paperweight on the “print” button is not a policy. Neither is buying garbage debt (something of NO value) at 100 cents on the dollar. Indeed, there’s a word for someone willing to the latter action; it’s “sucker.”
Fact #5: The Stock Market is Controlled by Computers
The stock market has rallied courtesy of outright manipulation and fraud. Bailout Ben’s money didn’t go to Mom and Pop America, it went to Wall Street where they gunned the stock market higher on next to no volume using algorithmic computer programs to front-run their clients (see Goldman above).
So markets today are not moving based on real investors, they are moving based on computers that trade back and forth in nanoseconds if not faster. These programs were created to reap a ¼ penny profit for each transaction the make (a policy the NYSE created to induce investors to continue trading and provide “liquidity”). However, as last Wednesday showed, when things start to get ugly all these “liquidity providers” seem to vanish in a hurry.
What It All Adds Up To
All of the above are facts that have been staring us in the face for well over six months, if not a year. If you suspected that something was “strange” about the market, you’re absolutely right, it’s that our entire financial system is based on fraud, lies, and BS.
So how to you play this?
It’s really quite simple:
Buy some physical bullion
Have some Crisis Trades (shorts) lined up for the next collapse (see below)
Don’t listen to anyone who missed Round One of the Crisis
Speaking of Crisis…
Europe officially joined the Moral Hazard club in a big way over the weekend. Having put off the “Greek” issue for five months they finally caved, launching a $1 trillion bailout AND their own variation on the Fed’s Quantitative Easing Program at the same time.
The implications of this are two-fold:
The Euro is going to parity with the US Dollar
Gold is now the top currency in the world
Regarding #1, the Euro only bounced for a brief 24 hours before continuing its slide. It is now clear that the world markets are like a drug addict, needing a bigger and bigger “fix” just to stay “high.”
The fact that Europe launched the largest single bailout in history and only bought a day’s worth of gains tells you all you need to know about just how saturated with debt the entire world is.
Regarding #2, Gold has broken out to a new all time high in both the US Dollar AND the Euro. In plain terms, Gold is no longer an inflation hedge or anti-Dollar trade. It is a stand-alone currency. In fact, it has traded higher at the same time as the Dollar!
If you do not already own Gold, you should strongly consider buying some now. Europe’s moves were a clear signal to the world that it’s a “race to the bottom” in terms of currency devaluation. With every central bank in the world willing to turn their currency into toilet paper, why not own a currency that you CAN'T wipe with?
Which brings us to my final point.
The final conclusion to draw from this is that there is not one politician in power worldwide with a set of cajones. When it comes time to choose between doing the right thing (default, clear the junk, start over from a fresh base) our “leaders” have shown time and again that they’d rather throw more taxpayer money at the problem.
In plain terms, no one wants to actually solve anything. All they want to do is put a band-aid on the issue and hope they can make it to their next election retaining their corporate backers without pissing off voters too much.
Let’s connect the dots on the ENTIRE financial system right now.
Fact #1: Banks are Insolvent.
The only reason they’re still in business is because they are permitted to value their balance sheet at whatever price they choose. I could privately value my car at $500 TRILLION, but that doesn’t mean I’ll get that price for it when it comes time to sell.
Ditto for the banks and their garbage saturated balance sheets.
Fact #2: Countries are Insolvent
Europe, a union of broke countries, recently announced it is bailing itself out. This is a bit like your bankrupt friend announcing he is gifting himself $1 million: it DOESN’T SOLVE ANYTHING. As I’ve stated time and again, you CANNOT solve a debt problem by issuing more debt.
Fact #3: Wall Street is Crooked
Anyone who even wants to debate this can look at Goldman Sachs’ latest trading results: Goldie made money EVERY SINGLE DAY of last quarter. As if that wasn’t statistically impossible enough, the firm pulled in $100 million+ on 35 out of 63 days. This simply cannot be done ethically. The only way your trading is that good is because you’re cheating (front-running your clients or manipulating the market).
Fact #4: The Central Bankers Cannot “SAVE” Anything
The world’s central bankers are clueless about fixing the debt problems (see Europe). If a private business employed the same tactics as Ben Bernanke and pals, it would be bankrupt. Leaving a paperweight on the “print” button is not a policy. Neither is buying garbage debt (something of NO value) at 100 cents on the dollar. Indeed, there’s a word for someone willing to the latter action; it’s “sucker.”
Fact #5: The Stock Market is Controlled by Computers
The stock market has rallied courtesy of outright manipulation and fraud. Bailout Ben’s money didn’t go to Mom and Pop America, it went to Wall Street where they gunned the stock market higher on next to no volume using algorithmic computer programs to front-run their clients (see Goldman above).
So markets today are not moving based on real investors, they are moving based on computers that trade back and forth in nanoseconds if not faster. These programs were created to reap a ¼ penny profit for each transaction the make (a policy the NYSE created to induce investors to continue trading and provide “liquidity”). However, as last Wednesday showed, when things start to get ugly all these “liquidity providers” seem to vanish in a hurry.
What It All Adds Up To
All of the above are facts that have been staring us in the face for well over six months, if not a year. If you suspected that something was “strange” about the market, you’re absolutely right, it’s that our entire financial system is based on fraud, lies, and BS.
So how to you play this?
It’s really quite simple:
Buy some physical bullion
Have some Crisis Trades (shorts) lined up for the next collapse (see below)
Don’t listen to anyone who missed Round One of the Crisis
Speaking of Crisis…
Europe officially joined the Moral Hazard club in a big way over the weekend. Having put off the “Greek” issue for five months they finally caved, launching a $1 trillion bailout AND their own variation on the Fed’s Quantitative Easing Program at the same time.
The implications of this are two-fold:
The Euro is going to parity with the US Dollar
Gold is now the top currency in the world
Regarding #1, the Euro only bounced for a brief 24 hours before continuing its slide. It is now clear that the world markets are like a drug addict, needing a bigger and bigger “fix” just to stay “high.”
The fact that Europe launched the largest single bailout in history and only bought a day’s worth of gains tells you all you need to know about just how saturated with debt the entire world is.
Regarding #2, Gold has broken out to a new all time high in both the US Dollar AND the Euro. In plain terms, Gold is no longer an inflation hedge or anti-Dollar trade. It is a stand-alone currency. In fact, it has traded higher at the same time as the Dollar!
If you do not already own Gold, you should strongly consider buying some now. Europe’s moves were a clear signal to the world that it’s a “race to the bottom” in terms of currency devaluation. With every central bank in the world willing to turn their currency into toilet paper, why not own a currency that you CAN'T wipe with?
Which brings us to my final point.
The final conclusion to draw from this is that there is not one politician in power worldwide with a set of cajones. When it comes time to choose between doing the right thing (default, clear the junk, start over from a fresh base) our “leaders” have shown time and again that they’d rather throw more taxpayer money at the problem.
In plain terms, no one wants to actually solve anything. All they want to do is put a band-aid on the issue and hope they can make it to their next election retaining their corporate backers without pissing off voters too much.
Politics Is Not The Answer
I recently heard a conservative analyst talking about the sad state of affairs in our country and he laid the blame at the feet of the Democrats. His solution to our problems was to advise all of us to vote Republican.
Well, as I have stated here many times, if you are voting for EITHER of the two major parties, you are wasting your vote. They are ALL bought and paid for and will ONLY do what is in the best interest of those who put them in office.... the Wall Street Bankers.
I'd vote for Charles Manson before I would ever vote for another Republican or Democrat. Follow the money.
Click chart to enlarge.
I recently heard a conservative analyst talking about the sad state of affairs in our country and he laid the blame at the feet of the Democrats. His solution to our problems was to advise all of us to vote Republican.
Well, as I have stated here many times, if you are voting for EITHER of the two major parties, you are wasting your vote. They are ALL bought and paid for and will ONLY do what is in the best interest of those who put them in office.... the Wall Street Bankers.
I'd vote for Charles Manson before I would ever vote for another Republican or Democrat. Follow the money.
Click chart to enlarge.
Unemployment At Record High
Click chart to enlarge.
This chart courtesy Federal Bank of St. Louis, features the length of time the average person has been unemployed. It is now at 33 weeks and shows no sign of turning down. This reduces tax revenue and puts a drain on the funds required for social assistance.
Click chart to enlarge.This chart courtesy Federal Bank of St. Louis, features the length of time the average person has been unemployed. It is now at 33 weeks and shows no sign of turning down. This reduces tax revenue and puts a drain on the funds required for social assistance.
What To Invest In Now?
Doug Casey of Casey Research recently stated that "nothing looks like a screaming bargain to me these days, but in relative terms, food commodities and the precious metals look like the places to be. Remember, most of the time, the intelligent speculator will do nothing. Maybe 90 percent of the time, you don't swing at the ball. But when you do, it should be because it looks to you like you've got a chance to knock it out of the ballpark.
Regarding what to do with your cash while you wait, it's worth remembering that gold is cash.
It's the only asset class that is not simultaneously someone else's liability. And that's more important than ever today; counterparty risk is going to extreme levels. Gold is the main asset to benefit both from fear of crisis and from inflation, when that beast finally rears its ugly head.
And it's highly liquid. You can actually pay for things in gold and silver, if need be.
I'm sorry I don't have a super pick today that will make our readers millionaires overnight. But as Richard Russell said, in a depression nobody really wins – the winners are those who lose the least. I'm starting to think more of capital survival than capital gains, so when things do hit bottom, we'll have the resources to buy great assets cheap and start accumulating a real fortune in a sound, sustainable recovery. Because there will be one. At some point."
Doug Casey of Casey Research recently stated that "nothing looks like a screaming bargain to me these days, but in relative terms, food commodities and the precious metals look like the places to be. Remember, most of the time, the intelligent speculator will do nothing. Maybe 90 percent of the time, you don't swing at the ball. But when you do, it should be because it looks to you like you've got a chance to knock it out of the ballpark.
Regarding what to do with your cash while you wait, it's worth remembering that gold is cash.
It's the only asset class that is not simultaneously someone else's liability. And that's more important than ever today; counterparty risk is going to extreme levels. Gold is the main asset to benefit both from fear of crisis and from inflation, when that beast finally rears its ugly head.
And it's highly liquid. You can actually pay for things in gold and silver, if need be.
I'm sorry I don't have a super pick today that will make our readers millionaires overnight. But as Richard Russell said, in a depression nobody really wins – the winners are those who lose the least. I'm starting to think more of capital survival than capital gains, so when things do hit bottom, we'll have the resources to buy great assets cheap and start accumulating a real fortune in a sound, sustainable recovery. Because there will be one. At some point."
Getting Closer....
Last week we noted that several prominent Austrian and German gold dealers had run out of inventory and were no longer transacting with a European population that has suddenly discovered gold religion. As a result, dealers are now focusing procurement efforst outside of Europe, with South Africa receiving the brunt of Europe's panic for physical precious metals. As the FT reports, "At the Rand refinery in South Africa, the phone has not stopped ringing this week." Just imagine what will happen when the gold bug goes airborne and jumps across the Atlantic... Source
Last week we noted that several prominent Austrian and German gold dealers had run out of inventory and were no longer transacting with a European population that has suddenly discovered gold religion. As a result, dealers are now focusing procurement efforst outside of Europe, with South Africa receiving the brunt of Europe's panic for physical precious metals. As the FT reports, "At the Rand refinery in South Africa, the phone has not stopped ringing this week." Just imagine what will happen when the gold bug goes airborne and jumps across the Atlantic... Source
What Should The Gov't Do?
From a recent conversation with Doug Casey regarding the inevitable coming currency collapse.
I'll say that within the next year, we will see things noticeably coming unglued. And they'll just keep getting worse and worse, until governments finally get out of the way of what must happen to set things right, painful as that will be.
And for that to happen, the lapdogs and cheerleaders in the media, and the people who listen to them, have got to stop looking to the government for solutions to the problem. People have got to stop looking for clever men who will do the "right things" to make everything better. The government can't solve the problem because the government is the problem. It needs to… go away.
From a recent conversation with Doug Casey regarding the inevitable coming currency collapse.
I'll say that within the next year, we will see things noticeably coming unglued. And they'll just keep getting worse and worse, until governments finally get out of the way of what must happen to set things right, painful as that will be.
And for that to happen, the lapdogs and cheerleaders in the media, and the people who listen to them, have got to stop looking to the government for solutions to the problem. People have got to stop looking for clever men who will do the "right things" to make everything better. The government can't solve the problem because the government is the problem. It needs to… go away.
Women's Lib, Environmentalism, Healthcare, Taxes, The Economy and Huntin' n Fishin'
The Wisdom of Chief Two Eagles
Indian Chief Two Eagles was asked by a white US Government official, "You have observed the white man for 90 years. You've seen his wars and his technological advances. you've seen his progress, and the damage he's done."
The Chief nodded in agreement.
The official continued, "Considering all these events, in your opinion, where did the white man go wrong?"
The Chief stared at the government official then replied.
"When white man find land, Indians running it, no taxes, do debt, plenty buffalo, plenty beaver, clean water. Women did all the work. Medicine man free. Indian man spend all day hunting and fishing; all night having sex."
Then the chief leaned back and smiled. "Only white man dumb enough to think he could improve system like that."
The Wisdom of Chief Two Eagles
Indian Chief Two Eagles was asked by a white US Government official, "You have observed the white man for 90 years. You've seen his wars and his technological advances. you've seen his progress, and the damage he's done."
The Chief nodded in agreement.
The official continued, "Considering all these events, in your opinion, where did the white man go wrong?"
The Chief stared at the government official then replied.
"When white man find land, Indians running it, no taxes, do debt, plenty buffalo, plenty beaver, clean water. Women did all the work. Medicine man free. Indian man spend all day hunting and fishing; all night having sex."
Then the chief leaned back and smiled. "Only white man dumb enough to think he could improve system like that."
Perfect setup for a gold rally: Wall St. 'flash crash' meets rising mistrust of paper currencies
LA Times / May 12, 2010 10:00 pm
Anyone in the business of pushing gold as an investment shouldn't have had to work very hard this week. Wall Street's "flash crash" and the European Union's largess did the heavy lifting.
Gold surged Wednesday to another all-time high, egged on by more chatter that Europe’s rescue plan for its weakest states is another big step down the road to severe inflation or debasement of paper currencies, or both.
This is the easiest way for gold bulls to pitch the metal, of course, because it’s basically like selling insurance: You aren’t sure you’ll need it, but it seems prudent to have it.
And after last week’s stock market flash crash, prudence is all the more in vogue. That’s a blessing for anyone hawking the yellow metal, which can’t offer interest or dividends to investors but can promise to always keep the same weight and gleam, and always be worth something -- unlike, say, General Motors stock.
What is gold really worth? That’s the problem: It can’t be valued in the same way that a stock or bond can be valued, because it doesn’t produce cash flow. If you're buying gold as insurance, the cost obviously is a lot steeper than it was a few years ago. But if it turns out that you didn't need the insurance, and gold tumbles or languishes, presumably the rest of your portfolio would make up for it (as during the 1980s and '90s).
If a fair price for gold is unknowable, investors at least can count on the metal's historical function as hard money that will always have some intrinsic value.
Paper currencies may come and go, and likewise companies, but gold is forever.
LA Times / May 12, 2010 10:00 pm
Anyone in the business of pushing gold as an investment shouldn't have had to work very hard this week. Wall Street's "flash crash" and the European Union's largess did the heavy lifting.
Gold surged Wednesday to another all-time high, egged on by more chatter that Europe’s rescue plan for its weakest states is another big step down the road to severe inflation or debasement of paper currencies, or both.
This is the easiest way for gold bulls to pitch the metal, of course, because it’s basically like selling insurance: You aren’t sure you’ll need it, but it seems prudent to have it.
And after last week’s stock market flash crash, prudence is all the more in vogue. That’s a blessing for anyone hawking the yellow metal, which can’t offer interest or dividends to investors but can promise to always keep the same weight and gleam, and always be worth something -- unlike, say, General Motors stock.
What is gold really worth? That’s the problem: It can’t be valued in the same way that a stock or bond can be valued, because it doesn’t produce cash flow. If you're buying gold as insurance, the cost obviously is a lot steeper than it was a few years ago. But if it turns out that you didn't need the insurance, and gold tumbles or languishes, presumably the rest of your portfolio would make up for it (as during the 1980s and '90s).
If a fair price for gold is unknowable, investors at least can count on the metal's historical function as hard money that will always have some intrinsic value.
Paper currencies may come and go, and likewise companies, but gold is forever.
What If Doug Casey Is Right?
By Jeff Clark of the Casey’s Gold & Resource Report
Gold is once again above $1,200 and making new highs. And yet, Doug Casey thinks we’re just getting started, estimating gold could touch $5,000 before this is all over. A titillating thought, to be sure, but... how likely is that?
Gold’s latest rise stems from mounting fear that the Greek bailout will be followed by other euro-area countries queued for a me-too handout. In other words, gold is serving its historical role as a safe haven, a store of value, and an alternate form of money when governments recklessly plunge themselves heavily into debt and abuse their currency.
“But Jeff, $5,000 gold is a long way up,” the skeptics observe. “If you step back and look at the big picture, isn’t the gold price bubbly here?” Click here for the rest of the story
By Jeff Clark of the Casey’s Gold & Resource Report
Gold is once again above $1,200 and making new highs. And yet, Doug Casey thinks we’re just getting started, estimating gold could touch $5,000 before this is all over. A titillating thought, to be sure, but... how likely is that?
Gold’s latest rise stems from mounting fear that the Greek bailout will be followed by other euro-area countries queued for a me-too handout. In other words, gold is serving its historical role as a safe haven, a store of value, and an alternate form of money when governments recklessly plunge themselves heavily into debt and abuse their currency.
“But Jeff, $5,000 gold is a long way up,” the skeptics observe. “If you step back and look at the big picture, isn’t the gold price bubbly here?” Click here for the rest of the story
Mainstream Notices Gold
You have to know that we're in a major bull market in gold when analysts over at JP Morgan are turning bullish on the stuff. This story is posted at yesterdays businessinsider.com website. The very provocative headline reads "JP Morgan: Gold Could Now Face 'Unlimited' Demand".
Here's another interesting article about gold, and the title says it all: Abu Dhabi hotel installs gold vending machine. Westerners who get their news from the controlled media have no clue about the gold rush going on around the rest of the world. And by the time we figure it out, the gold price will be multiple times higher than it is now.
You have to know that we're in a major bull market in gold when analysts over at JP Morgan are turning bullish on the stuff. This story is posted at yesterdays businessinsider.com website. The very provocative headline reads "JP Morgan: Gold Could Now Face 'Unlimited' Demand".
Here's another interesting article about gold, and the title says it all: Abu Dhabi hotel installs gold vending machine. Westerners who get their news from the controlled media have no clue about the gold rush going on around the rest of the world. And by the time we figure it out, the gold price will be multiple times higher than it is now.
Inflation Adjusted Dow
For some long-term perspective, today's chart illustrates the Dow adjusted for inflation since 1925. There are several points of interest. For one, when adjusted for inflation, the bear market that concluded in the early 1980s was almost as severe as the one that concluded in the early 1930s. Also, the inflation-adjusted Dow is a little more than double where it was at its 1929 peak and trades 61% above its 1966 peak -- not that spectacular of a performance considering the time frames involved. (Source)
For some long-term perspective, today's chart illustrates the Dow adjusted for inflation since 1925. There are several points of interest. For one, when adjusted for inflation, the bear market that concluded in the early 1980s was almost as severe as the one that concluded in the early 1930s. Also, the inflation-adjusted Dow is a little more than double where it was at its 1929 peak and trades 61% above its 1966 peak -- not that spectacular of a performance considering the time frames involved. (Source)
The No. 1 Reason Gold Could Enter Mania Phase Soon
On February 18, 2009 the Financial Times published one of the most important articles nobody read.
The article's headline was Gold primed to become "mania asset."
The gist of the article was something I've been telling people for a long time: Gold – more so than any asset right now – has the potential to experience a mania phase... one like we saw in Internet stocks from 1997 through 2000.
A mania phase is a period in an asset's lifecycle marked by leaps of 10% or 20% in a month... 100% or 300% in a year... and 500% or more over the course of several years. Get in early with a big position on a mania phase, and you'll make a fortune. Remember one Internet-mania darling, JDS Uniphase, climbed more than 30-fold in about two years... which would have turned a stake of $20,000 into $640,000.
As that little-read article mentioned, an asset must have one key ingredient to enter mania phase: It must have the "new era" factor... a set of conditions folks can point to and say, "This time is different... The old, conventional methods of valuing assets are useless in this case."
Take Internet stocks. In the late '90s, Wall Street analysts chucked classic valuation measures – like price-to-cash flow and price-to-book – out the window. The Internet was growing too fast for these old measures, they figured. Instead, they used crazy metrics like web traffic (and often pure fantasy) to justify valuations. Companies with little chance of turning a profit sported market caps of hundreds of millions of dollars simply because they had good stories... and because that time was "different."
Now let's get to gold. As we've noted many times in DailyWealth, you can make a good case that this time is different. Never before has the nation with the world's reserve paper currency – which is backed by nothing but faith in a bankrupt government – promised so much to so many people (Social Security, Obamacare, unlimited military commitment).
We're funding many of these promises with borrowed money... so crushing interest payments are on the way. The U.S. government could pay as much as 20% of its tax revenue to service the national debt in just three years. Imagine working your tail off just to pay the interest on your credit cards.
For a picture of what could happen, consider that Europe – which in aggregate has made the same crazy promises... and is under a similar debt load – is watching its paper currency union experience a slow-motion train wreck. The chart below shows what gold's action looks like in the eyes of a European. It's looking a lot like a mania phase.
How high can gold go? I can't say. Nobody can.
Despite what many gurus will tell you, we simply cannot properly value gold. It's not a stock, so you can't say, "I'll pay 10 times cash flow for this." It's not a rental property, so you can't say, "I'll buy this for eight times annual rent." Gold's chief use isn't in the manufacturing process, like copper and iron ore.
Nope... gold is the odd man out in the asset family.
Gold represents real, intrinsic wealth. Greece can't debase it. The U.S. government cannot debase it. There's no way to know what people will pay for gold in a big crisis. This is precisely the reason it is a candidate for mania phase. People can tell themselves, "This time is different. It's a new era of currency crisis, so gold can and should trade for $2,000... $3,000... or $6,000 an ounce."
I'm no "the world is going to hell in a handcart" guy. I simply look around for assets with extraordinary potential to rise. I'm indifferent to whether it's gold, stocks, homebuilders, uranium, or Malaysian palm oil.
I'm not saying a gold mania will happen next week... or even six months from now. I actually believe gold needs to pull back and "catch its breath." I am saying gold is an asset folks can justify paying any price for.
The same sort of analysts who claimed the Nasdaq would go to 50,000 are the same sort of analysts who will claim gold will go to $25,000 an ounce. The sober among us will be shouted down... because "this time is different."
This is the chief requirement of a mania. It is in place for gold.
Good investing,
Brian Hunt,
Editor in Chief, DailyWealth
Saturday, May 8, 2010
On February 18, 2009 the Financial Times published one of the most important articles nobody read.
The article's headline was Gold primed to become "mania asset."
The gist of the article was something I've been telling people for a long time: Gold – more so than any asset right now – has the potential to experience a mania phase... one like we saw in Internet stocks from 1997 through 2000.
A mania phase is a period in an asset's lifecycle marked by leaps of 10% or 20% in a month... 100% or 300% in a year... and 500% or more over the course of several years. Get in early with a big position on a mania phase, and you'll make a fortune. Remember one Internet-mania darling, JDS Uniphase, climbed more than 30-fold in about two years... which would have turned a stake of $20,000 into $640,000.
As that little-read article mentioned, an asset must have one key ingredient to enter mania phase: It must have the "new era" factor... a set of conditions folks can point to and say, "This time is different... The old, conventional methods of valuing assets are useless in this case."
Take Internet stocks. In the late '90s, Wall Street analysts chucked classic valuation measures – like price-to-cash flow and price-to-book – out the window. The Internet was growing too fast for these old measures, they figured. Instead, they used crazy metrics like web traffic (and often pure fantasy) to justify valuations. Companies with little chance of turning a profit sported market caps of hundreds of millions of dollars simply because they had good stories... and because that time was "different."
Now let's get to gold. As we've noted many times in DailyWealth, you can make a good case that this time is different. Never before has the nation with the world's reserve paper currency – which is backed by nothing but faith in a bankrupt government – promised so much to so many people (Social Security, Obamacare, unlimited military commitment).
We're funding many of these promises with borrowed money... so crushing interest payments are on the way. The U.S. government could pay as much as 20% of its tax revenue to service the national debt in just three years. Imagine working your tail off just to pay the interest on your credit cards.
For a picture of what could happen, consider that Europe – which in aggregate has made the same crazy promises... and is under a similar debt load – is watching its paper currency union experience a slow-motion train wreck. The chart below shows what gold's action looks like in the eyes of a European. It's looking a lot like a mania phase.
How high can gold go? I can't say. Nobody can.
Despite what many gurus will tell you, we simply cannot properly value gold. It's not a stock, so you can't say, "I'll pay 10 times cash flow for this." It's not a rental property, so you can't say, "I'll buy this for eight times annual rent." Gold's chief use isn't in the manufacturing process, like copper and iron ore.
Nope... gold is the odd man out in the asset family.
Gold represents real, intrinsic wealth. Greece can't debase it. The U.S. government cannot debase it. There's no way to know what people will pay for gold in a big crisis. This is precisely the reason it is a candidate for mania phase. People can tell themselves, "This time is different. It's a new era of currency crisis, so gold can and should trade for $2,000... $3,000... or $6,000 an ounce."
I'm no "the world is going to hell in a handcart" guy. I simply look around for assets with extraordinary potential to rise. I'm indifferent to whether it's gold, stocks, homebuilders, uranium, or Malaysian palm oil.
I'm not saying a gold mania will happen next week... or even six months from now. I actually believe gold needs to pull back and "catch its breath." I am saying gold is an asset folks can justify paying any price for.
The same sort of analysts who claimed the Nasdaq would go to 50,000 are the same sort of analysts who will claim gold will go to $25,000 an ounce. The sober among us will be shouted down... because "this time is different."
This is the chief requirement of a mania. It is in place for gold.
Good investing,
Brian Hunt,
Editor in Chief, DailyWealth
Saturday, May 8, 2010
$1,245 Target Met - $1,286 Next
This from today's Rick's Pick's column.
Meanwhile, the price of gold continues to reflect only the ugly truth about Western Civilization’s money. Yesterday, Comex June Gold hit a $1245 target that we disseminated a month ago when quotes were $100 lower. In fact, our target was exceeded by about $3, which according to the proprietary Hidden Pivot Method we use to trade and forecast, means still higher prices are imminent. The most immediate Hidden Pivot target is $1286, but as a result of yesterday’s surge we have shifted the analysis to the daily chart from the intradays, allowing for significantly higher projections. If you’d like to find out exactly what we’re thinking, you can take a free seven-day trial to Rick’s Picks by clicking here.
This from today's Rick's Pick's column.
Meanwhile, the price of gold continues to reflect only the ugly truth about Western Civilization’s money. Yesterday, Comex June Gold hit a $1245 target that we disseminated a month ago when quotes were $100 lower. In fact, our target was exceeded by about $3, which according to the proprietary Hidden Pivot Method we use to trade and forecast, means still higher prices are imminent. The most immediate Hidden Pivot target is $1286, but as a result of yesterday’s surge we have shifted the analysis to the daily chart from the intradays, allowing for significantly higher projections. If you’d like to find out exactly what we’re thinking, you can take a free seven-day trial to Rick’s Picks by clicking here.
World Gov't To Replace US Sovereignty?
James G. Rickards, senior managing director for Virginia-based research firm Omnis Inc., was interviewed for 19 minutes today by Eric King of King World News and remarked that world government is under construction, and it's not the hallucination of the paranoid fringe. Rather, Rickards said, it's being arranged at the International Monetary Fund, whose Special Drawing Rights are being prepared to replace the U.S. dollar as the international reserve currency.
Rickards expects gold to rise to $2,000 in the near term and $5,000 in the long term.
You can listen to his interview at King World News here:
James G. Rickards, senior managing director for Virginia-based research firm Omnis Inc., was interviewed for 19 minutes today by Eric King of King World News and remarked that world government is under construction, and it's not the hallucination of the paranoid fringe. Rather, Rickards said, it's being arranged at the International Monetary Fund, whose Special Drawing Rights are being prepared to replace the U.S. dollar as the international reserve currency.
Rickards expects gold to rise to $2,000 in the near term and $5,000 in the long term.
You can listen to his interview at King World News here:
Free Press
It is interesting that in the land of the free the media suppresses information about gold and its role in the monetary system. Yet in RUSSIA, the newspaper Pravda is free to tell it like it is. You're not in Kansas anymore Dorothy!
Has Gold Become A New Reserve Currency?
May 11, 2010
[Pravda] For decades, the U.S. dollar has been the reserve currency of the world. This has given the United States an extraordinary amount of economic power, but as the U.S. economy has started to come apart over the past decade, other nations have increasingly sought to move away from the U.S. dollar and find other alternatives. For a long time it was thought that the Euro would become the next great reserve currency of the world. However, the recent Greek debt crisis, along with massive financial instability in nations such as Portugal, Spain and Italy, has caused investors to rapidly lose confidence in the Euro. In fact there are even some whispers that the Euro may not even survive the sovereign debt crisis as it sweeps across Europe. With both the U.S. dollar and the Euro looking shaky, investors have been searching somewhere safe to put their money. Increasingly, they have been turning to gold. So has gold now become a new reserve currency? Will all of this new demand drive the price of gold into unprecedented territory?
Well, the truth is that as long as paper currencies around the world continue to show instability, gold will continue to be a preferred choice. Nations all over the world are looking for ways to diversify their very large foreign exchange reserves. For example, China now has approximately $2 trillion in foreign exchange reserves, and has been wanting to reduce its position in U.S. dollars for quite some time now.
But where should they put their money?
The Euro is coming apart like a 20 dollar suit. There is a very real fear that Greece is only the first domino to fall and that soon nations like Italy, Spain and Portugal will be begging the IMF for assistance as the sovereign debt crisis sweeps across Europe.
Well, what about the British pound? The truth is that the pound is not very appealing right now because the U.K. is facing a massive government debt crisis as well. In fact, Bank of England governor Mervyn King recently warned that public anger over the "austerity measures" that soon must be implemented in the U.K. will be so intense that whatever party wins this election will be out of power for a generation.
Well, how about the Japanese yen? Ironically, there has been a move towards the Japanese yen in recent days, but the truth is that the Japanese debt situation is one of the worst in the world. Japan's gross public debt has reached 201 percent of GDP and Japan's battle with deflation dragged into its 13th straight month in March. No, the yen is not safe at all.
So does that bring us back to the U.S. dollar? No. There is a reason why nations all over the world have been wanting to get out of the U.S. dollar. The United States has piled up the biggest mountain of debt in the history of the world, and even official U.S. government reports admit that the U.S. government is on a financial path that is not even close to sustainable. The U.S. economy is caught in a death spiral, and that makes the U.S. dollar very unsafe.
So, what is safe at this point?
Well, gold is.
The price of gold rose to $1,210 an ounce on Friday. The terms "flight to quality" and "safe haven" are increasingly being used for the precious metal as investors flee all of the major global paper currencies.
Just consider some of the recent comments about gold by financial experts that have shown up in the news....
Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago:
"The sovereign-debt panic is spreading and forcing a flight to quality into gold."
Citigroup analyst David Thurtell:
"Gold is now enjoying safe haven status, partly because bonds, particularly peripheral euro zone government and bank paper, is no longer a safe haven."
Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter:
"There is a clear flight into quality to the gold market as frightened capital seeks a haven of any sort while confusion reigns."
So will this move towards gold continue?
Sure.
Although anyone who follows the gold market knows that big financial institutions regularly work to suppress the price of gold. In fact, one industry insider recently decided to be a whistleblower and came forward with "smoking gun" evidence of price manipulation in the precious metals markets, but the CFTC didn't do a thing about it.
Fortunately, the overwhelming demand for gold is now pushing the price up despite efforts to suppress it.
In addition, once it becomes apparent that most of the "gold" that is traded in the world is not backed by the actual metal itself, the price of gold will go even higher.
For years, almost everyone has assumed that the London Bullion Market Association (LBMA), the world's largest gold market, had actual gold to back up the massive "gold deposits" at the major LBMA banks.
But that is just not the case.
People are now starting to realize that there is very little actual gold in the LBMA system.
When most people think they are buying "gold", what they are actually buying are just pieces of paper that say they own gold.
Egon von Greyerz of Matterhorn Asset Management in Switzerland recently elaborated on this point. He says that "a lot of people who have studied it closely are convinced that there is a major shortage in physical gold at LBMA. LBMA trades around 700 tons net of gold daily. That is 25% of world annual production and around $6 trillion annually. To back that amount of trading on a 100% reserve ratio basis, it would need several year’s production of physical gold, which they definitively haven’t got."
So what is going to happen when investors start demanding physical delivery of the gold that they purchase?
It is going to create a huge mess.
Needless to say, if you are investing in gold make sure that you take physical delivery of the gold.
As the paper currenices all over the globe continue to unravel (as all debt-based paper currencies always do), all precious metals, including gold, will be increasingly in demand.
In fact, the idea of gold being a "reserve currency" is not anything new.
Gold has been a "reserve currency" for thousands of years, and those who understand history know that it will always remain one.
It is interesting that in the land of the free the media suppresses information about gold and its role in the monetary system. Yet in RUSSIA, the newspaper Pravda is free to tell it like it is. You're not in Kansas anymore Dorothy!
Has Gold Become A New Reserve Currency?
May 11, 2010
[Pravda] For decades, the U.S. dollar has been the reserve currency of the world. This has given the United States an extraordinary amount of economic power, but as the U.S. economy has started to come apart over the past decade, other nations have increasingly sought to move away from the U.S. dollar and find other alternatives. For a long time it was thought that the Euro would become the next great reserve currency of the world. However, the recent Greek debt crisis, along with massive financial instability in nations such as Portugal, Spain and Italy, has caused investors to rapidly lose confidence in the Euro. In fact there are even some whispers that the Euro may not even survive the sovereign debt crisis as it sweeps across Europe. With both the U.S. dollar and the Euro looking shaky, investors have been searching somewhere safe to put their money. Increasingly, they have been turning to gold. So has gold now become a new reserve currency? Will all of this new demand drive the price of gold into unprecedented territory?
Well, the truth is that as long as paper currencies around the world continue to show instability, gold will continue to be a preferred choice. Nations all over the world are looking for ways to diversify their very large foreign exchange reserves. For example, China now has approximately $2 trillion in foreign exchange reserves, and has been wanting to reduce its position in U.S. dollars for quite some time now.
But where should they put their money?
The Euro is coming apart like a 20 dollar suit. There is a very real fear that Greece is only the first domino to fall and that soon nations like Italy, Spain and Portugal will be begging the IMF for assistance as the sovereign debt crisis sweeps across Europe.
Well, what about the British pound? The truth is that the pound is not very appealing right now because the U.K. is facing a massive government debt crisis as well. In fact, Bank of England governor Mervyn King recently warned that public anger over the "austerity measures" that soon must be implemented in the U.K. will be so intense that whatever party wins this election will be out of power for a generation.
Well, how about the Japanese yen? Ironically, there has been a move towards the Japanese yen in recent days, but the truth is that the Japanese debt situation is one of the worst in the world. Japan's gross public debt has reached 201 percent of GDP and Japan's battle with deflation dragged into its 13th straight month in March. No, the yen is not safe at all.
So does that bring us back to the U.S. dollar? No. There is a reason why nations all over the world have been wanting to get out of the U.S. dollar. The United States has piled up the biggest mountain of debt in the history of the world, and even official U.S. government reports admit that the U.S. government is on a financial path that is not even close to sustainable. The U.S. economy is caught in a death spiral, and that makes the U.S. dollar very unsafe.
So, what is safe at this point?
Well, gold is.
The price of gold rose to $1,210 an ounce on Friday. The terms "flight to quality" and "safe haven" are increasingly being used for the precious metal as investors flee all of the major global paper currencies.
Just consider some of the recent comments about gold by financial experts that have shown up in the news....
Stephen Platt, a commodity analyst at Archer Financial Services Inc. in Chicago:
"The sovereign-debt panic is spreading and forcing a flight to quality into gold."
Citigroup analyst David Thurtell:
"Gold is now enjoying safe haven status, partly because bonds, particularly peripheral euro zone government and bank paper, is no longer a safe haven."
Dennis Gartman, an economist and the editor of the Suffolk, Virginia-based Gartman Letter:
"There is a clear flight into quality to the gold market as frightened capital seeks a haven of any sort while confusion reigns."
So will this move towards gold continue?
Sure.
Although anyone who follows the gold market knows that big financial institutions regularly work to suppress the price of gold. In fact, one industry insider recently decided to be a whistleblower and came forward with "smoking gun" evidence of price manipulation in the precious metals markets, but the CFTC didn't do a thing about it.
Fortunately, the overwhelming demand for gold is now pushing the price up despite efforts to suppress it.
In addition, once it becomes apparent that most of the "gold" that is traded in the world is not backed by the actual metal itself, the price of gold will go even higher.
For years, almost everyone has assumed that the London Bullion Market Association (LBMA), the world's largest gold market, had actual gold to back up the massive "gold deposits" at the major LBMA banks.
But that is just not the case.
People are now starting to realize that there is very little actual gold in the LBMA system.
When most people think they are buying "gold", what they are actually buying are just pieces of paper that say they own gold.
Egon von Greyerz of Matterhorn Asset Management in Switzerland recently elaborated on this point. He says that "a lot of people who have studied it closely are convinced that there is a major shortage in physical gold at LBMA. LBMA trades around 700 tons net of gold daily. That is 25% of world annual production and around $6 trillion annually. To back that amount of trading on a 100% reserve ratio basis, it would need several year’s production of physical gold, which they definitively haven’t got."
So what is going to happen when investors start demanding physical delivery of the gold that they purchase?
It is going to create a huge mess.
Needless to say, if you are investing in gold make sure that you take physical delivery of the gold.
As the paper currenices all over the globe continue to unravel (as all debt-based paper currencies always do), all precious metals, including gold, will be increasingly in demand.
In fact, the idea of gold being a "reserve currency" is not anything new.
Gold has been a "reserve currency" for thousands of years, and those who understand history know that it will always remain one.
FDIC Prepares For The Worst
Though the Feds are telling us that we are in "recovery" mode, their actions tell a different story. Consider the following:
The Federal Deposit Insurance Corp. board approved a proposed rule that would require about 40 U.S. financial institutions to submit annual contingent resolution plans -- “funeral plans” -- that would demonstrate how to wind down the company in the event of its failure. The story is only three short paragraphs... and bears the headline "FDIC Approves Proposal for Large Banks to Write 'Funeral Plans'"... and the link is here.
Though the Feds are telling us that we are in "recovery" mode, their actions tell a different story. Consider the following:
The Federal Deposit Insurance Corp. board approved a proposed rule that would require about 40 U.S. financial institutions to submit annual contingent resolution plans -- “funeral plans” -- that would demonstrate how to wind down the company in the event of its failure. The story is only three short paragraphs... and bears the headline "FDIC Approves Proposal for Large Banks to Write 'Funeral Plans'"... and the link is here.
An Interesting Perspective on House Prices
Thus, the above chart shows how much less expensive house prices have truly become if measured by world’s numéraire, but Chart of the Day did not carry its analysis to its logical conclusion.
Specifically, gold’s bull market is not yet finished, at least based on the historical experience recorded in this chart. Regardless what happens to the dollar price of houses, their gold price is likely to fall further. In other words, housing prices seem destined to become cheaper, or more to the point, the dollar price of gold looks destined to rise further.
In January 1980, when gold reached its peak in that previous bull market, the median single-family home cost 86 ounces. Although I am not aware of the historical record for housing prices during the Great Depression, it is likely that at its depth, the median single-family home probably cost less than 86 ounces, given the severity of that economic downturn and gold’s heightened purchasing power because of the financial crisis back then caused by widespread bank failures.
Thus, when the median single-family home price falls to less than 100 ounces from today’s 153 ounces, home prices are starting to become good value. And at some point when the median single-family home price is at 90 ounces or 80 ounces and perhaps even less, a house can be purchased at exceptionally good value. At that moment, it will be a good time to spend some gold now being accumulated – i.e., being saved – to buy a house. This observation leads to a more important conclusion, given that gold is money.
Saving money is of course always a good thing, whether to build a nest-egg for a rainy day, funds for your retirement, or to make some future purchase. It is a particularly good thing to save gold while it is undervalued and the item you wish to purchase is overvalued, which brings me back to the importance of gold as the world’s numéraire.
To truly understand the cost of any good or service, use gold to measure prices. Use gold to evaluate whether the good or service you wish to purchase is good value. After all, gold is money.
James Turk
Free Gold Money Report
We all know that house prices in the United States and pretty much everywhere else in the world have been falling for a few years, but less well recognized is that the extent of the decline is masked by inflation. In other words, if the dollar was not being inflated – an insidious practice that causes the dollar to lose purchasing power – the decline in house prices would be even greater. And what is true for the dollar, is also true for other national currencies because all are being inflated to some extent. Only their rate of inflation differs.
What the world’s monetary system is missing is a reliable numéraire. National currencies do not meet this need. There must be some standard against which all goods and services can be measured. Only with this unalterable standard can the price of goods and services be viewed over time to make accurate comparisons, for example, to see whether something overpriced a few years ago – like houses – has become undervalued today.
The good news is that this reliable numéraire exists – it is called gold. The price of every good and service can be expressed in gold as well as any national currency. In fact, it is essential to measure things with gold in order to get a true perspective on prices.
For example, I often look at the price of crude oil in terms of gold as well as financial assets, such as the gold price of the stock market. We can also measure house prices the same way, and in this regard, Chart of the Day has provided the following useful chart. It measures the US median single-family home price in terms of gold. In their words: “It currently takes 153 ounces of gold to buy the median single-family home. This is considerably less that the 601 ounces it took back in 2001. When priced in gold, the median single-family home is down 75% from its 2001 peak and remains well within the confines of its five-year accelerated downtrend.”
Specifically, gold’s bull market is not yet finished, at least based on the historical experience recorded in this chart. Regardless what happens to the dollar price of houses, their gold price is likely to fall further. In other words, housing prices seem destined to become cheaper, or more to the point, the dollar price of gold looks destined to rise further.
In January 1980, when gold reached its peak in that previous bull market, the median single-family home cost 86 ounces. Although I am not aware of the historical record for housing prices during the Great Depression, it is likely that at its depth, the median single-family home probably cost less than 86 ounces, given the severity of that economic downturn and gold’s heightened purchasing power because of the financial crisis back then caused by widespread bank failures.
Thus, when the median single-family home price falls to less than 100 ounces from today’s 153 ounces, home prices are starting to become good value. And at some point when the median single-family home price is at 90 ounces or 80 ounces and perhaps even less, a house can be purchased at exceptionally good value. At that moment, it will be a good time to spend some gold now being accumulated – i.e., being saved – to buy a house. This observation leads to a more important conclusion, given that gold is money.
Saving money is of course always a good thing, whether to build a nest-egg for a rainy day, funds for your retirement, or to make some future purchase. It is a particularly good thing to save gold while it is undervalued and the item you wish to purchase is overvalued, which brings me back to the importance of gold as the world’s numéraire.
To truly understand the cost of any good or service, use gold to measure prices. Use gold to evaluate whether the good or service you wish to purchase is good value. After all, gold is money.
James Turk
Free Gold Money Report
Food Stamps
(Reuters) – Nearly 40 million Americans received food stamps — the latest in an ever-higher string of record enrollment that dates from December 2008 and the U.S. recession, according to a government update.
Food stamps are the primary federal anti-hunger program, helping poor people buy food. Enrollment is highest during times of economic distress. The jobless rate was 9.9 percent, the government said on Friday.
The Agriculture Department said 39.68 million people, or 1 in 8 Americans, were enrolled for food stamps during February, an increase of 260,000 from January. USDA updated its figures on Wednesday.
"This is the highest share of the U.S. population on SNAP/food stamps," said the anti-hunger group Food Research and Action Center.
(Reuters) – Nearly 40 million Americans received food stamps — the latest in an ever-higher string of record enrollment that dates from December 2008 and the U.S. recession, according to a government update.
Food stamps are the primary federal anti-hunger program, helping poor people buy food. Enrollment is highest during times of economic distress. The jobless rate was 9.9 percent, the government said on Friday.
The Agriculture Department said 39.68 million people, or 1 in 8 Americans, were enrolled for food stamps during February, an increase of 260,000 from January. USDA updated its figures on Wednesday.
"This is the highest share of the U.S. population on SNAP/food stamps," said the anti-hunger group Food Research and Action Center.
The Most Important Wealth-Protection Step You Can Take
They're calling it the "Flash Crash"...
With a market cap of $25 billion, Accenture is one of the largest technology, consulting, and outsourcing companies in the world. For a few minutes on Thursday, Accenture's stock price fell to zero. Its stock market value literally vanished.
Something similar happened to a dozen other companies and funds. Even Proctor & Gamble, one of the largest and most stable companies in the world, dropped 37%. CNBC observed it was a loss of $35 billion in market cap.
A few moments later, everything returned to normal...
Some are blaming an electronic trading glitch. Others say high-speed trading programs caused it. Some are even saying an individual trader caused the crash by entering a position incorrectly into the system.
I have no idea what caused this "flash crash," and nor does anyone else it seems. Even the Wall Street Journal refrained from speculating in Friday morning's edition. But a dozen stocks saw their value go to zero, and the stock market lost 10% of its value in seconds.
Now... think about how much of your business depends on the smooth functioning of computers, databases, and the Internet. Think about how much of your life is now online and vulnerable to genius computer criminals. If you're like most people, you don't know much about how it all works... You just go along with everyone else and trust the system.
As yesterday's stock market glitch – and our series on personal Internet security – showed, trusting 100% of your life and money to technology is risky.
The point Thursday's market action reinforces is this: If you hold wealth in electronic form, you're taking a risk. That risk is technological failure. It may be a tiny risk... or it may not be so tiny. You can't know. But are you willing to risk so much on something you don't understand?
Fortunately, it's an easy risk to insure against. You simply have to keep a small percentage of your wealth in physical gold, silver, and cash. And don't trust anyone else to store it. Keep it yourself, secure it, and don't tell anyone about it.
We've all come to rely and depend upon technology we don't understand to store our wealth. We're taking a small, but potentially catastrophic risk. By keeping a stash of physical wealth, you're taking the first step in mitigating this risk.
They're calling it the "Flash Crash"...
With a market cap of $25 billion, Accenture is one of the largest technology, consulting, and outsourcing companies in the world. For a few minutes on Thursday, Accenture's stock price fell to zero. Its stock market value literally vanished.
Something similar happened to a dozen other companies and funds. Even Proctor & Gamble, one of the largest and most stable companies in the world, dropped 37%. CNBC observed it was a loss of $35 billion in market cap.
A few moments later, everything returned to normal...
Some are blaming an electronic trading glitch. Others say high-speed trading programs caused it. Some are even saying an individual trader caused the crash by entering a position incorrectly into the system.
I have no idea what caused this "flash crash," and nor does anyone else it seems. Even the Wall Street Journal refrained from speculating in Friday morning's edition. But a dozen stocks saw their value go to zero, and the stock market lost 10% of its value in seconds.
Now... think about how much of your business depends on the smooth functioning of computers, databases, and the Internet. Think about how much of your life is now online and vulnerable to genius computer criminals. If you're like most people, you don't know much about how it all works... You just go along with everyone else and trust the system.
As yesterday's stock market glitch – and our series on personal Internet security – showed, trusting 100% of your life and money to technology is risky.
The point Thursday's market action reinforces is this: If you hold wealth in electronic form, you're taking a risk. That risk is technological failure. It may be a tiny risk... or it may not be so tiny. You can't know. But are you willing to risk so much on something you don't understand?
Fortunately, it's an easy risk to insure against. You simply have to keep a small percentage of your wealth in physical gold, silver, and cash. And don't trust anyone else to store it. Keep it yourself, secure it, and don't tell anyone about it.
We've all come to rely and depend upon technology we don't understand to store our wealth. We're taking a small, but potentially catastrophic risk. By keeping a stash of physical wealth, you're taking the first step in mitigating this risk.
When Is The Best Time To Buy Gold?
Click here for your free report from Casey Research.
Excerpt:
You’ve decided to invest in gold and gold stocks – but how do you know if today’s price is a good price? Are there signs that will allow you to “buy low and sell high”? And how do you know it’s just a correction and not a permanent slump? Timing the absolute tops and bottoms of a market is a fool’s errand… but there are indicators that, if you watch for them, can give you hints about where you stand. Read this report to prepare for profiting from gold…
Click here for your free report from Casey Research.
Excerpt:
You’ve decided to invest in gold and gold stocks – but how do you know if today’s price is a good price? Are there signs that will allow you to “buy low and sell high”? And how do you know it’s just a correction and not a permanent slump? Timing the absolute tops and bottoms of a market is a fool’s errand… but there are indicators that, if you watch for them, can give you hints about where you stand. Read this report to prepare for profiting from gold…
$1200 Floor In Gold
by David Tanner
Gold in dollars has now ended above 1200 for three days. This morning's action pushed gold all the way up to $1225 without even blinking. It appears that $1200 is probably the new floor for gold as buyers disregard this former ceiling with fearless buying. No doubt, the banksters will short gold at some point and probably push it below this level for a short time, but I will be using that type action to "buy."
There now seems to be a new dynamic at work in the gold market and my bullion wholesalers confirm this. The previous sentiment seemed to be "I want to buy gold, but I don't want to buy while the price is so high." The new mentality is now "get it while you can, regardless of the price." THAT type mindset is what I believe will take gold to its next plateau. Where will that plateau be?
I will pass this along from Martin Armstrong from his March 23, 2009 peice entitled "Destroying Capital Formation": He is one of the smartest men on the planet and he forecast what gold is doing this week over a year ago.
"The next technical barrier will be slightly above the current high, forming at the 110 and 1200 area. Once we begin to see gold close above the 1200 level, then we should start to see the Phase Transition type move that will carry it upward to about $2,500. It is still entirely possible for gold to even reach $5.000. That is the extreme projection that would signal serious decline in public confidence in government as a whole. Reaching $2.500, is a normal stage of market development. This is still not the end of the world."
This next phase could happen overnight, but it will probably take a few years. More immediately, I like Jim Sinclair's (former precious metals advisor to Hunt Oil and the Hunt family) thoughts on where this next target might be. In an audio interview with King World News he touts the $1,650 level before year end. I will be very surprised if this level is not achieved.
by David Tanner
Gold in dollars has now ended above 1200 for three days. This morning's action pushed gold all the way up to $1225 without even blinking. It appears that $1200 is probably the new floor for gold as buyers disregard this former ceiling with fearless buying. No doubt, the banksters will short gold at some point and probably push it below this level for a short time, but I will be using that type action to "buy."
There now seems to be a new dynamic at work in the gold market and my bullion wholesalers confirm this. The previous sentiment seemed to be "I want to buy gold, but I don't want to buy while the price is so high." The new mentality is now "get it while you can, regardless of the price." THAT type mindset is what I believe will take gold to its next plateau. Where will that plateau be?
I will pass this along from Martin Armstrong from his March 23, 2009 peice entitled "Destroying Capital Formation": He is one of the smartest men on the planet and he forecast what gold is doing this week over a year ago.
"The next technical barrier will be slightly above the current high, forming at the 110 and 1200 area. Once we begin to see gold close above the 1200 level, then we should start to see the Phase Transition type move that will carry it upward to about $2,500. It is still entirely possible for gold to even reach $5.000. That is the extreme projection that would signal serious decline in public confidence in government as a whole. Reaching $2.500, is a normal stage of market development. This is still not the end of the world."
This next phase could happen overnight, but it will probably take a few years. More immediately, I like Jim Sinclair's (former precious metals advisor to Hunt Oil and the Hunt family) thoughts on where this next target might be. In an audio interview with King World News he touts the $1,650 level before year end. I will be very surprised if this level is not achieved.
UBS Cites Strong Gold Buying
"Our Zurich and Geneva sales desk experienced exceptionally strong demand for small bars and coins. All size bars up to 1kg are wanted by retail investors. Buying has been evident all week, but demand yesterday was the greatest that we have experienced since 2008... Coin demand is so intense, that supply is struggling to match, even as premiums rise. Capacity constraints, greatly evident last year, are once again a feature. We saw particularly strong demand for Kruggerands, but all coins are being sought right now... Physical demand has been most obvious in Germany this week. Considering their primary role in the Greek bail-out, and the near borderless European debt problem, with few viable investment alternatives... Germany's investors have turned to gold."
"Our Zurich and Geneva sales desk experienced exceptionally strong demand for small bars and coins. All size bars up to 1kg are wanted by retail investors. Buying has been evident all week, but demand yesterday was the greatest that we have experienced since 2008... Coin demand is so intense, that supply is struggling to match, even as premiums rise. Capacity constraints, greatly evident last year, are once again a feature. We saw particularly strong demand for Kruggerands, but all coins are being sought right now... Physical demand has been most obvious in Germany this week. Considering their primary role in the Greek bail-out, and the near borderless European debt problem, with few viable investment alternatives... Germany's investors have turned to gold."
Buy Gold Now While You Still Can
This from UBS on Friday.
Physical Gold Grabbed
Friday, May 07, 2010 3:56:12 AM
Author: Edel Tully
The flight to safety in gold intensified yesterday, as our Zurich and Geneva sales desk experienced exceptionally strong demand for small bars and coins. All size bars up to 1kg are wanted by retail investors. Buying has been evident all week, but demand yesterday was the greatest that we have experienced since 2008. It is little surprise then that the important $1200/oz level was taken out yesterday.
Current gold demand reflects investor fear and extreme risk aversion, in contrast to Tuesday, when liquidation in other markets caused a shallow selloff in gold. On Wednesday, the UBS Risk Index moved into risk aversion territory for the first time this year and yesterday this extended to its most risk averse level since March 2009.
Coin demand is so intense that supply struggles to match, even as premiums rise. Capacity constraints, greatly evident last year, are once again a feature.,* We saw particularly strong demand for Kruggerands, but all coins are being sought right now. On the US Mint website, demand for American Eagles for the first four days of May is reported at 24,500 oz. Should this level of demand persist, then US Mint coin sales could challenge the December 2008 record of 176 koz. Coin demand in 2008 reflected panic buying, and current demand is firmly on this path. Yesterday's staggering price activity in equities and the dramatic surge in the VIX index - trading error or not - compounds the fear factor. This should help gold.
This from UBS on Friday.
Physical Gold Grabbed
Friday, May 07, 2010 3:56:12 AM
Author: Edel Tully
The flight to safety in gold intensified yesterday, as our Zurich and Geneva sales desk experienced exceptionally strong demand for small bars and coins. All size bars up to 1kg are wanted by retail investors. Buying has been evident all week, but demand yesterday was the greatest that we have experienced since 2008. It is little surprise then that the important $1200/oz level was taken out yesterday.
Current gold demand reflects investor fear and extreme risk aversion, in contrast to Tuesday, when liquidation in other markets caused a shallow selloff in gold. On Wednesday, the UBS Risk Index moved into risk aversion territory for the first time this year and yesterday this extended to its most risk averse level since March 2009.
Coin demand is so intense that supply struggles to match, even as premiums rise. Capacity constraints, greatly evident last year, are once again a feature.,* We saw particularly strong demand for Kruggerands, but all coins are being sought right now. On the US Mint website, demand for American Eagles for the first four days of May is reported at 24,500 oz. Should this level of demand persist, then US Mint coin sales could challenge the December 2008 record of 176 koz. Coin demand in 2008 reflected panic buying, and current demand is firmly on this path. Yesterday's staggering price activity in equities and the dramatic surge in the VIX index - trading error or not - compounds the fear factor. This should help gold.
Stock Market Overvalued Based On Fundamentals
This chart courtesy Clusterstock.com, shows the S&P 500 to have risen further above the US economy than at any time in 45 years. Either industrial production is going to have to rise quite fast (year over year), or the S&P is due for a snap back. (This chart was drawn a few days before the drop of May 6th)...
This chart courtesy Clusterstock.com, shows the S&P 500 to have risen further above the US economy than at any time in 45 years. Either industrial production is going to have to rise quite fast (year over year), or the S&P is due for a snap back. (This chart was drawn a few days before the drop of May 6th)...
US Mint Sales Soaring
The U.S. Mint had a busy day yesterday as well. They reported that 7,000 one-ounce gold eagles... 8,000 24-karat gold buffaloes... and an additional 169,500 silver eagles were sold. Monthly total for these three items are as follows: 1-ounce gold eagles... 41,500, 24-karat gold buffaloes... 28,500 and 892,000 silver eagles. And it's only May 7th! The run to the precious metals has been quite something this week... (Source: Ed Steer's Friday column at Casey Research)
The U.S. Mint had a busy day yesterday as well. They reported that 7,000 one-ounce gold eagles... 8,000 24-karat gold buffaloes... and an additional 169,500 silver eagles were sold. Monthly total for these three items are as follows: 1-ounce gold eagles... 41,500, 24-karat gold buffaloes... 28,500 and 892,000 silver eagles. And it's only May 7th! The run to the precious metals has been quite something this week... (Source: Ed Steer's Friday column at Casey Research)
Christianity And Gold
(Source) By anybody’s standards Peter Daniels has a most amazing "rags to riches" story.
At the age of 26 Peter was an illiterate bricklayer, from a 3rd generation welfare recipient family. Today he has involvement in business than spans the globe, has chaired boards of directors, advised corporations and governments and written several books.
When asked if there was one key factor that brought about this change, Peter Daniels sites when he, and his wife Robina, attended a Billy Graham Crusade and May 25th 1959; "I suddenly realized I was equal with all men before God."
The following is an excerpt from an interview with him by Phillip Judge in September 1999.
PHILIP: This brings me to a very interesting and bold statement you’ve said in the past "if every Christian owned 2 oz of gold and 6 oz of silver, we would absolutely control tomorrows economy". Can you explain what you meant by this?
PETER DANIELS: We would then have the majority of the wealth in the world. You don’t need the total wealth, you just need to have a percentage that is big enough to shift markets. If you look at the Christians of the world (including nominal) and multiply that by 2 oz of gold and 6 oz of silver, there is no question, we would control global economics, and you not talking about a lot of money in western terms to own that amount of gold and silver. I cant believe why Christians will not do that, they have read the story of the flood, they have read the story of the wise virgins who had to trim their lamps, in both those stories the door was shut when they did not take head of the warnings.
We understand Ecclesiastes, "there is a time for every purpose under heaven", there was a time to negatively gear, a time for borrowing big, but now is not the time, now is the time for being conservative. Now is the time to acquire gold, not using it for growth return, but putting it aside as a heritage for your family.
One of the things I hear all the time is that "the wealth of the wicked is laid up for the righteous" but people don’t always recall the beginning of the verse where it is written "a good man leaves an inheritance to his children’s children." We need to be leaving an inheritance to our future generations, and if we did this today we wouldn’t be so poor, we would be the movers and shakers of the world.
______________________________________________
Peter J. Daniels, (born in 1932 in Adelaide, Australia) is an Australian life coach, writer, and professional speaker. Daniels has authored thirteen books, including How to Reach Your Life Goals and How to be Happy Though Rich. Daniels is a renowned philanthropist, including regular 'no cost' presentations to churches around the world. He has also been chairman of the board of Youth for Christ Australia, a board member of Haggai Institute of Advanced Leadership, world treasurer of Youth for Christ International and international director of Robert Schuller Ministries.
(Source) By anybody’s standards Peter Daniels has a most amazing "rags to riches" story.
At the age of 26 Peter was an illiterate bricklayer, from a 3rd generation welfare recipient family. Today he has involvement in business than spans the globe, has chaired boards of directors, advised corporations and governments and written several books.
When asked if there was one key factor that brought about this change, Peter Daniels sites when he, and his wife Robina, attended a Billy Graham Crusade and May 25th 1959; "I suddenly realized I was equal with all men before God."
The following is an excerpt from an interview with him by Phillip Judge in September 1999.
PHILIP: This brings me to a very interesting and bold statement you’ve said in the past "if every Christian owned 2 oz of gold and 6 oz of silver, we would absolutely control tomorrows economy". Can you explain what you meant by this?
PETER DANIELS: We would then have the majority of the wealth in the world. You don’t need the total wealth, you just need to have a percentage that is big enough to shift markets. If you look at the Christians of the world (including nominal) and multiply that by 2 oz of gold and 6 oz of silver, there is no question, we would control global economics, and you not talking about a lot of money in western terms to own that amount of gold and silver. I cant believe why Christians will not do that, they have read the story of the flood, they have read the story of the wise virgins who had to trim their lamps, in both those stories the door was shut when they did not take head of the warnings.
We understand Ecclesiastes, "there is a time for every purpose under heaven", there was a time to negatively gear, a time for borrowing big, but now is not the time, now is the time for being conservative. Now is the time to acquire gold, not using it for growth return, but putting it aside as a heritage for your family.
One of the things I hear all the time is that "the wealth of the wicked is laid up for the righteous" but people don’t always recall the beginning of the verse where it is written "a good man leaves an inheritance to his children’s children." We need to be leaving an inheritance to our future generations, and if we did this today we wouldn’t be so poor, we would be the movers and shakers of the world.
______________________________________________
Peter J. Daniels, (born in 1932 in Adelaide, Australia) is an Australian life coach, writer, and professional speaker. Daniels has authored thirteen books, including How to Reach Your Life Goals and How to be Happy Though Rich. Daniels is a renowned philanthropist, including regular 'no cost' presentations to churches around the world. He has also been chairman of the board of Youth for Christ Australia, a board member of Haggai Institute of Advanced Leadership, world treasurer of Youth for Christ International and international director of Robert Schuller Ministries.
"Safe Haven" Investing
From Chuck Butler's daily market commentary on 5/6/10. Chuck is Senior Market Strategist at Casey Research.
Speaking of Gold... You know earlier this week, I told you how Gold was moving close to $1,190... But then the trap door sprung, and the shiny metal fell hard... Was there any reason for this fall? NO! And if you're like me, you see this and think... "The price manipulators are back in the market"... I mean, to me, that price action smelled of price manipulation by the BIG BOYS in an attempt to make Gold look bad, while stocks were getting deep sixed... For... If investors are fleeing stocks, they need someplace to put their cash to work... And if Commodities, led by Gold, are getting deep sixed too, along with currencies, then the only place to go would be bonds... Oh, boy, give me some more of those "safe haven" bonds! NOT! But... That's what's happening folks... I told you yesterday that the 10-year Treasury saw a 10 BPS move in one day! That required a TON of purchasing to do that... And the Gold Manipulators just happen to be BIG BOND DEALERS... Hmmm, you don't think that they figured this all out ahead of time, and moved investors on purpose do you? OF COURSE I DO! And you should too!
The "good times" continue at the U.S. Treasury, as they announced that they will be auctioning $39 Billion of three-year notes on May 11. Next week’s sales will also include $25 Billion of 10-year debt on May 12 and $16 Billion in 30-year bonds the following day.
In doing my best Ace... How long has this been going on? Well... The answer to that is it has been going on a too long! And how long will it continue? Given the Gov't's budget for this year, this need to auction $80 Billion in Treasuries will continue for far too long!
And what will it eventually do to Treasuries? How about this... Have you ever heard of dilution? The Treasuries that already exist continue to be diluted by more Treasuries, making them worth less all the time... I've said this before on many occasions, but basically, if this continues, foreigners needed to buy the Treasuries, will begin to demand higher yields, to take on such risk... Higher yields means lower prices... Now, Treasuries don't look so inviting or like a safe haven do they?....
And... Just look over to Greece and Spain... Sure they are small potatoes when compared to the U.S. but, you can get an idea of what happens when your debt gets so big, and bond buyers no longer want your debt at current levels... Yields on Greek and Spanish Bonds are going through the roof in an attempt to attract buyers... If you don't think that can happen here in the U.S. then, well... Maybe you should go buy some "safe haven Treasuries" today...
From Chuck Butler's daily market commentary on 5/6/10. Chuck is Senior Market Strategist at Casey Research.
Speaking of Gold... You know earlier this week, I told you how Gold was moving close to $1,190... But then the trap door sprung, and the shiny metal fell hard... Was there any reason for this fall? NO! And if you're like me, you see this and think... "The price manipulators are back in the market"... I mean, to me, that price action smelled of price manipulation by the BIG BOYS in an attempt to make Gold look bad, while stocks were getting deep sixed... For... If investors are fleeing stocks, they need someplace to put their cash to work... And if Commodities, led by Gold, are getting deep sixed too, along with currencies, then the only place to go would be bonds... Oh, boy, give me some more of those "safe haven" bonds! NOT! But... That's what's happening folks... I told you yesterday that the 10-year Treasury saw a 10 BPS move in one day! That required a TON of purchasing to do that... And the Gold Manipulators just happen to be BIG BOND DEALERS... Hmmm, you don't think that they figured this all out ahead of time, and moved investors on purpose do you? OF COURSE I DO! And you should too!
The "good times" continue at the U.S. Treasury, as they announced that they will be auctioning $39 Billion of three-year notes on May 11. Next week’s sales will also include $25 Billion of 10-year debt on May 12 and $16 Billion in 30-year bonds the following day.
In doing my best Ace... How long has this been going on? Well... The answer to that is it has been going on a too long! And how long will it continue? Given the Gov't's budget for this year, this need to auction $80 Billion in Treasuries will continue for far too long!
And what will it eventually do to Treasuries? How about this... Have you ever heard of dilution? The Treasuries that already exist continue to be diluted by more Treasuries, making them worth less all the time... I've said this before on many occasions, but basically, if this continues, foreigners needed to buy the Treasuries, will begin to demand higher yields, to take on such risk... Higher yields means lower prices... Now, Treasuries don't look so inviting or like a safe haven do they?....
And... Just look over to Greece and Spain... Sure they are small potatoes when compared to the U.S. but, you can get an idea of what happens when your debt gets so big, and bond buyers no longer want your debt at current levels... Yields on Greek and Spanish Bonds are going through the roof in an attempt to attract buyers... If you don't think that can happen here in the U.S. then, well... Maybe you should go buy some "safe haven Treasuries" today...
Glenn Beck Audio Interview On Gold
The Glen Beck show promotes Goldline, one of my pricey competitors, but still, this is information that needs to get out there.
The Glen Beck show promotes Goldline, one of my pricey competitors, but still, this is information that needs to get out there.
"I Own"
There are tons of lines in the movie "Wall Street" that are so profound that we completely miss the weight of them. One such line is when Gekko states "I create nothing..... I own."
Although I hate to use Gekko as a positive example, the bottom line is that "ownership" IS the only way to be in control. And there is only ONE asset that you can own that gives you ultimate control.... GOLD.
Think you are in control of your real estate? Hah! Quit paying your taxes and you will find out who REALLY owns it.
Think cash money puts you in control? Take a look at a dollar bill an notice that it says "Federal Reserve Note." A "note" is a debt obligation... it is not ownership. If/when the Fed defaults you will be left holding nothing.
And one more wake up call while I am at it. Gekko was right. We DON'T live in a democracy. We live in a plutocracy controlled by the wealthy elite. THEY own and THEY control. They control the banks, the politicians, the press and the economy. And your only way to protect yourself against them is to OWN! Period. End of story.
There are tons of lines in the movie "Wall Street" that are so profound that we completely miss the weight of them. One such line is when Gekko states "I create nothing..... I own."
Although I hate to use Gekko as a positive example, the bottom line is that "ownership" IS the only way to be in control. And there is only ONE asset that you can own that gives you ultimate control.... GOLD.
Think you are in control of your real estate? Hah! Quit paying your taxes and you will find out who REALLY owns it.
Think cash money puts you in control? Take a look at a dollar bill an notice that it says "Federal Reserve Note." A "note" is a debt obligation... it is not ownership. If/when the Fed defaults you will be left holding nothing.
And one more wake up call while I am at it. Gekko was right. We DON'T live in a democracy. We live in a plutocracy controlled by the wealthy elite. THEY own and THEY control. They control the banks, the politicians, the press and the economy. And your only way to protect yourself against them is to OWN! Period. End of story.
Bank Withdrawal Limits: $200 Per Day?
The following is an excerpt from Rick Ackerman's daily commentary.
Too big too fail no longer means big banks, but rather the entire global financial system. Fallout from a Greek bankruptcy will be felt initially in Brussels, Frankfurt, Paris and London, but eventually – though perhaps not long afterward — in Topeka, Auckland, and Cape Town. Will you be ready if, say, your bank were to limit daily withdrawals to $200? That might be as good as it gets when the dominoes start to fall.
The following is an excerpt from Rick Ackerman's daily commentary.
Too big too fail no longer means big banks, but rather the entire global financial system. Fallout from a Greek bankruptcy will be felt initially in Brussels, Frankfurt, Paris and London, but eventually – though perhaps not long afterward — in Topeka, Auckland, and Cape Town. Will you be ready if, say, your bank were to limit daily withdrawals to $200? That might be as good as it gets when the dominoes start to fall.
Pyramid Of Safety
John Exter, formerly of the Federal Reserve Bank of New York and one-time custodian of earmarked gold locked up in the Liberty Street fortress in Manhattan, is best-known for his model of the money supply represented as an inverted pyramid. Exter belongs to the school teaching that the current experiment with irredeemable currency is more likely to lead to a deflationary than an inflationary catastrophe.The inverted pyramid is delicately balanced on a tip of pure gold. Its upper layers consist of money of increasingly greater proliferation such as Federal Reserve notes, T-bills, bank deposits, as well as other bank liabilities. The layers are graded according to safety, going from the safest, gold at the bottom to the least safe, the layer of electronic dollars at the top.
In times of financial panic, money flows from the top levels of the pyramid to the bottom levels seeking safety. As is easy to see, there is not enough gold to go around when the derivatives bubble finally bursts and everyone runs for the safety of gold.
CLICK CHART TO ENLARGE
Bank Failures YTD: 64 And Counting
Well, the FDIC closed another seven banks on Friday... and some of them were very expensive. They shut down three banks in Puerto Rico, two in Missouri, and one each in Michigan and Washington... bringing the number of U.S. bank failures this year to 64. The best coverage of what happened was sent out from Jim Sinclair's website... jsmineset.com... and bears the headline "Important Notes on Friday's Bank Failures". The preamble, written by one Mr. Richard B., is a must read... as is the American Press article linked at the end. This deserves your undivided attention... and the link is here.
Well, the FDIC closed another seven banks on Friday... and some of them were very expensive. They shut down three banks in Puerto Rico, two in Missouri, and one each in Michigan and Washington... bringing the number of U.S. bank failures this year to 64. The best coverage of what happened was sent out from Jim Sinclair's website... jsmineset.com... and bears the headline "Important Notes on Friday's Bank Failures". The preamble, written by one Mr. Richard B., is a must read... as is the American Press article linked at the end. This deserves your undivided attention... and the link is here.
Yesterday's Selloff
This from Ed Steer's column this morning.
Yesterday's destruction across the precious metals complex should be seen for exactly what it was... a blatant attempt to get investors to stay away from the precious metals and other commodities while the Dow was getting buried. But, as I said yesterday, the bullion banks also wanted to harvest the low-hanging fruit, ring the cash register, plus cover as many short positions as possible... especially in silver. They were successful on all counts.
This from Ed Steer's column this morning.
Yesterday's destruction across the precious metals complex should be seen for exactly what it was... a blatant attempt to get investors to stay away from the precious metals and other commodities while the Dow was getting buried. But, as I said yesterday, the bullion banks also wanted to harvest the low-hanging fruit, ring the cash register, plus cover as many short positions as possible... especially in silver. They were successful on all counts.
Gold Needed Now More Than Ever
by James Turk of the Free Gold Money Report - April 30, 2010 - Greece’s debt troubles are well known. Less recognized is the worrying truth that Greece is just the tip of the iceberg.
There have been plenty of warnings. These include, for example, the recent downgrades of the debts of Spain and Portugal. By highlighting the risks, the debt rating agencies have sent a signal with one certain outcome. Heightened awareness over sovereign credit risk will grow, and rightly so.
A report released just last month by the Bank for International Settlements, entitled “The future of public debt: prospects and implications”, made some startlingly frank and sobering conclusions. The BIS report began earnestly:
“Since the start of the financial crisis, industrial country public debt levels have increased dramatically. And they are set to continue rising for the foreseeable future.”
After a through and well-researched analysis complete with detailed documentation, the BIS walked carefully through this political minefield, no doubt aware the slightest misstatement would leave it open to rebuke by its benefactors, the countries and central banks that fund its operation. But hats-off to the BIS. It left no doubt as to where it stands on this matter by concluding with the following stark assessment.
“First, fiscal problems confronting industrial economies are bigger than suggested by official debt figures…As frightening as it is to consider public debt increasing to more than 100% of GDP, an even greater danger arises from a rapidly ageing population. The related unfunded liabilities are large and growing...In the aftermath of the financial crisis, the path of future output is likely to be permanently below where we thought it would be just several years ago. As a result, government revenues will be lower and expenditures higher, making consolidation even more difficult…
Second, large public debts have significant financial and real consequences. The recent sharp rise in risk premia on long-term bonds issued by several industrial countries suggests that markets no longer consider sovereign debt low-risk…
Third, we note the risk that persistently high levels of public debt will drive down capital accumulation, productivity growth and long-term potential growth…
Finally, looming long-term fiscal imbalances pose significant risk to the prospects for future monetary stability...unstable debt dynamics could lead to higher inflation: direct debt monetisation, and the temptation to reduce the real value of government debt through higher inflation.”
Please read that last paragraph again about the significant risk to monetary stability. In other words, governments will not cut spending and bring their budget back into balance. They will simply lean on their central bank to print and print and print. Everyone holding sovereign paper will get their euros and dollars and pounds repaid to them, but those currencies will have only a fraction of their present purchasing power. The rest will have been inflated away.
I have always wondered why people – after paying 40% or so of their income in taxes – then put what they manage to save in government paper. Further, it always struck me as somewhat bizarre that they then call the paper they purchased “risk free”, even though nothing in our real and imperfect world comes without risk. It is a conundrum with only one explanation – it is irrational. All of us have seen this behavior before.
It is the behavior that sent the unthinking crowds into Internet stocks. It is the behavior of unthinking people who bought second and third homes and condos with debt in the expectation of flipping them with a huge profit to someone else. It is the behavior of unthinking bankers who piled into mortgage-backed securities believing that the triple-A rating meant the paper came without risk. The common characteristic of all these manic episodes is that they are the actions of people acting with a ‘bubble mentality’. They are not guided by rational thought, but unthinking and emotional knee-jerk reactions. And the same is true today with sovereign credit risk, but with a difference.
The other examples are past history. The so-called “risk-free” sovereign debt bubble has only recently begun to pop.
The signs are all around us. Iceland, Dubai, Latvia, Greece with Portugal and Spain not far behind, and the UK and even the US and most every other country on the not-too-distant horizon. The sovereign debt crisis – which is actually a latent bank crisis because banks are stuffed full with the worthless paper of over-indebted sovereigns – is a powder keg, and the fuse has already been lit. So what should we do? What can we do?
The answer is simple. Own physical gold instead of someone’s promise. Its time-proven record built up over the centuries clearly illustrates that gold is the ultimate safe haven. Gold is the best way to avoid counterparty risk, which is essential today as the sovereign debt bubble continues to lay bare the stark reality that governments throughout the world are bankrupt, and more to the point, that the bubble has popped. People holding sovereign paper are already heading for the exits. As a result, everyone needs gold now more than ever.
by James Turk of the Free Gold Money Report - April 30, 2010 - Greece’s debt troubles are well known. Less recognized is the worrying truth that Greece is just the tip of the iceberg.
There have been plenty of warnings. These include, for example, the recent downgrades of the debts of Spain and Portugal. By highlighting the risks, the debt rating agencies have sent a signal with one certain outcome. Heightened awareness over sovereign credit risk will grow, and rightly so.
A report released just last month by the Bank for International Settlements, entitled “The future of public debt: prospects and implications”, made some startlingly frank and sobering conclusions. The BIS report began earnestly:
“Since the start of the financial crisis, industrial country public debt levels have increased dramatically. And they are set to continue rising for the foreseeable future.”
After a through and well-researched analysis complete with detailed documentation, the BIS walked carefully through this political minefield, no doubt aware the slightest misstatement would leave it open to rebuke by its benefactors, the countries and central banks that fund its operation. But hats-off to the BIS. It left no doubt as to where it stands on this matter by concluding with the following stark assessment.
“First, fiscal problems confronting industrial economies are bigger than suggested by official debt figures…As frightening as it is to consider public debt increasing to more than 100% of GDP, an even greater danger arises from a rapidly ageing population. The related unfunded liabilities are large and growing...In the aftermath of the financial crisis, the path of future output is likely to be permanently below where we thought it would be just several years ago. As a result, government revenues will be lower and expenditures higher, making consolidation even more difficult…
Second, large public debts have significant financial and real consequences. The recent sharp rise in risk premia on long-term bonds issued by several industrial countries suggests that markets no longer consider sovereign debt low-risk…
Third, we note the risk that persistently high levels of public debt will drive down capital accumulation, productivity growth and long-term potential growth…
Finally, looming long-term fiscal imbalances pose significant risk to the prospects for future monetary stability...unstable debt dynamics could lead to higher inflation: direct debt monetisation, and the temptation to reduce the real value of government debt through higher inflation.”
Please read that last paragraph again about the significant risk to monetary stability. In other words, governments will not cut spending and bring their budget back into balance. They will simply lean on their central bank to print and print and print. Everyone holding sovereign paper will get their euros and dollars and pounds repaid to them, but those currencies will have only a fraction of their present purchasing power. The rest will have been inflated away.
I have always wondered why people – after paying 40% or so of their income in taxes – then put what they manage to save in government paper. Further, it always struck me as somewhat bizarre that they then call the paper they purchased “risk free”, even though nothing in our real and imperfect world comes without risk. It is a conundrum with only one explanation – it is irrational. All of us have seen this behavior before.
It is the behavior that sent the unthinking crowds into Internet stocks. It is the behavior of unthinking people who bought second and third homes and condos with debt in the expectation of flipping them with a huge profit to someone else. It is the behavior of unthinking bankers who piled into mortgage-backed securities believing that the triple-A rating meant the paper came without risk. The common characteristic of all these manic episodes is that they are the actions of people acting with a ‘bubble mentality’. They are not guided by rational thought, but unthinking and emotional knee-jerk reactions. And the same is true today with sovereign credit risk, but with a difference.
The other examples are past history. The so-called “risk-free” sovereign debt bubble has only recently begun to pop.
The signs are all around us. Iceland, Dubai, Latvia, Greece with Portugal and Spain not far behind, and the UK and even the US and most every other country on the not-too-distant horizon. The sovereign debt crisis – which is actually a latent bank crisis because banks are stuffed full with the worthless paper of over-indebted sovereigns – is a powder keg, and the fuse has already been lit. So what should we do? What can we do?
The answer is simple. Own physical gold instead of someone’s promise. Its time-proven record built up over the centuries clearly illustrates that gold is the ultimate safe haven. Gold is the best way to avoid counterparty risk, which is essential today as the sovereign debt bubble continues to lay bare the stark reality that governments throughout the world are bankrupt, and more to the point, that the bubble has popped. People holding sovereign paper are already heading for the exits. As a result, everyone needs gold now more than ever.
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